How ‘Chaos’ In The Shipping Industry Is Choking The Economy

Whidbey Island is a lovely place about 30 miles north of Seattle on the Puget Sound. Most days the tranquil sounds of rolling waves and chirping birds provide an escape from the hustle and bustle of the city. But these days, all is not so serene. Residents are complaining about the ruckus created by humongous container ships anchored off their shore.

“We’ve never seen them this close before,” a Whidbey Islander told a local news station. “We’re hearing the throbbing noise at night. … It’s a nuisance.” The noise has been so loud that residents have been complaining to the county sheriff’s office about it.

Whidbey Islanders are getting a front row seat to the growing U.S. trade deficit, which is hitting record highs. It’s fueled by a surge in demand for imports, mostly from East Asia. There’s so much cargo being shipped to the U.S. from Asia right now that the ports of Seattle and Tacoma are chock-full of container ships.

“We are seeing a historic surge of cargo volume coming into our ports,” says Tom Bellerud, the chief operations officer of The Northwest Seaport Alliance, which manages all cargo processing at the ports of Seattle and Tacoma. “The terminals are having a difficult time keeping up with processing all the cargo off these vessels fast enough.”

On both land and at sea, the entire supply chain is struggling to keep up. In the Pacific Northwest, it’s become such a clusterfest that the U.S. Coast Guard has been redirecting boats to anchor off the coast of Whidbey Island and other places they typically don’t park. Ship crews are having to wait days, even weeks, for the chance to dock at the ports and offload their precious goods.

It’s the same story up and down the West Coast. In San Francisco Bay, the traffic jam of container ships has gotten so bad that the U.S. Coast Guard has been asking ships not to enter the bay at all. Robert Blomerth, director of the USCG’s San Francisco Vessel Traffic Service, said last week that there were 16 container ships waiting in the open ocean outside the Golden Gate to get in and unload their cargo. He says it’s “completely abnormal.”

When we spoke to Gene Seroka, the head of the Port of Los Angeles, he said his port had 19 ships waiting to dock and they’re now waiting, on average, about five days to get in. In normal times, they don’t have to wait at all.

Lars Jensen, CEO of Vespucci Maritime, has spent 20 years studying the industry and he says what’s going on is unprecedented. “The container shipping industry is in a state of chaos that I don’t think it has ever been since it was invented,” he says.

The maiden voyage of the first container ship set sail from Newark, N.J., back in 1956. It may be hard to fathom just how big a deal this innovation was. It was just a big ship that carried containers, literally metal boxes. But these metal boxes enabled ships to carry dramatically more cargo, and, by standardizing shipping practices and using new machines to handle the boxes, shippers were able to slash costs and the time it takes to load, unload and transport that cargo.

Economists credit these metal boxes with increasing the efficiency of shipping so much that it stitched the modern global economy together more than anything else — more than all free-trade agreements put together.

Now economists are concerned that the plumbing provided by these miracle boxes and the vessels that transport them is clogged. It’s making it more difficult for stores to restock their shelves, manufacturers, carmakers and builders to get the parts they need, and farmers to export their products. It’s an important reason, analysts say, that we’re seeing consumer prices surge.

How did shipping get topsy-turvy?

In the early days of the pandemic, global trade hit an iceberg and sank into the abyss. The decline of maritime shipping was so dramatic that American scientists saw a once-in-a-lifetime opportunity to study what happened to whales in the absence of a constant deluge of vessels. The noise from the ships apparently stresses them out — kind of like they’re currently stressing out the residents of Whidbey Island.

Greater tranquility for whales in the first half of 2020 was the result of shipping companies canceling their trips and docking their ships. Then the economy rebounded, and American consumers unleashed a tidal wave of demand that swept through the shipping industry when they started shifting their spending patterns. Unable to spend money on going out, many started spending their money (and their stimulus checks) on manufactured goods — stuff that largely comes from China on container ships.

At first, it wasn’t the ships that were the problem; it was the containers. When the buying spree began, Chinese exporters struggled to get their hands on enough empty boxes, many of which were still stranded in the U.S. because of all the canceled trips at the beginning of the pandemic. More importantly, processing containers here has been taking longer because of all the disruptions and inefficiencies brought about by the pandemic. Containers have been piling up at dockyards, and trains and trucks have struggled to get them out fast enough.

“The pandemic has exacerbated longstanding problems with the nation’s supply chain, not just at the ports but in the warehouses, distribution centers, railroads, and other places that need to run smoothly in order for Longshore workers to move cargo off of the ships,” says Cameron Williams.

He’s an official at the International Longshore and Warehouse Union, which represents dock workers, primarily on the West Coast. Dock workers have been working through the pandemic to handle the increased cargo volume, he says, and at least 17 ILWU workers lost their lives to COVID-19. “We continue to work hard and break records month after month to clear the cargo as quickly as the supply chain allows,” Williams says.

It’s been all hands on deck to supply ravenous consumers and businesses with the stuff they want. The resulting traffic jams at West Coast ports means it takes longer to unload stuff, which then extends the time it takes for ships to get back across the Pacific to reload.

