Tag Archives: high inflation

Failing Banks, High Inflation, now Shortage of Money supply falling the fastest since the Depression

Woman Surprised Screaming

Revelations 18:23:’For the merchants were the great men of the earth; for by thy sorceries were all nations deceived.’

Important Takeaways:

  • US money supply is falling at the fastest rate since the 1930s
  • U.S. money supply is falling at its fastest rate since the 1930s, a red flag for the economy and financial markets. Money supply has now been shrinking year-on-year since December, an unprecedented development in modern times that should make investors sit up and take notice – growth, asset prices and inflation could all weaken.
  • According to Reuters, it is largely a consequence of the reversal of the liquidity generated by massive post-pandemic fiscal and monetary stimulus, the Federal Reserve shrinking its balance sheet via quantitative tightening, falling bank deposits, and weak demand for and provision of credit.

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Majority of Americans see Recession looming ahead

Rev 6:6 NAS “And I heard something like a voice in the center of the four living creatures saying, “A quart of wheat for a denarius, and three quarts of barley for a denarius; and do not damage the oil and the wine.”

Important Takeaways:

  • 70% of Americans think a recession is coming: Here’s what they are doing to prepare
  • A recession is defined as a significant economic decline that lasts more than a few months.
  • Most Americans — 70% — already believe an economic downturn is on its way, according to a new survey from MagnifyMoney.
  • High inflation is one of the biggest risk factors that make people think an economic decline is coming, along with high housing and rent prices and rising interest rates.
  • In order to prepare for a downturn, many are focused on keeping their spending in line — 62% of respondents said they are cutting back on spending, while 39% are sticking to a budget.
  • One in 4 respondents in the MagnifyMoney survey reported paying down debt as a way to get their finances ready for an economic downturn.

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U.S. consumer prices post biggest annual gain in more than 39 years

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices rose further in November amid strong gains in the cost of food and a range of other goods, leading to the largest annual increase in more than 39 years and potentially giving the Federal Reserve ammunition to quickly wind down its bond purchases.

The report from the Labor Department on Friday followed on the heels of a slew of data this month showing a rapidly tightening labor market. With supply bottlenecks showing little sign of easing and companies raising wages as they compete for scarce workers, high inflation could persist well into 2022.

The increased cost of living, the result of shortages caused by the relentless COVID-19 pandemic, is hurting President Joe Biden’s approval rating. High inflation and a strengthening economy have raised the risk of an early Fed interest rate increase.

“The biggest problem for the Fed is the mounting evidence of a strong pick-up in cyclical price pressures,” said Paul Ashworth, chief economist at Capital Economics in Toronto.

“Although we think headline inflation has now peaked, it will decline only gradually over the first half of next year and, crucially, because of that building cyclical pressure we expect core inflation to remain above the Fed’s target for a prolonged period.”

The consumer price index rose 0.8% last month after surging 0.9% in October. The broad-based increase was led by gasoline prices, which rose 6.1%, matching October’s gain. With crude oil prices declining recently, gasoline prices have likely peaked.

Food prices rose 0.7%. The cost of food at home increased 0.8%, driven by increases in the price of fruits and vegetables, meat and cereals and bakery products. It also cost more to eat away from home.

In the 12 months through November, the CPI accelerated 6.8%. That was the biggest year-on-year rise since June 1982 and followed a 6.2% advance in October.

Economists polled by Reuters had forecast that the CPI would climb 0.7% and increase 6.8% on a year-on-year basis.

TIGHTENING LABOR MARKET

The government reported last week that the unemployment rate fell to a 21-month low of 4.2% in November. Tightening labor market conditions were underscored by a report on Thursday showing new applications for unemployment benefits dropped to the lowest level in more than 52 years last week.

Other data this week showed there were 11 million job openings at the end of October and Americans quit jobs at near-record rates.

“With supply shortages likely to stick around until next year and service-sector prices trending higher, inflation is going to get worse before it gets better,” said Sam Bullard, a senior economist at Wells Fargo in Charlotte, North Carolina.

Fed Chair Jerome Powell has said the U.S. central bank should consider speeding up the winding down of its monthly bond purchases at its policy meeting next week. Many economists are expecting an early Fed interest rate increase.

