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    Homebuilders are boosting incentives as they suddenly struggle to sell homes

    Sales of newly built homes fell more than 8% in June from the prior month and were 17% lower than June of 2021, according to a report Tuesday from the U.S. Census.
    Inventory also rose to a 9.3-month supply, up from 5.6 months at the end of last year.
    Chief executives of major builders are saying they have to respond more quickly to the sudden turnaround in the market, in part by boosting incentives.

    Contractors work on the roof of a house under construction in the Stillpointe subdivision in Sumter, South Carolina, on Tuesday, July 6, 2021.
    Micah Green | Bloomberg | Getty Images

    After two years of not being able to build homes fast enough to keep up with demand, the nation’s homebuilders are now experiencing a slowdown in sales and an increase in supply.
    Sales of newly built homes fell more than 8% in June from the prior month and were 17% lower than June of 2021, according to a report Tuesday from the U.S. Census. Inventory also rose to a 9.3-month supply, up from 5.6 months at the end of last year.

    Chief executives of major builders are saying they have to respond more quickly to the sudden turnaround in the market, in part by boosting incentives.
    Pulte Group, one of the nation’s largest homebuilders, reported Tuesday that net new orders for its homes in the second quarter were lower by 23% from last year. The company’s cancelation rate was 15%, compared with 7% in the prior year period.
    “We have to work harder to sell homes. We have to be more nimble,” Pulte CEO Ryan Marshall said on a conference call with investors. “Home price appreciation has slowed, stopped, or, through the use of incentives, is taking a couple of steps back. Through much of the second quarter, incentives were mostly tied to the mortgage, but this is now expanding to include discounts on options and lot premiums.”
    The median price of a newly built home sold in June was $402,400, still up 7.4% from a year ago. But the market had been experiencing double-digit price increases. Builders are getting help from lower commodity prices now, especially lumber, and land prices are starting to adjust lower as well.
    Buyers are still seeing sticker shock, though, due to the sharp rise in mortgage rates and inflation in the overall economy. The average rate on the 30-year fixed mortgage began this year around 3% and then began rising steadily. It jumped over 6% briefly in June, before settling back in the high 5% range.

    “The consumer, really, it was mid-June that we saw this kind of pullback, that pause. I kidded our sales people the other week that they’d gone from order takers to financial therapist,” said Doug Bauer, CEO of Tri Pointe Homes on CNBC’s “Squawk on the Street.”
    The builder is also increasing buyer incentives.
    “I think over the next quarter or two there will be some price discovery as we match up mortgage payments with pricing,” Bauer added.
    Prices for existing homes are also starting to come back to earth. While still in the double digits, price gains decelerated in May for the second month in a row, according to the S&P Case-Shiller national home price index. Prices are stubbornly high in the existing home market because supply is still quite low. The builders had been helping, accelerating construction, but that has suddenly changed.
    “This may just be the beginning of a difficult stretch for the homebuilding industry,” said Nicole Bachaud, an economist with Zillow. “Decelerations in housing permits and starts activity will put a cap on sales in the near term and suggests that builders are bracing for rougher road ahead, even as the housing market remains hungry for more inventory with long run demand staying put.”

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    Home price growth slowed for the second straight month in May, S&P Case-Shiller says

    Home prices in May were 19.7% higher compared with the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index.
    This marks the second month of slower increases, as the housing market cools due to higher mortgage rates and increasing concern over inflation.
    In April, the annual gain was 20.6%.

    New homes under construction in Tucson, Arizona.
    Rebecca Noble | Bloomberg | Getty Images

    Home prices in May were 19.7% higher compared with the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index.
    This marks the second month of slower increases, as the housing market cools due to higher mortgage rates and increasing concern over inflation. In April, the annual gain was 20.6%.

    The 10-city composite rose 19% year over year, down from 19.6% in the previous month. The 20-city composite increased 20.5%, down from 21.2% in April.
    Cities seeing the strongest gains were Tampa, Florida, Miami and Dallas, with annual increases of 36.1%, 34% and 30.8%, respectively. Four of the 20 cities reported higher price increases in the 12 months that ended in May versus the 12-month period that ended in April. In February of this year, all 20 cities in the survey were seeing increasing annual gains.
    “Despite this deceleration, growth rates are still extremely robust, with all three composites at or above the 98th percentile historically,” Craig Lazzara, managing director at S&P DJI, said in a release.
    “We’ve noted previously that mortgage financing has become more expensive as the Federal Reserve ratchets up interest rates, a process that was ongoing as our May data were gathered. Accordingly, a more-challenging macroeconomic environment may not support extraordinary home price growth for much longer,” he added.
    Mortgage rates have been rising steadily since January of this year, when the average rate on the 30-year fixed loan hovered around 3%. It spiked to just over 6% in June and has since settled back to around 5.75%. Given the recent inflation in home prices, which are up 40% since the start of the coronavirus pandemic, the fast rise in interest rates hit affordability hard. Potential buyers have been sidelined.
    “In the short-term, transactions are feeling the pressure, with sales of existing homes down for five consecutive months. In addition, with less competition, houses that would have flown off the market within hours last year are lingering,” said George Ratiu, manager of economic research at Realtor.com. “The share of homes seeing price cuts has doubled from a year ago, as motivated homeowners want to close a deal before more buyers drop out of the market.”

