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Real Time Economics |
Good morning. David Harrison here filling in for Jeff Sparshott with the latest on the economy. You can send questions, comments and suggestions by replying to this email. |
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The global economy’s strange, unsettled post-pandemic interlude is going to be with us for a while longer. Economists and central bankers have repeatedly said this period of supply-chain disruptions, surging commodity prices, ravenous consumer demand and high inflation will be temporary. So far, however, it’s showing few signs of abating. Shipping rates from China to the U.S. West Coast are up 66% since January and are up more than 400% since the beginning of 2020, reports Costas Paris. The pressure is only likely to intensify as retailers begin preparing for the holiday season. Shipyards have been rushing to build new ships but most won’t be delivered until 2023. Meanwhile, demand for space and high rates will likely continue into next year. General Mills will raise prices on its grocery products around the world as it faces its highest costs in a decade, write Annie Gasparo and Micah Maidenberg. The maker of Cheerios cereal and Betty Crocker cake mix said higher prices for ingredients, packaging, trucking and labor combined will push up its costs about 7% over the next year or so. Other food makers such as Campbell Soup Co. and J.M. Smucker Co. are also charging more. Also in line to get more expensive: booze. Vineyards, brewers and distillers say they’ve been absorbing higher costs, holding down consumer price increases for now. But that may not last, writes Alistair MacDonald. Costs for cardboard packaging, aluminum for beer cans, labels, energy and transportation are all rising. |
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Meanwhile, a shortage of computer chips continues to bedevil the auto industry. Ford Motor Co. said Wednesday it will close or cut output through much of July at factories in Michigan, Kentucky, Missouri and Illinois. Ford has had to scrap production of more than 350,000 vehicles that it had planned to build this year through May. General Motors has cut production by 250,000 vehicles, write Mike Colias and Nora Naughton. On Wall Street, investors are starting to have doubts about how strong the U.S. economy will be in the coming years. Yields on the benchmark 10-year Treasury note have fallen in recent months as investors pare back their expectations, writes Sam Goldfarb. |
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U.S. jobless claims came in at 411,000 in the week ended June 19. Economists expect they'll tick down to 390,000 for the week ended June 26. (8:30 a.m. ET) Manufacturing activity in the U.S. expanded slightly in May and economists expect it at 62.6 in June. (10 a.m. ET) |
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After two weeks of higher readings, the number of new jobless claims is expected to dip once more for the week ended June 26, reports Bryan Mena. Economists surveyed by The Wall Street Journal expect claims decreased to a seasonally adjusted 390,000 from 411,000 the prior week. Jobless claims, a proxy for layoffs, are down by more than 40% since the first week of April but remain about double prepandemic levels. |
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China’s factory and services sector both showed signs of weakness in June, as supply bottlenecks and new coronavirus outbreaks held back growth, writes Jonathan Cheng. The country’s manufacturing purchasing managers index fell to 50.9 in June from 51.0 in May, while its nonmanufacturing PMI fell to 53.5 from 55.2. Economists have lowered their growth forecasts for China amid the hints of weakness. The U.S. and Taiwan have revived trade talks and pledged to keep supply chains free from forced labor, in a dig at China. |
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As the economy improves and vaccination rates rise, people are hitting the road for the July Fourth holiday. Roughly 47 million people are expected to travel this weekend, write Krystal Hur and Alison Pohle. This weekend is expected to have the highest auto-travel volume on record, surpassing 2019 levels. |
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The labor shortage has led some restaurants to adopt automated ordering and paying technology. Cracker Barrel Old Country Store Inc. uses technology for payments while Dave & Buster’s Entertainment Inc. now allows completely contactless ordering and paying. |
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The Internal Revenue Service ended the tax-filing season with 35.3 million unprocessed tax returns, more than four times what it had in 2019, before the pandemic, writes Richard Rubin. That’s meant delays for taxpayers awaiting refunds. Calls to the agency’s phone lines this year were four times what they were last year. Just 9% of those were answered by employees, down from 25% in 2019. |
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“Covid has been the biggest boost ever for container ships, with a supercycle which is set to continue.” | — Jonathan Roach, container analyst at London-based Braemar ACM Shipbroking |
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The jobs data has been volatile over the past few months, with employment numbers coming in below expectations in some cases. That could partly be due to the difficulty of collecting statistical data from wide-ranging surveys in the middle of a pandemic, according to a blog post by the White House Council of Economic Advisers. One month’s jobs report is no longer a good predictor of the next month’s, as it was before the pandemic. Monthly revisions have also been larger than normal. Part of the reason could be that the pandemic has hit industries differently. That means employment data could reflect the bumpy transition of workers from one industry to another rather than an overall picture of the labor market. Seasonal variations in hiring that the Bureau of Labor Statistics adjusts for in its calculations might also have been disrupted by the pandemic, making the data less reliable. |
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| | Real Time Economics offers a downloadable calendar with concise previews, forecasts and analysis of major U.S. data releases. To add to your calendar, please click here. |
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Real Time Economics comes to you from WSJ economics reporters and editors around the world. Today's issue was curated and edited by David Harrison in Washington, D.C., and Kyle Morris in Barcelona, Spain. |
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How are we doing? Please send us any questions, comments or suggestions by replying to this email. Thank you. |
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