Evelyn Reynolds

More stories

  • 213 Shares199 Views

    in Economy

    China’s Xi Jinping Draws Elon Musk, Tim Cook and other U.S. CEOs to Gala in San Francisco

    Amid frosty U.S.-China relations, Xi Jinping emphasized friendship in an address to executives from Apple, Boeing, Nike and others.The streets outside the San Francisco hotel where Chinese leader Xi Jinping addressed a crowd of American business executives Wednesday night were chaotic, echoing with police sirens and the chants of protesters. A woman had strapped herself to a pole 25 feet in the air in front of the hotel, yelling “Free Tibet!” as a cold rain fell.But inside the ballroom of the Hyatt Regency, the atmosphere was warm and friendly. More than 300 executives and officials listened attentively as Mr. Xi — the leader of a country often considered America’s greatest rival — spoke for over half an hour about an enduring friendship between China and the United States that could not be diminished by recent turmoil.Mr. Xi spoke of pandas. He spoke of Ping-Pong. He spoke of Americans and Chinese working together during World War II to battle the Japanese. He addressed the tensions that have rocked U.S. and Chinese relations in the past year only briefly and obliquely, comparing the relationship to a giant ship that was trying to navigate through storms.“The number one question for us is: are we adversaries, or partners?” Mr. Xi asked. Seeing the other side as a competitor, he said, would only lead to misinformed policy and unwanted results. “China is ready to be a partner and friend of the United States.”Among those who paid thousands of dollars to attend the dinner and hear Mr. Xi’s message were Tim Cook, the chief executive of Apple, Larry Fink of BlackRock, and Jerry Brown, the former governor of California. They mingled with executives from Boeing, Pfizer, Nike and FedEx. Elon Musk popped by during the cocktail hour to greet Mr. Xi, but departed before dinner began.Mr. Xi’s tone was welcomed by many of those in attendance, who believe that more engagement between the United States and China will improve the lives of people in both countries, reduce misunderstandings and potentially even deter a war.“I think it’s important Americans and Chinese are meeting again face to face,” John L. Holden, managing director for China of McLarty Associates, a consultancy, said as he queued outside the hotel. “This is not a magic bullet, but it is something that can provide possibilities that wouldn’t exist otherwise.”President Biden met with Mr. Xi earlier in the day at the Filoli Estate outside of San Francisco.Doug Mills/The New York TimesMr. Xi’s positive tone, and the enthusiasm of some of the event’s attendees, struck a sharp contrast with much of the recent conversation in the United States about China, which has focused on potential economic and security threats.Republican lawmakers have blasted President Biden for his “zombie engagement” with China. Recent polls have shown that Americans are more concerned about the rise of China than at any point since the end of the Cold War.At a news conference Wednesday, Mr. Biden celebrated a successful meeting with Mr. Xi earlier that day, which had resulted in agreements to fight drug trafficking and increase communication between the countries’ militaries. But when asked if he still thought Mr. Xi was a dictator, Mr. Biden replied: “Well, look, he is.”China has for decades been an attractive market for American businesses because of its size and growth, but the country’s slowing economy and increasingly authoritarian bent have been cooling the enthusiasm executives feel toward China.Foreign companies say the Chinese government has been slowly squeezing them out in favor of local competitors. While some think Chinese leaders have been shaken by a recent drop-off in foreign investment in China and are motivated to mend ties, executives are still concerned about recent crackdowns in China on foreign business and strict regulations, including on how companies use Chinese data.For companies that manufacture in China, supply chain disruptions during the pandemic also sent a strong message that firms should not rely on a single country for their goods, and kicked off a trend toward “de-risking.” Still, some American businesses are still making a lot of money in China. “I don’t think that anybody thinks that one dinner, or one visit, or one