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Weekly Economic & Financial Commentary: Restoring Balance in the Post-Pandemic Economy

Summary

United States: Consumer Prices Continue to Climb, Little Reprieve to Supply Issues In Sight

  • This week’s data continued to demonstrate severe supply problems. The number of unemployed workers per job opening reached a fresh record low of 0.67 in October. Container ships continue to stack up off the San Pedro Bay ports and trade flows are still a ways from normalizing. With little reprieve to supply issues in sight, price pressure will persist into next year. We expect the Fed to announce an acceleration to its wind-down of asset purchases at next week’s meeting.
  • Next week: Retail Sales (Wed), FOMC Rate Decision (Wed), Industrial Production (Thurs)

International: Subdued Economic News From Europe

  • This week’s European economic news was soft in tone. U.K. October GDP rose just 0.1% month-over-month, reflecting a steady increase in services activity but a decline in industrial activity. Norway’s mainland GDP was also flat for the month of October, a downside surprise. Even with the soft October outcomes we still expect Norway’s central bank to raise interest rates at next week’s monetary policy meeting, while we lean towards the Bank of England raising interest rates as well.
  • Next week: Japan Tankan Survey (Mon), China Retail Sales & Industrial Output (Wed), ECB Monetary Policy Announcement (Thurs)

Interest Rate Watch: Long-Term Interest Rates: What Gives?

  • The Federal Reserve has begun tapering its asset purchases and markets are priced for multiple fed funds rate increases in 2022. Despite this, the 10-year Treasury yield remains historically low at 1.48%. Adjusted for the year-over-year pace of inflation, which currently stands at 6.88%, yields are the lowest they have been in decades. So what gives?

Credit Market Insights: Consumer Credit: A Miss or a Step Toward Normalization?

  • Consumer credit rose $16.9B in October coming in over $8B short of consensus estimates and dropping off from the September’s $28B increase. But the monthly change aligns with non-pandemic prints and was broad based as both revolving and nonrevolving credit came in weaker.

Topic of the Week: Restoring Balance in the Post-Pandemic Economy

  • We released our 2022 Annual Outlook this week. The aftershocks of pandemic have led to notable economic imbalances. How do we find balance again?

Full report here.

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