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The Second Look

This week's inflation report was a welcome relief after last week's news about higher-than-expected wholesale prices. The consumer price index rose 0.3 percent in October, and core prices were up 0.2 percent, both spot on expectations. While the CPI numbers were higher than the previous month, the rate of increase remains moderate and under control. Two sectors in particular contributed heavily to the overall strength in the index: energy prices rose the most since January, and used car prices had the largest jump in eight years.

Keep in mind the rise in used car prices follows a month when prices fell the most in 15 years. And the rise in energy prices could very well be offset next month due to this month's significant drop in oil prices. Perhaps the best takeaway from the report was a slowdown in the year-over-year core rate of inflation, an increase of just 2.1 percent. This is one of three inflation indices the Federal Reserve takes into account when setting monetary policy. With inflation staying close to the Fed's two percent comfort zone, the Fed is likely to remain on its current path of normalizing monetary policy.

Key Indicators this Week:

Retail Sales – Consumers got their shopping groove back in October. After back-to-back months of 0.1 percent declines, retail sales surged 0.8 percent in October, the largest monthly rise since May. The largest contributors to the increase came from gasoline stores, auto sales and building materials. A large part of the auto and building material increases can be attributed to the aftermath effects of Hurricane Florence. Ten of the 13 major retail categories posted increases. Small gains at general merchandise stores, online shopping and clothing stores may just be calm before the holiday shopping storm. Analysts estimate sales will top $1 trillion for the first time this year.

Industrial Production – Industrial production increased 0.1 percent in October, less than expected, but still in expansion territory. This was the fifth month of expansion, the longest such stretch since 2011. Manufacturing activity carried the index, rising 0.3 percent. Utility and mining activity were both negative. Capacity utilization was 78.4 percent, just a slight dip from the recent high level of 78.5.

Oil – One of the big stories this week was the abrupt change in the price of oil. West Texas Intermediate, the benchmark in oil pricing, swung from being up 31 percent at its peak in October to down 3.4 percent year-to-date. The dramatic price move was fueled by concerns over too much supply in the midst of weakening demand. OPEC and Russia recently increased production to make up for expected supply issues resulting from U.S. imposed sanctions against Iran. The sudden turnaround in the oil market only exacerbated the growing feeling of a global economic slowdown that the financial markets have been toying with for weeks.

Between the Numbers:

With consumer prices front and center this week, it seems worthwhile to take a look at something relatable to us all this week. The average cost of this year's Thanksgiving dinner for 10 people is $48.90, according to the American Farm Bureau Federation. This is 22 cents less than last year. The Federation found that turkey prices are the lowest since 2014.  With that bit of good news, I hope everyone has a happy and thankful Thanksgiving.

Note: Due to the Thanksgiving holiday weekend, there will be no Behind the Numbers next week. Behind the Numbers will resume on November 30.

Sarina Freedland –Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.