conference is going to reverse all the hostility that has built up between the U.S. and China,” Michael Hart, the president of the American Chamber of Commerce in China, said in an interview on Tuesday. But he added that if Mr. Xi had a friendlier stance toward the United States, “that will hopefully mean a slightly more friendly operating environment toward U.S. business in China.”Supporters of Mr. Xi near his hotel in San Francisco on Tuesday.Jim Wilson/The New York TimesIn the ballroom, 34 tables were laid with roses and orchids. They were numbered 1 to 39, skipping any number with a four, which in Chinese sounds similar to death, as well as unlucky number 13. Guests chose between a coffee-crusted Black Angus steak and vegetable curry with jasmine rice and toasted pistachios.Gina Raimondo, the U.S. secretary of commerce who spoke at the dinner, thanked Mr. Xi for a productive meeting earlier that day, where Chinese officials had met with Mr. Biden and his deputies.“We all know that we have differences,” Ms. Raimondo said at the dinner. “I’m not going to pretend otherwise. That being said, President Biden has been very clear that while we compete with China and other countries, we do not seek conflict and we do not seek confrontation.”“We want robust trade with China,” Ms. Raimondo said. She said that many of the people in attendance remained keenly interested in doing business in China. “I know that because many of you come to see me and tell me that,” she said, to laughter.Mr. Xi, who has overseen China’s military modernization and increasingly robust projection of power abroad, emphasized China’s commitment to a rules-based international system, its efforts to eradicate poverty, and its peaceful nature. Mr. Xi also touted his personal connections to the United States, including the time he spent in Iowa in the 1980s and an old photo he said he keeps of himself in front of the Golden Gate Bridge.“China has no intention to challenge the United States or unseat it,” he said.Stephen A. Orlins, the president of the National Committee on United States-China Relations, one of the groups sponsoring the event, said he was there when the committee hosted previous Chinese leaders in the United States — Deng Xiaoping, Jiang Zemin and Hu Jintao — and that all had projected a friendly demeanor. He recalled Mr. Deng famously donning a cowboy hat during a U.S. visit in 1979.“When they stand in front of an American, they tend to be more constructive and pro-American. It’s just part of what happens,” Mr. Orlins said. “They’re not going to come to an event like this and put their thumb in the eye of us as the sponsors and the audience.”Mr. Xi touted his connections to the United States during his speech. Jeff Chiu/Associated PressMr. Orlins’ group and the other organizer of the event, the U.S.-China Business Council, went through a logistical Olympics to set up the dinner. Because of security concerns, the organizers could not reveal the location until the day before, and guests received an invitation to an event with an unnamed “senior Chinese leader.”Mr. Orlins said his group knew that Mr. Xi had attended every meeting of the international grouping known as the Asia-Pacific Economic Cooperation, and concluded that he would do the same when the meeting occurred in San Francisco this week. So they extended an invitation nine months ago to host Mr. Xi.Three or four weeks ago, Mr. Orlin said he was told that Mr. Xi’s presence was still uncertain, but that he should start preparations.The Chinese protocol office peered over every attendee; they were extremely sensitive about security, especially since someone had crashed a sedan into the Chinese consulate in San Francisco just weeks before. The White House insisted that the dinner happen after Mr. Biden’s meeting with Mr. Xi Wednesday, so as not to upstage that event.The groups had to hire copious security and staff, and even fly in translation equipment, since local supplies were already claimed by the Asia-Pacific conference. Even though far more people wanted to attend the event than there was capacity for, Mr. Orlin said the $40,000 the groups charged for some tables would only partially recoup the costs of the event.Mr. Orlins said the Chinese had prepared three versions of a speech Mr. Xi could deliver that night. After Wednesday’s events with Mr. Biden, Mr. Xi had picked the friendliest one. More

