CPI for all items rises 0.6% in May as many indexes increase
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in May on a seasonally adjusted basis after rising 0.8 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.0 percent before seasonal adjustment; this was the largest 12-month increase since a 5.4-percent increase for the period ending August 2008.
The index for used cars and trucks continued to rise sharply, increasing 7.3 percent in May. This increase accounted for about one-third of the seasonally adjusted all items increase. The food index increased 0.4 percent in May, the same increase as in April. The energy index was unchanged in May, with a decline in the gasoline index again offsetting increases in the electricity and natural gas indexes.
The index for all items less food and energy rose 0.7 percent in May after increasing 0.9 percent in April. Many of the same indexes continued to increase, including used cars and trucks, household furnishings and operations, new vehicles, airline fares, and apparel. The index for medical care fell slightly, one of the few major component indexes to decline in May.
The index for all items less food and energy rose 3.8 percent over the last 12-months, the largest 12-month increase since the period ending June 1992. The energy index rose 28.5 percent over the last 12-months, and the food index increased 2.2 percent.
Noteworthy:
- Never mind the base effect, core CPI is up at a 7.8% annualized rate in the last 3 months, +10% a.r. in the last 2.
- Core Goods inflation: +25.1% a.r. in the last 2 months. Apparel: +9.0%.
- CPI Shelter inflation, very quiet during the pandemic, +4.0% a.r. in the last 3 months, +4.3% in the last 2. Yet, both Rent and Owners’ Equivalent Rent remained subdued below 2.0% (although OER was up 0.3% MoM in May).
Technology Fills the Gap as Jobs Lag Behind GDP The pandemic and labor shortages are driving businesses to boost productivity with digital investments.
(…) The gap between GDP and jobs is explained by soaring output per worker. The U.S. is in the midst of a productivity boom. That is positive for wages and inflation because higher revenue can absorb increased wages without companies raising prices. It isn’t such great news for the jobs outlook if employers conclude they can meet sales goals with less hiring.
In recessions employers are typically slow to cut jobs as sales slump, which causes productivity to decline. When sales recover, they are slow to add jobs and productivity rebounds. The pandemic has broken with that pattern. Business output per hour has grown in three of the past four quarters. In the January-to-March quarter of this year, it was up 4.1% from a year earlier, the fastest in a decade.
Some of this reflects the unusual patterns of this particular downturn. The losses suffered by low productivity, low wage sectors such as leisure, hospitality and other in-person services artificially boosted average overall productivity.
But the pandemic may also have prodded companies to change their business models and intensify their use of technology to squeeze more sales out of the same workforce. Industries accounting for a third of the job loss since the start of the pandemic have increased output, including retailing, information, finance, construction, and professional and business services, said Jason Thomas, head of global research at private-equity manager Carlyle Group. (…)
Executives began to ask “hard questions: Why do we have so much floor space? Are we sure our cost base makes so much sense? Why were we taking so many intra-office trips? (…)
Indeed, software investment rose 10.5% adjusted for inflation in the first quarter from a year earlier as businesses poured money into cloud computing, collaboration software and electronic commerce. (…)
I am no economist and do not pretend to negate Greg Ip’s arguments. But I am prudent making broad interpretations of recent data given the significant dislocations the pandemic has created. One case in point is the shift in consumer expenditures (67% of GDP) from Services (70% of expenditures), down 1.3% from their pre-pandemic level, to Goods, up 16%, and the concurrent shift in retail sales (Goods) from stores to on-line. Note also that a large part of goods consumed in the USA are imports, particularly technology, so the pandemic-induced jump in the purchase and use of technology has benefitted imports. We shall see how post-pandemic data reset.
The chart shows how GDP, and particularly Business Sales, have outpaced Aggregate Payrolls, and particularly Employment, since Q1’20. There is much enhancement in profit margins in there but how sustainable?
Bank of Canada holds steady on rates, bond buying as vaccination efforts bolster economic outlook
The central bank kept its overnight policy rate at 0.25 per cent Wednesday, where it has been since March, 2020, and reiterated that it does not expect to hike interest rates until the second half of 2022 at the earliest. Likewise, it maintained its $3-billion-a-week target for government bond buying, also known as quantitative easing, which was in line with analysts’ expectations.
“With vaccinations proceeding at a faster pace, and provincial containment restrictions on an easing path over the summer, the Canadian economy is expected to rebound strongly, led by consumer spending,” the bank said in its rate decision.
“Housing market activity is expected to moderate but remain elevated. Strong growth in foreign demand and higher commodity prices should also lead to a solid recovery in exports and business investment,” it said.
The statement-only rate decision follows a significant policy shift in April, when the bank revised its economic outlook upward, scaled back its bond purchases and pulled forward its timing for a potential rate hike. (…)
On inflation, the bank continued to talk down the recent spike in the Consumer Price Index, which rose 3.4 per cent in April, the fastest annual pace of inflation in almost a decade. (…)
“While CPI inflation will likely remain near 3 per cent through the summer, it is expected to ease later in the year, as base-year effects diminish and excess capacity continues to exert downward pressure,” the bank said. (…)
The Retreat of Exxon and the Oil Majors Won’t Stop Fossil Fuel National oil champions are likely to fill the gap left by private-sector players
Big Oil Is Getting Smaller
The majors’ spending on oil and gas production has fallen
- America’s Energy Gift to Dictators China, Russia and Iran will exploit the U.S. retreat on fossil fuels.
(…) U.S. producers reduced investment during the pandemic as demand plunged. While prices have since recovered to a two-year high, a larger U.S. retrenchment driven by government and progressive investors is on the way.
Two weeks ago the hedge fund Engine No. 1 allied with big asset managers, government pension funds and proxy advisers ousted three Exxon Mobil board members in a climate proxy battle. Shareholders also passed a resolution requiring Chevron to reduce its downstream emissions. The latter is a de facto mandate to withdraw from oil and gas.
America’s big banks have red-lined U.S. coal companies and refused to finance oil projects in ANWR, which the 2017 GOP tax reform opened up to development. Now the Biden Administration is trying to wall off the Arctic again as it launches a regulatory assault on fossil fuels—from tighter emission rules to endangered-species protections. (…)
Unless there is some technology breakthrough, demand for fossil fuels will continue to grow for decades. And Russia and China will take advantage of U.S. energy disarmament. Russian oil giant Rosneft warned last fall that retrenchment by U.S. and European companies would result in higher prices and shortages. “Someone will need to step in,” Rosneft senior executive Didier Casimiro said. (…)
CRYPTOS
- Global banking regulator urges toughest capital rules for crypto Basel committee report comes as authorities step up plans to regulate the fast-emerging sector
- China Arrests 1,100 for Money Laundering in Crypto Crackdown
China arrested over 1,100 people in a sweeping crackdown on the use of cryptocurrencies for money laundering, adding to signs it’s further reining in crypto-linked activities.
Police busted more than 170 criminal groups that used cryptocurrencies to launder money in telecom scams to avoid being tracked down, the Ministry of Public Security said in a statement. The campaign spanned 23 provinces and cities, it added. Arrest figures were as of Wednesday afternoon. (…)