US ECONOMY & POLITICS

Prices in US Outstrip Forecasts in Sign of Inflation Persisting – Bloomberg, 5/11/2022

• US consumer prices rose by more than forecast in April, indicating inflation will persist at elevated levels for longer and keeping the Federal Reserve on the path of aggressive interest-rate hikes.
• The core consumer price index, which excludes food and energy, increased 0.6% from a month earlier and 6.2% from April 2021, according to Labor Department data released Wednesday.
• The broader CPI rose 0.3% from the prior month and 8.3% on an annual basis, a slight cooling but still among the highest readings in decades.
• The core CPI topped all estimates in a Bloomberg survey of economists, which had a median projection of 0.4%. The headline gauge was seen climbing 0.2%.
• Food prices rose 0.9% in April, and were up 9.4% from a year earlier.
• Energy costs declined in April, as gasoline prices fell 6.1% from the prior month in what may prove to be just a temporary reprieve. Gas prices have since rebounded to a record high.
• Shelter costs — which are the biggest services’ component and make up about a third of the overall index — rose 0.5% for a third straight month.
• Rent of primary residence climbed 0.6%, while owners’ equivalent rent increased by the most since 2006.
• In another sign of soaring costs of household necessities, prices for energy services, which includes electricity and natural gas, were up 13.7% from a year earlier in the biggest advance since 2008.
• Driven by a pickup in travel plans, the cost of hotel stays rose 1.7% while airfares surged a record 18.6% as airlines passed along higher fuel costs to consumers. New-vehicle prices advanced 1.1%, the most this year, while used-auto prices fell 0.4%.
• Adjusted for inflation, average hourly earnings fell 2.6% in April from a year earlier, marking the 13th straight decline, separate data showed Wednesday.

April Inflation Report Cinches Fed’s Half-Point Rate Rise Path – Wall Street Journal, 5/11/2022

• Another strong inflation reading in April is likely to keep pressure on the Federal Reserve to continue raising rates in half-percentage-point increments at the central bank’s next two policy meetings and possibly beyond that.
• Wednesday’s report offers few signs that would give Fed officials comfort to dial back a more aggressive pace of rate increases this summer.
• Because a decline in 12-month inflation readings have been largely anticipated, the question now shifts to where inflation might settle and whether that level will be unacceptably high for the central bank.
• While officials seem to have coalesced around the current pace of increases, investors are looking for signs that the Fed might dial up or down that pace.
• The Fed faces a related and arguably more important question over their ultimate destination for interest rates.

Two-thirds of Americans live paycheck to paycheck as inflation continues to climb – CNBC, 5/11/2022

• Inflation is showing no signs of slowing down, making it harder for workers to make ends meet.
• As of March, close to two-thirds, or 64%, of the U.S. population was living paycheck to paycheck, just shy of the high of 65% in 2020, according to a LendingClub report.
• Consumers who are struggling to afford their day-to-day lifestyle tend to rely more on credit cards and carry higher monthly balances making them financially vulnerable, the survey of more than 2,600 adults found.
• Overall, credit card balances rose year over year, reaching $841 billion in the first three months of 2022, according to a separate report from the Federal Reserve Bank of New York.

Adjustable-rate mortgage demand surges to 14-year high, as homebuyers try to afford this pricey spring market – CNBC, 5/11/2022

• Mortgage applications to purchase a home rose 5% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
• Demand was still 8% lower than the same week one year ago, but that annual drop is now shrinking.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 5.53% from 5.36%, with points rising to 0.73 from 0.63 (including the origination fee) for loans with a 20% down payment.
• The rate on a 5-year ARM was 4.47%.
• While homebuyers are showing more interest, current homeowners have less interest in refinancing. Those applications dropped another 2% week to week and were 72% lower than a year ago.
• There is simply a very small pool of borrowers left who can benefit from a refinance at the current interest rates.

