US consumer confidence hit by inflation worries, but markets push higher – as it happened

Graeme Wearden

from on 2021-05-14 17:08 (#5HT4Q)

Rolling coverage of the latest economic and financial news

US consumer confidence hit by inflation worries
Inflation expectations jump
US retail sales flat in April after March surge

Earlier:

SFO investigating GFG Alliance
Full story: Investigation includes arrangements with Greensill
Amazon to hire 10,000 more UK staff
FTSE 100 rallies, but mining companies drag
Introduction: Iron ore prices plunge in China amid clampdown.
Full story: Bank of England head says drivers of inflation will not persist

6.08pm BST

After a week dominated by worries about inflation, US consumer confidence has taken a hit.... but the markets seem less concerned tonight.

US consumers are increasingly worried about rising prices, according to the University of Michigan's monthly gauge. It fell unexpectedly this month, with inflation expectations rising to the highest level in a decade.

5.32pm BST

In other news today, a campaign has been launched to encourage the UK's largest companies to fast-track payments to small suppliers

Called the Good Business Pays campaign, it is encouraging major firms to give smaller organisations a helping hand out of the pandemic, by paying swiftly.

Late payments have long been a scourge, causing financial hardship for smaller suppliers and contractors, and inhibiting their ability to grow. There have been some important steps along the way to improve this, including development of the role of Small Business Commissioner.

But more needs to be done to ensure small businesses and the self-employed are paid on time for work done and products provided, and that includes a cultural shift in bigger businesses towards faster payment practices. Good Business Pays is an excellent opportunity to create both pressure and a positive argument for change."

Today we support the launch of the #GoodBusinessPays campaign, tackling the issue of late payments to small businesses as we look to build back stronger from the pandemic.
Find out more and sign up here https://t.co/hHBxhSOgqf #SMEs #smallbusinessowners @GBP_Movement pic.twitter.com/Nltl0zif9H

5.15pm BST

European markets also closed strongly, with the Stoxx 600 finishing 1.2% higher.

Germany's DAX gained 1.4%, led by energy firms, manufacturers, and car firms like Volkswagen, Daimler and BMW.

4.56pm BST

After a volatile week, Britain's blue-chip stock index has ended the day with solid gains.

The FTSE 100 has closed 80 points higher at 7043 points, up 1.15%.

4.10pm BST

The drop in US car production last month, due to semiconductor shortages, is part of a much wider problem.

With the global car industry estimated to lose $110bn this year thanks to the chip shortage, IBM's president, Jim Whitehurst, told the BBC on Friday that the tech industry was struggling to keep up with demand brought on by the reopening of the world economy.

Some factories were forced to close when the pandemic first struck in 2020. The backlog in production was compounded by soaring demand for chips from a boom in sales of laptops, game consoles and mobile phones as people were forced into lockdown.

4.04pm BST

Wall Street is shrugging off those rising inflation expectations, with the S&P 500 index still up around 1.1%.

Technology companies, travel firms and oil producers are among the risers.

3.54pm BST

Bloomberg's Steve Matthews also has a good take on rising inflation expectations:

Inflation expectations have risen. In the Michigan survey, the median expectation for 5-10 years out are 3.1%. That's up and bears watching but not now really in a frightening way, lower than in 2006, 2008, 2011. https://t.co/CbdD33YoNV via @PayneLubbers @livrockeman @economics pic.twitter.com/2p8Mn89RDj

Some Fed officials don't put much stock in these consumer surveys of expectations and much prefer market measures of inflation expectations -- which have moved up but aren't at all inconsistent with the Fed's inflation goals.

3.44pm BST

This tweet from Greg Daco of Oxford Economics show how US consumers are more worried about inflation:

Strong rise in #inflation expectations after the strong #CPI data earlier this week:

Expected #inflation rate, next year: 4.6% (+1.2xppt)
Expected #inflation rate, next 5 years: 3.1% (+0.4ppt) pic.twitter.com/eEr8jtp48j

US consumers' 5-year inflation expectations have risen to 3.1% - a level that should concern even a dovish #Fed.

ps. bond market expectations - as measured by breakeven inflation rates - are surging too pic.twitter.com/a2Y4BjONrl

Are expectations for higher #inflation becoming embedded? If it leads to buying in anticipation of price hikes, it can be self fulfilling. Too soon to say at 3.1% pic.twitter.com/2gMVTfX6uB

3.29pm BST

Just in. US consumer confidence has fallen unexpectedly this month, as Americans grow more concerned about rising prices.

