US ECONOMY & POLITICS

U.S. Producer Prices Rise 10%, Reinforcing Fed’s Rate-Hike Path – Bloomberg, 3/15/2022

• Prices paid to U.S. producers rose strongly in February on higher costs of goods, underscoring inflationary pressures that set the stage for a Federal Reserve rate hike this week.
• The producer price index for final demand increased 10% from February of last year and 0.8% from the prior month, Labor Department data showed Tuesday. That followed an upwardly revised 1.2% monthly gain in January.
• The median forecasts in a Bloomberg survey of economists called for a 10% year-over-year increase and a 0.9% monthly advance.
• The data reflect the biggest monthly gain in the price of goods in data back to 2009, with two-thirds of the increase due to energy.
• Food prices were also up.
• Excluding the volatile food and energy components, the so-called core PPI increased 0.2% from a month earlier and was up by a 8.4% from a year ago, both missing estimates.
• There were signs in other parts of the economy that inflationary pressures were cooling.
• Prices for final demand services were little changed from January, the first month without an increase since December 2020.
• Costs of processed goods for intermediate demand, which reflect prices earlier in the production pipeline, increased 1.6% from a month earlier, over 40% of which can be attributed to a rise in the price of diesel fuel.
• Compared with a year earlier, the measure was up 23.3%.

Fed Wrestles With the Challenge of How Quickly to Raise Interest Rates – Wall Street Journal, 3/15/2022

• Federal Reserve Chairman Jerome Powell took much of the suspense out of this week’s policy meeting when he said recently he would propose raising interest rates by a quarter percentage point from near zero, which would be the first increase since 2018.
• Federal Reserve Chairman Jerome Powell took much of the suspense out of this week’s policy meeting when he said recently he would propose raising interest rates by a quarter percentage point from near zero, which would be the first increase since 2018.
• Escalating sanctions against Moscow as a result of Russia’s invasion of Ukraine are driving up energy and commodity prices while aggravating supply-chain bottlenecks. New pandemic-driven lockdowns in Chinese manufacturing hubs are also set to exacerbate those supply imbalances.
• Fed officials are on guard for signs that price pressures could cause consumers and businesses to expect high inflation to persist, making those expectations self-fulling. If workers anticipate a robust inflation rate in a year’s time, they will be more likely to push for higher wages now.

NY Fed: Public’s Near-Term Inflation Expectations Again Hit Record in February – Wall Street Journal, 3/15/2022

• Households’ expectations of the near-term future path of inflation surged back to record levels in February, amid growing worries that it will become harder to borrow money over coming months, according to a report Monday from the Federal Reserve Bank of New York.
• The bank said that respondents to its monthly survey see inflation hitting 6% a year from now, up from 5.8% in January.
• That matches the reading seen in November of last year and is the highest reading in a poll that dates back to 2013.
• Three years from now, survey respondents see inflation hitting 3.8%, from the prior month’s 3.5% reading, the bank said. The February reading remains under the November 2021 peak of 4.2%.
• In the New York Fed report, expectations for inflation a year from now rose for food, gasoline, medical care and college costs.
• The expected rise for rent costs a year from now increased to 10.1% in February from 9.8% the month before, while expectations for house price rises a year from now moved to 5.7% from 6% in January.
• The New York Fed report found moderating expectations of future income growth from survey respondents, and a rise in expected spending a year from now, at a series high of 6.4%, from January’s 5.5%.

Single-family rent prices are surging at a record rate, led by homes in Sun Belt cities like Miami and Phoenix – CNBC, 3/15/2022

• Demand for single-family rental homes is soaring, pushing prices to record highs, as Americans continue to want larger homes with outdoor spaces.
• Single-family rents gained a record 12.6% year over year in January, according to a new report from CoreLogic.
• That compares to an increase of 3.9% in January 2021.
• For example, single-family rents soared 38.6% in Miami, up from just 2% the previous January.
• Orlando, Fla., and Phoenix were next in line, with gains of 19.9% and 18.9%, respectively, as Americans continued their migration to warmer parts of the nation.
• The Washington, D.C., area saw the lowest annual growth in rent prices — but they were still up 5.6%.

EUROPE & WORLD

China Locks Down More Than 45 Million People as Covid Returns – Bloomberg, 3/15/2022

• China saw more than 5,000 new Covid-19 infections for the first time since the early days of the pandemic, as outbreaks of the highly contagious omicron variant prompt officials to lock down more cities and impose further restrictions.
• The were a total of 5,154 new cases Tuesday, of which 1,647 were asymptomatic, the National Health Commission said.
• The virus is starting to encroach on some of China’s most important cities. Langfang, which borders Beijing, was locked down early Tuesday, and the tech hub of Shenzhen was shut on Sunday, the most significant Chinese city yet to be subject to movement restrictions.
• Altogether, more than 45 million people are now under some kind of lockdown.
• Elsewhere, Dongguan, a key manufacturing city in the southern province of Guangdong, suspended operations at factories in areas where the virus is circulating.