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    Ice Cream Trucks Are the Latest Target of Inflation

    Inflation and its rising fuel prices have pushed some ice cream truck owners to the brink.On a steamy evening at Flushing Meadows Corona Park in Queens, Jaime Cabal had a line of customers at his Mister Softee ice cream truck. He blended milkshakes, topped bowls of vanilla soft-serve with strawberries and dipped cones into cherry and blue-raspberry shell. One boy no sooner finished his treat than he begged his parents for more, pointing at the menu’s pops shaped like SpongeBob SquarePants, Sonic the Hedgehog and Tweety.Crowds like these are becoming rarer for ice cream vendors across the country as high fuel prices feed inflation, leaving some owners of soft-serve trucks questioning their future in the business.Owning an ice cream truck used to be a lucrative proposition, but for some, the expenses have become untenable: The diesel that powers the trucks has topped $7 a gallon, vanilla ice cream costs $13 a gallon and a 25-pound box of sprinkles now goes for about $60, double what it cost a year ago.Many vendors say the end of the ice-cream-truck era has been years in the making. Even the garages that house these trucks are evolving, renting parking spaces to other types of food vendors as the ranks of ice cream trucks dwindle.For much of the day at Flushing Meadows Corona Park in Queens, Mr. Cabal sits in his truck waiting for customers.Jose A. Alvarado Jr. for The New York TimesParks, pools and residential streets used to be prime territory for the ice cream man. But now, more often than not, a soft-serve truck’s jingle plays to a crowd of no one as prices for some cones with add-ons like swirly ice cream and chocolate sauce reach $8 on some trucks.Though no organization appears to have hard figures on just how many ice-cream trucks are currently working the streets of New York City, some owners said they would likely leave the business in the next few years. It’s a sentiment that is felt nationwide, where mobile ice-cream vendors face higher costs for city permits and registration, and hefty competition from other ice cream businesses, said Steve Christensen, the executive director of the North American Ice Cream Association.The ice cream truck, he said, is “unfortunately becoming a thing of the past.”New delivery methods, through third-party apps or ghost kitchens, are proliferating. Brick-and-mortar scoop shops are focusing on offering a fun experience, he said, and serve dozens more flavors than a traditional ice cream truck can, driving lines away from these vehicles.“It’s horrible,” said Mr. Cabal, the ice cream vendor in Queens, who has worked on ice cream trucks for the last nine years. Inflation has even raised the cost of mechanical parts for the truck. Last year, when his slushy machine broke down, a part he needed cost $1,600. He decided to wait a few more months to fix it, but part nearly doubled in cost, to $3,000. Now, the slushy is off the menu and the machine is sitting in his garage.In 2018, Mr. Cabal thought business in the Flushing Meadows Corona Park would be good enough to support his own truck, so he sold his house in New Jersey for $380,000, moved to Hicksville, N.Y., and bought a Mister Softee franchise. He won a contract with the city to operate in the park.Despite the tens of thousands of dollars he pays each year for that permit and others, Mr. Cabal has contended with unlicensed vendors who sell fruit, empanadas and Duro wheels from baby strollers, and even ice cream from pushcarts strategically placed around his truck. He said they undercut him on price so much that it’s impossible for him to compete. Ramon Pacheco said many of his 27 years in the ice cream truck business were profitable, but the pandemic has drastically cut into customer traffic.Jose A. Alvarado Jr. for The New York TimesIn Lower Manhattan, Ramon Pacheco is struggling with his recent decision to raise his prices by 50 cents to account for some of his increased daily expenses, like $80 in gasoline ($15 before the pandemic) and $40 in diesel, ($18 earlier). He now pays about $41 for the three gallons of vanilla ice cream that used to cost him $27.He has sold ice cream for 27 years, and since the pandemic, he said he’s noticed a drop-off in demand. He now takes in as little as $200, before expenses, selling ice cream for nine hours. Sometimes, if a regular customer comes to him with $2 for ice cream, he’ll just sell it at a loss.“I’m 66, and I’m tired,” Mr. Pacheco said in Spanish, adding that he is thinking of selling his truck next year.Carlos Cutz decided to leave his job at a deli two years ago to work on an ice cream truck to support himself, his wife and their three children. He took out a loan and bought his own truck in May.The ice cream man he bought it from had a route in Williamsburg, Brooklyn, and Mr. Cutz has resisted raising the prices to avoid alienating his customer base, even though his expenses have doubled for products like a package of 250 cake cones.“These have been the worst years for ice cream trucks,” he said in Spanish, adding “I’m going to try to do the best that I can to continue with this business. I’m feeding my family, and I can’t leave a business I haven’t tried.”Carlos Cutz decided to leave his job at a deli and buy an ice cream truck.Jose A. Alvarado Jr. for The New York TimesThe price of gasoline has been the most shocking expense in recent months for Andrew Miscioscia, the owner of Andy’s Italian Ices NYC which operates three trucks for private catering events. He spent $6,800 in June on gas alone. Mr. Miscioscia pivoted to catering during the pandemic when sales slipped on the Upper West Side.“People are not getting out like they used to,” he said. “And there’s a lot of competition out there.”Still, the appearance of an ice cream truck on a hot summer day remains a thrill for many. At Flushing Meadows Corona Park, Domenica Chumbi, of Hillside, N.J., held a vanilla cone dipped in cherry shell for her quinceañera photos. The pink-hued ice cream not only matched her dress and her party’s theme of cherry blossoms, but it also summoned memories of childhood visits to the park.“It’s something that reminds me of New York,” she said.Follow New York Times Cooking on Instagram, Facebook, YouTube, TikTok and Pinterest. Get regular updates from New York Times Cooking, with recipe suggestions, cooking tips and shopping advice. More