  • 113 Shares119 Views

    in Economy

    U.S. to Press China to Stop Flow of Fentanyl

    President Biden pressed the Chinese leader Xi Jinping on Wednesday to crack down on the Chinese firms that are helping to produce fentanyl, a potent drug that has killed hundreds of thousands of Americans.A plan to curb China’s illicit exports of fentanyl and, particularly, the chemicals that can be combined to make the drug was hoped to be one of the more significant achievements for the United States out of Mr. Biden and Mr. Xi’s meeting, which took place as leaders from Pacific nations gathered for an international conference in San Francisco.A summary of the meeting published by China’s CCTV News said that Mr. Biden and Mr. Xi had agreed to establish an anti-drug working group.China is home to a thriving chemical industry that pumps out compounds that are made into pharmaceuticals, fragrances, textile dyes and fertilizers. Some of those same compounds can also be combined to create fentanyl, an opioid that can be 100 times as potent as morphine.U.S. officials argue that this vast chemical industry is playing a key role in the American fentanyl crisis by supplying the bulk of materials used in illegal drug labs, including in Mexico, which is now the largest exporter of fentanyl to the United States.The Chinese government denies that its country plays such a pivotal role and instead blames the United States for harboring a culture of drug use.“All-out marketing by pharmaceutical companies, over-prescription by doctors, ineffective government crackdowns and the negative implications of marijuana legalization are among the combination of factors behind an ever-growing market for narcotics,” China’s foreign ministry said in a statement last year.U.S. officials say they have stopped more fentanyl from coming into the United States in the past two years than in the previous five years combined. According to the Centers for Disease Control and Prevention, fentanyl and other synthetic opioids may have resulted in more than 77,000 overdose deaths in the United States between May 2022 and April 2023. The problem with fentanyl overdoses is particularly acute in San Francisco, where Mr. Biden and Mr. Xi are meeting.Ian Johnson, a senior fellow for China studies at the Council on Foreign Relations, said that getting China to agree to do something about fentanyl would resonate more with average Americans than the typical “deliverables” from international meetings.“For Biden, that would be nice to have to show to the heartland of the United States that relations with China are more than just some esoteric matter, but can actually bring something to ordinary people,” Mr. Johnson said in a briefing held by the council last week. Republicans have made fentanyl-related deaths a central piece of their campaign against Mr. Biden and Democrats in the 2024 elections.Red stained pollen grain sample at the U.S. Customs and Border Protection in Chicago, last year.Lyndon French for The New York TimesCollecting pollen samples at a Customs and Border Protection facility. The extent to which an agreement with China would curb the flow of fentanyl into the United States is unclear.Lyndon French for The New York TimesStill, given the difficulties with policing an illicit industry, the extent to which an agreement would curb the flow of fentanyl into the United States is unclear.Roselyn Hsueh, an associate professor of political science at Temple University, said that an agreement between Mr. Biden and Mr. Xi could lead the Chinese central government to provide more oversight and invest more resources into inspection and monitoring. But she said Beijing had run into difficulty in the past clamping down on fentanyl and precursor chemicals.Before 2019, China was the primary source of fentanyl coming into the United States, typically through the mail and other commercial couriers. As a part of trade talks with President Donald J. Trump, the Chinese government in 2019 agreed to prohibit the production, sale and export of all fentanyl-related drugs except through special licenses.But that resulted in Chinese companies rerouting to Mexico and India’s emergence as a new production site, Ms. Hsueh said. The main source of U.S. fentanyl became Mexican criminal organizations, which used Chinese-made components and Chinese money-laundering services.Today, online sales that mask the identities of sellers and buyers further complicate enforcement. The regulation and enforcement of fentanyl and precursor chemicals remain “fragmented and decentralized” among Chinese local governments, industry associations and firms with vested interests in the chemical trade, Ms. Hsueh said.U.S. officials have said that problem is compounded because many of the ingredients used to make fentanyl are legal chemicals that can be used for legitimate purposes in other industries. The United States has issued sanctions against dozens of people in China and Hong Kong for their role in fentanyl trafficking. In September, Mr. Biden added China to the U.S. list of the world’s major drug-producing countries, a move that the Chinese government denounced as “a malicious smear.”Last month, the U.S. customs department released an updated strategy to combat fentanyl and synthetic drugs, including through the enhanced use of data and counterintelligence operations to track drug manufacturing and distribution networks, and target suspicious locations and recipients that demonstrate patterns of illicit activity. “In my 30 years as a customs official, the trafficking of synthetic illicit drugs like fentanyl is one of the toughest, most daunting challenges I have ever seen,” said Troy Miller, the acting commissioner for Customs and Border Protection.U.S. officials say they have stopped more fentanyl from coming into the United States in the past two years than in the previous five years combined.Mamta Popat/Arizona Daily Star, via Associated PressU.S. officials believe China’s dominance as a chemical producer makes Beijing’s cooperation key for enforcement. Administration officials, including Commerce Secretary Gina M. Raimondo, have raised the issue with top Chinese officials during recent trips to China.When six lawmakers, including Senator Chuck Schumer, the majority leader, had a chance to talk to Mr. Xi during a visit to China last month, the main issue they brought up was not trade or military coordination or climate change, but the harm that fentanyl had caused in their home states.“Everyone told stories, personal stories about how, you know, friends of ours, family, have died from fentanyl, and how this was a really important issue, and I think that you could tell that made an impression on him, how deeply we felt about it,” said Mr. Schumer, a New York Democrat.Fentanyl precursors from China have become a bipartisan issue in Congress, and the six senators who spoke with Mr. Xi were three Democrats and three Republicans.“China needs to enforce laws that prevent the export of fentanyl precursors to international drug markets,” said Senator Bill Cassidy, Republican of Louisiana.Despite the scale of the problem, there is hope that greater coordination between the United States and China could improve the situation. Cooperation between the countries on preventing shipments of the precursor chemicals stalled several years ago after the United States placed sanctions on a Chinese government entity for its alleged involvement in human rights abuses in China’s westernmost region, Xinjiang.That entity was located at the same address in Beijing as the National Narcotics Laboratory of China, which plays a key role in China’s law enforcement effort on drug-related chemicals.Chinese officials deeply resent American sanctions on their institutions, and U.S. officials have taken the position that because of the risk of confusion among the two institutes at the same address, neither institute can work with the United States.China then broadened its position in August 2022 when it halted any counternarcotics coordination with the United States as one of a series of measures taken in response to a visit to Taiwan by Representative Nancy Pelosi, then the speaker of the House. Beijing claims Taiwan, a self-ruled island democracy, as part of its territory.Eileen Sullivan More

