Prices are climbing at the fastest pace since 2008, a key index released on Friday showed, an increase that is sure to keep inflation central to economic and political debates.
The Bureau of Economic Analysis’ personal consumption expenditure inflation measure climbed 3.6 percent in April from the prior year — the strongest reading in 13 years and more than the 3.5 percent gain that economists in a Bloomberg survey had expected.
The core price index, which strip out volatile food and fuel prices, rose 3.1 percent in the year through April — the fastest pace since 1992. Prices rose 0.7 percent compared with the prior month, the biggest increase in two decades.
The pickup in inflation is coming as rebounding demand and supply shortages push costs higher, along with data quirks that are increasing the annual number. The inflation gauge is closely watched because it is the Federal Reserve’s favorite, and officials are carefully monitoring the pickup in prices as the economy reopens.
The Fed targets 2 percent annual inflation, on average over time. While price gains are now well above that, central bankers and economists expect that pickup will probably fade with time as producers catch up with consumer demand and the boost from government stimulus disappears.
The report showed that personal income declined sharply in April as a jump caused by stimulus payments in March faded. Income fell by 13.1 percent, actually a smaller decrease than the 14.2 percent drop economists had expected.
Personal spending rose 0.5 percent, a slow but steady pace, but that improvement eroded when counting for price increases. In a surprise to economists, spending actually declined slightly when adjusted for inflation, falling by 0.1 percent — missing the 0.2 percent gain they had penciled in.
“The combination of falling real consumption and soaring prices last month gives off a faint whiff of stagflation,” Paul Ashworth, chief U.S. economist at Capital Economics, wrote in a note following the release. While there was some pickup in services spending, he noted that the pace was “a bit of a disappointment given the removal of most Covid-related restrictions.”
The Fed, which is tasked with maintaining stable prices and is supposed to foster full employment, has signaled that it is willing to look through the current run-up in inflation as the economy heals and moves through a wildly unusual period. But it has also signaled that if it proves persistent or gets out of control, it would react, which could mean a quicker pullback from mass bond-buying or interest rate increases.
Both bond purchases and low rates support asset prices, so markets have been on edge about the possibility of faster inflation that prompts the Fed to reduce its economic support.
Politicians have been talking about price changes daily since an earlier inflation release — the Consumer Price Index report — showed that prices gains picked up more than expected in April. Republicans paint the inflation as a sign that big government spending is coming at a cost, while Democrats say it is a temporary phenomenon, driven by data quirks and the fact that demand is bouncing back and supply must rise to meet it. They argue short-lived bigger price gains are no reason to change course.
The question now is both how quickly supply can react, and how long the current trend will last. Consumers are spending from savings they amassed during the pandemic as the economy reopens and vaccines become widespread.
“Spending will likely continue to be boosted for a while by unspent stimulus payments, although we expect most of the ‘excess savings’ to remain saved,” economists at the bank TD had written in a note previewing the release.
JD Logistics, a supply chain unit of JD.com, the big Chinese internet retailer, raised more than $3.1 billion in a share listing in Hong Kong on Friday, the latest Chinese company to raise money in a record-breaking year for the city’s stock exchange.
Investors were watching the initial public offering to gauge whether there was still an appetite for splashy debuts by Chinese internet companies at a time when the technology industry is facing intense regulatory scrutiny from Beijing.
The scrutiny did not appear to bother traders, who sent the stock up by as much as 18 percent during its first day of trading on the Hong Kong stock exchange. But the stock pared most of those gains during the session, and closed 3.3 percent higher than its listing price, at 41.70 Hong Kong dollars, or $5.37.
The offering by JD Logistics, which helps JD.com provide same-day and next-day delivery for tens of thousands of counties and towns in China, valued the company at $4 billion, making it the third-largest share offering in Hong Kong this year.
Beijing has imposed record fines on some of China’s biggest internet companies like Alibaba as regulators try to tame the power and anticompetitive nature of the country’s most popular and ubiquitous technology companies.
On Friday, Yu Rui, the chief executive of JD Logistics, addressed the regulatory scrutiny and said the company would use the money it had raised to improve its ability to serve smaller cities and pursue overseas markets.