That congestion was already creating massive delays on both ends of the shipping supply chain, tying up large numbers of containers and ships and leading to growing backlogs and shortages. Then, in March 2021, the Ever Given, one of the largest container ships in the world, got stuck in the Suez Canal in Egypt. While the blockage didn’t directly affect the Asia-West Coast shipping corridor, it added to the global shortage of ships and containers by stranding even more of them out at sea.

As if all this weren’t enough, last month there was a COVID-19 outbreak at the Yantian International Container Terminal in China, which is normally one of the busiest ports in the world. The Chinese government implemented stringent measures to control the outbreak, and as a result, more than 40 container ships had to anchor and wait. “In terms of the amount of cargo, what’s going on in South China right now is an even larger disturbance than the Suez canal incident,” Jensen says.

The effects on the American economy

With so much shipping capacity bogged down, importers and exporters have been competing for scarce containers and vessels and bidding up the price of shipping. The cost of shipping a container from China/East Asia to the West Coast has tripled since 2019, according to the Freightos Baltic Index. Many big importers pay for shipping through annual contracts, which means they’ve been somewhat insulated from surging prices, but they are starting to feel the pain as they renegotiate contracts.

Rising shipping costs and delays are starving the economy of the stuff it needs and contributing to shortages and inflation. It’s not just consumers and retailers that are affected: American exporters are complaining that shipping companies are so desperate to get containers back to China quickly that they’re making the return trip across the Pacific without waiting to fill up containers with American-made products. That’s bad news for those exporters — and for America’s ballooning trade deficit.

As for when it’s going to get better, none of the people we spoke to believes it’ll be anytime soon. And it’s not even considered peak season for the shipping industry yet. That typically begins in August, when American stores start building their inventories for the back-to-school and holiday seasons. The residents of Whidbey Island may have to continue dealing with the nuisance of gigantic, noisy ships cluttering up the horizon for the foreseeable future.

By:

Source: How ‘Chaos’ In The Shipping Industry Is Choking The Economy : Planet Money : NPR

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References:

Shipbuilding NewsCruise Ship News, Ports News ,Salvage News ,Training News ,Government News, Environment News,Corporate News, Maritime Executive , Volga Targets Market, Nuclear-Powered Cargo Ship, China’s Exports, American Vulkan’s Service Team, JFE Steel, OMSA, OceanManager Inc.

Global Boom in House Prices Becomes a Dilemma for Central Banks

Surging house prices across much of the globe are emerging as a key test for central banks’ ability to rein in their crisis support.

Withdrawing stimulus too slowly risks inflating real estate further and worsening financial stability concerns in the longer term. Pulling back too hard means unsettling markets and sending property prices lower, threatening the economic recovery from the Covid-19 pandemic.

Bubble Trouble

Countries seeing surging real house price growth

Source: OECD

With memories of the global financial crisis that was triggered by a housing bust still fresh in policy makers minds, how to keep a grip on soaring house prices is a dilemma in the forefront of deliberations as recovering growth sees some central banks discuss slowing asset purchases and even raising interest rates.

Federal Reserve officials who favor tapering their bond buying program have cited rising house prices as one reason to do so. In particular, they are looking hard at the Fed’s purchases of mortgage backed securities, which some worry are stoking housing demand in an already hot market.

In the coming week, central bankers in New Zealand, South Korea and Canada meet to set policy, with soaring home prices in each spurring pressure to do something to keep homes affordable for regular workers.

New Zealand policy makers are battling the hottest property market in the world, according to the Bloomberg Economics global bubble ranking. The central bank, which meets Wednesday, has been given another tool to tackle the issue, and its projections for the official cash rate show it starting to rise in the second half of 2022.

Facing criticism for its role in stoking housing prices, Canada’s central bank has been among the first from advanced economies to shift to a less expansionary policy, with another round of tapering expected at a policy decision also on Wednesday.

The Bank of Korea last month warned that real estate is “significantly overpriced” and the burden of household debt repayment is growing. But a worsening virus outbreak may be a more pressing concern at Thursday’s policy meeting in Seoul.

In its biggest strategic rethink since the creation of the euro, the European Central Bank this month raised its inflation target and in a nod to housing pressures, officials will start considering owner-occupied housing costs in their supplementary measures of inflation.

The Bank of England last month indicated unease about the U.K. housing market. Norges Bank is another authority to have signaled it’s worried about the effect of ultra-low rates on the housing market and the risk of a build-up of financial imbalances.

Beginning of the End of Easy Money: Central Bank Quarterly Guide

The Bank for International Settlements used its annual report released last month to warn that house prices had risen more steeply during the pandemic than fundamentals would suggest, increasing the sector’s vulnerability if borrowing costs rise.

While the unwinding of pandemic-era is support is expected to be gradual for most central banks, how to do so without hurting mortgage holders will be a key challenge, according to Kazuo Momma, who used to be in charge of monetary policy at the Bank of Japan.

“Monetary policy is a blunt tool,” said Momma, who now works as an economist at Mizuho Research Institute. “If it is used for some specific purposes like restraining housing market activities, that could lead to other problems like overkilling the economic recovery.”

But not acting carries other risks. Analysis by Bloomberg Economics shows that housing markets are already exhibiting 2008 style bubble warnings, stoking warnings of financial imbalances and deepening inequality.

New Zealand, Canada and Sweden rank as the world’s frothiest housing markets, based on the key indicators used in the Bloomberg Economics dashboard focused on member countries of the Organisation for Economic Co-operation and Development. The U.K. and the U.S. are also near the top of the risk rankings.

