The Fed’s Economic Outlook
Posted by Eddy Elfenbein on July 7th, 2021 at 2:25 pm

The federal Reserve just released the minutes from its last meeting. Here’s a look at their economic outlook.

The U.S. economic projection prepared by the staff for the June FOMC meeting was stronger than the April forecast. Real GDP growth was projected to increase substantially this year, with a correspondingly rapid decline in the unemployment rate. Further reductions in social distancing and favorable financial conditions were expected to support output growth, even though the effects of fiscal stimulus on economic growth were starting to unwind. With the boost to growth from continued reductions in social distancing assumed to fade after 2021 and the further unwinding of fiscal stimulus, GDP growth was expected to step down in 2022 and 2023. Nevertheless, with monetary policy assumed to remain highly accommodative, the staff continued to anticipate that real GDP growth would outpace that of potential over most of this period, leading to a decline in the unemployment rate to historically low levels.

The staff’s near-term outlook for inflation was revised up markedly, but the staff continued to expect the rise in inflation this year to be transitory. The 12 month change in total and core PCE prices had moved well above 2 percent in April, and incoming CPI data suggested that PCE price inflation would remain high in May. The recent 12-month measures of inflation were being boosted significantly by the base effects of the drop in prices from the spring of 2020 rolling out of the calculation. In addition, the surge in demand as the economy reopened further, combined with production bottlenecks and supply constraints, contributed to the large recent monthly price increases. The staff expected the 12-month change in PCE prices to gradually move down in coming months, reflecting, importantly, the fading of base effects along with smaller expected monthly price increases, but PCE price inflation was forecast to still be well above 2 percent at the end of this year. Over the next year, the transitory price increases caused by bottlenecks and supply constraints were expected to largely reverse, and the growth in demand was forecast to ease. As a result, inflation was projected to slow to slightly below 2 percent in 2022 before moving back up to a bit above 2 percent in 2023, supported by high levels of resource utilization.

The staff continued to see the uncertainty surrounding the economic outlook as elevated, although increasingly widespread vaccinations, along with ongoing policy support, were viewed as helping to diminish some of these uncertainties. Nevertheless, the staff judged that the risks around their strong baseline projection for economic activity were still tilted somewhat to the downside, as adverse alternative courses of the pandemic—including the possibility of the spread of more-contagious, more-vaccine-resistant COVID-19 variants—seemed more likely than outcomes that would be more favorable than in the baseline forecast. The staff continued to view the risks around the inflation projection as roughly balanced. On the upside, bottlenecks, supply disruptions, and historically high rates of resource utilization were seen as potential sources of greater-than-expected inflationary pressures, particularly if there were a significant rise in inflation expectations that altered inflation dynamics. On the downside, if the effects of supply constraints proved to be transitory, as expected, then the inflation record from the past 25 years suggested the possibility that low underlying trend inflation and a flat Phillips curve could cause inflation to revert to relatively low levels despite a strengthening economy.

9.2 Million Unfilled Jobs
Posted by Eddy Elfenbein on July 7th, 2021 at 11:16 am

Yesterday, the S&P 500 snapped its seven-day winning streak. The market is mostly flat so far this morning.

Later today, the Fed will release the minutes from its last meeting. There was a disconnect at the meeting. The economic forecasts from the Fed officials were much more hawkish than the comments by the Fed. Hopefully, the minutes will clarify the issue.

This morning’s job openings report was little changed at 9.2 million. That’s the number for May. (Technically, it rose a little bit to a new all-time high.)

Middleby looks to lose its battle to buy Welbilt (which is fine by me). Italy’s Ali Group raised its offer to buy Welbilt to $24 per share. Welbilt looks to go ahead with Ali Group. This will earn MIDD a new break-up fee.

Middleby stayed in the news by releasing updates for guidance for this quarter and full year. The company was sure to mention that this guidance is above current estimates.

For Q2, MIDD sees revenue of $808 million and adjusted EBITDA of $186 million. Wall Street had been expecting $794 million and $174 million respectively.

For all of 2021, MIDD now sees revenue of $3.244 billion and adjusted EBITDA of $730 million. That’s above consensus of $3.167 billion and $704 million.

Morning News: July 7, 2021
Posted by Eddy Elfenbein on July 7th, 2021 at 7:05 am

Oil Rises as OPEC+ Clash Over Supply Boost Keeps Prices Volatile

Saudi Arabia and the UAE Can’t Afford Not to Be Friends Despite Their OPEC Tiff

European Commission Sees the Economy Recovering Faster Than Expected.