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    After Enduring a Pandemic, Small Businesses Face New Worries

    It has been a tough few years for companies without the scale to cruise through disruption. Making money isn’t getting any easier.America’s small businesses can’t catch a break.After two years of shutdowns and restrictions due to the Covid-19 pandemic, they’re straining to keep up with price increases without losing customers to larger competitors. They are struggling to keep positions filled as competition for workers remains at a fever pitch. And just at the moment that many business owners begin to recover and shore up their depleted savings, they’re worried that the Federal Reserve’s medicine for inflation will bring fresh hardship: higher borrowing costs and timid consumers.Surveys show that small-business sentiment has taken a markedly pessimistic turn in recent months — even more so than that of professional forecasters and of corporate executives.In June, the National Federation of Independent Business measured its lowest reading ever for economic expectations. The nonprofit Small Business Majority, in a survey in mid-July, found that nearly one in three small businesses couldn’t survive for more than three months without additional capital or a change in business conditions. The U.S. Chamber of Commerce’s Small Business Index for the second quarter showed that inflation had skyrocketed to the top of owners’ concerns. Seventy-five percent of participants in Goldman Sachs’s small-business coaching program reported that higher costs had impaired their finances.The sector — which the federal government typically defines as businesses below a certain size, ranging from 500 to 1,500 employees depending on the industry — is responsible for two of every three jobs created over the past 25 years, according to the Labor Department. So a weakening of that engine bodes ill for American growth and prosperity.Corinne Hodges runs the Association of Women’s Business Centers, a national network offering training, mentoring and financing to entrepreneurs. The organization’s funding from the Small Business Administration was augmented to help thousands of businesses navigate the pandemic, but, with the extra money now exhausted, the centers are laying off advisers, just as clients are asking for more help.“We saw pivoting in Covid,” Ms. Hodges said. “Well, what is it now? What’s the new pivot? It’s just been a vise grip of pressure emerging from the pandemic. Is a pivot going to be enough, or does it need to be something more?”Kymme Williams-Davis was one of those who survived pivot after pivot, and she isn’t sure she can make it much longer.Seven years ago, she started a coffee shop in Brooklyn called Bushwick Grind, specializing in fair-trade beans that are locally roasted. She spent $200,000 building out the space with a kitchen, and developed a brisk business selling healthier fare than that of the fast food outlets around her.When the pandemic hit, the shop had to close for nine months. Ms. Williams-Davis made rent by subletting the space to other small vendors. When she reopened in 2021, she got a boost from a contract to deliver 400 meals a day to the city’s vaccine sites. That cash flow allowed her to qualify for a loan to buy her own space.But she hasn’t been able to find anything in Brooklyn, in part because large investors keep outbidding her. Foot traffic hasn’t recovered. The cost of coffee, kale and other provisions — if she can even get them — is skyrocketing. Farmers from upstate are saving on gas by taking fewer trips into the city, so she has begun to swap in lower-grade ingredients.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    Is the U.S. Entering a Recession? Here’s Why It’s Hard to Say.

