CDC Lifts All Restriction Guidelines on Those Who Are Vaccinated… The CDC updated its guidelines to remove mask and social distancing requirements for people who have been vaccinated against COVID-19.
What it means— Let’s have a massive mask bonfire! First, before the vaccines were available, some refused to wear masks to signal their defiance of mask mandates. Later, the masks became a symbol of virtue for others, who wore them even while alone outdoors after getting vaccinated. It will be a relief to get back to some semblance of normal life. Perhaps we can restart the rest of the economy, including leisure and hospitality, and encourage anyone on the fence about vaccination to take the leap.
While it will be nice to see people’s faces again, we can’t overstate the importance to the economy of eliminating masks and social distancing restrictions. Properties in Las Vegas immediately returned to 100% capacity operations, and it’s likely that everything from coffee shops to theme parks will do the same. Those with pricing power, like Disney (NYSE: DIS) and Starbucks (Nasdaq: SBUX) should have very profitable summers.
Inflation Runs Hot, Up 4.2% Over Last Year… Shooting past expectations, prices increased dramatically over the last year, marking a 13-year high, with core inflation less food and energy up 3%, the highest level in a quarter of a century (yes, the mid-1990s really were that long ago).
What it means— The Fed members are probably sweating a bit after this week’s inflation report. Chair Powell and his cohorts have been talking about the “transitory” inflation, which they expect to dissipate in a few months, as low readings from early 2020 fall out of the comparison and the stimulus effects wear off. But what if they’re wrong? With trillions of dollars charged to the national credit card and then sent to consumers and businesses, we have a lot of room for consumption to run, and the labor market appears tight even as unemployment remains at 6%. The Fed Chair and governors have been clear: they intend to stand pat, holding interest rates near zero and buying $120 billion worth of bonds each month for at least the rest of the year. With that as a background, the inflation numbers sent shudders through the equity markets and pushed long rates higher.
The Job Openings and Labor Turnover Survey (JOLTS) showed eight million job openings in March and 9.6 million people unemployed. We’re getting close to the point where we have more jobs than people out of work. This sure sounds like a recipe for wage-push inflation.
Producer Prices Jump 6.2%, the Highest Reading Since 2009… Producer prices, also considered wholesale prices, rose at the fastest rate since the oil spike of 2008-2009 worked its way through the economy.
What it means— As with consumer prices, it’s not so obvious that the rising costs of wholesale goods will fade. Two thirds of the higher prices were in services, including air travel, medical care, and retailing. Wholesale food prices jumped 2.1%. The core rate excluding food and energy increased by 4.6%, which shows that the high prices are broad-based and not associated only with the highly volatile food and energy categories.
The big issue with both consumer and wholesale prices is pricing power. For most of the 2010s, it appeared that suppliers and retailers had little pricing power, which kept inflation to a minimum. As consumers emerge from the economic lockdown with more cash and less debt, it looks like businesses will have more leeway to raise prices without losing business.
Retail Sales Moved Sideways in April: March Sales Gains Were Revised Higher, From 9.7% to 10.7%… Analysts expected a 1% gain, based on stimulus payments and fewer economic restrictions.
What it means— After sales jumped by more than 10% in March, it’s a wonder we didn’t give up a little bit of ground in April, especially with the semiconductor chip shortage crimping sales across several industries. With masks and economic restrictions coming off just as the summer season arrives, look for retail sales to shoot higher in the months ahead.
Colonial Pipeline Shuts Down After Ransomware Attack, Restarts After Payment… Cyber criminals took control of the Colonial gas pipeline, which stretches from Texas to New Jersey. The firm paid the ransom within hours of the attack, but it still took four days to restart the pipeline.
What it means— The pipeline supplies Southeastern and Atlantic Seaboard states with refined fuels. News of the shutdown and possible shortages sent drivers to the gas station to top up their tanks and fill any portable containers they had (including plastic bags), which made the situation worse. The company and authorities identified the perpetrators, a group of Russia-based online criminals known as DarkSide. The timing was fortunate, as retailers were stocking up for Memorial Day, which meant they had more supply than usual on hand to get them through.
Tesla Crippled Crypto… Tesla reversed course; the company now won’t accept bitcoins as payment, because Founder Musk claims the cryptocurrency consumes insane amounts of electricity, which leads to higher greenhouse gas emissions.
What it means— Um, gee, where’s Musk been for the past ten years? Or the past three months? Just in February of this year, he lit the digital currency world on fire by announcing that Tesla would buy cryptos with its excess cash and that such currencies were on the cusp of gaining wide acceptance worldwide. It appears that since then, someone pointed out to Musk that mining Bitcoin takes enormous computing power, which is generated by electricity, and that the Chinese dominate the field because they have access to nearly free, coal-fired electricity. Tesla said it won’t divest of its crypto holdings, but the company’s announcement and Musk’s words drove Bitcoin, Ether, and other cryptocurrencies lower.
Chick-fil-A Suffers Sauce Shortage, Sends Customers Into a Tizzy… Citing ingredient shortages due to supply chain issues and labor shortages, the fast-food chain limited customers to one sauce packet per entrée, two sauce packets per meal, and three sauce packets per 30-count nugget order. While this might be anathema to Americans who regularly enjoy gluttonous proportions (50-ounce 7-Eleven Double Gulp drink, anyone?), people from other countries must be wondering why anyone would want more than one sauce per meal.
Data supplied by HS Dent Research
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