Some of the company’s biggest shareholders are Blackstone, the Wall Street private equity firm; Temasek, Singapore’s sovereign wealth fund; and the hedge funds Tiger Global and Oaktree.
The whirlwind trading of small retail investors who concentrate on driving up the share price of a handful of companies energetically returned to markets this week. Shares in AMC, the movie theater chain, surged more than 20 percent in premarket trading and was the most traded stock on Friday morning as traders pounced on the company’s stock.
The trading is reminiscent of the GameStop frenzy in January. One of the aims of the retail traders is to push up a company’s share price to force losses on hedge funds that have bet against the stock in what is called a short squeeze.
AMC shares have jumped 120 percent this week, to $26.52, giving the company a market value of $13 billion. At the end of 2019, before AMC became a “meme stock” darling like GameStop, the video game retailer, and Blackberry, the phone company, the share price for AMC was about $2.
GameStop shares have risen 44 percent this week.
AMC Entertainment share price
U.S. stock futures rose on Friday. The S&P 500 is set to rise 0.4 percent when markets open. It has already climbed more than 1 percent this week and is less than 1 percent away from a record high. Stock prices have been kept by buoyant by expectations of ample federal spending and low interest rates.
President Biden will propose a $6 trillion budget on Friday, according to documents obtained by The New York Times. The budget will finance Mr. Biden’s two-part plan to upgrade American infrastructure and expand the social safety net, contained in his American Jobs Plan and American Families Plan.
Most European stock indexes were higher after a measure of economic confidence in the European Union climbed to its highest level since early 2018.
The Stoxx Europe 600 rose 0.6 percent, gaining for a seventh consecutive day to a record high.
Exxon Mobil’s defeat by an activist investor, Engine No. 1, at its annual meeting on Wednesday is still reverberating around Wall Street. Shareholders voting against management to install at least two new board members is seen as both a milestone for climate-focused investing and the emergence of a new force in shareholder activism.
The DealBook newsletter has behind-the-scenes details on the most important moments in the battle.
On Jan. 22, Exxon’s chief executive, Darren Woods, and lead independent director, Ken Frazier, held a Zoom call with Engine No. 1 executive. During the meeting, Mr. Frazier struck a conciliatory tone — at one point, he held up a peace sign — but said the company didn’t consider Engine No. 1’s nominees to be qualified. Charlie Penner, the fund’s head of active engagement, said the company should reconsider, and insisted on all four of its candidates taking seats on Exxon’s board.
After the call, both sides girded for battle, with Exxon naming new board members later without Engine No. 1’s input.
In March, Exxon reached a settlement with a far bigger investor, the hedge fund D.E. Shaw, that had also been calling for changes in strategy. The company used that agreement to put pressure on Engine No. 1 to call off its fight, and Engine No. 1 briefly worried that could undercut support for its campaign from other big investors.
By Wednesday, Exxon and its advisers knew they were in danger, when preliminary vote counts before the shareholder meeting appeared to show Engine No. 1 winning at least two seats. In the middle of the meeting, Exxon unexpectedly called for a one-hour recess, and both sides reached out to investors. Exxon asserted it was at the behest of shareholders asking for more time to decide; supporters of Engine No. 1 worried the company was trying to persuade them to change their ballots.
In the end, many of Exxon’s top institutional investors voted in favor of Engine No. 1’s candidates, while retail shareholders tended to favor the company’s nominees. The final results — including whether the fund can claim a third director position — aren’t expected until next week, at the earliest.
Although Engine No. 1 may have claimed seats on Exxon’s board, but the hard part is just beginning. Getting a few directors on the 12-person board doesn’t guarantee a quick shift in Exxon’s business practices. “Our overall goal is really greater transparency,” Chris James, Engine No. 1’s founder, said.
The worst of the pandemic may be over for airlines, but another crisis looms for the industry: an accounting over its contribution to climate change.
There’s growing pressure to do something to reduce and eventually eliminate emissions from travel, but that won’t be easy, The New York Times’s Niraj Chokshi and Clifford Krauss report. Some solutions, like hydrogen fuel cells, are promising, but it’s unclear when they will be available, if ever. That leaves companies with few options: They can make tweaks to squeeze out efficiencies, wait for technology to improve or invest today to help make viable options for the future.
