U.S. Factories, Services Output Extend Records on Robust Demand – Bloomberg, 5/21/2021

• A measure of output at U.S. manufacturers and service providers advanced to a fresh record in May, underscoring solid demand that’s contributing to added inflationary pressures.
• The IHS Markit flash composite index of purchasing managers at manufacturers and service providers surged to 68.1, the highest in data back to 2009, from 63.5 a month earlier, the group reported Friday. Readings above 50 indicate growth.
• Order growth at U.S. manufacturers climbed to a record, though shortages of materials also caused backlogs of work to reach a series high.
• In addition a gauge of export orders for manufacturers advanced to a 14-year high.
• Measures of prices received by factories and services rose to record highs.
• The IHS Markit’s gauges of input prices and new business at service providers also climbed to the highest in data back to 2009.

U.S. Home Prices Push to Record High, Slowing Pace of Purchases – Wall Street Journal, 5/21/2021

• The nationwide house-buying frenzy eased in April, as home prices climbed to new highs and the supply of available properties remained low.
• Existing-home sales fell 2.7% in April from March to a seasonally adjusted annual rate of 5.85 million, the third straight monthly decline, the National Association of Realtors said Friday. April sales rose 33.9% from a year earlier, when Covid-related lockdowns caused a sharp drop in home sales.
• Existing-home sales fell the most month-over-month in the Northeast, down 3.9%, and in the South, down 3.7%. Sales rose 0.8% in the Midwest.
• The median existing-home price rose 19.1% in April from a year earlier to $341,600, a record high, NAR said. The annual price appreciation was the strongest in data going back to 1999.
• There were 1.16 million homes for sale at the end of April, up 10.5% from March and down 20.5% from April 2020. At the current sales pace, there was a 2.4-month supply of homes on the market at the end of April.

Drought Imperils Economy in California’s Farm Country – Wall Street Journal, 5/21/2021

• California is gripped in severe drought just four years after emerging from the last one, forcing many farmers to scramble to find enough water. The U.S. Bureau of Reclamation has cut the water allocations for many to zero this year. Last year, when the latest dry spell began, the same farmers were allocated 20% of what they are contracted to receive annually.
• Some are responding by letting fields go fallow. “We need 39 days and 39 nights of rain,” said Steve Danley, water manager of the Zumwalt Mutual Water, whose 20 rice-grower customers are leaving all but 500 of their 6,000 acres unplanted after the provider lost its federal water.
• Others are turning to the private market, where they pay as much as $400 per acre foot of water—325,851 gallons, or enough to cover an acre of land one foot deep—compared to the $100 typically charged by the federal government.
• Drought is afflicting 88% of the American West, up from 40% a year ago, according to the U.S. Drought Monitor.
•  In California, the mountain snowpack is at 4% of normal, largely as the result of one of the lowest statewide precipitation totals on record and an unusual spring warm-up.

EUROPE & WORLD

Israel-Hamas Cease-Fire Holds Despite Jerusalem Clashes – Wall Street Journal, 5/21/2021

• A cease-fire between Israel and militant group Hamas was holding Friday, despite clashes between Israeli police and Palestinians at a Jerusalem mosque that became the flashpoint for 11 days of fighting.
• Israeli police were seen tossing stun grenades near crowds of Palestinians who had gathered for prayers at the mosque, according to videos posted on social media.
• An Israeli police spokesman said riots had broken out and hundreds of people threw rocks and Molotov cocktails at police officers, who responded with crowd-dispersal methods. At least 20 Palestinians were injured during the clashes, the Palestinian Red Crescent said.
• The Al Aqsa mosque was at the center of the 11-day conflict between Israel and Hamas. Earlier this month, Palestinians demonstrated over the possible eviction of residents from homes in the Sheikh Jarrah neighborhood of East Jerusalem.
• Israeli police stormed the mosque compound during a crackdown on protesters, who police said threw stones and fireworks at them. Days later, Hamas fired a salvo of rockets at Jerusalem, which Israel said was a red line.