The University of Michigan's Index of Consumer Sentiment has dropped to 82.8 this month, down from 88.3 in April, preliminary data shows. Economists had expected it to rise, to 90.4.

Consumer confidence in early May tumbled due to higher inflation--the highest expected year-ahead inflation rate as well as the highest long term inflation rate in the past decade.

Univ of Michigan survey inflation expectations showed both 1-yr and 5-10 yr inflation expectations up. The 1-yr at 4.6% isn't a big concern but 5/10 year at 3.1% is the highest since 2011

The average of net price mentions for buying conditions for homes, vehicles, and household durables were more negative than any time since the end of the last inflationary era in 1980.

Shifting policy language and even minor rate increases could douse inflationary psychology. Indeed, such a policy would be consistent with consumer expectations since two-thirds expect a rate hike in the year ahead.

It should be no surprise that consumers anticipate a booming economy over the next year or so, including rapid job gains as well as increases in the inflation rate and interest rates. Indeed, consumers think these economic prospects are the natural result of stimulating an economic boom from last year's shutdown.

"Consumer confidence in early May tumbled due to higher inflation--the highest expected year-ahead inflation rate as well as the highest long term inflation rate in the past decade" https://t.co/xZ7Gqe5hzn pic.twitter.com/0ha7oodnKL

The University of Michigan consumer confidence update for May dropped unexpectedly from 88.3 to 82.8 (expected to hit 90.4). The inflation expectations component carries forward this week's price pressure message with 1-year outlook up jumping 1.2 ppt to 4.6%

2.52pm BST

Wall Street has opened higher, as New York traders try to end a volatile week on an upbeat note.

Here's the position:

Stocks opened higher Friday in a bid to extend the previous session's bounce at the end of a volatile week that saw inflation fears move front and center across capital markets. https://t.co/JnwHm8gzMC pic.twitter.com/Exh0SmA7YX

2.42pm BST

The 4.3% drop in US motor vehicle production last month shows that the chip shortage really began to bite", says Paul Ashworth of Capital Economics:

Semiconductor imports did hit a record high last month, which suggests that particular shortage may become less acute in the coming months.

Unfortunately, the shortages now extend well beyond just semiconductors, and include raw materials, other intermediate inputs and, based on the very elevated job openings rate for manufacturing, labour too. The upshot is that we expect those broader supply constraints to hold back the recovery in manufacturing output this year.

2.36pm BST

US industrial output rose by 0.7% in April, below forecasts of a 1% rise, new figures show.

UnitedStates Industrial Production month-on-month at 0.7% https://t.co/d2vCgluAuV pic.twitter.com/3KGSnI8hHI

Automotive products, transit equipment, and consumer parts all recorded losses, as shortages of semiconductors held back motor vehicle assemblies.

Among the other market groups, chemical materials and consumer energy products posted strong gains of 6.7% and 3.8%, respectively.

An important contributor to the gain in factory output was the return to operation of plants that were damaged by February's severe weather in the south central region of the country and had remained offline in March.

The weather-induced drop in total industrial production in February and the subsequent rebound in March are now estimated to have been larger than reported last month.

April #IndustrialProduction: Total +0.7%, Mfg. +0.4%, Utilities +2.6%, Mining +0.7%; #CapacityUtilization 74.9% https://t.co/zVqv8Pk85g #FedData

2.16pm BST

Neil Birrell, Premier Miton's Chief Investment Officer, says:

April US retail sales inevitably pulled back from the March surge, but still continued to advance; much in line with expectations. The data keeps telling us that the economy is pushing ahead and the University of Michigan survey later will be scrutinised for more signs of inflation.

The Fed will be keeping a close eye on the trend and how markets react, which seem to be in a holding pattern waiting for clear signs of any policy shift."

