Looked at on a year-over-year, averaged basis, the data indicates more of the same with no real pattern of acceleration and strength, but no slowing, either.

Over the last year, retail sales growth, adjusted for inflation, has averaged 2.5%, and this month's moving average was slightly better at 2.7% as shown above. That excludes autos, which I track and discuss at month-end when industry unit sales data is released, and gasoline, which is not adjusted for changing prices.

Though I am not a big fan of the month-to-month date, the news here was surprisingly good. The month-to-month individual category data was quite strong with several categories growing at faster than 1% and rebounds prominent in several key categories.

Clothing, which has been having a tough time, grew 1.4% in October. Electronics had another good month in October, as iPads and iPhones continued to move out the door, with sector growth of 1.4%. Sporting goods also was also surprisingly strong, perhaps reflecting better consumer confidence as this is a category that is more discretionary than others. Speaking of discretionary spending, restaurants had a great month, too, growing at 1.0%.

On the negative side of the house, I am unsure if it was weather or slowing housing activity that slowed sales at building material stores. The sector data seems a little out of sync with a good earnings report from Home Depot. Gasoline station sales were down because of lower prices and not demand. Grocery stores fared poorly, perhaps because restaurant sales did so well and overall prices were unchanged month to month. Despite these headwinds, the headline number still looked much better than it did over the summer months.

All in all, the monthly data was very consistent with retailer third-quarter earnings reports that indicated that October, the last month of the quarter for most retailers, was better than the other two months of the quarter. However, I do worry a little that the data collections period and responses might be slightly different than usual, potentially aiding results. And returning government workers could have been a plus, too. Finally, one month is probably too small a data set to make a firm conclusion on the consumer. However, I can now say with some confidence that things are clearly not getting worse.

That said, weekly shopping center data continued with its third week of improvement, and the five-week moving average growth rate moved back toward 2.5%, the bottom of the range of normal retail sales growth, after spending several months below that target.

Inflation Continues to Fall
On a single-month basis, prices fell 0.1% from September to October and were up just 1% year over year, according to the Consumer Price Index. Even the less-volatile three-month average dropped to 1.2%. Since 1948, only 16% of the readings have been lower than that, and most of those were during recessions, not well into a recovery as we are now. The U.S. is now operating well below the 65-year median of 3.1% inflation and below the Federal Reserve's 2% target.

By category, energy was the key driver of lower inflation, though other items were also down in price, including apparel, used cars, and medical services. Furthermore, there weren't a lot of categories that showed strong inflation. The transportation services category was up 0.7%, driven largely by higher prices for airline tickets. Drug costs were up a little more than usual this month. The heavy pressure on brand-name drugs, such as Lipitor, has begun to diminish. The move to generics is now largely complete in some drug categories. Relatively softer new-car sales of late probably explain the modestly higher inflation rate for used autos. The list of big upward movers is small and most things energy-related were down significantly.

CPI Varies By User
I do caution that not everyone is seeing the low 1.2% annual growth rate in inflation. Some high-profile items, especially food proteins, are up a lot more. Highly visible chicken, fish, and pork are up 5%, 6%, and 3.4%, respectively. Near and dear to my heart, college tuition was up 3.7%, far outpacing the rate of inflation.

On the other hand, TVs are down 14%, but not everyone buys a TV every year. Year-over-year flat auto prices might go unnoticed, too, if one were not in the market for a car. Other big year-over-year downers included floor covering (negative 5%) and furniture (negative 2%)--both items that aren't purchased every day. Unless you use Lipitor, you might not have experienced falling drug prices, either.

Medical Inflation Still Tame
The medical inflation numbers still have the patina of a story too good to be true. Medical care commodities (goods, primarily drugs) were up just 0.5% year over year, while medical services are up just 2.9%. Weighting services and drugs produces an overall medical inflation rate of just 2.4% over the last 12 months. That compares with the 65-year average of 5.9% and the 10-year average of 4.0%. Recall that the dire warnings of health-care expenditures eating up the entire economy are based on medical inflation of 5% or so. If, and it is a huge if, price increases stayed at current low levels, the Medicare and Medicaid time bombs might be a little less explosive and federal budget deficits a lot smaller.

Looking Forward: Slightly Higher Inflation
Although inflation in November still may prove exceptionally low, I expect inflation to move back into the 1.5%-2% range for next year. Drug prices could move higher next year with fewer blockbuster drugs moving off patent.

Also, I surmise lower gas and oil prices just might curb supply, possibly causing this category to move back up, especially with cooler weather. However, a bumper crop of grains will limit food price increases in 2014.

Existing-Home Sales Fall as Expected
Falling pending home sales correctly predicted a rather large drop in existing-home sales, and that is exactly what we got. Sales fell back to 5.12 million units, after getting as high as 5.39 million units in July and August (on a seasonally adjusted annual rate basis). Recall that a rush to close homes before interest rates went even higher artificially drove home sales higher, at least temporarily. Now it's payback time.

On a year-over-year basis, growth rates are decelerating sharply as we begin to lap stronger results from the end of 2012, when the housing market really began to catch fire. Higher interest rates and lower affordability are not helping matters, either. Total transaction values continue to hold up much better than unit volumes. Inventories, while still very tight in some markets, are now higher than a year ago, the first time that has happened since March 2011. Prices and the mix of homes sold are also deteriorating modestly. The slower growth rate in existing-home sales will potentially lower housing's contribution to the GDP calculation for the fourth quarter. Housing contributed 0.4% to the GDP calculation in the third quarter.

