REUTERS
"Fed's Powell holds fast to 'this year' timeline for bond-buying taper"
By Howard Schneider, Ann Saphir
AUGUST 27, 2021
WASHINGTON (Reuters) - Federal Reserve Chair Jerome Powell, in a speech that affirmed an ongoing U.S. economic recovery and explained why there is no rush to tighten monetary policy, gave a detailed account on Friday of why he regards a spike in inflation as temporary and offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be “this year.”
In remarks to the annual Jackson Hole economic conference, Powell indicated the Fed will remain cautious in any eventual decision to raise interest rates as it tries to nurse the economy to full employment, saying he wants to avoid chasing “transitory” inflation and potentially discouraging job growth in the process - a defense in effect of the new approach to Fed policy he introduced a year ago.
On the separate and potentially imminent decision by the U.S. central bank to begin reducing its $120 billion in monthly purchases of U.S. Treasuries and mortgage-backed securities, Powell said he agreed with the majority of his colleagues that if job growth continues it “could be approriate...this year.”
The weeks since the Fed’s policy meeting in July “brought more progress” towards repairing the jobs market, Powell said, with nearly a million positions added and continued progress expected.
But it also coincided with “the further spread of the Delta variant” of the coronavirus, Powell noted, raising risks that would need to be evaluated as the debate over the bond-buying “taper” continues ahead of the Fed’s Sept. 21-22 policy meeting.
In the days before Powell’s speech, several Fed regional bank presidents said they were eager to get a taper underway, and to reduce the asset purchases fast, with some arguing the shift was needed to prepare for interest rate increases that may be needed sooner than expected.
Data released earlier on Friday showed inflation continuing to rise.
The personal consumption expenditures (PCE) price index, a key inflation gauge watched by the Fed, was up 4.2% in the 12 months through July, the third straight month it has been at least double the central bank’s 2% target.
Powell, however, was non-committal, and gave no precise indication of when a reduction in bond purchases might start.
“We will be carefully assessing incoming data and the evolving risks,” he said, signaling that Fed discussions about exactly when to reduce the bond-buying program not only remain unresolved, but must be squared against the health and economic risks posed by the highly contagious Delta variant.
Stocks were trading higher after Powell’s speech, with the benchmark S&P 500 index hitting a record high, as investors took the view that Powell was signaling no rush to tighten policy.
Treasury bond yields edged lower and the dollar weakened against a basket of trading-partner currencies.
“Powell understands that tapering will happen, but it’s not going to happen sooner than later,” said Kim Forrest, chief investment officer at Bokeh Capital Partners in Pittsburgh.
‘PREPARED TO ADJUST’
Powell’s remarks offered a broad road map of where the U.S. central bank stands as it moves away from policies rolled out to counteract the pandemic’s economic shock, while also accounting for the fact that the health crisis has not passed, and that millions of Americans remain out of work as a result of it.
The pivot away from asset purchases now appears just a matter of time, as long as robust U.S. job growth continues through August and into the fall.
Fed officials have said they expect the resurgent health crisis will not throw the recovery off track, though concerns about COVID-19 risks did force the central bank itself to move its Jackson Hole symposium from a mountain resort in Wyoming to a virtual event for the second year in a row.
Expectations for continued job growth are in part based on reopened schools, eased childcare constraints, and a steady return to consumer spending on close-contact activities - developments that may be influenced by the worsening outbreak.
Fed officials “expect to see continued strong job creation."
"And we will be learning more about the Delta variant’s effects,” Powell said in his speech.
“For now, I believe that policy is well positioned; as always, we are prepared to adjust.”
The next major decision, of when to raise the benchmark overnight interest rate from the current near-zero level, will be subject to a “substantially more stringent test,” Powell said, that satisfies Fed officials that the economy has reached maximum employment and inflation is sustainably at the 2% target.
Powell, who spearheaded the new policy framework put in place by the Fed last year, is being considered by President Joe Biden for a second term as head of the central bank. Powell’s current term expires early next year.
Much of Powell’s speech on Friday was devoted to an exposition of why he feels current high inflation does not necessarily meet the test because it is likely to pass, with the reasons ranging from supply chain bottlenecks that are likely to ease to globalization acting as an anchor on prices.
While the current fast pace of price increases is “a cause for concern,” Powell said it would also be damaging if the Fed jumped the gun with a premature decision to hike rates.
“We have much ground to cover to reach maximum employment, and time will tell whether we have reached 2 percent inflation on a sustainable basis,” Powell said.
“If a central bank tightens policy in response to factors that turn out to be temporary ... the ill-timed policy move unnecessarily slows hiring and other economic activity and pushes inflation lower than desired."
"Today, with substantial slack remaining in the labor market and the pandemic continuing, such a mistake could be particularly harmful.”
Reporting by Howard Schneider; Editing by Paul Simao
https://www.reuters.com/article/us-usa- ... SKBN2FS1C8
THE ECONOMY
Re: THE ECONOMY
REUTERS
"Fed's Mester says more labor market gains needed before rates liftoff"
By Reuters Staff
AUGUST 27, 2021
Aug 27 (Reuters) - Cleveland Federal Reserve Bank President Loretta Mester said on Friday that it is time to start reducing the central bank’s asset purchases, but more improvement is needed in the labor market before officials would consider raising interest rates.
“There is still room to go on the employment side in terms of those criteria that we put out for the first liftoff of the funds rate,” Mester said during an interview with Bloomberg TV.
“Let’s see how the economy performs.”
(Reporting by Jonnelle Marte; Editing by Chris Reese)
https://www.reuters.com/article/usa-fed ... SS0N2O301I
"Fed's Mester says more labor market gains needed before rates liftoff"
By Reuters Staff
AUGUST 27, 2021
Aug 27 (Reuters) - Cleveland Federal Reserve Bank President Loretta Mester said on Friday that it is time to start reducing the central bank’s asset purchases, but more improvement is needed in the labor market before officials would consider raising interest rates.
“There is still room to go on the employment side in terms of those criteria that we put out for the first liftoff of the funds rate,” Mester said during an interview with Bloomberg TV.
“Let’s see how the economy performs.”
(Reporting by Jonnelle Marte; Editing by Chris Reese)
https://www.reuters.com/article/usa-fed ... SS0N2O301I
Re: THE ECONOMY
REUTERS
"Automobiles restrain U.S. consumer spending, monthly inflation slowing"
By Lucia Mutikani
AUGUST 27, 2021
WASHINGTON (Reuters) - U.S. consumer spending slowed in July as a decline in motor vehicle purchases due to shortages offset a rise in outlays on services, supporting views that economic growth will moderate in the third quarter amid a resurgence in COVID-19 infections.
But the foundation for the recovery remains solid, with the report from the Commerce Department on Friday showing wages rising and Americans further boosting savings.
Inflation appears to have peaked, which could preserve households’ purchasing power.
Businesses are also restocking and exporting more goods, suggesting a slowdown in growth this quarter could be temporary.
“There are clear downside risks to spending if more events and trips are canceled and more products are delayed getting to shelves,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
“But it’s a bit early to throw in the towel on the economic outlook given supportive wage and saving trends and a likely boost from business investment, inventories, and trade in the third quarter.”
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3% last month after advancing 1.1% in June.
Last month’s rise was in line with economists’ expectations.
Demand is rotating back to services like travel and leisure, but spending has been insufficient to compensate for the drop in goods purchases, which are also being impacted by shortages.
Goods spending fell 1.1% last month, led by motor vehicles.
A global shortage of semiconductors is hampering auto production.
There were also decreases in spending on recreational goods as well as clothing and footwear.
Still, goods spending is 20% above its pre-pandemic level.
Spending on services rose 1.0%, a broad increase led by food services and accommodations.
Outlays on services last month were 1% above their February 2020 level.
Healthcare, transportation and recreation are yet to recoup their pandemic losses.
Credit card data suggests spending on services like airfares and cruises as well as hotels and motels slowed in August amid soaring COVID-19 cases driven by the Delta variant.
Fears about the virus knocked consumer sentiment to a more than 9-1/2-year low in August.
Inflation continued to rise last month, fanned by the unrelenting supply constraints and the economy’s move toward normalcy after the upheaval caused by the pandemic.
But the pace of increase is slowing.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed 0.3% in July.
That was the smallest gain in five months and followed a 0.5% advance in June.
In the 12 months through July, the so-called core PCE price index rose 3.6% after a similar increase in June.
The core PCE price index is the Federal Reserve’s preferred inflation measure for its flexible 2% target.
Fed Chair Jerome Powell in a speech to the Jackson Hole economic conference on Friday defended his long-held view that high inflation would be transitory.
Powell said the economy continued to make progress towards the U.S. central bank’s benchmarks for reducing its massive support, but stopped short of signaling the timing for any policy shift.
Powell’s comments buoyed U.S. stocks, with the S&P 500 and the Nasdaq scaling record highs.
The dollar fell against a basket of currencies. U.S. Treasury prices rose.