2.13pm BST

Andrew Hunter, senior US economist at Capital Economics, says stimulus cheques and easing restrictions are supporting retail spending in the US, although labor shortages could be holding hospitality back...

He writes:

The unchanged reading for retail sales in April is slightly stronger than it looks given that it follows an upwardly-revised 10.7% m/m surge in March, and it suggests that the boost from the $1,400 stimulus cheques has only partly faded.

Nevertheless, as goods spending inevitably drops back over the coming months we were hoping for an offsetting rebound in services. But food services sales only increased by 3.0% m/m last month, a marked slowdown on the March gain, which is a hint that labour shortages and the resulting surge in wages and prices may be acting as a constraint on the recovery in real activity.

2.02pm BST

Ben Casselman of the New York Times is tweeting some handy retail sales charts:

Retail sales were flat in April after a stimulus-driven surge in March (which was revised higher). Total retail sales still well above pre-pandemic trend.https://t.co/4wY06160ik pic.twitter.com/xarOsxPEAh

Big jump in restaurant spending as vaccinations spread/restrictions lift. Up 3% from March, now down just 2% from prepandemic level. pic.twitter.com/AUZDwX6IQb

Clothing-store sales down a bit in April after surging in March. But here's a number you don't see every day: Sales were up 726.8% from a year ago (because no one bought clothes in April 2020). pic.twitter.com/o0xpnMHvc0

2.01pm BST

The US retail sales report also shows that spending on cars and auto parts rose 2.9% month-on-month in April (on top of a 17.1% surge in March).

Spending on electronics kit and appliances rose by 1.2% (again, after a very strong March when it jumped 17.5%).

It ain't about speed, it's all about tempo#Retail sales flat in April w/ core sales -1.5%

Rest. & bars +3.0%
Auto +2.9%
Elect +1.2%
Health +1.0%
Build mat -0.4%
Online -0.6%
Furn. -0.7%
Gas -1.1%
Sports -3.6%
Cloth -5.1%

Don't be fooled, stronger consumer spending ahead pic.twitter.com/YwFwvsU0b1

1.40pm BST

Just in: US retail sales were unchanged in April, after a surge of spending in March.

That's below than the 1% monthly growth which had been expected, as the US economy picked up speed.

BREAKING:

*U.S. RETAIL SALES 0.0% IN APRIL; EST. +1.0% pic.twitter.com/vP2hgsL1jB

Retail sales unchanged from March to April, meaning they hit a high peak in March and kept it up in April. All is well.

Retail & food services seasonally adjusted sales ex autos were $480.4b in April 2021, down 0.8% from March 2021, but up 40.6% from April 2020. #CensusEconData #RetailSales

1.28pm BST

ING rates strategist Antoine Bouvet has also digested the ECB minutes, and tweeted some analysis:

ECB minutes (/accounts) thread 1/n

The overall message was (as widely expected) 'see you in June', in particular wrt the subject that concerns us the most: the pace of PEPP purchases

The ECB did not avoid the topic entirely. Discussions on the path for bond yields suggest that they were satisfied that EUR rates failed to follow USD peers after the March meeting

2/n

I find it is difficult to extrapolate and say if the ECB would be uncomfortable with EUR rates rising FASTER than USD since the last meeting

BUT the GC sounded pretty dismissive of the rise in inflation swaps, attributing it largely to greater inflation risk premia

3/n

In plain English, they are sceptical that the outlook for inflation has improved as much as swap suggest, even if their economic assessment seemed more upbeat to mehttps://t.co/PMHpubxMSs

Fin (4/4)

This last point partially contradicts our argument this morning that negative real rate are still near a record low, although the point about credit spreads remaining unaffected still standshttps://t.co/dwqQFpUIpN pic.twitter.com/ctw7CHCFbG

1.26pm BST

The minutes of the European Central Bank's last monetary policy meeting are out, and show that policymakers expect a firm' rebound in growth later this year, thanks to Covid-19 vaccines.

While the recovery in global demand and the sizeable fiscal stimulus were supporting global and euro area activity, the near-term economic outlook remained clouded by uncertainty about the resurgence of the pandemic and the roll-out of vaccination campaigns.

