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Sticker shock: what is driving US inflation higher?

Line chart of Year-over-year change (%) showing US consumer price index soars

US consumer prices bounded higher in June at the fastest pace in roughly 13 years, surpassing even the loftiest forecasts, casting a shadow on the Federal Reserve’s claim that the inflation associated with the economic reopening will be purely a “transitory” phenomenon.

The Bureau of Labor Statistics’ consumer price index jumped 0.9 per cent last month from May, up 5.4 per cent over June 2020. Even stripping out volatile items such as food and energy, “core” CPI came in hot at an annual rate of 4.5 per cent.

Here’s what is — and is not — driving the jump:

Used cars

Surging prices for previously-owned vehicles drove the bulk of the increase last month, up 10.5 per cent on the previous month and 45 per cent from June 2020, accounting for a third of the rise in CPI.

Jay Powell, Fed chair, has repeatedly invoked used car prices as evidence for the temporary nature of the current inflation surge, especially in light of the semiconductor shortage that has caused severe disruption to vehicle production.

“Used car prices are going up because of sort of a perfect storm of very strong demand and limited supply,” he said at the press conference following the Fed’s last meeting on monetary policy. “It’s going up at just an amazing annual rate. But we do think that it makes sense that would stop, and that in fact it would reverse over time.”

Powell has also told investors to pay heed to “base effects”, which cause year-over-year increases to look outsized given the collapse in activity at the height of the pandemic last year.

Line chart of US CPI previously-owned cars and truck index (year-over-year change, %) showing Used vehicles price appreciation smashes records

Energy prices

Fuel prices have surged this year as Americans shake off pandemic restrictions and take to the roads again, with energy costs last month rising 1.5 per cent relative to May. On a year-over-year basis, they are up 4.5 per cent.

Petrol prices climbed 2.5 per cent in June from May. Demand for petrol reached a record weekly high ahead of the Fourth of July holiday, helping push national average fuel prices to about $ 3.10 a gallon. That is the highest in nearly seven years and 40 per cent higher than this time last year. Prices are even higher in big metro areas, with drivers paying well over $ 4 a gallon at the pump in California.

There may not be much relief on the horizon for consumers. Fuel prices are up on the back of strong global crude prices, which have topped $ 70 a barrel in recent weeks, the highest since 2018.

Travel

The loosening of Covid-19 lockdowns also fuelled another bumper month for airfares and hotel prices. Between May and June, prices for airfares jumped 2.7 per cent, while hotel charges bounded 7.9 per cent higher. Since June 2020, the sectors have seen increases of roughly 25 per cent and 17 per cent, respectively.

Car rental costs have also ballooned, with consumers facing prices in June that were 5.2 per cent higher than the previous month.

“With these increases, the price index for hotels is now well above its pre-Covid level, while the price index for airfares still has some further room to run,” said Ellen Zentner, chief US economist at Morgan Stanley. “While pandemic-sensitive price increases should eventually begin to contribute less to the overall CPI, there is still scope for significant contributions to linger.”

Rents

One area of concern for economists was a pick-up in owners’ equivalent rent, which measures what homes would rent for.

As the “largest and most sticky component of the CPI”, according to Aneta Markowska, chief economist at Jefferies, it suggests inflationary pressures are beginning to broaden out beyond the areas most sensitive to the pandemic recovery.

Prices rose by 0.3 per cent month-over-month in June, in line with the increase in May, but were elevated enough to generate attention. Compared to June 2020, prices are higher by 2.3 per cent.

“CPI rents are slow to adjust to reality as individual properties are surveyed only once every six months,” Markowska said. “Recent gains in market rents point to continued [or] significant upside in the coming months. So even, if used car prices reverse, putting downward pressure on the CPI, rents will be pushing in the opposite direction.”

