CPI for all items rises 0.8% in April; used cars and trucks among many indexes rising
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in April on a seasonally adjusted basis after rising 0.6 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 4.2 percent before seasonal adjustment.
This is the largest 12-month increase since a 4.9-percent increase for the period ending September 2008.
The index for used cars and trucks rose 10.0 percent in April. This was the largest 1-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all items increase. The food index increased in April, rising 0.4 percent as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.
The index for all items less food and energy rose 0.9 percent in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.
(… ) the index for all items less food and energy rose 3.0 percent over the last 12 months, a larger increase than the 1.6-percent rise over the 12 month period
ending in March. The energy index rose 25.1 percent over the last 12-months, and the food index increased 2.4 percent.
Ray Dalio Raises Inflation Concerns Over Federal Spending
(…) “The big issue is the amounts of money that have been produced and put into the system,” Mr. Dalio said. Such risks have to “be balanced carefully. Productivity is the key” to keeping the economy from overheating, he said. (…)
“There’s two types of bubbles,” Mr. Dalio said. “There’s the debt bubble when the debt time comes back and you can’t pay for it, and then you have the bubble bursting. And the other kind of bubble is the one where there’s just so much money and they don’t tighten it as much, and you lose the value of money. I think we’re more in the second type of bubble.” (…)
Job Openings Reach Record as Hiring Slows Job openings in the U.S. reached 8.1 million at the end of March, the Labor Department said, reflecting a widening gap between open positions and workers willing and able to take those roles.
Available jobs rose by a seasonally adjusted 600,000 in March to exceed the prior record of 7.6 million set in November 2018, the Labor Department said Tuesday. Data from job search site Indeed.com separately showed job posting continued to rise in April, ending the month 24% higher than February 2020’s pre-pandemic level.
The Labor Department said the highest rate of open jobs was in the South, while the strongest growth in openings was in the Northeast. Government and private data showed increasing openings in construction, manufacturing and hospitality. (…)
The rate of openings, or available jobs as a share of all filled and unfilled positions, was also a record at 5.3% in March. That is above the pre-pandemic peak of 4.8% in late 2018, when the unemployment rate approached a 50-year low. (…)
A lack of available workers for restaurants could also reflect that prospective employees found better-paying jobs at warehouses and other employers, Mr. Bunker said. Average wages in the warehouse industry were more than $22 an hour in March, and there were about 350,000 jobs available in the broader transportation, warehousing and utilities sector. (…)
The National Federation of Independent Business said Tuesday that 44% of small-business owners reported job openings they couldn’t fill in April, the highest level in records dating back to the 1970s. (…) “Owners are raising compensation, offering bonuses and benefits to attract the right employees.” (…)
- Employers, Prepare for a Wage Jolt Businesses must prepare to pay more for staffing in a tightening job market where it is harder to attract pandemic-scarred workers
(…) Data from jobs site Indeed.com show that as of May 7 job postings were a seasonally adjusted 23% above their Feb. 1, 2020, level. That is up from the end of March, when postings were 16% above that pre-pandemic level. (…)
Nevertheless, to keep pace with demand in a quickly growing economy, businesses are going to need to add workers. If higher wages are the only way they can do it, wages are going higher.
Layoffs are the lowest on record (since 2000) while Quits are at their highest since 2001. The Atlanta Fed data show that job switchers have recently enjoyed 4% wage gains vs 3.0% for stayers.
The NYT ran a long piece yesterday (I.P.A. Signing Bonuses and Free Subs: Luring Labor as a Beach Economy Booms) illustrating the chaos in the labor market and the various ways various economic agents are dealing with this. For now, businesses are coping with the challenges because revenues are booming. Eventually, things will settle down and reveal the real effects of this hugely monetarily subsidized pandemic.
Friday we get April retail sales. The consensus is for +1.0% MoM with a range of -0.1% to -3.9%!!! Control Group sales are seen up only 0.1% (range -1.0 to +2.0%). The Chase card spending tracker says +1.3% for Control Sales with no signs of any slowing just yet:
U.S. Home Prices Surge, Scaring Off Some Buyers Home prices rose in nearly every corner of the country in the first quarter, showing little sign of fading soon with limited housing inventory and robust buyer demand.
The median sales price for existing single-family homes was higher in the quarter compared with a year earlier for 182 of the 183 metro areas tracked by the National Association of Realtors, the group said Tuesday. In 89% of those metro areas, median prices rose by more than 10% from a year earlier. (…)
“The record-high home prices are happening across nearly all markets, big and small, even in those metros that have long been considered off the radar in prior years for many home seekers,” said Lawrence Yun, NAR’s chief economist. (…)
Many of the metro areas that posted the strongest price increases in the first quarter were vacation destinations, as second-home demand surged during the pandemic and continues to remain robust. The biggest gainer was Kingston, N.Y., with a 35.5% median-price increase from a year earlier. Kingston is in New York’s Hudson Valley, where many city dwellers temporarily or permanently relocated in the past year. (…)
Nationwide, the median existing-home sales price rose 16.2% in the first quarter to $319,200, a record high in data going back to 1989, NAR said.