Again, it's not that housing is falling apart. Instead, it is nearly impossible to sustain very high growth rates over multiple years. Housing will continue to be a big contributor to GDP growth, just not as large--and certainly not at an accelerating rate, either.

In the New-Home Segment, Builder Sentiment Continues to Hold Its Own
Builder sentiment has been overly bullish lately, but I had some fear that some of that overconfidence might be reversed with this month's report. Instead, the overall index held steady at 54, indicating that more builders were optimistic than pessimistic and their mood had only modestly soured since this summer's peak.

New homes carry more weight in the GDP calculation than existing homes. However, we haven't seen much data on new homes or housing starts because of the government furloughs. While the sentiment indicator hasn't been perfect, at least it provides some indication that the new-home market has not fallen apart while the government statisticians have been quiet.

Lumber Prices May Indicate That Home Construction Is Improving
With those quiet statisticians, I also took a quick peek at lumber prices, which can also provide some hints about the strength of the housing industry. The framing lumber price composite (according to trade publication Random Lengths) has moved up from the low $300s at the end of the third quarter to almost $400 in the latest weekly reading. That's also above the year-ago reading of $352 but still below the second-quarter high of more than $450. Again, this suggests that things in the housing world aren't falling apart, but aren't quite as robust as they were this spring.

U.S. Manufacturing Growth Accelerates Versus the Rest of the World
The Markit U.S. flash data from purchasing managers for November showed a sharp acceleration in the U.S., modest improvement in Europe, and a disappointing modest decline in China. It looked like the U.S. might be losing its multimonth lead in manufacturing growth as Europe and China came out of their slumps, but it now appears that U.S. industry is kicking into gear again. The market reacted sharply to the data, with China and emerging markets faltering on the news while the U.S. markets powered ahead. The Markit data, especially for China and Europe, has become almost as influential on markets as the employment report. Manufacturing is much more important to the non-U.S. economies.

The U.S. is hitting on a lot more cylinders manufacturing-wise than the rest of the world. First, autos remain strong not only in the U.S., but also in most of the rest of the world. Housing has been an engine of growth in the U.S. that hasn't been as available in Europe, and which the Chinese are trying to control in order to avoid a bubble.

Furthermore, Boeing (BA) and the whole aerospace industry continue to gear up in the U.S. for commercial aircraft production (though defense aircraft are slumping). And although there has been a lot of talk about the direct benefits of oil and shale production, it takes a lot of machinery and manufactured goods to get at that oil, which has provided a big boost to some equipment suppliers. Then there are the chemicals and plastics industries in the U.S. that are finally beginning to benefit from lower natural gas and electricity prices. I am also hearing some scuttlebutt that port construction in front of the Panama Canal expansion is also aiding U.S. manufacturers.

However, while the manufacturing data from PMI reports are looking better, actual shipments and orders from other reports are only modestly better for now. I think the true state of U.S. manufacturing is somewhere between the overly optimistic PMI reports and the more pessimistic orders and shipments reports. At a minimum, I can say that manufacturing continues to aid U.S. growth rates. We will get more news on actual shipment and orders next week with the durable goods report.

Housing Dominates Next Week's Reports
Pending home sales, housing starts and permits, and home prices are all on the docket for next week, with durable goods data being the only non-housing-related report of consequence.

The starts and permit data will probably be of greatest significance because we didn't have a September report, and the October data is delayed by about a week. Higher mortgage rates and prices had caused some new-home sales data to deteriorate over the summer, but the pattern certainly wasn't at all clear. Rates have fallen back a little, and some of the government-related uncertainty has been resolved, which might help the September and October starts and permits data.

Starts are expected to improve to 931,000 annualized units from 891,000 for the August report. That number is slightly ahead of the year-to-date average of 907,000 starts. Permits are expected to stay flat at 930,000 units--exactly matching the starts data. Permits are often considered a leading indicator of housing starts, but keep in mind that the data collection process and the timing of gathering of the raw data could skew these reports, especially in terms of how the data points are separated into the individual months and how the seasonal adjustment factors are applied. Therefore, only swings outside a range of 850,000-950,000 units for either starts or permits would do much to change my housing outlook. The mix between single-family and multifamily homes will also need to be examined closely.

Pending home sales have been in a real slump, with the index falling for three consecutive months as higher prices and higher mortgage rates began to weigh on buyers. That decline finally hit existing-home sales hard in the report for October. With rates lower now and the higher-rate-induced surge in late spring now behind us, I am hoping that pending home sales finally show some improvement in the October data to be released on Monday. My best guess is for a month-to-month improvement of 2% or 3%.

The cat is already out of the bag on home prices because of the CoreLogic (CLGX) data released earlier this month. Case-Shiller and FHFA data on Tuesday should both show a similar pattern of slowing month-to-month growth but still-elevated year-over-year data. The Case-Shiller data is still likely to show year-over-year growth of around 12% for the three-month period ended in October, but that rate of growth is likely to decelerate in the months ahead, based on higher inventories and higher rates.

With PMI data and industrial production reports modestly out of sync, I will be looking a little more closely at next week's durable goods report for October. Again, the effects of large airliner orders and shipments will need to be stripped out of the data to make it meaningful. Airline orders helped last month's durable goods order to surge 3.8%. Airline orders are expected to be down, so overall orders are expected to be down about 1.8%. Ex-aircraft orders, I suspect orders will be up, perhaps at an accelerating rate.