    The U.S. may register a second straight quarter of economic contraction, one benchmark of a recession. But that won’t be the last word.The United States is not in a recession.Probably.Economic output, as measured by gross domestic product, fell in the first quarter of the year. Government data due this week may show that it fell in the second quarter as well. Such a two-quarter decline would meet a common, though unofficial, definition of a recession.Most economists still don’t think the United States meets the formal definition, which is based on a broader set of indicators, including measures of income, spending and job growth. But they aren’t quite as sure as they were a few weeks ago. The housing market has slowed sharply, income and spending are struggling to keep pace with inflation, and a closely watched measure of layoffs has begun to creep up.“A month ago, I was writing that it was very unlikely that we are in a recession,” said Jeffrey Frankel, a Harvard economist. “If I had to write that now, I would take out the ‘very.’”

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    Change in select recession indicators since February 2020
    Notes: Production and job data are through June. Income and spending are through May and are adjusted for inflation. Income data excludes government transfer payments. All figures are seasonally adjusted.Sources: Commerce Department, Labor Department and Federal Reserve, via FREDBy The New York TimesMr. Frankel served until 2019 on the Business Cycle Dating Committee of the National Bureau of Economic Research, the semiofficial arbiter of when recessions begin and end in the United States. The committee tries to be definitive, which means it typically waits as much as a year to declare that a recession has begun, long after most independent economists have reached that conclusion. In other words, even if we are already in a recession, we might not know it — or, at least, might not have official confirmation of it — until next year.In the meantime, economists agree that the risks of a recession are rising. The Federal Reserve is raising rates aggressively to try to tame inflation, which has already contributed to large declines in the stock market and a steep drop in home construction and sales. Higher borrowing costs are all but certain to lead to slower spending by consumers, reduced investment by businesses and, eventually, slower hiring and more layoffs — all hallmarks of an economic downturn.“Are we in a recession? We don’t think so yet. Are we going to be in one? It’s a high risk,” said Joel Prakken, chief U.S. economist for S&P Global Market Intelligence.But the U.S. economy still has important sources of strength. Unemployment is low, job growth is robust, and households, in the aggregate, have lots of money in savings and relatively little debt. “The narrative that the economy has slowed quite a bit and is showing signs of deterioration from higher inflation and higher interest rates, that narrative is solid,” said Ellen Zentner, chief U.S. economist for Morgan Stanley. “But when you look at factors like jobs, where we’re still creating three to four hundred thousand jobs a month, with an unemployment rate that has not begun to show signs of sustained increases, and the cushions of excess savings, healthy household balance sheets — these are things that go far in keeping the U.S. out of recession, or at least staving off recession for longer.”What is a recession?Americans feel terrible about the economy right now — worse, at least by some measures, than at the peak of the pandemic-related layoffs in spring of 2020. It’s easy to understand why: The climbing cost of food, fuel and other essentials is eroding living standards. Hourly earnings, adjusted for inflation, are falling at their fastest pace in decades.8 Signs That the Economy Is Losing SteamCard 1 of 9Worrying outlook. More

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    The numbers show the U.S. economy is at least teetering on a recession

    With second-quarter GDP data due out Thursday, the question of whether the economy is in recession will be on everyone’s mind.
    The economy stands at least a fair a chance of hitting the rule-of-thumb recession definition of two consecutive quarters with negative GDP readings.
    Should inflation stay at high levels, that then will trigger the biggest recession catalyst of all, namely Federal Reserve interest rate hikes.
    Treasury Secretary Janet Yellen said “we just don’t have” conditions consistent with a recession.

    Foreman Angel Gonzalez and Anthony Harris, with E-Z Bel Construction, work on pipes along Fredericksburg Road during an excessive heat warning in San Antonio, Texas, July 19, 2022.
    Lisa Krantz | Reuters

    The White House is sure the economy is not in a recession nor headed for one. Wall Street is pretty sure there is no recession now, but isn’t as positive about what’s ahead.
    Looking at the data, the picture is indeed nuanced. Nothing right now is screaming recession, though there is plenty of chatter. The jobs market is still pretty good, manufacturing is weakening but still expanding, and consumers still seem fairly flush with cash, if somewhat less willing to part with it these days.

