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Economic Indicators

U.S. consumers gear up to hit the road and foreign destinations

By Dan Burns

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U.S. consumers gear up to hit the road and foreign destinations
© Reuters. FILE PHOTO: Traffic is seen at the Lincoln Tunnel ahead of the July 4th holiday, in New York City, New York, U.S., July 2, 2021. REUTERS/Eduardo Munoz

By Dan Burns

(Reuters) – U.S. consumers, itching for a change of scene after more than a year-and-a-half of constricted pandemic life, are as eager to travel as at any time since COVID-19 sent the world into rolling waves of lockdowns, and now a record number of Americans plan to get out of the country in the next six months.

Nearly 48% of consumers plan a vacation in the next half year, a survey from the Conference Board released on Tuesday showed. That is the highest positive response rate to the every-other-month question included in the economic research group’s benchmark consumer confidence survey since February 2020, the month before the coronavirus triggered a short but deep recession.

Travel and leisure activities were the hardest hit by coronavirus lockdowns. They began improving notably early this year on the back of COVID-19 vaccinations but tailed off over the summer and early fall as the Delta variant swept through the country, especially regions with the lowest inoculation rates such as the South that are also popular vacation destinations.

For a graphic on Let’s get out of Dodge!:

https://graphics.reuters.com/USA-ECONOMY/TRAVEL/znvnezoaopl/chart.png

Lynn Franco, the Conference Board’s senior director of economic indicators, said in a statement the increase this month was “a reflection of the ongoing resurgence in consumers’ willingness to travel and spend on in-person services.”

That indication came as consumer confidence overall rose unexpectedly in October, snapping a three-month skid that had been triggered largely by the summer’s Delta wave and by concerns over rising inflation.

While by far most people plan a trip somewhere in the United States – and by car – a record 16.8% said they are headed to a foreign country between now and next April. That tops the previous record of just under 15% in the October 2017 survey and is roughly double the series historic average of 8.4% dating to the 1970s.

For a graphic on Headed to distant shores:

https://graphics.reuters.com/USA-ECONOMY/TRAVEL/lgpdwleywvo/chart.png

With fewer people planning to travel by air, the surge in foreign travel plans may in part reflect the pending relaxation of restrictions at the U.S. borders with Canada and Mexico https://www.reuters.com/world/us/us-open-border-with-canada-starting-early-november-buffalo-news-2021-10-13, the two countries most easily reached by motor vehicle from the United States.

Indeed, nearly 35% of those planning a getaway of any sort say they will travel by automobile, the fourth-highest percentage since the Conference Board launched the vacation-plans supplement to its survey in 1978.

Of those planning to get away, just 19.6% plan to get aboard an airplane, the lowest percentage since the Conference Board’s survey in February. That is more than 3 percentage points lower than the average over the past decade and 10 points below the record of greater than 30% in August 2019.

The number of passengers proceeding through airport security over the latest weekend totaled roughly 5.8 million, more than double the volume from a year earlier but still only about 85% of the passenger volumes from the comparable period in 2019, the latest Transportation Security Administration data showed.

For a graphic on Hopping a flight soon? Maybe not:

https://graphics.reuters.com/USA-ECONOMY/TRAVEL/lgvdwlezwpo/chart.png

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Economic Indicators

U.S. manufacturing presses ahead; labor market gaining traction

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U.S. manufacturing presses ahead; labor market gaining traction
© Reuters. FILE PHOTO: A restaurant advertising jobs looks to attract workers in Oceanside, California, U.S., May 10, 2021. REUTERS/Mike Blake/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. manufacturing activity picked up in November amid strong demand for goods, keeping inflation high as factories continued to struggle with pandemic-related shortages of raw materials.

Signs that the economy was gathering momentum halfway through the fourth quarter were underscored by other data on Wednesday showing private employers maintained a strong pace of hiring last month. But there are fears that the Omicron variant of COVID-19 could hurt demand for services as well as keep the unemployed at home, and hold back job growth and the economy.

