CPI for all items rises 0.9% in June as many indexes increase
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.9 percent in June on a seasonally adjusted basis after rising 0.6 percent in May, the U.S. Bureau of Labor Statistics reported today. This was the largest 1-month change since June 2008 when the index rose 1.0 percent. Over the last 12 months, the all items index increased 5.4 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 10.5 percent in June. This increase accounted for more than one-third of the seasonally adjusted all items increase. The food index increased 0.8 percent in June, a larger increase than the 0.4-percent increase reported for May. The energy index increased 1.5 percent in June, with the gasoline index rising 2.5 percent over the month.
The index for all items less food and energy rose 0.9 percent in June after increasing 0.7 percent in May. Many of the same indexes continued to increase, including used cars and trucks, new vehicles, airline fares, and apparel. The index for medical care and the index for household furnishings and operations were among the few major component indexes which decreased in June.
The all items index rose 5.4 percent for the 12 months ending June; it has been trending up every month since January, when the 12-month change was 1.4 percent. The index for all items less food and energy rose 4.5 percent over the last 12-months, the largest 12-month increase since the period ending November 1991. The energy index rose 24.5 percent over the last 12-months, and the food index increased 2.4 percent.
Inflation Threat May Be Boosted by Reversal of Long-Term Forces Shifts in the global economy over the past few decades have helped keep prices in check, but some economists say these forces have begun to reverse in ways that the pandemic has intensified.
- Globalization goes into reverse: protectionism, onshoring, reshoring.
- From demographic plenty to scarcity: a rising ratio of dependents to workers adds to inflationary pressures (more consumers, fewer producers).
- E-commerce matures
Freight’s Up!
Cass Implied Freight Rates, January 2009 – June 2021 (01’1990=1.00)
Lumber Wipes Out 2021 Gain With Demand Ebbing After Record Boom
But they only wiped out 2021 gains, not 2020’s:
More commodity price charts from Ed Yardeni:
FIBER: Industrial Commodity Price Index Declines
Fed’s Williams Says He Doesn’t Yet See Case To Slow Fed Bond Buying
Goldman Says Pandemic Is Shaping a More Productive U.S. Economy
(…) Since the crisis began, annualized growth in output per hour has risen 3.1%, compared with 1.4% in the previous business cycle, Goldman economists wrote in a note. “Stronger productivity growth has been one of the silver linings of the pandemic,” they said.
Those gains are most visible in sectors that can take advantage of virtual meetings, and where in-person expenses such as travel and entertainment have scope to decline. The gains are being led by sectors including information technology, professional services and wholesale trade, while online shopping has lifted productivity in the retail sector. (…)
In their analysis, the Goldman economists said that even once workplaces fully reopen and workers resume regular service, productivity gains aren’t likely to be unwound.
“If gains from workplace digitization are indeed sustainable, the reopening of corporate office buildings and the face-to-face economy should not be associated with a pause or reversal of these trends,” they wrote. (…)
Here’s more, directly from GS:
Company data mirror the productivity growth rebound in the GDP statistics and suggest that it continued into Q2. Operating margins for S&P 1500 nonfinancial services firms are tracking 180bp higher than pre-crisis, with even larger gains in industries where gains from digitization are clear-cut: technology services, professional services, and non-virus-sensitive consumer services.
We continue to expect the evolution of business models and gains in worker efficiency to boost the level of productivity in the nonfarm business sector by around 4% by 2022—or a +1.3pp boost to annual productivity growth over three years. The productivity acceleration to date and our fundamental-based estimates suggest that the output gap is roughly twice as large as the pre-crisis trend would imply (at 3-3.5% in Q2). This would lengthen the runway for expansion as the business cycle matures.
Rising productivity is now conventional wisdom and a major reason why inflation should prove transitory. On June 28, I humbly offered these 2 charts as potential counterweights:
I would only signal that productivity seems to always accelerate during recessions so I would wait a little before concluding that Zoom and others have created a new productivity era.
Unit labor costs have also sharply accelerated since 2019. Will they drop in coming quarters like they did in the previous two recessions?
I also wonder whether the unusual strength of the Goods economy in the past year, most of which being imported, does not temporarily impact U.S. productivity data.