As many economies still grapple with the virus or slow loan growth, central bankers may look for alternatives to interest-rate hikes such as changes to loan-to-value limits or risk weighting of mortgages — so called macro-prudential policy.

Yet such measures aren’t guaranteed to succeed because other dynamics like inadequate supply or government tax policies are important variables for housing too. And while ever cheap money is gushing from central banks, such measures are likely to struggle to rein in prices.

“The best approach would be to stop the further expansion of central bank balance sheets,” according to Gunther Schnabl of Leipzig University, who is an expert on international monetary systems. “As a second step, interest rates could be increased in a very slow and diligent manner over a long time period.”

Another possibility is that house prices reach a natural plateau. U.K. house prices, for example, fell for the first time in five months in June, a sign that the property market may have lost momentum as a tax incentive was due to come to an end.

There’s no sign of that in the U.S. though, where demand for homes remains strong despite record-high prices. Pending home sales increased across all U.S. regions in May, with the Northeast and West posting the largest gains.

While navigating the housing boom won’t be easy for central banks, it may not be too late to ward off the next crisis. Owner-occupy demand versus speculative buying remains a strong driver of growth. Banks aren’t showing signs of the kind of loose lending that preceded the global financial crisis, according to James Pomeroy, a global economist at HSBC Holdings Plc.

“If house prices are rising due to a shift in supply versus demand, which the pandemic has created due to more remote working and people wanting more space, it may not trigger a crisis in the same way as previous housing booms,” said Pomeroy. “The problems may arise further down the line, with younger people priced out of the property ladder even more.”

Read More:
A Housing Frenzy Sparks Bidding Wars From New York to Shenzhen

World’s Bubbliest Housing Markets Flash 2008 Style Warnings

Stimulus ‘Pandexit’ Is Next Challenge as Recovery Quickens

As they tip toe away from their crisis settings, monetary authorities in economies with heavily indebted households will need to be especially careful, said Alicia Garcia Herrero, chief economist for Asia Pacific at Natixis who used to work for the ECB and International Monetary Fund.

“Real estate prices, as with other asset prices, will continue to balloon as long as global liquidity remains so ample,” she said. “But the implications are much more severe than other asset prices as they affect households much more widely.”

— With assistance by Theophilos Argitis, and Peggy Collins

By:

Source: Global Boom in House Prices Becomes a Dilemma for Central Banks – Bloomberg

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Critics:

A housing bubble (or a housing price bubble) is one of several types of asset price bubbles which periodically occur in the market. The basic concept of a housing bubble is the same as for other asset bubbles, consisting of two main phases. First there is a period where house prices increase dramatically, driven more and more by speculation. In the second phase, house prices fall dramatically.

Housing bubbles tend to be among the asset bubbles with the largest effect on the real economy, because they are credit-fueled, because a large number of households participate and not just investors, and because the wealth effect from housing tends to be larger than for other types of financial assets.

References

  • Brunnermeier, M.K. and Oehmke, M. (2012) Bubbles, Financial Crises, and Systemic Risk NBER Working Paper No. 18398
  • see eg. Case, K.E., Quigley, J. and Shiller R. (2001). Comparing wealth effects: the stock market versus the housing market. National Bureau of Economic Research, Working Paper No. 8606., Benjamin, J., Chinloy, P. and Jud, D. (2004). ”Real estate versus financial wealth in consumption”. In: Journal of Real Estate Finance and Economics 29, pp. 341-354., Campbell, J. and J. Cocco (2004), How Do Housing Price Affect Consumption? Evidence from Micro Data. Harvard Institute of Economic Research, Discussion Paper No. 2045
  • Stiglitz, J.E. (1990). “Symposium on bubbles”. In: Journal of Economic Perspectives Vol. 4 No. 2, pp. 13-18.
  • Palgrave, R.H. I. (1926), “Palgrave’s Dictionary of Political Economy”, MacMillan & Co., London, England, p. 181.
  • Flood, R. P. and Hodrick, R. J. (1990), “On Testing for Speculative Bubbles”, The Journal of Economic Perspectives, Vol. 4 No. 2, pp. 85–101.
  • Shiller, R.J. (2005). Irrational Exuberance. 3nd. New Jersey: Princeton University Press. ISBN 0-691- 12335-7.
  • Smith, M. H. and Smith, G. (2006), “Bubble, Bubble, Where’s the Housing Bubble?”, Brookings Papers on Economic Activity, Vol. 2006 No. 1, pp. 1–50.
  • Cochrane, J. H. (2010), “Discount Rates”, Working paper, University of Chicago, Booth School of Business, and NBER, Chicago, Illinois, 27 December.Lind, H. (2009). “Price bubbles in housing markets: concept, theory and indicators”. In: International Journal of Housing Markets and Analysis Vol. 2 No. 1, pp. 78-90.

Here’s Why A Standoff Between Oil Producers Is Fueling Surging Gas Prices

Oil Prices Hit Historic High On Weak Dollar

As oil prices spike to a nearly three-year high, a bitter disagreement between international oil producers has shattered hopes for a deal to increase oil production this year—thereby threatening to further hike up rising oil and gas prices as a broad economic reopening looks to ramp up travel demand.

