Weekly Economic Update: December 21, 2020

Last Week’s Economic News

• Following its meeting last week, the Federal Open Market Committee decided to keep the target range for the federal funds rate at 0.00%-0.25%. The Committee expects it will maintain this target range until labor market conditions have reached levels consistent with the Committee’s assessments of maximum employment and inflation has risen to 2.0% and is on track to moderately exceed 2.0% for some time. The Committee will also continue to increase its holdings of Treasury securities and mortgage-backed securities at the current pace.

• Prices for U.S. imports ticked up 0.1% in November after edging down 0.1% in October. Higher fuel prices in November (4.3%) more than offset lower nonfuel prices. Despite the recent increases, prices for imports decreased 1.0% from November 2019 to November 2020. Export prices also rose in November, increasing 0.6% following advances of 0.2% in October. Export prices fell 1.1% from November 2019 to November 2020, despite increases in each of the last six months.

• Retail sales stepped back in November, falling 1.1% behind their October pace. However, retail sales are 4.1% ahead of last November’s totals. Retail trade sales were down 0.8% from October, but 7.1% above last year. Nonstore (online) retailers were up 0.2% in November and are 29.2% ahead of November 2019. While overall sales at the retail level have been impacted by the pandemic, particularly hard hit were sales at food services and drinking places (-4.0%), clothing and clothing accessories stores (-6.8%), motor vehicle and parts dealers (-1.7%), electronics and appliance stores (-3.5%), and gasoline stations (-2.4%).

• Industrial production continued to accelerate in November, increasing 0.4% from October. After falling 16.5% between February and April, industrial production has risen to within 5% of its pre-pandemic (February) level. In November, manufacturing output advanced 0.8% for its seventh consecutive monthly gain. Manufacturing of motor vehicles and parts increased 5.3% last month, contributing significantly to the gain in factory production. The output of utilities declined 4.3% as warmer-than-usual temperatures reduced the demand for heating. Mining production increased 2.3% after decreasing 0.7% in October. Overall, total industrial production was 5.5% lower in November than it was a year earlier.

• The housing sector continued to show strength in November. The number of residential building permits issued grew by 6.2% over October’s rate. Single-family authorizations in November were 1.3% above the October figure. Housing starts increased 1.2% in November over October. Single-family housing starts in November were 0.4% above the October number. Privately-owned housing completions in November were 12.1% below the October estimate. Single-family housing completions in November were 0.6% below the October rate.

• For the week ended December 12, there were 885,000 new claims for unemployment insurance, an increase of 23,000 from the previous week’s level, which was revised up by 9,000. According to the Department of Labor, the advance rate for insured unemployment claims was 3.8% for the week ended December 5, a decrease of 0.1 percentage point from the prior week’s rate. For comparison, during the same period last year, there were 229,000 initial claims for unemployment insurance, and the insured unemployment claims rate was 1.2%. The advance number of those receiving unemployment insurance benefits during the week ended December 5 was 5,508,000, a decrease of 273,000 from the prior week’s level, which was revised up by 24,000. States and territories with the highest insured unemployment rates in the week ended November 28 were California (7.0%), New Mexico (6.7%), Alaska (6.6%), Hawaii (6.5%), Nevada (6.1%), Illinois (5.6%), Puerto Rico (5.6%), Pennsylvania (5.5%), Massachusetts (5.4%), and the Virgin Islands (5.4%). The largest increases in initial claims for the week ended December 5 were in California (+48,341), Illinois (+33,485), Texas (+22,729), Pennsylvania (+16,955), and New York (+16,814), while the largest decreases were in Louisiana (-2,666), Kentucky (-1,151), New Mexico (-378), and North Dakota (96).

Eye on the Week Ahead

Sincerely,

Robert G. Carpenter