The biggest Biden risk: Inflation

From: POLITICO's Morning Money - Friday Sep 10,2021 12:04 pm

Sep 10, 2021

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Quick Fix

Here comes inflation — There are plenty of economic headaches facing the Biden administration right now from the debit limit issue to the impact of Delta to significant issues pushing through the giant budget reconciliation package. But the most dangerous risk remains inflation, which continues to spike across the economy, vexing consumers and businesses alike.

Friday brings a fresh read on producer prices with expectations for a 0.6 percent headline number and 0.5 percent core. Those are big numbers. The question is whether we are hitting a peak in “transitory” inflation or more price hikes remain ahead.

Via Pantheon’s Ian Shepherdson : “Core PPI inflation is set for another cycle high in today's August report, but on a sequential month-to-month basis we think the peak is near. A big part of the story in recent months has been soaring margins, especially in the auto sector, where the chip shortage has allowed dealers to sell far more vehicles than usual at or above the sticker price. …

“When margins stabilize, overall core PPI inflation likely will start to fall. Any downshift likely will be modest, though, given the continued disruptions to global supply chains, rising distribution costs and the tightness of the domestic labor market.”

Biden wants to call GOP bluff on the debt limit — Our Laura Barrón-López and Christopher Cadelago: “President Joe Biden is treating the latest Republican threats over the debt limit like a bluff. And the entire party, from congressional Democratic leadership to the top brass at the Treasury Department, is calling them on it.

“Multiple Democratic sources on the Hill and with knowledge of the White House’s thinking said the administration wants to include a suspension of the debt limit … in a continuing resolution to fund the government. Such a bill, which Congress is expected to consider as early as this month, would require 60 votes to pass in the Senate, meaning at least 10 Republicans would need to vote to advance the measure.”

GOOD FRIDAY MORNING — Happy weekend everyone. Email me on bwhite@politico.com and follow me on Twitter @morningmoneyben. Email Aubree Eliza Weaver on aweaver@politico.com and follow her on Twitter @AubreeEWeaver.

BIDEN TELLS XI HE WANTS TO AVOID CONFLICT — Our Nahal Toosi: “Biden told Chinese leader Xi Jinping late Thursday that the United States wants to ‘responsibly manage the competition’ between the two countries, in hopes of avoiding conflict. The two leaders held their second call since Biden took office at a time when Washington and Beijing are increasingly at odds on issues ranging from cybersecurity to trade, and the White House stressed that the discussion was about high-level themes.

“‘The two leaders had a broad, strategic discussion in which they discussed areas where our interests converge, and areas where our interests, values, and perspectives diverge. They agreed to engage on both sets of issues openly and straightforwardly,’ the White House said in a readout of the call. ‘The two leaders discussed the responsibility of both nations to ensure competition does not veer into conflict.”

BIDEN BEEFS UP VACCINE PUSH — Our Adam Cancryn and David Lim: “Biden ... announced plans to require staff vaccinations at all health facilities that receive federal funding, as part of a sweeping new plan to rein in the coronavirus.

“The move represents a dramatic expansion of the administration’s bid to boost vaccination rates among frontline health care workers, and comes as the administration readies a redoubling of efforts to rein in the virus. The requirement is part of a broader six-part blueprint for combating the pandemic that Biden unveiled.”

WATERS PUSHES $300B IN HOUSING AIDE — Our Katy O'Donnell: “House Financial Services Chair Maxine Waters (D-Calif.) … proposed $300 billion in spending on housing programs over a decade as part of Democrats' massive budget reconciliation bill.

“The California Democrat's bill would significantly expand the Department of Housing and Urban Development’s Section 8 rental assistance, with $90 billion in funding for new housing vouchers and project-based assistance over 10 years. It also includes more than $77 billion to address the public housing capital backlog of repairs and $10 billion to tackle lead-based paint and other health hazards in more than 581,000 housing units.”

Markets

WALL STREET ENDS DOWN — Reuters’ Noel Randewich: “Wall Street ended lower on Thursday after weekly jobless claims fell to a near 18-month low, allaying fears of a slowing economic recovery, but also stoking worries the Fed could move sooner than expected to scale back its accommodative policies.

“The Labor Department said initial claims for state unemployment benefits dropped 35,000 to a seasonally adjusted 310,000 for the week ended Sept. 4, the lowest level since mid-March 2020. That suggested that job growth could be hindered by labor shortages rather than cooling demand for workers. Microsoft and Amazon each declined about 1 percent, both among the stocks weighing most on the S&P 500 and Nasdaq.”

TOUGHER SPAC DISCLOSURE RULES ENDORSED BY SEC ADVISORY GROUP — Bloomberg’s Benjamin Bain: “A group of executives and academics that advises the U.S. Securities and Exchange Commission wants better SPAC disclosures — the latest sign that tougher rules are coming for booming blank-check companies.

