Chief Economist Scott Brown discusses the latest market data.
As expected, the Federal Open Market Committee accelerated the reduction (“tapering”) of its monthly asset purchases (now expected to end in March rather than June). The policy statement indicated that “job gains have been solid in recent months and the unemployment rate has declined substantially.” In his press conference, Chair Jerome Powell noted that “while the drivers of higher inflation have been predominantly connected to the dislocations caused by the pandemic, price increases have now spread to a broader range of goods and services.”
Retail sales rose 0.3% in the advance estimate for November (+18.2% y/y). While the increase was disappointing relative to expectations, it followed a 1.8% jump in October and the level of sales remains about 15% above the pre-pandemic trend. The Producer Price Index rose 0.8% in November (+9.6% y/y). Import prices rose 0.7% in November (+11.7% y/y). Manufacturing output rose 0.7% (+4.8% y/y and +2.1% over the last two years), with broad gains across industries led by a 2.2% gain in motor vehicles (down 5.4% y/y and 6.3% lower than two years ago).
Next week, the economic data reports should not be market moving. Figures on durable goods shipments and personal spending will help to fill in the 4Q21 GDP picture. Looking ahead, we’ll get some fresh economic data in the first week of January, although the ISM surveys and employment data will be subject to seasonal noise.