Weekly Economic Update: October 19, 2020

Stocks climbed this week to their highest levels in more than a month.

For the week, the Dow, the Nasdaq, and the S&P 500 posted moderate gains, while the Global Dow and the Russell 2000 lost value. Year to date, the Nasdaq is more than 30.0% higher than its 2019 closing mark, pushed higher by mega-tech stocks. The S&P 500 is nearly 8.0% ahead of last year’s pace, while the Dow is barely above the break-even point.

Last Week’s Economic News

• The Consumer Price Index climbed 0.2% in September after advancing 0.4% in August. Over the past 12 months, the CPI has increased 1.4%. Consumer prices, less the more volatile food and energy components, increased 0.2% in September and are up 1.7% over the last 12 months.

• According to the latest information from the Bureau of Labor Statistics, the Producer Price Index advanced 0.4% in September after climbing 0.3% in August. Producer prices are up 0.4% for the 12 months ended in September.

• Sales at the retail level increased by 1.9% in September following a 0.6% jump in August. Retail sales are 5.4% above the September 2019 pace. Motor vehicle and parts dealers saw sales climb 3.6% last month, while sales at clothing and clothing accessories stores surged 11.0%. Sales at food services and drinking places increased 2.1%. Nonstore (online) retail sales increased 0.5% last month after soaring 23.8% in August.

• Prices for U.S. imports increased 0.3% in September following an advance of 1.0% in August. Despite the recent increases, overall import prices declined 1.1% for the year ended in September. The September increase was the largest one-month advance since the index rose 3.8% in December 2018.

• Industrial production fell 0.6% in September, its first decline after four consecutive months of gains. The index increased at an annual rate of 39.8% for the third quarter as a whole. Although production has recovered more than half of its February to April decline, the September reading was still 7.1% below its pre-pandemic February level. Manufacturing output decreased 0.3% in September and was 6.4% below the February level. The output of utilities dropped 5.6% as demand for air conditioning fell more than usual in September. Mining production increased 1.7% in September; even so, it was 14.8% below a year earlier. Overall, total industrial production was 7.3% lower in September than it was a year earlier.

• The government deficit for September, the last month of the fiscal year, was $125 billion. Monthly receipts totaled $373 billion while monthly expenses were $498 billion. The total deficit for fiscal year 2020 was a record-setting $3.132 trillion, an increase of 218% from fiscal year 2019. Expenditures increased 47% while receipts fell 1.0%. The extraordinary annual deficit pointed to large expenditures for COVID-19 relief.

• For the week ended October 10, there were 898,000 new claims for unemployment insurance, an increase of 53,000 from the previous week’s level. For perspective, a year ago there were 218,000 initial claims for unemployment insurance, the rate for insured unemployment claims was 1.2%.

Eye on the Week Ahead

Have a nice week!

Sincerely,

Robert G. Carpenter