Looking ahead, progress with vaccination campaigns and the envisaged gradual relaxation of containment measures underpinned the expectation of a firm rebound in economic activity in the course of 2021.

While in some countries activity was expected to return to pre-pandemic levels by the end of 2021, in others - especially those in which the services sector had been most affected - it was expected still to be below the pre-pandemic level at the end of 2022.

It was suggested that forced savings might unwind more dynamically than expected. A one-off boost to consumption later in the year was considered a possibility, based on previous observations, when higher consumption had followed lower infection rates and an easing of restrictions last summer. Still, it was also possible that the boost to consumption from pent-up demand might unfold more gradually. At the same time, it was argued that consumers might prove to be more cautious in their spending this year.

Against this background, it was generally felt that risks to activity had become more balanced over the medium-term horizon, with a view also being expressed that they were now marginally tilted to the upside.

Members recalled that the monetary policy meeting in June would provide the next opportunity to conduct a thorough assessment of financing conditions and the inflation outlook, at which time the assessment would be informed by the new Eurosystem staff macroeconomic projections.

There are no clues about the ECB's next steps from the latest minutes but @carstenbrzeski expects the tapering debate to grow louder over the summerhttps://t.co/OcV0RtCna5

12.47pm BST

Oil is moving higher, with Brent crude now up over 1% to almost $68 per barrel (having fallen from $69 to $67 yesterday).

Oils update:
Oil - WTI (AUG) 6447 +1.23%
Oil - WTI (JUN) 6465 +1.28%
Oil - Brent (AUG) 6769 +1.23%
Oil - Brent (SEP) 6732 +1.17%#Gasoline 21102 +0.9%#London Gas Oil 553 +1.24%#Oil #Brent #WTI #OOTT

12.22pm BST

On the smaller FTSE 250 index, Sanne Group is leading the risers - leaping over 20%, after becoming the latest UK firm to receive a takeover approach.

Sanne, an alternative asset and corporate services business, has rejected the 1.35bn buyout offer from private equity firm Cinven, saying it was opportunistic" and significantly undervalues" the company.

1.35bn proposal for Sanne Group Plc by Cinven has been rejected outright by the Sanne Board as "opportunistic" and "not meriting further engagement". But with a premium of 38% and an EV/EBITDA multiple of 25x, some shareholders may disagree. #privateequity #manda

Cinven's approach marks the latest example of a UK-listed company that has drawn interest from a private equity buyer, at a time when UK equities are relatively cheap amid the fallout from the pandemic and uncertainty surrounding Brexit.

On Wednesday, US buyout firm Clayton, Dubilier & Rice agreed to acquire UDG Healthcare for 2.61bn in cash, while last week Blackstone made a 1.2bn approach to buy St Modwen Properties, a logistics and housing developer.

12.08pm BST

UK accountancy software firm Sage is the top FTSE 100 riser, up 3.3% so far, after beating forecasts this morning, with a 4.4% rise in organic recurring revenue.

Sage also reassured the City by reporting that its move towards cloud computing was on track, helping it win customers.

We continue to innovate to support customers and drive growth - Sage Business Cloud growth of 18%, with cloud native solutions growing at 36%. Thank you to colleagues, partners and customers for your support. #SageResults pic.twitter.com/UUnMGXLdDS

Following a strong performance in the first half, we now expect organic recurring revenue growth for FY21 to be towards the top end of our guidance range of 3% to 5%.

Historically Sage was a steady-eddy' business built on a license sales model, where most of the contracted cash came up front with high margin servicing and maintenance income rolling in over the term of the contract.

In recent times its market has been disrupted by cloud computing as clients look to access applications on any internet-enabled device and this has led to volatility in the share price.

11.49am BST

Back in the markets, European shares continue to bounce from their losses earlier this week.

The UK's FTSE 100 is holding above the 7,000-point mark, up around 0.66% today. The pan-European Stoxx 600 is up 0.5%, with gains on France's CAC (+0.66%) and Germany's DAX (+0.5%).

Stocks are higher, recovering some ground lost during a choppy week. Fed officials have been out in force to calm inflation nerves.

Governor Christopher Waller said rates will not rise until policymakers see inflation above target for a long time or there is excessively high inflation, saying the Fed will need to see several more months of data.

