Hello, I’m Greg Curvall, Senior Portfolio Manager with Fifth Third Bank.
Last week, the major U.S. equity benchmarks fell the first time in 6 weeks amid concerns surrounding inflation, though they remain very close to all-time highs. The yield on the U.S. 10-year Treasury jumped to 1.57 percent, while the dollar rose and oil declined.
The biggest market-moving news from last week was the spike in inflation. The U.S. CPI, or Consumer Price Index, surprised to the upside in October. Headline CPI was up 6.3 percent year-over-year, though many will argue that this is not the appropriate measure of inflation. Core inflation, or inflation not including the volatile food and energy sectors, was up 4.6 percent over the same time period. Furthermore, keep in mind that the Fed’s preferred measure of inflation, the core Personal Consumption Expenditures index, or PCE, registered a 3.6 percent rate in September for the fourth month in a row. Without a doubt, inflation is at a 30-year high, but we are still a good distance away from the inflation numbers we lived through back in the 1970s.
In tandem with rising inflation, consumer sentiment hit a 10-year low as the University of Michigan Consumer Sentiment Index unexpectedly fell about 7 percent in October. That being said, the U.S. labor force remains robust, with over 10 million job openings waiting to be filled.
Looking ahead, demand is likely to remain strong as reopening proceeds, supply chain problems recede, inventories are replenished, and the unprecedented surge in consumer savings flow through the economy.
On the political front, the House finally came to an agreement and passed the bipartisan infrastructure bill, which will be spent on a number of things such as roads, bridges, power and water infrastructure and more. The House of Representatives passed the measure last week with the aid of 13 Republicans.
The Biden administration also detailed their plan aimed to help resolve the supply chain disruptions. The multi-billion dollar infrastructure plan will also include construction projects and upgrades to coastal ports and facilities in order to increase international trade efficiency.
Looking towards this week’s economic calendar, data releases are a bit lighter than usual. On Tuesday, we get our most anticipated number, retail sales. Economists expect to see a meaningful rebound from last month’s disappointing report. Also on Tuesday, we get both Industrial Production and Capacity Utilization. Midweek we get some housing data with Building Permits and Housing Starts. Then on Thursday we get Initial Jobless Claims and the Leading Economic Index.
As always, we will be watching and reporting back to you next week. Thank you.