“The recommendations from the SEC’s investor advisory committee will likely help agency staff as they craft new regulations for special purpose acquisition companies, which have drawn bipartisan criticism from lawmakers after attracting a record $80 billion last year. The agency, which is run by Gary Gensler, said in June that it planned to propose rule changes.”

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Fly Around

JOBLESS CLAIMS HIT NEW PANDEMIC LOW — WSJ’s Amara Omeokwe: “Filings for jobless benefits last week fell and reached a pandemic low, extending a downward trend as demand for labor remains high and employers hold onto workers despite the Delta variant of Covid-19.

“Initial unemployment claims, a proxy for layoffs, moved lower in the week ended Sept. 4 to 310,000 from a slightly upwardly revised 345,000 the prior week, the Labor Department reported Thursday. The four-week moving average, which smooths out weekly volatility in the data, fell to 339,500, also a pandemic low.”

BIDEN HAS A CHANCE TO MAKE THE FED’S BOARD LOOK MORE LIKE AMERICA — Reuters’ Jonnelle Marte and Lindsay Dunsmuir: “As U.S. President Joe Biden assesses whether to reappoint Federal Reserve Chair Jerome Powell and nominate as many as three others to the central bank's powerful board, he has the opportunity to revamp a leadership team long criticized for being too white and too male.

“The stakes are high for an institution that has failed to reflect the racial, ethnic and gender makeup of the United States, and recently promised to do better. The Fed sets monetary policy, a primary lever in controlling the cost of money and the availability of credit, in a nation where the wealth held by the median white household is nearly eight times that of the typical Black household.”

BOND BUYERS EMBRACE 72-HOUR, 52-DEAL CORPORATE BORROWING BINGE — Bloomberg’s Jack Pitcher: “Corporate America’s unprecedented issuance spree showed no signs of slowing Thursday amid what bankers and borrowers say are ideal conditions for high-grade companies to tap the bond market for financing.

“After a relatively slow August even by Wall Street standards, issuers are back in force. They’re taking advantage of pent-up investor demand for high-quality credits, and looking to lock in their funding needs for the year amid concern that the Federal Reserve will soon begin to pull back stimulus that’s helped push interest rates to near-record lows.”

FED’S BOSTIC: DOOR REMAINS OPEN TO BOND BUYING TAPER THIS YEAR — WSJ’s Michael S. Derby: “Federal Reserve Bank of Atlanta President Raphael Bostic believes the Fed will be able to pull back on its asset buying campaign this year, though he doesn’t expect a decision to do so will come at the U.S. central bank’s meeting this month.

“Mr. Bostic, who for most of this year has advocated the Fed pare its $120 billion a month in Treasury and mortgage bond stimulus, said in an interview with The Wall Street Journal that recent data and the resurgence of the coronavirus pandemic call for more time before a decision on reducing stimulus for the economy.”

And Bowman, encouraged by recovery, said the taper is still likely — Reuters’ Howard Schneider: “U.S. Federal Reserve bank Gov. Michelle Bowman added her voice Wednesday to the growing number of policymakers who say the weak August jobs report will not throw off the central bank's developing plan to trim its $120 billion in monthly bond purchases later this year.

“‘Even though some of the recent data may have been less strong than we expected we are still looking at very robust economic growth,’ Bowman said at an online event organized by the American Bankers Association. ‘We are very close to our goal on maximum employment...If the data comes in as I expect that it will, it will likely be appropriate for us to begin the process of scaling back our asset purchases this year.’”

RENTS RISE IN ALL BIG CITIES FOR FIRST TIME SINCE COVID HIT — Alexandre Tanzi: “Apartment rents were up in August from a year earlier in all the top 30 U.S. metro areas, the first time that’s happened since the start of the pandemic, according to a new report by Yardi. The national average rent in multi-family buildings rose 10.3 percent from a year earlier to $1,539 — the first double-digit rise in the dataset’s history — after a $25 increase in August, the real-estate firm said. Over the past 10 years, the average pace of growth has been 2 percent.”

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For Your Radar

NEW DEAL FOR CRAMER AT CNBC — Via Talking BizNews: “CNBC announced Thursday that anchor Jim Cramer has signed a multi-platform deal that brings his media assets into the CNBC portfolio. … In addition to his on-air duties for “Mad Money w/Jim Cramer” and “Squawk on the Street,” CNBC will partner with Cramer to create exclusive subscription products and content aimed at the investment community. Additionally, CNBC will create conferences with Cramer.”

Transitions… Ike Umunnah is now senior adviser for global markets at the International Trade Administration. He most recently was director of the office of public affairs for Commerce's Economic Development Administration.

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