(NEW YORK) — Average monthly car payments hit a record high in May while the cost of new vehicles continues to rise, according to industry insiders.
A report from Moody’s Analytics found that typical monthly car payments hit a record high of $712 in May. Kelley Blue Book data found that new vehicle prices averaged $47,148 in May, the second highest on record.
Vehicle affordability worsened again because of higher interest rates and increased car prices, according to a recent Cox Automotive & Moody’s Analytics vehicle affordability index report. The report said “the estimated typical monthly payment increased 1.7% to $712,” which is a new record high for monthly payments.
It would cost 41.3 weeks of median income to buy a new vehicle, which is a jump of 19% from May of 2021, according to the report.
Brian Moody, executive editor for Kelley Blue Book, told ABC News that a low supply of cars and high demand from buyers means consumers “are going to be paying more” than the MSRP. Data from Kelley Blue Book suggests non-luxury car buyers paid on average $1,030 more than the sticker price.
For luxury cars, where experts say there is a lot of demand, buyers are paying an average of $65,379 for a new vehicle, about $1,071 above sticker price, according to Kelley Blue Book data.
But Moody said customers can still get good deals on less sought-after brands like Mazda, Hyundai and Buick.
And prices could even drop later this year, he noted.
“Although prices are up for May, it’s only 1%, and so that indicates … we may be headed toward a place where the prices will start to decrease,” Moody said.
(WASHINGTON) — The Federal Reserve raised interest rates significantly on Wednesday, hiking it 0.75%, escalating a strategy of increased borrowing costs that aims to dial back historic inflation.
The rate hike of 0.75% marks the largest increase since 1994. The dramatic rate increase follows new inflation data that showed a reacceleration of price increases to levels not seen for more than four decades, dashing hopes that inflation had reached its peak.
A rate hike of 0.75% brings the interest rate to a range of 1.5% to 1.75%
The Fed also indicated that more rate hikes will follow in the coming months.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand. But the strategy also risks tipping the economy into a recession. The rate hike will likely increase everything from credit card fees to mortgage rates.
The Federal Reserve raised its benchmark interest rate by 0.5% last month, and central bankers had signaled the same increase for June. But a persistent surge in costs appears to have prompted a reevaluation. The consumer price index, or CPI, stood at 8.6% year-over-year in May, a significant increase from 8.3% the month prior, according to data released by the U.S. Bureau of Labor Statistics on Friday.
President Joe Biden has touted the economic recovery from a coronavirus-induced downturn, but acknowledged that many American households are struggling with high costs.
“Jobs are back, but prices are still too high,” he said during a speech in Philadelphia on Tuesday.
Republican members of Congress have criticized Biden for the price hikes, suggesting they stem from his mismanagement of the economy. Biden has attributed high prices to the disruption of food and gas markets that has resulted from the Russian invasion of Ukraine, calling the sky-high inflation “Putin’s price hike” — a term the administration has used repeatedly.
(WASHINGTON) — The Federal Reserve is expected to raise interest rates significantly on Wednesday, escalating a strategy of increased borrowing costs that aims to dial back historic inflation.
Central bankers are expected to consider a rate hike of 0.75%, which would mark the largest increase since 1994. The potentially dramatic rate increase follows new inflation data that showed a reacceleration of price increases to levels not seen for more than four decades, dashing hopes that inflation had reached its peak.
The Fed is also expected to indicate that more rate hikes will follow in the coming months.
An increase to the benchmark interest rate raises borrowing costs for consumers and businesses, which in theory should slash inflation by slowing the economy and eating away at demand. But the strategy also risks tipping the economy into a recession. The rate hike will likely increase everything from credit card fees to mortgage rates.
The Federal Reserve raised its benchmark interest rate by 0.5% last month, and central bankers had signaled the same increase for June. But a persistent surge in costs appears to have prompted a reevaluation. The consumer price index, or CPI, stood at 8.6% year-over-year in May, a significant increase from 8.3% the month prior, according to data released by the U.S. Bureau of Labor Statistics on Friday.
A rate hike of 0.75% would bring the interest rate to a range of 1.5% to 1.75%.
President Joe Biden has touted the economic recovery from a coronavirus-induced downturn, but acknowledged that many American households are struggling with high costs.
“Jobs are back, but prices are still too high,” he said during a speech in Philadelphia on Tuesday.
Republican members of Congress have criticized Biden for the price hikes, suggesting they stem from his mismanagement of the economy. Biden has attributed high prices to the disruption of food and gas markets that has resulted from the Russian invasion of Ukraine, calling the sky-high inflation “Putin’s price hike” — a term the administration has used repeatedly.
