We skipped it last month, but we have an updated snapshot of how much trade has been lost between the U.S. and China as a result of the coronavirus pandemic.

With January 2020's 'Phase 1' trade deal, the volume of trade between the U.S. and China should have begun recovering in February following the truce in President Trump's tariff war with the country. Instead, it plunged through March 2020 with the coronavirus pandemic starting in China before beginning to recover. In April 2021, the volume of trade is $9.7 billion higher than April 2020. The gap between the trailing year average of trade between the two nations and a 'No Coronavirus Pandemic' counterfactual shrunk to $7.5 billion in April 2021. We estimate the cumulative loss is $116.8 billion.

Speaking of which, the Biden-Harris administration has bought into the tariffs on Chinese goods, claiming they saved U.S. jobs, which means they won't be going away anytime soon.

No economists were asked if they agree with the Biden-Harris administration's assessment, though one labor union that endorsed the Biden-Harris administration supports the tariffs.

The thing to watch during the rest of 2021 is how much the gap between the trajectory of the combined value of trade between the U.S. and China and the "no coronavirus pandemic" counterfactual trajectory narrows during the year. The gap between actual and "what if" peaked at $10.6 billion in October 2020 and has narrowed in each of the months since.

Inflation ruled the headlines in the trading week ending on Friday, 11 June 2021. But perhaps the most surprising outcome of the higher than expected inflation data that came out on Thursday, 10 June 2021 was its the effect of the report on U.S. stock prices. They rose to close at new record highs after the Bureau of Labor Statistics' Consumer Price Index report for May 2021 became public.

From our perspective, the S&P 500 (Index: SPX) appears to be behaving consistently with investors focusing on the current quarter of 2021-Q2. That assessment assumes the amplification factor of the dividend futures-based model is -5, which may no longer be true. We are closely watching for indications that value has changed in response to the inflation report, where we don't yet have enough information to confirm a change. We may be revisiting this initial assessment as early as next week, because we're also on the cusp of when the focus of investors will be forced to shift to another point of time in the future, if it hasn't already.

The May 2021 inflation report is significant enough that we've gathered a range of analysis from investing professionals related to the main question it raises: Is it a short-term "transitory" affair or will it have long-lasting legs? Here's a short roundup of analysis on the "transitory" side of the argument:

• Goldman CFO says inflation likely transitory but a sharp rise would have ‘negative consequences’
• Markets Have Bought The Fed’s ‘Transitory’ Narrative Hook, Line And Sinker
• #MacroView: Rates, The Dollar & The 2021 Outlook

Here are several arguments favoring the interpretation higher inflation will be with us for an undetermined time to come:

• Deutsche Bank warns of global ‘time bomb’ coming due to rising inflation
• BofA Just Threw Up All Over The Fed's "Transitory" Argument: Here's Why
• Today's Consumer Inflation Cycle Comes With Yesteryear Denial, Problems & Consequences

And one last take, from RaboBank, which considers both possibilities:

• Answering The "$64 Trillion Question": A New Theory Of Inflation

And you thought it was going to be a dull summer! Let's close by rounding up the market-moving headlines of which we took note during the week that was....

Monday, 7 June 2021

• Signs and portents for the U.S. economy:
• Yellen says higher interest rates would be 'plus' for U.S., Fed- Bloomberg News
• From lapsing job benefits to full stadiums, June could be U.S. recovery's pivot
• Oil dips on profit-taking after logging 2-year high on OPEC+ curbs
• U.S. consumers sour on housing market's buying conditions
• Fed minions drive interest rates to 0%:
• Fed's reverse repo volume hits all-time high
• Bigger inflation developing all over:
• China's imports grow at fastest pace in decade as materials prices surge
• Russian May inflation accelerates to 6.0%, above forecast
• Only quick shift to 'net zero' emissions will boost GDP: report
• Wall Street mixed as buyers step to sidelines

Tuesday, 8 June 2021

• Signs and portents for the U.S. economy:
• Oil rises as Iranian supply not seen returning soon
• U.S. crude oil exports in April reached 3.24 million bpd – U.S. Census Bureau
• U.S. job openings, quits hit record highs in April
• Bigger trouble developing in Eurozone:
• Supply bottlenecks throttle German industrial output in April
• Euro zone economic dip milder than expected in first quarter
• S&P 500 closes little changed as "meme stocks" extend rally

Wednesday, 9 June 2021

• Signs and portents for the U.S. economy:
• U.S. wholesale inventories rise solidly; supply constraints loom
• Campbell Soup lowers annual profit forecast as costs rise
• Oil steadies amid weak summer kickoff for U.S. fuel demand
• Senators discuss U.S. infrastructure deal that avoids tax hikes
• Fed minions drive interest rates to 0%:
• U.S. Fed's reverse repo volume soars to half a trillion dollars
• Bigger inflation developing all over:
• China's highest producer inflation in over 12 years highlights global price pressures
• Brazil inflation in May hits multi-year high, putting upward pressure on interest rates
• Wall Street reverses, closing lower ahead of inflation report