    So with second-quarter GDP data due out Thursday, the question of whether the economy is merely in a natural slowdown after a robust year in 2021 or in a steeper downturn that could have extended repercussions, will be on everyone’s mind.
    “This is not an economy that’s in recession, but we’re in a period of transition in which growth is slowing,” Treasury Secretary Janet Yellen told “Meet the Press” on Sunday. “A recession is a broad-based contraction that affects many sectors of the economy. We just don’t have that.”

    On Monday, Kevin Hassett, head of the National Economic Council during the Trump administration, pushed back on that view, and said the White House was making a mistake by not owning up to the realities of the moment.
    “We’re … kind of in recession, right? So it’s a difficult time,” Hassett, who is now a distinguished senior fellow at the Hoover Institution, told CNBC’s Andrew Ross Sorkin during a live “Squawk Box” interview.
    “In this case, if I were in the White House I would not be out there sort of denying it’s a recession,” he added.

    Two negative quarters

    If nothing else, the economy stands at least a fair a chance of hitting the rule-of-thumb recession definition of two consecutive quarters with negative GDP readings. The first quarter saw a gross domestic product decline of 1.6% and an Atlanta Federal Reserve gauge is indicating the second quarter is on pace to hit the same number.
    Wall Street, though, is seeing things a little differently. Though multiple economists, including those at Bank of America, Deutsche Bank and Nomura, see a recession in the future, the consensus GDP forecast for the second quarter is a gain of 1%, according to Dow Jones.
    Whether the U.S. skirts recession will mostly rest in the hands of consumers, who accounted for 68% of all economic activity in the first quarter.
    Recent indications, however, are that spending retreated in the April-to-June period. Real (after-inflation) personal consumption expenditures declined 0.1% in May after increasing just 0.2% in the first quarter. In fact, real spending fell in three of the first five months this year, a product of inflation running at its hottest pace in more than 40 years.

    It’s that consumer inflation factor that is the U.S. economy’s biggest risk now.
    While President Joe Biden’s administration has been touting the recent retreat of fuel prices, there are indications that inflation is broadening beyond gasoline and groceries.
    In fact, the Atlanta Fed’s “sticky” consumer price index, which measures goods whose prices don’t fluctuate much, has been rising at a steady and even somewhat alarming pace.
    The one-month annualized Sticky CPI — think personal care products, alcoholic beverages and auto maintenance — ran at an 8.1% annualized pace in June, or a 5.6% 12-month rate. The central bank’s flexible CPI, which includes things such as vehicle prices, gasoline and jewelry, rose at a stunning 41.5% annualized pace and an 18.7% year-over-year rate.

    One argument from those hoping that inflation will recede once the economy shifts back to higher demand for services over goods, easing pressure on overtaxed supply chains, also appears to have some holes. In fact, services spending accounted for 65% of all consumer outlays in the first quarter, compared to 69% in 2019, prior to the pandemic, according to Fed data. So the shift hasn’t been that remarkable.
    Should inflation persist at high levels, that then will trigger the biggest recession catalyst of all, namely Federal Reserve interest rate hikes that already have totaled 1.5 percentage points in 2022 and could double before year-end. The rate-setting Federal Open Market Committee meets Tuesday and Wednesday and is expected to approve another 0.75 percentage point increase.
    Fed monetary tightening is causing jitters both on Wall Street, where stocks have been in sell-off mode for much the year, as well as Main Street, with skyrocketing prices. Corporate executives are warning that higher prices could cause cutbacks, including to an employment picture that has been the main bulwark for those who think a recession isn’t coming.
    Traders expect the Fed to keep hiking its benchmark rate, taking the fed funds level to a range of about 3.25%-3.5% by the end of the year. Futures pricing indicates the central bank then will begin cutting by the summer of 2023 — a phenomenon that wouldn’t be uncommon as history shows policymakers usually start reversing course less than a year after their last move.
    Markets have taken notice of the tighter policy for 2022 and have started pricing in a higher risk of recession.
    “The more the Fed is set to deliver on further significant hikes and slow the economy sharply, the more likely it is that the price of inflation control is recession,” Goldman Sachs economists said in a client note. “The persistence of CPI inflation surprises clearly increases those risks, because it worsens the trade-off between growth and inflation, so it makes sense that the market has worried more about a Fed-induced recession on the back of higher core inflation prints.”
    On the bright side, the Goldman team said there’s a reasonable chance the market may have overpriced the inflation risks, though it will need convincing that prices have peaked.
    Financial markets, particularly in fixed income, are still pointing to recession.
    The 2-year Treasury yield rose above the 10-year note in early July and has stayed there since. The move, called an inverted yield curve, has been a reliable recession indicator for decades.
    The Fed, though, looks more closely at the relationship between the 10-year and 3-month yields. That curve has not inverted yet, but at 0.28 percentage point as of Friday’s close, the curve is flatter than it’s been since the early days of the Covid pandemic in March 2020.