“It’s a big crisis, it’s a pressing crisis — a lot needs to be done soon,” said Jagoda Egeland, an aviation policy expert at the International Transport Forum, a unit of the Organization for Economic Cooperation and Development. “It’s a hard-to-abate sector. It will always emit some carbon.”
Experts say commercial air travel accounts for about 3 to 4 percent of total U.S. greenhouse gas emissions. Planes become more efficient with each new model, but growing demand for flights is outpacing those advancements. The United Nations expects airplane emissions of carbon dioxide, a major greenhouse gas, to triple by 2050. Some researchers say emissions may grow even faster.
Investors are pushing businesses to disclose more about their efforts to lobby lawmakers on climate issues, too.
There has been some progress:
Some large corporations, whose employees crisscross the globe and fill plush business class seats, are reviewing travel budgets to reduce expenses and emissions.
A recently announced United Airlines deal will result in the airline’s buying about 3.4 million gallons of sustainable fuel this year.
And in France, lawmakers are considering a ban on short flights that can be replaced by train travel.
Someday, hydrogen fuel cells and synthetic jet fuel could help to decarbonize the industry, and pilot projects have already begun, mainly in Europe, where Airbus says it plans to build a zero-emission aircraft by 2035. But renewable jet fuel has its limits, too.
Despite the challenges, Scott Kirby, the chief executive of United Airlines, is optimistic that investments in alternative fuels and carbon capture technology will yield a breakthrough.
“In the near term, it’s about getting them to work economically,” he said. “Once you cross that threshold, you will have an exponential increase.”
The Biden administration will require the nation’s pipeline companies to report to the government any time they are hit with a significant cyberattack, and to create 24-hour emergency centers for such episodes, Alejandros N. Mayorkas, the secretary of homeland security, said Thursday morning.
The move is the first of several, administration officials said Wednesday night, to address the lessons of the Colonial Pipeline ransomware attack this month, which forced Colonial to shut off the systems that send gasoline and jet fuel to nearly half of the East Coast. But based on the details released by people familiar with the order, it does little to solve the central problems that were revealed by that attack.
The new requirement will essentially assure that the pipeline companies always have at least one employee with some cybersecurity training monitoring their systems, though it is unclear what that employee would be empowered to do other than raise an alarm.
The order also sets a 30-day period to “identify any gaps and related remediation measures to address cyber-related risks” and report them to the Transportation Security Administration and the Cybersecurity and Infrastructure Security Agency.
But the gaps identified in the Colonial ransomware attack most likely would not have been anticipated by any such review, many experts note. And the company’s intense secretiveness in dealing with the government during the episode — including its decision to pay the ransom — was a source of constant frustration to government officials.
Senate Republicans on Thursday proposed spending less that one seventh of what President Biden has requested in his expansive $1.7 trillion infrastructure initiative, countering with $257 billion in new funding for roads, bridges and other public works.
The narrow scope of the plan, which Republicans said would amount to a total of $928 billion over eight years when paired with existing programs — $1.4 trillion short of Mr. Biden’s proposal of new funds — illustrated the long odds that negotiations will yield a workable bipartisan compromise.
The latest Republican plan contains another probable deal breaker: They suggest paying for much of their proposal by repurposing funds from the $1.9 trillion pandemic relief law, an approach that White House officials have repeatedly rejected.
Instead, Mr. Biden has proposed large tax increases on corporations and wealthy taxpayers to pay for his much larger package, a prospect that Republicans, in turn, have refused even to consider.
“I haven’t had the chance to go over the details” of the counterproposal, Mr. Biden told reporters Thursday before boarding Air Force One to visit Cleveland.
The president said he had spoken with Senator Shelley Moore Capito of West Virginia, one of the lead authors of the Republican plan, and planned to meet with negotiators next week, adding that he wanted to see a bill “done” soon.
But his spokesman, Jen Psaki, while careful to praise the work of Ms. Capito and her allies, cast doubt on whether their comparatively small spending plan would ultimately pass muster.
