GLOBAL MARKETS REVIEW
 

United States: Momentum Continues to Slow
 

• This week's data show that while the U.S. economy has remained resilient thus far, tighter monetary policy is certainly starting to impact some key sectors. Industrial production regained its footing in September, but there are signs of slower growth ahead, while regional manufacturing surveys support this loss of momentum. Meanwhile, the real estate sector has been significantly affected by rising interest rates, with total housing starts falling 8.1% in September. Peering ahead, the forward-looking Leading Economic Index points to a recession in the coming year.
• Next week: New Home Sales (Wed), Q3 Real GDP (Thu), Personal Income & Spending (Fri)

International: Robust Consumer Inflation, Subdued Consumer Spending

Credit Market Insights: ARMs Make a Comeback as Mortgage Applications Plummets
 

Topic of the Week: "Modest" Is the Word of the Day in a Mixed Beige Book
 

• This week saw more evidence on the international front of divergent economic trends—with consumer inflation remaining rapid and consumer spending staying subdued. Inflation surprised to the upside in the United Kingdom, Canada and New Zealand. Meanwhile, retail spending data were subdued in the United Kingdom and Canada. For now, rapid inflation remains a greater concern than slower growth for foreign central banks, and we anticipate further monetary tightening in the weeks and months ahead. 
• Next week: U.K. PMIs (Mon), Bank of Canada (Wed), European Central Bank (Thu)
  • The Mortgage Bankers Association (MBA) reported on Wednesday that mortgage applications for purchase fell 4.5% during the week ended October 14. The long skid has helped push application counts to their lowest level since 1997. With markedly higher financing costs squeezing demand for mortgages, there is one type of home loan that has made a comeback this year, the adjustable rate mortgage (ARM).
     
  • From employment in New York to overall economic activity in Dallas, "modest" was the word of the day in the newest Beige Book released by the Federal Reserve. Modest growth was broad-based, manufacturing activity improved on net and demand for services remains strong. That said, the outlook continues to worsen.