On the margin, the releases today weren’t very pretty. We will begin with the biggest surprises of the day: retail sales and industrial production. Retail sales were expected to fall by 0.1% month-over-month in August and ended up actually falling by -0.3%. Core retail sales have lost some momentum as well. In June the 6-month annualized rate 5.3% and it has since fallen to 4.7%. Lastly, our 1-year diffusion index that tracks whether a retail sales category has either grown or shrunk from a year earlier has dropped to just +4 which is the lowest level since March. This means that nine categories have seen growth over the past year and five have experienced a decline.

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Industrial production also surprised to the downside as economist were expecting a -0.2% decline and instead got a -0.4% MoM decline. The year-over-year rate in industrial production has now been negative for 11 straight months. This is the longest such streak that has occurred without a recession happening at the same time. The 3-month annualized rate of change has also turned over from a recent 18-month high in July. Capacity utilization also surprised to the downside as the headline number declined 0.4. Capacity has expanded by just 0.4% year-over-year. This is the slowest ear-over-year growth rate since 2011.

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In light of the weak industrial numbers for August, the NY Fed released some middling data for September. The Empire Manufacturing PMI came in at -1.99 which was an improvement from -4.2 in August but still didn’t meet consensus expectations of 1. The employment data was ugly with the overall employment index and the average workweek component falling to 2016 lows.

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The PMI data out of the Philadelphia Fed, on the hand, was much improved in September. The business activity index rose to 12.8 from 1 and crushed expectations of 2.

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The headline PPI index was soft again in August. It was unchanged MoM and remains stuck in negative territory YoY. The good news is we are starting to see some improvement under the surface of the headline PPI. Our 1-year diffusion index is still negative but has improved from -39 in January to -9 in August.

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Initial unemployment claims remain very low as the latest data point for the week of 9/10 is just 260k. The four-week moving average is just 261k. Claims as a percentage of overall payroll employment is basically at the lowest level on record. This series tends to spike higher during recession.

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Finally we have current account data for the second quarter. The current account narrowed slightly from $125 billion (revised down from $132 billion) to $120 billion in the second quarter. The overall current account deficit as percentage of GDP has been relatively steady around 2-3% since the financial crisis. What is interesting, however, is that the current account deficit excluding oil has really widened out over the past 20 months or so. The ex-oil current account deficit as a percentage of GDP was just -0.3% in the 4Q13. It has since widened out to -2.1% which is on par with what it was at during 2008.

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