Key Facts

Following two days of fraught discussions last week, the group of oil producers known as OPEC+ called off an afternoon meeting Monday and set no date to meet again, effectively suspending a planned agreement to raise output by 2 million barrels per day from August to December

Two unnamed sources told Reuters the failed negotiations mean the expected production hikes this year will no longer occur.

The price of U.S. oil benchmark West Texas Intermediate—at about $75.31 a barrel—jumped 1.3% Monday after the news and has climbed 5% over the past week’s disagreement, while the price of the United Kingdom’s Brent Crude ticked up 1.1% and 4%, respectively.

The United Arab Emirates, which has invested heavily in its oil production capacity, refused to move forward with the deal because it would also extend oil production cuts through late 2022.

Though the UAE wants to raise its output unconditionally, Saudi Arabian oil producers, who supported the agreement, argued the extended output cuts are necessary to prevent excess oil supply that could tank prices.

The production increase was meant to help curb rising oil prices and buy producers time while they assess the risk of rapidly spreading variants in countries like India once again hurting demand and shuttering economies.

Big Number

60%. That’s how much the price of WTI oil has surged this year alone, while the price of Brent Crude has climbed about 50%.

Tangent

Oil prices crashed last year but recouped all their pandemic losses by March, and they’ve surged roughly 20% higher since. After cutting production by about 10 million barrels per day last year, oil producers are still supplying about 5.8 million fewer barrels per day than before the pandemic. Most recently, OPEC+ in early June agreed to increase oil output by 450,000 barrels per day starting this month.

Key Background

Despite the easing of lockdowns and an accelerating vaccine rollout, producers have been careful to ramp up supply after excess inventories drove prices down to negative territory for the first time in history last spring. That happened after an all-out price war erupted between oil-producing giants Russia and Saudi Arabia in March 2020—just as travel demand began to plummet during the coronavirus outbreak.

Costly-to-maintain storage tanks soon filled up with no buyers, and the price of one American oil futures contract plunged below zero in April 2020. OPEC and its allies agreed to cut production in order to stabilize prices amid the turmoil, but according to the International Energy Agency, those inventories are still being worked off to this day.

Further Reading

OPEC+ resumes oil policy talks amid Saudi-UAE standoff (Reuters)

Oil Producers Agree To Boost Production By 450,000 Barrels Per Day As Travel Picks Up (Forbes)

OPEC Plus Agrees To Ramp Up Production By 500,000 Barrels Per Day Starting January, Ending Bitter Standoff In Bid To Save Oil Prices (Forbes)

Follow me on Twitter. Send me a secure tip.

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com. And follow me on Twitter @Jon_Ponciano

Source: Here’s Why A Standoff Between Oil Producers Is Fueling Surging Gas Prices

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References

Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

After closing at record highs last week, stocks are falling for the second day in a row as corporate earnings—which lifted the market to new highs during the pandemic—start to show signs of weakness, all while speculative pockets of investor mania continue to rage on.

Shortly after the open, the Dow Jones Industrial Average fell 147 points, or 0.4%, while the S&P 500 also slipped 0.4%, and the tech-heavy Nasdaq, which underperformed Monday, shed 0.3%.

Far outperforming any other stock in the S&P, shares of railroad company Kansas City Southern are soaring 15% after Canada National proposed to acquire the company in a $33.7 billion deal—topping Canadian Pacific’s $25 billion bid from last month and setting the stage for a potential bidding war.

Heading up the S&P’s losses, Marlboro parent Altria Group’s stock is slumping 6% after reports that Joe Biden’s administration (which has not commented on the matter) is considering a reduction in the amount of nicotine allowed in tobacco products.

On the earnings front, shares of IBM are climbing 2.5% after the software giant surpassed first-quarter expectations with revenue of $5.4 billion—bolstered by ongoing growth in its enterprise cloud business—and adjusted earnings of $2.2 billion.

Meanwhile, medical device company Abbott, which makes Covid-19 test kits, reported worse-than-expected revenue of $10.5 billion Tuesday morning as Covid-related sales fell nearly 10% quarter to quarter, sending shares down about 3%.

Reflecting ongoing uncertainty over the economic recovery, epicenter stocks—or those belonging to companies hard-hit by the pandemic—are also driving losses Tuesday, with chemicals firms Dupont De Nemours, cruise-liner Carnival Corp. and Delta Air Lines all falling about 2%.

Crucial Quote

“The reopening news is directionally positive, but the big problem is that many epicenter stocks have already seen their enterprise values return to pre-Covid levels, while some are well beyond where they stood in 2019,” Vital Knowledge Media Founder Adam Crisafulli said in a Tuesday morning note.

Tangent

In a break from tradition, the Bank of Japan revealed Tuesday that it opted out of buying exchange-traded funds despite weakness in Japanese stocks. Crisafulli says the move is “perhaps the most important piece of news today” because it signals the central bank is dialing back its economic support—at a time when central banks around the world, including the Federal Reserve, have revved up their accommodative policy to help the economy and usher in new stock-market highs. Japan’s Nikkei 225, the nation’s benchmark index, fell 2% Tuesday and is now down 4.5% from a February high.

