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U.S. inflation sizzles as consumer prices post biggest annual gain since 1982

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U.S. consumer prices rose solidly in November as Americans paid more for food and a range goods, leading to the largest annual gain since 1982, posing a political nightmare for President Joe Biden’s administration and cementing expectations for the Federal Reserve to start raising interest rates next year.

The report from the Labor Department on Friday, which followed on the heels of a slew of data this month showing a rapidly tightening labor market, makes it likely the U.S. central bank will announce that it is speeding up the wind-down of its massive bond purchases at its policy meeting next week.

With supply bottlenecks showing little sign of easing and companies raising wages as they compete for scarce workers, high inflation could persist well into 2022. The increased cost of living, the result of shortages caused by the relentless COVID-19 pandemic, is hurting Biden’s approval rating. The White House and the Fed have characterized high inflation this year as transitory.

“There’s not much room to explain away this inflation from pandemic or reopening anomalies,” said Will Compernolle, a senior economist at FHN Financial in New York. “Inflation is a tax, gas and food are among the most regressive aspects of it. Lower-income Americans spend disproportionately on both.”

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The consumer price index increased 0.8% last month after surging 0.9% in October. The broad-based rise was led by gasoline prices, which increased 6.1%, matching October’s gain. With crude oil prices declining recently, gasoline prices have likely peaked for now.

Food prices rose 0.7%. The cost of food at home increased 0.8%, driven by a jump in the price of fruits and vegetables, meat, and cereals and bakery products. The price of food consumed at home gained 6.4% over the past 12 months, the most since December 2008. Dining out was also more expensive last month.

In the 12 months through November, the CPI accelerated 6.8%. That was the biggest year-on-year rise since June 1982 and followed a 6.2% advance in October. Economists polled by Reuters had forecast the CPI would climb 0.7% and rise 6.8% on a year-on-year basis.

Rising inflation is eroding wage gains. Inflation-adjusted average weekly earnings fell 1.9% on a year-on-year basis in November.

Biden acknowledged the increased burden on household budgets from the high inflation, while trying to reassure Americans that the country was pushing ahead with efforts to ease supply bottlenecks.

“We are making progress on pandemic-related challenges to our supply chain which make it more expensive to get goods on shelves, and I expect more progress on that in the weeks ahead,” Biden said in a statement.

Indeed, gasoline prices have been trending lower since the end of November. That helped to lift consumer sentiment in early December, a separate survey from the University of Michigan showed on Friday.

(Graphic: Consumer sentiment: the present vs the future, https://graphics.reuters.com/USA-STOCKS/lbpgnlwwkvq/umich.png)

 

Investors took the strong inflation readings in stride. U.S. stocks were trading higher. The dollar slipped against a basket of currencies. U.S. Treasury prices rose.

TIGHTENING LABOR MARKET

The government reported last week that the unemployment rate fell to a 21-month low of 4.2% in November. Tightening labor market conditions were underscored by a report on Thursday showing new applications for unemployment benefits dropped to the lowest level in more than 52 years last week.

Other data this week showed there were 11 million job openings at the end of October and Americans quit jobs at near-record rates. Fed Chair Jerome Powell has said the U.S. central bank should consider hastening the tapering of its bond purchases at its policy meeting next week.

“The Fed has little choice but to accelerate tapering and prepare for the possibility of much earlier rate hikes than it was planning just a few months ago,” said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto.

Excluding the volatile food and energy components, the CPI rose 0.5% last month after gaining 0.6% in October. The so-called core CPI was supported by rents, with owners’ equivalent rent of primary residence, which is what a homeowner would receive from renting a home, rising a solid 0.4%.

(Graphic: Core CPI, https://graphics.reuters.com/USA-STOCKS/egvbkolqnpq/corecpi.png)

 

Hotel and motel accommodation also cost more as did apparel, household furnishings and healthcare.

Prices for used cars and trucks increased 2.5% for a second straight month. New motor vehicle prices rose 1.1%, marking the eighth consecutive month of gains. A global semiconductor shortage has undercut motor vehicle production.