White House officials “remain concerned that their plan still provides no substantial new funds for critical job-creating needs, such as fixing our veterans’ hospitals, building modern rail systems, repairing our transit systems, removing dangerous lead pipes, and powering America’s leadership in a job-creating clean energy economy, among other things,” Ms. Psaki said in a statement.
The White House also signaled a willingness to pursue talks into early June, when Congress returns from a Memorial Day recess, even as officials expressed concerns about the package’s narrow scope and its intention to repurpose pandemic relief funds.
The quartet of Republicans who proposed the latest plan includes Ms. Capito, Senators Patrick J. Toomey of Pennsylvania, Roy Blunt of Missouri and John Barrasso of Wyoming. The group said the proposal was proof their party was negotiating in good faith on an infrastructure deal.
They had initially presented a $568 billion plan for five years’ worth of overall spending, which also contained only a fraction of new spending; the outline presented on Thursday included about $70 billion more.
“We believe that this counteroffer delivers on what President Biden told us in the Oval Office,” Ms. Capito said, referring to a private meeting the senators attended with the president earlier this month. “It sticks to the core infrastructure features.”
Still, optimism for a bipartisan deal on infrastructure has dwindled despite an exchange of offers between the administration and Republicans, who have continued to object to Mr. Biden’s ambitions for the scope and size of a package. White House officials have expressed frustration with lawmakers’ reluctance to significantly increase the amount of new spending.
Several Democrats, wary of losing valuable time to act on their key priorities, are urging leaders to abandon the bipartisan talks and use the fast-track budget reconciliation process to advance the legislation, protecting it from a filibuster and allowing it to pass with a simple majority. A bipartisan group of senators is also quietly discussing their own proposal as a fallback option should talks between Republican senators and the White House collapse.
The Senate Environment and Public Works Committee also unanimously advanced on Wednesday a $304 billion reauthorization transportation bill, an effort that Ms. Capito said was “a major anchor” for a bipartisan accord.
A day after testifying to the Senate Committee on Banking, the chief executives of the six largest banks faced a second round of questioning from lawmakers on Thursday in an hourslong hearing before the House Committee on Financial Services.
Some of the lawmakers’ questions on topics like overdraft fees echoed Wednesday’s Senate hearing.
Others questioned executives for their views on financial regulation.
David Solomon, the chief executive of Goldman Sachs, said he believed more disclosure was needed on special purpose acquisition companies, the blank-check firms known as SPACs that have become a Wall Street favorite for bypassing the traditional public offering process.
“I think there’s an opportunity for more plain language disclosure, so that investors really understand the sponsorship economics in plain clear language, and they also understand the process,” Mr. Solomon said.
Mr. Solomon also said there were “opportunities to think carefully” about disclosure and liabilities in a typical I.P.O. process.
Jamie Dimon, the chief executive of JPMorgan Chase, called for more regulation of cryptocurrencies, noting that the bank will offer some forms of digital currency as clients demand them. “My own personal advice to people is stay away from it — that does not mean the clients don’t want it,” he said.
Lawmakers also questioned Mr. Dimon and Jane Fraser, Citigroup’s chief executive, about the banks’ resistance to conducting racial equity audits, as urged by some investors. Nearly 40 percent of JPMorgan shareholders said they were in favor of a racial equity and audit report at a recent shareholders’ meeting, but Mr. Dimon said he did not believe one was necessary.
Mr. Dimon highlighted the investments the firm has made and committed toward racial equity, a mission to which he said the firm is “devoted.”
“That is completely different than the bureaucracy and B.S. of having outside orders come in to certify something,” Mr. Dimon said. “If there are best practices that we can learn from, we’ll learn from them, but this kind of thing is not going to make it much better over time — it just adds a whole layer of unnecessary cost.”
Citi shareholders recently voted down a proposal that would have required the company’s board to oversee a racial equity audit. “We didn’t think it was needed to have a separate audit,” Ms. Fraser said of that proposal, which was pushed by CtW, an adviser to union pensions. “But it is something that we’re looking at again given it was brought up by our shareholders.”
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