Key Background

Boosted by massive fiscal stimulus, an accelerating vaccine rollout and falling unemployment, stocks have had a strong start to the year, with the S&P pulling off 23 new all-time highs in 2021, according to LPL Financial Chief Market Strategist Ryan Detrick. “Many of our favorite sentiment gauges are becoming extremely bullish, which could be a near-term contrarian warning,” Detrick says of indicators like sentiment, at a three-year high, and low cash allocations from portfolio managers increasingly piling into stocks.

Surprising Fact

The price of dogecoin is soaring Tuesday, climbing back near record territory from last week, as retail traders around the world stage a rally around cannabis holiday 4/20. The cryptocurrency, modeled after a meme and originally developed as a joke, has climbed eight-fold over the past month, nabbing a staggering $49 billion market capitalization.

Further Reading

S&P And Dow Score New Record Highs, For The Week: Health Care, Materials And Utilities Sectors Lead Gains (Forbes)

Peloton Shares Drop After It Resists Regulator Warnings About Treadmill Following Child’s Death  (Forbes)

I’m a reporter at Forbes focusing on markets and finance. I graduated from the University of North Carolina at Chapel Hill, where I double-majored in business journalism and economics while working for UNC’s Kenan-Flagler Business School as a marketing and communications assistant. Before Forbes, I spent a summer reporting on the L.A. private sector for Los Angeles Business Journal and wrote about publicly traded North Carolina companies for NC Business News Wire. Reach out at jponciano@forbes.com.

Source: Stocks Fall Again As Experts Worry About ‘Extremely Bullish’ Market Indicators

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Related Blog Posts:

Elon Musk tweets that Autopilot had not been enabled as Tesla crash brings scrutiny

Apple stock update: The key numbers you need to look at now

IBM surprises with revenue gain, see growth returning to pre-COVID-19 levels

Kansas City Southern’s stock soars after Canadian National’s ‘superior’ bid valued at $33.7 bln

 

 

Inflation Surged 2.6% On A Yearly Basis In March Here’s Why

Grocery Store In Pennsylvania During COVID-19 pandemic

Consumer prices—everything from cars to groceries to clothes and houses—rose 2.6% over the 12 months ending in March 2021, according to data released Tuesday by the Labor Department, in line with experts’ expectations of a short-term bounce in inflation as the economy begins to recover from the slowdown caused by the coronavirus pandemic.

Key Facts

Prices rose 0.6% from February—their largest jump since August 2012—and the core price index, which excludes volatile energy and food prices, rose 1.6% over the last year.

Tuesday’s data comes amid heated debate in Washington about whether President Biden’s ambitious fiscal spending agenda—when combined with an upcoming boom in consumer spending—will overheat the economy and push prices to unsustainable levels.

Some of the spike in prices last month is attributable to something called the “base effect”—the fact that prices were so much lower than usual during the onset of the pandemic last spring means that yearly measures of price movement this year are distorted.

Federal Reserve chair Jerome Powell has repeatedly said that the central bank is anticipating a short-term spike in prices as the economy recovers and that the Fed has the tools to deal with runaway inflation should it become a problem.

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In the past two decades inflation has puzzled economists by remaining low in good times and bad. Could the pandemic cause it to rise? Sign up to The Economist’s daily newsletter to keep up to date with our latest coverage: https://econ.st/3aor3kg Find all of our finance and economics coverage: https://econ.st/3nsEfZm Read our special report about how inflation is losing its meaning as an economic indicator: https://econ.st/3noSaPY
How to make economic policy fit for a world of low inflation: https://econ.st/2IWxy2u Why a surge in inflation due to the pandemic looks unlikely: https://econ.st/2KAfITk The World In 2021: governments must judge if the economic recovery needs more help: https://econ.st/37sscpj Why economists’ models of inflation are letting them down: https://econ.st/3gTULPA How most emerging markets overcame high inflation: https://econ.st/3gWOUZD Why the Fed made its biggest inflation-policy change in decades: https://econ.st/3oTAQD8
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Crucial Quote

“We don’t see runaway inflation as an imminent risk—actual inflation is nowhere near what markets are pricing in, and even with a near-term price lift, it won’t be enough to signal runaway inflation,” analysts from S&P Global wrote in a Monday research note.

Key Background

On Monday, two White House economists explained why they expect a manageable uptick in inflation in the short term—a view shared by other Biden officials at the Treasury Department and at the Federal Reserve. First, they cite the base effect. Second, they note that ongoing supply chain disruptions could cause manufacturers to temporarily raise prices to make up for materials that are temporarily more expensive. Last, they say that pent-up demand caused by months of restrictions and closures may prompt some businesses to raise prices to take advantage of extra demand. The economists emphasized that these effects will be short-lived and said they are confident inflation will fall back to normal levels over time.

Further Reading

Here’s Why The White House Isn’t Worried About Inflation (Forbes)

Federal Reserve Looking Ahead To Higher Inflation As Economy Rebounds, But It Won’t Raise Rates Yet (Forbes)

Inflation—Not Covid-19—Is Now The Biggest Risk To Markets, Bank Of America Survey Shows (Forbes)

Biden’s Infrastructure Plan May Slow Economy Down, Moody’s Says—But Not For Long (Forbes)

Follow me on Twitter. Send me a secure tip.

