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U.S. economy eyes strong 2021 finish as labor market tightens, spending accelerates

Weekly jobless claims post stunning decline to 199,000, the lowest level since 1969

The number of Americans filing new claims for unemployment benefits dropped to a 52-year low last week, suggesting economic activity was accelerating as a year ravaged by shortages, high inflation and an unrelenting pandemic draws to a close.

Initial claims for state unemployment benefits tumbled 71,000 to a seasonally adjusted 199,000 for the week ended Nov. 20, the lowest level since mid-November 1969.

Global economies' simultaneous recovery from the pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, unleashing inflation.

President Joe Biden announced on Tuesday that the United States would release 50 million barrels of crude from the U.S. Strategic Petroleum Reserve to help cool oil prices, in coordination with China, India, South Korea, Japan and Britain.

U.S. consumer spending surges in October; inflation heats up again

Consumer spending is accelerating after slowing sharply in the third quarter as COVID-19 infections driven by the Delta variant flared up and shortages of goods became more widespread. Fears of empty shelves and paying even more for scarce goods have encouraged Americans to start their holiday shopping early.

The Commerce Department said on Wednesday that consumer spending, which accounts for more than two-thirds of U.S. economic activity, jumped 1.3% last month after rising 0.6% in September. Spending was partially boosted by higher prices as demand continues to outpace supply.

Key inflation figure for the Fed up 4.1% year over year, the highest since January 1991

The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.4% last month after gaining 0.2% in September. In the 12 months through October, the so-called core PCE price index accelerated 4.1%. That was the largest gain since January 1991 and followed a 3.7% year-on-year advance in September.

The core PCE price index is the Fed's preferred inflation measure for its flexible 2% target.

Adjusted for inflation, consumer spending rose a solid 0.7%.

Including food and energy, the PCE index rose 5%, the fastest gain since November 1990.

In another boost to the economy, orders for non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans, rose 0.6% last month, the Commerce Department said in a fourth report.

U.S. core capital goods orders increase strongly in October

More goods were exported in October, sharply narrowing the goods trade deficit by 14.6% to $82.9 billion. If the trend holds, trade could contribute to GDP growth this quarter.

Inventory accumulation, the key driver of GDP growth last quarter, will likely continue to support the economy. The strong data flow led the Atlanta Fed to raise its fourth-quarter GDP growth estimate to an 8.6% rate from an 8.2% pace. JPMorgan boosted its forecast to a 7.0% pace from a 5.0% rate.

 

U.S. new home sales rise in October, September revised down

Sales of new U.S. single-family homes rose in October, but the sales pace for the prior month was revised sharply down as higher prices remain a hurdle for some first-time buyers.

New home sales increased 0.4% to a seasonally adjusted annual rate of 745,000 units last month, the Commerce Department said on Wednesday. September's sales pace was revised down to 742,000 units from the previously reported 800,000 units.