We break down timely topics, centered on the major economic events around the world and their impacts to financial markets, in order to help you simplify client conversations around important investing decisions.
Despite a shortage of workers, as well as supply chain and transportation challenges within many industries, economic activity remained robust in October while inflation jumped. Payroll growth has been strong in recent months even as many businesses continue to report difficulties finding workers. But faster and broader inflation is a growing concern as supply chain dislocations remain in place.
This week saw very positive data across the economy, including retail sales, the National Association of Home Builders housing market index, and industrial production. Yet supply chains are still strained and inflation is at its highest level in several years. Nationwide’s Chief Economist David Berson and Senior Economist Ben Ayers provide their perspective on these reports and whether or not they suggest a pickup in the economy ahead.
Intense supply chain disruptions and labor shortages resulted in slower growth in the third quarter, but recent high-frequency data suggest that growth conditions are improving as Covid cases wane and as supply chains slowly heal. Job growth was strong again for October, and the most recent housing data are the best since January. These factors all point to much better growth to close out the year and provide reason for optimism that some lost growth could be recovered in the first half of 2022. But higher inflation is a growing risk. See Nationwide Economics’ take on what's happening and why this month in the economy.
The annual change in the consumer price index (CPI) increased to a thirty-year high for October, as energy prices and increasing rents drove the gains. Pandemic related issues continue to be a major factor driving price increases, and while there are hints that some supply chain issues are peaking (or have already), it will still take time for the bottlenecks to heal by enough to ease inflationary burdens. Job openings and small business optimism fell modestly for a second and third straight month, respectively, for October while consumer sentiment dropped more sharply for early November.
Consumer price data for October were released this week and the CPI was much hotter than expected, especially for this point of the business cycle. Nationwide’s Deputy Chief Economist Bryan Jordan and Senior Economist Ben Ayers share their perspectives on if inflation is mostly the result of Covid’s disruptions to supply chains and how the Fed might react to it.
As expected, the Fed announced that it will taper asset purchases starting this month and finishing in June. The taper announcement was followed later in the week by an employment report that continued to show progress in getting people back to work, particularly in the service sector where the most recent ISM survey showed robust growth, portending a solid fourth quarter for economic activity
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