This Weeks Economic Update, November 30, 2020

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Hopefully all of you were able to connect with family over this rather odd Thanksgiving holiday.

Short update this week as there was limited information released.  Let’s start with the oil industry. Just a slight jump in oil prices and the US drilling industry roars back to life.  The US drill rig count increased by 10 in three days. The refiners pushed out more production last week increasing virtually all levels of final product. This also pulled crude oil supplies on hand down.  Not to worry though as crude supplies are expected to rebound in the next two weeks due to both US and OPEC production levels.  The news of a covid vaccine has markets optimistic over a return to a travel normal, that might be very premature.  It is unlikely that the new normal will approach the old demand levels for some time.

The Markit Manufacturing PMI Report showed a nice increase in November rising to 57.7. The improvement indicates that manufacturing is stabilizing at a healthy level.  Continuation of the growth is something to keep an eye on.  While there is no sign of any government action to curtail manufacturing, it would not take much for firms here or there to be shut down or production cut back if a spread thrugh a plant were to occur.  The main issues remain in the supply chain where a key inventory item becomes short in supply causing other dominos to fall, resulting in a short term closing or production interruption.  Tuesday December 1, the PMI Manufacturing Report will be released.  The number I expect will be close to 60 for November based on the Fed Reports and other indicators.

There are two early signs that December will be a down month.  First, the Richmond Fed economic numbers for late November dropped by half. This could be due to COVID spread issues that are causing problems or it might have been a signal that late October numbers were too aggressive and pulled some production into the earlier period.  The October number was the highest in over a year. 

The second indicator was the initial jobless claims which rose for the second week in a row.  This follows a number of states that announced new curtailments of activity. A related indicator here was a drop in continuing unemployment claims.  That number fell due both to new hiring as well as those who dropped off the rolls after exhausting their benefits. 

Have a great week.



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