(WASHINGTON) — President Joe Biden on Wednesday sent a letter to seven major oil refiners blasting them for record profits amid the war in Ukraine as Americans pay record prices at the gas pump.
In the letter, he informs them he has ordered Secretary of Energy Jennifer Granholm to convene an emergency meeting with company executives to provide an explanation of any reduction in refining capacity since 2020.
While acknowledging that “Putin’s war of aggression” has dwindled the world supply of oil, Biden also pointed out that oil company profit margins are at the highest levels ever recorded.
“The last time the price of crude oil was about $120 per barrel, in March, the price of gas at the pump was $4.25 per gallon. Today, gas prices are 75 cents higher, and diesel prices are 90 cents higher. That difference — of more than 15% at the pump — is the result of the historically high profit margins for refining oil into gasoline, diesel and other refined products. Since the beginning of the year, refiners’ margins for refining gasoline and diesel have tripled, and are currently at their highest levels ever recorded,” Biden wrote.
Biden blames on the companies for “worsening” the pain the war has imposed on Americans.
“I understand that many factors contributed to the business decisions to reduce refinery capacity, which occurred before I took office. But at a time of war, refinery profit margins well above normal being passed directly onto American families are not acceptable. There is no question that Vladimir Putin is principally responsible for the intense financial pain the American people and their families are bearing. But amid a war that has raised gasoline prices more than $1.70 per gallon, historically high refinery profit margins are worsening that pain,” he wrote.
He hinted his administration is prepared to take action if the companies don’t boost production, although the consequences of not complying are not clear.
“I am prepared to use all tools at my disposal, as appropriate, to address barriers to providing Americans affordable, secure energy supply,” he wrote. “The crunch that families are facing deserves immediate action. Your companies need to work with my Administration to bring forward concrete, near-term solutions that address the crisis and respect the critical equities of energy workers and fence-line communities.”
Asked on CNN Wednesday morning what “tools” are at Biden’s disposal, Granholm did not answer directly, but said his use of the Defense Production Act in other contexts has been on the table and that Congress can also take a variety of actions to address the issue.
She said he first wants to hear from the companies why “we are seeing these massive profit-taking on the part of refiners.”
When pressed repeatedly if a proposal from Sen. Ron Wyden, an Oregon Democrat, to impose a 21% surtax on excess profits form the oil companies is something Biden would consider supporting, Granholm nervously said “no tool has been taken off the table” but did not directly say whether he’d back the idea.
“I’m saying no tool has been taken off the table and he wants to hear from the refineries, the companies who are doing refining to see what is the bottleneck and how we can increase supply. And he’s also asking, of course, for the oil and gas industry to increase supply as well, by drilling more.”
Biden’s letter was sent to the Marathon Petroleum Corp; Valero Energy Corp; ExxonMobil; Phillips 66; Chevron; BP and Shell.
An industry group, The American Petroleum Institute, responded by trying to shift blame back to the White House, saying the administration’s “misguided policy” in reducing domestic oil and gas production has added to energy costs.
“While we appreciate the opportunity to open increased dialogue with the White House, the administration’s misguided policy agenda shifting away from domestic oil and natural gas has compounded inflationary pressures and added headwinds to companies’ daily efforts to meet growing energy needs while reducing emissions,” API President Mike Sommers said in a statement.
It urged the president to “prioritize unlocking U.S. energy resources” to reduce costs instead of increasing reliance on countries like Saudi Arabia.
ABC News’ Stephanie Ebbs contributed to this report.
(NEW YORK) — The U.S. Consumer Product Safety Commission issued warnings Tuesday after at least 14 deaths in recent years related to child rockers.
The warnings covered certain Fisher-Price and Kids2 rockers, and the agency warned consumers to not let their children sleep in the products.
CPSC reported at least 13 deaths between 2009 and 2021 of infants in Fisher-Price Infant-to-Toddler Rockers and Newborn-to-Toddler Rockers. It also reported one death in 2019 of an infant in a Kids2 Bright Starts Rocker.
“Parents and caregivers should never use inclined products, such as rockers, gliders, soothers, and swings, for infant sleep and should not leave infants in these products unsupervised, unrestrained, or with bedding material, due to the risk of suffocation,” CPSC said.
There are about 3,400 sleep-related deaths among babies each year in the United States, according to the Centers for Disease Control and Prevention (CDC) — a number the health agency says includes deaths due to “sudden infant death syndrome (SIDS), accidental suffocation in a sleeping environment and other deaths from unknown causes.”