Line chart of US CPI owners' equivalent rent (year-over-year change, %) showing Inflationary pressures begin to broaden out

Services

Not all sectors of the economy are contributing to the boom in prices. Medical expenses and the cost of household furnishings were among a small number of important sectors where prices decreased last month.

But it has become far more expensive to eat out, with food prices away from home 0.7 per cent higher than the previous month. Compared to the same time last year, costs are 4.2 per cent higher.

Andrew Hunter, senior US economist at Capital Economics, said the increase provided “clear evidence that the severe labour shortages and resulting upward pressure on wages in the leisure sector [are] feeding through. Both trends look to have much further to run.”

As such, economists warn it is becoming increasingly difficult to dismiss the risk that inflation could be more persistent than initially expected.

“The most spectacular increases remain in those reopening categories, so it is fair to say the bulk of the increases are transitory,” said Stephen Stanley, chief economist at Amherst Pierpont. “But the problem is when you are running at this pace, you are still left with some pretty hefty increases . . . and some of the underlying categories are starting to show acceleration.”

Additional reporting by Justin Jacobs

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Driving safety co GreenRoad Insights plans TASE IPO

Driving safety technology company GreenRoad Insights has filed a draft prospectus for an offering on the Tel Aviv Stock Exchange at a valuation of NIS 500 million, Trend reports with reference to Globes.

GreenRoad Insights has developed an active safety system for improving driver behavior, using technology for detecting safety incidents on the basis of a driving model that identifies complex driving situations of a wide range of severity. The system also gives the driver continuous safety-rating feedback, and immediate feedback on the type and severity of a driving incident. The company’s solutions are adapted to the type of vehicle: car, motorcycle, truck or bus.

The company is controlled by private equity firm Israel Growth Partners (IGP), owned by Haim Shani and Moshe Lichtman. Another shareholder is Generation Investment Management, with a 13.3% stake.

GreenRoad Insights is active in 60 countries, and has 140 customers with vehicle fleets. In 2020, it had revenue totaling $ 12.6 million (NIS 41 million). At the time of the filing of the prospectus, the company had an orders backlog of $ 28 million. The company estimates that in the first half of 2021, its revenue grew by 16-20% in comparison with the first half of 2020.

GreenRoad Insights plans to use the proceeds of the share offering to finance growth and strengthen its capital structure. The offering is being led by Discount Capital Underwriting.

Police: Compared with other seasons, 49% more Norwegians lose their driving license during the summer

In the last three years, the Norwegian police have seized 49% more driving licenses in the summer months of June, July, and August than in the rest of the year.

“We do not know whether it is the case that more people are actually driving faster now or whether we have become better at detecting them. But we still catch more that drive too fast, and it is worrying,” Steven Hasseldal at the National Mobile Police Service told P4.

In the last three years, an average of 686 drivers lost their driving license in each of the summer months, compared with 460 in the other months.

So far this year (January-June), the police have seized slightly fewer driving licenses than in the same period last year, but the figures are 22% higher than in 2019.

Source: © NTB Scanpix / #Norway Today / #NorwayTodayNews

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New Jersey gets low marks for distracted driving

A new report says that New Jersey has a higher rate of distracted driving crashes than almost any other state. The report was compiled by Zutobi, a driver education website.

According to their research, New Jersey has the second highest rate of fatal crashes due to distraction, trailing only New Mexico. New Jersey’s rate is 24.6% of all fatal driving crashes because of some form of distraction (New Mexico’s is 37.2%).

Data in this report has been gathered from different governmental websites, including the Fatality and Injury Reporting System Tool (FIRST) developed by NHTSA, the use of electronic devices, and fatal road crashes and injuries involving different age groups.

As you might expect, cell phones are a major culprit; nationally, about 8% of crashes with injuries can be attributed to cell phones, with the percentage growing in relation to the severity of the accident – for example, cell phones can be attributed to 13% of fatal distracted driving accidents in 2019.

