US jobless claims fall to lowest level since 1969 as US economy grows 2.1% – as it happened

The German, French and Spanish stock markets are down again today, amid a fourth wave of coronavirus infections, while the UK’s FTSE 100 index has edged 0.2% higher to 7,283 and Italy’s FTSE MiB is 0.3% ahead at 27,016.

On Wall Street, the Nasdaq is trading 1.15% lower while the S&P 500 has lost 0.6% and the Dow Jones has slipped 0.26%.

The US economy grew at an annualised rate of 2.1% in the third quarter, up from the 2% estimated previously, but this represents a sharp slowdown from the previous quarter’s 6.7% growth, with consumers spending less. Durable goods were much weaker than expected. On a brighter note, initial jobless claims fell to 199,000 in the week to 20 November, the lowest since 1969. Tonight, we’ll get the Fed minutes.

Here are our main stories today:

Thank you for reading. We’ll be back tomorrow. Take care - JK

The US Federal Reserve’s preferred inflation measure, the core personal consumption expenditures (PCE) index, rose to an annual rate of 4.1% in October from 3.6% in September, as expected.

On Wall Street, shares have slipped as expected after poor results from US companies, a mixed bag of US data and growing Covid worries in Europe. The Nasdaq is down more than 1%, while the Dow Jones opened 0.6% lower and the S&P 500 lost 0.5%.

Over here, the FTSE 100 index has given up earlier gains and is trading flat while Europe’s main indices are a sea of red.

Fiona Cincotta, senior financial markets analyst at City Index, has looked ahead to the Wall Street open, and the barrage of US data.

US stocks are set to open slower on the back of disappointing earnings from a number of big retailer names, after a mixed bag of US data and amid growing Covid concerns in Europe.

On the one hand, Q3 GDP was revised up in the second estimate to 2.1%, from 2% thanks to stronger than initially estimated consumer spending. However, this was still short of forecasts of an increase to 2.2%. This is still down sharply from 6.7% in Q2 amid a resurgence of Covid, supply chain disruptions and labour shortages.

Alongside a slightly disappointing GDP print were weaker than forecast durable goods sales. Durable goods sales unexpectedly contracted in October to -0.5% month-on-month, down from -0.4% in September and well short of the 0.2% increase forecast.

On the other side of the coin, US jobless claims figures were impressive falling to a level not seen since 1969. The significant drop in jobless claims is offsetting weak data elsewhere because we know that the Fed is watching the labour market very closely. The Fed wants to see improvements in the labour market recovery in order to raise rates and today’s data is certainly a step in that direction. However it is worth noting that this huge drop could in fact be due to seasonal swings.

Looking ahead there is still plenty more data for investors to sink their teeth into with Michigan confidence and Core PCE data due [at 3pm]. Core PCE is expected to show inflation at 4.1% with a high reading expected to prompt bets of a sooner move by the Fed.

The minutes from the latest Fed meeting are also due and whilst these could shed some light on the transitory inflation theme, it’s important to remember that the meeting happened prior to the 6.2% consumer price index print.

And the latest on the supply shortages.

Keeping shelves stocked is “harder work than ever before”, the UK boss of Lidl has said as shortages of drivers, warehouse workers and food processing staff put pressure on grocery supply chains, reports our retail correspondent Sarah Butler.

Christian Härtnagel, chief executive of the German discount chain’s British arm, said problems with availability of products in stores had eased in the past 10 to 12 weeks and “the worst times are behind us” but “daily hard work” was still required to ensure there were no gaps on shelves.

He said the company was constantly having to seek new ways to work around problems, by simplifying ranges and other measures, as a combination of the pandemic, Brexit and trade disruption continued to affect businesses.

And here is our story on David Cameron lobbying a Lloyds Banking Group director over the lender Greensill Capital, which has since collapsed.

David Cameron lobbied a director of Lloyds Banking Group, whom the former prime minister had given a peerage, to reverse the bank’s decision to withdraw support from Greensill Capital, which it later did.

Cameron appealed to James Lupton, a Conservative peer who had served as party treasurer and donated more than £3m to the Tories, to urge the bank not to withdraw funding from Greensill’s supply chain financing of NHS pharmacies.

After his lobbying of Lord Lupton in January, the bank reconsidered its decision and agreed to continue providing financial support to Greensill, according to the Financial Times, which first reported the story.