INCOME, SAVINGS RISE
High inflation chipped away at consumer spending last month.
Consumer spending adjusted for inflation dipped 0.1%.
The so-called real consumer spending rose 0.5% in June.
Real consumer spending is slightly above the second-quarter average.
“Spending growth in the current quarter is still guaranteed to be far below the 11.6% annualized rate of the first half of the year, but at least it is starting in positive territory,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City.
The Atlanta Fed cut its third-quarter GDP growth estimate to a 5.1% rate from a 5.7% pace.
The resurgence in COVID-19 cases, which is global, could cause more supply disruptions.
The economy grew at a 6.6% pace in the second quarter, which raised the level of gross domestic product above its peak in the fourth quarter of 2019.
But the drag from slowing consumer spending this quarter is likely to be limited by a narrowing trade deficit and the replenishing of depleted inventories by businesses.
In another report on Friday, the Commerce Department said the goods trade deficit decreased 6.2% to $86.4 billion last month as imports fell and exports rose.
Retail inventories gained 0.4%, while stocks of goods at wholesalers increased 0.6%.
Overall, the economy remains supported by record corporate profits.
Households accumulated at least $2.5 trillion in excess savings during the pandemic.
Growth is expected to pick up in the fourth quarter, in part driven by inventory accumulation.
The saving rate increased to 9.6% last month from 8.8% in June as some of the money disbursed by the government under the Child Tax Credit program to qualifying households was socked away.
Personal income shot up 1.1% after gaining 0.2% in June.
Wages also rose as companies compete for scarce workers, increasing 1.0% in July.
Income at the disposal of households after accounting for inflation rebounded 0.7% after three straight monthly declines.
Household wealth is also being boosted by high stock market prices and accelerating home prices.
“The overall position of the household sector is strong and consumers have plenty of buying power,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/article/us-usa- ... SKBN2FS14N
"Automobiles restrain U.S. consumer spending, monthly inflation slowing"
By Lucia Mutikani
AUGUST 27, 2021
WASHINGTON (Reuters) - U.S. consumer spending slowed in July as a decline in motor vehicle purchases due to shortages offset a rise in outlays on services, supporting views that economic growth will moderate in the third quarter amid a resurgence in COVID-19 infections.
But the foundation for the recovery remains solid, with the report from the Commerce Department on Friday showing wages rising and Americans further boosting savings.
Inflation appears to have peaked, which could preserve households’ purchasing power.
Businesses are also restocking and exporting more goods, suggesting a slowdown in growth this quarter could be temporary.
“There are clear downside risks to spending if more events and trips are canceled and more products are delayed getting to shelves,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.
“But it’s a bit early to throw in the towel on the economic outlook given supportive wage and saving trends and a likely boost from business investment, inventories, and trade in the third quarter.”
Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3% last month after advancing 1.1% in June.
Last month’s rise was in line with economists’ expectations.
Demand is rotating back to services like travel and leisure, but spending has been insufficient to compensate for the drop in goods purchases, which are also being impacted by shortages.
Goods spending fell 1.1% last month, led by motor vehicles.
A global shortage of semiconductors is hampering auto production.
There were also decreases in spending on recreational goods as well as clothing and footwear.
Still, goods spending is 20% above its pre-pandemic level.
Spending on services rose 1.0%, a broad increase led by food services and accommodations.
Outlays on services last month were 1% above their February 2020 level.
Healthcare, transportation and recreation are yet to recoup their pandemic losses.
Credit card data suggests spending on services like airfares and cruises as well as hotels and motels slowed in August amid soaring COVID-19 cases driven by the Delta variant.
Fears about the virus knocked consumer sentiment to a more than 9-1/2-year low in August.
Inflation continued to rise last month, fanned by the unrelenting supply constraints and the economy’s move toward normalcy after the upheaval caused by the pandemic.
But the pace of increase is slowing.
The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, climbed 0.3% in July.
That was the smallest gain in five months and followed a 0.5% advance in June.
In the 12 months through July, the so-called core PCE price index rose 3.6% after a similar increase in June.
The core PCE price index is the Federal Reserve’s preferred inflation measure for its flexible 2% target.
Fed Chair Jerome Powell in a speech to the Jackson Hole economic conference on Friday defended his long-held view that high inflation would be transitory.
Powell said the economy continued to make progress towards the U.S. central bank’s benchmarks for reducing its massive support, but stopped short of signaling the timing for any policy shift.
Powell’s comments buoyed U.S. stocks, with the S&P 500 and the Nasdaq scaling record highs.
The dollar fell against a basket of currencies. U.S. Treasury prices rose.
INCOME, SAVINGS RISE
High inflation chipped away at consumer spending last month.
Consumer spending adjusted for inflation dipped 0.1%.
The so-called real consumer spending rose 0.5% in June.
Real consumer spending is slightly above the second-quarter average.
“Spending growth in the current quarter is still guaranteed to be far below the 11.6% annualized rate of the first half of the year, but at least it is starting in positive territory,” said Lou Crandall, chief economist at Wrightson ICAP in Jersey City.
The Atlanta Fed cut its third-quarter GDP growth estimate to a 5.1% rate from a 5.7% pace.
The resurgence in COVID-19 cases, which is global, could cause more supply disruptions.
The economy grew at a 6.6% pace in the second quarter, which raised the level of gross domestic product above its peak in the fourth quarter of 2019.
But the drag from slowing consumer spending this quarter is likely to be limited by a narrowing trade deficit and the replenishing of depleted inventories by businesses.
In another report on Friday, the Commerce Department said the goods trade deficit decreased 6.2% to $86.4 billion last month as imports fell and exports rose.
Retail inventories gained 0.4%, while stocks of goods at wholesalers increased 0.6%.
Overall, the economy remains supported by record corporate profits.
Households accumulated at least $2.5 trillion in excess savings during the pandemic.
Growth is expected to pick up in the fourth quarter, in part driven by inventory accumulation.
The saving rate increased to 9.6% last month from 8.8% in June as some of the money disbursed by the government under the Child Tax Credit program to qualifying households was socked away.
Personal income shot up 1.1% after gaining 0.2% in June.
Wages also rose as companies compete for scarce workers, increasing 1.0% in July.
Income at the disposal of households after accounting for inflation rebounded 0.7% after three straight monthly declines.
Household wealth is also being boosted by high stock market prices and accelerating home prices.
“The overall position of the household sector is strong and consumers have plenty of buying power,” said Conrad DeQuadros, senior economic advisor at Brean Capital in New York.
Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci
https://www.reuters.com/article/us-usa- ... SKBN2FS14N
Re: THE ECONOMY
CNBC
"Powell's benign view on inflation is getting pushback at the Fed, and elsewhere"
Jeff Cox
27 AUGUST 2021
Fed Chairman Jerome Powell's conviction that the inflation whipping through the economy this year soon will subside is not universally shared.
No fewer than five Fed regional presidents have told CNBC it's time to pull back on the easy-money policies, citing various levels of confidence in the economy tempered by worries over inflation.
"All the extra costs that we get passed onto us, we have to pass down to the customers," JKC Trucking owner Mike Kucharski said.
Federal Reserve Chairman Jerome Powell's conviction that the inflation winds whipping through the U.S. economy this year soon will subside is not universally shared.
In fact, a growing contingent within the Fed's virtual halls is raising concern that the supply chain disruptions, burgeoning demand and shortages of labor and supplies could push the current trend well into 2022 and beyond.
Patrick Harker, the president of the Philadelphia Fed, said as much Friday in a CNBC interview that aired just before Powell gave his pivotal Jackson Hole symposium speech.
The Fed not only has achieved the inflation part of its mandate by keeping the level at well above 2% for a period of time, but it also faces the challenge that those price pressures don't seem to be fading, Harker said.
"There's also some evidence that they may not be so transitory, and that's a risk I'm worried about," the central bank official said in an interview about two hours before Powell's speech.
Business contacts in Harker's region "are seeing clear price pressures," he added.
"What I'm hearing is they're trying not to pass most of that along to the consumer and customers …"
"That said, they are passing some of that along."
"That's inevitable."
"So far people have been understanding."
"That won't last forever."
"At some point, we need to get this under control."
Those remarks stood in stark contrast to Powell's speech.
The Fed chief devoted a long passage in the remarks to rebut the notion that inflation posed a longer-term structural problem to the economy.
He attributed most of the current price rise to a surge in longer-lasting "durable" goods that in pre-pandemic times actually had a long-running negative inflation rate.
Moreover, he said there is evidence that one key area of inflation, used car prices, has stabilized and is likely to bring the overall rate much closer to the longer trend.
Earlier Friday morning, the Commerce Department reported that the Fed's preferred inflation gauge, the personal consumption expenditures price index, had expanded by 3.6% from a year ago, the fastest pace in about 30 years.
"The spike in inflation is so far largely the product of a relatively narrow group of goods and services that have been directly affected by the pandemic and the reopening of the economy," Powell said.
