Market Briefing

  • US Economy
  • Housing
  • Power Tool Industry
  • Distribution
  • Canada
  • Market Trends
  • PDF
  • US Economy
  • Housing
  • Power Tool Industry
  • Distribution
  • Canada
  • Market Trends
  • PDF

US Economy

US Economy January 2021

1/18/2021

 
Picture
Markets closed out a very volatile year on a high note, with the DOW and S&P closing at record highs and the NASDAQ hitting a record high before falling back slightly. After plunging in February and March, markets began recovering as the economy found footing, and generally trended upwards for the remainder of the year. For all of 2020, the DOW gained 7.25%, the S&P rose 16.3% and the tech-heavy NASDAQ soared 43.6%.
 
Consumer Spending Falls 0.4% 
Consumer spending fell 0.4% in November
after rising a downwardly revised 0.3% in October. It was the first decline in consumer spending since April. With new CV19 cases accelerating in much of the country, many states are adopting new restrictions and have closed or limited hours and capacity at retailers and restaurants and curtailed events and gatherings. Personal incomes fell 1.1% in November as unemployment programs and other aid programs expired. It was the third drop in personal incomes in the last four months. Consumer spending accounts for 70% of US economic activity.
 
Consumer Prices Rise 0.2%
The Consumer Price Index (CPI) rose 0.2% in November
after being essentially flat in October. The CPI was up 1.2% year over year for the second consecutive month. Excluding the volatile food and energy components, core prices rose 0.2% after being unchanged in October. In the 12 months through November the rate of increase for core prices remained 1.6%. Economists expect inflation to remain under control in the coming months until vaccines are widely available and consumers feel more confident about shopping, attending events and traveling. Shelter prices rose just 0.1% for the third consecutive month, with rental prices trending down. Shelter accounts for 42% of the core CPI, which should keep a lid on overall price growth. Wells Fargo expects inflation to increase, but remain below the pre-pandemic trend for quite some time.
 
Consumer Confidence Falls to 88.6
Picture
  • The New York-based Conference Board’s Consumer Confidence Index fell to 88.6 in December after falling to a downwardly revised 92.9 in November.
  • The Present Situation Index, which is based on consumers’ assessment of current business conditions, fell sharply to 93.3 after rising to a downwardly revised 105.9 in November.
  • Expectations increased to 87.5 in December after dropping to a downwardly revised 84.3 in November.
  • Rising CV19 numbers across the country helped send confidence down for another month despite encouraging news about vaccines and the resolution of the presidential election. 
*A level of 90 indicates that the economy is on solid footing; a level of 100 or more indicates growth. Analysts caution that the real driver behind consumer spending is income growth and that labor market trends are a more accurate predictor of consumer behavior.
 
Unemployment Remains at 6.7% 
Picture
  • The unemployment rate remained at 6.7% in December but the economy shed 140,000 jobs, the first drop in jobs since April. *
  • Thus far the US has recovered 56% of the more than 22 million jobs lost because of CV19. Payroll employment is still 9.8 million jobs below pre-pandemic levels.
  • The leisure and hospitality sector lost nearly 500,000 jobs, with three-quarters of the losses in restaurants and bars.
  • The combination of surging CV19 cases, colder weather and new closures and other measures to halt the spread led to layoffs, but there were also job gains in retail and a handful of other industries.
  • Wells Fargo believes that hiring will ramp up quickly once CV19 is under control due to pent-up demand.
* The economy needs to create about 120,000 new jobs each month to keep up with growth in the working-age population.
 