China Considers Closing Loophole Used by Tech Giants for U.S. IPOs

Didi Removed from China’s WeChat and Alipay Apps for New Users in Another Big Blow

IMF Chief Sees Risk of Sustained Rise in U.S. Inflation

A Planned Biden Order Aims to Tilt the Job Market Toward Workers

Yellen’s Next Test: Persuading G20 That U.S. Congress Will Not Block Tax Deal

Running for Safety When Market Corrections Occur Cn Be Costly

Amazon Notches Comeback Win in Years-Long Pentagon Cloud Battle

Revolt Against Bank Fees Mints a $3 Billion Fortune for Fintech Founders

Russia ‘Cozy Bear’ Breached GOP as Ransomware Attack Hit

Discovery’s David Zaslav Promises More Media Merger Mania at Sun Valley

Violence, Drugs And Fast Food: How Americans’ Risky Behavior Surged While Under A Covid Lockdown

Ever Given Container Ship Begins Exit from Suez Canal 106 Days After Getting Stuck

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Morning News: July 6, 2021
Posted by Eddy Elfenbein on July 6th, 2021 at 7:07 am

OPEC+ Crisis Propels Oil to Six-Year High

Is This the End of OPEC? How Saudi Arabia and UAE Infighting Threatens the Future of the Oil Alliance

Global Corporate Tax Overhaul Faces Rocky Road to Completion

Empathy Bootcamp? UK Banks Seek Payback on $105 Billion COVID Loans

When Will China Overtake the U.S. as the World’s Top Economy? Maybe Never

Quickening U.S. Recovery Puts Fed Taper Discussion in Focus

The Next Big Divide in Finance Takes Shape in Your Office

American Internet Giants Hit Back at Hong Kong Doxxing Law

China’s Crackdown on Didi Is a Reminder That Beijing Is in Charge

Big Ransomware Hack Highlights a Robust Software Business Model

No Soil. No Growing Seasons. Just Add Water and Technology.

Here’s What You Should Know About That Eye-Popping Sign-On Bonus

Airbnb’s Pandemic Party-Blocking Spree Rages On

SoftBank Pays $1.6 Billion for Yahoo Japan Rights

Amazon Transformed Seattle. Now, Its Workers Are Poised to Take It Back.

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Italy’s Ali Group Raises Offer for Welbilt to $3.41 Billion, Trumping Middleby Bid
Posted by Eddy Elfenbein on July 5th, 2021 at 11:45 pm

From Reuters:

Italy’s Ali Group on Monday said it raised its offer to buy Welbilt Inc, valuing the U.S. food service equipment maker at $3.41 billion.

The deal trumps a $2.9 billion all-stock offer for Welbilt put forward by competitor Middleby in April to beef up its commercial foodservice platform.

Welbilt will receive $24 for each share, representing a premium of 3.53% to the closing price on Friday.

The offer is a raised bid from its previous $23 per share offer in May.

Ali Group said that it has obtained fully underwritten, binding commitment letters for debt financing from Goldman Sachs International and Mediobanca.

Based near Milan, Ali Group, with 80 brands, operates worldwide and supplies foodservice equipment to businesses ranging from hotels to schools and supermarkets.

Morning News: July 5, 2021
Posted by Eddy Elfenbein on July 5th, 2021 at 7:09 am

OPEC+ Crisis Deepens as Saudi Arabia Refuses to Budge

Credit Suisse Strategist Sees $1 Trillion Problem for Money Markets

Why Is China Cracking Down on Didi After U.S. IPO?

Chinese Antitrust Regulator to Block Tencent’s Videogaming Merger

The Tech Cold War’s ‘Most Complicated Machine’ That’s Out of China’s Reach

Britain Proposes Tech Company Listing Reforms to Catch Up with New York

Stocks Are Expensive but that Doesn’t Mean the Bull Run is Ending

Hacking Wall Street

Pandemic Wave of Automation May Be Bad News for Workers

Investigating Amazon, the Employer

‘Absolutely a Sprint’: How Andy Jassy Raced to the Top of Amazon

After Pressuring Telecom Firms, Myanmar’s Junta Bans Executives from Leaving

The Charges Against the Trump Organization Are a Master Class in Tax Evasion

The US is a First-World Nation With a Third-World Rail System

Sun Valley’s Billionaire ‘Summer Camp’ Is Back After A Virus-Induced Break

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June Jobs Report
Posted by Eddy Elfenbein on July 2nd, 2021 at 8:33 am

The jobs report is out. Last month, the U.S. economy created 850,000 new jobs. The consensus was for 706,000.

The private sector added 762,000 jobs. The unemployment ticked up to 5.9%.