“Fisher-Price recommends consumers visit Fisher-Price’s Safe Start webpage at www.fisherprice.com/SafeStart for safety videos, tips and additional safety information, as well as the latest safety warnings for Rockers and other infant products,” the company said in the CPSC statement Tuesday. The company added that it’s committed to the safety of its products.
Kids2 said in a statement on CPSC’s website that it encourages consumers to report incidents to the company and that its “number one priority is the safety and well-being of the babies and families who love and use our products.”
The CDC advises placing babies on their back for all sleep times; using a firm surface such as a mattress in a safety-approved crib; keeping soft bedding, pillows, bumper pads and soft toys out of the baby’s sleeping area; and having the baby sleep in the same room as a parent, but not in the bed.
A final rule issued by CPSC will go into effect later this month requiring sleep products to have a sleep surface angle of 10 degrees or less, and that all sleep products conform to the existing bassinet, crib, or play yard standards.
“Your infant’s sleep environment should be the safest place in your home,” CPSC Chair Alex Hoen-Saric said Tuesday.
Fisher-Price and Kids2 did not immediately respond to ABC News’ requests for comment.
(NEW YORK) — Prices for flights this summer have skyrocketed at unprecedented rates, and some travel experts say that travelers looking for deals should start planning for fall trips.
Domestic flight prices have jumped by 47% since January, according to an Adobe Analytics report released Thursday. The cost of domestic airfare also increased 6.2% from April to May, the report said.
“We expected to see elevated demand leading into 2022,” Patrick Brown, vice president of growth marketing insights at Adobe, said. “And consumers have been spending at twice the rate that they have over last year, but prices have grown even faster than the demand has grown.”
Brown also said the price increase “hasn’t dampened the demand for travel.”
“Despite the high increases in prices month over month, we’re seeing consumers still booking their travel while they’re looking for other ways to do it and getting creative about when to travel,” Brown said.
However, travel experts said there are still a few ways travelers can find affordable travel options or more room in their travel budget.
Scott Keyes, the founder of Scott’s Cheap Flights, said cheap flights “aren’t gone forever,” but they are for travelers looking to book this summer.
“It’s really too late to get a great deal for your summer travels, but that’s because it’s already June,” Keyes told ABC News.
Keyes said there are still “a ton of deals to be had” for those looking to book fall or winter vacations. For the same seven-day trip from Los Angeles to Maui, waiting a few months could save travelers more than 70%, according to Scott’s Cheap Flights.
“Flights on July 1 through 8 from Los Angeles to Maui are $725 roundtrip,” Keyes said. “But flights from L.A. to Maui on Sept. 1 through 8 are just $161 round trip.”
But Keyes says to get those deals, travelers need to book now.
“My recommendation is book those fall flights now while fares are really cheap and give yourself a trip on the books to look forward to that you get to daydream about,” Keyes said.
For travelers who have already booked flights or are still looking for destinations, the strength of the U.S. dollar could mean more bang for your buck in some foreign destinations, according to Haley Berg, an economist at the booking platform Hopper.
“The dollar has appreciated compared to many local currencies, Mexican pesos is one of them,” Berg said. “So many of those Central American and Caribbean countries might be more attractive to visit this summer than in previous years as well.”
The U.S. dollar’s strength will especially benefit travelers to Europe this summer, where the Euro has depreciated by nearly 15%. Berg said that even though prices for airfare to Europe are up, the dollar parity will help travelers stay in budget.
“When you’re there shopping, staying at hotels, eating out, your dollars will go about 6% further than in 2019,” Berg said.
(WASHINGTON) — Celebrity chef José Andrés on Monday announced plans to open a restaurant in the Old Post Office, the Washington landmark which recently reopened as the Waldorf Astoria Washington D.C. after operating for five years as the Trump International Hotel.
“People of DC big news! Today after a dream of 30 years I’m announcing we will open @bazaarbyjose in the Old Post Office!” Andrés tweeted. “Building longer tables in the heart of our nation’s capital, welcoming people from across the city & the world.”
The new restaurant follows Donald Trump’s company agreeing to sell its hotel lease in May.
It’s not the first time Andrés has planned to have a location in the complex — or the first time his career overlapped with Trump. According to The Washington Post, Andrés was in progress on the $7 million Topo Atrio, at Trump International, when Trump launched his 2016 presidential candidacy.
The chef split with Trump after the latter, then a businessman and reality TV show host, announced his campaign at an event in New York where he notoriously disparaged some immigrants.
Andrés subsequently sought to exit their partnership and a legal battle ensued. (It was settled in 2017.)
The chef went on to repeatedly, publicly criticize Trump-the-politician, tweeting in 2017 that Trump’s continued behavior only reaffirmed his decision to pull out of the hotel partnership.
