Evelyn Reynolds

The NewsWalmart, the largest retailer in the United States, on Thursday reported higher sales and profit in the first quarter, giving insight into how consumer spending is weathering the high-interest-rate environment.Walmart has performed better than retailers dependent on apparel sales, in part because it sells essential goods like groceries.Cj Gunther/EPA, via ShutterstockThe Numbers: Sales grew in stores and especially online.Walmart said its comparable-store sales in its U.S. business rose 3.8 percent from the quarter a year earlier. Its global e-commerce business jumped 21 percent. Walmart has performed better than retailers dependent on apparel sales, in part because it also sells essential goods like groceries. Consumers are continuing to find places to cut back on their purchasing.Transactions were up 3.8 percent, while the average ticket price showed with each visit people were spending about the same as they did this time last year. The retailer said consumers from “upper-income households” helped it gain market share, reiterating a trend it has noted since Americans started navigating high inflation a couple of years ago.Walmart’s quarterly profit, of $5.1 billion, was triple the result a year earlier.The retailer’s stock rose in premarket trading, as investors reacted to last quarter’s results and the company’s upgraded forecast for growth this year.What They’re Saying: Smooth sailing on a choppy sea.“In a sea of challenged and volatile and confusing consumer spending,” said David Silverman, a retail analyst at Fitch Ratings, “what’s interesting is how strong and consistent this quarter and many of Walmart’s last few quarters have been.” He said Walmart’s focus as a value-oriented retailer had been a strength during this period.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The CPI report showed an increase of 0.3% from March, the Labor Department’s Bureau of Labor Services reported Wednesday.
Inflation eased slightly in April, providing some relief for consumers.
On a 12-month basis, however, the CPI increased 3.4%, in line with expectations.
Core inflation was at 3.6%, the lowest reading ex-food and energy since April 2021.

Inflation eased slightly in April, providing at least a bit of relief for consumers while still holding above levels that would suggest a cut in interest rates is imminent.
The consumer price index, a broad measure of how much goods and services cost at the cash register, increased 0.3% from March, the Labor Department’s Bureau of Labor Services reported Wednesday. That was slightly below the Dow Jones estimate for 0.4%.

On a 12-month basis, however, the CPI increased 3.4%, in line with expectations.
Excluding food and energy, the key core inflation reading came in at 0.3% monthly and 3.6% on an annual basis, both as forecast. The core 12-month inflation reading was the lowest since April 2021.
Markets reacted positively after the CPI release, with futures tied to major stock indexes rallying and Treasury yields tumbling. Futures traders raised the implied probability that the Federal Reserve would start cutting interest rates in September.
“This is the first print in a month that wasn’t hotter than expected, so there’s a relief rally,” said Dan North, senior economist at Allianz Trade North America. “The excitement is a little overdone. This is not Caitlin Clark. She’s exciting, this is not exciting.”
In other economic news Wednesday, retail sales were flat on the month, compared to the estimate for a 0.4% increase. That figure is adjusted for seasonality but not inflation, suggesting consumers did not keep up with the pace of price increases.

For the inflation report, price gains on the month were driven heavily by increases in both shelter and energy.
Shelter costs, which have been a particular trouble spot for Federal Reserve officials expecting inflation to come down this year, increased 0.4% for the month and were up 5.5% from a year ago. Both are levels uncomfortably high for a Fed trying to drive overall inflation back down to 2%.
The energy index rose 1.1% for a month and was up 2.6% on an annual basis. Food was flat and up 2.2% respectively. Used and new vehicle prices, which had contributed to the early rise in inflation during the worst of the Covid pandemic, both declined, falling 1.4% and 0.4% respectively.
Areas showing notable gains on the month included apparel (1.2%), transportation services (0.9%) and medical care services (0.4%). For transportation services, that took the annual increase up to 11.2. Services excluding energy, a key point for policymakers, increased 0.4% on the month and was up 5.3% on the year.
The inflation increase was bad news for workers, who saw earnings fall 0.2% on the month when adjusted for inflation. On a 12-month basis, real earnings rose just 0.5%.
In the shelter components, both rent of primary residence and the important owners equivalent rent, or what homeowners think they can get to rent their properties, rose 0.4% on the month. They respectively increased 5.4% and 5.8% on a 12-month basis.

