Inflation Rate Rises as the Economy Reawakens
Consumer prices rose faster than expected in March, the Labor Department said, which may fuel inflation fears. Here’s the latest on the economy.,
Consumer prices rose in March at their fastest pace in nearly nine years, an increase that may fuel inflation fears but that likely overstates the extent of the acceleration.
The Consumer Price Index, a closely watched inflation measure, rose 0.6 percent in March from February, the Labor Department said Tuesday. That was up from February’s 0.4 percent increase, and a bit faster than economists’ expectations.
Prices at the pump drove the increase: Gasoline prices rose 9.1 percent in March.
Core inflation, which ignores volatile food and energy prices, rose 0.3 percent, up from 0.1 percent in February.
Prices were up 2.6 percent from a year ago. But that measure — usually closely watched by economists — was skewed by the comparison to March 2020, when prices fell as consumers pulled back spending in the face of the pandemic.
Inflation rose substantially above 2 percent in March.
FROM A YEAR AGO
However, some of the jump can be explained
through what’s known as base effects — prices fell
significantly last spring, so the increase now from the
year prior is larger, even if prices are not rising as
2021 Consumer price index
Inflation rose substantially above 2 percent in March.
PERCENT CHANGE IN CONSUMER
PRICE INDEX FROM A YEAR AGO
However, some of the jump can be explained through what’s known as base effects —
prices fell significantly last spring, so the increase now from the year prior is larger, even
if prices are not rising as dramatically.
2021 Consumer price index
Inflation rose substantially above 2 percent in March.
PERCENT CHANGE IN
CONSUMER PRICE INDEX
FROM A YEAR AGO
However, some of the jump can be explained through what’s known as base effects — prices fell significantly last spring, so the increase now from the year prior is larger, even if prices are not rising as dramatically.
2021 Consumer price index
Economists surveyed by Bloomberg expected an increase of 0.5 percent in overall C.P.I. from February, and 2.5 percent from March 2020.
Inflation data matters because it gives an up-to-date snapshot of how much it costs Americans to buy the goods and services they regularly consume. And because the Federal Reserve is charged in part with keeping increases in prices contained, the data can influence its decisions — and those affect financial markets.
Consumer inflation is measured by statisticians who take a bundle of goods and services Americans buy — everything from fresh fruit to rent — and aggregate it into a price index. The inflation rate that is reported each month shows how much that index changed.
Why the annual rate may overstate the situation.
For a quarter century, most measures of inflation have held at low levels. The C.P.I. moves around a bit because of volatile food and fuel prices, but a “core” index that strips out those factors has mostly increased at a year-over-year rate of less than 2 percent.
But the data reported for March reflects a drop in prices last year, as the country went into lockdown and airlines slashed ticket costs, clothing stores discounted sweaters, and hotels saw occupancy plunge.
That means inflation measures are lapping low readings, and as that low base falls out, it will cause the year-over-year percent changes to jump — a little bit in March, and then a lot in April.
To be sure, climbing prices could last for a while as businesses reopen, consumers spend down big pandemic savings and producers scramble to keep up with demand. Economists and Federal Reserve officials do not expect those increases to persist for more than a few months, but if they did, it would matter to consumers and investors alike.
Americans pay $17 billion in overdraft fees every year. PNC Bank announced on Tuesday its plans to help customers reduce that burden, which often falls on those who can least afford it.
The bank is introducing measures that it said would cut customers’ overdraft fees about 60 percent, and its own annual revenue by $125 million to $150 million, the DealBook newsletter reports. It comes as PNC prepares to close its deal with BBVA, which would make it the country’s fifth-largest retail bank.
Eight percent of account holders generate three-quarters of overdraft fees, according to the Consumer Financial Protection Bureau. Lawmakers have worried that banks obfuscate these fees as they become a reliable source of revenue. The fees are expected to come under scrutiny by the Biden administration, particularly if Rohit Chopra, a consumer advocate, is confirmed take over the C.F.P.B.
“Overdraft is an expensive fee they charge only on those people who run out of money that goes straight to short-term profits,” said Aaron Klein, a senior fellow at the Brookings Institution.
PNC is hoping to change that with a new feature in its app. “We weren’t doing the best we could do by our clients,” PNC’s chief executive, William Demchak, said in an interview. In the PNC app’s new “low cash mode,” when an account goes negative, the customer has at least 24 hours to fix it, including by reviewing pending payments and deciding which to prioritize.