Biden Administration Asks Congress to Approve New Weapons Deal With Turkey – Wall Street Journal, 5/11/2022

• The Biden administration has asked congressional leaders to approve the sale of advanced weapons and other equipment for Turkey’s fleet of F-16 jet fighters, U.S. officials said, setting up a showdown with lawmakers over a proposal to sell more of the aircraft to Ankara as it seeks to recalibrate ties with Washington.
• The proposed weapons sale, which was sent to congressional leaders last month, highlights how Turkey is hoping to leverage its role as a facilitator of Russia-Ukraine peace talks and its backing of the Ukrainian military as a way to repair frayed relations with Washington and obtain new weapons.
• The potential deal would include missiles, radar and electronics for Turkey’s F-16s, representing a significant upgrade for the country’s jet fighters.
• U.S. officials familiar with the request said the administration could be using the missile deal to gauge the level of support in Congress for a separate proposal to sell 40 new F-16s to Turkey, a North Atlantic Treaty Organization ally that has angered some officials in Washington over its ties to Russia.

Drug-Overdose Deaths Reached a Record in 2021, Fueled by Fentanyl – Wall Street Journal, 5/11/2022

• Drug-overdose deaths in 2021 topped 100,000 for the first time in a calendar year, federal data showed, a record high fueled by the spread of illicit forms of fentanyl throughout the country.
• More than 107,000 people in the U.S. died from drug overdoses last year, preliminary Centers for Disease Control and Prevention data released Wednesday showed, roughly a 15% increase from 2020.
• U.S. deaths linked to heroin have been declining as fentanyl’s profile rises.
• But deaths linked to synthetic opioids, a category largely made up by fentanyl, climbed 23% last year to about 71,200 while representing about two-thirds of all drug deaths, the preliminary CDC numbers show.

California Legislative Leader Wants to Spend $10 Billion to Help Families Buy Homes – Wall Street Journal, 5/11/2022

• A top California lawmaker is proposing to spend $10 billion to help families buy homes in the state with some of America’s highest housing prices.
• Democratic State Senate Leader Toni Atkins on Wednesday unveiled details of a proposal she’s pushing to create a revolving fund that would provide interest-free loans for up to 30% of the purchase price of a home for low- and middle-income households.
• If implemented, it would be the largest program of its kind in the nation, according to the people who designed it. Proponents hope that it will be included in the state budget that must pass by June 15 and go into effect as soon as January.
• Under the proposal, California would spend $1 billion a year for 10 years. Participation would be limited to households making 150% of the median income in an area.

EUROPE & WORLD

China Consumer Inflation Accelerates Modestly – Wall Street Journal, 5/11/2022

• China’s consumer inflation edged up in April and factory-gate price pressures remained elevated as Covid-19 lockdowns jammed up logistics networks and the Ukraine war pushed up global energy prices.
• China’s consumer-price index in April was up 2.1% from a year earlier, official data showed Wednesday, the fastest pace in five months—accelerating from March’s 1.5% and topping the 2% median forecast of economists polled by the Journal.
• Inflation in China is running below the official target for the year, which is a rate of less than roughly 3%.
• The producer-price index, a gauge of factory-gate inflation, was up 8% in April from a year earlier, down from March’s 8.3% but exceeding the economists’ 7.8% forecast.
• Food prices in April were up 1.9% from a year earlier, led by rises of 24% and 14% in fresh vegetables and fruit, respectively.

China Censors WHO Chief’s Call to End Covid-19 Strategy Dubbed Unsustainable – Wall Street Journal, 5/11/2022

• China’s censors blocked rare public criticism of its zero-Covid strategy by the World Health Organization from social media Wednesday, as officials in Shanghai insisted there would be no change to policies that have locked tens of millions of people in their homes for weeks.
• WHO Director-General Tedros Adhanom Ghebreyesus said China’s inflexible approach to Covid-19 needs to adapt to the evolving nature of the virus.
• “When we talk about the zero-Covid strategy, we don’t think that it is sustainable considering the behavior of the virus now and what we anticipate in the future,” Mr. Tedros told a briefing on Tuesday, adding that the WHO has been discussing the issue with Chinese experts.
• There was no acknowledgment of the WHO’s comments in major state-run media Wednesday, though a spokesman for China’s Foreign Ministry called for Mr. Tedros to avoid making what he called irresponsible comments.
• At Shanghai’s daily Covid-19 briefing, Wu Huanyu, deputy director of the city’s center for disease control, reaffirmed that China will stick to the policy now dubbed “dynamic zero.”

