Last Week’s Economic News in Review

February 17, 2021

Wholesale inventories increased, as did consumer prices. Meanwhile, layoffs declined.

Wholesale Activity

Wholesale inventories rose to $651.5 billion at the end of December, which marked a 0.3 percent gain over November, the Census Bureau reported. That said, wholesale inventories still have to catch up to last year, given that December’s inventories were 1.6 percent below December 2019.

Some key categories that helped drive December’s inventory gains included alcohol, which grew 4.6 percent in December; furniture, which expanded 2.9 percent; professional equipment, which was up 2.6 percent; pharmaceuticals, which rose 2.2 percent; and farm products, which increased 1.9 percent.

Meanwhile, wholesale sales grew to $503.8 billion in December, which was 1.2 percent over November, and when compared to the same period last year, was up 1.7 percent from December 2019’s sales.

December’s gains helped narrow the inventory-to-sales ratio to 1.29. A declining ratio is welcome news, because it reflects an increasing demand for wholesale goods. Moreover, increased wholesale inventories indicate wholesalers’ anticipation of increased demand from the consumer sector, which drives roughly 70 percent of all U.S. economic activity.

Consumer Prices

Consumer prices were flat with the Consumer Price Index for All Urban Consumers grew by its fastest pace in five months in January, rising 0.3 percent for the month, according to last week’s report from the Bureau of Labor Statistics.

The big driver for January’s growth was energy prices, with gasoline prices rising 7.4 percent and the indexes for electricity and natural gas both rising 3.5 percent.

Meanwhile, the index for all items except for the volatile food and energy categories – known as core inflation – saw no change in January. That said, the report, along with a push on Capitol Hill for a broad stimulus package, did prompt economists to start discussing increased inflation.

“Though inflation remained moderate at the start of year, the opening up of the economy, the possibility of a bigger stimulus package making it through Congress, and shortages of inputs all point to warmer inflation in coming months,” BMO Capital Markets senior economist Jennifer Lee told MarketWatch.

Initial Jobless Claims

Looking at weekly layoffs data, initial jobless claims filed by recently unemployed Americans during the week ending February 6th fell to 793,000, a drop of 19,000 claims from the previous week’s 812,000 claims, the Employment and Training Administration reported last week.

The four-week moving average, which is considered a more stable measure of jobless claims, declined to 823,000, which was 33,500 claims lower than the preceding week’s average of 856,500 claims.

“We’re stuck at this very high level of claims, but activity is picking up,” ZipRecruiter.com labor economist Julia Pollak told the New York Times.

This week, we can expect:

    Wednesday – Retail sales for January and business inventories for December from the Census Bureau; industrial production and capacity utilization for January from the Federal Reserve.

    Thursday – Initial jobless claims for last week from the Employment and Training Administration; housing starts and building permits for January from the Census Bureau and the Department of Housing and Urban Development; import prices for January from the Bureau of Labor Statistics.

   Friday – Existing home sales for January from the National Association of Realtors.

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Omar Khamisa
Owner
Mission San Jose Mortgage
2111 W. March Lane, Suite B100
Stockton, CA 95207
Office: 209-651-2000
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Omar@MSJMortgage.com

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