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Disappointing News at 7:30:
By Kathleen Madigan 7:30amCDT
Empire State Index Slumps
New York business conditions softened significantly this month, continuing a seesaw pattern in how manufacturers
view the economy, according to data released Wednesday by the Federal Reserve Bank of New York.
The Empire State's business conditions index fell to 6.17 in October from 27.54 in September, which was the
highest reading since late 2009. The numbers follow a reading of 14.69 in August and a jump to 25.60 in July.
Economists surveyed by The Wall Street Journal had expected the latest index to slow, but only to 20. A reading
above zero indicates expansion. "The pace of growth slowed significantly from last month," the report said.
The New York Fed subindexes, outside of jobs, fell steeply as well. The new orders index plunged to -1.73
from 16.86 in September. The shipments index dropped to 1.12 from a multi-year high of 27.08 last month.
The employment index, however, bounced back to 10.23 after it plunged in September to 3.26 from August's 13.64
reading. The workweek index contracted to -1.14 from from 3.26. Both price measures slowed this month, "a sign
that the pace of growth had moderated for input prices and selling prices," the New York Fed said. The pricesreceived index declined to 6.82 from 17.39 in September. The prices-paid index dropped to 11.36 from 23.91.
"Most of the indexes assessing the future outlook were down from last month," the report said. "Nevertheless, they
remained fairly high by historical standards, and conveyed an expectation that activity would continue to grow in
the months ahead."
The general business-conditions expectations index for the next six months remained at an elevated level, at 41.66
in October, versus 46.72 in September and 46.76 in August. New-orders expectations slipped to 42.34 from 45.56.
The employee-expectations index dropped to 12.50 from 14.13 in September. The New York Fed survey is the first
monthly factory report released by regional Fed banks. The Philadelphia Fed will release its survey Thursday.
Economists use the Fed surveys as guideposts to forecast the health of the national industrial sector as captured in
the monthly manufacturing report done by the Institute for Supply Management. Write to Kathleen Madigan at
kathleen.madigan@wsj.com (END) Dow Jones Newswires
By Nick Timiraos and Eric Morath 7:30amCDT
PPI Eases
WASHINGTON-A gauge of U.S. inflation eased in September, the latest sign that price pressures remain soft
across the U.S. economy. The producer-price index for final demand, which measures changes in the prices firms
receive when they sell goods and services, decreased a seasonally adjusted 0.1% last month from August, the Labor
Department said Wednesday. It was the first decline in the measure in more than a year, following a flat reading in
August. Excluding the more volatile food and energy categories, producer prices were unchanged. Economists
surveyed by The Wall Street Journal had forecast prices would rise 0.1% in September. Producer prices rose 1.6%
in September from a year earlier. Prices rose 1.8% for the 12-month period through August and 1.7% in July.
Inflation in the U.S. and other industrialized nations has been soft in recent years. The Federal Reserve sets a 2%
target for inflation, using a different measure from the one in Wednesday's report, and prices have undershot that
target for more than two years.
Prices picked up somewhat in the summer, prompting the Fed to note in its July statement that the chance of
inflation persistently falling shy of the 2% target had "diminished somewhat."
But in recent weeks, prices around the world have slumped amid concerns of a slowdown in China and Europe. Oil
prices have fallen to four-year lows, as have commodities such as copper and corn.
Most Fed policy makers expect to begin raising rates next year, but weaker overseas growth could lead the Fed to
move "more slowly than otherwise," Fed Vice Chairman Stanley Fischer said last weekend.
Energy prices at the producer level fell a seasonally adjusted 0.7% in September. Gasoline prices dropped 2.6%, the
largest decline in 18 months. Food prices at the producer level decreased 0.7%, matching the largest decline in a
year. Prices of meat fell 4.5%, the largest monthly drop in more than four years.
The producer price index for personal consumption, which most closely matches the consumer price index, edged
down 0.2% in September and was up 1.9% from one year earlier. The Labor Department's producer price index
report can be accessed at: http://www.bls.gov/ppi Write to Nick Timiraos at nick.timiraos@wsj.com and Eric
Morath at eric.morath@wsj.com (END) Dow Jones Newswires
By Eric Morath and Nick Timiraos 7:30amCDT
Retail Sales Down
WASHINGTON--Spending at U.S. retailers declined in September, suggesting many Americans remain cautious
heading into the final months of the year. Retail and food sales fell 0.3% from August to a seasonally adjusted
$442.7 billion, the Commerce Department said Wednesday. It was the first decline in retail sales since January,
when an unusually cold winter slowed the economy. Excluding automotive purchases, sales decreased 0.2% from
the prior month. Economists surveyed by The Wall Street Journal had forecast overall retail sales would fall 0.1%
last month. They had predicted a 0.3% gain excluding autos.
Figures for August were not revised. Overall sales rose a healthy 0.6% and advanced 0.3% when removing carrelated purchases in August. Total retail sales were up 4.3% in September from a year earlier, still well above the
rate of inflation. But the pace of spending has been choppy month-to-month. Stronger consumer spending is
needed for the economy to accelerate from the about 2% growth pattern recorded during most of the five-year-old
recovery. Household spending accounts for more than two thirds of economic output.
The latest reading could be a setback for second-half growth, despite an improving labor market that should support
increased spending. The economy has added more than 200,000 jobs on average through the first nine months of
the year. But a relatively high unemployment rate of 5.9% and worries about Middle East conflicts and a slowing
global economy could erode consumers' confidence.
September's decline was driven in part by decreased spending at auto dealerships, home improvement suppliers and
nonstore retailers, a category that includes online sales. Spending at clothing stores fell 1.2% on the month, the
largest decline in nearly two years. Partially offsetting those declines was improved sales at electronics and
appliance stores and restaurants. In September, motor vehicle and parts sales fell 0.8%, the first decrease in the
category since January. Auto sales, which rose 9.5% from a year earlier, have been a bright spot for the economy.
Sales are rising as Americans take advantage of easier credit and low rates to replace aging vehicles.
Sales at gasoline stations were down 0.8% from August and down 2.5% from a year earlier. Average gasoline
prices were down 40 cents per gallon at the end of September from a spring peak on a non-seasonally adjusted
basis, according to the Energy Information Administration. Lower fuel costs should give consumers more to
money to spend on other goods and services. But when excluding both autos and gasoline, retail sales fell 0.1% in
September. The Commerce Department's retail sales report can be found at
http://www.census.gov/retail/marts/www/marts_current.pdf Write to Eric Morath at eric.morath@wsj.com and
Nick Timiraos at nick.timiraos@wsj.com (END) Dow Jones Newswires
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8:38 EDT 7:38amCDT
30-year under 3%?
Weak US retail sales and a decline in PPI added to concerns about the global growth outlook. Investors are keeping
a close eye on US data to see whether the US economy, so far the bright spot in the developed world, can withstand
economic woes in Europe. Weak US data could further convince bond investors that the Fed needs to keep rates
lower for longer. The 10-year yield hits 2.118%, a fresh 16-month low. The 10-year note is 24/32 higher, yielding
2.122%. (min.zeng@wsj.com; @minzengwsj) (END) Dow Jones Newswires