Average hourly earnings rose 0.3%. In the last year, average hourly earnings are up 3.6%.

Underemployment is 9.8% and the labor force participation rate was 61.6%. The latter figure has barely budged.

Hospitality continued to be the prime beneficiary of the reopening as workers returned to jobs at bars, restaurants, hotels and the like.

The industry notched a gain of 340,000 amid easing restrictions across the country. That total included 194,000 in bars and restaurants, but still left the sector 2.2 million shy of where it was in February 2020 before the pandemic began.

Other notable gains came in education, which totaled 269,000 across state, local and private hiring, while professional and business services increased by 72,000 and retail added 67,000.

The other services industry added 56,000 jobs, including a gain of 29,000 in personal and laundry services, a subsector that has been seen as a proxy for the resumption of normal business activity. Social assistance added 32,000, while wholesale trade contributed 21,000 to the total and mining grew by 10,000.

Manufacturing edged up 15,000 for the month, though construction lost 7,000 positions despite a sizzling housing industry where new building has been held back by supply shortages and what had been soaring lumber prices before the recent plunge.

Here’s the updated chart of nonfarm payrolls.

We’ve created a lot of jobs but we still have a long way to go.

Morning News: July 2, 2021
Posted by Eddy Elfenbein on July 2nd, 2021 at 7:01 am

Oil Holds Near $75 as Brinkmanship at OPEC+ Threatens Deal

U.S. Proposal for 15% Global Minimum Tax Wins Support From 130 Countries

Budget Deficit Projected to Hit $3 Trillion as Pandemic Spending Buoys Economy

Halfway Through 2021, the Hot Stocks Are Old-Fashioned

World’s Top Pension Fund Books ‘Historic’ $339 Billion Gain

China and Hong Kong Stocks Tumble After ‘Broken Heads and Bloodshed’ Speech from Xi

U.S. Toymaker Doubles Down in China Despite Rising Costs, Political Tensions

Didi Opens Door for More Tech IPOs Beyond China. Where Emerging Market Investors Should Look.

Dogecoin Whale? Robinhood IPO Filing Reveals Dogecoin as One of its Biggest Risk Factors

Rumors of the Demise of Cars Have Been Greatly Exaggerated

‘Shocked’ Mitsubishi Electric CEO to Quit Over Data Deceit

New Saudi Airline Plan Takes Aim at Emirates, Qatar Airways

The FTC Just Took a Step That Could Make It Easier to Go After Amazon

Amazon Revises Corporate Values Days Before Bezos Steps Down

Bezos’ Exit Is One of Many Among Amazon’s Top Ranks

Jeff Bezos Is Headed To Space. Richard Branson Decided To Beat Him There

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Jobless Claims Drop to 364,000
Posted by Eddy Elfenbein on July 1st, 2021 at 1:44 pm

I like the initial jobless claims report, but it tends to be “noisy.” It can bounce around a lot. Two weeks ago, it rose from 374,000 to 418,000. Then last week, it edged down to 415,000. Today’s report was 364,000. That’s another pandemic low.

This morning’s ISM Manufacturing report came in at 60.6. That was just below expectations of 61. That’s the lowest since January. That’s still a solid number. Any number above 50 means the factory sector is expanding.

The expectation for tomorrow’s jobs report is that the unemployment rate fell to 5.6% and that the U.S. economy created 704,000 net new jobs. The report is due out tomorrow morning.

Morning News: July 1, 2021
Posted by Eddy Elfenbein on July 1st, 2021 at 7:04 am

European Factories Racing As Asian Manufacturers See Momentum Weaken

Ghosts of Crises Past Haunt Policymakers and Markets

A Housing Frenzy Is Sparking Bidding Wars From New York to Shenzhen

Averting Inflation Crisis Turns on Something Fed Doesn’t Control

Amazon Says the New F.T.C. Chair, Lina Khan, Should Recuse Herself from Investigations

Biden’s Big Business Crackdown Bad for Wall Street Behemoths

An NFT of the World Wide Web Sells for $5.4 Million

At Monterey Car Week, the Sheet Metal Shines

Car Market Is Expected to Cool Amid Dearth of Vehicles on Lots

Nissan Bets on UK ‘Renaissance’ With Battery Plant and New Vehicle

Lockheed Wins $5.5 Billion Swiss Warplane Deal

Robbing the Xbox Vault: Inside a $10 Million Gift Card Cheat

Robinhood Is Fined $70 Million Over Misleading Customers and System Outages

Robinhood Looks Beyond Its Big Fine

Shortage of Truck Drivers is Behind Fuel Delivery Delays, Says GasBuddy Analyst

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