CPI for all items rises 0.1% in May as shelter, food indexes increase

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in May on a seasonally adjusted basis after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.8 percent before seasonal adjustment. (…)

The index for all items less food and energy increased 0.1 percent for the fourth consecutive month. (…)

The all items index increased 1.8 percent for the 12 months ending May. The index for all items less food and energy rose 2.0 percent over the last 12 months, and the food index also rose 2.0 percent. (…)

YtD, core CPI is +1.5% annualized; last 4 months, +1.2%. “Transitory” suddenly needs a different definition. Pressure building for the Fed to ease.

Core Goods: YtD –1.0% a.r., last 4 months –2.5% a.r.! Core Services: YtD +3.0% a.r., last 4 months +3.0% a.r..

• U.S. Producer Prices Up Slightly in May, Showing Little Inflation Pressure

The producer-price index, a measure of the prices businesses receive for their goods and services, advanced a seasonally adjusted 0.1% in May from a month earlier, the Labor Department said Tuesday. When excluding the often-volatile food and energy categories, business prices were somewhat stronger, up 0.2% from the prior month. (…)

Producer prices were up 1.8% in May from a year earlier, considerably less than the recent peak of up 3.4% reached last summer. Excluding food and energy, the index was up 2.3% from a year earlier. (…)

Haver Analytics’ table provides further insight. Core PPI accelerated in April and May even though core goods prices were unchanged. Inflation in Services was in the 2.5-3.0% range in the past 3 months even after deflating Trade Services inflation (which is a measure of retail gross margins). In all, not much inflation in the goods pipeline, pressures on retail margins and rising core Services costs.

Another way of looking at margins:

Trump Says He’s Holding Up Trade Deal With China Ahead of G-20

(…) “It’s me right now that’s holding up the deal,” Trump said at the White House before he left on a trip to Iowa. “And we’re going to either do a great deal with China or we’re not going to do a deal at all.” (…) “We had a deal with China and unless they go back to that deal I have no interest,” Trump said. (…)

Hmmm…

• 
  

  US demanded ‘hundreds’ of changes to Chinese law in trade talks State Council adviser Shi Yinhong says America’s insistence on strong intellectual property protections is asking too much of Beijing.

(…) Shi Yinhong, a prominent international relations scholar from Renmin University, said the gap between the two sides was widening as Washington demanded a strong enforcement mechanism while Beijing wanted more leeway.

He said China could only agree to a “relatively weak enforcement mechanism” without too much scrutiny and there should not be automatic penalties for violating the agreement.

Shi, who is also an adviser to the State Council, the country’s cabinet, was speaking on the sidelines of a security conference in Hong Kong.

He continued: “From early May, China began to think that no deal might be better than a bad deal, and right now China and the US have fundamentally contradictory attitudes as to what would be a good deal.

“Slowly it has become a zero-sum game where neither party can accept something the other side would deem a good deal.” (…)

“In essence, the trade war is not about the trade surplus. It’s a US effort to change how the Communist Party runs the nation’s economic activities at home and abroad,” Shi said. (…)

On Tuesday, Chinese foreign ministry spokesman Geng Shuang did not confirm whether the two leaders would meet, saying only that information would be released once it was available to the ministry. (…)

Damage is building and irreversible:

• Google Is Moving More Hardware Production Out of China

• Nintendo Shifts Some Production From China

Nintendo Co. NTDOY -2.42% is shifting some production of its Switch videogame console to Southeast Asia from China to limit the impact of possible U.S. tariffs on Chinese-made electronics, said people who work on Nintendo’s supply chain.

It is another example of manufacturers adapting to the tariff threat. Taiwan’s Foxconn Technology Group said Tuesday that it was ready to move assembly of Apple Inc.’s iPhones out of China if necessary, and Japan’s Sharp Corp. , which is controlled by Foxconn, said last week that it planned to move production of personal computers to Taiwan or Vietnam. (…)

• Chinese Cash That Powered Silicon Valley Is Suddenly Toxic As U.S. startups reject their money, Chinese venture-capital firms in U.S. are dialing back investments, structuring deals to avoid regulators or shutting down

(…) Since late last year, amid rising U.S.-China tensions, venture firms with China ties have been dialing back their U.S. investments, structuring deals in novel ways to avoid regulators or shutting their U.S. offices. Some American venture firms are dumping their Chinese limited partners or walling them off with special structures. And some U.S. startups that have taken significant Chinese money are keeping the investments quiet or trying to push their Chinese investors out to avoid scrutiny. (…)

Since October, Democratic Sen. Mark Warner of Virginia and Republican colleagues on the Senate Intelligence Committee have been holding briefings for U.S. venture capitalists, tech executives, other business leaders and university administrators, urging them to take the threat of Chinese intellectual-property theft more seriously and to reduce dealings with their Chinese counterparts. (…)

Mr. Warner, a former venture capitalist, says he historically supported expanding economic ties with China. “But a few years and many, many classified briefings later, my views have changed, as the government in China has,” Mr. Warner said in a written statement. “While many people in Washington understand the gravity of the threat, that’s not true across the country.” (…)

• Huawei Pulls Laptop Launch as U.S. Restrictions Sting China’s Huawei Technologies canceled the launch of a new laptop and paused production at its personal-computer business due to restrictions on buying American components.

