Economic News in the week ending Friday Narch 19, 2021

Source:

http://creditbubblebulletin.blogspot.com/2021/03/weekly-commentary-powell-on-inflation.html

by Doug Noland

My highly edited version of the column at the link above:

"Ten-year Treasury yields rose another 10 bps this week to 1.72%, the high since January 23, 2020. 

The Treasury five-year “breakeven” inflation rates rose to 2.65% in Tuesday trading, the high since July 2008. 

The Philadelphia Fed’s Business Survey Prices Paid Index surged to a 41-year-high. 

In the New York Fed’s Manufacturing Index, indices of Prices Paid and Received both jumped to highs since 2011.

... crude oil’s notable 6.4% decline for the week spurred a moderate pullback in market inflation expectations
 

... The Federal Reserve will not anytime soon be contemplating a retreat from its ultra-dovish stance. It was music to the equities mania, as the Dow gained 190 points to trade above 33,000 for the first time.

... For the first time in years, bond markets face serious uncertainty with respect to inflation risk. 

 

The Fed’s balance sheet has doubled in only 79 weeks to $7.694 TN. 

 

Our Federal government is in the process of running consecutive years of $3.0 TN plus deficits. 

March 13 – Bloomberg (Suzi Ring and Michelle Fay Cortez): “AstraZeneca Plc’s vaccine for Covid-19, once expected to be a mainstay of protection for much of the world, remains shrouded in controversy as more countries limit its use even as scientists warn of the need for governments to tread carefully. The Netherlands joined a growing list of about a dozen places, including northern Italy and Ireland, moving to suspend the shot over concerns about possible side effects from two batches.”


March 13 – Bloomberg (Brandon Kochkodin): 

“A digital artwork by Beeple set auction records… when it sold at Christie’s for a mind-bending $69 million. Twitter Inc. co-founder Jack Dorsey is auctioning the non-fungible token for the first tweet ever, ‘just setting up my twttr,’ with the highest bid coming in at $2.5 million, so far. LeBron James highlights are fetching six figures. If you were somehow unaware, digital assets are booming, with buyers paying up for so-called NFTs that give them exclusive ownership of electronic tchotchkes. Explanations for why, say, a GIF of a cat with a rainbow trail commands a king’s ransom aren’t hard to come by. The more prosaic theories say the price per pixel is surging as Bitcoin and other cryptocurrencies mint new millionaires every day and those newly rich digital natives look to spend in their adopted domain. And sure, it could be as simple as a good old mania around the latest shiny object that’s caught people’s attention.”


March 17 – Reuters (Joshua Franklin):  

“Yet with more than nine months to go until the end of 2021, initial public offerings (IPOs) of U.S. SPACs this week surpassed the $83.4 billion the sector raised in all of 2020… This is also more than the $29.5 billion that IPOs of companies that operate businesses - as opposed to being empty shells like SPACs - have raised since the start of the year… The breakneck growth of what was once an obscure backwater of capital markets reflects the popularity of SPACs as an alternative vehicle to traditional IPOs.”


March 18 – Bloomberg (Anjani Trivedi):  

“When Samsung Electronics Co. says there is a ‘serious imbalance in supply and demand’ for chips, there can be little doubt that we are dealing with a severe semiconductor shortage. The warning from the world’s largest smartphone maker — and a major producer of chips — was the loudest in the recent litany of complaints from carmakers, auto parts and electronics manufacturers as well as other microprocessor companies. The underlying data from some of the biggest chipmakers continue to show lead times at factories getting longer for products across the board. On average, it’s gone from 10 weeks to about 17 weeks for certain types of microprocessors over the last year… In addition, around 75% of all semiconductor parts had an overall jump in lead times… Capacity utilization numbers remain elevated… And there are a variety of chips that have lead times of as long as 52 weeks. If you need a different types of chips in your car or phone or flat screen panel, then the problems just multiply.”


March 17 – Wall Street Journal (Ryan Dezember and Marco Quiroz-Gutierrez): “Prices are surging for the raw materials used to build American homes. Lumber, one of the biggest costs in home-building after land and labor, has never been more expensive and is more than twice the typical price for this time of year. Crude oil, a starting point for paint, drain pipe, roof shingles and flooring, has shot up more than 80% since October. Copper, which carries water and electricity throughout houses, costs about a third more than it did in the autumn. Prices for granite, insulation, concrete blocks and common brick have all pushed to records in 2021… Drywall and ceramic tiles are short of records but have also climbed.”


