The Weekly Briefing - November 23rd, 2020

Retail Sales Growth Slows in Last Monthly Report; Up 4.5% YOY

U.S. retail sales grew slightly with a 0.3% increase in October after averaging 1.4% monthly increases during each of the preceding three months. While the pace of growth has slowed, October’s $553.3 billion total retail sales figure marks the sixth consecutive month of increase. And retail sales are up 4.5% YOY as spending at retailers has bounced back more quickly than most economic indicators. The monthly report from the Census Bureau, however, shows divergent trends across retailer categories as many consumers have not returned to pre-pandemic shopping patterns. Spending at restaurants and gasoline stations remains approximately down 14.0% YOY, and clothing stores sales are down 12.6% YOY. In contrast, online retailers continue to outperform, and e-commerce spending has accelerated over the past several months. This trend could have lasting implications for consumer trends. Sales at online-only retailers are up 29.1% YOY and accounted for nearly one out of every six dollars spent at retailers last month. And several traditional retailers, such as Target and Walmart, have separately reported recent surges in spending on online platforms. Looking ahead, retailers may see a more modest end-of-the-year boost from the holiday shopping season as many consumers remain cautious about their financial situation, especially those at the lower end of the income spectrum. The National Retail Federation’s annual survey found shoppers plan to spend 4.9% ($51) less during the holidays compared to last year. A separate survey by Fortune found 21% of people earning below $25,000 plan to curtail holiday spending, compared to 7% of those earning more than $150,000. Monthly Nonstore (Online) Retail Sales Homebuilding Activity Continues to Show Strength

New residential construction continued its months-long surge in October as privately owned housing starts rose 4.9% compared to the month prior. Single-family home starts led the way with a 6.4% increase, while multifamily starts were unchanged for the second consecutive month. At the same time, the National Association of Homebuilders (NAHB) reports homebuilder sentiment reached an all-time high for the third consecutive month. The strong construction activity has provided lift for wages in the sector as homebuilders have sought to bring on new workers in order to ramp up production capacity and bring homes to market more quickly. The average hourly wage for construction workers has steadily climbed during 2020 and is up 2.8% YOY. The inventory of homes on the market is equivalent to 3.6 months of supply, which is approximately 1.7 months lower than a year ago. And the NAHB reports that limited lot and material availability are holding back some builders. The average price for a new single-family home has jumped $10,000 over the past year to $327,000, and prices are likely to see upward pressure due to supply constraints. A key question for housing revolves around the depth of demand for homes after many renters already transitioned to homeownership earlier this year. The homeownership rate has surged 2.3 percentage points this year to 67.2%, well above historic trendlines and approaching levels not seen since the Global Financial Crisis. Industrial Sector Improving but Still below Pre-Pandemic Levels

U.S. industrial production bounced back from a small decline in September to increase 1.1% during October, according to the latest data from the Federal Reserve. October’s gains were broad-based as each of the major market groups—final goods, nonindustrial supplies, and materials—saw an uptick in activity. Despite the gains, the industrial sector continues to see slack activity levels as overall output is down 5.3% YOY. Capacity utilization stands at 72.8%, which is 7.0 percentage points below the long-run average. However, utilization has increased 8.6 percentage points since this year’s low registered in April. From an employment perspective, some sectors of the industrial economy have experienced more disruption than others. Since February, both utilities and manufacturing have experienced smaller declines in job levels compared to the overall economy. The percentage decrease in mining and logging jobs, however, is nearly twice the drop in total nonfarm payrolls. The sector includes oil and gas extraction, which has experienced the dual shocks of lower demand due to the pandemic and a global drop in energy prices. Change in Employment by Industrial Sector Since February

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