World Economy Faces Supply Hit as China Battles Covid Again – Bloomberg, 3/15/2022

• The global economy — already struggling with war in Ukraine and the stagflation risks it’s fanning — is bracing for greater disruption as China scrambles to contain its worst outbreak of Covid-19 since the pandemic began.
• As manufacturer to the world, any disruptions to exports resulting in shortages could also drive up inflation internationally, just as central banks begin hiking interest rates, like the Federal Reserve is expected to do on Wednesday.
• A survey of fund managers released Tuesday by Bank of America Corp. showed confidence in global growth was the lowest since July 2008 and expectations for stagflation jumped to 62%. The survey was conducted in the week through March 10.
• Shenzhen’s 17.5 million residents we put into lockdown on Sunday for at least a week. The city is located in Guangdong, the manufacturing powerhouse province, which has a gross domestic product of $1.96 trillion, around that of Spain and South Korea, and which accounts for 11% of China’s economy, according to Bloomberg Economics.
• Guangdong’s $795 billion worth of exports in 2021 accounted for 23% of China’s shipments that year, the most of any province.

China’s Factories, Consumers Make High-Speed Start to Year, but Roadblocks Lie Ahead – Wall Street Journal, 3/15/2022

• China’s economy got off to a racing start this year as factories churned out more goods and consumers dug deeper into their wallets.
• Industrial output in the first two months of the year was up 7.5% from a year earlier, accelerating from December’s 4.3% pace and more than double the 3.5% expected by economists polled by The Wall Street Journal.
• Retail sales, a gauge of household consumption, were up 6.7%, beating the 4.3% expected by the surveyed economists.
• Catering sales, including restaurants, grew at a faster pace than goods sales for the first time since last July.
• Fixed-asset investment recovered strongly, up 12.2% in the first two months from a year earlier, beating the economists 5% prediction and the 4.9% pace in the same period last year.
• Investment in infrastructure projects was up 8.1% from a year earlier, an indicator that authorities plan to rely on more publicly funded projects to drive growth as the contribution from exports wanes and the real-estate sector’s woes drag on.
• Broad credit expansion pulled back to 10.2% in February from 10.5% in January, slowing for the first time since September.
• China’s official unemployment rate in February was 5.5%, up 0.4 percentage point from the end of 2021, while the youth jobless rate climbed to 15.3% from 14.3%.
• Home sales by value in the first two months were down 22.1% from a year earlier, the biggest decline since March 2020, when the erupting Covid-19 pandemic dealt a hammer blow to China’s economy. Real-estate investment was up 3.7% from a year earlier, compared with a 4.4% pace for 2021 as a whole.

Apple Supplier Foxconn in Talks to Build $9 Billion Factory in Saudi Arabia – Wall Street Journal, 3/15/2022

• Foxconn Technology Group, the biggest assembler of Apple iPhones, is in talks with Saudi Arabia about jointly building a $9 billion multipurpose facility that could make microchips, electric-vehicle components and other electronics like displays, according to people familiar with the matter.
• The Saudi government is reviewing an offer from the company, formally known as Hon Hai Precision Industry Co. , to build a dual-line foundry for surface-mount technology and wafer fabrication in Neom, a tech-focused city-state the kingdom is developing in the desert, the people said.
• Discussions over the project started last year, they said.
• Besides Saudi Arabia, Foxconn is also talking with the United Arab Emirates about potentially siting the project there, one of the people said.

Saudi Arabia Considers Accepting Yuan Instead of Dollars for Chinese Oil Sales – Wall Street Journal, 3/15/2022

• Saudi Arabia is in active talks with Beijing to price its some of its oil sales to China in yuan, people familiar with the matter said, a move that would dent the U.S. dollar’s dominance of the global petroleum market and mark another shift by the world’s top crude exporter toward Asia.
• The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year as the Saudis have grown increasingly unhappy with decades-old U.S. security commitments to defend the kingdom, the people said.
• The Saudis are angry over the U.S.’s lack of support for their intervention in the Yemen civil war, and over the Biden administration’s attempt to strike a deal with Iran over its nuclear program. Saudi officials have said they were shocked by the precipitous U.S. withdrawal from Afghanistan last year.
• China buys more than 25% of the oil that Saudi Arabia exports. If priced in yuan, those sales would boost the standing of China’s currency.

Factmonster – TODAY in HISTORY

• Christopher Columbus returned to Spain after his first visit to the Western Hemisphere. (1493)
• Nicholas II, the last czar of Russia, is forced to abdicate his throne (March 2, old style calendar). (1917)
• On the “Ides of March,” Julius Caesar was stabbed to death in the senate house by a group of conspirators led by Cimber, Casca, Cassius, and Marcus Junius Brutus. (1965)
• Hu Jintao was chosen to replace Jiang Zemin as the president of China. (2003)
• Scientists reported the discovery of Sedna, the most distant object in the solar system. (2004)