McDonald's is among the latest companies to raise hourly wages. It will raise wages at an average of 10 percent for its U.S. company-owned restaurants over the next several months. https://t.co/Ja721ADnRD pic.twitter.com/aaCoFjGqBz

Wage push inflation is of greater concern than short-term supply chain pressures and rising commodity prices.

The labour market is far tighter than it looks - the Fed will hope that things change quickly once Federal assistance rolls off later in the year. That could see us endure a rough summer of hot inflation readings, with the Fed looking on and hoping it comes to an end in the autumn.

11.17am BST

Here's our story on Amazon's plans to hire 10,000 more staff in the UK:

11.07am BST

GFG say they will co-operate' fully with the Serious Fraud Office's investigation.

It also says its factories are still working around the world, and that it is making progress' in its search for new financial backing -- following the collapse of Greensill.

GFG Alliance notes the UK Serious Fraud Office (SFO)s announcement that it has opened an investigation into GFG Alliance. GFG Alliance will co-operate fully with the investigation. As these matters are the subject of an SFO investigation we cannot make any further comment.

GFG Alliance continues to serve its customers around the world and is making progress in the refinancing of its operations which are benefitting from the operational improvements it has made and the very strong steel, aluminium and iron ore markets."

10.56am BST

The Serious Fraud Office's investigation into the financing of Sanjeev Gupta's metals empire by Greensill Capital will heighten concerns over the future of thousands of UK jobs at Liberty Steel.

My colleague Jasper Jolly explains:

The UK's anti-corruption agency said it suspected fraud, fraudulent trading and money laundering related to the financing of Gupta Family Group (GFG) Alliance, the loose grouping of steel and metals trading companies controlled by Gupta.

It includes its financing arrangements with Greensill Capital UK Ltd, the supply chain finance provider set up by the banker Lex Greensill. Previous court representations have suggested Greensill lent Gupta's companies as much as $5bn (3.6bn).

10.34am BST

The UK's Serious Fraud Office has announced it is investigating Sanjeev Gupta's GFG Alliance and its financing arrangements with Greensill Capital.

GFG Alliance owns Liberty Steel, which employs 3,000 steel workers in the UK. It employs 35,000 people at metalworks across the world.

The SFO is investigating suspected fraud, fraudulent trading and money laundering in relation to the financing and conduct of the business of companies within the Gupta Family Group Alliance (GFG), including its financing arrangements with Greensill Capital UK Ltd.

As this is a live investigation, the SFO can provide no further comment.

SFO investigating conduct of Gupta Family Group Alliance (GFG) companies over suspected fraud and money laundering, including financing arrangements with Greensill Capital UK Ltd.

More here:

https://t.co/B27TKh3AQ3 pic.twitter.com/VV37oBE7Wv

Serious Fraud Office investigating Sanjeev Gupta's GFG Alliance. Finally pic.twitter.com/T7IIPXbisr

UK Serious Fraud Office says it's investigating Gupta Family Group Alliance for suspected fraud and money-laundering over its dealings with Greensill

Finally.

We are also cooperating with counterparts in other UK enforcement and regulatory agencies, as well as authorities in a number of overseas jurisdictions.

10.12am BST

Business secretary Kwasi Kwarteng tweets:

Great to visit @AmazonUK in #Gateshead this morning as they announce 10,000 new, full-time jobs in the UK - as well as investing 10m to boost skills

This is a huge vote of confidence in the British economy and our workforce, helping us to #BuildBackBetter pic.twitter.com/cKkOfZ0yxH

10.03am BST

As well as hiring 10,000 more UK staff, Amazon is also spending 10m over the next three years on employee training.

This money will help 5,000 of its staff learn new skills to help them get a job outside Amazon, and boost the skills and employability of British workers".

This is a great initiative that will not only help Amazon but also provide a much wider benefit to the community, while showcasing how business can be a force for good.

Providing staff with training to plug the skills gaps that exist within the local business community is going to be a key driver to increasing productivity and boosting the economy as the UK recovers from the pandemic."