  • 113 Shares99 Views

    in Economy

    G.M.’s Contract Deal With U.A.W. Faces Surprisingly Stiff Opposition

    Many longstanding General Motors workers have been voting against the tentative accord, which they feel insufficiently improves retirement benefits.A United Automobile Workers union vote on a tentative contract agreement with General Motors that provides record wage increases has run into unexpectedly strong resistance from veteran workers.Voting at most union locals has been completed and the final result, due as early as Thursday evening, will very likely be decided by a narrow margin. A majority of workers at several large plants in Michigan, Indiana and Tennessee rejected the contract, though union members at a large sport utility plant in Arlington, Texas, voted in favor of it.G.M., Ford Motor and Stellantis agreed to similar contracts with the union after U.A.W. members went on strike at select plants and warehouses. Workers walked off the job at the first three plants on Sept. 15 and stayed on strike for more than 40 days. It was the first time the union has struck all three automakers at the same time, though it did not shut down all of the factories of any company.The agreement appears to be headed for ratification at Ford and Stellantis, the maker of Chrysler, Jeep and Ram vehicles, by comfortable margins, according to running tallies the U.A.W. published online.At G.M., many veteran workers have opposed the contract because they want the company to contribute more money to retirement plans and the cost of health care for retirees.“I’ve heard from some traditional workers who said there wasn’t enough in there for them,” said David Green, director of the U.A.W. Region 2B, which includes Ohio, Indiana and a small part of Michigan. “The post-retirement health care is an issue for some people. For some people, it’s the pension contributions.”Mr. Green himself thinks the contract represents a big victory for union members. “This is the best contract I’ve seen since I started in 1989,” he said. “So I was happy with it.”General Motors declined to comment on the contract vote.The tentative contract raises the top wage by 25 percent, from $32 to more than $40 over four and a half years. The increase is more than the combined wage increases the union has won over the past 22 years, according to U.A.W. officials.Newer hires who are lower on the pay scale will see larger increases that take them to the new top wage. And workers who were recently hired will see their hourly pay double.The agreement also provides for cost-of-living adjustments that will nudge wages higher if inflation persists as well as enhanced company contributions to pensions and retirement plans, more paid time off and the ability to strike if any plant is closed during the term of the contract.The contract negotiations with G.M., Ford and Stellantis were led by the United Automobile Workers president, Shawn Fain, center, who was elected this year.Brittany Greeson for The New York TimesTo be ratified, the agreement must secure a simple majority. More than 46,000 U.A.W. workers work at G.M., although not all of them are likely to turn in ballots. More than 14,000 company employees took part in the targeted strikes.As of Wednesday afternoon, an online vote tally that the union maintains showed that just over 54 percent of the votes were in favor of the contract, but that tally did not include numbers from some big plants.If the tentative agreement is voted down, it would represent a big setback for the U.A.W. president, Shawn Fain, who was elected this year and promised to take a more aggressive approach in the contract talks in hopes of winning significant pay increases and reversing some of the concessions the union accepted in past contracts.He appeared to deliver that in what was widely regarded as a record deal. President Biden, who joined striking workers on the picket line in September at a G.M. site in Belleville, Mich., hailed Mr. Fain’s efforts. The president joined Mr. Fain last week at a plant in Belvidere, Ill., that Stellantis agreed to keep open after halting production this year.“I don’t think it diminishes Shawn Fain’s luster that much because of a close ratification vote,” said Arthur Wheaton, director of labor studies at Cornell University School of Industrial and Labor Relations. “It just means expectations were high, and had he not delivered as much as he did, it wouldn’t have passed.”After the contracts with the three Detroit automakers are ratified, Mr. Fain hopes to try to organize workers at nonunion plants in the South owned by Toyota, Honda and other foreign automakers, and the nonunion plants that Tesla operates in California and Texas.Since the terms of the U.A.W. agreements were announced, some of those companies have increased wages of factory workers. Toyota has told workers that it will raise hourly rates by 9 percent in January. Honda and Hyundai will lift wages 11 percent and 14 percent next year. Hyundai plans to increase wages 25 percent by 2028.“Everybody at those companies should say, ‘Thank you, U.A.W.,’” Mr. Wheaton said. “Those increases wouldn’t have happened without the new U.A.W. contract.” More

  • 238 Shares109 Views

    in Economy

    The market thinks the Fed is going to start cutting rates aggressively. Investors could be in for a letdown

    The most recent indications on the CME Group’s FedWatch gauge point to a full percentage point of interest rate cuts by the end of 2024.
    This week has featured two important reports, one showing that consumer prices were unchanged and wholesale prices actually declined half a percent in October.
    “They’re not going to want to signal that now is the time to start talking about decreases in interest rates, even if fed funds futures already has that incorporated,” former Boston Fed President Eric Rosengren told CNBC.

    Traders work on the floor of the New York Stock Exchange (NYSE) on November 15, 2023 in New York City. 
    Spencer Platt | Getty Images News | Getty Images

    Markets seem to have taken this week’s positive economic data as the all-clear signal for the Federal Reserve to start cutting interest rates aggressively next year.
    Indications that both consumer and wholesale inflation rates have eased considerably from their mid-2022 peaks sent traders into a frenzy, with the most recent indications on the CME Group’s FedWatch gauge pointing to a full percentage point of cuts by the end of 2024.

    That may be at least a tad optimistic, particularly considering the cautious approach central bank officials have taken during their campaign to bring down prices.
    “The case isn’t conclusively made yet,” said Lou Crandall, chief economist at Wrightson ICAP. “We’re making progress in that direction, but we haven’t gotten to the point where they’re going to say that the risk of leveling out at a level too far above target has gone away.”
    This week has featured two important Labor Department reports, one showing that consumer prices in aggregate were unchanged in October, while another indicated that wholesale prices actually declined half a percent last month.
    While the 12-month reading of the producer price index sank to 1.3%, the consumer price index was still at 3.2%. Core CPI also is still running at a 12-month rate of 4%. Moreover, the Atlanta Fed’s measure of “sticky” prices that don’t change as often as items such as gas, groceries and vehicle prices, showed inflation still climbing at a 4.9% yearly clip.
    “We’re getting closer,” Crandall said. “The data we’ve gotten this week are consistent with what you would want to see as you move in that direction. But we haven’t reached the destination yet.”

