Retail sales rose in November as holiday shopping began.
The increase in spending continued for a fourth straight month despite an increase in coronavirus cases and higher prices on goods because of inflation.,
Credit…Philip Cheung for The New York Times
Retail sales rose for the fourth straight month in November, as consumers in the United States continued to spend even as they faced fast rising prices and an upswing in coronavirus infections.
The 0.3 percent increase in sales last month reported by the Commerce Department was a slowdown from the month before — something that analysts said likely reflected a shift in the start of the holiday shopping season to October. Sales growth in October was revised slightly higher on Wednesday to 1.8 percent.
Consumers, motivated by news of product shortages and fast rising prices, began their holiday shopping well before the Thanksgiving holiday, which is seen as the traditional start of the holiday shopping season.
“We saw consumers thinking of inflation and supply chains being chocked, so the ultimate pantry loading happened in October,” Kathy Gramling, a consumer industry markets consultant for EY.
As overall sales rose, spending — the key drivers of U.S. economic activity — at grocery stores and liquor stores, gas stations, clothing retailers and home improvement stores increased.
Sales declined in several categories however: Spending at electronics and appliances stores fell 4.6 percent last month, while sales at car dealers and general merchandise stores, such as department stores, were down as well. Health and personal care stores, such as pharmacies, also saw a decrease of 0.6 percent.
Ms. Gramling said retailers were likely to face logistical issues in January, when consumers come back to stores with returns from the holiday season.
The latest measure of sales — the key driver of economic activity in the United States — comes as consumers are grappling with high inflation and a predicted surge in coronavirus infections. The sales data for November does not reflect how shoppers might have reacted to the emergence of the Omicron variant, which started to make headlines during the Thanksgiving weekend.
But for now, economists expect that sales will continue to rise in December.
A reading on consumer sentiment, measured by a University of Michigan survey on how Americans view the general state of the economy, increased in December after falling to its lowest level in a decade in early November. Those surveyed pointed to inflation as the most serious problem the country faces, according to preliminary results published on Friday.
Also on Friday, the Labor Department reported that consumer prices had risen at their fastest pace in nearly 40 years. The Consumer Price Index was up 6.8 percent last month compared with a year earlier as demand for products remained strong and the virus continued to disrupt manufacturing and transportation.
U.S. consumers were not slowed by surging coronavirus cases in November, when more than 30 states saw sustained increases in infections and hospitalizations climbed in certain areas of the country.
Federal Reserve officials are shifting their focus away from bolstering the economic recovery and toward trying to guard against out-of-control inflation, and on Wednesday they are expected to announce they are hastening plans to cut their policy help.
Policymakers are wrapping up their final gathering of 2021, and are widely expected to signal a faster end to the bond-buying campaign they have used to keep money flowing through financial markets and support the economy since the early days of the pandemic. They could also telegraph that they expect to raise rates from rock-bottom more rapidly than they projected just a few months ago.
The potential for major policy signals at the Fed’s meeting, which concludes at 2 p.m. Wednesday, will make it one of the most closely watched of the pandemic era.
Officials took their first step toward weaning the economy off the central bank’s support in November, when they said they would begin to slow a large-scale bond-buying program that had been in place since early in the pandemic to keep money flowing around markets and support the economy. In the weeks since the Fed’s last meeting, fresh data has showed that consumer prices are climbing rapidly and the unemployment rate is falling swiftly as the economy heals.
Given inflation and growth trends, Fed officials made clear ahead of their December meeting that they planned to discuss withdrawing support more quickly, and economists think officials will on Wednesday signal a plan to taper off bond purchases so that the buying will stop altogether in March.
Wall Street investors will also eagerly watch both the Fed’s quarterly economic projections and the post-meeting news conference by the Fed chair, Jerome H. Powell, for any hint at when and how rapidly policymakers expect to lift interest rates away from near-zero, where they have been set since March 2020.
Here’s what to watch in the announcement.
Quicker end to bond buying: Economists expect that the Fed will speed up its retreat from its bond-buying program, doubling the monthly slowdown in purchases by $15 billion, so that the central bank is buying $30 billion less each month. That would mean that the purchases would end altogether ahead of the central bank’s March meeting.
Interest rate projections: Several Fed officials have signaled that they would prefer to wait until the bond-buying program ends to lift interest rates, their more traditional and powerful tool for cooling off the economy. By gearing up to stop bond buying sooner, the Fed could put itself in a position to raise interest rates earlier, should officials decide that higher rates are necessary to cool off consumer demand and weigh down inflation.
Policymakers could also offer hints about when rate increases might start and how quickly they will proceed in their so-called dot plot, which shows officials’ anonymous projections of where interest rates will be set in coming years. Many economists expect the plot to show two to three increases in 2022.
