Week in Review: November 27, 2020

A busy week for economic data could arguably be described as mixed. Housing and manufacturing generally exceeded expectations, while consumer and employment data generally missed expectations.

Measures of consumer confidence and sentiment contracted slightly from last month’s readings. Interestingly it was consumers’ outlooks for six months out, not current conditions, that pulled the broader readings down. That was somewhat counterintuitive given the current surge in coronavirus cases vs. the increasing likelihood that vaccines will widely available by mid-2021.

Consumer spending rose 0.5% in October, slightly better than expected but down from the 1.2% pace in September, and the slowest increase since April.  Incomes, however, fell 0.7%, dragged down by a 6.2% decline in government transfers, including unemployment benefits. That was partially offset by a 0.7% increase in wages and salaries. The combination of slower spending and falling incomes does not bode well for the holiday shopping season, especially with no clear signs that Congress is close to passing additional stimulus.

Durable goods orders exceeded expectations, boosted by strong defense spending, offset in part by further declines in civilian aircraft orders. Core business spending rose 0.7%, slightly better than expected but down from the strong 1.9% increase recorded in September.

Housing data remained strong with October new home sales registering at an annualized pace of 999K. Compared to a year ago, new homes sales increased a very strong 41.5%.