"We are also directly monitoring the prices of particular goods and services most affected by the pandemic and the reopening, and are beginning to see a moderation in some cases as shortages ease."
A view from the road
That's not what Mike Kucharski, the owner of Summit, Illinois-based JKC Trucking, is seeing in his daily business encounters.
Instead, he is witnessing escalating freight rates caused by lowered capacity, rising demand and sharply higher energy prices.
Shortages of food ingredients — he cited gluten for bread as one example — along with other raw materials also are driving inflation.
The situation is compounded by long lag times for deliveries as jammed ports are aggravating the goods shortages.
Labor also is in short supply, with workers reluctant to head back to work even as there are more than 10 million job openings, a record for the U.S.
"The catalyst for skyrocketing prices for food is fuel has gone up, our insurance has gone up, all the costs have gone up, including extra pay for labor," Kucharski said.
"The stimulus checks are not helping because even as truckers have been working through the pandemic, we're delivering to warehouses where some of them are taking two, three days to unload because they don't have the capacity and the workforce."
Indeed, freight trucking costs that had been on the downswing from mid-2018 until the pandemic have soared at record levels since.
The rate for a long-distance truckload jumped 28.5% from a year ago in May, easily the highest ever in data going back to December 2004, and was rising at a still-astronomical 20.5% pace in July, according to Labor Department data.
Those are the kinds of expenses that ultimately find their way to store shelves.
"All the extra costs that we get passed onto us, we have to pass down to the customers," Kucharski said.
"Our margins are very small."
Lower earners are hurt the most
The impact being felt by businesses like JKC Trucking are on the minds of multiple Fed officials, who worry that rising costs are especially impacting low- and moderate-income households who have the least ability to absorb them.
Over the past two days, no fewer than five Fed regional presidents said it's time to start pulling back on the easy-money policies of the past year and a half, citing various levels of confidence in the economy tempered by worries over inflation.
"We want to make sure we're on this, because high inflation or anything close to runaway inflation is really going to hurt people at the bottom of the ladder," Atlanta Fed President Raphael Bostic told CNBC on Friday.
Fed Vice Chairman Richard Clarida was a notable exception, telling CNBC on Friday that he agrees with the "transitory" view of inflation, though he noted the higher pressures in place now.
"What I would say is my baseline view is it it is largely transitory," he said.
"I do think that the risks to inflation are to the upside, and that's why I think my colleagues are going to be looking at the data closely."
For his part, Powell conceded that the Fed probably has hit its 2% inflation target not only in the near term but also over a longer trajectory.
In a rare revelation of what goes on behind the Fed's closed doors, Powell said he and others at the July meeting of the Federal Open Market Committee agreed that it is time at least to start pulling back on its minimum $120 billion a month in bond purchases, though rate hikes will be a separate consideration saved for later.
Powell also acknowledged that inflation "is a cause for concern," but said the current levels "are likely to prove temporary."
But with the conditions creating the inflation not subsiding, Kucharski said the issues now are likely to persist at least into next year and maybe beyond.
"Everybody's increasing the costs just to keep afloat and keep the wheels rolling," he said.
"But it's affecting the end user, the American people."
"We've passed our going rate on to the shelves."
https://www.msn.com/en-us/money/markets ... d=msedgntp
"Powell's benign view on inflation is getting pushback at the Fed, and elsewhere"
Jeff Cox
27 AUGUST 2021
Fed Chairman Jerome Powell's conviction that the inflation whipping through the economy this year soon will subside is not universally shared.
No fewer than five Fed regional presidents have told CNBC it's time to pull back on the easy-money policies, citing various levels of confidence in the economy tempered by worries over inflation.
"All the extra costs that we get passed onto us, we have to pass down to the customers," JKC Trucking owner Mike Kucharski said.
Federal Reserve Chairman Jerome Powell's conviction that the inflation winds whipping through the U.S. economy this year soon will subside is not universally shared.
In fact, a growing contingent within the Fed's virtual halls is raising concern that the supply chain disruptions, burgeoning demand and shortages of labor and supplies could push the current trend well into 2022 and beyond.
Patrick Harker, the president of the Philadelphia Fed, said as much Friday in a CNBC interview that aired just before Powell gave his pivotal Jackson Hole symposium speech.
The Fed not only has achieved the inflation part of its mandate by keeping the level at well above 2% for a period of time, but it also faces the challenge that those price pressures don't seem to be fading, Harker said.
"There's also some evidence that they may not be so transitory, and that's a risk I'm worried about," the central bank official said in an interview about two hours before Powell's speech.
Business contacts in Harker's region "are seeing clear price pressures," he added.
"What I'm hearing is they're trying not to pass most of that along to the consumer and customers …"
"That said, they are passing some of that along."
"That's inevitable."
"So far people have been understanding."
"That won't last forever."
"At some point, we need to get this under control."
Those remarks stood in stark contrast to Powell's speech.
The Fed chief devoted a long passage in the remarks to rebut the notion that inflation posed a longer-term structural problem to the economy.
He attributed most of the current price rise to a surge in longer-lasting "durable" goods that in pre-pandemic times actually had a long-running negative inflation rate.
Moreover, he said there is evidence that one key area of inflation, used car prices, has stabilized and is likely to bring the overall rate much closer to the longer trend.
Earlier Friday morning, the Commerce Department reported that the Fed's preferred inflation gauge, the personal consumption expenditures price index, had expanded by 3.6% from a year ago, the fastest pace in about 30 years.
"The spike in inflation is so far largely the product of a relatively narrow group of goods and services that have been directly affected by the pandemic and the reopening of the economy," Powell said.
"We are also directly monitoring the prices of particular goods and services most affected by the pandemic and the reopening, and are beginning to see a moderation in some cases as shortages ease."
A view from the road
That's not what Mike Kucharski, the owner of Summit, Illinois-based JKC Trucking, is seeing in his daily business encounters.
Instead, he is witnessing escalating freight rates caused by lowered capacity, rising demand and sharply higher energy prices.
Shortages of food ingredients — he cited gluten for bread as one example — along with other raw materials also are driving inflation.
The situation is compounded by long lag times for deliveries as jammed ports are aggravating the goods shortages.
Labor also is in short supply, with workers reluctant to head back to work even as there are more than 10 million job openings, a record for the U.S.
"The catalyst for skyrocketing prices for food is fuel has gone up, our insurance has gone up, all the costs have gone up, including extra pay for labor," Kucharski said.
"The stimulus checks are not helping because even as truckers have been working through the pandemic, we're delivering to warehouses where some of them are taking two, three days to unload because they don't have the capacity and the workforce."
Indeed, freight trucking costs that had been on the downswing from mid-2018 until the pandemic have soared at record levels since.
The rate for a long-distance truckload jumped 28.5% from a year ago in May, easily the highest ever in data going back to December 2004, and was rising at a still-astronomical 20.5% pace in July, according to Labor Department data.
Those are the kinds of expenses that ultimately find their way to store shelves.
"All the extra costs that we get passed onto us, we have to pass down to the customers," Kucharski said.
"Our margins are very small."
Lower earners are hurt the most
The impact being felt by businesses like JKC Trucking are on the minds of multiple Fed officials, who worry that rising costs are especially impacting low- and moderate-income households who have the least ability to absorb them.
Over the past two days, no fewer than five Fed regional presidents said it's time to start pulling back on the easy-money policies of the past year and a half, citing various levels of confidence in the economy tempered by worries over inflation.
"We want to make sure we're on this, because high inflation or anything close to runaway inflation is really going to hurt people at the bottom of the ladder," Atlanta Fed President Raphael Bostic told CNBC on Friday.
Fed Vice Chairman Richard Clarida was a notable exception, telling CNBC on Friday that he agrees with the "transitory" view of inflation, though he noted the higher pressures in place now.
"What I would say is my baseline view is it it is largely transitory," he said.
"I do think that the risks to inflation are to the upside, and that's why I think my colleagues are going to be looking at the data closely."
For his part, Powell conceded that the Fed probably has hit its 2% inflation target not only in the near term but also over a longer trajectory.
In a rare revelation of what goes on behind the Fed's closed doors, Powell said he and others at the July meeting of the Federal Open Market Committee agreed that it is time at least to start pulling back on its minimum $120 billion a month in bond purchases, though rate hikes will be a separate consideration saved for later.
Powell also acknowledged that inflation "is a cause for concern," but said the current levels "are likely to prove temporary."
But with the conditions creating the inflation not subsiding, Kucharski said the issues now are likely to persist at least into next year and maybe beyond.
"Everybody's increasing the costs just to keep afloat and keep the wheels rolling," he said.
"But it's affecting the end user, the American people."
"We've passed our going rate on to the shelves."
https://www.msn.com/en-us/money/markets ... d=msedgntp
Re: THE ECONOMY
REUTERS
"Fed's Mester not ready to accept recent inflation surge as meeting central bank's goal"
By Jonnelle Marte
AUGUST 30, 2021
(Reuters) - Cleveland Federal Reserve Bank President Loretta Mester said on Monday that the U.S. economy is recovering strongly but she is not yet convinced that recent inflation readings will be enough to satisfy the price stability goal the U.S. central bank revamped a year ago.
