October 22, 2018 — Hurricane Florence Affects Economic Data


Housing starts and retail sales missed economists’ expectations for last month with the effects of Hurricane Florence evident in the data.

US homebuilding fell in September, with activity in the South falling the most in nearly three years, likely due to hurricane effects.  Starts in the South, which account for most of new homebuilding, fell 13.7 percent, the biggest decline since October 2015. Building permits, overall, fell by 0.6 percent, combined with rising mortgage rates, indicate building will stay slow in the upcoming months.

Retail sales barely rose last month, up 0.1 percent, with spending in bars and restaurants driving the downturn having its biggest drop in close to two years. Disruptions caused by the hurricane could have been the cause for the decline. However, core retail sales, which excludes cars, gas, building materials and food services, rose 0.5 percent. Core sales continue to point to strong consumer spending which will drive the economy.

Consumer confidence remains high, the unemployment level low and the US was named the world’s most competitive economy by the World Economic Forum last week.  Even with last week’s weaker data, there is no reason to expect the Fed to forego its December rate increase.  Swaps continue to be the best option to lock in rates before they rise again.