Retail sales disappoint

Consumers apparently still felt the pinch of higher prices for the month.
The advance estimate for retail sales in April showed no change on the month after increasing a downwardly revised 0.6% in March. Sales, however, were up 3% from a year ago. Excluding autos, sales rose 0.2%, in line with the Dow Jones estimate.
A 1.2% decline in online receipts held the sales figure back, as did a 0.9% slide in sporting goods and related stores, while motor vehicles and parts dealers posted a 0.8% decrease.
Gasoline stations, boosted by rising prices at the pump, reported a jump of 3.1%, while electronics and appliances saw a 1.5% increase.

Dilemma for the Fed

The reports come with the Fed on hold since July 2023 as inflation has proved more resilient than expected. Policymakers have said in recent weeks that they need more evidence inflation is on a sustainable path back to their 2% goal before agreeing to lower rates.
 The Fed’s benchmark overnight lending rate is targeted in a range between 5.25%-5.5%, the highest level in 23 years.
 In remarks Tuesday, Fed Chair Jerome Powell acknowledged that readings earlier in 2024 had been higher than expected and said it’s likely the central bank will need to keep monetary policy “at the current rate for longer than had been thought.”
To financial markets, that means the Fed likely will wait out the summer for better inflation data, with an initial rate cut coming in September. That would be the first reduction since the early days of the Covid pandemic in 2020.
“We think it’s September at the earlies that they’re going to cut,” said North, the Allianz economist. “Their mind seems to be that, ‘we’re not in any hurry to cut rates. Inflation is not near 2%, the economy is OK, we’re not going anything for months.'”
Fed officials hiked the key overnight funds rate 11 times from March 2022 through July 2023 in hopes that it would help tamp down demand that drove inflation to its highest level in more than 40 years. Policymakers had thought inflation would pass once supply chain issues brought on by the pandemic eased, but powerful demand fueled by fiscal and monetary policy stimulus has kept price pressures elevated. More

Europe needs a “more mature” attitude to trade and must avoid a global decoupling while it secures its economy and addresses Chinese state subsidies, the EU’s economics chief Paolo Gentiloni told CNBC on Wednesday.
“The characteristic of the EU economy is to be more open, more influenced by trade, and less by only internal consumption,” Gentiloni said.
He also said several factors would boost the EU economy in the year ahead, including a rise in private consumption, falling inflation and high employment.

The European Union must avoid a harmful decoupling of global trade as it mulls tariffs on Chinese electric vehicles and other goods, the bloc’s economic chief said Wednesday.
“I think that as far as Europe is concerned we need a more mature attitude in our trade, securing our economy … especially with China,” European Commissioner for Economy Paolo Gentiloni told CNBC’s Silvia Amaro.

Gentiloni said the EU’s ongoing anti-subsidy probes covering the EV market and wind turbines, addressing concerns that China is overwhelming global markets with green energy products.
These enquiries are a way to understand whether the subsidies prodvided by the Chinese government to domestic firms are “disrupting any chance for European companies,” Gentiloni said.
“But this is not bringing us to a theory of decoupling of global trade, which would be a disaster for both parts of the decoupling,” he said.
“The characteristic of the EU economy is to be more open, more influenced by trade, and less by only internal consumption. This is the reason, the economic reason, why it is in the interest of the European Union to keep the doors of trade open.”
The U.S. on Tuesday announced hefty tariff hikes on $18 billion worth of Chinese imports, across EVs and the lithium-ion batteries used in them, solar cells, steel and aluminum.

