Rent Component of CPI Maintaining Positive Trajectory
|The rent component of the consumer price index (CPI) has shown stability throughout 2020, according to the latest data from the Bureau of Labor Statistics (BLS). Primary residence rents rose 0.1% in September and have increased every month this year, albeit at a slower pace compared to 2019. These steady gains track with trends during the GFC when rent inflation registered a handful of modest monthly declines while growing 4.4% over the course of the downturn.
These consistent gains in rents as reported by the BLS contrasts with volatility in overall CPI during the pandemic. Overall CPI declined this spring when much of the economy shuttered before making up lost ground during the summer with larger-than-average increases. Since then, the index has started reverting toward the long-term average of 0.2% monthly increases.
Monthly Change in Rent Component of CPI and Overall CPI
Retail Sales Continue to Improve After Rapid GainsU.S. retail sales climbed 1.9% during September, easily beating the Dow Jones consensus of 0.7%. Total retail sales had already rebounded to the pre-pandemic baseline this summer, and retail sales are now up 5.4% YOY. These figures stand out due to their rapid, V-shaped recovery compared to sluggish gains in many other sectors of the economy. Clothing retailers and department stores experienced the largest gains during September (~10.0%), although both remain well below year-prior numbers. Despite the gains in retail sales, overall consumer spending has yet to fully recover. Weighed down by depressed activity in travel, hospitality, entertainment, and healthcare, consumer spending hovers 3.2% below pre-pandemic levels as of early October, according to Opportunity Insights. As shown in the figure below, personal consumption figures are well off the trend of the previous expansion.
U.S. Personal Consumption Expenditures, Chained 2012 Dollars SAAR
Looking ahead, consumer activity faces additional headwinds moving into the holiday shopping season. A JPMorgan Chase Institute study of banking data found expanded jobless benefits provided a crucial lifeline to unemployed workers earlier in the pandemic that allowed them to pay down debts and build up rainy day funds. But the combination of no additional federal stimulus and a weak labor market has contributed to a decline in household savings, leaving many U.S. households with diminishing financial resources. The results of the study underscore the crucial role that government aid has played in staving off worst-case scenarios for unemployed workers as well as the broader economy. They also make clear that the trajectory of the recovery moving forward will greatly depend on the timing and size of any additional fiscal stimulus.
Change in Consumer Spending by Sector Compared to January 2020
U.S. Virus Cases Climb as New Hotspots Emerge
|The resurgence in new coronavirus case counts in the U.S. provides a reminder of the ongoing risks that the virus still poses for the economic recovery. After peaking in mid-July, the seven-day rolling average of new virus cases trended downward until reaching a low of 35,000 in mid-September. But the trajectory has since reversed, and the seven-day rolling average of new daily cases stands at more than 56,000.
The Upper Midwest and portions of the Intermountain West have experienced the most significant increases in new case counts in recent weeks as the geography of virus hotspots continues to evolve, as shown in the figure below. Many Sunbelt states, such as Arizona, Florida, and Louisiana, saw new virus cases peak during the summer before declining this fall. And New York, the U.S. epicenter of the coronavirus this spring, has kept case counts at some of the lowest levels nationwide over the past few months.
Heading into winter, colder temperatures could further alter regional trends in COVID-19 cases. Google mobility data indicates Americans have spent significantly more time outdoors at parks this year as restrictions prevented typical indoor activities. But time spent outdoors has edged steadily downward in recent weeks as temperatures cooled, especially in northern states, which is concerning as several studies have found that transmission is substantially more likely indoors than out.
New COVID-19 Cases Per Capita by State
The Weekly Briefing - October 19th, 2020
The Weekly Briefing – October 19th, 2020:
In This Week’s Brief:
- Rent Component of CPI Maintaining Positive Trajectory
- Retail Sales Continue to Improve After Rapid Gains
- U.S. Virus Cases Climb as New Hotspots Emerge