Excluding the volatile food and energy components, the CPI rose 0.5% last month after gaining 0.6% in October. The so-called core CPI was supported by rents, with owners’ equivalent rent of primary residence, which is what a homeowner would receive from renting a home, rising a solid 0.4%.

Prices for used cars and trucks increased 2.5% for a second straight month. New motor vehicle prices rose 1.1%, marking the eighth consecutive month of gains. A global semiconductor shortage has undercut motor vehicle production.

Airline fares rebounded 4.7%. But further increases are unlikely following the emergence of the Omicron variant of COVID-19, which could make some people hesitant to travel by air. The United States is already experiencing a resurgence in coronavirus infections, driven by the Delta variant.

The so-called core CPI jumped 4.9% on a year-on-year basis, the largest rise since June 1991, after increasing 4.6% in the 12 months through October.

The Fed tracks the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, for its flexible 2% inflation target. The core PCE price index surged 4.1% in the 12 months through October, the most since January 1991. Data for November will be released later this month.

“A continued trend higher in core inflation creates further hawkish risks for a Fed that has recently become more focused on the inflation side of its mandate, and suggests a rising likelihood of an even earlier first rate hike,” said Veronica Clark, an economist at Citigroup in New York.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

Gasoline, auto retailing boost U.S. producer prices

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. producer prices increased solidly in October, driven by surging costs for gasoline and motor vehicle retailing, suggesting that high inflation could persist for a while amid tight global supply chains related to the pandemic.

The Federal Reserve last week restated its belief that current high inflation is “expected to be transitory.” A tightening labor market as millions remain at home is adding to price pressures, which together with shortages of goods sharply restrained economic growth in the third quarter.

The Fed this month started reducing the amount of money it is injecting into the economy through monthly bond purchases.

“The acceleration in inflation may not fade as quickly as previously thought, particularly for businesses because of the global supply-chain issues,” said Ryan Sweet, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “Elevated inflation is turning up the heat on the Fed but they haven’t shown signs of buckling as they will stomach higher inflation to get the labor market back to full employment quickly.”

The producer price index for final demand rose 0.6% last month after climbing 0.5% in September, the Labor Department said on Tuesday. That reversed the slowing trend in the monthly PPI since spring. In the 12 months through October, the PPI increased 8.6% after a similar gain in September.

Economists polled by Reuters had forecast the PPI advancing 0.6% on a monthly basis and rising 8.7% year-on-year.

More than 60% of the increase in the PPI last month was due to a 1.2% rise in the prices of goods, which followed a 1.3% jump in September. A 6.7% surge in gasoline prices accounted for a third of the rise in goods prices. There were increases in the prices of diesel, gas and jet fuel as well as plastic resins.

Wholesale food prices dipped 0.1% as the cost of beef and veal tumbled 10.3%. Prices for light motor trucks fell as the government introduced new-model-year passenger cars and light motor trucks into the PPI.

Exorbitant motor vehicle prices have accounted for much of the surge in inflation as a global semiconductor shortage linked to the nearly two-year long COVID-19 pandemic has forced manufactures to cut production, leaving virtually no inventory.

Services gained 0.2% last month after a similar rise in September. An 8.9% jump in margins for automobiles and parts retailing accounted for more than 80% of the increase in services. The cost of transportation and warehousing services jumped 1.7%, also reflecting snarled supply chains.

Surveys from the Institute for Supply Management this month showed measures of prices paid by manufacturers and services industries accelerating in October. Manufacturers complained about “record-long raw materials lead times, continued shortages of critical materials, rising commodities prices and difficulties in transporting products.”

Data on Wednesday is expected to showed strong gains in consumer prices in October, according to a Reuters survey of economists. Stocks on Wall Street retreated from record highs. The dollar was steady against a basket of currencies. U.S. Treasury prices rose.

PORT CONGESTION

There is congestion at ports and widespread shortages of workers at docks and warehouses. There were 10.4 million job openings as of the end of August. The workforce is down 3 million from its pre-pandemic level.

Worker shortages were underscored by a report from the NFIB on Tuesday showing almost 50% of small businesses reported job openings they could not fill in October.

Also on Tuesday, Fed Chair Jerome Powell emphasized the U.S. central bank’s commitment to maximum employment, telling a virtual conference on diversity and inclusion in economics, finance and central banking that “an economy is healthier and stronger when as many people as possible are able to work.”

