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How Long Will ‘Transitory’ Inflation Last?

The US Consumer Price Index surged in April, topping estimates by a wide margin. The question is whether this is the start of an inflationary wave or just the latest run of noise? Reliably answering that question will take several months at the least,…

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The US Consumer Price Index surged in April, topping estimates by a wide margin. The question is whether this is the start of an inflationary wave or just the latest run of noise?

Reliably answering that question will take several months at the least, but if we ignore that caveat the numbers for last month certainly look worrisome. Let’s start with core CPI, which strips out the food and energy noise, a filter that helps identify the underlying trend. On this basis, the monthly surge in core CPI is an extreme outlier: the 0.9% increase in April is the highest since inflation was raging 40 years ago. That could be a sign that the jig is up and pricing pressure is heating up to the point that the old paradigm no longer applies. But outliers can also be one-time shocks that are mostly light and heat. Outliers, by definition, after all, aren’t usually indicative of the trend. Unfortunately, we don’t yet know which applies and so caution is still recommended for reading too much in one number.

Filtering out the monthly noise paints a less severe trend, but even here the year-over-year results stand out. The 3.0% rise is the highest in nearly 15 years.

Taking the two charts at face value makes it easy to conclude that the inflation genie is out of the bottle. No one can dismiss that possibility and yesterday’s numbers raise the odds that hotter inflation is more likely than previously thought. But it’s also a mistake to see the April report as a smoking gun that cements the worst-case outlook for inflation. As anyone who trafficks in economics data more than casually understands, one monthly macro report (or even two or three) can easily mislead us.

One reason is that economics data is revised, sometimes dramatically. There’s also an added complication in 2021: the pandemic effects on the economy are unprecedented in modern times and so analysts are still grappling with unusually noisy numbers. Recall that it was just a week ago that the April payrolls report was sharply weaker than expected: jobs increased 266,000 last month, a world below the expected 1-million gain.


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As for CPI, there are surely several temporary factors that drove inflation up last month. As Bloomberg’s John Authers observes, “There are a number of bizarre numbers within the data that plainly wouldn’t have happened without the pandemic, and must be transitory to an extent. Most notably, inflation in the prices of used cars and trucks took off as rental companies struggled to cope with reawakened demand:”

In fact, supply chain issues generally have conspired to be a key contributing factor in the jump in inflation. But supply shortages aren’t necessarily inflationary, at least not beyond the short term. Indeed, higher prices are the catalyst that typically leads to greater supply, which suggests that many of the supply chain shortages will be short-lived.

Eric Winograd, senior economist at AllianceBernstein, makes this point, writing in a note to clients: “The more persistent categories of inflation (services, and rent specifically) were relatively tame last month, but goods prices surged, as did transportation and travel. None of those moves are likely to be persistent. Over time, that means that the most likely course of events is still for inflation to settle down as the supply side of the economy catches up to the demand side.”

Perhaps the biggest risk is expectations. Even if the supply-demand gap lessens in the months ahead, there’s a danger that the mindset on inflation will change, unleashing a self-reinforcing pattern that drives prices higher. Such inflationary sentiment has been dormant in the US for much of the past four decades, but some analysts wonder if it could return.

“If everybody else is raising prices, it becomes a lot easier for you to do that, too,” notes Kristin Forbes, an MIT economist.

Adding to the inflation-is-coming narrative: a ramp-up in government stimulus and ongoing dovish monetary policy. The combination, runs the thinking, will break the disinflation-deflation trends of the past generation.

Nonetheless, one data point doesn’t tell us much, even if it’s easy to characterize the April results as a tipping point. The true smoking gun, if there is one, will take time to emerge. Exhibit A on that front will be a sharply higher pace in core CPI on a year-over-year basis that holds on to the jump.

For the moment, the latest pop still looks like one more transitory runup. Note that there have been several spikes over the years, and every one so far has turned out to be fleeting, as the annual core CPI chart above indicates.

The argument for thinking that a runup in inflation is one more passing phase includes the failed efforts by policymakers to raise pricing pressure over the past ten years. Despite continued efforts at ever-greater unprecedented monetary stimulus programs, inflation has remained muted.

Perhaps the question to ask: What would inflation be if the Federal Reserve shifted from dovish to neutral or even hawkish tomorrow?

The cold, hard facts tell us that structural forces in the global economy have put downward pressure on inflation for 40 years. Have these forces receded to the point that allows pricing pressure to sustainably surge? Maybe, but that’s not evident in the April CPI data.

Jeff Snider at Alhambra Investments asks the essential question: “The economy right now is improving, even rebounding as more reopening gets done, but with such a long way still to go and having squandered so much time just to get this far once the latest sugar high wears off, what will the CPI look like this summer?”

We may be on the cusp of a new inflationary regime, but the secular forces of the past 40 years (still) suggest otherwise. That leaves us with just one task: monitor the incoming data in the months ahead to decide which way the wind is blowing and whether it’s shifted. Meantime, as a baseline forecast, the disinflation/deflation still resonates – until or if the reports ahead tell us otherwise.

