Retail Sales
Total retail sales rose 1.1% in September, after rising by an upwardly revised 0.3% in August (originally reported as no change). The report was mostly positive, with almost all categories, including motor vehicle and parts (3.6%), clothing & clothing accessories (1.3%), and gas stations (1.2%) improving. Only three categories declined, and the declines were modest. Sporting goods and hobby stores declined 0.3%, followed by food and beverage (-0.2%) and building materials (-0.1%). Sales are 7.9% 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 good news, we did not raise our expectations for consumption growth in the second half. We still expect the pace to accelerate from the dismal first half, but to remain sluggish.

International Trade Balance
The U.S. trade deficit in goods and services remained unchanged at $45.6 billion in August. Exports declined 0.1% and imports were essentially unchanged. The trade deficit in goods narrowed to $61.4 billion and the trade surplus in services rose $0.2 billion to $15.8 billion in August. Despite weakness in the global economy, and in the Euro area in particular, we expect exports to rebound in the next few months and for imports to gradually rise as well.

Federal Open Market Committee (FOMC) Minutes
The minutes from the FOMC’s September 20-21 meeting indicate that the members are not in clear agreement about the next policy steps the Fed should take. Several options were discussed, from reducing the interest paid on excess reserves to taking steps to increase the transparency of monetary policy. The FOMC voted to leave the fed funds rate at its current level between 0 and 25 basis points and maintained its commitment to leave rates unchanged through mid-2013. There was some disagreement about how much further intervention would be necessary, but most members agreed that recent economic performance has been slower than anticipated.