Powell’s stance: The Fed chair signaled late last month that the central bank was shifting toward a more wary stance when it comes to inflation.
But those comments were made before fresh data was released, including last week’s report that showed consumer prices rising at the fastest pace since 1982. Producer prices are climbing briskly and the labor market continues to recover, and Mr. Powell’s interpretation of those metrics will be closely watched. So, too, will any hint about what it all means for interest rates down the road.
Meeting the full employment test: One big question lingering on the Fed’s horizon is what full employment might look like in 2022. After months of stagnation, pandemic-depressed labor force participation showed signs of picking up in November. If officials want to see more recovery, it could mean that reaching maximum employment will take longer as sidelined workers slowly trickle back. If, on the other hand, they just want to see a lower unemployment rate, that trend is well in train. Joblessness is already down to 4.2 percent, compared with a peak of 14.8 percent early in the pandemic.
The Fed has said that it wants to see inflation above 2 percent on a sustained basis — a goal officials have suggested has been more than achieved — and maximum employment before raising rates. With one target met, the second one is the factor to watch.
Tuesday marked a year since the first coronavirus vaccine was administered in the United States. It was also the day the country neared 800,000 deaths from Covid-19. Now that the Omicron variant is spreading fast, companies are revising their pandemic policies, the DealBook newsletter notes.
Google set deadlines for complying with its vaccine mandate. The company circulated a memo that said workers who had not shown proof of vaccination or applied for an exemption by Jan. 18 would be placed on paid leave for 30 days, followed by unpaid leave for up to six months, and then they would lose their jobs.
JPMorgan Chase will bar unvaccinated employees from entering its New York headquarters, along with several other offices in the city. In a memo reviewed by DealBook, the bank said that those locations would relax their masking rules, because “it seems unfair to require our vaccinated employees to wear masks all day at their desks,” which would be mandated under a state rule for companies that do not require proof of vaccination.
Apple is reinstating mask mandates and crowd control at retail stores. “Amid rising cases in many communities, we now require that all customers join our team members in wearing masks while visiting our stores,” Apple told The Verge. The company is also limiting visitor numbers at some store locations.
The N.F.L. is mandating booster shots for staff members who work most closely with players. More than 94 percent of players are vaccinated, but more cases have been recorded this season than last. The players’ union argued for a return to daily testing for all, regardless of vaccination status.
Amtrak temporarily dropped its vaccine mandate for employees, and will allow workers to opt for weekly testing instead, citing a court decision that halted the enforcement of a national mandate for federal contractors. The policy means that Amtrak no longer plans to cut services next month, it said.
Inflation in Britain rose 5.1 percent last month, the highest annual rate in more than a decade, driven mainly by jumps in the cost of gasoline and clothing.
The figure is a significant increase from October’s 4.2 percent rate, and shows that prices are rising faster than the Bank of England‘s most recent forecast, which predicted inflation would rise to about 5 percent next spring. The central bank tries to keep inflation at about 2 percent.
Prices for motor fuels were the biggest factor pushing the Consumer Prices Index higher, the Office for National Statistics said. The average gasoline price in Britain last month — 145.8 pence per liter, which translates to about $7.30 a gallon — was the highest on record since 1990, the agency said.
Inflation, mostly dormant for years, is now soaring around the world. In the United States, the Consumer Price Index climbed by 6.8 percent in the year through November, the fastest pace since 1982, and in Europe it has hit 4.9 percent, a record for the euro. The main trigger has been the jagged reawakening of economies that were largely shut down during the pandemic lockdowns during parts of 2020 and 2021. The surge in activity has caused supply-chain problems, hampered further by labor shortages, as well as shortages of oil and natural gas.
The issue of how to curb prices increases will undoubtedly come up at this week’s Bank of England meeting. The policymakers, who will release a statement tomorrow, have discussed raising the bank’s record-low benchmark interest rate, but must weigh inflation concerns with the recent surge in the Omicron variant, which is expected to rob the economy of some growth.
Since the discovery of the Omicron variant, bets that the central bank would raise interest rates on Thursday have significantly dropped.
“The quick ascent” of inflation won’t panic the Bank of England into raising interest rates this week, Samuel Tombs, an economist at Pantheon Macroeconomics, wrote in a note to clients, because “the full extent of the economic damage wrought by Omicron is still unknown.”
With winter just beginning, European natural gas prices have once again reached record highs, as worries grow over potential supply disruptions because of tensions over Ukraine or from cold weather.
“We are literally at the mercy of the weather for the next month or two,” said Henning Gloystein, an analyst at Eurasia Group, a political risk firm.
On Europe’s main trading hub for natural gas, the TTF in the Netherlands, futures are trading at their highest levels in more than a decade and are roughly eight times their value of a year ago.
