Week in Review: October 16, 2020

A busy week for economic data saw better-than-expected results for housing and the consumer, along with continued growth in manufacturing. However, the most notable release of the week, September’s employment report, provided more mixed signals.

Economic data for the week was mixed, reinforcing the current sentiment that overall economic growth is decelerating from the strong initial rebound experienced in 2Q20, to a slower, (more sustainable?) run rate.

Perhaps the most notable data point was retail sales, which rose 1.9% in September, significantly better than the expected 0.7% increase. However, the gain was not inconsistent with the nearly 16-point jump in consumer confidence in September, the largest monthly gain since 2003. Increasing consumer confidence is often viewed as a precursor to increased consumer spending.

Manufacturing data gave conflicting signals. At the national level, activity declined 0.3% in September, part of a broader and unexpected decline in overall industrial production, which fell 0.6%. The decline in industrial production, the first in five months, was below the expected 0.5% increase. Regional manufacturing data out of New York and Philadelphia continued to expand, with notable improvements in new orders and the length of the average work week.

Consumer inflation (CPI) remains well contained with headline and core CPI both registering a 0.2% monthly gain in September, while rising 1.4% and 1.7% respectively from a year ago.

Initial jobless claims rose nearly 55K to 898K, above the expected 825K and the highest level since late August. The trend in continuing jobless claims was more positive, with claims falling by nearly 1.2M to just over 10M.