Industrial Production
Industrial production increased 0.7% in October following a modest 0.1% decline in September. Production in manufacturing industries rose 0.5% following an increase of 0.3% in September. Motor vehicle sales, a component of manufacturing, rose 3.1%. Mining rose 2.3% after falling 0.5% in the previous month. Utilities fell 0.1% after a deeper 2.0% drop in September. Capacity utilization, which has gradually improved since the end of the recession, rose 0.5 percentage points in October to 77.8%. The pace of production picked up in October after several months of weak activity. We do not expect investment growth to pick up from its already strong levels.

Consumer Price Index
The consumer price index fell 0.1% in October after rising 0.3% in September. The slowdown in headline inflation was driven by more modest growth in food prices and a decline in energy prices. Energy prices fell 2.0% after growing 2.0% in September. Food prices increased 0.1%, down from 0.4% in September. Over the year the CPI is up 3.5%. Core prices, net of food and energy prices increased 0.1% in October and are up 2.1% over the year. The pace of inflation has slowed in recent months and we do not expect much pressure on prices, even as demand stabilizes in coming months.

Housing Starts
New residential construction decreased by a slight 0.3% in October to an annualized rate of 628,000 units. Single family starts rose in October while multi-family starts fell.   Single family housing starts rose 3.9% to 430,000 while multi-family starts fell 8.3% to 198,000 units. Over the year total starts are up 16.5%. Building permits for new homes increased 10.9% to 653,000 in October and is 17.7% above the October 2010 estimate of 555,000.  Housing completions decreased 5.7% in October to an annual rate of 584,000 from 619,000. The loss this past month reflected a sharp downturn in multi-family, which are particularly volatile. The upturn in building permits and the gain in single family starts suggests some underlying strength in the housing market, however we continue to expect only limited improvement over the next year.

Retail Sales
Total retail sales were rose 0.5% in October, after rising 1.1% in September. The report was mostly positive, with almost all categories, including electronics & appliances (3.7%), building materials (1.5%), and nonstore retailers (1.5%) improving. Only three categories declined, and the declines were modest. Furniture and home furnishing stores declined 0.7%, followed by clothing & clothing accessories (-0.7%) and gasoline stations (-0.3%). Sales are 7.2% above their year-ago level. Core sales, net of building materials, gas stations, and motor vehicle sales, were up by 0.6%. While this report was positive, we do not expect consumption to pick up much from its current level.