    In search of 2% inflation

    The Fed’s “destination” is a place where inflation isn’t necessarily at its 2% annual goal but is showing “convincing” progress that it’s getting there.
    “What we decided to do is maintain a policy rate and await further data. We want to see convincing evidence, really, that we have reached the appropriate level,” Fed Chair Jerome Powell said at his post-meeting news conference in September.
    While Fed officials haven’t indicated how many months in a row it will take of easing inflation data to reach that conclusion, 12-month core CPI has fallen each month since April. The Fed prefers core inflation measures as a better gauge of long-run inflation trends.
    Traders appear to have more certainty than Fed officials at this point.
    Futures pricing Wednesday indicated no chance of additional hikes this cycle and the first quarter percentage point cut coming in May, followed by another in July, and likely two more before the end of 2024, according to the CME Group’s gauge of pricing in the fed funds futures market.
    If correct, that would take the benchmark rate down to a target range of 4.25%-4.5% and would be twice as aggressive as the pace Fed officials penciled in back in September.
    Markets, then, will watch with extra fervor how officials react at their next policy meeting on Dec. 12-13. In addition to a rate call, the meeting will see officials make quarterly updates to their “dot plot” of rate expectations, as well as forecasts for gross domestic product, unemployment and inflation.
    But pricing of Fed actions can be volatile, and there are two more inflation reports ahead before that meeting. Wall Street could find it self disappointed in how the Fed views the near-term policy course.
    “They’re not going to want to signal that now is the time to start talking about decreases in interest rates, even if fed funds futures already has that incorporated,” former Boston Fed President Eric Rosengren said Wednesday on CNBC’s “Squawk Box.”

    ‘Soft landing’ sightings

    Market enthusiasm this week was built on two basic supports: the belief that the Fed could start cutting rates soon, and the notion that the central bank could achieve its vaunted “soft landing” for the economy.
    However, the two points are hard to square, considering that such aggressive easing of monetary policy historically has only accompanied downturns in the economy. Fed officials also seem reticent to get too dovish, with Chicago Fed President Austan Goolsbee saying Tuesday that he sees “a way to go” before reaching the inflation target even as he holds open a possible “golden path” to avoiding a recession.
    “A slower economy rather than a recession is the most likely outcome,” Rosengren said. “But I would say there’s certainly downside risks.”
    The stock market rally plus the recent drop in Treasury yields also pose another challenge for a Fed looking to tighten financial conditions.
    “Financial conditions have eased considerably as markets project the end of Fed rate hikes, perhaps not the perfect underpinning for a Fed that professes to keeping rates higher for longer,” said Quincy Krosby, chief global strategist at LPL Financial.
    Indeed, the higher-for-longer mantra has been a cornerstone of recent Fed communication, even from those members who have said they are against additional hikes.
    It’s part of a broader feeling at the central bank that it doesn’t want to repeat the mistakes of the past by quitting the inflation fight as soon as the economy shows any signs of wobbling, as it has done lately. Consumer spending, for instance, fell in October for the first time since March.
    For Fed officials, it adds up to a difficult calculus in which officials are loathe to express overconfidence that the final mile is within sight.
    “Part of the problem the Fed always has to deal with is this illusion of control,” said Crandall, the economist who started at Wrightson ICAP in 1982. “They can influence things, but they can’t control them. There are just too many exogenous factors feeding into the complex dynamics of the modern global economy. So I’m moderately optimistic [the Fed can achieve its inflation goals]. That’s a little different than being confident.” More

  • 163 Shares109 Views

    in Economy

    Wholesale prices fell 0.5% in October for biggest monthly drop since April 2020

    The producer price index declined 0.5% for the month, the biggest monthly decline since April 2020. Wall Street had been expecting a 0.1% increase.
    The Commerce Department’s advance retail sales report for the month showed a decline of 0.1%. Wall Street had been looking for a decline of 0.2%.
    The Empire State Manufacturing Survey, which gauges conditions in the New York area, posted an unexpected increase of 14 points to 9.1.

    Wholesale prices in October posted their biggest decline in 3½ years, providing another indication that the worst of the inflation surge may have passed.
    The producer price index, which measures final-demand costs for businesses, declined 0.5% for the month, against expectations for a 0.1% increase from the Dow Jones consensus, the Labor Department reported Wednesday. The department said that was the biggest monthly decline since April 2020.

    On a yearly basis, headline PPI posted a 1.3% increase, down from 2.2% in September.
    Excluding food and energy, core PPI was unchanged, also below the forecast for a 0.3% increase. Excluding food, energy and trade services, the index increased 0.1%.
    The report comes a day after the Labor Department said the consumer price index, which measures prices for goods and services at the consumer level, was unchanged in October from the previous month. That set off an aggressive rally on Wall Street, where sentiment is rising that the Federal Reserve is done raising interest rates and could in fact start cutting in the first half of 2024.
    However, consumers in October displayed some sensitivity to prices.
    The Commerce Department’s advance retail sales report for the month showed a decline of 0.1%, according to a number that is adjusted for seasonal factors but not inflation. Wall Street had been looking for a drop of 0.2%. Excluding autos, sales rose 0.1%, compared with expectations for an unchanged number.

    Price declines came primarily from the goods side, as the index slid 1.4%, according to the PPI report. Final demand services prices were unchanged. A spike in goods prices caused by outsized demand for big-ticket items in the early days of the Covid pandemic helped fuel the inflation surge.
    Some 80% of the drop in goods prices came from a 15.3% tumble in gasoline prices, the Labor Department said.
    On the services side, transportation and warehousing costs increased 1.5%, while trade services declined 0.7%. Airline passenger services prices increased 3.1%.
    From the consumer standpoint, sales also were held back by the decrease in gasoline prices, with sales at service stations down 0.3%, the Commerce Department reported. Motor vehicles and parts dealers saw a decline of 1% while furniture and home furnishing stores reported a 2% drop. Both food and beverage and electronics and appliance stores showed increases of 0.6%.
    The control group of retail sales that the Commerce Department uses to compute gross domestic product showed a 0.2% gain. Sales overall increased 2.5% from a year ago.
    Stocks were positive following the report while Treasury yields also were higher.
    In other economic news, the Empire State Manufacturing Survey, which gauges conditions in the New York area, posted an unexpected increase of 14 points to 9.1, better than the estimate for a -3 reading. The number represents the percentage of companies seeing expansion against contraction, so any positive number indicates growth.
    The report, from the New York Federal Reserve, showed gains in inventories and shipments, while the indexes for employment, prices and unfilled orders fell.
    Correction: Wholesale prices in October posted their biggest decline in 3½ years. An earlier version misstated the time frame. More