Ukraine Stops Russian Gas Flowing to Europe Through Key Pipeline – Wall Street Journal, 5/11/2022

• Ukraine reduced flows of Russian natural gas through its territory to Europe, introducing a new threat to the energy security of a continent already racing to sever its dependence on Russian fossil fuels.
• The company that runs Ukraine’s pipeline network halted the flow of gas through a major entry point in the east of the country Wednesday, blaming interference by Russian troops with critical gas infrastructure.
• The border crossing accounts for a third of Russian gas exports through Ukraine to Europe and feeds 3% of the European Union’s overall gas consumption.
• Ukrainian energy officials say Russia appears to have avoided deliberate strikes on pipelines that bring revenue into Russia’s bruised economy, though extensive damage to Ukraine’s domestic gas network left millions of residents without fuel.
• Ukraine, for its part, earns transit fees from Moscow for shuttling Russian gas to customers in Europe.

Panasonic sees flat profits amid price rises, shortages – Reuters, 5/11/2022

• Panasonic on Wednesday forecast flat operating profits this business year as component shortages caused by COVID-19 lockdowns in China and rising material costs following Russia’s invasion of Ukraine pose a risk to earnings.
• In the three months to March 31, Panasonic posted operating profit of 83.3 billion yen, compared with a profit of 31.8 billion yen a year earlier.
• That result was worse than a mean estimate of 85.5 billion yen profit from nine analysts surveyed by Refinitiv.
• The company predicted operating profit of 360 billion yen for the year to March 31, 2023, little changed from the 357 billion in the previous business year. That forecast is 5.9% lower than the mean estimate of 382.7 billion yen from 20 analysts, Refinitiv data shows.
• Panasonic also noted risks of factory lockdowns by suppliers due to COVID-19 and the “international situation.”
• “The impact of lockdowns in Shanghai will likely be felt from June,” Hirokazu Umeda, the company’s chief financial officer said.
• As part of its strategy to move away from making low-margin consumer electronics and household appliances, Panasonic on Wednesday also announced it wanted to list shares of its supply chain software business to raise funds for investment.

Thyssenkrupp shares soar after group raises 2022 outlook – Reuters, 5/11/2022

• Shares in Thyssenkrupp gained the most in 18 months after the German car parts-to-submarines conglomerate raised its outlook for sales and operating profit in 2022, reflecting a strong recovery rise in selling prices of steel and materials.
• In the second quarter, adjusted EBIT nearly quadrupled to 802 million euros, while sales increased by nearly a quarter to 10.6 billion as order intake jumped 57%.
• Adjusted earnings before interest and tax (EBIT) are now forecast to grow to at least 2 billion euros ($2.1 billion), the group said. It previously expected adjusted EBIT of 1.5 billion to 1.8 billion euros.
• Sales are expected to rise by a low double-digit percentage, compared with a mid single-digit percentage increase expected previously.

Factmonster – TODAY in HISTORY

• Charges against Daniel Ellsberg for his role in the Pentagon Papers case were dismissed. (1973)
• Reggae performer Bob Marley died of cancer in Miami at the age of 36. (1981)
• IBM’s supercomputer, Deep Blue defeated Garry Kasparov, the reigning world champion, in a six game chess match (2 for blue, 1 for Kasparov, and 3 ties). (1997)
• India set off atomic blasts. (1998)
• 91% of Lithuanian voters opted to join the European Union—the first former Soviet nation to do so. (2003)