For the largest banks to adopt a similar approach is a matter of technology — and desire. On a scale of which banks earn the most from the fees, overdraft fees generate $35.61 per account for JPMorgan Chase on the high end and $4.90 per account for Citi on the low end, according to Mr. Klein. PNC fell in the middle, with $14.96 per account.
PNC already assumed a short-term revenue drop into projections as part of its deal with BBVA, but over the long term, it expects the move will help it gain market share. “We’re in a consolidated industry where we want to be one of the consolidators,” Mr. Demchak said. “In the short run, if it costs us 100 million bucks or something — so what?”
China has ordered 34 of its most prominent internet companies to ensure their compliance with antimonopoly rules within the next month and to submit to official inspections thereafter — with “severe punishment” promised for any illegal practices that are uncovered.
The demand, which China’s market regulator announced on Tuesday, represents the government’s latest cracking of the whip in its campaign to tighten supervision over giant internet platforms.
For years, Beijing gave internet companies wide berth to grow rich and innovate. But in China, as in the West, concerns have been growing about the ways the companies use their clout to edge out rivals, their use and abuse of algorithms and big data and their acquisitions of smaller peers. In recent months, China has begun using both regulatory enforcement actions and public shaming to keep tech companies in check.
The country’s market regulator imposed a record $2.8 billion antitrust fine on Alibaba, the e-commerce titan, on Saturday. And on Monday, Alibaba’s fintech sister company, Ant Group, unveiled a revamp of its business in response to government demands.
Officials from China’s market watchdog, internet regulator and tax authority met with the companies on Tuesday, according to the government’s statement. At the meeting, the officials “affirmed the positive role of the platform economy” but also told the companies to “give full play to the cautionary example of the Alibaba case.”
The nearly three dozen companies included almost all of the top names in the Chinese internet industry, from established titans like Alibaba, Tencent and Baidu to newer powerhouses such as TikTok’s parent, ByteDance; the food delivery giant Meituan; the e-commerce site Pinduoduo; and the video platform Kuaishou.
At Tuesday’s meeting, the companies were told to strengthen their “sense of responsibility” and to “put the nation’s interests first,” the regulator’s statement said.
Grab — a ride-hailing company, bank and food delivery business all rolled into one — is set to make its debut in the largest offering by a Southeast Asian company on a U.S. stock exchange.
The company, which is based in Singapore, announced a deal on Tuesday with Altimeter Growth, a company listed for the sole purpose of buying a business. These special purpose acquisition vehicles, or SPACs, have snapped up companies over the past year at a rapid-fire pace. But this deal, which values Grab at roughly $39.6 billion, is expected to the largest such deal to date. Grab shares will trade on the Nasdaq stock exchange
The deal also includes an investment of more than $4 billion from a group that includes BlackRock, T. Rowe Price Associates and Temasek. Altimeter Capital Management, the investment firm backing the vehicle acquiring Grab, has agreed to hold certain shares in the company for at least three years.
Grab offers a “super app” that allows users to order food, pay bills and hail a car. It’s a model already popular in China, where WeChat offers a range of services, but is growing in Southeast Asia, particularly as the region builds its digital businesses. The pandemic helped propel the trend forward, with Southeast Asian consumers spending more than $10 billion online last year.
Grab acquired Uber’s Southeast Asia operations in 2018 and a digital banking license as part of a consortium in 2020. It has attracted investors including Booking Holdings, Hyundai, Microsoft, SoftBank and Toyota.
The company is going public as deal-making is flourishing in Southeast Asia. Bain, the consulting firm, said in 2018 it expected that the region would have had at least 10 unicorns, or start-ups valued at $1 billion or more, by 2024. One of those, the e-commerce company Sea, went public in the United States in 2017. Shares of the company have risen more than 400 percent over the past year, giving it a market capitalization of $125 billion.
“It gives us immense pride to represent Southeast Asia in the global public markets,” Grab’s chief executive, Anthony Tan, said in a statement. “This is a milestone in our journey to open up access for everyone to benefit from the digital economy.”
Credit Suisse said it would be able to pay back additional money to investors in funds whose troubles were among a series of disasters that have battered the Swiss bank’s reputation and finances.
