Month: September 2022

Inflation rose more than expected in August as rising shelter and food costs offset a drop in gas prices, the Bureau of Labor Statistics reported Tuesday.

The consumer price index, which tracks a broad swath of goods and services, increased 0.1% for the month and 8.3% over the past year. Excluding volatile food and energy costs, CPI rose 0.6% from July and 6.3% from the same month in 2021.

Energy prices fell 5% for the month, led by a 10.6% slide in the gasoline index. However, those declines were offset by increases elsewhere.

The food index increased 0.8% in August and shelter costs, which make up about one-third of the weighting in the CPI, jumped 0.7% and are up 6.2% from a year ago.

Medical care services also showed a big gain, rising 0.8% on the month and up 5.6% from August 2021. New vehicle prices also climbed, increasing 0.8% though used vehicles fell 0.1%.

“Today’s CPI reading is a stark reminder of the long road we have until inflation is back down to earth,” said Mike Loewengart, head of model portfolio construction for Morgan Stanley’s Global Investment Office. “Wishful expectations that we are on a downward trajectory and the Fed will lay off the gas may have been a bit premature.”

Prices at the wholesale level fell from June to July, the first month-to-month drop in more than two years and a sign that some of the U.S. economy’s inflationary pressures cooled last month.

Thursday’s report from the Labor Department showed that the producer price index — which measures inflation before it reaches consumers — declined 0.5% in July. It was the first monthly drop since April 2020 and was down from a sharp 1% increase from May to June.

Yet economists caution that it’s still too early to say that inflation is headed steadily lower. “The July deceleration … is a move in the right direction,” said Rubeela Farooqi, chief U.S. economist at High Frequency Economics. “But producer costs continue to rise at a rapid pace, well above target.”

Wholesale food prices rose 1% from June to July, a sign that grocery prices will likely keep rising in the coming months. The wholesale costs of eggs, beef and vegetables all jumped.

Thursday’s report showed that wholesale gas prices tumbled 16.7% from June to July, a sign that retail prices at the pump will continue to decline this month and likely into September. Consumers are already seeing steady reductions: Gas prices fell below $4 a gallon, on average, on Thursday for the first time in five months.

A potential nationwide freight rail strike is looming, threatening to cripple the U.S. economy ahead of the holiday shopping season. Roughly 115,000 rail workers could walk off the job as soon as September 16 if they cannot agree to a new contract with railroads.

Five of the 13 unions representing rail workers have reached tentative agreements with railroads to enact the Presidential Emergency Board (PEB) recommendations, which call for 24 percent pay raises, back pay and cash bonuses.

But the bulk of railroad workers belong to unions that haven’t yet agreed to a deal. It’s also unclear whether workers would vote to ratify PEB recommendations that don’t address their concerns about punishing hours and rigid schedules that make it difficult to take time off for any reason.

“I would suspect that most railroad workers would love to strike, would love to get back at their employers after years of abuse while they watched the industry make record profits,” said Ron Kaminkow, an organizer at Railroad Workers United, which represents rank-and-file railroaders.

Federal law gives Congress the power to block or delay a railroad strike. If workers were to walk out, lawmakers could vote to enact the PEB deal or appoint arbitrators to fast-track a new contract, among a range of other options.

The Association of American Railroads, which estimates that a national rail shutdown would cost the U.S. at least $2 billion a day, said that lawmakers should vote to implement the PEB recommendations in the event of a strike to “instantly reward employees and reduce economic uncertainty.”

Experts say that an extended walkout would devastate industries that rely on freight to transport grain, coal, diesel, steel and motor vehicle parts. Shipping containers would pile up at ports, severely congesting supply chains and sending prices soaring ahead of the holidays.

The Internal Revenue Service mistakenly published confidential data for 120,000 taxpayers on its website before realizing the error and taking down the data, the Treasury Department said.