  • 175 Shares199 Views

    in Economy

    Inflation was flat in October from the prior month, core CPI hits two-year low

    The consumer price index was flat in October from the previous month but increased 3.2% from a year ago. Both were below Wall Street estimates, sparking a major rally on Wall Street.
    Excluding volatile food and energy prices, the core CPI rose 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual rate was the smallest increase since September 2021.
    The flat reading on the headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index.
    Following the report, traders took any potential Fed rate hikes almost completely off the table, according to CME Group data.

    Inflation was flat in October from the previous month, providing a hopeful sign that stubbornly high prices are easing their grip on the U.S. economy and giving a potential green light to the Federal Reserve to stop raising interest rates.
    The consumer price index, which measures a broad basket of commonly used goods and services, increased 3.2% from a year ago despite being unchanged for the month, according to seasonally adjusted numbers from the Labor Department on Tuesday. Economists surveyed by Dow Jones had been looking for respective readings of 0.1% and 3.3%.

    The headline CPI had increased 0.4% in September.

    Excluding volatile food and energy prices, the core CPI increased 0.2% and 4%, against the forecast of 0.3% and 4.1%. The annual level was the lowest in two years, down from 4.1% in September, though still well above the Federal Reserve’s 2% target. However, Fed officials have stressed that they want to see a series of declines in core readings, which has been the case since April.
    Markets spiked following the news. The Dow Jones Industrial Average roared higher by nearly 500 points as Treasury yields fell sharply. Traders also took any potential Fed rate hikes almost completely off the table, according to CME Group data.
    “The Fed looks smart for effectively ending its tightening cycle as inflation continues to slow. Yields are down significantly as the last of investors not convinced the Fed is done are likely throwing in the towel,” said Bryce Doty, portfolio manager at Sit Fixed Income Advisors.
    The flat reading on the headline CPI came as energy prices declined 2.5% for the month, offsetting a 0.3% increase in the food index. It was the slowest monthly pace since July 2022.

    Shelter costs, a key component in the index, rose 0.3% in October, half the gain in September as the year-over-year increase eased to 6.7%. Within the category, owners equivalent rent, which gauges what property owners could command for rent, increased 0.4%. A subcategory that includes hotel and motel pricing dropped 2.9%.
    “This is a game changer,” Paul McCulley, former chief economist at Pimco and now an adjunct professor at Georgetown University, said on CNBC’s “Squawk on the Street.” “We’re having a day of rational exuberance, because the data clearly show what we’ve been waiting for for a long time, which is a crack in the shelter component.”
    Chicago Fed President Austan Goolsbee called the report “slow but clear progress” on getting inflation back to healthy levels.
    Vehicle costs, which had been a key inflation component during the spike in 2021-22, fell on the month. New vehicle prices declined 0.1%, while used vehicle prices were off 0.8% and were down 7.1% from a year ago.
    Airfares, another closely watched component, declined 0.9% and are off 13.2% annually. Motor vehicle insurance, however, saw a 1.9% increase and was up 19.2% from a year ago.
    The report comes as markets are closely watching the Fed for its next steps in a battle against persistent inflation that began in March 2022. The central bank ultimately increased its key borrowing rate 11 times for a total of 5.25 percentage points.
    While markets overwhelmingly believe the Fed is done tightening monetary policy, the data of late has sent conflicting signals.
    Nonfarm payrolls in October increased by just 150,000, indicating the labor market finally is showing signs that it is reacting to Fed efforts to correct a supply-demand imbalance that has been a contributing inflation factor.
    Labor costs have been increasing at a much slower pace over the past year and a half as productivity has been on the rise this year.
    Real average hourly earnings — adjusted for inflation — increased 0.2% on a monthly basis in October but were up just 0.8% from a year ago, according to a separate Labor Department release.
    More broadly speaking, gross domestic product surged in the third quarter, rising at a 4.9% annualized pace, though most economists expect the growth rate to slow considerably.
    However, other indicators show that consumer inflation expectations are still rising, the likely product of a spike in gasoline prices and uncertainty caused by the wars in Ukraine and Gaza.
    Fed Chair Jerome Powell last week added to market anxiety when he said he and his fellow policymakers remain unconvinced that they’ve done enough to get inflation back down to a 2% annual rate and won’t hesitate to raise rates if more progress isn’t made.
    “Despite the deceleration, the Fed will likely continue to speak hawkishly and will keep warning investors not to be complacent about the Fed’s resolve to get inflation down to the long-run 2% target,” said Jeffrey Roach, chief economist at LPL Financial.
    Even if the Fed is done hiking, there’s more uncertainty over how long it will keep benchmark rates at their highest level in some 22 years.
    Don’t miss these stories from CNBC PRO: More