There’s a wide spread of numbers among the states; the report says: “The large difference in distracted driving crashes could, in part, be attributed to different state guidelines on reporting distracted driving accidents. It can also be a result of extensive work by local governments on tackling distracted driving through anti-text laws, awareness campaigns, and more.”

Following New Mexico and New Jersey in the top five are Hawaii, Washington, and Virginia. The state with the lowest percentage of fatal crashes due to distraction are Mississippi, West Virginia, Georgia, Nevada, and Oregon. Our neighbors in Pennsylvania ranked #33 while New York was 11th.

The post above reflects the thoughts and observations of New Jersey 101.5 talk show host Bill Doyle. Any opinions expressed are Bill Doyle’s own.

UP NEXT: See how much gasoline cost the year you started driving

Stunning Jersey Shore rentals, steps from the beach

Here are 10 houses along New Jersey’s coastline for an Insta-ready beachfront staycation.

Author: Bill Doyle
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Pent-up demand is only one of the factors driving up the cost of every step of the travel journey

Hotel rooms? Up about 44% at the end of June compared to a year earlier, according to data from hotel research firm STR. Air fares? They were 24% higher in May than in the same month last year, according to the Consumer Price Index.
Even so, many of the prices are still below where they stood in the summer of 2019, six months before the outbreak of the Covid-19 pandemic brought demand for travel to a near halt and sent prices plunging.
“Most of what people are seeing in price inflation is due to how cheap things were last year,” said Adam Sacks, president of Tourism Economics.
Most in the industry avoid making the year-over-year comparisons in the CPI. Instead they’re looking at the contrast with the 2019 price and booking levels.
But even some of those prices are back to near or even above 2019 levels, thanks to the strong rebound in demand. For example, STR shows the national average for US hotel rates in the week ending June 26 back to 99.5% of where they were at the same time in 2019.
“That’s an incredible run,” said Sacks. Only two weeks ago they stood at 93% of 2019 levels, he added.
The national average disguises some even bigger increases in vacation destinations.
“The price differences are pretty disparate,” Sacks said. “The national prices don’t really mean anything when you’re looking to travel to a specific location at a specific time.”
He said that in locations where the travel and tourism industry depend on business travel, such as New York, Chicago and Washington, prices are still well below 2019 levels, since business travel has been much slower to return than leisure travel. That suggests fare increases for leisure travelers are likely even greater than the overall numbers show, he said
“If business travel was performing anywhere near what it was in normal times, we’d be seeing record performance,” said Sacks.
Popular vacation destinations have hotel prices already going above 2019 levels. In Orlando, prices are up 6%, and in Miami they’ve jumped 48% during the week ending June 26 compared to the same time two years ago. But if you’re going to New York City, traditionally a center for business travel which also has yet to reopen Broadway shows, a major tourist draw, hotel prices are 25% below where they were in the same week of 2019, according to data from hotel research firm STR.
“You see pent-up demand to get back out on vacation pushing up travel, and prices,” said Vivek Pandya, senior digital insights manager at Adobe.
Hotels and air fares aren’t the only travel items that are more expensive.
The national average price for a gallon of regular gasoline today stands at $ 3.13, a seven-year high and a 44% increase from a year ago.
The most extreme example? Rental car prices, which have not only soared 110% from a year ago to record levels, but are 70% higher than even the pre-pandemic prices, according to the May Conumer Price Index.
The increase in pricing is connected to the supply of autos. To raise enough cash to survive the downturn, rental car companies sold off about a third of their fleets, and they’ve been unable to purchase the replacement vehicles this year due to a chip shortage that’s choking off new car production. Significantly smaller fleets and a rebound in demand means significantly higher prices.
Unlike the rental car companies, hotels and airlines have restored most of the capacity they shut down during the pandemic.
But bringing back capacity has been somewhat constrained by staffing difficulties. Even airlines, which pay far above the wages paid in lodging, are struggling with staffing shortages at some of their suppliers. That has forced some airlines, including American (AAL), the largest, to cut back on flights they had planned to fly this summer, adding to the upward pressure on prices.

