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Weekly economic review & outlook Inflation soars as pandemic lingers

November 15, 2021

You Need to Know

Week in review

Mostly pandemic-related categories lead CPI increase

The major drivers of the above-consensus CPI data for last month have more to do with supply chain issues rather than sticky price increases.

Small business optimism fell for a second straight month

Small business owners are fearing a worsening economy thanks in part to rising inflation, as 37 percent now expect it to worsen.

Week Ahead

Forecasts

Retail sales expected to surge due to strong underlying demand and rising prices

We project growth in total retail sales of 2.3 percent, while growth in retail sales ex-autos should come in at a still strong 1.8 percent. This would be the highest growth in total retail sales since the stimulus-driven surge in March.

Industrial production likely fell again

The latest ISM manufacturing index showed flat month-over-month production growth as activity continues to be held back by supply constraints for both labor and materials. Additionally, October was a relatively warm month, likely resulting in lower utility usage. Taken together, we project a fall in industrial production (IP) of 0.5 percent, the third consecutive decline for IP.

Small increase projected for housing starts

Home construction continues to be limited by several factors, including a persistent shortage of workers, lack of buildable lots, and product supply shortages. Homebuilders are trying to increase production, leading to a modest increase in starts for the month. We project an annualized pace of housing starts of 1.60 million units for October.

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. Hear our recent podcast to learn more.

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