The IRS accidentally posted data from a tax form used by both individuals and tax-exempt organizations, the Treasury said in a letter to lawmakers on Friday. While information about nonprofit groups is routinely made public, that for individuals is supposed to be kept private. The Treasury said the IRS would contact all individuals affected in the coming weeks.

Yesterday, the nonpartisan Legislative Audit Bureau (LAB) released a limited-scope review of certain broadband expansion grant programs (report 22-11).

The Public Service Commission of Wisconsin (PSC) administers programs that award grants to telecommunication providers that make broadband service available to businesses and residences. In October 2020, the Department of Administration (DOA) allocated $6.2 million in Coronavirus Aid, Relief, and Economic Security (CARES) Act funds to PSC. In July 2021, DOA allocated $103.4 million in American Rescue Plan Act (ARPA) funds to PSC.

Through June 2022, PSC awarded $105.3 million in broadband grants and reimbursed telecommunication providers $7.7 million. PSC awarded 95 grants, including 12 grants with CARES Act funds and 83 grants with ARPA funds.

LAB identified concerns with PSC’s program administration. For example, almost all of the 384 supporting documents that PSC reviewed did not indicate the amounts the providers had actually paid to construct the projects. PSC did not document its efforts to verify that providers had constructed the broadband infrastructure for which the providers were reimbursed. In addition, the guidance of PSC’s commissioners to their staff for reviewing grant applications for the ARPA-funded program did not consistently adhere to the application instructions. For example, the commissioners instructed their staff not to consider 23 grant applications for “middle-mile” projects even though the instructions did not indicate that such projects would not be considered.

“We hear regularly from Wisconsinites who demand broadband access, however without any written procedures, documented verification efforts, or proper cost accounting, it’s still unclear if these dollars are being put to their highest and best use. PSC’s lack of oversight and rewriting of application criteria after applications have been submitted has eroded much of my confidence concerning PSC’s ability to award future broadband expansion grants. As Wisconsin is soon anticipating a lot of federal dollars for broadband expansion, PSC needs to tighten this program up immediately, said Senator Robert Cowles (R-Green Bay).

LAB made 8 recommendations for PSC to improve its administration of broadband expansion grant programs, including by establishing comprehensive written program policies and improving how it reviews and awards grants, reimburses telecommunication providers, and oversees the programs.

“It’s evident, there needs to be a far more accountable process in this program moving forward. Once LAB’s recommendations in this audit report are implemented by PSC, future applicants for broadband expansion grants will have a greater assurance that their projects will be considered appropriately and consistently. I’m frustrated that efforts to improve and better target broadband grants were vetoed by the Governor in the last session, because problems like these could have simply been avoided in the first place,” said Representative John Macco (R-Ledgeview).

The European benchmark index measuring future electricity prices increased to a record $993 per megawatt hour (MWh) on Monday, days after prices in France and Germany surged 25%, according to European Energy Exchange data compiled by Bloomberg. By comparison, the average price of electricity in the U.S. hit $129 per MWh in June, federal data showed.

The energy crisis has forced consumers to cut back on power consumption, industrial production declines and energy rationing across the continent. The European Union Council (EU) scheduled an emergency meeting of EU energy ministers slated for next week in response to the market conditions.

“The skyrocketing electricity prices are now exposing, for different reasons, the limitations of our current electricity market design,” European Commission President Ursula von der Leyen remarked during a speech Monday. “It was developed under completely different circumstances and for completely different purposes. It is no longer fit for purpose.”

Von der Leyen blamed the record price increases on Russia’s invasion of Ukraine which has upended global energy markets but added that the crisis was evidence the bloc needed to transition further to green energy. Russia has throttled natural gas supplies to Europe in response to the EU’s sanction packages introduced following the February invasion.

However, electricity prices in Europe hit all-time highs months before the invasion.

A Reuters analysis published in December concluded that lower-than-expected wind power generation was a major factor sending prices higher and forcing suppliers to turn back to coal and natural gas. Russia was the largest provider of Europe’s natural gas and coal imports at the time of the invasion.