Domestic economic health.

It seems almost a given that the Federal Reserve will intervene in the economy again, albeit too late to have an effect on mid-term elections. The latest Commerce Department data showed personal spending up 0.2% for September, not exactly the 0.4% gain economists polled by Bloomberg forecast. Personal wages declined by 0.1% in September, and there hadn't been a reversal in that category since July 2009. Speaking of reversals, the most respected consumer sentiment survey in America reversed course in October - the University of Michigan's index fell to 67.7, the lowest reading since November 2009. (The Conference Board's index did show some improvement, rising 1.6% to 50.2.) ^2,3,4 

The Commerce Department estimated third-quarter GDP at +2.0%, which mitigated some of the anxieties about a double-dip recession. However, more pronounced growth was needed to make a dent in the nation's 9.6% jobless rate.^5,6 The manufacturing sector was healthy, as evidenced by the October Institute for Supply Management report - a 56.9 reading, up 2.4% from September and marking the fifteenth straight month of growth. ISM's October service sector index improved 1.1% to 54.3.^7,8 

We got word that consumer prices rose only 0.1% in September; the core Consumer Price Index was flat, just as it had been in August. Producer prices were up 0.4% for September according to the Labor Department, with core PPI rising only 0.1%. If retailers were keeping prices low to promote a little demand, it was aiding retail sales - the Commerce Department said they were up 0.6% in September following a revised 0.7% advance in August.^9,10.11 

The Fed made no move with interest rates, but certainly held Wall Street's attention for most of the month with signals of quantitative easing - and an October 25 Wall Street Journal article asserting that " it would gradually buy a few hundred billion dollars worth of Treasuries over the next several months" was accurate.¹²

Confidence was up in Europe, at least according to the Eurozone's October index of executive and consumer sentiment. It rose to 104.1, the highest level since December 2007. The key German business confidence index improved along with European manufacturing growth. In the middle of the month, the International Monetary Fund forecast a +1.7% GDP this year for the euro-region economy, which would be a great improvement from the -4.1% mark of 2009. The IMF also predicted +3.3% 2010 GDP for Germany, the EU's biggest economy. The European Central Bank kept its key interest rate at 1.0%.¹³ 

A Goldman Sachs analysis forecast China's GDP at +10.1% for 2010 and +10.0% for 2011; China's 3Q 2010 GDP was officially +9.6%. Japan, which had managed a +1.5% GDP for the second quarter, saw the yen touch a 15-year high against the dollar last month.^14,15 Manufacturing leapt north in both India and China; India's HSBC Purchasing Managers' Index went to 57.2 from September's 55.1 reading, and China's benchmark PMI improved from 53.8 to 54.7.¹⁶

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