The policymaker said there were upside risks to inflation and that officials need to pay close attention to price changes, but that she expects some inflation metrics will come down after some of the supply chain disruptions caused by the pandemic are resolved.
“I’d like to see a little more data before I can arrive and conclude that...we’re at 2% and on the way above 2% for some time,” Mester said during an interview with Reuters on Monday.
Mester’s remarks highlight the growing tension among Fed policymakers as they approach a turning point in their policy without broad agreement on some of the key metrics that define their goals.
The Fed slashed interest rates to near zero last year at the start of the pandemic and began purchasing $120 billion a month in Treasuries and mortgage-backed securities to stabilize markets and support the economy.
Fed officials largely agreed at their July meeting that the economy has improved enough for them to start reducing the pace of those asset purchases later this year, minutes of that meeting show.
Under their current guidance, however, the tightening phase that follows that - interest rate increases - cannot start until conditions clear an even higher bar: The economy has to be at maximum employment and, in addition to rising to 2% - which it already has - inflation must be on track to moderately exceed 2% for some time.
Doing so will help satisfy policymakers’ longer-run goal of inflation that “averages 2% over time” because it has fallen short of target for most of the last decade.
A TRICKY BUSINESS
Defining those parameters is proving tricky, with little evidence of wide agreement.
For instance, several Fed officials, including Atlanta Fed President Raphael Bostic, say the substantial overshoot in inflation over the last several months means the central bank has already achieved that average inflation target by some measures.
On the other hand, Chair Jerome Powell on Friday said it’s not clear to him that the current inflation pressures have sufficient staying power to meet their objective.
Mester said she wants to see more data shedding light on what inflation will look like next year before she can reach any conclusions.
She will look at what inflation has done over the past five years, but will also look forward at what inflation is projected to be using forecasts from the Cleveland Fed and other metrics.
It will also be important to watch inflation expectations to ensure they are anchored at 2% and likely to stay there - a goal that was difficult to reach even before the pandemic, Mester said.
“I’m sort of not in the camp that we’ve already met that criteria,” said Mester, who will become a voting member of the Fed’s policy-setting committee next year.
As for the labor market, Mester said the U.S. economy is not yet at maximum employment.
The fact that there are more job postings than there are unemployed people suggests there may be a mismatch between the jobs being created and the people searching for work.
The pandemic may have changed where the strongest job growth happens, if for instance a subset of workers stop having to commute into downtown hubs to do their jobs, she said.
Other workers may still be held back by school closures or disruptions to child care arrangements.
“You have to take the lens that there are going to be some things that are different,” Mester said.
The policymaker repeated her view that the Fed’s criteria for beginning to reduce its asset purchases have been met and that she would like to start tapering the purchases this year and be done with them by the middle of next year.
But she emphasized that the central bank would still be supporting the economy even after it slows its purchases.
“We’re still going to be very accommodative,” Mester said.
“We’re just not going to be as accommodative as we said was needed and felt was needed during the height of the pandemic.”
Reporting by Jonnelle Marte; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SS0N2PN009
"Fed's Mester not ready to accept recent inflation surge as meeting central bank's goal"
By Jonnelle Marte
AUGUST 30, 2021
(Reuters) - Cleveland Federal Reserve Bank President Loretta Mester said on Monday that the U.S. economy is recovering strongly but she is not yet convinced that recent inflation readings will be enough to satisfy the price stability goal the U.S. central bank revamped a year ago.
The policymaker said there were upside risks to inflation and that officials need to pay close attention to price changes, but that she expects some inflation metrics will come down after some of the supply chain disruptions caused by the pandemic are resolved.
“I’d like to see a little more data before I can arrive and conclude that...we’re at 2% and on the way above 2% for some time,” Mester said during an interview with Reuters on Monday.
Mester’s remarks highlight the growing tension among Fed policymakers as they approach a turning point in their policy without broad agreement on some of the key metrics that define their goals.
The Fed slashed interest rates to near zero last year at the start of the pandemic and began purchasing $120 billion a month in Treasuries and mortgage-backed securities to stabilize markets and support the economy.
Fed officials largely agreed at their July meeting that the economy has improved enough for them to start reducing the pace of those asset purchases later this year, minutes of that meeting show.
Under their current guidance, however, the tightening phase that follows that - interest rate increases - cannot start until conditions clear an even higher bar: The economy has to be at maximum employment and, in addition to rising to 2% - which it already has - inflation must be on track to moderately exceed 2% for some time.
Doing so will help satisfy policymakers’ longer-run goal of inflation that “averages 2% over time” because it has fallen short of target for most of the last decade.
A TRICKY BUSINESS
Defining those parameters is proving tricky, with little evidence of wide agreement.
For instance, several Fed officials, including Atlanta Fed President Raphael Bostic, say the substantial overshoot in inflation over the last several months means the central bank has already achieved that average inflation target by some measures.
On the other hand, Chair Jerome Powell on Friday said it’s not clear to him that the current inflation pressures have sufficient staying power to meet their objective.
Mester said she wants to see more data shedding light on what inflation will look like next year before she can reach any conclusions.
She will look at what inflation has done over the past five years, but will also look forward at what inflation is projected to be using forecasts from the Cleveland Fed and other metrics.
It will also be important to watch inflation expectations to ensure they are anchored at 2% and likely to stay there - a goal that was difficult to reach even before the pandemic, Mester said.
“I’m sort of not in the camp that we’ve already met that criteria,” said Mester, who will become a voting member of the Fed’s policy-setting committee next year.
As for the labor market, Mester said the U.S. economy is not yet at maximum employment.
The fact that there are more job postings than there are unemployed people suggests there may be a mismatch between the jobs being created and the people searching for work.
The pandemic may have changed where the strongest job growth happens, if for instance a subset of workers stop having to commute into downtown hubs to do their jobs, she said.
Other workers may still be held back by school closures or disruptions to child care arrangements.
“You have to take the lens that there are going to be some things that are different,” Mester said.
The policymaker repeated her view that the Fed’s criteria for beginning to reduce its asset purchases have been met and that she would like to start tapering the purchases this year and be done with them by the middle of next year.
But she emphasized that the central bank would still be supporting the economy even after it slows its purchases.
“We’re still going to be very accommodative,” Mester said.
“We’re just not going to be as accommodative as we said was needed and felt was needed during the height of the pandemic.”
Reporting by Jonnelle Marte; Editing by Andrea Ricci
https://www.reuters.com/article/usa-fed ... SS0N2PN009
Re: THE ECONOMY
REUTERS
"Surging COVID-19 cases dampen U.S. consumer confidence, house prices post record gains"
By Lucia Mutikani
August 31, 2021
Summary
* Consumer confidence drops sharply in August
* House prices surge in June
WASHINGTON, Aug 31 (Reuters) - U.S. consumer confidence fell to a six-month low in August as worries about soaring COVID-19 infections and higher inflation dimmed the outlook for the economy.
The survey from the Conference Board on Tuesday showed consumers less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of robust growth.
Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic.
Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.
"The report does raise the warning flag that if the pandemic worsens, and given the continued unwillingness of many to get vaccinated that is a real possibility, we could see people stashing away funds just in case," said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.
"We could see growth moderate faster than expected."
The Conference Board's consumer confidence index dropped to a reading of 113.8 this month, the lowest since February, from 125.1 in July.
Economists polled by Reuters had forecast the index falling to 124.0.
The cutoff for the survey was Aug. 25, before the killing of 13 service members in Afghanistan and Hurricane Ida slammed Louisiana.
The measure, which places more emphasis on the labor market, held up well compared to other surveys.
The University of Michigan's survey of consumers showed sentiment tumbling to near decade lows in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID-19 cases that has been driven by the Delta variant of the coronavirus.
"While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead," said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.
Consumers' inflation expectations over the next 12 months rose to 6.8% from 6.6% last month.
There are signs, however, that price pressures have peaked, with data last week showing the Federal Reserve's preferred inflation measure posting its smallest gain in five months in July.
Wall Street's main indexes hovered near record highs.
The dollar was steady against a basket of currencies.
U.S. Treasury prices were lower.
LABOR MARKET HOLDING UP
The Conference Board's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, slipped to a still-high reading of 42.8 this month from 44.1 in July, which was the highest since July 2000.
This measure closely correlates to the unemployment rate in the Labor Department's closely watched employment report.
"It continues to send a pretty favorable signal about labor market conditions," said Daniel Silver, an economist at JPMorgan in New York.
Nonfarm payrolls likely increased by 750,000 in August after rising 943,000 in July, according to a Reuters survey of economists.
The unemployment rate is forecast falling to 5.2% from 5.4% last month.
Though fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers this month, more expected to travel domestically, with many intending to fly to their destinations.
