CPI for all items rises 0.3% in August; gasoline, food, shelter among indexes rising
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in August on a seasonally adjusted basis after rising 0.5 percent in July, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 5.3 percent before seasonal adjustment.
The indexes for gasoline, household furnishings and operations, food, and shelter all rose in August and contributed to the monthly all items seasonally adjusted increase. The energy index increased 2.0 percent, mainly due to a 2.8-percent increase in the gasoline index. The index for food rose 0.4 percent, with the indexes for food at home and food away from home both increasing 0.4 percent.
The index for all items less food and energy rose 0.1 percent in August, its smallest increase since February 2021. Along with the indexes for household operations and shelter, the indexes for new vehicles, recreation, and medical care also rose in August. The indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined over the month.
The index for all items less food and energy rose 4.0 percent over the last 12 months, also a smaller increase than the period ending July. The energy index rose 25.0
percent over the last 12 months, and the food index increased 3.7 percent; both were larger than the increases for the 12-month period ending July.
Amazon hikes starting pay to $18 an hour
Amazon.com Inc (AMZN.O) has increased its average starting wage in the United States to more than $18 an hour and plans to hire another 125,000 warehouse and transportation workers, an executive told Reuters.
The world’s largest online retailer has raised pay from around $17 since May. In some locations, the company is giving signing bonuses of $3,000, said Dave Bozeman, vice president of Amazon Delivery Services, or triple what the company offered four months ago. (…)
Amazon, now the second-biggest U.S. private employer, set a $15 an hour minimum wage in 2018. Walmart Inc recently touted average hourly wages of $16.40, while Walgreens Boots Alliance Inc said it would raise its minimum to $15 in October. (…)
Inflation Expectations Continue to Climb, New York Fed Survey Shows Respondents see inflation at 5.2% a year from now and 4% in three years.
In its August Survey of Consumer Expectations, the bank said Monday that respondents see inflation a year from now at 5.2%, up from expectations of 4.9% last month. Three years from now, it is expected to be at 4%, up from the 3.7% expected in July. Both readings mark record-high readings for data that goes back to 2013.
The report also found projections of big increases in some of the most important costs Americans face on a regular basis. Food prices are seen rising by 7.9% a year from now, rent by 10% and medical-care costs by 9.7%. The survey also found record-high levels of uncertainty about the path of inflation as well.
Lessening the blow of the expected leap in price pressures is respondents’ sanguine outlook for their personal finances. The survey found that the median expected growth in household income a year from now hit a series high of 3%. Survey respondents also expect home-price growth to slow. (…)
Embattled Evergrande warns of growing default risks as pressures mount
Cash-strapped property group China Evergrande Group (3333.HK) said on Tuesday it has engaged advisers to examine its financial options and warned of default risks amid plunging property sales, sending its stock and bond prices sharply lower. (…)
In the latest development, Evergrande said two of its subsidiaries had failed to uphold guarantee obligations for 934 million yuan ($145 million) worth of wealth management products issued by third parties.
That could “lead to cross-default”, which would “would have a material adverse effect on the group’s business, prospects, financial condition and results of operations,” it said in a statement to the Hong Kong stock exchange, without providing further details on the products. (…)
“Evergrande’s announcement flags the first step of a restructuring, which usually involves either delay in interest payment, no interest payment or delay together with haircuts,” said James Shi, distressed debt analyst at credit analytics provider Reorg.
He added liquidation would only happen if the restructuring failed. (…)
(…) China’s central bank highlighted in its financial stability report in 2018 that companies including Evergrande might pose systemic risks to the nation’s financial system.
Evergrande’s liabilities involve more than 128 banks and over 121 non-banking institutions, according to the letter Evergrande sent to the government late last year. JPMorgan estimated last week China Minsheng Bank (600016.SS) has the highest exposure to Evergrande.
Late payments could trigger cross-defaults as many financial institutions have exposure to Evergrande via direct loans and indirect holdings through different financial instruments.
In the dollar bond market, Evergrande accounts for 4% of Chinese real estate high-yields, according to DBS. Any defaults will also trigger sell-offs in the high-yield credit market.
A collapse of Evergrande will have a large impact on the job market. It has 200,000 staff and hires 3.8 million people every year for project developments. (…)
Democrats Release Details of Proposed Tax Increase House Democrats are calling for raising the corporate tax rate to 26.5% from 21%, a 3-percentage-point surtax on top earners and a capital-gains tax increase.
(…) Republicans are expected to mount unanimous opposition to the proposal, which would reverse many of the GOP tax cuts from 2017.
Democrats plan a committee vote this week on the proposals, which would generate more than $2 trillion that would go toward expanding Medicare, increasing renewable-energy tax breaks and creating a national paid-leave program, among other items.
Democrats also are looking elsewhere to cover the rest of the $3.5 trillion spending and tax-cut agenda they aim to pass this fall. They hope the government can save $700 billion from prescription drug pricing policy changes, and they plan to assert that their agenda would spur $600 billion in budgetary savings from faster economic growth. (…)
The changes, when combined with the expanded child tax credit available to households with no income, make the income-tax system much more of a tool for redistribution, said Lawrence Zelenak, a law professor at Duke University. (…)
For individuals, the top marginal tax rate would rise to 39.6% from 37% starting in 2022. That tax rate would kick in at taxable income of $400,000 for individuals and $450,000 for married couples, below where the Biden administration had proposed.
The 3-percentage-point surtax would apply to individuals and married couples with adjusted gross income above $5 million. (…)