Chief Economist Scott Brown discusses the latest market data.
Election results (a divided Washington) and good news on a potential vaccine boosted share prices, although there were some concerns about surging COVID-19 cases (163,402 reported on November 12) and possible difficulties in distributing the vaccine.
Weekly jobless claims fell to 709,000, trending lower, but still very high by historical standards (the figures tend to be noisy in the final two months of the year). The Consumer Price Index (CPI) was unchanged in October (+1.2% y/y). Ex-food and energy, the CPI was also flat (+1.6% y/y). Prices that were depressed in the March/April lockdown rebounded in June, July and August, but there appears to be no broad-based pickup in underlying inflation in the last couple of months. The UM Consumer Sentiment Index fell in the mid-November reading, reflecting Republican disappointment in the election and concerns about rising COVID-19 cases.
Next week, the mid-month economic reports are expected to remain consistent with a moderate pace of growth. Unit motor vehicle sales edged down last month, which should restrain overall retail sales. September retail sales (+1.9%) were exaggerated by the seasonal adjustment (weaker back-to-school sales in August led to a smaller letdown in September, which shows up as a seasonally adjusted gain). Industrial production should continue to improve. Residential construction activity is expected to be unseasonably strong. None of this may matter much for the financial markets, which are likely to be focused on the virus and vaccine news.