The forthcoming eatery, The Bazaar by José Andrés, has locations in Chicago, Miami’s South Beach and in Las Vegas. It offers a “vibrant mix of sophisticated cuisine” and “playful lounge spaces,” according to the restaurant’s Twitter.
A hotel spokesperson told ABC News they “look forward to sharing more details about new partnerships in the coming months” but that “with a long history of innovation across the culinary industry, Waldorf Astoria creates iconic, award-winning dining experiences at its landmark locations worldwide. We are continuing that tradition with exciting food and beverage concepts at our newest hotel.”
In a video Andrés — whose humanitarian organization World Central Kitchen is also working to provide meals to Ukrainians during the Russian invasion — tweeted with his announcement on Monday, he took in the historic bells of the Old Post Office ringing in the background.
“For whom the bells toll?” he asked. “Well, for a new restaurant by José Andrés at the Old Post Office.”
Toby Scott/SOPA Images/LightRocket via Getty Images
(NEW YORK) — For months, sky-high prices have pummeled the budgets of everyday Americans.
But many have offset the damage, at least in part, with wage increases driven by high demand for workers and resilient consumer spending. In short, strong pockets of the economy have blunted the worst effects of severe inflation.
But the economy will likely cool off in the coming months as the Federal Reserve raises borrowing costs through a series of interest rate hikes — an effort to tame inflation by slowing down the economy and eating away at demand. If the policy works, it will dial back inflation while preserving a stable level of economic growth and low unemployment, experts told ABC News.
But an unsuccessful series of rate hikes could fail to reduce prices while dramatically slowing the economy, experts said. Such an outcome would bring about stagflation — a mix of the words stagnation and inflation — which describes an economy with low growth and high prices. In other words, the high prices remain, but the lifeline of elevated income disappears.
“Stagflation is basically the worst of all worlds,” Veronika Dolar, a professor of economics at Long Island-based State University of New York Old Westbury, told ABC News. “It’s the place you definitely don’t want to be.”
What is stagflation?
Usually, in good economic times, low unemployment forces employers to raise wages so they can retain or attract workers, which heightens consumer demand and steepens price increases. Conversely, a slow economy typically results in stagnant wages, reduced demand, and slashed prices, the latter of which helps to relieve the financial strain for those who lose their jobs or receive diminished pay, Dolar said.
On rare occasions, however, high inflation persists even as the economy slows and unemployment rises, resulting in stagflation, she said.
No single economic authority formally decides whether stagflation has occurred, unlike a period of recession, which the National Bureau of Economic Research determines, Campbell Harvey, a professor of finance at Duke University’s Fuqua School of Business, told ABC News.
The last major bout of stagflation took place in the 1970s, when an oil shortage sent gas and other related prices soaring as it simultaneously dragged down economic output. But the crisis of the 1970s offers few lessons for the current moment, since the U.S. economy is far less reliant on gas expenditures and foreign oil, Harvey said.
Instead, present-day inflation is owed to generous central bank and Congressional policies in response to the pandemic, which flooded the economy with money, spiked demand and exacerbated a supply chain bottleneck, Harvey said. Moreover, the price crunch has intensified amid the Russian invasion of Ukraine, he added.
Some economists, like Dolar, believe we’re already in a period of stagflation. She noted that the U.S. gross domestic product shrank at an annual rate of 1.4% over the first three months of this year, even as inflation remained historically high. But Harvey disagrees, saying stagflation hasn’t arrived but poses a real threat.
Why stagflation matters
Stagflation hurts people in two different ways, Harvey told ABC News.
“One, the stuff you’re buying is more expensive,” he said. “And two, you have less income.”
Echoing the sentiment, Dolar said: “You’re already on your knees, struggling, and you get kicked in your gut.”
The lack of purchasing power ripples through the economy, denting business revenue and draining savings, Harvey said.
Stagflation offers no easy solutions, since generous fiscal policy or low borrowing costs may juice the economy but also risk raising inflation, while increased borrowing costs could bring down inflation but risk slowing growth even further, Dolar said.
The treacherous economic moment calls for financial prudence, Harvey said.
“Now is not the time to max out your credit card to go for a vacation,” he said. “Now is not the time for a small business to go to the bank and bet the business to do an expansion.”
(NEW YORK) — Global stocks tumbled and the S&P 500 closed in bear market territory Monday as fears over inflation rattle investors around the world.
The S&P 500 closed down 151 points, or 3.88%, meaning it’s down 21.3% since its high on Jan. 3. The Dow was down 876 points (2.79%) and the Nasdaq dropped 530 points (4.68%).