NY Fed Survey: June Year-Ahead Expected Inflation Rate Hits Highest Mark Since 2013 As of June, the public expects inflation to hit 4.8%, from a projected 4% the previous month
(…) The Fed believes where the public and markets expect inflation to go exerts a strong influence on where inflation is now. Recent market moves show financial markets cutting back on bets for expected inflation. Surveys of consumer-level inflation expectations consistently find the public overestimates the level of price pressure relative to government data.
Upsizing:
In a March survey by consumer data provider NPD, 40% of women and 30% of men said they no longer fit into the sizes they wore last year. Among those that reported a change, more went up in size than down.
This was driven by pandemic habits that tended toward either more snacking or more exercising, NPD says. (Axios)
U.S. Small-Business Optimism Index Climbs to an Eight-Month High The NFIB optimism index increased 2.9 points to 102.5. The figure exceeded the median projection of 99.5 in a Bloomberg survey of economists. Seven of the 10 components rose in June.
But the details are not really inspiring:
Deloitte: Back-to-School and Back-to-College Make a Comeback
- back-to-school spending will be at its highest level in recent years, reaching a collective $32.5 billion for K-12 students, or approximately $612 per student; back-to-college shoppers will spend $26.7 billion, or approximately $1,459 per student.
- The pandemic propelled education into the digital age, fueling a 37% increase in technology spending for K-12 students and 17% increase for college students, creating a new baseline for how and what parents purchase.
- A year of supply chain challenges and lingering concerns about stockouts pulls spend forward with 59% of K-12 planned spending to occur by the end of July.
- Shopping behaviors first adopted due to safety will continue as a desire for convenience takes over. Parents of K-12 students plan to shop more frequently at online retailers and dollar stores, while 34% of consumers plan to leverage services such as BOPIS (buy online, pick up in store) and curbside pickup more frequently.
- While online shopping continues to rise, parents of K-12 students are twice as likely as parents of college students to use emerging technology to complete their purchases.
- New payments to families begin this week
On Thursday, the Treasury Department begins monthly payments to families with children, a program created by the COVID stimulus in March, the N.Y. Times’ Jason DeParle reports (subscription).
“With all but the most affluent families eligible to receive up to $300 a month per child, the United States will join many other rich countries that provide a guaranteed income for children … Experts estimate the payments will cut child poverty by nearly half, an achievement with no precedent.”
The Treasury Department said 39 million households — covering 88% of U.S. children — will automatically begin receiving monthly payments through the expanded Child Tax Credit. The program is scheduled to expire in a year.
China Exports Accelerate, Defying Expectations Outbound shipments increased 32.2% in June from a year earlier in dollar terms, beating economist forecasts
(…) China’s imports, meanwhile, increased 36.7% in June from a year earlier—slower than May’s 51.1% year-over-year jump, but also far better than economists’ forecast of a 25.5% gain.
Taken together, the trade data expanded China’s trade surplus to $51.5 billion in June, from $45.5 billion in May, according to official data. Economists had expected China’s trade surplus to remain steady at $45.5 billion. (…)
From Bloomberg:
Global appetite for Chinese goods including medical goods and work-from-home equipment has helped spur exports this year and the data showed a broad-based expansion, with stronger shipments of goods such as cell phones, refined oil products and shoes. The surge in trade last month came despite a resurgence in coronavirus cases in southern China that had caused delays in shipments at some major ports for much of June. (…)
Earlier, the customs administration reported trade in yuan figures, showing exports climbed 28.1% in the first half of the year from a year earlier, while imports rose 25.9%. (…)
Export growth to the U.S. slowed to 17.8% in June, while picking up strongly to Hong Kong, Japan and South Korea. China’s trade surplus with the U.S. continued to increase, reaching $32.6 billion last month. (…)
Germany Sees 14 Million Electric Vehicles on Its Roads by 2030
The forecast is at least 40% higher than a previous estimate thanks to a recent surge in EV sales, Economy Minister Peter Altmaier said Tuesday. Germany expected to have about 1 million such cars on its roads this month. (…)
Germany’s government expects the surging EV sales to push up electricity demand to about 655 terawatt-hours by 2030, Altmaier said, citing preliminary estimates. Consumption was 568 TWhs in 2018, according to the International Energy Agency. (…)