Key Highlights
  • Despite the ongoing Federal government shutdown, alternative data sources show no material shift in economic trends for September and early October.
  • Consumer spending slowed in September but remains up year over year, and new single-family construction could accelerate if mortgage rates continue to fall.
  • Used-vehicle prices are showing signs of deflation, and lower gas prices may help lift consumer sentiment and spending in the months ahead.
Federal Government Shutdown: Data Delays, But No Major Trend Changes

The Federal government shutdown is entering its third week, delaying updates on crucial economic indicators such as the consumer price index, new construction permits and starts, retail sales, and jobless claims. However, alternative data sources indicate that economic trends have remained stable through September and early October.

Consumer Spending Slowed in September But Did Not Collapse

CONSUMER SPENDING declined 0.5% on a seasonally adjusted basis in September, according to Bloomberg Second Measure of US Consumer Spend.

  • Spending for the month was up 0.9% year over year, signaling resilience despite the slowdown.
  • The Bloomberg spend data suggest a moderation in spending, not a collapse, through September.
New Single-Family Construction Could Pick Up in Future Months

SINGLE-FAMILY HOMES: The National Association of Homebuilders reported improved sentiment for October, with gains in buyer traffic, current sales, and especially expectations for future sales.

  • Thirty-year fixed mortgage rates have dropped from nearly 7% in May to 6.23% today, according to Mortgage News Daily.
  • If mortgage rates fall to 6% or below, single-family construction activity is likely to increase in permits and starts.
Inflation Was Likely Little Changed in September

THE SEPTEMBER CONSUMER PRICE INDEX REPORT has been delayed, but expectations are for stability, with headline inflation at 2.9% year over year and core inflation at 3.1%, matching August levels.

  • New-vehicle prices increased in September, while used-vehicle prices declined slightly. (See the September Kelley Blue Book average transaction price report.)
  • Slowing demand has led to a 1.6% decline in wholesale used car prices in the first half of October, pointing to potential deflation in used cars in the months ahead.
Sentiment Is Down to Start October, But Lower Gas Prices Could Lift Spirits

OFFICIAL JOBLESS CLAIMS DATA are unavailable, but Oxford Economics reports that state-level claims have been stable in recent weeks.

  • The Morning Consult daily index of consumer sentiment continues its downward trend, decreasing 3.3% in September and 2.1% so far in October, leaving the index down 2.5% year over year.
  • Declining fuel prices may help reverse this trend: As of Thursday, Oct. 16, AAA reports the average price of unleaded gasoline has dropped 11 cents in October to $3.05, the lowest level so far this year.
Bottom Line

Despite the uncertainty caused by the Federal government shutdown and delayed official data, alternative sources confirm that the auto industry and broader economy remain on stable footing. Consumer spending is moderating but not collapsing, housing construction could accelerate if mortgage rates continue to fall, and used-vehicle prices are showing early signs of deflation. Lower gas prices may provide a much-needed boost to consumer sentiment and spending as we move further into the fall.