The bank said it would pay an additional $1.7 billion to investors in funds linked to Greensill Capital, which collapsed last month. The latest payment means that investors will get back close to half of their money, with the prospect for more payments as Credit Suisse liquidates the funds.
Credit Suisse’s asset management unit oversaw $10 billion in funds put together by Greensill based on financing it provided to companies, many of which had low credit ratings or were not rated at all.
“There is potential for recovery in these cases although clearly there is a considerable degree of uncertainty as to the amounts that ultimately will be distributed to investors,” Credit Suisse said in a statement.
The more money that Credit Suisse can salvage from the funds, the better its chances of repairing its reputation and its ability to attract new customers. The bank has been in crisis following a series of debacles, including its disclosure last week that it will lose almost $5 billion because of money it lent to Archegos Capital Management, which crumbled this month after a high-risk stock market play went sour.
Including the $1.7 billion payment announced Tuesday, Credit Suisse has paid $4.8 billion to investors in the Greensill funds. The bank said it would take legal action to recover more money and “is engaging directly with potentially delinquent obligors and other creditors.” Some losses may be covered by insurance.
“We remain acutely aware of the uncertainty that the wind-down process creates for those of our clients who are invested in the funds,” Credit Suisse said. “We are doing everything that we can to provide them with clarity, to work through issues as they arise and, ultimately, to return cash to them.”
Tech workers at The New York Times announced on Tuesday that they had formed a union and would ask the company to recognize it.
The group of more than 650 employees includes software engineers, designers, data analysts and product managers. It will be represented by the NewsGuild of New York. NewsGuild membership already includes more than 1,300 newsroom workers and business staff members at The Times, as well as workers at other media outlets.
As part of the Times Tech Guild, the tech workers would be in a separate bargaining unit from other Times employees represented by the NewsGuild.
In recent years, The Times has ramped up its hiring of tech workers as part of its strategy to reach 10 million paid digital subscribers by 2025. In 2020, digital-only subscriptions neared seven million and became the company’s largest revenue stream.
Kathy Zhang, a senior analytics manager and a member of the organizing committee, said in an interview that The Times felt like “an emerging company” in some ways, although it is a 170-year-old institution.
“There’s a lot of stuff we’re trying out,” she said. “There’s a lot of starting and stopping of different projects. It’s been really exciting, but it’s also been pretty exhausting.”
The tech workers were concerned about pay equity, health care costs, job security and career advancement, Ms. Zhang added. The union also hoped to improve diversity and inclusion in the department.
A spokeswoman for The New York Times Company said in a statement that the company had received the request for voluntary recognition from the union on Tuesday morning.
“At The New York Times, we have a long history of positive and productive relationships with unions, and we respect the right of all employees to decide whether or not joining a union is right for them,” the spokeswoman said. “We will take time to review this request and discuss it soon with representatives of the NewsGuild.”
The organizing of The Times’s tech workers came months after more than 400 Google engineers and other workers formed a union, a rarity in Silicon Valley. An organizing drive at an Amazon warehouse in Alabama was voted down last week.
Media companies have had a surge in such efforts. Workers at publications like BuzzFeed News, Vice, The New Yorker, Slate and Vox Media have all formed unions in recent years.
Stock trading on Wall Street was quiet for a second day on Tuesday, even as investors worried about a new setback in the fight to control the coronavirus and also considered updated inflation data.
The S&P 500 was essentially unchanged in early trading, after recovering from an early swoon that came in response to federal health agencies recommending an immediate pause to the use of the Johnson & Johnson’s single-dose coronavirus vaccine.
The Food and Drug Administration and Centers for Disease Control and Prevention said on Tuesday that six women who received the vaccine had developed rare blood clots. “We are recommending a pause in the use of this vaccine out of an abundance of caution,” the agencies said.
Shares of Johnson & Johnson fell about 3 percent in early trading, weighing on the Dow Jones industrial average.
News of the vaccine setback had sent stock futures lower earlier Tuesday, but the market regained its footing as investors seemed to read the latest consumer price inflation report as less worrisome than they might have expected.
Investors have been focused on rising prices lately, worried that fast economic growth might fuel a jump that prompts the Federal Reserve to raise interest rates or otherwise remove its support for the economy.
Consumer prices did increase in March at their fastest pace in nearly nine years, and a rate slightly higher than economists had expected. But the increase wasn’t enough to spook investors. Government bond yields, which have jumped sharply this year over concerns about inflation, held steady after the report.