Author: Chris Isidore, CNN Business
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Four new driving laws set to be introduced in June with drivers facing heavy fines

End of lockdown – 21 June

Under the current coronavirus roadmap, all legal social distancing rules will come to an end on 21 June.

For drivers, this will open up a range of extra freedoms to see friends and family over the summer.

Under current rules, drivers are not allowed to share a private vehicle in groups of more than six, except where everyone is from no more than two households.

The current regulations also mean drivers cannot stay overnight in holiday accommodation or in a second home with groups larger than six.

These are expected to be dropped on June 21 while international travel is expected to slowly come back to life.

Author:
This post originally appeared on Daily Express :: Life and Style Feed
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When Driving Is (Partially) Automated, People Drive More

Researchers, industry executives, and government officials have long puzzled over how self-driving cars might change the planet. If you could do something else while stuck in traffic, would it change the way you use your car? Would you be willing to live farther from work? Alternatively, would the advent of shared self-driving cars prod you to ditch your personal vehicle for shared Ubers, making trips more efficient?

Self-driving cars aren’t here yet, and it will likely be years, or decades, before most Americans have access to the technology, which is still in development. But Scott Hardman thinks he’s found a way to peer into the future. He’s a researcher at the UC Davis Institute of Transportation Studies who looks at how people respond to new fuels and travel technologies. If you want to know how the humans of a decade from now might travel, he thinks it’s useful to study partially automated car features available now, such as Tesla’s Autopilot.

Autopilot, along with General Motors’ Super Cruise, Nissan’s ProPilot Assist, BMW’s Driving Assistant, and Ford’s Co-pilot 360, is an advanced driver-assistance feature. These new systems won’t do the driving for you, but they’ll help. Depending on the system, they might automatically keep within and change lanes, hit the brakes, or swerve out of the way of something in the road. Two important caveats: Most of the systems were built to operate on relatively uncomplicated highways. And the person behind the wheel is meant to be paying attention, ready to take control.

In a 2020 paper, Hardman interviewed 35 people who owned Teslas with Autopilot, and he found that most thought the feature made driving less terrible. “The perception by drivers is that it takes away a large portion of the task of driving, so they feel more relaxed, less tired, less stressed,” Hardman says. “It lowers the cognitive burden of driving.”

Image may contain: Vehicle, Transportation, Car, Automobile, Sedan, Sports Car, and Race Car

In new research released this month, Hardman and postdoctoral researcher Debapriya Chakraborty suggest that making driving less terrible leads to a natural conclusion: more driving. Using data from a survey of 630 Tesla owners, with and without Autopilot, the researchers found that motorists with partial automation drive on average 4,888 more miles per year than similar owners without the feature. The analysis accounted for income and commute, along with the type of community the car owners live in.

Extrapolate that result to the wider population, and it may be that partially automated vehicles are already influencing how people travel, live, consume resources, and affect the climate. For governments, which have to anticipate future infrastructure demands, understanding those changes are critical. Shifting commute patterns could affect public transportation budgets and road maintenance schedules. More miles traveled means infrastructure gets more of a pounding. If electric vehicles are doing the traveling, governments still haven’t quite figured out how to charge them for it. And though electric vehicles like Teslas rely on cleaner energy than those guzzling gas, the electricity still has to come from somewhere, and that somewhere is not always a renewable source. A country made up of increasingly sprawling communities, where people blithely travel hundreds of miles via autonomous or sort-of-autonomous vehicles to get to work or play, isn’t an efficient or sustainable one.

The new research suggests that partial automation could have upsides too. The bulk of the extra thousands of miles that Autopilot drivers traveled each year happened on long weekend trips, Hardman and Chakraborty found. Prior to Autopilot, those drivers might have opted to fly, which would have generated more greenhouse gas emissions. In the end, their decision to stick to the road was likely the more climate-friendly choice.