China argues that its EV market is growing due to innovation rather than state subsidies, and says the U.S. Inflation Reduction Act — which has also sparked protectionism concerns among EU officials, including Gentolioni — is subsidising U.S. manufacturing.
Meanwhile, several EU nations are nervous about potential Chinese retaliatory trade measures hitting important domestic industries, from German automotives to French cognac.
That comes as the bloc looks to recover from years of sluggish economic growth and a shallow recession in the latter half of 2023.
Gentiloni on Wednesday struck an upbeat tone on the outlook for the year, which he said followed a “very, very difficult 2023” marked by economic stagnation, increased levels of savings and uncertainty from the ongoing Russia-Ukraine war.
“Gradually, activity is accelerating, and the main driver will be private consumption. At the same time, we have two other factors that are very positive,” he told CNBC.
“Inflation is indeed declining. And employment is still high, very high, it will continue to increase in the coming months.” More

There’s a three-letter abbreviation that economists have started pronouncing with the energy of a four-letter word: “O.E.R.”It stands for owner’s equivalent rent, and it has been used to measure American housing inflation since the 1980s. As its name suggests, it uses a combination of surveys and market data to estimate how much it would cost homeowners to rent the house they live in.But three years into America’s price pop, it has become almost cliché for economists to hate on the housing measure. Detractors blast if for being so slow-moving that it does not reflect up-to-date conditions in the economy. Critics argue that it uses convoluted statistical methods that make little sense. The most intense haters insist that it is giving a false impression about where inflation stands.“It’s just not adding anything to our understanding of inflation,” said Mark Zandi, chief economist of Moody’s Analytics and a frequent adviser to the Biden administration. Full disclosure: The New York Times called Mr. Zandi for this article because he has been one of the many economists grousing about O.E.R. on social media. He said he was “not a fan.”What has this one nerdy inflation component done to earn so much vitriol?It is preventing an economic happy ending, more or less. Housing inflation measures have been surprisingly sticky over the past year, and they are now a major barrier keeping price increases overall from returning to normal. That has knock-on effects: Because of inflation’s staying power, the Federal Reserve is keeping interest rates at a more than two-decade high to try to wrestle prices under control by slowing the economy.But while there’s no denying that O.E.R. has become a main character in America’s inflationary tale, not everyone thinks it is the bad guy. Some economists think it is a valid and reasonable way to measure an important part of the consumer experience. Ahead of a fresh Consumer Price Index report set for release on Wednesday morning, there are a few key facts to understand about how housing inflation is calculated, what it means and what it might do next.Housing Inflation Remains Stubbornly HighEconomists had expected two measures of rental inflation to fade in 2023 and 2024, but that process is taking time to play out.

Note: Inflation measures are shown as rates of annual change.Source: The Bureau of Labor StatisticsBy The New York TimesConsumer Price Index Inflation Remains HotterThe Consumer Price Index is climbing faster than the Personal Consumption Expenditures index, in large part because it weights housing more heavily.

Note: Indexes are shown as annual change.Sources: Bureau of Labor Statistics and Commerce DepartmentBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Automakers in the United States and their supporters welcomed President Biden’s tariffs, saying they would protect domestic manufacturing and jobs from cheap Chinese vehicles.The Biden administration’s new tariffs on Chinese electric vehicles won’t have a huge immediate impact on American consumers or the car market because very few such cars are sold in the United States.But the decision reflects deep concern within the American automotive industry, which has grown increasingly worried about China’s ability to churn out cheap electric vehicles. American automakers welcomed the decision by the Biden administration on Tuesday to impose a 100 percent tariff on electric vehicles from China, saying those vehicles would undercut billions of dollars of investment in electric vehicle and battery factories in the United States.“Today’s announcement is a necessary response to combat the Chinese government’s unfair trade practices that endanger the future of our auto industry,” Senator Gary Peters, a Michigan Democrat, said in a statement. “It will help level the playing field, keep our auto industry competitive and support good-paying, union jobs here at home.”On Tuesday, President Biden announced a series of new and increased tariffs on certain Chinese-made goods, including a 25 percent duty on steel and aluminum and 50 percent levies on semiconductors and solar panels. The tariff on electric vehicles made in China was quadrupled from 25 percent. Chinese lithium-ion batteries for electric cars will now face a 25 percent tariff, up from 7.5 percent.The United States imports only a few makes — electric or gasoline — from China. One is the Polestar 2, an electric vehicle made in China by a Swedish automaker in which the Chinese company Zhejiang Geely has a controlling stake. In a statement, Polestar said it was evaluating the impact of Mr. Biden’s announcement.“We believe that free trade is essential to speed up the transition to more sustainable mobility through increased E.V. adoption,” the company said.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

Prices for all items in April are projected to show a 0.4% gain on the month, the same as in March, though the annual rate is expected to edge lower to 3.4%.
On the important core measure that excludes food and energy, the respective projections are 0.3%, lower than March’s 0.4% reading, and 3.6%, down from 3.8%.
Wall Street will pore through Wednesday’s report looking for signs of how much longer the elevated inflation conditions will continue. One key focus will be on housing.