Households accumulated at least $2.5 trillion in excess savings during the pandemic, laying a strong foundation for consumer spending.
Gross domestic product growth estimates for the third quarter are around a 5% annualized rate.
The economy grew at a 6.6% pace in the second quarter.
The Conference Board survey also showed less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are sidelining some first-time buyers from the market.
Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but supply severely lagged, fueling house price growth.
COVID-19 vaccinations have allowed some employers to recall workers to offices.
Schools and universities have reopened for in-person learning.
A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index jumped a record 18.6% in June from a year ago after rising 16.8% in May.
Economists, however, believe that house price inflation has peaked, with homes becoming less affordable especially for first-time buyers.
"Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market," said Selma Hepp, deputy chief economist at CoreLogic.
"Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration."
"Going forward, home price growth may ease off but stay in the double digits through year-end."
A third report from the Federal Housing Finance Agency (FHFA) showed its house price index rose a record 18.8% in the 12 months through June.
House prices surged 17.4% in the second quarter compared to the same period in 2020.
FHFA believes house prices peaked in June.
Reporting by Lucia Mutikani; Additional reporting by Evan Sully; Editing by Paul Simao and Andrea Ricci
https://www.reuters.com/business/us-con ... 021-08-31/
"Surging COVID-19 cases dampen U.S. consumer confidence, house prices post record gains"
By Lucia Mutikani
August 31, 2021
Summary
* Consumer confidence drops sharply in August
* House prices surge in June
WASHINGTON, Aug 31 (Reuters) - U.S. consumer confidence fell to a six-month low in August as worries about soaring COVID-19 infections and higher inflation dimmed the outlook for the economy.
The survey from the Conference Board on Tuesday showed consumers less inclined to buy a home and big-ticket items like motor vehicles and major household appliances over the next six months, supporting the view that consumer spending will cool in the third quarter after two straight quarters of robust growth.
Still, more consumers planned to go on vacation, indicating a rotation in spending from goods to services was underway as economic activity continues to normalize following the upheaval caused by the coronavirus pandemic.
Increased spending on services, which account for the bulk of economic activity, should keep a floor under consumer spending.
"The report does raise the warning flag that if the pandemic worsens, and given the continued unwillingness of many to get vaccinated that is a real possibility, we could see people stashing away funds just in case," said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania.
"We could see growth moderate faster than expected."
The Conference Board's consumer confidence index dropped to a reading of 113.8 this month, the lowest since February, from 125.1 in July.
Economists polled by Reuters had forecast the index falling to 124.0.
The cutoff for the survey was Aug. 25, before the killing of 13 service members in Afghanistan and Hurricane Ida slammed Louisiana.
The measure, which places more emphasis on the labor market, held up well compared to other surveys.
The University of Michigan's survey of consumers showed sentiment tumbling to near decade lows in August because of rising prices for goods like food and gasoline, as well as the resurgence in COVID-19 cases that has been driven by the Delta variant of the coronavirus.
"While the resurgence of COVID-19 and inflation concerns have dampened confidence, it is too soon to conclude this decline will result in consumers significantly curtailing their spending in the months ahead," said Lynn Franco, senior director of economic indicators at the Conference Board in Washington.
Consumers' inflation expectations over the next 12 months rose to 6.8% from 6.6% last month.
There are signs, however, that price pressures have peaked, with data last week showing the Federal Reserve's preferred inflation measure posting its smallest gain in five months in July.
Wall Street's main indexes hovered near record highs.
The dollar was steady against a basket of currencies.
U.S. Treasury prices were lower.
LABOR MARKET HOLDING UP
The Conference Board's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, slipped to a still-high reading of 42.8 this month from 44.1 in July, which was the highest since July 2000.
This measure closely correlates to the unemployment rate in the Labor Department's closely watched employment report.
"It continues to send a pretty favorable signal about labor market conditions," said Daniel Silver, an economist at JPMorgan in New York.
Nonfarm payrolls likely increased by 750,000 in August after rising 943,000 in July, according to a Reuters survey of economists.
The unemployment rate is forecast falling to 5.2% from 5.4% last month.
Though fewer households intended to buy long-lasting manufactured goods such as motor vehicles and household appliances like washing machines and clothes dryers this month, more expected to travel domestically, with many intending to fly to their destinations.
Households accumulated at least $2.5 trillion in excess savings during the pandemic, laying a strong foundation for consumer spending.
Gross domestic product growth estimates for the third quarter are around a 5% annualized rate.
The economy grew at a 6.6% pace in the second quarter.
The Conference Board survey also showed less enthusiasm among consumers for home purchases over the next six months amid higher house prices, which are sidelining some first-time buyers from the market.
Demand for housing soared early in the pandemic as Americans sought more spacious accommodations for home offices and home schooling, but supply severely lagged, fueling house price growth.
COVID-19 vaccinations have allowed some employers to recall workers to offices.
Schools and universities have reopened for in-person learning.
A separate report on Tuesday showed the S&P CoreLogic Case-Shiller national home price index jumped a record 18.6% in June from a year ago after rising 16.8% in May.
Economists, however, believe that house price inflation has peaked, with homes becoming less affordable especially for first-time buyers.
"Some early data suggests that the buyer frenzy experienced this spring is tapering, though many buyers still remain in the market," said Selma Hepp, deputy chief economist at CoreLogic.
"Nevertheless, less competition and more for-sale homes suggest we may be seeing the peak of home price acceleration."
"Going forward, home price growth may ease off but stay in the double digits through year-end."
A third report from the Federal Housing Finance Agency (FHFA) showed its house price index rose a record 18.8% in the 12 months through June.
House prices surged 17.4% in the second quarter compared to the same period in 2020.
FHFA believes house prices peaked in June.
Reporting by Lucia Mutikani; Additional reporting by Evan Sully; Editing by Paul Simao and Andrea Ricci
https://www.reuters.com/business/us-con ... 021-08-31/
Re: THE ECONOMY
CNBC
"Two more factors have popped up that add to the Fed’s inflation worries"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, AUG 31 2021
KEY POINTS
* Home prices and consumer expectations pointed to more inflationary issues on the horizon for the U.S. economy.
* The S&P/Case-Shiller index rose a staggering 19.1% year over year, the largest increase in the series’ history going back to 1987.
* The Conference Board reported consumers now see inflation running at 6.8% 12 months from now.
* However, many Wall Street economists still see inflation falling off in the years ahead.
Trends in home prices and consumer expectations that were part of data releases Tuesday pointed to more inflationary issues on the horizon for the U.S. economy.
The S&P/Case-Shiller index, which measures home prices across 20 major U.S. cities, rose 1.77% in June, bringing the year-over-year gain to a staggering 19.1%.
That’s the largest jump in the series’ history going back to 1987.
For perspective, the biggest annual gain in prices prior to the subprime meltdown and 2008 financial crisis was the 14.4% increase in September 2005.
At the same time, The Conference Board reported that consumer inflation expectations ticked higher again, with respondents to the survey now seeing the metric running at 6.8% 12 months from now.
That’s up a full percentage point from a year ago, or 17.2% on a relative basis.
Both metrics sent important warning signs: Shelter costs make up an outsized portion of most inflation gauges – about one-third of the headline consumer price index and even more of the core reading, for example – while inflation expectations are considered a key indicator of how high price pressures will run.
“Every time you hear that inflation is transitory remember that double house price inflation hasn’t yet shown up in the indexes."
"Housing represents 40 percent of the core CPI,” former Treasury Secretary and Obama White House economic advisor Larry Summers said in a recent tweet.
The latest inflation-related readings come just days after a vigorous effort from Federal Reserve Chairman Jerome Powell to defuse concerns over price pressures.
Summers has been one of the most vigorous voices cautioning about inflation, but they’re beginning to arise within the Fed itself and other economists.
A post last week on the Dallas Fed website specifically addressed housing costs.
Economists Xiaoqing Zhou and Jim Dolmas wrote that rising housing prices are usually a leading indicator for rents, which account for most of the shelter costs in the CPI calculations.
The correlation, they said, hits with about an 18-month lag time, meaning that rising housing costs now promise heavier rent burdens in the years to come.
The bottom line is that they see rent and owners equivalent rent to steadily increase, with both hitting 6.9% by 2023.
That would tack on about 0.6% to the overall inflation reading as measured by the core personal consumption expenditures price index, the Fed’s preferred gauge.
Wall Street backs the Fed, even if Main Street doesn’t
Still, many Wall Street economists think the Fed is correct in anticipating that inflation will cool as temporary factors like supply chain glitches and shortages of goods and labor subside.
“We think [inflation] expectations are close to peaking, and they should fall over the next few months as the moderation in oil prices feeds into retail gas prices,” Pantheon Macroeconomics chief economist Ian Shepherdson wrote.
Indeed, economists tie consumer inflation expectations closely to volatile issues such as prices at the pump, which have nudged lower by a few pennies over the past couple weeks but are more than 41% higher than a year ago, according to the Energy Information Administration.