I’m a breaking news reporter for Forbes focusing on economic policy and capital markets. I completed my master’s degree in business and economic reporting at New York University. Before becoming a journalist, I worked as a paralegal specializing in corporate compliance.

Source: Inflation Surged 2.6% On A Yearly Basis In March—Here’s Why

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Vaccine Pause Hits Reopening Shares

Also, people shouldn’t think of vaccines as a simple product without potential problems. No one knows yet if these blood clots are a game changer for the JNJ vaccine, but it isn’t surprising that a complication got reported, simply because vaccines aren’t widgets. Like any medical product, they’re complex and can have different effects on different people.

Hopefully this gets resolved quickly and the JNJ vaccine comes back. It’s a handful of cases (six cases after 6.8 million vaccinations) and the FDA said it acted “out of an abundance of caution.” It’s unclear how long it might take to get to the bottom of this, but the other vaccines were already being used millions of times a day in the U.S., and that continues. The FDA may want to examine more data before allowing JNJ to come back, but in a worst-case scenario it’s off the market for an extended period, putting more pressure on supplies of the other vaccines.

The JNJ pause could put some pressure on some of the “reopening” stocks and sectors until things get sorted out. Already this morning we’re seeing shares of airlines, casinos, and cruise lines turning lower in pre-market trading. An FDA press conference scheduled for 10 a.m. ET today might grab Wall Street’s attention.

Though reopening shares start the day under pressure, a new JP Morgan Chase (JPM) note suggests the economy could fully reopen by July 4. Whether this JNJ development affects that timeline is unclear, but it’s nice to think JPM might be right.

Meanwhile, volatility remains light and Bitcoin is now above $62,000. The Cboe Volatility Index (VIX) is up, but still below 17.5, which is amazing when you remember how long it spent above 50 last year.

Unless there’s big news out of the FDA press conference, trading could be pretty slow today as investors await tomorrow’s onslaught of big bank earnings.

