U.S. Producer Prices Spike in February
RBC | Mar 16
In February, producer prices saw a significant increase of 1.6%, surpassing expectations of a 0.7% rise and following a previous 0.8% increase in January. Consequently, the year-over-year rate surged from 3.6% in January to 5.6%. On a core basis, prices increased by an anticipated 0.2%, which lifted the annual rate to 1.8%—up from 1.6% in January, moving away from a recent low of 0.9% recorded at the end of 2009.
Wholesale Prices Climb 1.6% Driven by Rising Food Costs
LA Times | Mar 16
Economist David Resler from Nomura Securities remarked that this price surge is probably temporary, a sentiment echoed by the Federal Reserve on Tuesday. He noted that many of the rising food prices are due to winter freezes affecting agriculture in Florida, Texas, and other areas. Additionally, unrest in the Middle East is largely responsible for rising gas prices. “Both food and gasoline prices will likely stop escalating as quickly,” Resler stated. Conversely, John Ryding of RDQ Economics disagreed, emphasizing that consumers will feel the financial strain for a while. “We do not fully accept the Fed’s assurance that these pressures will be temporary. The public, witnessing such significant increases in food and energy, is unlikely to lower their inflation expectations,” Ryding explained.
In February, housing starts experienced a sharp decline, marking the most significant drop in a single month since 1984, according to a report from the U.S. Census Bureau reports. The 23% decrease brought starts down to an annualized rate of 479,000, just above the cycle’s prior low of 477,000 recorded in April 2009. While it remains uncertain whether new lows are forthcoming, the likelihood has certainly increased following these statistics.
The update on housing starts for February is expected later today, but it is unlikely we will see a repeat of the near 15% rise witnessed in January. The consensus prediction points to a 3.5% decrease for last month, as per Briefing.com. To put it simply, the housing market continues to struggle following a significant correction. Housing starts may be stabilizing after a more than 50% drop from the pre-Great Recession highs, but a substantial rebound seems improbable in the near term. This raises the question of how this will impact the broader economic recovery.
Grant Thornton has released its Retirement Plan Survey 2011, which contains several noteworthy insights. Here’s a key finding:
How frequently is fiduciary training provided to the administrative/investment committee for your plan (excluding your record keeper)?
– Never: 23%
– Very infrequently and with no set pattern: 41%
– Annually: 24%
– When new members are added: 12%
The study recommends that, given the numerous developments affecting internal plan fiduciaries, more frequent fiduciary training should be implemented. The best practice is to conduct fiduciary training every year, alongside legal updates as new changes occur.
Last week, the Federal Reserve released its update on commercial bank loans in the U.S., indicating a fourth consecutive monthly increase in commercial and industrial (C&I) loans for February. However, the relative size of these increases is diminishing, with a rise of $2.3 billion, significantly down from January’s $5.3 billion jump. Meanwhile, real estate loans are continuing to decline in absolute terms, with last month observing the largest monthly decrease in a year when adjusted for seasonal factors.
Japan’s Nuclear Crisis Escalates
Voice of America | Mar 15
The situation at Japan’s troubled nuclear power plant continues to deteriorate. Government officials have confirmed higher radiation leaks and explosions at three reactors. On Tuesday morning, Japanese Prime Minister Naoto Kan addressed the nation following the explosion of a third reactor building in Fukushima. He urged citizens to remain calm and acknowledged that one of the damaged reactors is at a significantly increased risk of releasing radiation into the atmosphere. The Prime Minister advised those living between 20 and 30 kilometers from the plant to stay indoors, while approximately 200,000 residents who lived closer had already evacuated.
There have been numerous tragedies in the early years of the 21st century, but the disaster in Japan stands out among the worst. This ongoing catastrophe has the potential to worsen beyond the already devastating reports. If any event calls for the best of human compassion and action, it is the crisis in Japan. In light of this, here are some links to resources that can assist in supporting a country in distress.
The upcoming week will bring new information on various critical economic indicators for the U.S., including housing starts and consumer price inflation. However, these figures may become insignificant due to the impact of the tragedy in Japan on economic perceptions and activities. The global economy was already under strain due to turmoil in the Middle East, largely driven by rising oil prices. Although this concern appears to have subsided somewhat, it’s too soon to discount the implications over the coming weeks and months. Meanwhile, the human suffering in Japan remains a priority. Economically, the first challenge is navigating the uncertainty that has emerged in the wake of this tragedy. As a result, the relevance of dated economic news in the near future is likely to be limited.
Analysis: Japan’s Quake Could Lead to Severe Economic Fallout
Reuters | Mar 14
The devastating trio of earthquake, tsunami, and one of Japan’s most severe nuclear incidents is poised to inflict significant, possibly prolonged damage to the world’s third-largest economy. The combination of power outages and the likelihood of tax increases may adversely affect both businesses and households, potentially overshadowing the mild economic repercussions seen after the 1995 Kobe earthquake, especially given the current higher oil prices, stronger yen, and Japan’s substantial debt.
Oil is again a hot topic, though for unfortunate reasons. This recent downturn prompts a review of essential readings in the realm of energy literature. While this genre is vast, the following list barely scratches the surface, yet these titles are worthy of a spot on anyone’s bookshelf. Although there are more contemporary works available, here are five classic texts that will endure.
● The Prize: The Epic Quest for Oil, Money & Power
By Daniel Yergin
This comprehensive examination explores how the oil industry became so influential, addressing the politics, economics, and key figures involved. If one could read only a single book on this subject, this would be it—masterfully written and engaging, it truly stands as a monumental work.