Job Openings Rise More than Expected
U.S. job openings rose by about 100,000 jobs in October to 6.65 million
after rising to 6.4 million in September, according to the latest Job Openings and Labor Turnover Survey (JOLTS) from the US Bureau of Labor Statistics (BLS). Job openings are still 5% below pre-pandemic levels in February but indicate that the labor market is recovering more quickly than payrolls would suggest. Wells Fargo notes that at one point job openings were down 31% year over year. By the October report they were down 9%, well within the range of the two prior downturns, and below the contraction during the Great Recession. The labor force has fallen by 4.1 million workers since February; many people have stopped looking for work over concerns about childcare and healthcare, including people sick with CV19 or in quarantine. Wells Fargo also noted that due to the relatively small sample-size, JOLTS may be painting a distorted picture, as response is coming from stronger businesses that have kept their doors open and are responding to the survey. JOLTS is a lagging indicator but is closely watched by the Federal Reserve and factors into decisions about interest rates and other measures.
 
Chicago PMI Rises to 59.5
The Chicago Purchasing Managers Index (Chicago PMI) rose to 59.5 in December
after falling to 58.2 in November and remained in positive territory for the sixth consecutive month after spending a full year below 50. New Orders fell two points, but Production inched up just over a point as business activity picked up. Prices Paid rose 2.2 points to the highest level since 2018, with firms reporting higher prices for metals. The special question asked in December concerned respondents’ business activity forecast for 2021. Just under half of the respondents believed their businesses would grow less than 5%; the remainder expected growth between 5% and 10%. Looking back to when the series began in 1967, the PMI has ranged from 20.7 in June 1980 to 81.0 in November 1973.
               
Wholesale Prices Rise 0.1%
The Producer Price Index (PPI) rose 0.1% in November
after rising by the same percentage in October. The increase was in line with expectations. The PPI has risen for five consecutive months, but at a very slow pace. In the 12 months through November the PPI rose 0.8% after being up 0.5% year over year in October. Excluding the volatile food, energy and trade services components, producer prices rose 0.1% in November after rising 0.1% in October and were up 0.9% over the past twelve months. Over the past 12 months the PPI for inputs to new residential construction has jumped 6.6%, driven by climbing prices for many of the materials used in construction. Regardless, strong demand from builders and remodelers may keep prices high, according to Data Digest from the Associated General Contractors of America (AGC). Analysts noted that while pandemic-related price distortions are reversing, the trend in inflation is expected to remain subdued for some time.
 
Q3 GDP Revised up to 33.4%
GDP growth for the third quarter was revised up slightly to 33.4%
from 33.1%, according to the third and final estimate from the Commerce Department. The third quarter rebound followed a record 31.4% decline in the second quarter that reflected the impact of business lockdowns and other restrictions put in place to combat the pandemic. Analysts believe that after two quarters of distorted data, GDP will return to a somewhat more normal growth rate in the fourth quarter of 2020, when economists expect growth of about 3.5%. Thus far the economy has proven more resilient than expected. The Fed recently revised their 2020 GDP forecast to a decline of 2.4% compared to the prior estimate of a 3.7% drop.  Forecasts for 2021 GDP range from 3.9% to 5.9% growth.
 
Stimulus Package Passed
After months of tense negotiations, Congress passed a $900 billion CV19 relief bill just before Christmas.
Despite saying he would veto the bill because the stimulus checks to individuals were not large enough, President Trump signed it into law late on December 27, averting a partial government shutdown. The bill provides $600 for each American making less than $75,000 annually, as well as $600 for each dependent. The legislation also gives unemployed workers a $300 weekly federal payment that runs through March 14th and makes food stamps payments more generous. The Paycheck Protection portion of the bill contains more funds that should be accessible to more small businesses. The bill also provides funding for states to handle vaccine distribution. 
Next Section
​© Robert Bosch Tool Corporation.  All rights reserved, no copying or reproducing is permitted without prior written approval.

Comments are closed.


    Archives

    March 2023
    February 2023
    January 2023
    December 2022
    November 2022
    October 2022
    September 2022
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    March 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    July 2021
    June 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    October 2018
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016
    May 2016

    Picture
    Picture
    Picture
    Picture
    Picture
    Picture
    Picture


    ​Contact Us

Powered by Create your own unique website with customizable templates.