People shop in the food section of a retail store in Rosemead, California, Jan. 19, 2024.
Frederic J. Brown | AFP | Getty Images

Inflation trends may have gotten a little less dreary in April, though they are still likely to keep the Federal Reserve uncomfortable enough to stay on pause with interest rates.
The consumer price index, a broad measure of the cost of goods and services in the marketplace, is expected to show another increase for the month, though the annual inflation rate is projected to come down slightly, according to Dow Jones consensus forecasts.

Prices for all items are projected to show a 0.4% gain on the month, the same as in March, though the annual rate is expected to edge lower to 3.4%, compared to the 3.5% reading in the previous month. On the important core measure that excludes food and energy, the respective projections are 0.3%, lower than March’s 0.4% gain, and 3.6%, which is down from 3.8%.
In remarks made Tuesday in Amsterdam, Fed Chair Jerome Powell expressed hope that inflation would decelerate through the year but acknowledged the slow progress and provided further direction that rates aren’t likely to move anytime soon.
“I expect that inflation will move back down on a monthly basis to levels that were more like the lower readings we were having last year,” he told attendees at a banking conference. “I would say my confidence in that is not as high as it was, having seen these readings in the first three months of the year. So we’re just going to have to see where the inflation data fall out.”

Wholesale gauge brings bad news

Keeping with the higher-than-expected readings in the first quarter, the producer price index rose 0.5% in April, nearly double the expectation to kick off the second quarter on a sour note. The index, a proxy for wholesale prices, accelerated 2.2% on an annual basis, the highest reading in a year.
It also heightened the importance of Wednesday’s CPI release. The Labor Department’s Bureau of Labor Statistics will provide the data at 8:30 a.m. ET.

“This will be the most important read of the month [excluding nonfarm payrolls] as inflation continues to defy expectations,” said Dan North, senior economist at Allianz Trade North America. Even if the report comes in around consensus expectations, it will be “inadequate progress for the Fed to consider a cut until September,” he added.
Indeed, financial markets have given up hope on an accommodative Fed, reducing expectations from the start of the year of at least six rate cuts now down to two, with the first one unlikely to come before the September meeting.
Stocks, though, have been resilient in the face of a tighter Fed, with the focus instead turning to solid corporate earnings and economic growth.

Focus on housing

Wall Street will pore through the CPI report looking for signs of how much longer the elevated inflation conditions will continue. Sentiment surveys in recent days have shown that consumer expectations for inflation have risen, which the Fed considers key in taming price pressures.
One crucial focus Wednesday will be on housing, as shelter-related costs comprise about one-third of the weighting in the CPI. Fed officials have been banking on easing pressures in the rental market as a sign that the strong disinflation present during 2023 would appear again this year, but have so far been thwarted.
“The slower it comes down, the longer the path towards the Fed’s inflation target,” said Erica Groshen, senior economist at Cornell’s School of Industrial and Labor Relations and a former senior official with both the BLS and New York Fed. “We’re not seeing any big shifts in the housing market that would make me think it’s just now going to act differently. Demographics are slow to change. So I don’t really see an explanation for housing to react very differently than it has in the past.”
The key component of shelter costs is called owners’ equivalent rent, a hypothetical measure of what owners think they can get to rent their homes. It rose 5.9% annually in March, down from a peak of above 8% in April 2023 but still well above a level consistent with 2% overall inflation.
While Fed officials had been willing to look through housing costs when considering policy, continued stickiness in prices could change that. Central bankers had even come up with a separate measure known as “super core” that looked at services costs excluding food, energy and housing services, but that may not be as relevant now.
“It’s very important for the Fed not to be behind the curve on this,” Groshen said. “So I think it will make the Fed more cautious about lowering rates. I don’t think this would be enough for them to raise rates, but it probably will feed caution on their part.”