“Manufacturing should continue to contribute positively to GDP growth over the next year as businesses replenish inventories and supply-chain issues improve,” said Ryan Sweet, a senior economist at Moody’s (NYSE:) Analytics in West Chester, Pennsylvania. “There are risks, including the potential for businesses overbooking orders now and the Omicron variant magnifying price and supply chain issues.”

The Institute for Supply Management (ISM) said its index of national factory activity increased to a reading of 61.1 last month from 60.8 in October.

A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index rising to 61.0.

“The U.S. manufacturing sector remains in a demand-driven, supply chain-constrained environment, with some indications of slight labor and supplier delivery improvement,” said Timothy Fiore, ISM chair of the manufacturing business survey committee.

Global economies’ simultaneous recovery from the COVID-19 pandemic, fueled by trillions of dollars in relief money from governments, has strained supply chains, leaving factories waiting longer to receive raw materials.

All of the six largest manufacturing industries, including computer and electronic products as well as transportation equipment, reported moderate to strong growth.

Makers of computer and electronic products said “international component shortages continue to cause delays in completing customer orders.” Transport equipment manufacturers reported “large volume drops due to chip shortage.” Furniture producers said “business is strong but meeting customer demand is difficult due to a shortage of raw materials and labor.”

But there are some glimmers of hope. Prices for steel plate and hot-rolled coil appear to be nearing a plateau, according to manufacturers of fabricated metal products. Supply of plastic resins is improving, accounts from manufacturers of electrical equipment, appliances and components, as well as plastics and rubber products suggested.

The ISM survey’s measure of supplier deliveries slipped to a reading of 72.2 from 75.6 in October. A reading above 50% indicates slower deliveries.

The long delivery times kept inflation at the factory gate bubbling. The survey’s measure of prices paid by manufacturers fell to a still-high 82.4 from a reading of 85.7 in October.

Factories are easily passing the increased production costs to consumers and there are no signs yet of resistance.

Federal Reserve Chair Jerome Powell told lawmakers on Tuesday that “the risk of higher inflation has increased,” adding that the U.S. central bank should consider accelerating the pace of winding down its large-scale bond purchases at its next policy meeting in two weeks.

The Fed’s preferred inflation measure surged by the most in nearly 31 years on an annual basis in October.

Stocks on Wall Street rebounded after Tuesday’s sell-off. The dollar slipped against a basket of currencies. U.S. Treasury prices fell.

Graphic: ISM PMI – https://graphics.reuters.com/USA-STOCKS/akvezozqbpr/ISM.png

STRONG ORDERS

The ISM survey’s forward-looking new orders sub-index climbed to a reading of 61.5 last month from 59.8 in October. Customer inventories remained depressed.

With demand robust, factories hired more workers. A measure of manufacturing employment rose to a seven-month high.

Strengthening labor market conditions were reinforced by the ADP National employment report on Wednesday showing private payrolls increased by 534,000 jobs in November after rising 570,000 in October. Economists had forecast private payrolls rising by 525,000 jobs.

Graphic: ADP – https://graphics.reuters.com/USA-STOCKS/byvrjqjlzve/adp.png

This, combined with consumers’ robust perceptions of the labor market last month suggest job growth accelerated further in November. First-time applications for unemployment benefits declined between mid-October and mid-November.

But a shortage of workers caused by the pandemic is hindering faster job growth. There were 10.4 million job openings at the end of September.

Workers have remained home even as companies have been boosting wages, school reopened for in-person learning and generous federal government-funded benefits ended.

“Overall, the risk remains that renewed health concerns will keep workers, especially those with caregiving responsibilities, from returning to the labor force, preventing a return to pre-pandemic strength,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics in White Plains, New York.

According to a Reuters survey of economists nonfarm payrolls probably increased by 550,000 jobs in November. The economy created 531,000 jobs in October.

The Labor Department is scheduled to publish its closely watched employment report for November on Friday.