“Add it all up, and I would say that it will be at least six months for the Fed to get a sense of whether inflation pressures are transitory and more likely 12 months to make a firm conclusion in that respect,” advises Brett Ryan, an economist at Deutsche Bank AG.


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Part 1: Current State of the Housing Market; Overview for mid-March 2024

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-March 2024
A brief excerpt: This 2-part overview for mid-March provides a snapshot of the current housing market.

I always like to star…

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Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-March 2024

A brief excerpt:
This 2-part overview for mid-March provides a snapshot of the current housing market.

I always like to start with inventory, since inventory usually tells the tale!
...
Here is a graph of new listing from Realtor.com’s February 2024 Monthly Housing Market Trends Report showing new listings were up 11.3% year-over-year in February. This is still well below pre-pandemic levels. From Realtor.com:

However, providing a boost to overall inventory, sellers turned out in higher numbers this February as newly listed homes were 11.3% above last year’s levels. This marked the fourth month of increasing listing activity after a 17-month streak of decline.
Note the seasonality for new listings. December and January are seasonally the weakest months of the year for new listings, followed by February and November. New listings will be up year-over-year in 2024, but we will have to wait for the March and April data to see how close new listings are to normal levels.

There are always people that need to sell due to the so-called 3 D’s: Death, Divorce, and Disease. Also, in certain times, some homeowners will need to sell due to unemployment or excessive debt (neither is much of an issue right now).

And there are homeowners who want to sell for a number of reasons: upsizing (more babies), downsizing, moving for a new job, or moving to a nicer home or location (move-up buyers). It is some of the “want to sell” group that has been locked in with the golden handcuffs over the last couple of years, since it is financially difficult to move when your current mortgage rate is around 3%, and your new mortgage rate will be in the 6 1/2% to 7% range.

But time is a factor for this “want to sell” group, and eventually some of them will take the plunge. That is probably why we are seeing more new listings now.
There is much more in the article.

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RFK Jr. Reveals Vice President Contenders

RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former…

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RFK Jr. Reveals Vice President Contenders

Authored by Jeff Louderback via The Epoch Times,

New York Jets quarterback Aaron Rodgers and former Minnesota governor and professional wrestler Jesse Ventura are among the potential running mates for independent presidential candidate Robert F. Kennedy Jr., the New York Times reported on March 12.

Citing “two people familiar with the discussions,” the New York Times wrote that Mr. Kennedy “recently approached” Mr. Rodgers and Mr. Ventura about the vice president’s role, “and both have welcomed the overtures.”

Mr. Kennedy has talked to Mr. Rodgers “pretty continuously” over the last month, according to the story. The candidate has kept in touch with Mr. Ventura since the former governor introduced him at a February voter rally in Tucson, Arizona.

Stefanie Spear, who is the campaign press secretary, told The Epoch Times on March 12 that “Mr. Kennedy did share with the New York Times that he’s considering Aaron Rodgers and Jesse Ventura as running mates along with others on a short list.”

Ms. Spear added that Mr. Kennedy will name his running mate in the upcoming weeks.

Former Democrat presidential candidates Andrew Yang and Tulsi Gabbard declined the opportunity to join Mr. Kennedy’s ticket, according to the New York Times.

Mr. Kennedy has also reportedly talked to Sen. Rand Paul (R-Ky.) about becoming his running mate.

Last week, Mr. Kennedy endorsed Mr. Paul to replace Sen. Mitch McConnell (R-Ky.) as the Senate Minority Leader after Mr. McConnell announced he would step down from the post at the end of the year.

CNN reported early on March 13 that Mr. Kennedy’s shortlist also includes motivational speaker Tony Robbins, Discovery Channel Host Mike Rowe, and civil rights attorney Tricia Lindsay. The Washington Post included the aforementioned names plus former Republican Massachusetts senator and U.S. Ambassador to New Zealand and Samoa, Scott Brown.

In April 2023, Mr. Kennedy entered the Democrat presidential primary to challenge President Joe Biden for the party’s 2024 nomination. Claiming that the Democrat National Committee was “rigging the primary” to stop candidates from opposing President Biden, Mr. Kennedy said last October that he would run as an independent.

This year, Mr. Kennedy’s campaign has shifted its focus to ballot access. He currently has qualified for the ballot as an independent in New Hampshire, Utah, and Nevada.

Mr. Kennedy also qualified for the ballot in Hawaii under the “We the People” party.

In January, Mr. Kennedy’s campaign said it had filed paperwork in six states to create a political party. The move was made to get his name on the ballots with fewer voter signatures than those states require for candidates not affiliated with a party.

The “We the People” party was established in five states: California, Delaware, Hawaii, Mississippi, and North Carolina. The “Texas Independent Party” was also formed.

A statement by Mr. Kennedy’s campaign reported that filing for political party status in the six states reduced the number of signatures required for him to gain ballot access by about 330,000.

Ballot access guidelines have created a sense of urgency to name a running mate. More than 20 states require independent and third-party candidates to have a vice presidential pick before collecting and submitting signatures.

Like Mr. Kennedy, Mr. Ventura is an outspoken critic of COVID-19 vaccine mandates and safety.