On Friday, investors were disappointed to learn that inflation is moving in the wrong direction. U.S. consumer prices surged 8.6% year-over-year in May, to a fresh 40-year high, led by higher prices for energy, food and housing. For the first time in history, a gallon of regular gas now costs $5 on average nationwide, according to AAA, and experts predict gas prices could average $6 a gallon by August.
“Any talk that we are at peak inflation has to be tabled at least until prices stop rising,” said David Nelson, chief strategist at Belpointe Asset Management.
The worse-than-expected inflation report has investors raising their bets on more aggressive interest rate increases from the Federal Reserve, possibly as soon as the central bank’s policy-setting meeting this week.
According to the CME FedWatch Tool, there is now about a 25% chance that the Fed will raise short-term interest rates by three-quarters of a point at the end of Wednesday’s policy meeting as the Fed ratchets up its fight against high inflation.
The likelihood of a half point rate hike at the Fed’s September meeting has now jumped to 50%, up from 25% before Friday’s inflation report.
“The debate continues over whether the Fed can slow inflation using its many monetary policy tools without pushing the economy into a recession,” Art Hogan, chief market strategist at National Securities, told ABC News. “Raising rates by three-quarters or even one percentage point on Wednesday would send a strong message that this Fed is willing to do what needs to be done to get inflation moving in the right direction.”
Inflation fears have sparked a broad-based selloff on Wall Street that has spread beyond stocks to the bond market and cryptocurrencies. Bitcoin, the biggest cryptocurrency, traded below $24,000, down nearly 14% in just 24 hours.
Despite this year’s rapid stock market selloff, strategists at Morgan Stanley and Goldman Sachs said the market does not fully reflect the risks facing the economy.
“The Equity Risk Premium does not reflect the risks to growth, which are increasing due to margin pressure and weaker demand as the consumer decides to hunker down,” Morgan Stanley strategists, led by Michael Wilson, wrote in a note on Monday.
If the S&P 500 closes Monday’s trading session with a decline of more than 1.3%, the index would be in a bear market, defined as a 20% drop from a recent high. The technology-heavy Nasdaq-100 slipped into a bear market in March.
Igor Golovniov/SOPA Images/LightRocket via Getty Images
(NEW YORK) — The latest supply shortage to hit stores in the United States is disproportionately impacting women who menstruate.
Major retail chains across the country are reporting a shortage of tampon products as people have taken to social media to report their struggle to find products on store shelves.
“I had to go to three different stores to find the brand of #Tampons I like to use just to end up having to try another brand,” one woman shared on Twitter.
The shortage is reportedly stemming from a combination of factors, including staffing problems at factories, transportation delays and the rising cost of materials used to make the products, like plastics.
Walgreens told ABC News in a statement it is experiencing “some temporary brand-specific shortages in certain geographies.”
“Walgreens works diligently with our suppliers to ensure we have tampon supply available. However, similar to other retailers, we are experiencing some temporary brand-specific shortages in certain geographies,” the company said. “While we will continue to have products at shelf and online, it may only be in specific brands while we navigate the supply disruption. And, for customers looking for a specific product or brand, our website is up-to-date with the latest available store-level inventory information.”
CVS also confirmed a shortage in a statement to ABC News.
“We’re working with our suppliers to ensure we have an ample supply of feminine care products in our stores,” the company said. “In recent weeks, there have been instances when suppliers haven’t been able to fulfill the full quantities of orders placed. If a local store is temporarily out of specific products, we work to replenish those items as quickly as possible.”
Procter & Gamble, the manufacturer of Tampax, a leading tampon brand, told ABC News it is “producing tampons 24/7” to meet the demand.
“We understand it is frustrating for consumers when they can’t find what they need. We can assure you this is a temporary situation, and the Tampax team is producing tampons 24/7 to meet the increased demand for our products,” the company said in a statement. “We are working with our retail partners to maximize availability, which has significantly increased over the last several months.”
Procter & Gamble told Time magazine earlier this month that it saw a major spike in sales after launching an ad campaign with comedian Amy Schumer in July 2020.
“Retail sales growth has exploded,” a Procter & Gamble spokeswoman told the magazine.
Schumer, who shared publicly that she underwent surgery last year to remove her uterus due to endometriosis, responded on Instagram, writing, “Whoa I don’t even have a uterus.”
Amid the ongoing shortage, the average price for tampons and other menstrual products has also risen.
The price of tampons rose by nearly 10% and the price of menstrual pads by more than 8% through May, according to Bloomberg, citing NielsenIQ data.