Airline fares rebounded 4.7%. But gains are likely to be curbed by the spread of the Omicron variant of COVID-19, which could make some people hesitant to travel by air. The United States is already experiencing a resurgence in coronavirus infections, driven by the Delta variant.

But the cost of motor vehicle insurance fell. Recreation prices dropped after nine straight months of gains. The so-called core CPI jumped 4.9% on a year-on-year basis, the largest rise since June 1991, after increasing 4.6% in October.

The Fed tracks the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, for its flexible 2% inflation target. The core PCE price index surged 4.1% in the 12 months through October, the most since January 1991. Data for November will be released later this month.

(Graphic: The COVID inflation surge, https://graphics.reuters.com/USA-FED/INFLATION/akvezawxopr/chart.png)

 

Economists expect the year-on-year CPI could top 7% before falling back and the core CPI rate could rise above 6%.

“The recent strength in CPI and PCE inflation reflects both factors that are temporary and should fade over time and factors that could be more persistent,” said Daniel Silver, an economist at JPMorgan in New York. “But the tightening in the labor market likely will continue over time and this should keep upward pressure on inflation.”

 

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)

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Ottawa real estate: House starts down, apartments up in 2023 – CTV News Ottawa

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Rental housing dominated construction in Ottawa last year, according to a new report from the Canada Mortgage and Housing Corporation (CMHC).

Residential construction declined significantly in 2023, with housing starts dropping to 9,245 units, a 19.5 per cent decline from the record high observed in 2022. But while single-detached and row housing starts fell compared to 2022, new construction for rental units and condominiums rose.

“There’s been a shift toward rental construction over the past two years. Rental housing starts made up nearly one third of total starts in 2023, close to double the average of the previous five years,” the report stated.

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Apartment starts reached their highest level since the 1970s.

“The trend toward rental and condominium apartment construction follows increased demand in these market segments due to population growth, households looking for affordable options, and some seniors downsizing to smaller units,” the CMHC said.

Demand from international migration and students, the high cost of home ownership, and people moving to Ottawa from other parts of Ontario were the main drivers for rental housing starts in 2023. The CMHC says rental and condominium apartment starts made up 63 per cent of total starts in 2023, compared to the average of 37 per cent for the period 2018-2022.

There was a modest increase in rental housing starts in 2023 over the record-high seen the year prior and a jump in new condominiums. The report shows 5,846 new apartments were built in Ottawa last year, up 2.1 per cent compared to 2022.

Housing starts in Ottawa by year. (CMHC)

Big demand for condos

The CMHC said condo starts reached a new high in 2023, increasing 3 per cent from 2022 numbers.

“As of the end of 2023, there were only 13 completed and unsold condominium units, highlighting continued demand for new units,” the CMHC said.

Condominum starts increased in areas such as Chinatown, Hintonburg, Vanier and Alta Vista, as well as some suburban areas like Kanata, Stittsville, and western Orléans. Condo apartment construction declined in denser parts of the city like downtown, Lowertown and Centretown, the report says.

Taller buildings are also becoming more common, as the cranes dotting the skyline can attest. The CMHC notes that buildings with more than 20 storeys accounted for nearly 10 per cent of apartment structure starts in 2022 and 2023, compared to an average of 2 per cent over the 2017-2021 period. The number of units per building also rose 7 per cent compared to 2022.

Apartment building heights in Ottawa by year. (CMHC)

Single-detached home construction down significantly

The number of new single-detached homes built in Ottawa last year was the lowest level seen in the city since the mid 1990s, CMHC said.

“The Ottawa area experienced a slowdown in residential construction in 2023, driven by a significant decline in single-detached and row housing starts,” the CMHC said.

Single-detached housing starts were down 45 per cent compared to 2022. Row house starts dropped by 38 per cent compared to 2022, marking a third year of declines in a row.

“Demand for single-detached and row houses also declined in 2023. Higher mortgage rates and home prices have led to a shift in demand toward more affordable rental and condominium units,” the report said.

There were 1,535 single-detached housing starts in Ottawa last year, 208 new semi-detached homes and 1,678 new row houses.

The majority of single-detached and row housing starts were built in suburban communities such as Barrhaven, Stittsville, Kanata, Orléans and rural parts of the city.