• 
  

  Huawei looks to self-driving cars in bid to broaden focus Chinese group partnering with carmakers to target 2021 launch of autonomous vehicles

Baby you can drive my car…

Meanwhile, in the USA:

Rare Bipartisan Ground Emerges Over Big Tech Worries Investigations into antitrust law and technology giants may soon be bicameral

(…) The bipartisan support for the House inquiry indicates the broad political appetite for challenging large technology companies like Apple, Facebook and Amazon. Whether that political support will turn into any sort of legislative reality remains to be seen; there have been no shortage of House initiatives that have so far gone nowhere in the Senate this Congress.

The beginning of a parallel Senate investigation would make the possibility of legislative action more concrete.

• US antitrust chief issues warning to tech giants Lower prices and free products will not shield digital monopolists from scrutiny, Delrahim says

There are two parts to influence: First, influence is powerful; and second, influence is subtle. You wouldn’t let someone push you off course, but you might let someone nudge you off course and not even realize it. (Jim Rohn)

Here’s the subtle way: “You can be much more influential if people are not aware of your influence.”

• Unilever Invests in Influencer Management Company CreatorIQ

(…) The investment is largely an effort to better understand influencer marketing, which Unilever continues to use on a large scale, according to the company. (…) “We very much love working with influencers because, as you know, they’re very influential in driving consumer opinion,” said Vasiliki Petrou, executive vice president at Unilever and group chief executive at Unilever Prestige (…).

“At best it’s misleading, at worst it’s corrupt,” Unilever marketing chief Keith Weed said last June (…).

Its executives believe consumers listen to influencers in a way they no longer do to marketers speaking for themselves. (…)

Unilever says the influencer ecosystem has improved since its call for action last year.

Platforms such as Twitter and Instagram say they have deactivated millions of fake followers over the past year in an attempt to restore trust in the counts.

And here’s the not so subtle way: “You cannot antagonize and influence at the same time.”  (J. S. Knox)

• 
  

  Trump Blasts Fed Policies, Euro’s Value to the Dollar President Trump renewed his criticism of the Federal Reserve, saying that the Fed has raised rates too high and that its policy of shrinking its bond portfolio is “ridiculous.”

But here’s the biggie: how “influence” will drive this antitrust drive. Ben Thomson (my emphasis):

In other words, the regulation situation for these massive winner-take-all companies is not hopeless, but it has changed: their strength derives from the customer relationships they own, which means quiet backroom deals and straight-up arm wrestling of the Google and Uber varieties are liable to backfire in the face of overwhelming public opinion; it is in shaping that public opinion that the real battle will be fought. And while it’s true that the direct relationship aggregation companies have with their users is an advantage in this fight, the overwhelming power of social media is the new counterweight: it is easier than ever to reach said users with a report or column that resonates deeply. Your average writer or reporter has more (potential) power, not less.

Ben’s latest post Tech and Antitrust is most interesting. His conclusion:

That is not to say that tech deserves no regulation: questions of privacy, for example, are something else entirely. Nor, for that matter, is antitrust irrelevant in the United States generally: concentration has increased dramatically throughout the economy.

What is driving that concentration matters, though: at the end of the day tech companies are powerful because consumers like them, not because they are the only option. Consumer welfare still matters, both in a court of law and in the court of public opinion.

• The Coalition Out to Kill Tech as We Know It With enemies like these, the industry is going to need some friends.

• WHY ANTITRUST THREATS SHOULD WORRY WALL STREET

(…) The nightmare scenario for Silicon Valley is that the upcoming presidential election becomes a platform for debating who will take a harder line on reigning in the tech industry. And while signs of a tougher stance on tech are a long way from formal charges, the building momentum towards broad reform should raise red flags for both Wall Street and Silicon Valley that change is imminent – at least to some degree. (…)

Amazon Ends Restaurant Delivery in Face of Fierce Competition Shutdown comes after the company invested in British food-delivery company Deliveroo

(…) The demise of Amazon Restaurants is a rare logistical misstep by a company that is a dominant force in e-commerce and prides its delivery prowess. (…) The rough-and-tumble food-delivery business is swarming with competitors and is largely unprofitable. (…)

Amazon faced fierce competition from specialists that are raising vast sums of money to gain market share. San Francisco-based DoorDash Inc. raised $1 billion alone across two funding rounds this year, while Uber Technologies Inc. collected $8 billion in its IPO last month. Postmates Inc., another San Francisco-based delivery service, has raised almost $700 million in private capital and filed to go public in the coming months.

The cutthroat market has eaten away at any possible profits. Chicago-based Grubhub, a food-delivery pioneer that went public in 2014, reported a 78% drop in profit in its latest quarter to $6.9 million. Its shares have fallen more than 50% from their all-time high last year. (…)

Uber’s delivery arm, Uber Eats, has grown to service more than 300 markets in the U.S. and serves dozens of cities around the world. Revenue from Uber Eats surged 89% to $536 million in the first quarter, but the “take rate”—its share of the transactions—fell to 7.8% from 12.4% in the year-ago period. Uber’s overall first-quarter loss totaled $1 billion.

Between DoorDash, Grubhub and Uber Eats, about 80% of the U.S. restaurant delivery sector has been gobbled up, according to research firm Edison Trends. (…)

In May, British food-delivery company Deliveroo said it had raised $575 million in a round led by Amazon. Including its latest round, Deliveroo said it has raised a total of $1.53 billion.