Weekly Economic Update: October 19, 2020

The Markets (as of market close October 16, 2020)

Stocks climbed this week to their highest levels in more than a month.

For the week, the Dow, the Nasdaq, and the S&P 500 posted moderate gains, while the Global Dow and the Russell 2000 lost value. Year to date, the Nasdaq is more than 30.0% higher than its 2019 closing mark, pushed higher by mega-tech stocks. The S&P 500 is nearly 8.0% ahead of last year’s pace, while the Dow is barely above the break-even point.

Last Week’s Economic News

  • The Consumer Price Index climbed 0.2% in September after advancing 0.4% in August. Over the past 12 months, the CPI has increased 1.4%. Consumer prices, less the more volatile food and energy components, increased 0.2% in September and are up 1.7% over the last 12 months.

  • According to the latest information from the Bureau of Labor Statistics, the Producer Price Index advanced 0.4% in September after climbing 0.3% in August. Producer prices are up 0.4% for the 12 months ended in September.

  • Sales at the retail level increased by 1.9% in September following a 0.6% jump in August. Retail sales are 5.4% above the September 2019 pace. Motor vehicle and parts dealers saw sales climb 3.6% last month, while sales at clothing and clothing accessories stores surged 11.0%. Sales at food services and drinking places increased 2.1%. Nonstore (online) retail sales increased 0.5% last month after soaring 23.8% in August.

  • Prices for U.S. imports increased 0.3% in September following an advance of 1.0% in August. Despite the recent increases, overall import prices declined 1.1% for the year ended in September. The September increase was the largest one-month advance since the index rose 3.8% in December 2018.

  • Industrial production fell 0.6% in September, its first decline after four consecutive months of gains. The index increased at an annual rate of 39.8% for the third quarter as a whole. Although production has recovered more than half of its February to April decline, the September reading was still 7.1% below its pre-pandemic February level. Manufacturing output decreased 0.3% in September and was 6.4% below the February level. The output of utilities dropped 5.6% as demand for air conditioning fell more than usual in September. Mining production increased 1.7% in September; even so, it was 14.8% below a year earlier. Overall, total industrial production was 7.3% lower in September than it was a year earlier.

  • The government deficit for September, the last month of the fiscal year, was $125 billion. Monthly receipts totaled $373 billion while monthly expenses were $498 billion. The total deficit for fiscal year 2020 was a record-setting $3.132 trillion, an increase of 218% from fiscal year 2019. Expenditures increased 47% while receipts fell 1.0%. The extraordinary annual deficit pointed to large expenditures for COVID-19 relief.

  • For the week ended October 10, there were 898,000 new claims for unemployment insurance, an increase of 53,000 from the previous week’s level. For perspective, a year ago there were 218,000 initial claims for unemployment insurance, the rate for insured unemployment claims was 1.2%.

Eye on the Week Ahead

The housing sector is in the news this week, with the latest reports from September available. The number of building permits issued and housing starts slowed in August compared to the prior month. The September numbers are expected to show a slight increase over the August totals. Sales of existing homes have surged over the past several months. Total sales in August jumped 2.4%. A similar increase is expected for September.

Have a nice week!





Robert G. Carpenter

President & CEO
Baltimore-Washington Financial Advisors