    If the Fed keeps tightening, that should raise the 3-month rate until it eventually surpasses the 10-year as growth expectations dwindle.
    “Given the lags between policy tightening and inflation relief, that too increases the risk that policy tightens too far, just as it contributed to the risks that policy was too slow to tighten as inflation rose in 2021,” the Goldman team said.
    That main bulwark against recession, the jobs market, also is wobbling.
    Weekly jobless claims recently topped 250,000 for the first time since November 2021, a potential sign that layoffs are increasing. July’s numbers are traditionally noisy because of auto plant layoffs and the Independence Day holiday, but there are other indicators, such as multiple manufacturing surveys, that show hiring is on the wane.
    The Chicago Fed’s National Activity Index, which incorporates a host of numbers, was negative in July for the second straight month. The Philadelphia Fed’s manufacturing index posted a -12.3 reading, representing the percentage difference between companies reporting expansion vs. contraction, which was the lowest number since May 2020.
    If the jobs picture doesn’t hold up, and as investment slows and consumer spending cools some more, there will be little to stand in the way of a full-scale recession.
    One old adage on Wall Street is that the jobs market is usually the last to know it’s a recession, and Bank of America is forecasting the unemployment rate will hit 4.6% over the next year.
    “On the labor market, we’re basically in a normal recession,” said Hassett, the former Trump administration economist. “The idea that the labor market is tight and the rest of the economy is strong, it’s not really an argument. It’s just an argument that disregards history.”

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    Fed Prepares Another Rate Increase as Wall Street Wonders What’s Next