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Jerome H. Powell, the Federal Reserve chair, said the central bank was poised to leave interest rates on hold after surprisingly stubborn inflation.Jerome H. Powell, the Federal Reserve chair, reiterated Tuesday that policymakers were poised to hold interest rates steady at a high level as they waited for evidence that inflation is slowing further.Fed officials entered 2024 expecting to make interest rate cuts, having lifted borrowing costs sharply to a more than two-decade high of 5.3 percent between 2022 and the middle of last year. But stubbornly rapid inflation in recent months has upended that plan.Central bankers have been clear that rate cuts this year are still possible, but they have also signaled that they are planning to leave interest rates on hold for now as they wait to make sure that inflation is genuinely coming under control.Speaking during a panel discussion in Amsterdam, Mr. Powell said officials had been surprised by recent inflation readings. The Consumer Price Index inflation measure, which is set for release on Wednesday, came down rapidly in 2023 but has gotten stuck above 3 percent this year. The Fed’s preferred measure, the Personal Consumption Expenditures index, is slightly cooler, but it, too, remains well above the Fed’s 2 percent inflation goal.“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” Mr. Powell said on Tuesday of recent inflation readings. “What that has told us is that we will need to be patient and let restrictive policy do its work.”Mr. Powell said that he expected continued growth and a strong labor market in the months ahead, and that he believed inflation would begin to slow again.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% in April and was up 2.2% on a 12-month basis, the biggest gain in a year.
Core PPI also increased 0.5% compared to the 0.2% Dow Jones estimate.
Services prices boosted the wholesale inflation reading, rising 0.6% and accounting for about three-quarters of the headline gain.

Wholesale prices jumped more than expected in April, putting up another potential roadblock to interest rate cuts anytime soon.
The producer price index, a measure of what producers receive for the goods they produce, increased 0.5% for the month, higher than the 0.3% Dow Jones estimate, the Labor Department’s Bureau of Labor Statistics reported Tuesday. However, the March reading was revised from an initially reported 0.2% gain to a decline of 0.1%.

Stripping out volatile food and energy prices, core PPI also increased 0.5% compared to the 0.2% Dow Jones estimate. Excluding trade services from that core group showed a 0.4% increase on the month and 3.1% on a 12-month basis, the highest level since April 2023.
On a year-over-year basis, wholesale inflation rose 2.2%, also the highest in a year. Core PPI inflation was at 2.4%, the biggest annual move since August 2023. Both numbers were in line with estimates from Reuters.
Stock market futures were around breakeven following the data while Treasury yields were mixed.
“Sticky inflation looked downright stuck this morning after a much hotter-than-expected inflation reading. But with last month’s numbers revised lower, this report may not have been as much of an upside shock as it first appeared to be,” said Chris Larkin, managing director of trading and investing for E-Trade from Morgan Stanley.
Services prices boosted the wholesale inflation reading, rising 0.6% and accounting for about three-quarters of the headline gain, while the final demand goods index increased 0.4%. The services increase was the biggest monthly gain since July 2023, the BLS reported.

Portfolio management in turn helped drive the services costs, rising 3.9% on the month.
Goods prices as measured by the PPI rose 0.4%, reversing a 0.2% decline, fed by a 2% increase in the energy index, which included a 5.4% surge in gasoline prices. The final demand index for food fell 0.7%.
The latest inflation data comes with the Federal Reserve on extended hold regarding interest rates. Policymakers have said in recent days that they expect inflation to trend lower through the year but need more evidence that it is convincingly on the way back to the central bank’s 2% goal before cutting rates.
Recent data points have not been encouraging.
The consumer price index, the companion to the PPI that measures what consumers pay rather than that producers receive, has shown higher than expected gains through the first part of 2024, fueling fears that inflation is stickier than economists and policymakers had expected.
Similarly, the Fed’s preferred measure, the Commerce Department’s personal consumption expenditures price index, also has been running hot and showing inflation running just shy of 3%.
All of the various inflation measures are showing price pressures well ahead of the Fed’s target.
In addition, various consumer surveys have shown expectations running hot. The New York Fed’s monthly survey released Monday showed the one-year inflation outlook at 3.3%, the highest since November, pushed in good part by expectations that housing-related costs will continue to increase. More