It’s not just energy, though, and it’s not only mom-and-pop consumers who are leery of persistent price increases.
Goldman Sachs said a composite the firm uses that looks at seven business inflation expectation measures hit the highest level in the two decades that the firm has been tracking them.
Moreover, company pricing-related announcements are at the highest level since 2011, and mentions of “inflation” among Russell 3000 companies were at their peak in a data series that also goes back to the same year, the Wall Street firm’s economists said.
Yet Goldman is also in the transitory inflation camp, projecting that orders for long-lasting “durable” goods that soared during the pandemic will decline and offset the rise in shelter-related price increases.
Goldman sees core PCE inflation of 3.8% in 2021 easing to 2% by 2023-24, in line with the Fed’s longer-term target.
Not everyone is so confident the current pressures will yield so quickly.
The market will get a good look Friday when the Labor Department releases its nonfarm payrolls report along with a reading on average hourly earnings.
Wage-price inflation is what scares the Fed the most, and there is concern that the central bank is being too complacent about the various factors converging that could fuel “bad” inflation.
“Energy, food, and rent are the most visible forms of inflation."
"Persistent increases in these items will eventually lead to higher inflation expectations, and the Fed will have a problem,” Ned Davis Research chief global macro strategist Joseph Kalish wrote.
“My biggest fear is that complacency gives way to concern, and that low interest rates suddenly surge, prompting a reaction from Fed officials.”
https://www.cnbc.com/2021/08/31/two-mor ... lainternal
"Two more factors have popped up that add to the Fed’s inflation worries"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED TUE, AUG 31 2021
KEY POINTS
* Home prices and consumer expectations pointed to more inflationary issues on the horizon for the U.S. economy.
* The S&P/Case-Shiller index rose a staggering 19.1% year over year, the largest increase in the series’ history going back to 1987.
* The Conference Board reported consumers now see inflation running at 6.8% 12 months from now.
* However, many Wall Street economists still see inflation falling off in the years ahead.
Trends in home prices and consumer expectations that were part of data releases Tuesday pointed to more inflationary issues on the horizon for the U.S. economy.
The S&P/Case-Shiller index, which measures home prices across 20 major U.S. cities, rose 1.77% in June, bringing the year-over-year gain to a staggering 19.1%.
That’s the largest jump in the series’ history going back to 1987.
For perspective, the biggest annual gain in prices prior to the subprime meltdown and 2008 financial crisis was the 14.4% increase in September 2005.
At the same time, The Conference Board reported that consumer inflation expectations ticked higher again, with respondents to the survey now seeing the metric running at 6.8% 12 months from now.
That’s up a full percentage point from a year ago, or 17.2% on a relative basis.
Both metrics sent important warning signs: Shelter costs make up an outsized portion of most inflation gauges – about one-third of the headline consumer price index and even more of the core reading, for example – while inflation expectations are considered a key indicator of how high price pressures will run.
“Every time you hear that inflation is transitory remember that double house price inflation hasn’t yet shown up in the indexes."
"Housing represents 40 percent of the core CPI,” former Treasury Secretary and Obama White House economic advisor Larry Summers said in a recent tweet.
The latest inflation-related readings come just days after a vigorous effort from Federal Reserve Chairman Jerome Powell to defuse concerns over price pressures.
Summers has been one of the most vigorous voices cautioning about inflation, but they’re beginning to arise within the Fed itself and other economists.
A post last week on the Dallas Fed website specifically addressed housing costs.
Economists Xiaoqing Zhou and Jim Dolmas wrote that rising housing prices are usually a leading indicator for rents, which account for most of the shelter costs in the CPI calculations.
The correlation, they said, hits with about an 18-month lag time, meaning that rising housing costs now promise heavier rent burdens in the years to come.
The bottom line is that they see rent and owners equivalent rent to steadily increase, with both hitting 6.9% by 2023.
That would tack on about 0.6% to the overall inflation reading as measured by the core personal consumption expenditures price index, the Fed’s preferred gauge.
Wall Street backs the Fed, even if Main Street doesn’t
Still, many Wall Street economists think the Fed is correct in anticipating that inflation will cool as temporary factors like supply chain glitches and shortages of goods and labor subside.
“We think [inflation] expectations are close to peaking, and they should fall over the next few months as the moderation in oil prices feeds into retail gas prices,” Pantheon Macroeconomics chief economist Ian Shepherdson wrote.
Indeed, economists tie consumer inflation expectations closely to volatile issues such as prices at the pump, which have nudged lower by a few pennies over the past couple weeks but are more than 41% higher than a year ago, according to the Energy Information Administration.
It’s not just energy, though, and it’s not only mom-and-pop consumers who are leery of persistent price increases.
Goldman Sachs said a composite the firm uses that looks at seven business inflation expectation measures hit the highest level in the two decades that the firm has been tracking them.
Moreover, company pricing-related announcements are at the highest level since 2011, and mentions of “inflation” among Russell 3000 companies were at their peak in a data series that also goes back to the same year, the Wall Street firm’s economists said.
Yet Goldman is also in the transitory inflation camp, projecting that orders for long-lasting “durable” goods that soared during the pandemic will decline and offset the rise in shelter-related price increases.
Goldman sees core PCE inflation of 3.8% in 2021 easing to 2% by 2023-24, in line with the Fed’s longer-term target.
Not everyone is so confident the current pressures will yield so quickly.
The market will get a good look Friday when the Labor Department releases its nonfarm payrolls report along with a reading on average hourly earnings.
Wage-price inflation is what scares the Fed the most, and there is concern that the central bank is being too complacent about the various factors converging that could fuel “bad” inflation.
“Energy, food, and rent are the most visible forms of inflation."
"Persistent increases in these items will eventually lead to higher inflation expectations, and the Fed will have a problem,” Ned Davis Research chief global macro strategist Joseph Kalish wrote.
“My biggest fear is that complacency gives way to concern, and that low interest rates suddenly surge, prompting a reaction from Fed officials.”
https://www.cnbc.com/2021/08/31/two-mor ... lainternal
Re: THE ECONOMY
CNBC
"Private payrolls increase by just 374,000 in August, far short of the 600,000 estimate, ADP says"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, SEP 1 2021
KEY POINTS
* Private payrolls rose by 374,000 in August, well below the Dow Jones estimate of 600,000 though above July’s 326,000, according to ADP.
* Most of the new jobs came from leisure and hospitality, which added 201,000 positions.
* The ADP tally comes two days before the Labor Department’s nonfarm payrolls report.
* The two counts have differed widely this year.
U.S. companies created far fewer jobs than expected in August as the Covid resurgence coincided with cutbacks in hiring, according to a report Wednesday from payroll services firm ADP.
Private payrolls rose just 374,000 for the month, well below the Dow Jones estimate of 600,000 though above July’s 326,000, which was revised downward slightly from initial 330,000 reading.
Most of the new jobs came from leisure and hospitality, which added 201,000 positions in a somewhat hopeful sign that an industry beset by a labor shortage continues to recover.
Education and health services combined to add 59,000 for the month as hospitals in some parts of the country were swamped with virus cases and schools begin to reopen.
“The delta variant of COVID-19 appears to have dented the job market recovery,” said Mark Zandi, chief economist at Moody’s Analytics, which works with ADP on the report.
“Job growth remains strong, but well off the pace of recent months."
"Job growth remains inextricably tied to the path of the pandemic.”
The apparent letdown comes at a pivotal time.
Following a robust recovery from the shortest but steepest recession in U.S. history, economic data of late has been disappointing, possibly reflecting pullbacks from this summer’s surge of the Covid delta variant.
The U.S. has been averaging about 150,000 new cases a day following a burst in July and August.
Markets are awaiting Friday’s nonfarm payrolls report, which is expected to show 720,000 new jobs added and an unemployment rate falling to 5.2%, according to Dow Jones estimates.
Wall Street initially shrugged off the ADP report, with stock market futures still pointing to a higher open.
However, major averages were mixed in late-morning trade and government bond yields were little changed.
Differences between job counts
The ADP numbers could be pointing to a softer Labor Department report, though the firm’s count has been an unreliable indicator in 2021.
ADP’s tally averaged a growth of 495,000 jobs per month through July; the Labor report showed an average increase of 617,000 during that period.
The two reports also diverged sharply in July, with the official count at 943,000 compared with ADP’s 326,000.
Goldman Sachs said the ADP report “suggests potential downside” for Friday’s Bureau of Labor Statistics number.
Goldman already is forecasting below-consensus payroll growth of 600,000.
According to ADP, the weakest job growth for August came in small businesses, which added just 86,000 positions.
Companies with 50 to 499 employees led with 149,000, while big business contributed 138,000.
Elsewhere at the sector level, services accounted for 329,000 of the total, with professional and business services growing by 19,000 and trade, transportation and utilities adding 18,000.
Of the 45,000 goods-producing jobs, 30,000 came from construction, 9,000 from natural resources and mining and 6,000 from manufacturing.