“Increased construction costs resulting from higher financing rates and inflation that occurred in 2022 and 2023 contributed to the decline in construction in the region,” the CMHC said. 

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Trump’s media company ticker leads to fleeting windfall for some investors

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Open this photo in gallery:

A man looks at a screen that displays trading information about shares of Truth Social and Trump Media & Technology Group, outside the Nasdaq Market site in New York City, U.S., March 26.Brendan McDermid/Reuters

Possible confusion over the new stock symbol for former President Donald Trump’s Truth Social (DJT-Q) saw some investor brokerage balances briefly jump by hundreds of thousands of dollars on Tuesday, the first day Trump’s “DJT” ticker traded.

Several people complained on social media about briefly seeing the value of their DJT stock holdings on Charles Schwab platforms inflated to figures more in line with what they would be worth if the shares traded at the level of the Dow Jones Transportation Average.

Some users said they faced a similar issue in pre-market hours on Morgan Stanley’s E*Trade trading platform.

Shares of Trump Media & Technology Group opened Tuesday at $70.90, while the Dow Jones Transportation Average started the session at 15,937.73 points.

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For one trader, the Schwab brokerage balance jumped by more than $1 million due to the error, according to a screen grab shared on social media platform X. Reuters was unable to contact the trader or independently verify the brokerage balance.

“It sure was nice seeing millions in the account, even if it wasn’t real,” another person, going by the username @DanielBenjamin8, who faced the issue in his E*Trade account, posted on X.

Two X users and one on Reddit surmised that the inflated balances were due to the ticker symbol for the company being nearly identical to the index.

A spokeswoman for Charles Schwab said that certain users on some of Schwab’s trading platforms saw their brokerage balances briefly inflated due to a technical issue.

The issue has been resolved and investors are able to trade equities and options on Schwab platforms, she said. Schwab declined to describe the exact cause of the issue.

E*Trade did not immediately respond to a request for comment outside of regular business hours.

Trump Media & Technology Group and S&P Dow Jones Indices, which maintains the Dow Jones Transportation Average Index, did not immediately comment on the issue.

While social media users said the issue appeared to have been resolved, many rued not being able to cash out their supposed gains from the error.

“I better go tell my boss that I’m actually not retiring,” the trader whose account balance had briefly jump by more than $1 million, wrote on X.

Trump Media & Technology Group shares surged more than 36% on Tuesday in their debut on the Nasdaq that comes more than two years since its merger with a blank-check firm was announced.

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Chocolate prices have tripled. What does that mean for your Easter egg basket?

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Easter season is underway at Toronto’s The Chocolateria, where the walls are lined with bunny-shaped chocolate treats, chocolate eggs wrapped in colourful foil, and delicate “smash” eggs paired with a mini chocolate hammer.

If only the main ingredient weren’t so expensive: Cocoa prices have tripled in the last 12 months due to the spread of bean disease among cacao crops in West Africa, where more than 70 per cent of the global cocoa supply is produced.

The resulting cocoa crisis is pressuring chocolate makers who, during the typically busy Easter holiday, are trying to sustain business — and sweet-toothed customers who are trying to curb spending.

“We’ve seen a regular increase in prices for our raw materials, which makes it harder for us to keep our prices down,” said Priscilla Tallo, manager at The Chocolateria.

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“There’s some people who have made it clear that they can’t afford it anymore,” she added. “Most of our customers have been understanding. They see that everything is going up. So they understand why our prices are increasing.” One of the store’s chocolate suppliers increased its prices by 11 per cent in the last year.

The global chocolate industry is reportedly worth more than $100 billion US. But with cocoa prices hitting a record $10,000 US per metric ton on Tuesday, it’s likely that your Easter treats might look a little different this year, as major chocolate manufacturers look for creative ways to make chocolate less, well, chocolatey.

A woman smiles for a photo while posing in front of a shelf filled with chocolate treats.
Priscilla Tallo, manager of The Chocolateria, is pictured in front of the store’s Easter display in Toronto’s Roncesvalles neighbourhood. She says the shop has had to raise their prices in response to high chocolate costs. (Nisha Patel/CBC)

Cocoa harvests threatened by disease, weather

Cocoa production is down by about 30 per cent this year, mostly due to atypical weather patterns, according to Sophia Carodenuto, an assistant professor at the University of Victoria who studies the cocoa supply chain.

