This Week’s Economic Update, November 22, 2021

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Ah Thanksgiving.  Over the years we have been provided so much to be thankful for.  As a kid, when Thanksgiving came I was overjoyed about being thankful for four days away from school.  In college, I was really, really thankful for returning home for a wonderful, home cooked meal.  Those superficial appreciations aside, we are truly blessed in America for all we have.  Please take time this week to reflect on how God has worked in your life and that of your family this past year.  Even if it has been a tough year, consider how God got you through, it can all be a matter of perspective.

The numbers for manufacturing continue to be strong.  The New York Empire State Manufacturing index for November hit 30.9, growing from 19.8 in October.  New orders were up nicely.  That is a good sign for demand, but the key is fulfilling the orders.  Shipments exploded from 8.9 in October to 28.2, indicating that the supply chain issues may be abating.  At the same time, unfilled orders increased which is a sign we have a way to go yet on getting material off the ships and to the factories.  Employment also grew as did average hours worked per week. 

The Philadelphia Fed Manufacturing report was also impressive.  It grew from 23.8 in October to 39 in November.  Like the New York report, there was growth in both new orders as well as shipments.  The futures index of the Philly report reflected continued optimism from business owners forecast for the next six months.

The last of the October numbers indicate that we are on a good trajectory.  Retail sales, month over month, increased by 1.7% in October.  Embedded in the report are some interesting items.  The soft news first, food services and drinking establishments saw a decline as did clothing and health care.  This decline in eating out could be based on either restrictions due to covid, drive through vs eating in, or it could be the hours the eateries are actually open due to insufficient staff or it could be the sticker shock of some of the price increases.  All other retail related spending when up at a record pace, even after adjusting for inflation.  It appears that consumers still have cash to burn and are not quite yet being impacted by prices.  This could be the result of early Christmas shopping, time will tell.

Since the first of November, oil prices have fallen from $83.91 to $75.94 per barrel.  The drop of 9.4% is unlikely to be felt at the gas pump.  The supply numbers continue to fall and production is not keeping up.  At any other time, oil prices would have been maintained or increased.  The price is being driven more by speculation on Europe rather than on supply and demand.  Europe is experiencing a fifth wave of the Covid virus with numbers spiking.  Austria is in a virtual shutdown with Germany likely to follow.  Traders are anticipating a drop in demand for energy in Europe, in spite of the unreliable supply from Russia.  While the US saw its fourth covid wave begin to abate in October, we might be experience the start of the fifth wave currently.  That could also impact demand.  Time will tell.

Due to a short week this week and limited economic data being released, I will be back in two weeks with the next update.  Have a great week and a Wonderful Thanksgiving.

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