9.42am BST

Jobs news: Amazon is create 10,000 new permanent jobs in the United Kingdom this year, taking its UK workforce over 55,000.

Amazon to create more than 10,000 new jobs taking its total UK workforce to more than 55,000 by end of the year - @AmazonUK

Amazon's announcement today is fantastic news and a huge vote of confidence in the British economy, helping us deliver on our commitment to level up across the UK with a whopping 10,000 new permanent jobs.

As we build back better from the pandemic, this is a prime investment in our retail sector.

Fresh questions have been raised over Amazon's tax planning after its latest corporate filings in Luxembourg revealed that the company collected record sales income of 44bn (38bn) in Europe last year but did not have to pay any corporation tax to the Grand Duchy.

Accounts for Amazon EU Sarl, through which it sells products to hundreds of millions of households in the UK and across Europe, show that despite collecting record income, the Luxembourg unit made a 1.2bn loss and therefore paid no tax.

9.03am BST

Singapore's stock market fell sharply today, as authorities announced new Covid-19 restrictions following a rise in cases.

Singapore now has 12 active clusters and has already recorded 112 domestic infections this month, compared to 55 cases in April and just nine in March.

Health minister Gan Kim Yong said it was almost impossible" to completely eradicate the virus and we will have to learn to live with it".

Singapore stocks fall 3% as Covid restrictions tighten, travel bubble with Hong Kong likely delayed @YenNee_Lee https://t.co/QOdkwGnBWZ

8.34am BST

In London, the FTSE 100 has risen back to the 7,000 mark in early trading.

The blue-chip index of leading shares is up 44 points, or 0.6%, at 7007 points.

8.27am BST

Asia-Pacific stock markets have bounced back today, as the recovery on Wall Street last night lifted spirits.

Japan's Nikkei jumped 2.3%, after three days of heavy losses.

Stocks are broadly higher, in a move that's pretty unconvincing at the moment, but speaks of a market willing to give risk-assets another crack.

Bond yields are easing back off their highs, along with implied measures of inflation. While perhaps most conspicuously, commodity prices are down right across the board, and subsequently helping ease inflation fears, with a lot of that coming as traders back-off buying commodities as speculation mounts that the Chinese government is preparing to crack-down harder on surging prices.

Nikkei 225 closes up by 2.32% at 28,084.47
The Topix also closes up by 1.9% at 1,883.42 but it has been a rough week for Japanese indices, falling by a little over 4% with little help from the BOJ in terms of stepping in with ETF purchases this week

8.13am BST

Copper prices are on track for their first weekly loss in a month, Reuters says.

Supply will improve, while we note credit impulse data in the United States and China is easing, which will help demand taper off later this year and next," said Fitch Solutions in a report.

Metal prices will ease later in the year as the ongoing supply-demand mismatch eases."

7.44am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

If the circumstances are serious, it shall be ordered to suspend business for rectification, or its business license shall be revoked and publicly exposed.

#Ironore limit-down in #China, down 10% today.
chart @YuanTalks pic.twitter.com/s3Vu77zwfW

Stocks finishing strong. Currencies have been mostly boring all week. Check out the unwind in commodities though. Yikes. pic.twitter.com/FYlk5zP5ie

European Opening Calls:#FTSE 7000 +0.52%#DAX 15299 +0.65%#CAC 6329 +0.65%#AEX 699 +0.63%#MIB 24673 +0.76%#IBEX 9026 +0.67%#OMX 2217 +0.50%#STOXX 3981 +0.72%#IGOpeningCall

So the really big question is, is [higher inflation] going to persist or not? Our view is that on the basis of what we're seeing so far, we don't think it is."

Richmond Fed President Barkin said that he didn't see persistent recurring inflation as likely, while later on Fed Reserve governor Waller joined the chorus saying that the rise in prices is temporary".

This comes even as he forecasts inflation remaining above the 2% target through 2022, though he acknowledged that persistent 4% monthly increase would be very concerning". Waller wants to observe a few months of economic data before calling any point an outlier or adjusting any policy stances.

Source	RSS or Atom Feed
Feed Location	http://feeds.theguardian.com/theguardian/business/economics/rss
Feed Title
Feed Link	http://feeds.theguardian.com/