RETAIL SALES
Retail sales rose 0.4% in September, outpacing expectations for a 0.3% increase. The retail sales control group, which feeds GDP calculations, rose 0.7%.
Our Take: Retail sales is another in a recent series of reports that indicate underlying economic strength. Strong economic numbers weaken the argument that the Fed needs to cut rates quickly to ensure growth.
CHINA
Over the weekend, the Ministry of Finance briefing on fiscal stimulus measures failed to live up to investors’ expectations, with the main focus being on shoring up local government finances. Later in the week, inflation and growth data came in light, prompting further concerns about domestic demand and hitting 2024 growth targets. The People’s Bank of China (PBOC) then fleshed out details around its measures to support equity prices.
Our Take: Chinese authorities are ramping up measures targeted at hitting short-term growth goals and stabilizing equity and property prices. These measures are likely to have a short-term effect, but over the longer run the property market must be allowed to find a bottom at which the market clears, and the government must allow structural reforms that will allow self-sustaining domestic consumer demand to develop. The current regime in Beijing does not seem inclined to allow this.
EUROPEAN CENTRAL BANK (ECB)
The ECB cut its policy rate by 25 basis points, as expected. The move is in response to continued declines in inflation and weakening growth data.
Our Take: Like the Fed, the ECB is attempting to manage a soft landing by normalizing policy as inflation trends towards its target. The Eurozone does not seem to be standing up to restrictive policy as well as the U.S., making the ECB’s task more difficult.
MUNICIPALS
Hospital municipal bond issuance is increasing. The hospital sector has issued almost $27 billion of debt so far this year, which is significantly higher than the $11.6 billion issued in all of 2023 according to Bloomberg. This year’s hospital sector annual volume issuance has reached its highest level since 2019.
Our Take: Hospital issuance dropped during the pandemic as infrastructure and improvement projects were paused or put on hold. As the effects of the pandemic have passed, many medical facilities have been tackling expansion and renovation projects and some have sought financing in the municipal bond market. In addition to project funding, some hospitals have refinanced existing debt.