Wholesale prices of apparel, footwear and truck transportation of freight also rose last month as did the costs of food and alcohol retailing, hospital outpatient care as well as machinery, equipment parts and supplies.

Excluding the volatile food, energy and trade services components, producer prices shot up 0.4%. The so-called core PPI gained 0.1% in September. In the 12 months through October, the core PPI rose 6.2%. That followed a 5.9% advance in September.

Construction prices surged 6.6%, the largest gain since the series was incorporated into the PPI data in 2009.

“As companies feel the squeeze from higher energy and labor costs, as well as persistent logistics issues, producer price increases should be robust in the coming months,” said Will Compernolle, a senior economist at FHN Financial in New York.

Details of the PPI components, which feed into the personal consumption expenditures (PCE) price index, excluding the volatile food and energy component, were mixed. The core PCE price index is the Fed’s preferred measure for its flexible 2% target. Healthcare costs increased 0.4%. Airline tickets rebounded 0.3%, but portfolio management fees dropped 2.2%.

Though the October CPI data is still pending, economists believed that the core PCE price index moved higher last month after increasing 3.6% year-on-year in September.

“For now, we think the core PCE price index will be up 3.8% year-on-year in October,” said Daniel Silver, an economist at JPMorgan in New York.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Argentine farm tensions build over government beef export ban

By Nicolás Misculin

BUENOS AIRES (Reuters) -Argentine farm groups will halt trading of livestock in protest against a 30-day government ban on beef exports aimed at bringing down domestic prices, the country’s main producer groups said in a joint statement on Tuesday.

The South American country’s center-left Peronist government unveiled the ’emergency measure’ to tamp down high inflation on Monday, putting it on a potential collision course with the powerful farm sector that drives exports.

The country’s four main rural associations said in a statement they would launch a nine-day halt in livestock trading starting on Thursday in protest and could take further measures.

“The path and the decisions that the executive branch is taking are deeply wrong,” Jorge Chemes, president of the Argentine Rural Confederations (CRA), one of the four farm associations that launched the protest, told a press conference.

“This is the beginning of a raft of measures.”

The standoff underscores the fragile balance the government needs to strike between supporting farm exports that bring in much-needed foreign currency and bringing down damaging runaway inflation that is set to near 50% this year.

The tension also reflects mounting global concerns about rising food prices that have seen other countries move to control exports too, including top wheat producer Russia which has imposed an tax on exports of the grain.

The farm sector, dominated by grains including soy and wheat, has a history of clashes with Peronist governments over tax hikes and export caps, including with former President Cristina Fernandez de Kirchner, who is now Vice President.

CHINA EXPORTS

Argentina is the world’s no. 5 beef exporter and has been increasing sales to markets like China, which has bolstered the country’s ranchers but stoked fears about inflation, especially with poverty levels soaring amid a long recession.

The country exported some 897,500 tonnes of beef in 2020 worth around $2.7 billion, official data show. Over half of that went to China. In March shipments to China rose 8.3% year-on-year to $225.8 million, according to statistics from the Institute for the Promotion of Argentine Beef.

President Alberto Fernandez has in recent weeks criticized rising local beef prices and pointed to profit making by exporters who can charge higher prices to overseas buyers.

Omar Perotti, the governor of important farming province Santa Fe and part of the ruling coalition, said that the export ban was not the way forward and that it could harm the sector.

“The solution is to increase production and not close exports,” he wrote on Twitter. “We have the conditions to supply the internal and external market, maintaining the possibility of exporting our products to the world.”

Shares in Brazilian meatpackers Marfrig and Minerva slid on Tuesday after their operations in Argentina were hit by the ban.

Argentina is famed for its cattle ranches and sizzling cuts of steak, which are a central part of the local social fabric, with many gatherings of families and friends held around the “parrilla” barbecue grill at the weekend.

However, rising meat costs have come under fierce scrutiny in recent months. Some consumers – already hit hard by three straight years of recession – say they are no longer able to afford beef. Inflation has sapped growth and spending power.

(Reporting by Nicolas Misculin; Writing by Adam JourdanEditing by Alexandra Hudson)