Inflation is the current buzz word as today’s Bloomberg front page attests:
CPI for all items rises 0.6% in March as gasoline index continues to rise
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in March on a seasonally adjusted basis after rising 0.4 percent in February, the U.S. Bureau of Labor Statistics reported today. The March 1-month increase was the largest rise since a 0.6-percent increase in August 2012. Over the last 12 months, the all items index increased 2.6 percent before seasonal adjustment.
The index for all items less food and energy rose 0.3 percent in March. The shelter index increased in March as did the motor vehicle insurance index, the recreation index, and the household furnishings and operations index. Indexes which decreased over the month include apparel and education.
The index for all items less food and energy rose 1.6 percent over the last 12 months, after increasing 1.3 percent over the 12 month period ending in February. The food index rose 3.5 percent over the last 12 months, while the energy index increased 13.2 percent over that period.
The 0.3% MoM rise in the Core CPI (consensus was +0.2%) follows +0.1% in February and 0.0% in the 2 months previous. Core Goods prices rose 0.1% in March after -0.2% in February and 0.2% in total for the 4 previous months. Nothing serious so far.
Canada is also focused on inflation as NBF reports:
The business outlook survey released by the Bank of Canada (BoC) earlier today showed business sentiment continuing to improve and inflationary pressures building. “Over half of firms expect inflation to be above the midpoint of the Bank of Canada’s inflation-control target range of 1 to 3 percent over the next two years” the BoC said.
We might get there sooner than later if you believe the just-released alternative measure of CPI inflation produced by Statistics Canada that controls for shifts in household purchasing patterns during the COVID pandemic. As today’s Hot Chart shows, the CPI-adjusted (akin to the U.S. PCE deflator) showed annual inflation running well ahead of the official CPI in February: 1.5% vs 1.1%.
Following last Friday’s blockbuster jobs report, this is yet another data point that should give our central bank additional confidence to slow the pace of QE purchases.
Making their point:
Fed’s Powell says U.S. economy at an ‘inflection point’
JPMorgan Chief Strategist Says Markets May Be at Long-Term Turning Point
Global markets may have reached an inflection point with value shares set to outperform growth ones for a significant period, according to JPMorgan Chase & Co. chief global markets strategist Marko Kolanovic.
The rebound in value driven by the recovery from the pandemic, falling volatility and fiscal and monetary policy support is set to last for some time as the various factors work their way through the system, Kolanovic said in an interview. These could trigger a long-term investment shift toward being more cyclical and reflationary, he said.
“We might be at a more significant turning point rather than just historically what were blips that reverted back to the growth investing style,” New York-based Kolanovic said April 9. “We think this recovery can last longer and be more profound and have more of an impact on investor styles and flows than people appreciate.” (…)
While rising Treasury yields have helped tilt the playing field in favor of value assets, they are unlikely to become a negative factor for equities until the 10-year reaches 2.50%, Kolanovic said. (…)
JPMorgan’s view is that oil will move significantly higher in the near-term as demand returns (…).
The firm has a year-end target for the S&P 500 of 4,400, compared with the median prediction of 4,100 in a Bloomberg survey, and Monday’s close of 4,127.99. (…)
Bank of America Corp. and Citigroup Inc. both predict the S&P 500 will drop back to 3,800 by the end of December. BofA strategists led by Savita Subramanian warned of “anemic returns ahead,” in a note this month, while a Citi team led by Tobias Levkovich cites negatives such as high valuations and the potential for the Federal Reserve to roll back stimulus later this year.
- John Authers: Stocks May Be Primed for Some Bruising Encounters Any negative surprises in earnings and inflation data could have an exaggerated impact.
(…) In the near term, stock markets are in the uncomfortable Lewis Carroll state of expecting to be surprised. Looking at multiples of expected earnings for the year as a whole, as reported to Bloomberg, the S&P 500 is expensive as it has ever been, barring the very top of the dot-com boom, and a few weeks at the end of last year. Such high prospective multiples imply either an elevated confidence in continuing growth after this year, or a resolute belief that near-term earnings will be better than the consensus numbers reported to Bloomberg (…)
Small biz owners are not seeing the point(s) yet:
March Small Business Optimism Index
- Small biz owners are rather gloomy:
- They are not seeing much of a turn in sales…
- …and earnings:
- They are forced to raise prices:
- Partly because of this inflection:
- Hoping for something “transitory”:
- Yet, they seek to hire:
Strong job growth continued for small businesses in March. Firms increased employment by 0.42 workers per firm on average over the past few months. Forty-two percent (seasonally adjusted) of all owners reported job openings they could not fill in the current period, up 2 points from February, a record high reading. The March reading is 20 points higher than the 48-year historical average of 22 percent. Thirty four percent have openings for skilled workers (up 1 point) and 19 percent have openings for unskilled labor (up 3 points).
Owners are frustrated with mounting unfilled job openings as qualified and willing candidates are scarce. (…) Fifty-five percent of construction firms reported few or no qualified applicants (down 6 points) and 38 percent cited the shortage of qualified labor as their top business problem (up 3 points). Overall, 56 percent reported hiring or trying to hire in March, unchanged from February. (…)
Fifty-one percent (91 percent of those hiring or trying to hire) of owners reported few or no “qualified” applicants for the positions they were trying to fill in March (unchanged). Twenty-eight percent of owners reported few qualified applicants for their open positions (up 2 points) and 23 percent reported none (down 2 points).
Virus Aid Drives U.S. Six-Month Budget Deficit to Deepest Ever The budget deficit rose to a record $1.7 trillion in the first half of the fiscal year, as the government issued a third round of stimulus checks to help Americans ride out the economic fallout from pandemic.
Other than that:
- Hennes & Mauritz AB stores in parts of China are being closed by their landlords after the Swedish fashion retailer’s comments on Xinjiang prompted an unofficial boycott. Japanese brands Muji and Uniqlo became embroiled in the spat this week, while Oregon-based Nike Inc.’s shares sank as investors took fright at the potential impact on its Chinese business. (Bloomberg)
- China Warns 34 Tech Firms to Curb Excess in Antitrust Review
China ordered 34 internet corporations Tuesday to rectify their anti-competitive practices within the next month, signaling that Beijing’s scrutiny of its most powerful firms hasn’t ended with the conclusion of a probe into Alibaba Group Holding Ltd.
Shares in Tencent Holdings Ltd. and Meituan extended losses after the State Administration for Market Regulation issued a stern statement emphasizing it will continue to eradicate abuses of information and market dominance among other violations. Also summoned to an ad-hoc meeting with the watchdog on Tuesday were industry leaders including TikTok owner ByteDance Ltd., search giant Baidu Inc. and JD.com Inc.
Regulators warned internet companies to “heed Alibaba’s example,” reaffirming their intent to abolish forced exclusivity among other practices. (…)
The regulator also highlighted abuses like acquisitions that squeeze out smaller rivals and burning through cash to grab market share in community group buying, currently the hottest e-commerce arena in China. Firms also need to address issues like counterfeiting, data leaks and tax evasion, according to the statement. (…)
- Americans Have Too Much Toilet Paper. It’s Catching Up With Firms. Sales of toilet tissue are plummeting to below pre-pandemic levels after a year in which shortages left consumers scrambling for squares.