Mr. Ventura, 72, gained acclaim in the 1970s and 1980s as a professional wrestler known as Jesse “the Body” Ventura. He appeared in movies and television shows before entering the Minnesota gubernatorial race as a Reform Party headliner. He was a longshot candidate but prevailed and served one term.

Former pro wrestler Jesse Ventura in Washington on Oct. 4, 2013. (Brendan Smialowski/AFP via Getty Images)

In an interview on a YouTube podcast last December, Mr. Ventura was asked if he would accept an offer to run on Mr. Kennedy’s ticket.

“I would give it serious consideration. I won’t tell you yes or no. It will depend on my personal life. Would I want to commit myself at 72 for one year of hell (campaigning) and then four years (in office)?” Mr. Ventura said with a grin.

Mr. Rodgers, who spent his entire career as a quarterback for the Green Bay Packers before joining the New York Jets last season, remains under contract with the Jets. He has not publicly commented about joining Mr. Kennedy’s ticket, but the four-time NFL MVP endorsed him earlier this year and has stumped for him on podcasts.

The 40-year-old Rodgers is still under contract with the Jets after tearing his Achilles tendon in the 2023 season opener and being sidelined the rest of the year. The Jets are owned by Woody Johnson, a prominent donor to former President Donald Trump who served as U.S. Ambassador to Britain under President Trump.

Since the COVID-19 vaccine was introduced, Mr. Rodgers has been outspoken about health issues that can result from taking the shot. He told podcaster Joe Rogan that he has lost friends and sponsorship deals because of his decision not to get vaccinated.

Quarterback Aaron Rodgers of the New York Jets talks to reporters after training camp at Atlantic Health Jets Training Center in Florham Park, N.J., on July 26, 2023. (Rich Schultz/Getty Images)

Earlier this year, Mr. Rodgers challenged Kansas City Chiefs tight end Travis Kelce and Dr. Anthony Fauci to a debate.

Mr. Rodgers referred to Mr. Kelce, who signed an endorsement deal with vaccine manufacturer Pfizer, as “Mr. Pfizer.”

Dr. Fauci served as director of the National Institute of Allergy and Infectious Diseases from 1984 to 2022 and was chief medical adviser to the president from 2021 to 2022.

When Mr. Kennedy announces his running mate, it will mark another challenge met to help gain ballot access.

“In some states, the signature gathering window is not open. New York is one of those and is one of the most difficult with ballot access requirements,” Ms. Spear told The Epoch Times.

“We need our VP pick and our electors, and we have to gather 45,000 valid signatures. That means we will collect 72,000 since we have a 60 percent buffer in every state,” she added.

The window for gathering signatures in New York opens on April 16 and closes on May 28, Ms. Spear noted.

“Mississippi, North Carolina, and Oklahoma are the next three states we will most likely check off our list,” Ms. Spear added. “We are confident that Mr. Kennedy will be on the ballot in all 50 states and the District of Columbia. We have a strategist, petitioners, attorneys, and the overall momentum of the campaign.”

Tyler Durden Wed, 03/13/2024 - 15:45

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Pharma industry reputation remains steady at a ‘new normal’ after Covid, Harris Poll finds

The pharma industry is hanging on to reputation gains notched during the Covid-19 pandemic. Positive perception of the pharma industry is steady at 45%…

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The pharma industry is hanging on to reputation gains notched during the Covid-19 pandemic. Positive perception of the pharma industry is steady at 45% of US respondents in 2023, according to the latest Harris Poll data. That’s exactly the same as the previous year.

Pharma’s highest point was in February 2021 — as Covid vaccines began to roll out — with a 62% positive US perception, and helping the industry land at an average 55% positive sentiment at the end of the year in Harris’ 2021 annual assessment of industries. The pharma industry’s reputation hit its most recent low at 32% in 2019, but it had hovered around 30% for more than a decade prior.

Rob Jekielek

“Pharma has sustained a lot of the gains, now basically one and half times higher than pre-Covid,” said Harris Poll managing director Rob Jekielek. “There is a question mark around how sustained it will be, but right now it feels like a new normal.”

The Harris survey spans 11 global markets and covers 13 industries. Pharma perception is even better abroad, with an average 58% of respondents notching favorable sentiments in 2023, just a slight slip from 60% in each of the two previous years.

Pharma’s solid global reputation puts it in the middle of the pack among international industries, ranking higher than government at 37% positive, insurance at 48%, financial services at 51% and health insurance at 52%. Pharma ranks just behind automotive (62%), manufacturing (63%) and consumer products (63%), although it lags behind leading industries like tech at 75% positive in the first spot, followed by grocery at 67%.

The bright spotlight on the pharma industry during Covid vaccine and drug development boosted its reputation, but Jekielek said there’s maybe an argument to be made that pharma is continuing to develop innovative drugs outside that spotlight.

“When you look at pharma reputation during Covid, you have clear sense of a very dynamic industry working very quickly and getting therapies and products to market. If you’re looking at things happening now, you could argue that pharma still probably doesn’t get enough credit for its advances, for example, in oncology treatments,” he said.

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