Money Talk Podcast, Friday Dec. 25, 2020
Landaas & Company newsletter December edition now available.
(with Max Hoelzl, Joel Dresang, engineered by Jason Scuglik)
Week in Review (Dec. 22-25, 2020)
SIGNIFICANT ECONOMIC INDICATORS & REPORTS
No major announcements
The U.S. economy rose at a record annual pace of 33.1% in the third quarter, according to the final estimate of the gross domestic product. The Bureau of Economic Analysis said the quarter rebounded from a record decline of 31.4% in the second quarter, the result of widespread lockdowns from the COVID-19 pandemic. Measured year to year, the economy shrank 2.8% from the third quarter of 2019. Consumer spending, which accounts for about two-thirds of U.S. economic activity, bounced back at an annual rate of 41% in the third quarter, up slightly from earlier estimates but still 2.8% behind its level the year before.
The annual rate of existing home sales sank 2.5% to 6.69 million in November, the first setback in six months. The National Association of Realtors said 2020 home sales should still exceed 2019, given historically low mortgage rates and pandemic-fueled demand for places to hunker down. Inventory levels dropped to their lowest point on record, which contributed to a 14.6% year-to-year rise in the median sales price. Prices rose for the 105th consecutive month.
The Conference Board reported the third consecutive decline in its consumer confidence index in December, as a spike in COVID-19 cases lowered consumers’ assessment of current economic conditions. Their outlook for near-term economic prospects rose from November. Still, the business research group said over all, the economy appeared to be slowing in the fourth quarter. The confidence index was 88.6 in December after exceeding 130 in January and February.
By far the biggest driver of the U.S. economy, consumer spending declined in November as income fell for the third time in four months. The Bureau of Economic Analysis reported that personal consumption fell 0.4% while personal income declined 1.1% because of reduced government payments for pandemic relief. Declining for the first time in seven months, consumer spending was $311 billion or 2.1% below its level in February.
The four-week moving average for initial unemployment claims rose for the third week in a row and the fourth time in five weeks to a level nearly four times higher than before the pandemic. The Labor Department reported 20.4 million Americans were receiving unemployment benefits, including special pandemic assistance. The number of recipients was up from 1.8 million at the same time in 2019.
The Commerce Department said the annual rate of new home sales slowed 11% in November, the fourth consecutive reduction. Overall sales were up 20.8% from the pace the year before. Based on the sales pace, the supply of houses on the market would last 4.1 months, higher than in October but below what economists consider a sustainable level.
The Commerce Department said demand for manufacturing continued recovering in November, though at a slower rate. Durable goods orders rose 0.9% after gaining 1.8% in October. Although it was the seventh consecutive increase, orders remained 8% below the level in November 2019. A proxy measure for business investment rose 0.4% from October and was ahead of the year-ago pace by 0.8%.
The University of Michigan’s consumer sentiment index rose in December, mostly from a shift in partisan optimism following the November elections. An economist with the survey said even with brighter prospects following the rollout of coronavirus vaccines, a recovery in consumer behavior remains far off, even among households that haven’t suffered financially from the pandemic.
No major announcements
MARKET CLOSINGS FOR THE WEEK
- Nasdaq – 12805, up 209 points or 1.7%
- Standard & Poor’s 500 – 3703, up 19 points or 0.5%
- Dow Jones Industrial – 30200, up 41 points or 0.1%
- 10-year U.S. Treasury Note – 0.93%, up 0.03 point