ADVANCE MONTHLY SALES FOR RETAIL AND FOOD SERVICES, JUNE 2021
Advance estimates of U.S. retail and food services sales for June 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $621.3 billion, an increase of 0.6 percent (±0.5 percent) from the previous month, and 18.0 percent (±0.7 percent) above June 2020. Total sales for the April 2021 through June 2021 period were up 31.5 percent (±0.5 percent) from the same period a year ago. The April 2021 to May 2021 percent change was revised from down 1.3 percent (±0.5 percent) to down 1.7 percent (±0.3 percent).
Fed’s Powell Concedes Anxiety About Inflation but Resists Policy Shift Federal Reserve Chairman Jerome Powell said recent inflation was uncomfortably above the levels the central bank seeks, concluding two days of testimony in which he sounded somewhat less confident about the economic outlook—and the Fed’s policy path—than earlier this year.
(…) “This is a shock going through the system associated with reopening of the economy, and it has driven inflation well above 2%. And of course we’re not comfortable with that,” Mr. Powell told the Senate Banking Committee on Thursday.
Mr. Powell said pandemic-related bottlenecks and other supply constraints for a small group of goods and services have led to rapid price increases. He said it would be an error to overreact to inflation that results from one-time increases in the prices of certain services, like air travel and hotel rates, or goods, like new and used cars, that have surged due to the reopening of the economy.
Earlier this year, Mr. Powell said he expected inflation would prove transitory because those one-time increases wouldn’t continue. But Mr. Powell said Thursday that even though the central bank still expects surging prices related to bottlenecks to reverse, the Fed was watching to see if other goods and services, where price growth has been flat or modest, might accelerate as the economy heats up.
“We’ve identified a half dozen things” that “look very much like temporary factors that will abate over time. What we don’t know is are there other things coming along to replace them?” said Mr. Powell. “We won’t have to wait a tremendously long time, I don’t think, to know whether our basic understanding of this is right.” (…) “We are humble about what we understand.” (…)
Mr. Powell indicated the Fed was in no hurry to adjust its policies right now, but that it would have a better understanding of how the reopening was proceeding by year’s end. (…)
If “there’s less labor supply, then you’ll hit full employment earlier,” Mr. Powell said. Mr. Powell said he expected and hoped to see a significant increase in the number of people looking for jobs in the coming months. (…)
“The challenge we’re confronting is how to react to this inflation, which is larger than we had expected—or that anybody had expected,” Mr. Powell said. “And to the extent it is temporary, it wouldn’t be appropriate to react to it. But to the extent it gets longer and longer, we’ll have to re-evaluate the risks.” (…)
So, the facts are that labor supply is not coming back as expected and inflation is larger than expected. But we won’t react to these facts just yet, maybe by year’s end.
Initial claims for unemployment insurance fell to 360,000 in the week ended July 10 from an upwardly revised 386,000 (initially 373,000) in the previous week rose. The Action Economics Forecast Survey expected 362,000 initial claims. The four-week moving average fell to 382,500 from 397,000 in the prior week. Both readings are the lowest in the pandemic period.
Initial claims for the federal Pandemic Unemployment Assistance (PUA) program fell to 96,362 from a slightly upwardly revised 100,590 (initially 99,001) in the previous week. The PUA program provides benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.
Continuing claims for regular state unemployment insurance in the week ended July 3 fell to 3.241 million from 3.367 million in the prior week. The insured rate of unemployment held at 2.4%, a post-pandemic low. The rate reached a high of 15.9% in the week of May 9, 2020.
Continued claims for PUA fell to 5.687 million in the week ended June 26, the lowest since the week ended April 25, 2020, from 5.825 million in the prior week. Continued PEUC claims again fell sharply to 4.710 million in the week ended June 26 from 4.908 million in the previous week. The Pandemic Emergency Unemployment Compensation (PEUC) program covers people who have exhausted their state unemployment insurance benefits.
The total number of all state, federal, PUA and PEUC continuing claims declined to 13.837 million, the lowest level since the first week of April 2020 and a decrease of 372,279 from the previous week. The level is down from the high of 33.228 million in the third week of June 2020. These figures are not seasonally adjusted.
(Bespoke)
U.S. Import and Export Prices Continued to Soar
Import and export prices continued to soar in June. Export prices rose 1.2% m/m (16.8% y/y) in June after an unrevised 2.2% m/m jump in May. Import prices rose 1.0% m/m (11.2% y/y) in June versus an upwardly revised 1.4% m/m gain in May (initially 1.1%). The 16.8% y/y gain in export prices was the second largest in the series history, dating back to 1983, exceeded only by the 17.5% y/y surge in May. The Action Economics Forecast survey had looked for import prices to rise 1.2% m/m and for export prices to increase 1.3% m/m.