  • 88 Shares109 Views

    in Economy

    Sharp Drop in Airfares Cheers Inflation-Weary Travelers

    Airfares to many popular destinations have recently fallen to their lowest levels in months, and even holiday travel is far cheaper than it was last year, providing some welcome relief to consumers who have been frustrated for months by high prices for all manner of goods and services.The glut of deals suggests that the airline industry’s supercharged pandemic recovery may finally be slowing as the supply of tickets catches up and, on some routes, overtakes demand, which appears relatively robust.Consider the fares that Denise Diorio, a retired teacher in Tampa, Fla., recently scored. She spent less than $40 on flights to and from Chicago and paid just $230 for a round-trip ticket from New York to Paris and back, a trip she plans to take this month.“I’ve been telling all my friends, ‘If you want to go somewhere, get your tickets now,’” she said.The bargains she found may be exceptional, but Ms. Diorio is right that deals abound.Early this month, the average price for a domestic flight around Thanksgiving was down about 9 percent from a year ago. And flights around Christmas were about 18 percent cheaper, according to Hopper, a booking and price-tracking app. Kayak, the travel search engine, looked at a wider range of dates around the holidays and found that domestic flight prices were down about 18 percent around Thanksgiving and 23 percent around Christmas.“In a lot of cases, we’re seeing some of the lowest fares that we’ve seen really since travel started coming back after the drop-off in 2020,” said Kyle Potter, executive editor of Thrifty Traveler, a travel blog and deal-watching service.Domestic ticket prices fell over the summer, Mr. Potter said, and deals on international travel, particularly to Europe, have become more common recently.Airlines lower their fares when they are trying to get more people to book tickets as demand is slowing or they are facing stiffer competition. There’s little question that competition has intensified on some routes, but travel experts say it’s not clear whether demand is waning.Thanksgiving this year is expected to set a record for air travel, with nearly 30 million passengers forecast, according to Airlines for America, an industry group. That would be about 9 percent more than last year and 6 percent more than in 2019, before the pandemic.But some airlines say demand is slowing outside of holiday and other peak travel periods. In addition, some airports have been so flooded with flights that carriers have been forced to cut fares to fill planes.That hadn’t been much of a problem for most of the recovery from the pandemic. Weather and other disruptions limited the supply of flights last year and in 2021, as did shortages of trained pilots, parts and planes, among other factors. That drove up ticket prices, kept planes full and helped airlines take in strong profits.Thanksgiving this year is expected to set a record for air travel, with nearly 30 million passengers anticipated.Stefani Reynolds for The New York Times“The airline industry has never delivered the types of profit margins and return on capital that it has done over the last 2.5 years,” said John Grant, chief analyst with OAG, an aviation advisory and data firm. “We’re getting back to a more normal industry.”For the largest U.S. airlines, the good times have continued, fueled in particular by thriving demand for international travel. But smaller and low-fare carriers have started to suffer. Several reported disappointing financial results for the three months that ended in September. Executives at those airlines have said demand is weakening, fares are falling and costs remain high. They also say bad weather and a shortage of air traffic controllers have made flying more difficult.JetBlue Airways, for example, lost $153 million in the third quarter, compared with a $57 million profit in the same period last year. The company said recently that it was moving flights away from crowded markets, such as New York, to those where it expected stronger performance, such as the Caribbean. The budget carriers Spirit Airlines and Frontier Airlines recently told investors that they were looking to cut costs by tens of millions of dollars.Competition has been fierce in some important markets, driving down fares and profits.In Denver, where Frontier is based, about 14 percent more seats were available on flights this summer than in the summer of 2019, according to Cirium, an aviation data provider. Miami and Orlando, Fla., two popular destinations served by many budget carriers, saw even larger increases in capacity.But while airlines added flights in popular markets as they chased passengers, airports in other cities, including Los Angeles, a hub for several major airlines, had large declines in capacity from the summer of 2019.“You’ll find that there’s a large correlation between the airlines that are doing well and the ones that are struggling, margin-wise, when you compare where their concentrations are,” Barry Biffle, Frontier’s chief executive, said last month on a conference call to discuss the airline’s third-quarter results.When it comes to international routes, analysts are less certain of why fares are falling and whether they will remain low. The kinds of deals that Ms. Diorio got for her Paris trip could mean that larger airlines soon find themselves facing a financial squeeze or merely that the industry is returning to a prepandemic normal.“Historically, demand to Europe softens in the winter,” said Steve Hafner, Kayak’s chief executive. “So I think that reflects normal trends.”But demand for international travel could face challenges, partly because of the wars in the Middle East and Ukraine. Analysts also warn that many consumers may be less willing or able to splurge on travel than they were in the last couple of years, when they had pandemic savings to draw from. Even if demand remains strong, airlines risk offering too many seats on popular overseas routes.Whatever the cause of the recent drop in fares, the deals are a welcome break to travelers from years of high prices, Mr. Potter said.“Either way the recipe is there for cheap flights,” he said. “If it’s just a little bit of overcapacity, that’s a win for consumers. If travel demand is dropping, in some ways that’s an even bigger win for people who are never going to give up on travel.” More