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Economic Indicators

Mexican factories contract again as supply-side issues weigh, costs rise

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Mexican factories contract again as supply-side issues weigh, costs rise

MEXICO CITY (Reuters) – Mexico’s manufacturing sector remained little changed in November from October, shrinking for the 21st straight month as supply-side bottlenecks continued to weigh and input costs surged, a survey showed on Wednesday.

The IHS Markit Mexico Manufacturing Purchasing Managers’ Index inched slightly higher to 49.4 in November from 49.3 in October, below the 50 threshold that separates growth from contraction.

The index has consistently remained below that threshold every month since March 2020 and plummeted to 35.0 in April 2020 amid the fallout from the coronavirus pandemic, in what was by far the lowest reading in the survey’s 10-1/2 year history.

The new reading signaled a further deterioration in the health of the manufacturing sector, though the contraction was mild compared to those seen since the onset of COVID-19, the survey said.

“The performance of Mexican manufacturers was again negatively impacted by supply chain constraints, although subdued demand conditions partly contributed to the latest contraction in output,” said Pollyanna De Lima, Economics Associate Director at IHS Markit.

Data last week showed that Mexico’s economy contracted 0.4% https://www.reuters.com/markets/us/mexican-economy-shrinks-more-than-expected-third-quarter-2021-11-25 in the third quarter, receding faster than previously thought as services slumped and supply chain issues bit, challenging the central bank as it juggles record inflation, a weak peso and leadership changes.

“In some instances, companies indicated having purchased fewer inputs due to elevated prices for many items, exacerbating their stock-replenishing problems arising from lengthening delivery times,” said De Lima.

According to De Lima the survey underscored that inflationary pressures remained elevated, with the latest increase in input costs the second-strongest in over three years.

Mexican annual inflation accelerated faster than expected in the first half of November to more than 7%, the highest rate in over 20 years.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

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Economic Indicators

Italy may shift 2 billion euros from tax cuts to energy price curbs – sources

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Italy may shift 2 billion euros from tax cuts to energy price curbs - sources
© Reuters. FILE PHOTO: Italy’s Prime Minister Mario Draghi looks on during a news conference after signing an accord with French President Emmanuel Macron to try to tilt the balance of power in Europe, at Villa Madama in Rome, Italy, November 26, 2021. REUTERS/Remo

By Giuseppe Fonte and Gavin Jones

ROME (Reuters) -Italy is considering increasing by some 2 billion euros ($2.27 billion) funds set aside to curb energy prices next year, using resources previously planned to cut income and business taxes, three government sources said.

With international energy prices soaring, Mario Draghi’s government has already spent more than 4 billion euros this year to try to rein in utility bills by compensating companies that agree to cap their tariffs.

Draghi set aside a further 2 billion euros for next year in the 2022 budget approved by cabinet in October, but with energy cost pressures continuing to drive consumer price inflation, the government is now considering doubling that sum.

The money can be found because the government will use less than the 8 billion euros earmarked in the budget to cut income and business taxes, the sources said, asking not to be named because of the sensitivity of the matter.

With the Treasury aiming to trim the budget deficit to 5.6% of gross domestic product in 2022 from the 9.4% targeted this year, resources are limited.

The cabinet is likely to discuss the matter on Friday, one of the sources said.

The tax cut will focus mainly on income tax (IRPEF), reducing the number of tax rates to four from five, with the largest benefit going to middle-income tax-payers earning between 28,000 and 55,000 euros per year.

According to a preliminary deal reached among the ruling parties, the first tax band on annual income between 8,000 and 15,000 euros will be left at 23%. The second band, between 15,000 and 28,000 euros, will be lowered to 25% from 27%.

The third band, on income from 28,000 to 55,000 euros will get a more substantial cut to 35% from 38%.

The fourth band, on income from 55,000 to 75,000 euros will rise from 41% to 43%. This is the rate that is currently applied on income above 75,000 euros, effectively cancelling the fifth income tax band.

Draghi has been meeting delegations this week from parties in his national unity coalition to hammer out the details of the tax reform.

($1 = 0.8828 euros)

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Continue Reading

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