    Central bankers around the world have been picking up the pace of rate increases. Now the big question looms: When will they slow down?Federal Reserve officials are set to make a second abnormally large interest rate increase this week as they race to cool down an overheating economy. The question for many economists and investors is just how far the central bank will go in its quest to tame inflation.Central banks around the world have spent recent weeks speeding up their interest rate increases, an approach they’ve referred to as “front-loading.” That group includes the Fed, which raised interest rates by a quarter-point in March, a half-point in May and three-quarters of a point in June, its biggest move since 1994. Policymakers have signaled that another three-quarter-point move is likely on Wednesday.The quick moves are meant to show that officials are determined to wrestle inflation lower, hoping to convince businesses and families that today’s rapid inflation won’t last. And, by raising interest rates quickly, officials are aiming to swiftly return policy to a setting at which it is no longer adding to economic growth, because goosing the economy makes little sense at a moment when jobs are plentiful and prices are climbing quickly.But, after Wednesday’s expected move, the Fed’s main policy rate would be right at what policymakers think of as a neutral setting: one that neither helps nor hurts the economy. With rates high enough that they are no longer actively juicing growth, central bankers may feel more comfortable slowing down if they see signs that the economy is beginning to cool. Jerome H. Powell, the Fed chairman, is likely to keep his options open, but economists and analysts will parse every word of his postmeeting news conference on Wednesday for hints at the central bank’s path ahead.“It feels like 75 is kind of in the books — the interesting thing is the forward guidance,” said Michael Feroli, the chief U.S. economist at J.P. Morgan, explaining that he thinks the key question is what will come next. “It’s easier to slow down going forward, because every move will be a move into tightening territory.”The Fed’s latest economic projections released in June suggested that officials would raise rates to 3.4 percent by the end of the year, up from around 1.6 percent now. Many economists have interpreted that to mean that the Fed will raise rates by three-quarters of a point this month, half of a point in September, a quarter-point in November and a quarter-point in December. In other words, it hints that a slowdown is coming.But policy expectations have regularly been upended this year as data surprises officials and inflation proves stubbornly hot. Just this month, investors were speculating that the Fed might make a full percentage-point increase this week, only to simmer down after central bankers and fresh data signaled that a smaller move was more likely.That changeability is a key reason that the Fed is likely to emphasize that it is closely watching economic data as it determines policy. Its next meeting is nearly two months away, in September, so central bankers will most likely want to keep their options open so that they can react to the evolving economic situation.“Much as we’d like Mr. Powell to pull back from the Fed’s recent hyper-aggressive tone, it’s probably too early,” Ian Shepherdson, the chief economist at Pantheon Macroeconomics, wrote in a research note ahead of the meeting.Still, there are some reasons to think that the path the Fed set forward in its projections could play out. While inflation has been running at the fastest pace in more than 40 years, it is likely to slow when July data is released because gasoline prices have come down notably this month.And, although inflation expectations had shown signs of jumping higher, one key measure eased in early data out this month. Keeping inflation expectations in check is paramount because consumers and companies might change their behavior if they expect quick inflation to last. Workers could ask for higher pay to cover rising costs, companies might continually lift prices to cover climbing wage bills and the problem of rising prices would be perpetuated.A variety of other metrics of the economy’s strength, from jobless claims to manufacturing measures, point to a slowing business environment. If that cooling continues, it should keep the Fed on track to slow down, said Subadra Rajappa, the head of U.S. rates strategy at Société Générale. While Fed officials want the economy to moderate, they are trying to avoid tipping it into an outright recession.“When you start to see cracks appear in the unemployment measures, they’re going to have to take a much more cautious approach,” Ms. Rajappa said.Markets have been quivering in recent days, concerned that central banks around the world will push their war on inflation too far and tank economies in the process. Investors are increasingly betting that the Fed might lower interest rates next year, presumably because they expect the central bank to set off a downturn.“It is very likely that central banks will hike so quickly that they will overdo it and put their economies into a recession,” said Gennadiy Goldberg, a rates strategist at TD Securities. “That’s what markets are afraid of.”But signs of slowing growth and easing price pressures remain inconclusive, and price increases are still rapid, which is why the Fed is likely to retain its room to maneuver.American employers added 372,000 jobs in June, and wages continue to climb strongly. Consumer spending has eased somewhat, but less than expected. While the housing market is slowing, rents continue to pick up in many markets.Plus, the outlook for inflation is dicey. While gas prices may be slowing for now, risks of a resurgence lie ahead, because, for example, the administration’s efforts to impose a global price cap on Russian oil exports could fall through. Rising rents mean that housing costs could help to keep inflation elevated.While Mr. Powell made clear at his June news conference that three-quarter-point rate increases were out of the ordinary and that he did “not expect” them to be common, Fed officials have also been clear that they would like to see a string of slowing inflation readings before feeling more confident that price increases are coming under control.“We at the Fed have to be very deliberate and intentional about continuing on this path of raising our interest rate until we get and see convincing evidence that inflation has turned a corner,” Loretta Mester, the president of the Federal Reserve Bank of Cleveland, said in a Bloomberg interview this month.The central bank will get a fresh reading on the Personal Consumption Expenditures index — its preferred inflation gauge — on Friday. That data will be for June, and it is expected to show continued rapid inflation both on a headline basis and after volatile food and fuel prices are stripped out. The Employment Cost Index, a wage and benefits measure that the Fed watches closely, will also be released that day and is expected to show compensation climbing quickly.Given the recent decline in prices at the gas pump, at least two months of slower inflation readings by September are possible — but not guaranteed.“They cannot prematurely hint that they think victory over inflation is coming,” Mr. Shepherdson of Pantheon wrote. More

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    Biden’s New Economic Scorecard: The Price at the Pump

