December 15th, 2021
Consumer prices saw their fastest increase in nearly 40 years, while consumer sentiment improved, and layoffs continued falling.
Consumer prices notched up in November, with the Consumer Price Index for All Urban Consumers growing 0.8 percent during the month, according to last week’s report from the Bureau of Labor Statistics. Compared to the same period a year ago, November’s index was up 6.8 percent from November 2020, marking the fastest rate of year-over-year price growth since 1982.
The index for all items except for the volatile food and energy categories – known as core inflation – rose 0.5 percent in November. The energy index increased 3.5 percent in November, with the gasoline index increasing 6.1 percent for the month. The food index grew 0.7 percent, with the index for food at home rising 0.8 percent.
Other categories that saw large increases were prices for used cars and trucks, which increased 2.5 percent; apparel, which grew 1.3 percent; and new vehicles, which rose 1.1 percent.
The reasons for the price increases are clear: continued supply chain issues, with snarled shipping routes and clogged ports, as well as manufacturing disruptions. The surprise is that the length of the impact of these problems was considered to be temporary, but has lasted much longer than anticipated.
The entity that can help control this inflation is, of course, the Federal Reserve, and while the Fed has hung back in past months to monitor the situation, experts are anticipating that the Fed will move to taper its bond purchases and raise interest rates.
“It seems pretty clear that they’re going to speed up the taper,” UBS Senior Economist Alan Detmeister told the New York Times.
Consumer outlook improved in December, with the Index of Consumer Sentiment rising to a score of 70.4 for the month, which was up 4.5 percent from November’s score of 67.4, according to last week’s preliminary results from the University of Michigan Surveys of Consumers. That said, compared to the same period a year ago, this was 12.8 percent below December 2020’s score of 80.7.
The Index of Current Economic Conditions – which describes how consumers feel about the current state of the economy and their place in it – ticked up to 74.6 for December, which was 1.4 percent above November’s ranking of 73.6. When compared to the same period a year ago, December was 17.1 percent below December 2020’s score of 90.0.
The Index of Consumer Expectations – which assesses how consumers feel about where the economy is headed – improved in December, rising to 67.8, which was 6.8 percent up from November’s score of 63.5. When compared to last year, December’s score was 9.1 percent below December 2020’s ranking of 74.6.
“The more interesting result was the large disparity between monthly gain among households with incomes in the lowest third (up 23.6 percent) of the income distribution compared with the modest losses among households in the middle (down 3.8 percent) and top third (down 4.3 percent),” said Surveys of Consumers’ Chief Economist Richard Curtin. “While small differences in the direction of change are rather common, it is quite unusual to record such a large change in the bottom third: a larger one-month percentage was recorded only once before, a gain of 29.2 percent in June 1980.
“The core of the renewed optimism among the bottom third was the expectation of income increases of 2.9 percent during the year ahead; the last time a higher gain for this group was expected was in 1981,” he added.
Initial Jobless Claims
In employment news, first-time claims for unemployment benefits filed by recently unemployed Americans during the week ending Dec. 4 dropped to 184,000, a decline of 43,000 claims from the previous week’s revised total of 227,000, the Employment and Training Administration reported last week.
This was much lower than economists’ expectations of a smaller decline in initial jobless claims to 211,000, and marked the lowest level for initial claims since Sept. 6, 1969’s level of 182,000. Economists consider anything lower than 300,000 claims a sign of a growing job market.
The four-week moving average, which is considered a more stable measure of jobless claims, fell to 218,750, which was 21,250 claims below the preceding week’s revised average of 240,000 claims. This marked the lowest level for the four-week average since March 14, 2020, when it was 225,500.
This week, we can expect:
Tuesday – Producer prices for November from the Bureau of Labor Statistics.
Wednesday – Retail sales for November and business inventories for October from the Census Bureau; import prices for November from the Bureau of Labor Statistics.
Thursday – Initial jobless claims for last week from the Employment and Training Administration; housing starts for November from the Census Bureau and Department of Housing and Urban Development; industrial production and capacity utilization for November from the Federal Reserve.
Please drop me an email or call if you have any questions – or someone you know is in need of expert advice. I love to help those you care about. If you have a referral please click the button down below. Your referrals are the heart and lifeblood of my business.
Mission San Jose Mortgage
2111 W. March Lane, Suite B100
Stockton, CA 95207