“Too much rain, not enough rain, unpredictable weather patterns, but also disease,” Carodenuto said.

“Cacao is a very sensitive tropical tree,” and is predisposed to diseases like black pod disease and swollen shoot virus.

WATCH | Poor cacao harvests are making chocolate prices skyrocket: 

Poor cocoa harvests cause bitter price increase for Easter chocolate

2 days ago

Duration 2:02

Poor harvests of cocoa — the key ingredient in chocolate — have driven up prices of the raw material, and it’s showing up on store shelves this Easter.

Three years of poor cacao harvests have impacted production in Ghana and Ivory Coast. Processing plants, which transform cacao beans into the substance used to make chocolate, are increasingly unable to afford the raw material.

Farmers might be trying to plant more of these trees now, but the fruits of their labour might not be ready for quite some time. New trees will likely be harvested in three to five years, Carodenuto said.

Apart from a few areas that produce cocoa at an industrial scale, the cocoa is typically produced in a smallholder system, meaning that small-scale farmers are its main producers.

“These smallholder farmers are highly vulnerable,” Carodenuto said. “When you see these price shocks, it’s very unlikely that that is trickling down to the farmer and arguably the actor in the supply chain who would need this money the most.”

How will your Easter treats change?

Chocolate treats in the shape of a bunny biting into a carrot are displayed in cellophane wrapping on a store shelf.
A bunny-shaped chocolate treat is displayed at The Chocolateria. (Nisha Patel/CBC)

“I think for those that haven’t bought candy since, say, Halloween, the price of chocolate on the store shelves may be a bit of a surprise,” said Billy Roberts, a senior analyst of food and beverage at CoBank.

Cocoa futures — a type of trade agreement that allows an investor to buy or sell a commodity at a predetermined price on a future date — have grown “dramatically in recent months, all because of lower harvests than what producers were expecting in West Africa,” said Roberts.

“Long story short, their production last year was significantly, significantly below expectations, and this year is not looking much better.”

Chocolate makers will likely offer more snack-sized products, trimming the size of their candy bars to account for higher costs without having to charge more at the retail level, Roberts said.

Brands might also adjust their packaging — and they could shift their focus to developing chocolate recipes that have a lower cocoa content, like using white or milk chocolate instead of dark.

Three Hershey's chocolate bars rest on some chocolate shavings.
Hershey’s chocolate bars are shown in July 2014 in Chicago. Companies like Hershey’s and Cadbury parent Mondelez posted sales volume drops in the fourth quarter after raising their prices to contend with the cocoa crisis. (Scott Olson/Getty Images)

Major chocolate manufacturers stockpiled some cocoa last year to shield from rising prices, and some companies are still doing well: Swiss chocolatier Lindt posted a rise in annual profit earlier this month.

But the outlook has taken a bitter turn elsewhere. Companies like Hershey’s and Cadbury owner Mondelez reported that their sales volumes, or the amount of product sold, fell in the fourth quarter after raising their prices to contend with the cocoa crisis.

“Given where cocoa prices are, we will be using every tool in our toolbox, including pricing, as a way to manage the business,” said Hershey’s CEO Michele Buck in February.

Hershey’s has introduced a line of non-chocolate Easter treats, like cookies and cream treats, lemon KitKat bars and mixing in gummy bears in its assortment bags, though a spokesperson said these additions are not connected to rising cocoa prices.

Back at The Chocolateria in Toronto, Tallo says that it isn’t just cocoa impacting her bottom line. The store buys sugar, flour, butter, dairy products, nuts, cookies, marshmallows and dried fruit for its products — and some of those items are getting more expensive, as well.

The Chocolateria is trying to eat the costs where it can by rethinking packaging and sizes, and paring back on pricey ingredients, said Tallo.

But the challenge is with its star ingredient, first and foremost.

“It’s forcing us to look at our products differently, try and see how we can make things differently while keeping the quality the same.”

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