Fed Signals Eventual Shift From Easy-Money Pandemic Policies – Wall Street Journal, 5/20/2021

• The Federal Reserve has begun to telegraph an eventual shift away from the easy-money policies implemented during the pandemic as evidence builds of a robust economic recovery and mounting inflation.
• Several Fed officials said this week that the central bank is closely watching economic developments and will be ready to adjust policy when necessary.
• Minutes from the central bank’s policy meeting in late April, released Wednesday, reported that some Fed officials want to begin discussing a plan for reducing the Fed’s massive bond-buying program at a future meeting.
• The minutes showed general agreement among officials on the need to continue supporting the economy with near-zero interest rates and bond purchases.
• But they also dropped the Fed’s first hint that policy makers could soon begin discussing a slowdown in the pace of its Treasury and mortgage-bond purchases, which currently total at least $120 billion a month.

U.S. weekly jobless claims drop further; mid-Atlantic factory activity slows – Reuters, 5/20/2021

• The number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week, but jobless rolls swelled in early May, which could temper expectations for an acceleration in employment growth this month.
• Initial claims for state unemployment benefits totaled a seasonally adjusted 444,000 for the week ended May 15, compared to 478,000 in the prior week, the Labor Department said on Thursday.
• Continuing claims increased 111,000 to 3.751 million during the week ended May 8. There were about 16 million people on unemployment benefits under all programs on May 1.
• In a separate report on Thursday, the Philadelphia Fed said it business activity index fell to a reading of 31.5 this month from 50.2 in April. A reading above zero indicates growth in the mid-Atlantic region’s manufacturing sector.
• A measure of new orders received by factories grew at a slower pace in May relative to April as did shipments. But backlogs of uncompleted work continued to pile up, testament to the inputs shortage.
• The survey’s gauge of factory employment dropped to a reading of 19.3 from 30.8 in April. The average workweek index jumped six points to 35.5.

More Republican States Cut $300 Benefits, as Jobless Claims Fall – Wall Street Journal, 5/20/2021

• More than three-quarters of Republican-led states plan to end an extra $300-a-week in federal jobless benefits early, as unemployment claims reached a new pandemic low, likely triggering a decrease in the number of benefits recipients this summer.
• This week Texas, Oklahoma and Indiana joined the list of at least 21 states that are cutting off access to federal benefits early after a much weaker-than-expected April jobs report sparked concerns of labor shortages.
• States have announced dates ranging from mid-June to mid-July for when they will stop processing pandemic-related benefits. That means nearly 3.5 million individuals could lose the $300 weekly benefits—which were set to expire in early September—beginning in mid-June, according to estimates by forecasting firm Oxford Economics.
• Of those, about 1.4 million will also lose pandemic benefits for gig workers, and about 1.1 million will no longer have access to extended benefits that kick in after claimants exhaust their regular state benefits.

U.S. Mortgage Rates Reach 3% for the First Time Since April – Bloomberg, 5/20/2021

• The average for a 30-year loan was 3%, up from 2.94% last week, Freddie Mac data showed Thursday. It was the first time since mid-April that the rate was at or above 3%.
• Cheap loans have fueled a rally in home purchases and given Americans more buying power even as bidding wars push up prices. The 30-year average hit a record low of 2.65% in early January.
• It climbed above 3% this year amid optimism about the rebound, then dipped below that benchmark, where it remained for four weeks.

Criminal Probe of Andrew Cuomo Administration Broadens to Covid-19 Testing Issues – Wall Street Journal, 5/20/2021

• Federal investigators are examining whether New York state officials gave priority access to Covid-19 testing to some of Gov. Andrew Cuomo’s close associates and his brother during the early days of the coronavirus pandemic, according to people familiar with the matter.
• The review of the testing marks an expansion of the probe that the investigators, based in the U.S. attorney’s office for the Eastern District of New York, opened in February to look at how the Cuomo administration handled Covid-19 in nursing homes.
• The Wall Street Journal previously reported that people familiar with the testing program said Covid-19 specimens taken from state officials and other people close to the governor—including his brother, Chris Cuomo, a CNN anchor—were given priority processing at a state laboratory.
• The testing was done in March and April of 2020, when testing resources were scarce.

EUROPE & WORLD

Tencent Q1 profit rises 65% as online gaming revenue climbs – Reuters, 5/20/2021

• Chinese gaming and social media giant Tencent Holdings reported a forecast-beating 65% rise in quarterly profit on Thursday, while management reiterated the company’s focus on compliance as China steps up scrutiny on tech giants.
• Revenue rose 25% to 135.3 billion yuan, versus market expectations of 134.39 billion yuan.
• Tencent said revenue from online games grew by 17%.
• Tencent, the world’s largest gaming firm by revenue, booked profit of 47.77 billion yuan ($7.42 billion) for the three months through March, higher than the average analyst estimates published by Refinitiv of 35.45 billion yuan.
• Tencent also said on Thursday the company is investing in business services, games and short-form video content.