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[…] 6 instead, you could see grade inflation across the board […]
1
Business sentiment jumps to third-highest ever with many companies believing pandemic harm behind them | Financial Post
financialpost.com – Today
[…] more jobs than expected Safeguards needed to protect households from rising interest rates if inflation kicks in, CIBC’s Dodig says The interviews in the Bank of Canada business outlook survey wer […] to increase staff, slightly down from 54 per cent at end of last year More than half of firms see inflation at above 2 per cent, the first time it’s past the 50 per cent threshold since 2018 The balance o […] past the 50 per cent threshold since 2018 The balance of opinion for both input and output price inflation is highest on record Bloomberg […]
7
FACTBOX-Latest on the worldwide spread of the coronavirus | Health
[…] data expected to show a pick-up in inflation, with the dollar also edging higher […]
0
Gold rebounds after strong U.S. inflation data, weaker dollar | MarketScreener
[…] “We needed to see some inflation to get gold moving and we saw it this morning with that CPI number,” said Bob Haberkorn, senio […] than 8-1/2 years in March, kicking off what most economists expect will be a brief period of higher inflation […]
0
Stocks are mixed as regulators ‘pause’ J&J vaccine rollout
abcnews.go.com – Today
[…] 6% in March, the most since 2012, while inflation over the past year rose a sizable 2 […] The big gains are expected to be a temporary blip and not a sign that long dormant inflation pressures were emerging […]
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Rise in Seychelles’ currency should lead to drop in local prices, official says
[…] On the issue of inflation, Abel said that statistics published last week shows that inflation has risen to 9 […]
0
Tech leads decline as stock run-up takes a breather
[…] Investors have been focusing on the economic recovery as well as the risks higher inflation poses to consumers and companies […]
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S&P 500, Nasdaq up as tech stocks rise after J&J vaccine pause
[…] index (CPI) in March, kicking off what most economists expect will be a brief period of higher inflation […]
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Global Market Insights: March 2021 | MarketScreener
[…] One that looks certain to fall victim to the pandemic is ever-lower inflation. Many readers will recall the eighties’ focus on controlling money supply growth in order to bring inflation under control […] packages announced by the US, EU, and UK are all aimed at achieving these twin goals, with higher inflation preferable to a failed recovery. Typically, inflation and government bond yields are not far apart, so in the medium term, we expect the benchmark UK 1 […]
0
S&P 500, Nasdaq up as tech stocks rise after J&J vaccine pause
[…] index (CPI) in March, kicking off what most economists expect will be a brief period of higher inflation […]
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U.S. COVID vaccine program faces setback with J&J jab, as experts say there is no cause for alarm –
[…] the economy saying? Consumer prices rose in March for the fourth month in a row and the pace of inflation hit the highest level in 2½ years, underscoring new pressures emerging on the economy as the U […] The rate of inflation over the past year shot up to 2 […] The yearly rate of inflation is widely expected to surge in the next few months […]
0
While Bitcoin is inherently volatile, it may offer potential diversification benefits
businesstech.co.za – Today
[…] The majority of investors tend to hedge against risk and inflation by investing in gold, which is the quintessential safe-haven asset […]
1
Stock Market News | Wells Fargo Investment Institute
[…] are mixed in early trading Tuesday as investors digest this morning’s update on consumer price inflation […] Treasuries are strengthening following the relatively in-line inflation report […] 67% ahead of tomorrow’s closely-watched update on consumer price inflation […]
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Biden lobbies both parties on infrastructure
[…] Cheney also said she was concerned about stoking inflation […]
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Jeffrey Wennberg: Where have the deficit hawks gone?
vtdigger.org – Today
[…] Even after adjusting for inflation, we have added about 21 trillion current dollars to the debt since 1990 […] I have heard the experts explain all about why we don’t need to fear inflation because it is tied more to expectations than round-the-clock money printing […]
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BoC survey says firms expect higher inflation
[…] Apr 2021 The Bank of Canada’s latest business outlook survey shows a growing number of firms expect inflation to exceed the central bank’s target range when restrictions ease […] Over half of Canadian businesses expect annual inflation to be above the midpoint of the central bank’s 1% to 3% target range over the next two years […] The proportion of businesses believing the annual rate of inflation will remain between 2% and 3% over the next two years has also risen, the survey finds […]
0
Higher gas prices fuel fear over inflation – RetailWire
Gasoline prices were up 9.1 percent in March, driving a 0.4 percent increase in the Consumer Price Index, slightly higher than what economists were expecting. Core inflation prices, which do not include food and fuel, were up 0.1 percent from February.
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FTSE 100 dips ahead of the close but Just Eat and JD Sports provide support
[…] Markets may also be a little skittish due to faster than expected US inflation for March as stimulus measures and an easing of lockdown measures juiced the American economy […] 58pm: US prices edge higher than expected Those watching the US inflation figures will see further signs of pricing pressures with the March figures coming in slightl […] Before the vaccine news, analysts had been anticipating the latest US inflation figures, due at 1 […]
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U.S. COVID vaccine program faces setback with J&J jab, as experts say there is no cause for alarm
[…] the economy saying? Consumer prices rose in March for the fourth month in a row and the pace of inflation hit the highest level in 2½ years, underscoring new pressures emerging on the economy as the U […] The rate of inflation over the past year shot up to 2 […] The yearly rate of inflation is widely expected to surge in the next few months […]
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A sharp rise in bond yields is a bigger concern for fund managers than COVID-19 – and most believe crypto is in a bubble, but stocks aren’t even close, BofA said | Markets Insider
markets.businessinsider.com – Today
A so-called ‘taper-tantrum’ is now worrying investors more than Covid-19 and inflation, according to Bank of America […] managers are now more worried about a so-called “taper tantrum” in the bond market than Covid-19 or inflation, according to a Bank of America global survey of fund managers […] tantrum is the biggest tail risk as far as investors are concerned, trumping both Covid-19 and inflation […]
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Investorideas.com – Still a Bullish Fever in Stocks?
[…] be a daily occurence only unless and until copper gives in and slides – that’s because of the inflation expectations having stabilized for now, but Treasury yields not really retreating […] Yes, gold misses inflation uptick that would bring real rates down a little again – and is getting one in today’s CPI as w […] Inflation Expectations Inflation expectations as measured by the TIP:TLT ratio are basing, but bond yields are aiming higher again […]
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S&P 500, Nasdaq up as tech stocks rise after J&J vaccine pause | Business Standard News
[…] index (CPI) in March, kicking off what most economists expect will be a brief period of higher inflation […]
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SNIPEF: The Scottish and Northern Ireland Plumbing Employers’ Federation
snipef.org – Today
[…] million to tackle COVID-19 more than triples the increase to health funding by £500 million above inflation […]
0
Stocks are mixed as regulators ‘pause’ J&J vaccine rollout » Albuquerque Journal
[…] 6% in March, the most since 2012, while inflation over the past year rose a sizable 2 […] The big gains are expected to be a temporary blip and not a sign that long dormant inflation pressures were emerging […]
