Week in Review: December 11, 2020

Economic news was headlined by inflation data which showed that it remains tepid, at best. An unexpected jump in unemployment claims reflected the economic impact of the current surge in coronavirus cases.

Headline consumer inflation (CPI) rose 0.2% in November, matching October’s increase and exceeding the forecast estimate of 0.1%. Compared to a year ago, headline inflation increased just 1.2%, again matching October’s increase. Core inflation posted similar results, increasing 0.2% and 1.6%, on a monthly and annual basis, respectively. Business inflation (PPI) corroborated the general lack of inflation as core PPI rose just 0.1% and 1.4%, on a monthly and annual basis, respectively. As we have discussed previously, for now the threat of rising inflation remain a non-issue for both the Fed and the broader economy.

A preliminary reading of consumer sentiment for December showed an unexpected uptick, led by improvements in consumers’ views on both current and future conditions. However, as with so many things these days, the underlying data showed meaningful differences between the political parties, with Democrats turning more optimistic and Republicans becoming more pessimistic. Given the current surge in coronavirus cases, and the attendant impact on the economy, sentiment may well turn lower again in the near-term.

Weekly jobless claims jumped by 137K to 853K, marking their largest weekly increase since late March, and highest level since September. With coronavirus cases surging and Congress deadlocked over additional stimulus, the concern is that employment conditions will continue to deteriorate.