Federal Reserve officials are watching the jobs numbers carefully.
Recent statements out of the central bank indicate that it likely will slow the pace of its monthly purchases of bonds so long as job growth continues apace.
Officials have been largely optimistic about the employment picture, though they note that about 6 million fewer workers are holding jobs now than before the pandemic.
https://www.cnbc.com/2021/09/01/private ... -says.html
"Private payrolls increase by just 374,000 in August, far short of the 600,000 estimate, ADP says"
Jeff Cox @JEFF.COX.7528 @JEFFCOXCNBCCOM
PUBLISHED WED, SEP 1 2021
KEY POINTS
* Private payrolls rose by 374,000 in August, well below the Dow Jones estimate of 600,000 though above July’s 326,000, according to ADP.
* Most of the new jobs came from leisure and hospitality, which added 201,000 positions.
* The ADP tally comes two days before the Labor Department’s nonfarm payrolls report.
* The two counts have differed widely this year.
U.S. companies created far fewer jobs than expected in August as the Covid resurgence coincided with cutbacks in hiring, according to a report Wednesday from payroll services firm ADP.
Private payrolls rose just 374,000 for the month, well below the Dow Jones estimate of 600,000 though above July’s 326,000, which was revised downward slightly from initial 330,000 reading.
Most of the new jobs came from leisure and hospitality, which added 201,000 positions in a somewhat hopeful sign that an industry beset by a labor shortage continues to recover.
Education and health services combined to add 59,000 for the month as hospitals in some parts of the country were swamped with virus cases and schools begin to reopen.
“The delta variant of COVID-19 appears to have dented the job market recovery,” said Mark Zandi, chief economist at Moody’s Analytics, which works with ADP on the report.
“Job growth remains strong, but well off the pace of recent months."
"Job growth remains inextricably tied to the path of the pandemic.”
The apparent letdown comes at a pivotal time.
Following a robust recovery from the shortest but steepest recession in U.S. history, economic data of late has been disappointing, possibly reflecting pullbacks from this summer’s surge of the Covid delta variant.
The U.S. has been averaging about 150,000 new cases a day following a burst in July and August.
Markets are awaiting Friday’s nonfarm payrolls report, which is expected to show 720,000 new jobs added and an unemployment rate falling to 5.2%, according to Dow Jones estimates.
Wall Street initially shrugged off the ADP report, with stock market futures still pointing to a higher open.
However, major averages were mixed in late-morning trade and government bond yields were little changed.
Differences between job counts
The ADP numbers could be pointing to a softer Labor Department report, though the firm’s count has been an unreliable indicator in 2021.
ADP’s tally averaged a growth of 495,000 jobs per month through July; the Labor report showed an average increase of 617,000 during that period.
The two reports also diverged sharply in July, with the official count at 943,000 compared with ADP’s 326,000.
Goldman Sachs said the ADP report “suggests potential downside” for Friday’s Bureau of Labor Statistics number.
Goldman already is forecasting below-consensus payroll growth of 600,000.
According to ADP, the weakest job growth for August came in small businesses, which added just 86,000 positions.
Companies with 50 to 499 employees led with 149,000, while big business contributed 138,000.
Elsewhere at the sector level, services accounted for 329,000 of the total, with professional and business services growing by 19,000 and trade, transportation and utilities adding 18,000.
Of the 45,000 goods-producing jobs, 30,000 came from construction, 9,000 from natural resources and mining and 6,000 from manufacturing.
Federal Reserve officials are watching the jobs numbers carefully.
Recent statements out of the central bank indicate that it likely will slow the pace of its monthly purchases of bonds so long as job growth continues apace.
Officials have been largely optimistic about the employment picture, though they note that about 6 million fewer workers are holding jobs now than before the pandemic.
https://www.cnbc.com/2021/09/01/private ... -says.html
Re: THE ECONOMY
REUTERS
"U.S. manufacturing activity rises; shortages linger"
By Lucia Mutikani
Summary
* ISM manufacturing index rises 0.4 pts to 59.9 in August
* New orders measure increases; employment gauge contracts
* Private payrolls increase 374,000 in August
WASHINGTON, Sept 1(Reuters) - U.S. manufacturing activity unexpectedly picked up in August amid strong order growth, but a measure of factory employment dropped to a nine-month low, likely as workers remained scarce.
The survey from the Institute for Supply Management (ISM) on Wednesday continued to highlight persistent problems securing enough raw materials, a situation worsened by disruptions caused by the latest wave of COVID-19 infections, primarily in Southeast Asia, as well as ports congestion in China.
"A surprising turn of events for manufacturing activity in the U.S., but it doesn't change the story of supply disruptions and shortages holding back stronger growth," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July.
A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.
Economists polled by Reuters had forecast the index falling to 58.6.
Manufacturing is holding up even as spending is rotating back to services from goods because of vaccinations against COVID-19.
All of the six largest manufacturing industries, including computer and electronic products, chemical products and transportation equipment reported moderate to strong growth.
Manufacturers of computer and electronic products said while a global semiconductor shortage was impacting supply lines, they had so far "been able to manage it without impacting clients."
Chemical goods producers said they continued to "see extended lead times due to port delays and sea container tightness."
Transportation equipment makers reported that "strong sales continue, but production is limited due to supply issues with chips."
The ISM survey's forward-looking new orders sub-index rebounded to a reading of 66.7 last month after two straight monthly declines.
Fourteen out of 18 manufacturing industries, furniture and related products, machinery and electrical equipment, appliances and components reported growth in new orders.
Only nonmetallic mineral products reported a drop.
Demand is being driven by businesses desperate to replenish stocks after inventories were drawn down sharply in the first half of the year.
Inventory accumulation, which is expected to be the main driver of economic growth for the rest of this year and into 2022, has been frustrated by the supply constraints.
Stocks on Wall Street were trading higher.
The dollar slipped against a basket of currencies.
U.S. Treasury prices were mixed.
INFLATION ABATING
Scarce inputs have boosted prices for both manufacturers and consumers.
But there appears to be light at the end of the tunnel.
The ISM measure of delivery performance of suppliers to manufacturing organizations eased further in August, indicating some improvement in the pace of deliveries.
The survey's measure of prices paid by manufacturers fell to an eight-month low of 79.4 from a reading of 85.7 in July.
This measure has dropped from a record 92.1 in June.
It was the latest indication that inflation has probably peaked.
Data last week showed the Federal Reserve's preferred inflation measure recorded its smallest monthly gain in five months in July.
But worker shortages persist, with ISM chair Timothy Fiore highlighting "a clear cycle of labor turnover as workers opt for more attractive job conditions."
A measure of factory employment contracted last month and fell to its lowest level since November.
Together with the ADP National Employment Report, which showed on Wednesday that private payrolls increased by 374,000 jobs last month after rising 326,000 in July, the ISM factory index poses a downside risk to job growth in August.
Economists had forecast the ADP report would show private payrolls increased by 613,000 jobs.
The ADP report is jointly developed with Moody's Analytics and was published ahead of the Labor Department's more comprehensive and closely watched employment report for August on Friday.
But it has a dismal record predicting the private payrolls count in the department's Bureau of Labor Statistics (BLS) employment report because of methodology differences.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 728,000 jobs last month after rising 943,000 in July.
"ADP is far from consistent in predicting changes in the BLS payrolls data," said Rubeela Farooqi, chief U.S. economist at High Frequency economics in White Plains, New York.
"Overall, job growth has strengthened in recent months, even as companies continue to report labor supply shortages."
The pandemic has upended the labor market dynamics, creating worker shortages even as 8.7 million people are officially unemployed.
The were a record 10.1 million job openings at the end of June.
Lack of affordable child care, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.
The labor shortage is expected to ease starting in September.
The government-funded unemployment benefits lapse on Sept. 6 and schools are reopening for in-person learning.
But the resurgence in new COVID-19 cases, driven by the Delta variant of the coronavirus, could cause reluctance among some people to return to the labor force.
The labor shortages led to a building up of the backlog of uncompleted work at factories in August.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/business/us-pri ... 021-09-01/
"U.S. manufacturing activity rises; shortages linger"
By Lucia Mutikani
Summary
* ISM manufacturing index rises 0.4 pts to 59.9 in August
* New orders measure increases; employment gauge contracts
* Private payrolls increase 374,000 in August
WASHINGTON, Sept 1(Reuters) - U.S. manufacturing activity unexpectedly picked up in August amid strong order growth, but a measure of factory employment dropped to a nine-month low, likely as workers remained scarce.
The survey from the Institute for Supply Management (ISM) on Wednesday continued to highlight persistent problems securing enough raw materials, a situation worsened by disruptions caused by the latest wave of COVID-19 infections, primarily in Southeast Asia, as well as ports congestion in China.
"A surprising turn of events for manufacturing activity in the U.S., but it doesn't change the story of supply disruptions and shortages holding back stronger growth," said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.
The ISM said its index of national factory activity inched up to 59.9 last month from a reading of 59.5 in July.