(…) Nonfuel import prices rose 0.7% m/m (6.5% y/y) in June, after advances of 0.9% in May, 0.8% in April, and 0.9% in March. In June, higher prices for nonfuel industrial supplies and materials (1.9% m/m); foods, feeds, and beverages (1.9% m/m); consumer goods ex autos (0.4% m/m); and capital goods (0.2% m/m) all contributed to the increase in nonfuel import prices.
The 1.2% m/m rise in export prices in June was the seventh consecutive month in which export prices have increased more than 1.0%. Higher prices for nonagricultural and agricultural exports both contributed to the overall advance in June. Prices for agricultural exports advanced 1.5% m/m (33.5% y/y) in June following a 6.1% jump in the previous month. (…)
Nonfuels import prices are up 10.0% annualized in the last 3 months.
Meanwhile:
How Is the Economy Doing? Here’s What Banks Say Quarterly earnings from JPMorgan, Goldman and other big banks show an economy going strong. The question is, for how long?
Consumer spending is returning to pre-pandemic levels, and borrowing appears poised to rise. Markets are cooling, but deal making is as hot as ever. Still, the recovery remains vulnerable, bank executives said. Covid-19 variants are driving up case counts, raising the specter of new lockdowns. Government-aid programs that kept many Americans afloat are about to expire. (…)
Americans are spending again, even more than they were pre-pandemic—booking trips and paying for restaurant meals with their credit cards. Flush with cash from government stimulus programs, they are paying down their card debt faster than they are spending. (…)
The housing market remained red hot, with buyers bidding up the prices of second homes and suburban mansions. Wells Fargo & Co. and JPMorgan extended more mortgages than in the first quarter, which was already a blockbuster stretch for home lending. (…)
Goldman Sachs Group Inc. , for example, said its backlog of investment-banking transactions ended the quarter at a record level. (…)
Auto Loans Are Getting Off the Beaten Track Lenders are cushioning the impact of high sticker prices on cars with longer, cheaper loans
(…) Used cars and trucks were 45.2% more expensive in June than they were a year earlier, while new cars were 5.3% pricier, according to the Labor Department. Monthly payments don’t look all that different to consumers, though, thanks to lower rates, longer terms, or putting up more cash. For new cars, average monthly loan payments increased just $7 in the first quarter of 2021 compared with a year earlier, according to consumer-credit reporting company Experian. Monthly loan payments for used cars rose $19, or 5%, in the same period. (…)
The average length of an auto loan was 70 months for new cars and 68.9 months for used cars in the second quarter, according to data from Edmunds; 10 years ago, they averaged 64 months and 62 months, respectively. (…)
The average age of cars and light trucks in operation in the U.S. rose to 12.1 years this year, according to IHS Markit, from 9.6 years in 2002. (…)
The U.S. Housing Market Is Losing Some of Its ‘Frenzy,’ As More Homes List for Sale An uptick in inventory, especially at the high end, is bringing a crazy seller’s market back to earth
(…) More houses are coming on the market, real-estate experts said. For high-end properties in particular, inventory is increasing as owners who delayed selling during the worst of the pandemic list their homes. Owners who weren’t planning to sell have changed their minds after watching prices climb ever higher. Meanwhile, some deals made at the height of the frenzy have fallen through, while overpriced homes sit rather than getting snapped up immediately. The market is still hot, with strong demand buoyed by low interest rates, agents said, but buyers now have more options as a sense of normalcy returns. (…)
In June, the number of new listings hitting the market nationwide grew 11% from May and 5.5% compared with the same month of last year, according to the Realtor.com Monthly Housing Report. And while total active inventory is down 43% from the same period of last year, that is an improvement from a 60% difference in May, said Realtor.com Senior Economist George Ratiu. (…)
Price growth has slowed with more listings hitting the market across the country, Mr. Ratiu said. In June, the median listing price increased 12.7% year-over-year, compared with a jump of 17.2% in April. He said he expects growth to continue slowing over the next year. (…)
The number of new listings over $1 million jumped 17.5% year-over-year in the week ended June 19, according to Realtor.com, while new listings priced under $350,000 were down 7.4%. The total inventory of homes for sale above $1 million was still down from last year by 23%, but the number of listings below $350,000 fell 49%.
High-end listings are more abundant in part because the investors who have been scooping up single-family houses tend to purchase inexpensive homes to maximize returns, Mr. Ratiu said. (…)
- Home Sales Dipped 1.2% From May to June, the Largest Late-Spring Decline Since At Least 2012 Still, homes sold at their fastest pace and for their highest prices on record.