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Coinbase is listing for US$100 billion on NASDAQ, but you might be better buying bitcoin instead
theconversation.com – Today
[…] banks creating lots of extra money to stimulate their economies, many investors worry about the inflation that this could cause, which would devalue “fiat” currencies like the dollar and pound […]
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Iran: So Many Enemies
[…] The covid19 crises caused the GDO to shrink nearly ten percent in 2020 while inflation increased to nearly 70 percent […]
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JGBs Edges Higher after Auction Draws Strong Demand
bitcoin.cartel.click – Today
[…] Investors remain wary of further rise in global bond yields on concerns about rising inflation ahead of U […]
0
UK economy returns to growth; US inflation rises; Haldane to leave BoE – as it happened | Business | The Guardian
[…] In the US, inflation has jumped as higher energy prices and an economic recovery push up the cost of living […] And in February, he compared inflation in the UK to a tiger, poised to awaken… Friedrich von Hayek once referred to inflation control as akin to trying to catch a tiger by its tail […]
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CBM Annual Report for 2020 released
[…] The annual rate of inflation based on the Harmonised Index of Consumer Prices fell to 0 […] Inflation based on the Retail Price Index showed a similar development, easing to 0 […]
0
gs-424b2.htm
[…] result in the payment of a coupon, you will not be compensated for any opportunity cost implied by inflation and other factors relating to the time value of money […] economy in important respects, including growth of gross national product, rate of inflation, capital reinvestment, resources and self-sufficiency, which may have a positive or negative effect […] in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates […]
0
Viral video of Boris Johnson ‘lying to parliament’ approaches 10 million views
[…] ” According to the Institute for Fiscal Studies, once you accounted for inflation, the investment worked out closer to £23 […]
192
Market HIGHLIGHTS: Nifty ends just above 14,500, Sensex zooms 660 pts, tops 48,500; HDFC twins lead the rally
[…] three-year note auction and ahead of important data releases this week, including consumer price inflation […]
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A sharp rise in bond yields is a bigger concern for fund managers than COVID-19 – and most believe crypto is in a bubble, but stocks aren’t even close, BofA said
A so-called ‘taper-tantrum’ is now worrying investors more than Covid-19 and inflation, according to Bank of America […] managers are now more worried about a so-called “taper tantrum” in the bond market than Covid-19 or inflation, according to a Bank of America global survey of fund managers […] tantrum is the biggest tail risk as far as investors are concerned, trumping both Covid-19 and inflation […]
1
Muslims mark Ramadan amid virus surge and new restrictions » Albuquerque Journal
[…] In Lebanon, most Muslims began Ramadan on Tuesday amid soaring inflation […]
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Today’s Market View – Castillo Copper ; IronRidge Resources ; Vast Resources and more… | LON:AAL
[…] China potentially looking to limit and control commodity prices as raw material price rises lead inflation higher CLICK FOR PDF   MiFID II exempt information – see disclaimer below    Alba Mineral Resources […]   China potentially looking to limit and control commodity prices as raw material price rises lead inflation higher Do you ever have the feeling the Chinese government is playing a form of global economic and […] China is looking to limit raw materials prices to limit inflation and it doesn’t want to reward ‘Imperialist’ CTAs and other hedge funds along the way […]
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Why the World is Turning to Cash
[…] are mainly driven by local-specific determinants’ such as economic activity, foreign tourism and inflation, rather than external factors like global uncertainty—as in 2020—or short-term interest rates i […]
1
Advisor Tips for Talking About Social Security | Retirement Income Channel
[…] also provides cost of living adjustments, all these benefits are also protected from the ravages of inflation. Inflation can otherwise cripple the purchasing power of retirees during what often amounts to several decades […]
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Faculty salaries decreased this year
[…] 4 percent this year, adjusting for inflation, the first such decrease since 2011-12, according to preliminary data from the American Association […] Professor pay decreased at two-thirds of colleges and universities, adjusted for inflation […] Real wage growth decreased at 68 percent of colleges and universities, after adjusting for inflation […] Not adjusting for inflation, average salaries increased 1 percent year […]
2
Research reveals ‘climate-change complacency’ across Europe
warwick.ac.uk – Today
[…] · Europe’s citizens are more concerned with inward-looking issues seen as closer to home, such as inflation, the general economic situation, health and social security, and unemployment […]
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No bubble on Wall street yet; Goldman Sachs says equity risk premium still attractive for investors
[…] He added that since the Second World War, the nominal US GDP growth has been 5% while inflation has been at 2% […]
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r – VIF No intercept: vifs may not be sensible
stackoverflow.com – Today
[…] pdf So after searching for a while I came across variance inflation factors which measure how much the behavior (variance) of an independent variable is influenced […]
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UPDATE 2-Austria follows Italy as governments resume ultra-long issuance | Business
[…] sales from France, Spain and Belgium, a bond sell-off driven by expectations of higher growth and inflation saddled buyers of those bonds with losses and such issuance died down […] part of buying very long-dated bonds because there is no fear of a regime change in the growth and inflation dynamics,” said Antoine Bouvet, senior rates strategist at ING […] inflation rose 2 […]
0
COVID-19 Spike Slows The US Recovery : Forex
[…] place until ‘substantial further progress’ has been made in key indicators such as employment and inflation […]
0
Magna Gold Reports Q1 2021 Operating Results; San Francisco Ramp-Up Nearing Completion and on Track to Return to Full Scale Commercial Production by June 2021
[…] to the availability and costs of financing needed in the future, changes in equity markets, inflation, changes in exchange rates, fluctuations in commodity prices, delays in the development o […]
0
Jamie Dimon’s Letter to Shareholders, Annual Report 2020
reports.jpmorganchase.com – Today
[…] or the actual price of goods compared with calculated data like gross domestic product (GDP), inflation or productivity […] are superior to old products, such as smartphones versus dumb phones; similarly, calculations for inflation factor in something called “owners’ equivalent rent,” which generally differs substantially fro […] 10-year period after the Great Recession did not result in higher GDP growth and possibly higher inflation […]
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Human life above all else: PM tells nation on Pahela Baishakh eve
[…] and the people involved with non-institutional activities; and raise the money supply keeping inflation under control, she said […]
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Rising Yields Imperil Bond Values
[…] risen as the hopes of an economic rebound increase and the Federal Reserve raises its target for inflation […]
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March CPI At 5.52%: RBI Will Ignore Inflation Spike In Favour Of Growth, Say Economists
[…] What do the economists think about the spike in inflation and its likely impact on the monetary policy committee’s decisions? Inflation not a big worry, yet At least three economists Moneycontrol spoke to were of the view that th […] It was only in December, that inflation eased below 6 percent even as a debate rages if CPI captures the actual rise in prices. Inflation expectations high Inflation expectations are on the rise for the three months ahead, RBI’s March round of forward-lookin […]
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