Overview: The most significant economic report released over the past week revealed that retail sales were a good deal stronger than expected. Investors have grown accustomed to upside surprises in the economic growth data, however, and the impact was relatively small. Mortgage rates ended the week a little higher.
Consumer spending accounts for over two-thirds of U.S. economic activity, so the retail sales data is a key indicator of growth. Despite rising prices, retail sales in October surged 1.7% from September, and were a massive 16% higher than a year ago. Particular strength was seen in sales of electronics and appliances, while weakness was seen in the clothing category this month. Economists expect consumer spending to remain elevated through at least the remainder of the year.
With the lingering shortage of available homes in many areas, investors have been closely watching the monthly reports on housing starts, and the most recent data contained mixed news. In October, overall housing starts unexpectedly declined slightly from September, but still were higher than a year ago. Building permits, a leading indicator of future activity, rose 4% from September. According to home builders, rising prices and shortages for land, materials, and skilled labor remained obstacles to a faster pace of construction.
The latest Job Openings and Labor Turnover Survey (JOLTS) report indicated that the labor market remains very tight. At the end of September, there were an enormous 10.4 million job openings, close to the recent record high. A large level of job openings reflects a strong labor market, as companies struggle to hire enough workers with the necessary skills. A record- high number of employees also willingly left their jobs in September, another sign of labor market strength, since most people quit only if they expect that they can find better jobs.
Retail Sales (% change)
Week Ahead
November 22 — Existing-Home Sales report
November 24 — New-Home Sales report
November 24 — Core Personal Consumption Expenditures (PCE) Price Index
November 25 — Mortgage markets closed in observance of Thanksgiving