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Weekly economic review & outlook Consumer price gains jump to a 39-year high

December 13, 2021

You Need to Know

Week in review

Gas, cars, and rents lead the CPI higher

Mostly idiosyncratic factors continue to keep inflation rising faster than historical averages. For example, motor fuel has been the contribution leader from a monthly and yearly perspective.

Consumer sentiment up despite inflationary pressures

Consumer sentiment was up in early December despite rising prices, as those on the lower end of the pay scale expect higher wages in 2022.

Week Ahead

Forecasts

Another strong gain likely for retail sales

With the unemployment rate falling to a new pandemic low, wages continuing to move higher, and household net worth surging, demand factors for spending remained strong. Auto sales, however, slipped again because of the shortage of microchips. We project growth in total retail sales of 0.8 percent for November, with gains excluding autos of 1.0 percent.

Small increase expected for housing starts

Construction has been limited by shortages of inputs (including workers) and a lack of buildable lots — and these issues continued in November. We project November’s annualized pace of housing starts climbed to 1.59 million units, which seems to be close to maximum in the current environment.

Another rise likely for industrial production (IP) in November

The production component of the November ISM manufacturing index showed its highest reading since April. November was a relatively normal month for weather, so utilities shouldn’t contribute significantly to IP growth, while continued high crude oil prices probably led to an increase in energy production (mining). In total, we project growth of 0.4 percent for IP for November.

The consumer price index (CPI) continued its blistering pace of increase last month as gasoline, motor vehicle, and shelter costs all led the way. While there are some signs that price gains could slow moving forward, there remains plenty of concern as to how sticky prices will be at the current levels. Consumers have shown that they are willing to live with higher prices for now, but costs are weighing on sentiment which may impact spending down the road.

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