Weekly economic commentary: Eurozone economy at risk of renewed stumble

Summary

United States: Consumer in the spotlight

• The personal income and spending data this week show that inflation remains in check, shed light on the staying power of the consumer and paint a more constructive backdrop for household finances moving forward. Real estate should be a beneficiary of lower interest rates as the Fed eases policy, yet housing activity remains slow.

• Next week: ISM Manufacturing (Tue.), ISM Services (Thu.), Employment (Fri.)

International: Eurozone economy at risk of renewed stumble

• The Eurozone September manufacturing and services PMIs were disappointing, with output and orders both softening, although they also indicated an overall softening in price pressures. We expect Eurozone expansion to continue, but now expect a slower pace of recovery than previously. Elsewhere, it was a busy week for international central banks. China, Sweden, Switzerland, Hungary, the Czech Republic and Mexico all lowered interest rates, while Australia held monetary policy steady.

• Next week: China PMIs (Mon.), Japan Tankan Survey (Tue.), Eurozone CPI (Tue.)

Credit market insights: Is the tide turning for commercial Real Estate?

• When the Fed cut the policy rate by 50 bps last week, it marked what should be the beginning of the end of the worst CRE downturn since the global financial crisis. Although there are no shortage of obstacles ahead for CRE, the gap between the amount of maturing debt in need of refinancing and the available capital should be reduced with lower rates, thus limiting the extent to which stress mounts further.

Topic of the week: Reasons not to panic about looming port strikes

• Thousands of dockworkers are set to strike at East and Gulf coast U.S. ports this upcoming week if the International Longshoremen's Association (ILA) and the United States Maritime Alliance (USMX) cannot come to an agreement regarding wage negotiations. While work stoppages at these ports cannot be ruled out, and a prolonged worker stoppage could disrupt supply chains, our sense is that worries about major supply disruption are overstated.

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