A spokesperson for Nissan said the automaker doesn’t have data on the travel behavior of its ProPilot Assist tech users. A spokesperson for General Motors declined to comment on the study. Tesla did not respond to a request for comment.

Author: Aarian Marshall
This post originally appeared on Business Latest

The Chip Shortage Is Driving Up Tech Prices—Starting With TVs

Televisions, laptops, and tablets have been in high demand during the Covid-19 pandemic, as people worked and learned via Zoom, socialized over Skype, and binged on Netflix to alleviate the lockdown blues. But all that extra screen time also helped set in motion a semiconductor supply crunch that is causing prices for some gadgets to spike—starting with TVs.

In recent months, the price of larger TV models has shot up around 30 percent compared to last summer, according to market research company NPD. The jump is a direct result of the current chip crisis, and underscores that a fix is more complicated than simply ramping up production. It may also be only a matter of time before other gadgets that use the same circuitry—laptops, tablets, and VR headsets among them—experience similar sticker shock.

Some manufacturers have already flagged potential price rises. Asus, a Taiwanese computer maker, said during a quarterly earnings call in March that a shortage of components would mean “price hikes further upstream,” which would likely affect consumers.

“Prices are definitely—unfortunately—going up,” for these components, says Michael Hurlston, CEO of Synaptics, a company that sells integrated circuits for controlling touchscreen displays to manufacturers of consumer electronics. “In certain cases we’re passing those prices on to our customers, and we’ve heard that they’re passing those increases on to their customers.”

While the supply squeeze has been felt across the semiconductor industry, those display-bound integrated circuits pose specific challenges. Since they are not especially advanced, the circuits are typically made at chip factories that are several generations behind the cutting edge. With chipmakers focused on building more advanced fabrication plants that yield more valuable components, there has been little incentive to invest in capacity at older facilities. It’s simply not possible to churn out more of them even when demand spikes.

All manner of devices have already been affected by the chip shortage. Sony told analysts this week that the PlayStation 5 would remain in short supply through 2022 due to the crunch. Companies that act as electronics component brokers say that certain components have seen prices jump orders of magnitude; voltage regulators used in countless products that normally cost 50 cents have been selling for as much as $ 70. But at the consumer level, products that require display integrated circuits are feeling the impact first, and hardest, because of those factory limitations.

“The word I’ve heard recently is that the inventories have depleted,” says Peggy Carrieres, a vice president at AVNet, an electronics component supplier. “So those new prices are going to hit into the retail outlets, and consumer consumption.”

While it’s one type of integrated circuit, the impact is wide-ranging. “Anything that has a screen built into it is going to be affected by these price increases,” says Paul Gagnon, senior research director for consumer devices at analyst firm Omdia. That includes PC makers, he says, which have been able to avoid increases by selling devices for the same price but with, for instance, less memory.

Electronics retailer Monoprice has been affected by the component drought, says Paul Collas, the company’s vice president of product. He claims that Monoprice won’t raise prices but it may have to cancel sales and other promotions. “In some cases we are also seeing the need to invest more in upfront payments to partners to ensure long lead parts are secured to support our supply requirements.”

A confluence of factors have contributed to the unprecedented chip drought. The pandemic sparked a boom in demand for home electronics and cloud services, and the economic slowdown also caused certain industries to badly misjudge how demand would fall.

The impacts have been felt beyond traditional consumer technology as well. Carmakers, in particular, were left flatfooted after expecting fewer sales. After preemptively canceling orders for semiconductor components, many auto manufacturers have had to stop production while they wait for supply reinforcements to arrive. Broader supply chain disruptions have hurt as well, including a fire in March that shut down a plant in Japan that makes a range of different semiconductor components—including display integrated circuits.

Author: Will Knight
This post originally appeared on Business Latest

Yearn Finance price nearly hits $70,000 — What's driving the YFI bulls?