Around $41 per million British thermal units, the gas futures are priced at more than 10 times what gas is selling for in the United States and comparable to about $230 a barrel for oil, figures Laura Page, a gas analyst at Kpler, a research firm. (Brent crude is now trading for about $73 a barrel.)
Alarm bells about gas prices started sounding late last summer. Prices hit a peak in October, but lately they have resumed climbing, reaching new highs. Several factors are pushing prices higher, including the fact that supplies are straining to keep up with strong demand as the effects of the pandemic lockdowns ease.
At the same time, import volumes from Russia, Europe’s chief supplier, remain low. The buildup of Russian troops on the border with Ukraine is both creating worries over the possibility of disruptions of gas flows through that country, and the political tension is making it unlikely that Nord Stream 2, the recently completed but not approved gas pipeline between Russia and Germany, will open anytime soon.
Germany’s new foreign minister, Annalena Baerbock, sent gas prices soaring on Monday when she said the giant pipeline could not be certified because it did not meet European Union rules.
Whatever happens with Ukraine, Europe has not built up sufficient gas in storage to guarantee that there will be enough fuel to heat homes and power businesses if the weather turns frigid, as some forecasters predict.
Europe burns far more gas in the winter than in summer, and European gas suppliers last summer failed to replenish inventories that were drained by a late cold snap last spring. Adding to concerns, in November European storage facilities “depleted at the fastest rate since records began,” according to Ms. Page of Kpler.
Much of course depends on the weather and whether tensions ease over Ukraine, but analysts say the market is likely to be on edge at least until the peak of winter — bad news for businesses that use large amounts of gas, like fertilizer producers or metals smelters.
Elevated gas prices will continue to push electricity bills higher in countries like Britain and Italy that use large amounts of gas to generate power. Rising bills in turn will squeeze consumers and boost inflation, which hit 5.1 percent in Britain for November, the highest in a decade.
In the United States, drivers have seethed over having to pay high gasoline prices, but the natural gas that they use for heating and cooking may become cheaper. U.S. prices, which rose rapidly in October, have since dropped sharply, though they remain up about 50 percent since January.
The United States enjoys a big advantage over Europe, which depends heavily on fuel imports. American markets have abundant domestic natural gas production in part because of shale drilling.
How different age groups think inflation will rise
The Federal Reserve‘s approach to controlling inflation depends on ordinary Americans’ expectations. If people expect inflation to remain low into the future, the Fed may do nothing even if prices spike momentarily, because of supply chain constraints or other factors.
If inflation expectations rise, though, the Fed will probably bring down the hammer, worried that they will get baked into everyday decisions.
A tricky challenge for the Fed’s approach is that people’s inflation expectations do not necessarily flow from an analytical reading of prices and wages, Eduardo Porter reports for The New York Times. They are influenced by many things that often have little to do with the economy.
It is natural for the poor to be more preoccupied by rising prices, because prices tend to hit the poor harder. Moreover, the poor don’t have the financial tools that the rich can use to protect the value of their savings.
But people’s attitudes about inflation are also shaped by other influences. For instance, in a Gallup poll in November, 53 percent of Republicans reported that recent price increases were causing personal hardship, but only 37 percent of Democrats did. And expectations are influenced by time.
People not schooled in economics may have little clue about how inflation and monetary policy work. Given that knowledge gap, it is fair to ask whether the inflation expectations of ordinary Americans should play such a large role in shaping monetary policy. READ THE FULL ARTICLE ->
A partisan fight atop a sleepy bank regulator intensified on Tuesday, with Democratic members of the Federal Deposit Insurance Corporation board saying its Republican chairwoman was subverting the majority’s will.
Rohit Chopra, a member of the F.D.I.C. board and the new director of the Consumer Financial Protection Bureau, complained that the chairwoman, Jelena McWilliams — a Trump appointee — had refused to recognize their attempts to review rules about bank mergers.
“This approach to governance is unsafe and unsound,” he said in a statement. “It is also an attack on the rule of law.”
At a virtual meeting earlier Tuesday, Ms. McWilliams, the board’s lone Republican, struck down Mr. Chopra’s request to record in the minutes a vote on the review. Ms. McWilliams said the regulator’s general counsel had ruled the vote, which had been taken earlier by the Democratic members, to be invalid.
The dispute — believed by some experts to be part of an effort by Democrats to unseat Ms. McWilliams — spilled into public view last week.
Mr. Chopra and two other Democrats on the board — Martin J. Gruenberg, a longtime member, and Michael J. Hsu, the acting comptroller of the currency — voted over email last week to request public comment on the issue of bank mergers. A statement on the request was posted not on the F.D.I.C.’s site but on the site of the consumer bureau that Mr. Chopra leads. The F.D.I.C. soon released a statement saying it had not approved such a request for comment.
