Economic highlights last week continue to suggest that major economies are recovering from the recession although policymakers remain cautious about sustainability.

In the US, retail sales were slightly stronger than expected with a 1.5% decline in September following a revised 2.2% increase in August. The decline was largely due to a drop in car sales, indicating that consumer demand remains weak when not supported by government incentives. Consumer prices rose 0.2% in September in line with expectations.

Minutes of the Federal Open Market committee meeting revealed there was no support for higher interest rates even through there is substantial evidence that economic conditions are improving.

In the Eurozone, German investor sentiment surprised economists by dropping in October for the first time in three months, hitting its lowest level since July. The ZEW economic think tank said its monthly poll of economic sentiment fell to a reading of 56 from 57.7 in September.

Meanwhile, Eurozone industrial output rose 0.9% in August following a revised monthly increase of 0.2% in July. The highest rise was in the production of durable goods, which rose 5.3%, pointing to a pick-up in consumer demand. However, production is still 15.4% below that of a year ago.

In the UK, the headline consumer inflation rate was weaker than expected with a drop to 1.1% for September from its prior 1.6%, which was the lowest annual rate for five years. This supports the impression that the Bank of England will maintain very low interest rates.

In the labour market, data was better than anticipated in September, as the number of claimants rose by 20,800, when economists had expected an increase of 25,000. This was the lowest increase since May 2008, leaving the unemployment rate unchanged from August's 7.9%.

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