Europe’s Economy Springs Back to Life, but Shortages Boost Prices – Wall Street Journal, 5/21/2021

• Europe’s economy looks set for a return to growth in the three months through June, with business surveys pointing to a stronger-than-expected rebound in services activity during May, as government restrictions ease and consumers gain confidence in response to an acceleration in vaccinations.
• However, Japan’s services sector suffered a deeper contraction in May as the government there extended restrictions on the hospitality sector in areas including Tokyo and Osaka through the end of the month.
• Surveys of purchasing managers published Friday by data firm IHS Markit suggest that Europe’s recovery may be more rapid.
• Activity in France’s services sector rose to 56.6 in May from 50.3 in April, a much larger increase than the rise to 52.5 that was forecast by many economists. A reading above 50 points to an increase in activity.

Japan’s consumer prices extend falls as cellphone fee cuts offset input costs – Reuters, 5/21/2021

• Japan’s core consumer prices fell for the ninth straight month in April as a record slump in cellphone fees offset rising energy prices, suggesting that weak demand and higher costs will weigh on a fragile economic recovery.
• Separate data showed firms facing rising input costs and a slower expansion in factory activity in May, highlighting risks to an economy heavily reliant on the manufacturing sector.
• The core consumer price index (CPI), which excludes the effect of volatile fresh food costs, fell 0.1% in April from a year earlier, smaller than a median market forecast for a 0.2% drop, government data showed on Friday and in line with March’s decline.
• A record 26.5% fall in cellphone charges knocked 0.5% off core CPI, the data showed, as carriers heeded Prime Minister Yoshihide Suga’s calls to ease the burden on households.
• By contrast, energy prices rose 0.7% in April, marking the first gain since January 2020 due to recent rises in crude oil costs and the base effect of last year’s slump.

EXCLUSIVE Huawei-Changan smart car partnership expands to include chips -sources – Reuters, 5/21/2021

• China’s Huawei Technologies is expanding its smart car partnership with state-owned Chongqing Changan Automobile Co to include the design and development of auto-use semiconductors, four sources with knowledge of the matter said.
• The two companies, which unveiled their smart car tie-up in November, have been working together informally on chips for the last few months, two of the sources said. A third source said they might soon form a joint venture for chip development.
• Huawei has pivoted to electric vehicles after its global smartphone business was hammered by U.S. sanctions. The previous Trump administration labelled the company a threat to U.S. national security – a charge it denies.
• Huawei’s new chip partnership with Changan would come amidst a global semiconductor shortage that has hit automakers particularly hard.

Daimler Truck predicts engine job losses in transition to ‘green’ trucks – Reuters, 5/21/2021

• The transition to zero-emission fuel cell trucks will slash about half the jobs at Europe’s truck engine plants in the next 15 years, Daimler Truck Chief Executive Martin Daum said on Friday, urging policymakers to prepare for that now.
• Truck makers are moving towards a zero-emission world as hitting sustainability targets becomes more important for their customers but the fuel cells have fewer moving parts and require less labour to make than combustion engines.
• “We have to be cognizant that about 50% of the jobs will go away because a fuel cell and a battery are far less complex than a diesel engine and a transmission today,” Daum told Reuters.
• The world’s largest truck maker is going “all-in” for electric and hydrogen fuel cell-powered vehicles and on Thursday said zero-emission vehicles should make up 60% of its sales by 2030 and 100% of sales by 2039.

Factmonster – TODAY in HISTORY

• Spanish explorer Hernando De Soto died while searching for gold on the banks of the Mississippi River. (1542)
• The first hydrogen bomb to be dropped by air exploded over the Bikini Atoll in the Pacific. (1956)
• In Hong Kong, approximately one million people took to the streets to show their support for students protesting for democratic reforms in China’s Tiananmen Square. (1989)