"A second consecutive month of outright deflation certainly calls into question the Federal Open Market Committee's expectation for inflation to reverse course near-term and head back towards the Fed's longer-tem objective of 2%.”
Economic Watch: Latest Numbers Disappoint, More Uncertainty with Fed
While a recent good unemployment report led some to speculate the Federal Reserve will raise interest rates at year-end, new numbers released Friday remind us there's more to the equation.


While a recent good unemployment report led some to speculate the Federal Reserve will raise interest rates at year-end, new numbers released Friday remind us there's more to the equation.
U.S. retail sales increased a weaker-than-expected 0.1% in October from the month before. That follows September's retail sales being downwardly revised to no change, according to the Commerce Department.
Auto sales, though still at a high level, unexpectedly dropped 0.5%, taking back a portion of the 1.4% increase recorded in September.
Core retail sales (which exclude motor vehicle, gas station, food and building material store receipts) rose a smaller-than-expected 0.2%, following an upwardly revised 0.1% gain in September.
Retail sales are a closely watched economic indicator. Accounting for about two-thirds of total economic activity, it's a key barometer of nation’s overall economic health.
Despite the month-over-month decline, retail sales in October increased 1.7% from the level of a year earlier. However, those year over year increases are lower than the 2.2% increase at the end of the third quarter and even further below the 4.7% year over year improvement this time last year.
Meanwhile, a separate report from the Commerce Department on wholesale prices shows they fell 0.4% in October from the month before.
The downturn in the Producer Price Index is the second consecutive monthly of decline. Year-over-year, headline producer prices continue to retreat, moving from a drop of 1.1% in September to decline of 1.6% in October, the weakest pace since the index began in November 2010.
The more closely watched indicator of inflation, the Consumer Price Index, is set to be released Nov 17.
So What Does All This Mean? Hmmmm...
“What a turn of events,” says Lindsey Piegza, chief economist at Stifel Fixed Income. “Inflation, nonexistent inflation that is, has long been the sticking point for Federal Reserve officials. A second consecutive month of outright deflation certainly calls into question the Federal Open Market Committee's expectation for inflation to reverse course near-term and head back towards the Fed's longer-tem objective of 2%.”
She points out, as policymakers have said, monetary policy is not based on expectations but on the actual evolution of the data.
“This morning's report is just a reminder of why such a policy is necessary," Piegza said. "Despite expectations for further price pressures, an expectation, mind you, that the Fed has held onto since 2011, inflation continues to retreat. Even with one half of the Fed's mandate – full employment – arguably met, can the Fed raise rates with the other half of the equation – stable prices – vehemently unattained?”
Piegza is pointing to a recent U.S. Labor Department report showing unemployment in the country fell to a seven and a half year low of 5% as the number of non-farm jobs added was the largest since last December. This report led to speculation that the Fed will increase interest rates when officials meet in next month.
“Indications of a continued solid pace of domestic spending supports the case for the Fed to start to withdraw some of the current highly accommodative monetary stimulus," said Paul Ferley, assistant chief economist with RBC Economics. "Volatility in global financial markets was a factor staying the Fed’s hand at the September FOMC though pressures along this front have subsequently eased. With upcoming data expected to provide further confirmation of solid economic growth, our outlook for monetary policy is that the fed funds range will rise 25 basis points to 0.25% to 0.50% at the December 16 policy meeting.”
One could argue that a third report released Friday adds fuel to such a stance.
Preliminary results of the University of Michigan’s Survey of Consumers shows confidence rose in early November, mainly due to a stronger outlook for the domestic economy.
Its readings of consumer sentiment, feelings on current economic conditions, along with expectations, all registered increases from the month before as well as year-over-year, beating many analyst expectations.
“Overall, the most recent confidence reading was equal to the average during the first 10 months of 2015, and higher than any year since 2004," according to Surveys of Consumers Chief Economist Richard Curtin.
“Two trends dominated the early November data. Consumers anticipated somewhat larger income increases during the year ahead, as well as expected a somewhat lower inflation rate,” he said. “This meant that consumers held the most favorable inflation-adjusted income expectations since 2007. Moreover, the somewhat larger gains were anticipated by lower income households. Buying plans for large discretionary purchases improved, especially for vehicles.”
Based on this report, along with the recent one on employment/unemployment, one could easily make an argument that the Fed hiking interest rates is a slam dunk decision.
However, when you look at a wider amount of data, retail sales and wholesale prices, plus a report from last month showing growth in the nation’s gross domestics product slowed to an annual rate of 1.5% in the third quarter from 3.9% in the second quarter, only one thing seems certain – Federal Reserve Chair Janet Yellen and her compadres will keep everyone guessing about what they are going to do with interest rates.
More Fleet Management

How Innovative Trucking Leaders Turn Change Into an Advantage
As the pace of change accelerates in trucking, the fleets that adapt best have more than the latest technology. They have cultures that embrace improvement.
Read More →
Freight Broker Bonds Just Got Harder to Get. Here's What That Means for Your Fleet.
When it gets harder for a freight broker to prove they are financially sound, the ones who cannot clear that bar get pushed out of the market. And those are exactly the brokers who used to leave motor carriers holding the bag.
Read More →
Long-Awaited Canadian Border Bridge to Open in Detroit
For trucking, the bridge opening should offer immediate improvements in efficiency and reliability, with new customs facilities, expanded inspection capacity, and direct freeway-to-freeway connections.
Read More →
Aurora Rolls Out Next Generation of Driverless Trucks for Commercial Freight
Aurora's latest autonomous trucks it's rolling out with International feature lower-cost hardware designed for a million miles as the company expands commercial driverless freight operations across the U.S. Sun Belt.
Read More →
Freight Tonnage Down, Rates up, as Lower Capacity Powers Trucking Recovery
The recovery from the freight recession continues to be driven by reduction in capacity rather than by increased demand.
Read More →
Think Your Trucking Fleet Isn't Using Much AI? Think Again
Shadow AI — the use of unauthorized artificial intelligence tools at work — is becoming increasingly common, putting sensitive company data at risk. Learn how trucking fleets can protect sensitive data while embracing AI.
Read More →
ArcBest Consolidates Brands, Cuts Workforce
The company will bring three business units under the ArcBest brand, eliminate about 2% of positions, and expects the changes to generate $40 million in annual savings.
Read More →
Trucking Fleets Faced Record Operating Costs During Third Year of Freight Recession
ATRI's annual operational cost report shows carriers trimmed fleets, delayed equipment purchases, and ran older trucks as expenses continued to outpace freight rates.
Read More →
Michelin Adds AI Assistant to MyConnectedFleet Platform
Michelin’s new generative AI tool delivers instant fleet insights, helping managers analyze fuel use, tire maintenance, vehicle status, and operational performance without manually creating reports.
Read More →
LytxOne Platform Now Features AI, Compliance, and Asset Tracking Tools
New enhancements add AI-powered insights, asset tracking, compliance automation, and configurable privacy controls to Lytx's all-in-one fleet management platform.
Read More →