    The president has grown fond of boasting about a prolonged streak of falling gasoline prices, a move wrapped in risk and irony.WASHINGTON — After topping $5 a gallon in June, the price of gasoline has fallen for more than a month. The Biden administration wants to tell you about it. Again and again.President Biden and his top aides are in an all-out campaign to trumpet what is, as of Friday, 38 consecutive days of declines in the AAA average gas price nationwide. The president mentioned that streak in a news conference in Saudi Arabia and at the start of a speech on abortion rights. Aides have repeatedly trotted out charts showing the downward trajectory in news briefings and chastised reporters for not devoting more time to the subject.When President Andrés Manuel López Obrador of Mexico needled Mr. Biden in a meeting at the White House this month, saying that Americans were crossing the border to buy cheaper gas, the president interrupted him.“It has gone down for 30 days in a row,” Mr. Biden said.Celebrating the daily declines at the pump has become his version of President Donald J. Trump’s rampant bragging about gains in the stock market: a public obsession with a single economic indicator in hopes of driving a winning narrative with consumers and voters.Embracing this particular trend comes with obvious risks for Mr. Biden. Gas prices notoriously bounce up and down, and events outside his control could easily push them up again. If the administration’s efforts to impose a global price cap on Russian oil exports falls through before year’s end, White House economists fear that prices could soar higher than they were this spring, to potentially $7 per gallon.Gasoline cheerleading also poses an ironic challenge to Mr. Biden’s efforts to confront the mounting crisis of a warming planet.The jump in prices has had the short-term effect of forcing budget-constrained Americans to drive less, temporarily reducing the consumption of fossil fuels that drive global warming. But White House aides say the high prices are not helping Mr. Biden’s efforts to move the country to a low-emissions future. Instead, those costs might be undermining his longer-term climate goals by bolstering political and public support for more oil drilling and other fossil-fuel projects.High prices for motorists have already soured voters on the president’s handling of the economy and his overall performance in office. Mr. Biden, who speaks frequently of growing up in a working-class family where “if the price of gas went up, you felt it,” has for months tried to reassure voters that he is doing whatever he can to bring those prices down.When gasoline climbed past $3 a gallon nationwide in the fall, as global demand for oil increased amid the rebound of economic activity from the pandemic, Mr. Biden opened the taps of the Strategic Petroleum Reserve. In the spring, when prices reached $4 a gallon, he announced a waiver allowing summer sales of higher-ethanol gasoline, which costs slightly less for drivers but emits more greenhouse gases over its life cycle.When prices peaked above $5 a gallon this summer amid the war in Ukraine, Mr. Biden called for a suspension of the federal gas tax (which Congress has not passed), implored oil-producing countries in the Middle East to pump more crude into global markets and accused large oil companies and refiners of profiteering.Motorists in Brooklyn last week. Gas prices peaked above $5 a gallon this summer.Hiroko Masuike/The New York TimesAnalysts say the president’s efforts may have helped hold down prices at the margins. But no economists give the administration even a majority of credit for the steep drop in global oil prices that began in early June. Instead, they point to market forces: reduced oil demand from China, which is enduring another wave of restrictions because of the coronavirus, and weakening economic activity in Europe and other wealthy nations. Russian oil has also continued to flow to world markets despite sanctions imposed by the United States and other Western nations.The average national price reported by AAA on Friday was $4.41 per gallon. The drop over the past month is likely to produce a more favorable inflation rate for July than the 9.1 percent annual increase of the Consumer Price Index that the Labor Department reported for June. Industry analysts and futures markets suggest more relief is likely to be expected in the coming weeks.Mr. Biden has embraced the change. On Friday, in his first virtual event since testing positive for the coronavirus the day before, the president convened a half-dozen economic advisers for a briefing on falling gas prices.“You can find gas for $3.99 or less in more than 30,000 gas stations, in more than 35 states,” he said. “In some places, it’s down almost a dollar from last month.”While administration officials sought to deflect blame for rising oil prices over the past year, they were happy to claim at least partial credit for the current decline.“While there’s a lot that goes into setting the global oil and gas price,” Jared Bernstein, a member of the White House Council of Economic Advisers, said in a news briefing on Monday, “the historic actions taken by President Biden to address the impact of Putin’s invasion of Ukraine have helped and continue to help to increase the global supply of oil and therefore are in the mix of factors driving down the price.”Republicans say they are surprised the administration is celebrating at all, when prices remain more than $2 a gallon higher than they were when Mr. Biden took office. (They do not mention that he inherited an economy where global demand for oil was suppressed by the coronavirus pandemic.)It might also seem counterintuitive that the president is encouraging lower gasoline costs while he pursues what aides promise will be an ambitious unilateral agenda to cut greenhouse gas emissions.“The real answer,” Mr. Biden said on Friday, “is to get to a clean-energy economy as soon as possible, turn this into something positive.”Economists largely agree that raising the prices of fossil fuels like coal and gasoline is a way to ensure that consumers burn less of them and to encourage switching to lower-emission alternatives like electric vehicles. The Energy Department reported on Wednesday that gasoline use in the United States was down nearly 8 percent over the past four weeks compared with the same period a year ago. That continued for the second quarter of the year, which the Energy Information Administration said might have been the result of rising gasoline prices.But Biden administration officials — even economists who have previously favored steps to raise taxes on fossil fuels — say the high prices are not helping the president’s climate agenda.The prices are reinvigorating a push by Republicans for increased oil and gas drilling on federal lands, which Mr. Biden promised to end while campaigning for president. Recent price volatility could also give customers pause when they consider buying a more efficient gas-powered vehicle, or an electric one, when supply-chain shortages in the automobile industry are making it harder for consumers to buy electric cars anyway.Aides to Mr. Biden have privately said for months that to keep Americans on board with the energy transition, gas prices need to come down — definitely below $4 a gallon, and hopefully below $3, which was the national average at the start of last summer.If prices continue to decline at the rate they have over the past month, the nationwide average would slip below $3 a gallon in the final weeks of campaigning before the midterm elections. In about 79 days, to be exact.Not that anyone’s counting. More