  • 125 Shares199 Views

    in Economy

    Biden’s Pacific Trade Pact Suffers Setback After Criticism From Congress

    The administration will no longer try to announce the completion of the trade terms this week, after prominent Democrats objected to some provisions.The Biden administration has pulled back on plans to announce the conclusion of substantial portions of a new Asian-Pacific trade pact at an international meeting in San Francisco this week, after several top Democratic lawmakers threatened to oppose the deal, people familiar with the matter said.The White House had been aiming to announce that the United States and its trading partners had largely settled the terms of its Indo-Pacific Economic Framework for Prosperity, an agreement that aims to strengthen alliances and economic ties among the United States and its allies in East and South Asia.But Senator Sherrod Brown, Democrat of Ohio, and other prominent lawmakers have criticized the pact, saying it lacks adequate protections for workers in the countries it covers, among other shortcomings.The Biden administration, facing the possibility of additional critical public statements, has decided not to push to conclude the trade portion of the agreement this week, and has been briefing members of Congress and foreign trading partners in recent days on its decision, the people said.The agreement has been a key element of the Biden administration’s strategy to counter China’s growing influence in Asia by strengthening relations with allies. The framework’s partners include Australia, Indonesia, Japan, South Korea and Singapore and together account for 40 percent of the global economy.The Indo-Pacific Economic Framework for Prosperity has four main parts, or “pillars.” The first portion, which the administration completed in May, aims to knit together the countries’ supply chains.The Biden administration still appears likely to announce the substantial conclusion this week of two other big portions of the agreement, one on clean energy and decarbonization and another on taxation and anticorruption. The Commerce Department negotiated those two pillars, as well as the supply chain agreement.But the thorniest part of the framework has been the trade pillar, which is being overseen by Katherine Tai, the U.S. trade representative, and her office. The trade negotiations cover issues such as regulatory practices, procedures for importing and exporting goods, agriculture, and standards for protecting workers and the environment.Congressional Democrats, including Senator Ron Wyden of Oregon, who leads the Senate Finance Committee, have expressed concern over the labor and environmental standards. Lawmakers of both parties have criticized the administration for not closely consulting Congress during the negotiations, while others have been dismayed by the administration’s recent clash with big tech firms over U.S. negotiating positions on digital trade.Katherine Tai, the U.S. trade representative, second from left, has pledged to include tough labor standards in the agreement.Jason Henry/Agence France-Presse — Getty ImagesIn a statement last week, Mr. Brown, who is facing a tough re-election fight next year, called for cutting the entire trade pillar from the agreement, saying it did not contain strong enough protections to ensure workers aren’t exploited.“As the administration works to finalize the Indo-Pacific Economic Framework, they should not include the trade pillar,” Mr. Brown said. “Any trade deal that does not include enforceable labor standards is unacceptable.”Members of Congress and their staffs had communicated concerns about a lack of enforceable provisions in meetings for several months, one Senate aide said.In a meeting with White House officials this fall, officials from the Office of the United States Trade Representative proposed waiting until next year to announce the completed trade pillar, at which point all of the agreement’s contents, including the labor provisions, would be settled, according to a person familiar with the deliberations, who was not authorized to speak publicly.But White House officials were eager to have developments for President Biden to announce during the meetings in San Francisco. U.S. trade officials pushed their partners in foreign countries in recent weeks to complete a package of agreements that did not include the labor provisions, intending to finish them in 2024.After Mr. Brown’s public objections, the White House and the National Security Council asked to pull back on the announcement, the person who is familiar with the deliberations said.A spokesman for the National Security Council said in a statement that the Biden administration had focused on promoting workers’ rights and raising standards throughout the negotiations, and that the parties were on track to achieve meaningful progress.A spokesperson for Ms. Tai’s office said it had held 70 consultations with Congress while developing and negotiating the Indo-Pacific framework and would continue to work with Congress to negotiate a high-standard agreement.The decision to push back final trade measures until next year at the earliest is a setback for the Biden administration’s strategic plans for Asia. It’s also a demonstration of the tricky politics of trade, particularly for Democrats, who have frequently criticized trade agreements for failing to protect workers and the environment.Ms. Tai worked with Mr. Wyden, Mr. Brown and others during the Trump administration, when she was the chief trade counsel for the House Committee on Ways and Means, to insert tougher protections for workers and the environment into the renegotiated North American Free Trade Agreement.Ms. Tai has pledged to include tough labor standards in the Indo-Pacific agreement, which covers some countries — such as Malaysia and Vietnam — that labor groups say have low standards for protecting workers and unions. But critics say the power of the United States to demand concessions from other countries is limited because the deal does not involve lowering any tariff rates to give trading partners more access.While doing so would promote trade, the Biden administration and other trade skeptics argue that lower barriers could hurt American workers by encouraging companies to move jobs overseas. A previous Pacific trade pact that proposed cutting tariffs, the Trans-Pacific Partnership negotiated by the Obama administration, fizzled after losing support from both Republicans and Democrats.In a statement, Mr. Wyden said senators had warned Ms. Tai’s office for months “that the United States cannot enter into a trade agreement without leveling the playing field for American workers, tackling pressing environmental challenges and bulldozing trade barriers for small businesses and creators.”“It should not have taken this long for the administration to listen to our warnings,” Mr. Wyden said. “Ambassador Tai must come home and work with Congress to find an agreement that will support American jobs and garner congressional support.” More