Here’s the latest on the fate of Bulb, from our energy correspondent Jillian Ambrose.

Bulb Energy could be in the hands of an administrator within hours after the regulator applied to the courts for an advisory firm to run it after its collapse on Monday.

Britain’s seventh-largest supplier is expected to become the first energy company to be placed into a “special administration” process so it can continue to provide gas and electricity to its 1.7 million customers through the winter after going bust on Monday.

The provision for a special energy supplier administrator was first set in legislation in 2011 but has never been used, in part because previous supplier collapses have been small enough in scale to find a new buyer relatively quickly.

Energy industry sources believe it could take “somewhere between six weeks and six months” for the fallout of the Bulb collapse to be resolved by the administrator and a team of banks, which are due to be appointed in the coming weeks.

The energy regulator, Ofgem, has proposed that the global advisory firm Teneo take over the running of Bulb while the fate of gas and electricity customers is decided. A court hearing is expected to take place later on Wednesday before an appointment is confirmed.

Ofgem urged Bulb customers not to worry and said they would “see no disruption to their supply, their price plan will remain the same and any outstanding credit balances, including money owed to customers who have recently switched, will be honoured”.

Returning to the US GDP figures, they show that the economy slowed to a modest annual rate of 2.1% in the October-December quarter, slightly better than its first estimate, but down sharply from 6.7% in the second quarter. Economists are predicting a solid rebound in the current quarter as long as rising inflation and a recent uptick in Covid cases do not derail activity, AP reports.

The small increase from the initial GDP estimate a month ago reflected a slightly better performance for consumer spending, which grew at a still lacklustre 1.7% rate in the third quarter, compared to a 12% surge in the April-June quarter. The contribution to GDP from business inventory restocking was also revised up.

The economy’s weak summer performance reflected a big slowdown in consumer spending as a spike in Covid-19 cases from the delta variant caused consumers to grow more cautious and snarled supply chains made items such as new cars hard to get and also contributed to a burst of inflation to levels not seen in three decades.

While Covid cases in recent weeks have started to rise again in many parts of the country, economists do not think the latest increase will be enough to dampen consumer spending, which accounts for 70% of economic activity.

The expectation is that the economy in the current October-December quarter could grow at the strongest pace this year, possibly topping 8%.

For the whole year, the expectation is that the economy will grow by around 5.5%, which would be the best showing since 1984 and a big improvement from last year, when the economy shrank by 3.4% as the country struggled with lockdowns.

So far, the improving economy this year has not boosted the approval ratings of President Joe Biden because the US, with one of the most rapidly recovering economies, is also caught up in a global supply chain squeeze that is driving prices higher for everything from new cars and gasoline to the cost of food and airline tickets.

Biden this week nominated Federal Reserve Chairman Jerome Powell for a second four-year term to head the central bank. Powell and other Fed officials had earlier in the year insisted that the spoke in pries was being caused by temporary factors, such as those snarled supply chains.

However, recently the central bank has stressed that if the price increase persist it will be ready to start raising interest rates sooner than expected to slow growth as a way of dampening inflation pressures.

More good news for the US economy: Initial jobless claims fell by 71,000 to 199,000 in the week to 20 November, the US Labor Department said. This was much better than the 260,000 expected by economists.

This is the lowest level since November, 1969 when it was 197,000. The previous week’s level was revised up slightly, by 2,000 to 270,000.

The US economy grew at an annualised rate of 2.1% in the third quarter, a tad higher than the 2% pace estimated a month ago, according to the US Commerce Department’s Bureau of Economic Analysis. This comes after 6.7% growth in the previous quarter, due to a slowdown in consumer spending.

BEA explains:

A resurgence of Covid-19 cases resulted in new restrictions and delays in the reopening of establishments in some parts of the country. In the third quarter, government assistance payments in the form of forgivable loans to businesses, grants to state and local governments, and social benefits to households all decreased.

Here is our full story on the CBI industrial trends survey. Britain’s factories are struggling to meet the record demand for their goods as severe supply constraints put a brake on production lines, the latest snapshot of industry has shown, writes our economics editor Larry Elliott.

The CBI said manufacturers were running down their stocks of finished goods to meet the strongest order books since records began in 1977.