The Stoxx Europe 600 reversed earlier gains and was little changed by early afternoon in Europe.
Oil prices rose. Futures of West Texas Intermediate, the U.S. crude benchmark, gained 1 percent to just above $60 a barrel.
The stock market’s rally during the pandemic has been nothing short of amazing. But rising interest rates are raising the question of how long this bull market can last.
In the 12 months through March, the average general stock mutual fund tracked by Morningstar returned nearly 66 percent — a remarkable rebound after a three-month loss of nearly 22 percent at the start of last year.
The turnaround came after the Federal Reserve stepped in with support for financial markets and the economy, fueling much of the stock market’s exuberance with low interest rates.
But with the economy taking off, rates have begun to rise. At the start of a new quarter, it is a good moment to ask, how long can these strangely prosperous times last?
My crystal ball is no clearer now than it has ever been, alas, and I can’t time the market’s movements any better than anyone else. But this certainly is a good time to assess whether you are well positioned for a possible downward shift.
As always, the best approach for long-term investors is to set up a portfolio with a reasonable, diversified asset allocation of stocks and bonds and then live with it, come what may.
Our quarterly report on investing is intended to help. If you haven’t been an investor before, we’ve included tips on how to get started. Here you will find broad coverage of recent trends, guidance for the future and reflections on personal finance in a challenging era.
It’s been a long, fine run for the stock market, but a great deal of the upswing has depended on low interest rates, and in the bond market rates have been rising. Investment strategists are taking a wide array of approaches to deal with this difficult problem. For now, the bull market rides on.
Bonds provide ballast in diversified portfolios, damping the swings of the stock market and sometimes providing solid returns. Because bond yields have been rising — and yields and prices move in opposite directions — bond returns have been suffering lately. But adding a diversified selection of international bonds to domestic holdings can reduce the risk in the bond side of your investments.
Yes, the markets and the economy are complicated. That often puts people off, and stops them from taking action that can help them and their families immeasurably: investing. But investing need not be complicated. A succinct article gives pointers on how to get started, and on how to navigate the markets for the long haul.
After a piece of virtual art known as a nonfungible token — an NFT — sold at auction for $70 million recently, NFTs have suddenly became an asset that you can invest in. Our columnist prefers real dollars.
Short-term demand for oil and gas is rising, but if climate change is to be reversed, consumption of fossil fuels will have to diminish. This leaves investors in a tough spot.
ArcLight Cinemas, a beloved chain of movie theaters based in Los Angeles, including the Cinerama Dome in Hollywood, will permanently close all its locations, Pacific Theaters announced on Monday, after the pandemic decimated the cinema business.
ArcLight’s locations in and around Hollywood have played host to many a movie premiere, in addition to being favorite spots for moviegoers seeking out blockbusters and prestige titles. They are operated by Pacific Theaters, which also manages a handful of theaters under the Pacific name, and are owned by Decurion.
“After shutting our doors more than a year ago, today we must share the difficult and sad news that Pacific will not be reopening its ArcLight Cinemas and Pacific Theaters locations,” the company said in a statement.
“This was not the outcome anyone wanted,” it added, “but despite a huge effort that exhausted all potential options, the company does not have a viable way forward.”
Between the Pacific and ArcLight brands, the company owned 16 theaters and more than 300 screens.
The movie theater business has been hit particularly hard by the pandemic. But in recent weeks, the majority of the country’s largest theater chains, including AMC and Regal Cinemas, have reopened in anticipation of the slate of Hollywood films that have been put back on the calendar, many after repeated delays because of pandemic restrictions. A touch of optimism is even in the air as a result of the Warner Bros. movie “Godzilla vs. Kong,” which has generated some $70 million in box office receipts since opening over Easter weekend.
Still, the industry’s trade organization, the National Association of Theater Owners, has long warned that the punishing closures were most likely to affect smaller regional players like ArcLight and Pacific. In March, the Alamo Drafthouse Cinema chain, which operates about 40 locations across the country, announced that it had filed for Chapter 11 bankruptcy protection but would keep most of its locations operational while it restructured.
That does not seem to be the case for Pacific Theaters, which, according to two people with knowledge of the matter, fired its entire staff on Monday.
The reaction to ArcLight’s closing around Hollywood has been emotional, including an outpouring on Twitter.