Now the Democrats on the board of the F.D.I.C., which is chiefly known for backing consumer deposits but has a hand in overseeing all of the country’s banks, contend that Ms. McWilliams is stonewalling attempts by the majority to set policy.
The regulators spoke politely to one another during the virtual meeting on Tuesday, but Mr. Chopra released a scathing statement afterward, calling the general counsel’s decision “legally dubious.”
In his own statement, Mr. Hsu said he believed “the views of the majority of the F.D.I.C. board members should influence the agency’s agenda and actions.”
A spokeswoman at the F.D.I.C. did not respond to messages seeking comment.
Ms. McWilliams has mostly adhered to Republican ideological lines during her tenure. That makes her something of a barrier to President Biden’s agenda, which involves shifting the federal government’s stance on big issues like climate change and income inequality.
The F.D.I.C. focuses closely on the smallest banks. It has a five-member board that typically allows input from both political parties. A fully seated board will generally consist of two Republicans and two Democrats serving six-year terms and a chair appointed for a five-year term. One seat is currently empty.
The agency is just one of several regulators that play a regulatory role in the financial industry. Others include the Federal Reserve, the Office of the Comptroller of the Currency (overseen, for now, by Mr. Hsu) and the Consumer Financial Protection Bureau (overseen by Mr. Chopra).
Banking industry groups have urged calm and transparency. The American Bankers Association wrote to the board on Monday emphasizing the importance of an “orderly, transparent policymaking process.”
The head of the Consumer Bankers Association, another industry group, echoed that sentiment in an opinion essay in The Hill on Monday.
“Americans expect and deserve regulators to operate with transparency and instill certainty, especially for those tasked with overseeing financial institutions,” the group’s chief, Richard Hunt, wrote. “The implications of potentially unstable leadership at the F.D.I.C. and other prudential regulators are especially significant.”
Three women who interned at SpaceX said they faced sexual harassment and unwanted advances from other interns as well as men in more senior positions across a range of workplace incidents, some of which went without punishment.
Ashley Kosak, a former intern who later became a full-time engineer at SpaceX, wrote in an essay published on the website Lioness on Tuesday that a male intern groped her in 2017 while she was doing dishes in company housing shared by interns. She also said a male colleague ran his hand up her torso in 2018 at a company event.
She reported the 2017 episode that year to her manager, she said, and the 2018 episode to SpaceX’s human resources department the day after it happened. She said she never received responses to those complaints. Ms. Kosak’s account shared similarities with accounts from other former interns at the company. READ MORE ->
A New York trial court judge on Tuesday issued a clarification in an order that has temporarily prevented The New York Times from seeking out or publishing certain documents related to the conservative group Project Veritas, allowing The Times some latitude to report on the organization until a final ruling is reached.
The clarification, by Justice Charles D. Wood of State Supreme Court in Westchester County, came in response to a formal request from Times lawyers on Monday. In the request, The Times asked that the order be dissolved, while also requesting that the court clarify what it could and could not publish. READ MORE ->
Stocks on Wall Street were lower on Wednesday, as investors awaited word from the Federal Reserve on whether it would take more aggressive steps to combat inflation by pulling back more quickly on its efforts to support the economy.
The S&P 500 dropped about 0.3 percent in early trading, while the tech heavy Nasdaq composite fell 0.6 percent.
The central bank is ending a two-day meeting on Wednesday, and Fed officials have already said they would discuss whether policy needed to change. The central bank has begun to slow its purchases of government bonds — a measure meant to keep cash flowing through the financial system — and on its current timeline those purchases would end entirely midway through 2022.
Ending the purchases is seen as a prerequisite to the Fed using its more powerful tool to control the economy, raising its benchmark interest rates.
But the Fed is growing wary an unceasing rise in consumer prices that began earlier this year, and could end the bond purchases earlier than it had initially planned. Also on Wednesday, the central bank will also release new projections on the outlook for interest rates and those might show that policymakers expect to raise rates more aggressively than they did a few months ago.
Rising rates could dampen enthusiasm for risk investments like stocks, so an aggressive change in policy might prompt turmoil in the markets. Already this week, the prospect of rate increases has hit shares of high-flying technology companies, with the Nasdaq composite down about 3 percent so far.
Oil prices continued to drop on Wednesday, with the U.S. crude benchmark falling below $60 a barrel, and energy companies like Occidental Petroleum and were among the worst performers in the S&P 500 in early trading. Occidental Petroleum fell more than 3 percent, while Devon Energy dropped more than 2 percent.
Also lower were shares of travel and tourism companies, which have become a barometer of sentiment about the pandemic. Carnival Corporation and Marriott International each fell more than 2 percent, after the Centers for Disease Control and Prevention cautioned that the Omicron variant of the coronavirus could lead to a surge in infections as soon as next month.