A lackluster cryptocurrency market did little in offsetting Yearn Finance’s bullish bias as the price of its governance token YFI reached new record highs in USD terms on May 11 — just shy of $ 70,000.

YFI price hits new highs in USD

The YFI/USD exchange rate added $ 6,258, or 10.02%, to reach $ 68,748 ahead of the London opening bell. The pair quickly retraced lower as traders decided to realize their profits, hitting roughly $ 67,067 as of 0736 UTC. Nevertheless, the drop appeared marginal compared to the prevailing uptrend, hinting that YFI could continue its upward momentum following a short-term consolidation period.

The token performed equally well against Bitcoin (BTC), the flagship cryptocurrency whose own uptrend slowed down after hitting a milestone high of roughly $ 65,000 last month. Tuesday morning, the YFI/BTC exchange rate was near its five-month high of 1.192 BTC. Meanwhile, at its intraday peak, the pair’s bid was 1.247 BTC, up 58%.

YFI/BTC reaches 5-month high. Source: Tradingview

The massive upside moves in the Yearn Finance token market appeared as its top rivals underperformed severely. At first, Bitcoin continued to show weakness after failing to log a breakout above a psychological resistance level of $ 60,000. Its strong positive correlation with other top digital assets also pushed their prices lower.

For instance, Ether (ETH), the second-largest cryptocurrency by market cap, plunged back below $ 4,000 on profit-taking sentiment.

Meanwhile, the biggest losers on a 24-hour adjusted timeframe were Dogecoin (DOGE), XRP, Polkadot (DOT), and Litecoin (LTC). Each fell within the range of 9%-12%, again due to traders’ inclination to withdraw profits after the tokens’ supersonic price rallies in the previous sessions.

Yearn Finance’s YFI was comparatively weaker so far in 2021. The token would surge by almost 160% compared to its altcoin peers’ thousands of percentages worth of upside gains. For instance, Dogecoin remained a scene-stealer for most of the first and second quarters, rising by more than 19,000% to eventually outshine other large-cap altcoins.

Technically, YFI served as a hedge as the rest of the cryptocurrency market returned from their overbought levels. But looking closely, what worked in the favor for the Yearn Finance token — at least in the current quarter — is its ability to cast aside a flurry of its major issues.

Banking infrastructure for DeFi

In retrospect, Yearn had a rocky beginning in 2021. Its main problem heading into the year was funding deficits. The Yearn Finance group had no reserves set aside for its core contributors that limited it from gaining any upside exposure. Andre Cronje, the creator of the Yearn Finance protocol, even shared his frustration by writing a blog titled, “Building in DeFi Sucks”.

However, the following weeks witnessed huge community involvement to solve the reserves issue. The YFI holders introduced two proposals and passed them through a democratic vote. The first “Buyback and Build” upgrade assisted in introducing a buyback program that added YFI to their treasury for redistribution.

Meanwhile, the second “Funding Yearn’s Future” proposal minted 6,666 new YFI tokens to create the protocol treasury, with a primary focus on funding core contributors.

The next major upgrade came in the form of Yearn V2.  Its mid-January launch earlier met with negative reviews due to user interface issues. But the team responded promptly to address those concerns to a successful conclusion. In the months following the fix, the total value locked inside the Yearn Finance pool has climbed to $ 4.243 billion.

Source: Yearn.Science

The most notable changes Yearn V2 brought to the Yearn Finance protocol included a new fee structure, multi-strategy vaults, and highly differentiated strategies with the help of a new ecosystem partnership with Cream. YFI prices responded bullishly to the events.

Frax Finance,  a fractional-algorithmic stablecoin protocol, has added its fixed yield asset FXB to Yearn vaults. Meanwhile, Alchemix is also building a credit system atop their protocol, confirming that Yearn is becoming a banking alternative to the decentralized finance ecosystem.

The YFI rally takes its long-term bullish cues from the said growth prospects.