Prices are rising so rapidly that they are outweighing the benefit of rock-bottom borrowing rates. In the first quarter, the typical monthly mortgage payment rose to $1,067, from $995 a year earlier, NAR said, even as mortgage rates declined. (…)
That’s +$72 per month, less than 2% of average monthly earnings.
Bill Dudley: The Days of Low Treasury Yields Are Numbered
Bill Dudley is a senior research scholar at Princeton University’s Center for Economic Policy Studies. He served as president of the Federal Reserve Bank of New York from 2009 to 2018, and as vice chairman of the Federal Open Market Committee. He was previously chief U.S. economist at Goldman Sachs.
I think markets are severely underestimating how much that yield is likely to rise in coming years.
Right now, the 10-year Treasury yields about 1.6%. That’s unsustainably low, for two main reasons. First, as I argued in a recent column, the Federal Reserve is likely to raise short-term interest rates far beyond that level. Second, the added yield the government must pay to borrow for longer periods — known as the term premium — is likely to increase, too. Let’s take these points in order. (…)
In their latest projections, officials estimated that over the long run, the federal funds rate consistent with the central bank’s 2% inflation target would be somewhere between 2% and 3%. The median estimate was 2.5%. If they’re right, this should be the floor for longer-term Treasury yields. Why tie up money for 10 years if you can get the same return by lending for much shorter periods? (…)
Today, there’s ample reason to expect a positive term premium to return. For one, the Fed has a new, more patient monetary policy stance. As a result, inflation will be higher and more variable — a risk that must be compensated with higher long-term yields. Also, keeping inflation in check will require a higher peak fed funds rate, reducing the risk that the Fed will again get pinned at the zero lower bound. Beyond that, deficit financing is expanding the supply of government bonds: Treasury debt outstanding has quadrupled since 2007, and the Biden administration is seeking to add several trillion dollars more. Meanwhile, one big source of demand for the bonds is set to dwindle as the Fed phases out its asset purchases, most likely next year.
Putting the pieces together, one can expect a 10-year Treasury yield of at least 3%: The 2.5% floor set by the federal funds rate, plus a term premium of 0.5% or more. But that’s not all. The Fed says it wants inflation to exceed its 2% target for some time, to make up for previous shortfalls. This, in turn, could stoke inflationary fears and lead markets to expect a higher path for future short-term rates. As a result, the 10-year Treasury yield could more than double from the current 1.6%. And if persistent deficit financing prompts concern about growing U.S. debt, the yield could go to 4% or higher. (…)
Oil Glut Returns to Near Pre-Pandemic Levels The oil supply glut that built up after the pandemic forced producing countries to slash output has almost returned to normal levels, the International Energy Agency said.
But in its monthly report, the IEA cut its 2021 global demand growth forecast by 270,000 barrels to 5.4 million barrels a day. Demand in Europe and the Americas in the first quarter was weaker than previously thought, the IEA said. The agency cut its second-quarter forecast for Indian demand as the country struggles with high coronavirus infection rates.
The Paris-based organization left its demand estimates for the second half of the year unchanged, adding that vaccination rollout programs, rebounding economic activity and easing transport restrictions in the U.S. and Europe clear the way for crude demand to begin outstripping supply later this year.
The agency expects demand to outstrip supply even after the Organization of the Petroleum Exporting Countries and its allies raise output. The IEA cut its already moderate supply growth forecast for non-alliance producers to roughly half the amount of last year’s contraction, while also forecasting a further drop in U.S. production in line with OPEC’s forecast this week. (…)
“Anticipated supply growth through the rest of this year comes nowhere close to matching our forecast for significantly stronger demand beyond the second quarter,” it said. (…)
The organization expects demand in the fourth quarter to be 120,000 barrels a day fewer than it was in the same quarter of 2019.
U.S. Tariffs Drive Drop in Chinese Imports Levies now cover about $250 billion a year in goods—down from $370 billion—as U.S. companies shift purchases elsewhere
U.S. tariffs have led to a sharp decline in Chinese imports and significant changes in the types of goods Americans buy from China, new data show, with purchases of telecommunications gear, furniture, apparel and other goods shifting to other countries.
Nearly two-thirds of all imports from China—or roughly $370 billion in annual goods—were covered by tariffs imposed by the U.S. in 2018 and 2019. Tariffs now cover just half of Chinese exports to the U.S., or about $250 billion in goods annually, as U.S. companies buy more from other countries, according to a Wall Street Journal analysis of information from Trade Data Monitor. (…)
That so-called re-shoring of manufacturing hasn’t happened in any appreciable way, economic data show, as U.S. companies instead turned to other countries in Asia for supply. (…)
Tariff revenue paid to the U.S. Treasury by importers has dropped as a consequence. The U.S. collected $66 billion from tariffs in the 12 months ended in March, down from a peak of $76 billion in February 2020.
Imports of non-tariffed items from China have begun to pick up in recent months, after a global downturn in trade triggered by the Covid-19 pandemic. Even so, imports from China overall were at $472 billion for the 12 months ended March 31, compared to a peak of $539 billion in 2018. (…)
Companies prepare share buyback bonanza as profits surge US corporations announce record repurchase plans as activity resumes
These charts are from Ed Yardeni:
