02/19/2021 | Press release | Distributed by Public on 02/19/2021 13:18
The jump in January retail sales was well above consensus expectations but supports our decision to increase our estimate of consumer spending in the first quarter. Retail sales likely benefited from consumers receiving a further $600 stimulus check. Given the elevated level of personal savings, we currently believe that further stimulus checks coupled with enhanced unemployment benefits will lead to significant levels of consumer spending later in the year as vaccines become widespread and restrictions begin to lift in earnest. While concerns about inflation have surfaced, particularly given the strong growth in PPI, we believe the Federal Reserve is likely willing to downplay any growth in inflation until it has run above the 2.0 percent target level for a certain amount of time. Though manufacturing production increased in January, the current shortage of semiconductor chips is weighing on the motor vehicle industry. This shortage will likely continue in the coming months, and we may need to lower our expectations of business investment or inventories investment. With fewer cars being produced, car dealers may also need to draw down their current stock to make up for the lack of production. Another risk to business investment is mining production. While the decline in January utilities output can be attributed to warmer-than-average weather, we believe utilities production in February will likely rise as much of the country experiences very low temperatures due to the current winter storms. Despite problems with power distribution in Texas and other states given the severe cold, consumption of utilities was likely higher than normal, though the disruption to oil/gas extraction will likely weigh on February mining output and require a draw down in existing oil/gas inventories. In housing, a decline in single-family housing starts was expected, and though we believe the period of rapidly increasing starts has passed, we expect a continued strong construction pace going forward. Although existing home sales increased slightly, the level of sales continues to be constrained by the record low level of available inventories, which will likely continue going forward.
Economic and Strategic Research Group
February 19, 2021
Opinions, analyses, estimates, forecasts and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.