March 17 – Wall Street Journal (Dan Strumpf and Sean McLain): “Toyota Motor Corp, Honda Motor Co. and Samsung Electronics Co. said supply-chain problems were complicating their businesses, as freak weather, port blockages and the continued impact of Covid-19 combine to disrupt global supply chains. Toyota and Honda said… they would halt production at plants in North America because of a squeeze in crucial supplies, including plastic components, petrochemicals and semiconductors. Honda also blamed port backlogs and severe winter weather that has frozen plants and pipes across the central U.S. for the disruption.”

 

March 17 – Reuters (Lucia Mutikani): 

“U.S. homebuilding dropped to a six-month low in February as severe cold gripped many parts of the country, in a temporary setback for a housing market that remains supported by extremely lean inventories amid strong demand for larger homes… Housing starts fell 10.3% to a seasonally adjusted annual rate of 1.421 million units last month, the lowest level since last August. Economists… had forecast starts would decrease to a rate of 1.560 million units… Starts were down 9.3% on a year-on-year basis in February. Groundbreaking activity plunged in the Northeast, Midwest and South, but surged in the West. Permits for future home building tumbled 10.8% to a rate of 1.682 million units last month. They, however, jumped 17.0% compared to February 2020…”


March 19 – Bloomberg (Christopher Maloney, Adam Tempkin and Shahien Nasiripour): 

“ ... The real-estate market is red hot, profits on flips are at a record high -- some $66,000 on average per home -- and throngs of HGTV-inspired wannabes have been piling into the business for months. And now, America’s financiers are too. There are more than 60 banks and other firms financing flippers today, according to AlphaFlow… That’s an increase of almost 50% in a little more than two months. It was always just a matter of time before lenders set aside their apprehensions and began writing checks to the fix-and-flip crowd again.”

March 14 – CNBC (Jessica Dickler): 

“College dreams are not what they used to be… A recent survey of high school students found that the likelihood of attending a four-year school sank nearly 20% in the last eight months — down to 53%, from 71%, according to ECMC Group, a nonprofit aimed at helping student borrowers. High schoolers are putting more emphasis on career training and post-college employment, the report found. More than half said they can achieve professional success with three years or less of college…”


March 15 – Wall Street Journal (Sebastian Pellejero): “Investors are scooping up low-rated corporate loans, fueling a rally that is lowering borrowing costs for highly indebted companies. Investors poured more than $8 billion into funds of so-called leveraged loans in January and February, according to Lipper… —the most in more than two years and a notable reversal from more than $26 billion in net outflows last year. That has helped boost loan prices to around their highest levels since November 2018, beating returns on corporate bonds and Treasurys.”


March 17 – Bloomberg (Sohee Kim): 

“Samsung Electronics Co. warned it’s grappling with the fallout from a ‘serious imbalance’ in semiconductors globally, becoming the largest tech giant to voice concerns about chip shortages spreading beyond the automaking industry. Samsung, one of the world’s largest makers of chips and consumer electronics, expects the crunch to pose a problem to its business next quarter... Industry giants from Continental AG to Renesas Electronics Corp. and Innolux Corp. have in recent weeks warned of longer-than-anticipated deficits thanks to unprecedented Covid-era demand for everything from cars to game consoles and mobile devices.”


March 13 – Financial Times (Jeremy Grantham):

 “We are in a global baby bust of unprecedented proportions. It is far from over and its implications are gravely underestimated. The worldwide fertility rate has already dropped more than 50% in the past 50 years, from 5.1 births per woman in 1964 to 2.4 in 2018, according to the World Bank. In 2020, the 20% shortfall below replacement rate in US fertility, together with low net immigration, produced the lowest population growth on record of 0.35%, below even the flu pandemic of 1918. Many countries, including Italy, South Korea and Japan, are predicted to see their populations drop by more than half by the end of this century.”


March 19 – Reuters (Yimou Lee and Ben Blanchard): “China is bolstering its ability to attack and blockade Taiwan, deploying long-range missiles to prevent foreign forces helping in the event of war and using psychological warfare to undermine faith in Taiwan’s military, the island’s defence ministry said. The ministry, in its once-every-four-years defence review…, warned China was deploying ‘grey zone’ warfare tactics to subdue the Chinese-claimed island, seeking to wear Taiwan down with repeated drills and activities near its airspace and waters.”