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November Economic Review: Lingering supply woes drive slower growth and faster inflation

November 16, 2021

Economic Review: Economic Review: Growth slowed in the third quarter, but should pick up again soon (Page 3)

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.

Financial Markets Review: Financial Markets: Strong earnings drive an equities rebound (Page 4)

The S&P 500 Index shot upward last month, quickly erasing the almost five percent retreat for September. Third-quarter earnings propelled the rally as revenue growth and profit margins were healthy. Short-term interest rates rose on anticipation of tightening by the Federal Reserve next year, while long-term rates moved higher, then lower, and ended the month little changed (but they have slipped again early this month). Additionally, oil prices remained elevated, with OPEC+ announcing that it would not accelerate the rate at which it plans on increasing production.

The Outlook: The Outlook: Rents add to near-term inflation risks (Page 5)

After moving up only tamely since the Covid recession early last year, residential rental prices have accelerated noticeably in recent months. With rents accounting for nearly a third of the consumer price index, the recent trend is yet another source of near-term upside inflation risk.

Go deeper with the full November report linked below.