Last Week’s Economic News in Review (November 17th, 2021)

November 17th, 2021

Consumer prices saw their largest yearly jump in decades, while wholesale inventories increased, and layoffs continued declining.

Consumer Prices

Consumer prices surged in October, with the Consumer Price Index for All Urban Consumers growing 0.9 percent during the month, according to last week’s report from the Bureau of Labor Statistics. Compared to the same period a year ago, October’s index was up a sizable 6.2 percent from October 2020, marking the biggest year-over-year gain since December 1990.

The index for all items except for the volatile food and energy categories – known as core inflation – rose 0.6 percent in July. The energy index increased 4.8 percent in October, with the gasoline index increasing 6.1 percent for the month. The food index grew 0.9 percent, with the index for food at home rising 1.0 percent.

Clearly, the supply chain issues impacting the economy are resulting in both core price increases as well as spikes in more volatile indexes. With even used cars growing more expensive (used vehicle prices were up 2.5 percent in October), the price pressures in the economy are broad. The question is, when will the Federal Reserve act to contain inflation?

For now, it appears the Fed is continuing to monitor the demand side of the economy every bit as closely as it is watching the supply side to gauge how much employment and wages will grow before acting to boost interest rates.

“We don’t think it’s time yet to raise interest rates,” Federal Reserve Chairman Jerome Powell said at a press conference earlier this month. “There is still ground to cover to reach maximum employment.”

Wholesale Activity

Looking a little more closely at the economy’s supply side, wholesale inventories rose to $742.2 billion at the end of September, which marked a 1.4 percent gain over August, the Census Bureau reported last week. This outpaced the 1.0 percent growth economists had expected for the month, and when compared to the same period a year ago, September’s inventories were 13.1percent over September 2020.

Some key categories that helped drive September’s inventory expansion included farm products, which grew 9.6 percent for the month; apparel, which was up 4.2 percent; electrical goods, which expanded 3.6 percent; metals, which rose 3.5 percent; and hardware, which increased 2.9 percent.

Meanwhile, wholesale sales increased to $603.1 billion in September, which was 1.1 percent over August. Compared to the same period last year, September’s wholesale sales were up 22 percent over September 2020’s sales.

September’s inventory-to-sales ratio hovered at 1.23, unchanged from August’s 1.23. That even pace between sales growth and inventory growth reflects the steady demand from the retail sector for whatever wholesalers can get to them.

Initial Jobless Claims

In employment news, layoffs continued to drop. First-time claims for unemployment benefits filed by recently unemployed Americans during the week ending October 23rd ticked down to 267,000, a decline of 4,000 claims from the previous week’s revised total of 271,000, the Employment and Training Administration reported last week.

This was slightly higher than economists expectations of a larger decline in initial jobless claims to 260,000, and marked the lowest level for initial claims since March 14, 2020’s weekly claims of 256,000. 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 278,000, which was 7,250 claims below the preceding week’s average of 285,250 claims.

This week, we can expect:

Tuesday – Retail sales for October and business inventories for September from the Census Bureau; import prices for October from the Bureau of Labor Statistics; industrial production and capacity utilization for October from the Federal Reserve.

Wednesday – Housing starts and building permits for October from the Census Bureau and the Department of Housing and Urban Development.

Thursday – Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for October from The Conference Board.

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Omar Khamisa
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Mission San Jose Mortgage
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