• Home
  • Contact Us
  • Privacy & Policy
Sunday, May 22, 2022
Finances Advise
No Result
View All Result
  • Home
  • Business
  • Commodities
  • Crypto News
    • Block chain
    • Bitcoin
    • Ethereum
    • Litecoin
  • Finance
    • Financial Advisors
    • Personal Finance
    • Market Insider
  • Forex
  • Investing
  • Stocks
  • ICOs
  • Trading
  • Home
  • Business
  • Commodities
  • Crypto News
    • Block chain
    • Bitcoin
    • Ethereum
    • Litecoin
  • Finance
    • Financial Advisors
    • Personal Finance
    • Market Insider
  • Forex
  • Investing
  • Stocks
  • ICOs
  • Trading
No Result
View All Result
Finances Advise
No Result
View All Result
Home Market Insider

Inflation may have been warming up in February, but it could be hot by May

by admin
March 10, 2021
in Market Insider
0
152
SHARES
1.9k
VIEWS
Share on FacebookShare on Twitter


A customer wearing a protective mask loads lumber onto a cart at a Home Depot store in Pleasanton, California, on Monday, Feb. 22, 2021.

David Paul Morris | Bloomberg | Getty Images

Inflation is just warming up, but by late spring it could get downright hot, even if temporarily.

February’s consumer price index — a measure of inflation — is expected to be up moderately when it is released Wednesday at 8:30 a.m. ET. By May, the pace of headline consumer inflation on an annualized basis could be double February’s pace.

The debate in the market is whether the spike is transitory as the Fed and many economists say, or the start of a bigger trend.

“The big question to ask is will that level of heat we’re going to see by May be sustained or not?” said Barclays senior U.S. economist Blerina Uruci.

“I’m in the camp of people who think probably not, but there are some who think the opposite,” she said.

Warming trends

Economists expect the consumer price index rose 0.4% in February, or up 1.7% from a year ago. That compares to a 0.3% increase in January, and a 1.4% rise on an annual basis.

When energy and food are excluded, the core CPI is expected to be up 0.1% in February, or an annual pace of 1.3%.

Signs of inflation are already showing up in the goods side of the economy, and Uruci expects that to spread to the service side.

Consumers will soon be armed with another stimulus check. Pent-up demand should start sending up prices on things like airfare, public transportation, hotels, dining out, and rental cars as more people feel comfortable leaving their homes.

Higher prices for companies

Companies have already been dealing with a range of rising prices.

The National Association of Manufacturers in its quarterly survey Tuesday said the increasing costs of raw materials was the biggest challenge facing companies.

Manufacturers were upbeat, expecting output to exceed pre-pandemic levels in the next couple of months, the survey found. They also had difficulty finding workers, which could suggest a rise in wages in addition to other costs.

The manufacturers’ association pointed to a report from the Institute for Supply Management, showing the backlog of orders was at its highest level since 2004 and raw material costs were rising at the fastest rate since May 2008.

So far this year, oil prices are up more than 30%, while copper and lumber are up nearly 15%.

Jim Caron, head of global macro strategies at Morgan Stanley Investment Management, said the rise in inflation could rattle investors in the spring.

However, he agrees with an assessment laid out by Federal Reserve Chairman Jerome Powell that it will be transitory. Without wages moving up materially, Caron doesn’t expect to see a lasting trend, but that won’t stop investors from being concerned.

Potential turbulence ahead?

Shoppers wearing protective masks push shopping carts inside a Costco store in San Francisco, California, on Wednesday, March 3, 2021.

David Paul Morris | Bloomberg | Getty Images

The $1.9 trillion fiscal stimulus package is expected to add juice to the economy. That has raised inflation concerns, and the market could be spooked by a CPI report that is any hotter than expected.

Gasoline prices were sharply higher in the January CPI report, up 7.4% though core inflation was flat. Gas prices could again be a factor in headline inflation in February.

Caron of Morgan Stanley said the market could get nervous when higher inflation readings show up in coming months.

“We all know there’s a rational component to it,” he said. “This should be an air pocket. The pilot told me we’re going to hit one, but I’m still nervous when we hit it.”

Prices are rising on Main Street as well. The National Federation of Independent Business’ small business survey found Tuesday that a net 25% of the firms it surveyed plan price increases.

Expectations for May

By May, Uruci of Barclays says headline inflation could be as hot as 3.6%. “There is the base effect story, but that’s just mechanical. That’s just transitory noise,” she said.

“We have consumer demand for goods remaining strong, especially after the fiscal stimulus passed in December and we have another one coming,” Uruci said. “All these are keeping core goods prices strong. The one that’s lagging will be the services side.”

This should be an air pocket. The pilot told me we’re going to hit one, but I’m still nervous when we hit it.

Jim Caron

head of global macro strategies at Morgan Stanley Investment Management

The Barclays economist expects a hand-off between goods inflation and services inflation. But she said services inflation will include temporary one-offs as the economy adjusts to increased demand.