Seasonally-adjusted home sales fell 1.2% from May to June, the largest drop at this time of year on record through at least 2012, suggesting that the housing market frenzy may have peaked for the year. Homes sold for their highest prices and at their fastest pace on record, but measures for market speed and competition seem to be at or near peak levels for this year. (…)
“In June we entered a new phase of the housing market,” said Redfin Chief Economist Daryl Fairweather. “Home sales are starting to stall because prices have increased beyond what many buyers can afford. This summer I expect home prices to stabilize as more homeowners list their homes, realizing they likely won’t fetch a higher price by waiting longer to sell. But as rents rise, homeownership will become appealing to more people, and home sales will rev back up by 2022.” (…)
Seasonally adjusted new listings of homes for sale were up 8% in June from a year earlier. (…) In June, 56% of homes sold above list price, the largest share on record. (…)
The number of homes that changed hands dropped 8.4% in June from the month before, the third consecutive decline after hitting an all-time record in March, according to data released Thursday from the Canadian Real Estate Association. Still, benchmark prices managed to rise 0.9% as activity remained elevated by historical standards. (…)
Inventory on the market, meanwhile, continued to climb to about 2.3 months worth of housing stock, up from the record low 1.8 months in March, according to the real estate board’s report. (…)
OUT OF BREADTH!
Almost Daily Grant’s writes that
Yesterday’s seemingly routine 40 basis point decline in the S&P 500 included an historic footnote: A whopping 429 members of that index finished lower on the day, marking the smallest decline with that many red components since at least 1996, Callie Cox, senior investment strategist at Ally Invest, relays to Bloomberg.
Since May 7, the S&P 500 is up 3.0% but its equal-weighted version is down 0.8%. The NDX is up 7.8% and the NYFANG 9.5%. At the other end of the cap spectrum, the S&P 600 is down 4.2% and the Russell 2000 down 3.4%.
Measures of demand and supply show weakening demand and rising supply with the latter threatening to become dominant.
The truth is that there is growing uncertainty on the course of the economy, inflation and interest rates. Even the Fed is admittedly less certain about its own convictions. Interested buyers don’t know why they should be buying or what they should buy. The bigger risk is that more investors lose faith in the Fed.
COVID-19
The Reassuring Data on the Delta Variant There’s no sign of a surge in hospitalization or severe illness, and the vaccines remain extremely effective.
(…) A new study from the U.K. found that vaccines are still incredibly effective at preventing serious illness with the Delta variant circulating. The Pfizer vaccine was 96% effective after two doses at preventing hospitalization, meaning the average unvaccinated person in the study was more than 25 times as likely to be hospitalized with Covid as the average vaccinated one. (This almost certainly understates the protectiveness of the vaccine, as the vaccinated cohort was older and had a higher incidence of pre-existing conditions than the unvaccinated one.) The Johnson & Johnson vaccine produces strong neutralizing antibodies and cellular responses against the Delta variant, still present eight months after administration.
Studies from Canada and the U.K. show 79% to 87% effectiveness against symptomatic infection with the Delta variant. On July 8 the Centers for Disease Control and Prevention and the Food and Drug Administration asserted their confidence in the vaccines. They jointly announced that no boosters are necessary at this time.
This is all excellent news, as is the finding that 99% of hospitalizations for Covid-19 are among unvaccinated people. The vaccines are as good as first heralded, even against new variants. (…)
When we look at current hospitalization data across the country, the most striking predictive pattern is that a high vaccination rate in a region accurately predicts a lower hospitalization rate. (…)
So far, as we march through the variant alphabet, none of the predicted doomsday scenarios in virulence or vaccine resistance have come to pass. (…)
We have to work harder to get people vaccinated, given that almost every American death from Covid-19 is tragically preventable, that world-wide vaccination is paramount to tamp down transmission and stop future variants, and that saving lives everywhere is the right thing to do.
These charts are courtesy of NBF Economics and Strategy:
U.K. Warns Covid Curbs May Return If Cases Get Out of Control
Merkel presses Biden over lifting Covid-related Europe travel ban US president says he will have an answer soon as German chancellor makes final visit to Washington
Canada Eyes Reopening Border to U.S. Tourists in Mid-August The lifting of restrictions would be conditional on Canada continuing a robust pace of Covid-19 vaccinations, according to Prime Minister Justin Trudeau.
(China snubs senior US official in worsening diplomatic stand-off Beijing refuses to allow Biden’s deputy secretary of state to meet counterpart in planned visit