Weekly economic review & outlook
Inflation remains high, but it may be stabilizing
October 19, 2021
You Need to Know
Week in review
The core CPI held steady, but the risks aren’t over
Consumer price increases continue to be strong and there are growing concerns that above-trend price gains may linger longer than expected previously.
Small business optimism edged lower
Inflation and hiring continue to weigh heavily on small businesses owners and their outlook for the economy. But business activity remains solid.
Industrial production should rise further
We project growth of 0.3 percent for IP in September, a solid gain but slower than in the past four months.
Modest decline expected for housing starts
We project a slight step down to an annualized pace of 1.61 million units for September housing starts.
Existing home sales expected to rise
We project a rise in the annualized pace of existing home sales for September to 6.15 million units.
Inflation appears to be the topic du jour for nearly everyone today, as price gains continue to be surprisingly strong. This is unlikely to subside in the near term given the continued pressures from supply chain disruptions and labor market dynamics (although we still expect inflation to partially subside next year). The impact from rising prices can be seen in other economic data, with small business optimism and consumer sentiment edging lower and consumers being forced to spend more with higher food and energy costs (among other things), boosting retail sales.