Bank of Canada Warns on Household Debt and Housing Exuberance – Bloomberg, 5/20/2021

• The Bank of Canada warned household debt vulnerabilities are intensifying amid a surge in housing prices that’s being driven in part by speculative activity.
• In its annual Financial System Review, the Ottawa-based central bank said Thursday there are signs people are buying houses in some regions of the country with the expectation prices will continue to rise, which creates unsustainable dynamics.
• High home prices across the country, meanwhile, have led many households to take on larger mortgages relative to their income, putting them in a precarious situation should the economy take a downward turn.
• The quality of new mortgage borrowing deteriorated during the pandemic, the central bank said, citing data showing the share of new mortgages with a loan-to-income ratio above 450% rose substantially in the second half of last year to 22% of all mortgages.
• That’s above the range seen in 2016 and 2017, the report said, when regulators tightened mortgage qualification rules.
• At the same time, policy makers led by Governor Tiff Macklem found the nation’s lenders could absorb a significant amount of losses in the case of another shock. The bank said household debt and housing market vulnerabilities probably don’t pose a significant systemic threat to bank solvency, even though they could undermine future growth.

UK factories boom but bottlenecks pushing up prices – CBI – Reuters, 5/20/2021

• British manufacturers reported the fastest growth in orders since December 2017 in May but fear supply-chain bottlenecks will cause their costs to rise sharply, according to a survey which adds to signs of a rebound for factories.
• The Confederation of British Industry’s industrial orders balance – measuring the proportion of firms reporting order volumes above or below normal – rose to +17 from -8 in April.
• Overall output growth over the past three months was the highest since December 2018 and represented the first material growth in almost two years, the CBI said.
• Official data for March released last week showed factory output was 2% below its level in February 2020, before Britain went into its first COVID lockdown which caused output to slump briefly by 30%.

UK restaurant bookings jump after indoor dining restarts – Reuters, 5/20/2021

• Restaurant bookings surged in Britain when coronavirus rules eased on Monday to allow indoor dining for the first time in months, the country’s statistics office said on Thursday.
• Restaurant reservations rose to 73% of their level two years ago, before the pandemic, in the week to May 17, which included just one day under the new rules.
• This was up from 60% the previous week, according to figures from booking website OpenTable produced for the Office for National Statistics.
• The proportion of employees on the government’s job-supporting furlough scheme also fell to 10% in late April and early May, down from 11% two weeks earlier and its lowest since the start of the year, the ONS said.

China’s industrial commodities slide after Beijing warns of market crackdown – Reuters, 5/20/2021

• China’s main industrial commodities tumbled on Thursday after the government announced stepped-up measures to keep a lid on soaring raw material prices which threaten to undermine the country’s economic recovery.
• Prices of key steelmaking ingredients iron ore and coking coal , as well as steel products such as rebar and hot-rolled coil , all dropped more than 5% as traders offloaded supplies and speculators placed short-sided bets that Beijing’s measures will trigger a further pullback in metals markets.
• China’s cabinet announced on Wednesday that it will strengthen management of commodity supply and demand to curb “unreasonable” prices and investigate behaviour that bids up commodity costs, spooking China’s hoards of metal traders.
• Beijing’s warning about overheated markets follows a 30%-40% climb in several critical steel and metal prices so far in 2021, fuelled by a synchronised recovery in China’s mammoth construction and manufacturing sectors from last year’s pandemic.

Food Prices Soar, Compounding Woes of World’s Poor – Wall Street Journal, 5/20/2021

• A surge in food prices is deepening the pain caused by Covid-19 across the developing world, forcing millions into hunger and contributing to social problems that could lead to more political unrest and migration.
• Food prices have jumped by nearly a third over the past year, according to the Food and Agriculture Organization of the United Nations, even as pandemic-related job losses are making it harder for families to afford basic staples.
• Corn prices are 67% higher than a year ago, the FAO says, while sugar is up nearly 60%, and prices for cooking oil have doubled.
• Overall prices have risen for 11 consecutive months to the highest levels since 2014, the FAO says.
• Previous spikes in food and fuel prices contributed to political instability in recent decades, including the “Arab Spring” revolutions in 2011. While nothing of that scale has emerged this year, expensive food is part of the mix in several countries now experiencing unrest.

Factmonster – TODAY in HISTORY

• Christopher Columbus died in Spain. (1506)
• Charles Lindbergh began the first solo nonstop transatlantic flight, departing from Long Island aboard the Spirit of Saint Louis. (1927)
• Amelia Earhart took off from Newfoundland to become the first woman to fly solo across the Atlantic. (1932)
• In a 6-3 vote, the Supreme Court rejected a Colorado measure banning laws that protect homosexuals from discrimination. (1996)