A reading above 50 indicates expansion in manufacturing, which accounts for 11.9% of the U.S. economy.
Economists polled by Reuters had forecast the index falling to 58.6.
Manufacturing is holding up even as spending is rotating back to services from goods because of vaccinations against COVID-19.
All of the six largest manufacturing industries, including computer and electronic products, chemical products and transportation equipment reported moderate to strong growth.
Manufacturers of computer and electronic products said while a global semiconductor shortage was impacting supply lines, they had so far "been able to manage it without impacting clients."
Chemical goods producers said they continued to "see extended lead times due to port delays and sea container tightness."
Transportation equipment makers reported that "strong sales continue, but production is limited due to supply issues with chips."
The ISM survey's forward-looking new orders sub-index rebounded to a reading of 66.7 last month after two straight monthly declines.
Fourteen out of 18 manufacturing industries, furniture and related products, machinery and electrical equipment, appliances and components reported growth in new orders.
Only nonmetallic mineral products reported a drop.
Demand is being driven by businesses desperate to replenish stocks after inventories were drawn down sharply in the first half of the year.
Inventory accumulation, which is expected to be the main driver of economic growth for the rest of this year and into 2022, has been frustrated by the supply constraints.
Stocks on Wall Street were trading higher.
The dollar slipped against a basket of currencies.
U.S. Treasury prices were mixed.
INFLATION ABATING
Scarce inputs have boosted prices for both manufacturers and consumers.
But there appears to be light at the end of the tunnel.
The ISM measure of delivery performance of suppliers to manufacturing organizations eased further in August, indicating some improvement in the pace of deliveries.
The survey's measure of prices paid by manufacturers fell to an eight-month low of 79.4 from a reading of 85.7 in July.
This measure has dropped from a record 92.1 in June.
It was the latest indication that inflation has probably peaked.
Data last week showed the Federal Reserve's preferred inflation measure recorded its smallest monthly gain in five months in July.
But worker shortages persist, with ISM chair Timothy Fiore highlighting "a clear cycle of labor turnover as workers opt for more attractive job conditions."
A measure of factory employment contracted last month and fell to its lowest level since November.
Together with the ADP National Employment Report, which showed on Wednesday that private payrolls increased by 374,000 jobs last month after rising 326,000 in July, the ISM factory index poses a downside risk to job growth in August.
Economists had forecast the ADP report would show private payrolls increased by 613,000 jobs.
The ADP report is jointly developed with Moody's Analytics and was published ahead of the Labor Department's more comprehensive and closely watched employment report for August on Friday.
But it has a dismal record predicting the private payrolls count in the department's Bureau of Labor Statistics (BLS) employment report because of methodology differences.
According to a Reuters survey of economists, nonfarm payrolls likely increased by 728,000 jobs last month after rising 943,000 in July.
"ADP is far from consistent in predicting changes in the BLS payrolls data," said Rubeela Farooqi, chief U.S. economist at High Frequency economics in White Plains, New York.
"Overall, job growth has strengthened in recent months, even as companies continue to report labor supply shortages."
The pandemic has upended the labor market dynamics, creating worker shortages even as 8.7 million people are officially unemployed.
The were a record 10.1 million job openings at the end of June.
Lack of affordable child care, fears of contracting the coronavirus, generous unemployment benefits funded by the federal government as well as pandemic-related retirements and career changes have been blamed for the disconnect.
The labor shortage is expected to ease starting in September.
The government-funded unemployment benefits lapse on Sept. 6 and schools are reopening for in-person learning.
But the resurgence in new COVID-19 cases, driven by the Delta variant of the coronavirus, could cause reluctance among some people to return to the labor force.
The labor shortages led to a building up of the backlog of uncompleted work at factories in August.
Reporting By Lucia Mutikani; Editing by Chizu Nomiyama
https://www.reuters.com/business/us-pri ... 021-09-01/
Re: THE ECONOMY
CNBC
"Jobless claims total 340,000, lowest level since early days of pandemic"
Thomas Franck @TOMWFRANCK
PUBLISHED THU, SEP 2 2021
KEY POINTS
* Initial filings for unemployment insurance fell last week to their lowest levels since March 2020, another sign that the labor market is recovering from the Covid-19 era.
* First-time jobless claims totaled 340,000 for the week ended Aug. 28, compared with the 345,000 estimate.
* The jobless claims data comes one day ahead of the Labor Department’s all-important monthly jobs report, which will show how many jobs U.S. employers added in August.
Initial filings for unemployment insurance fell last week to their lowest levels since March 2020 in another sign that the labor market is gradually improving from the Covid-19 era, the Labor Department reported Thursday.
First-time jobless claims totaled 340,000 for the week ended Aug. 28, compared with the 345,000 Dow Jones estimate.
That is the lowest level for initial claims since March 14, 2020, when first-time claims totaled 256,000, just before the coronavirus pandemic caused a historic rush to unemployment benefits.
The level of initial claims for the week ended Aug. 21 was revised up by 1,000, to 354,000.
The level of continuing claims, the measure of ongoing benefits, was 2.75 million, a decrease of 160,000 from the previous week’s revised level.
The decrease in the number of continuing claims also represents the lowest level for insured unemployment since the Covid era began.
Economists looking for even more robust job creation have noted that federal unemployment benefits, a safety net for those who lost jobs during the worst of the pandemic, are set to expire Monday.
Others noted that with public schools starting to open across the U.S., parents may be able to finally return to the office.
“Bottom line, we now have the lowest initial filings for claims and smallest level of continuing claims since everything changed in March last year,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Just listen to any company that is looking to expand and you’ll hear stories about the difficulty in finding positions so it makes sense that claims continue to decline.”
“We’ll of course now hear about what will happen in coming weeks as classrooms refill, hopefully without incident, parents go back to work and added benefits expire,” he added.
The total number of continued weeks claimed for benefits in all programs across all states for the week ending Aug. 14 was 12.19 million, an increase of 178,526 from the previous week.
There were 29.75 million weekly claims filed for benefits in all programs in the comparable week in 2020.
The jobless claims data comes one day ahead of the Labor Department’s all-important monthly jobs report, a detailed update that the Federal Reserve uses as a gauge on the broader U.S. labor market in setting its monetary policy.
Economists expect that U.S. employers added 720,000 payrolls last month and that the unemployment rate ticked lower to 5.2% from 5.4%.
https://www.cnbc.com/2021/09/02/us-week ... laims.html
"Jobless claims total 340,000, lowest level since early days of pandemic"
Thomas Franck @TOMWFRANCK
PUBLISHED THU, SEP 2 2021
KEY POINTS
* Initial filings for unemployment insurance fell last week to their lowest levels since March 2020, another sign that the labor market is recovering from the Covid-19 era.
* First-time jobless claims totaled 340,000 for the week ended Aug. 28, compared with the 345,000 estimate.
* The jobless claims data comes one day ahead of the Labor Department’s all-important monthly jobs report, which will show how many jobs U.S. employers added in August.
Initial filings for unemployment insurance fell last week to their lowest levels since March 2020 in another sign that the labor market is gradually improving from the Covid-19 era, the Labor Department reported Thursday.
First-time jobless claims totaled 340,000 for the week ended Aug. 28, compared with the 345,000 Dow Jones estimate.
That is the lowest level for initial claims since March 14, 2020, when first-time claims totaled 256,000, just before the coronavirus pandemic caused a historic rush to unemployment benefits.
The level of initial claims for the week ended Aug. 21 was revised up by 1,000, to 354,000.
The level of continuing claims, the measure of ongoing benefits, was 2.75 million, a decrease of 160,000 from the previous week’s revised level.
The decrease in the number of continuing claims also represents the lowest level for insured unemployment since the Covid era began.
Economists looking for even more robust job creation have noted that federal unemployment benefits, a safety net for those who lost jobs during the worst of the pandemic, are set to expire Monday.
Others noted that with public schools starting to open across the U.S., parents may be able to finally return to the office.
“Bottom line, we now have the lowest initial filings for claims and smallest level of continuing claims since everything changed in March last year,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group.
“Just listen to any company that is looking to expand and you’ll hear stories about the difficulty in finding positions so it makes sense that claims continue to decline.”
“We’ll of course now hear about what will happen in coming weeks as classrooms refill, hopefully without incident, parents go back to work and added benefits expire,” he added.
The total number of continued weeks claimed for benefits in all programs across all states for the week ending Aug. 14 was 12.19 million, an increase of 178,526 from the previous week.
There were 29.75 million weekly claims filed for benefits in all programs in the comparable week in 2020.
The jobless claims data comes one day ahead of the Labor Department’s all-important monthly jobs report, a detailed update that the Federal Reserve uses as a gauge on the broader U.S. labor market in setting its monetary policy.
Economists expect that U.S. employers added 720,000 payrolls last month and that the unemployment rate ticked lower to 5.2% from 5.4%.
https://www.cnbc.com/2021/09/02/us-week ... laims.html