“Until we have the population in unity and people moving freely and going into the services that require social distancing, we’re not going to have a build in prices,” Uruci said. “That comes around Q3 or Q4. There could be some supply-side bottlenecks that manifest themselves in a few categories.”

Public transportation could see prices rise after a year of empty trains and buses.

Meanwhile, shipping costs are rising, which could affect imported goods, Uruci added.

A “sticky” increase in prices

While markets have been nervous about an overheating economy, the bond market is not pricing a much higher pace of inflation.

Market-based expectations show inflation running at an average 2.2% over the next 10 years. That’s higher the Fed’s previously targeted 2%, but well within the scope of its new policy of targeting an average range around 2%.

The Fed favors the personal consumption expenditures price index as a measure of the rising costs of goods and services. Indeed, the so-called PCE deflator has been showing a subdued level of inflation, at a pace of about 1.5% in January.

Peter Boockvar, chief investment officer at Bleakley Advisory Group has been warning about inflation for months. “Inflation still never went negative,” he said. “The whole world was shut down and inflation was never negative.”

“The question is what happens in September, October and November? Those base effects can work their way out or they could be sticky,” Boockvar said. “I think they’ll be sticky.”

Meanwhile, Mark Zandi, chief economist at Moody’s Analytics, expects a burst higher in the inflation data in the spring, and then it will fall back.

“We’ll get some big numbers here in the next couple of months,” he said. “I think we’ll go back below 2% for a bit then we’ll reaccelerate. My sense is we’ll be consistently above 2% by the end of the year going into next.”

“Then by end of 2022, inflation will be consistently above the Fed’s target,” Zandi added. “By early 2023, I think they will be raising short term interest rates.” At that point, we will be at full employment, he said.

Zandi said inflation will be higher and could get to 2.5% to 3% ultimately. That may surprise investors.

“We’ll then have to work to get inflation back to 2%. That’s a problem [Fed officials] want,” he said. “I don’t think investors have bought into how high inflation will be….For 20, 25 years, we’ve barely gotten to 2%.”



Source link

Tags: FebruaryhotInflationwarming
  • Trending
  • Comments
  • Latest

A 48-year market vet warns that the Fed will be forced to tighten policy ‘way sooner’ than investors anticipate as inflation continues to soar — triggering a stock market crash of up to 80%

August 28, 2021
27-year-old UG graduate now millionaire proposes to girlfriend on b’day in video

27-year-old UG graduate now millionaire proposes to girlfriend on b’day in video

August 9, 2021

‘It’s begging to be destroyed’: A stock trader who says he made more than $100,000 shorting the market during the 2008 crash just bet against the S&P 500 — and warns there’s a ‘fair chance’ stocks are about to drop 25%

September 11, 2021

Stocks tanked in the first quarter, and new research shows there should be a reversal by the end of June

April 15, 2022

Stock Market Sell-Off: 2 Bargain Growth Stocks to Buy Now | The Motley Fool

0

Uber Hacking: Customers Not at Risk of Financial Crime, Says Minister

0

Black Friday Merchants Look to Extend Moment of Retail Optimism

0

Hotshot Snapchat Founders Face a Dilemma: Lie Low or Live Large?

0

Stock Market Sell-Off: 2 Bargain Growth Stocks to Buy Now | The Motley Fool

May 22, 2022
FOREX-Euro rises as Putin sees “sure positive shifts” in talks with Ukraine | Business

FOREX-Dollar drops as yen, Swiss franc draw safe-haven flows | Business

May 22, 2022

US stock market top gainers for the third week in May

May 22, 2022
Erdogan says Turkey has raised forex swap deal with China to $6 bln

Price hike, forex reserves: Finance Minister sits with NBR, BB officials

May 22, 2022

Recent News

Stock Market Sell-Off: 2 Bargain Growth Stocks to Buy Now | The Motley Fool

May 22, 2022
FOREX-Euro rises as Putin sees “sure positive shifts” in talks with Ukraine | Business

FOREX-Dollar drops as yen, Swiss franc draw safe-haven flows | Business

May 22, 2022

Categories

  • Bitcoin
  • Block chain
  • Business
  • Commodities
  • Ethereum
  • Financial Advisors
  • Forex
  • Investing
  • Litecoin
  • Market Insider
  • Personal Finance
  • Stocks

Site Navigation

  • Home
  • Contact Us
  • Privacy & Policy

We bring the Best and latest Crypto News

© 2022 JNews - Premium WordPress news & magazine theme by Jegtheme.

No Result
View All Result
  • Home
  • Business
  • Commodities
  • Crypto News
    • Block chain
    • Bitcoin
    • Ethereum
    • Litecoin
  • Finance
    • Financial Advisors
    • Personal Finance
    • Market Insider
  • Forex
  • Investing
  • Stocks
  • ICOs
  • Trading

© 2022 JNews - Premium WordPress news & magazine theme by Jegtheme.