13 May 2020

1) The U.S. consumer prices has declined for the second straight month as the shutdown continues with people spending less. Prices have fallen 0.8% on a seasonally adjusted basis in April, which makes it the largest drop since December 2008. The prices are being forced down by the falling cost of gasoline and energy prices. While falling prices might at first seem like a good thing, economist say that deflation, the opposite of inflation, would be very bad news. This starts a chain reaction spurred by people not buying things, which means manufactures and producers often can’t charge enough to make the product they are trying to sell, so then they stop making products and layoff people. But food prices are climbing, with the biggest increase since February 1976 by 2.6%. The Federal Reserve tries to keep inflation at around 2%, which is considered ideal, but core inflation is likely to be below 1% for the coming year. Normally, it’s expected that a large release of money into the economy, such as the recent stimulus program, would cause inflation to increase.

2) Tim Hortons of Restaurant Brands International, says the food service industry needs to change for the near future, and possibly forever. The company is increasing its digital ordering capabilities by adding to restaurants smartphone apps with enhancements to its drive-thrus and curb service. Restaurant brands using delivery services such as pizza have seen an increase in revenues during the shutdown. The delivery service industries such as GrubHub were growing before the virus crisis, but have been given a real boost which will most likely be sustained when restrictions are lifted. Some restaurant chains are even experimenting with ‘kitchen only’ restaurants with multiple brands under the same roof providing delivery only. This could be an answer to the ‘living wage’ problem with restaurant systems using less labor thereby making a greater surplus of labor which keeps wages low.

3) The economic damage to the economy may not be over with yet, indeed there are fears that the economic crisis could still get worst. The provisions from Congress has done a fair job of sheltering the most vulnerable citizens, whose provisions will run out at the end of July. It’s unlikely that the labor market will be restored by July, so if the Congress doesn’t act, the economy could slide downward even more.

4) Stock market closings for – 12 MAY 20:

Dow 23,764.78 down 457.21
Nasdaq 9,002.55 down 189.79
S&P 500 2,870.12 down 60.20

10 Year Yield: down at 0.68%

Oil: up at $25.83

6 May 2020

1) The U.S. Bureau of Labor’s CPI (Consumer Price Index) statistic declined by 0.42% in March, the largest decline since January 2015. The CPI is used to measure the change in the cost of a typical basket of goods, which an American would buy in a month. This downward trend of the index indicates the value of the dollar is going up, which is deflation. Normally, the dollar is the subject of inflation, with prices rising between 0.1% and 0.3% per month, which makes a 0.4% drop somewhat strange. The largest factor driving this drop is energy cost, which experts attribute about three-quarters of the decline to, but other goods such as automobiles, airline tickets, household furnishing and apparel have also dropped in cost. However, there is debates among economists that the CPI is flawed, because it is based on items selected two years ago, which people may not actually be buying much of now. It doesn’t account for quick changes in people’s buying habits.

2) Oil prices continue to climb for the fifth straight day, the longest run of daily gains in nine months. Production cuts are starting to whittle down the surplus, coupled with the coronavirus lockdowns subsiding. Morgan Stanley predicts the supply glut most likely has hit its peak, but still the glut in oil will remain for quite a while.

3) Consumer debt has reached a record high to start 2020, even as credit card balances decline. Household debt balances total $14.3 trillion dollars through March, which is a 1.1% increase from the previous quarter. A $34 billion dollar drop in credit card balances was offset by an increase of $27 billion dollars in student loans and $15 billion dollars in auto debt. Mortgage balances rose by $156 billion dollars. The decline of credit card debt is an indicator that people are spending less on consumer goods as a result of the coronavirus.

4) Stock market closings for – 5 May 20:

Dow 23,883.09 up 133.33
Nasdaq 8,809.12 up 98.41
S&P 500 2,868.44 up 25.70

10 Year Yield: up at 0.66%

Oil: up at $25.68

ASIAN MARKETS POST SMALL GAINS AFTER CHINA’S RATE CUT…..

 

asian markets pic

 

 

 

 

By: Economic & Finance Report

 Asian stocks posted higher gains because of the rate cuts that were provided by China. China cut it’s deposit and lending rates, so it can offset deflation. The gains posted in Asia were somewhat limited because of small data adhered in the U.S.  equity markets, which did not show major significance in its economic data.

US consumer buying did beat expectations but it did not send a ripple effect in the equity markets. The US dollar inched up .01%, while the Euro snagged  $1.1160, which happened to be the Euro’s five year low. China yuan fell greatly to the US dollar, while US crude fell $.37 cents. In February US crude oil netted its first gain monthly, the last monthly gain in crude oil was in June 2014…

-SB