Thursday, 10 June 2021

• Signs and portents for the U.S. economy:
• U.S. wholesale inventories rise solidly; supply constraints loom
• P&G says commodity, freight costs to bite this fiscal year
• Oil steadies amid weak summer kickoff for U.S. fuel demand
• Senators discuss U.S. infrastructure deal that avoids tax hikes
• Bigger inflation developing all over:
• China's highest producer inflation in over 12 years highlights global price pressures
• Brazil inflation in May hits multi-year high, putting upward pressure on interest rates
• Wall Street reverses, closing lower ahead of inflation report

Friday, 11 June 2021

• Signs and portents for the U.S. economy:
• Oil hits multi-year highs in third weekly gain on demand recovery
• Oil rally has more room to run, Brent expected to hit $80/bbl - Goldman
• Fed minions expected to announce slowing bond buys befoere end of 2021-Q3, starting with cuts to mortgage bond buys first:
• Fed to announce QE taper in August or September on rising inflation concerns: Reuters poll
• Fed may opt for faster phase-out of housing-backed bond purchases
• Recovery signs in Eurozone:
• German economy set for post-pandemic bounce in growth and prices, Bundesbank says
• Italian economy to grow around 5% this year, says central bank
• Bigger inflation developing all over:
• Russia raises key rate to 5.5%, flags more hikes to curb inflation
• U.S. inflation will accelerate if recovery stays on track: Kemp
• BOJ minions coming to grips with never-ending stimulus:
• BOJ may extend pandemic-aid schemes to support fragile recovery
• Wall Street ekes out gains to close languid week

Normally, we'd point to Barry Ritholtz' weekly succinct summation of his list of positives and negatives for the economy and markets at this point. Alas, he presented none of either this week!

Cuneiform is the world's oldest known writing system. It's also one of the most successful, because its use spans two-thirds of recorded human history. In the following 11 minute Numberphile video, Alex Bellos explains how to write numbers the way the Sumerians, Akkadians, Babylonians, Elamites, Hittites, Assyrians, and Hurrians did!

Be sure to check out The Biggest Math Story of 2020, in which we featured Matt Parker's video describing the world's first known math mistake, which also involves techniques for recording numbers that pre-date cuneiform writing. Just scroll down to the section on "A Year Defined by Mistakes".

What percentage of the population needs to be vaccinated to usefully reduce the risk of dying from COVID-19?

We're going to do a back-of-the-envelope calculation to estimate the answer to that question using Arizona's high quality COVID data in general, and the state's data for COVID-related hospital admissions and deaths in particular.

We're also going to build off our previous analysis that synchronized Arizona's figures for the number of positive COVID infection test results, hospitalizations, and deaths according to the approximate date of initial SARS-CoV-2 coronavirus exposure for the Arizonans who became infected and experienced these pandemic-related events. The following chart shows these three streams of data using a logarithmic scale, covering the period from 15 March 2020 through 30 April 2021.

We've annotated the chart to indicate two periods of "noise" in the data for deaths, which came into play when the daily number of COVID-related deaths of Arizonans dropped into the single digits. Because of the small numbers involved, having a relatively small change in the daily number can have an outsize effect on the appearance of the overall trend, which accounts for the "noisy" short-term trough that was recorded in mid-September 2020 and the short-term spike in late March 2021. We've added the dotted lines to these areas of the chart to indicate what the overall pattern would look like without the short term noise in the data.

Now to the bigger question. We're going to focus on the ratio of deaths to hospital admissions because these events represent the most serious classes of COVID infections. In Arizona, 75% of COVID-related deaths have occurred among the state's senior population, Age 65 or older. This same demographic has accounted for 46% of COVID-related hospital admissions in the state.

These figures confirm seniors are disproportionately vulnerable to both these outcomes if they become infected by the SARS-CoV-2 coronavirus. This fact is why this portion of the state's population was targeted for early COVID vaccinations once the vaccines became available.

Because the incidence of COVID-related deaths in concentrated in Arizona's senior population, we should see a sustained decline in the ratio of COVID deaths to hospital admissions corresponding to roughly when the population Age 65 or older achieved effective herd immunity. We can then identify what percentage of the state's elderly population had been received at least one vaccine dose at that point in time, which in turn, will give us a reasonable indication of what percentage of the population needs to be vaccinated for COVID to reduce its risk of death.

The next chart graphically shows the results when we combine these points of data together.

We find at least 55% of the population would need to have received at least one dose of the COVID-19 vaccines to provide the benefit of reduced risk of death from becoming infected by the coronavirus. That's the percentage of the Age 65 and older population of Arizonans who had been vaccinated as of 28 February 2021, which marks the point in time at which COVID-related deaths in the state began to plunge as a result of the Operation Warp Speed vaccination programs.

That's the low end for our estimate, because it does not consider the portion of the senior population who would have obtained natural immunity from having become infected with the SARS-CoV-2 coronavirus and who recovered from it. As of 28 February 2021, Arizona's senior population accounted for 109,897 known COVID infections, about 13.4% of the state's total at that time. Added to the 696,559 Age 65 or older Arizonans who had received at least one COVID vaccination dose at that date would put the high end of the estimate at 64%.

That upper level figure would explain why public health officials have set a target of 70% of the population for COVID vaccinations, but it seems strange they are not giving more weight to the potential contribution of natural immunity in achieving that goal. If they did, they could focus their limited resources for providing COVID vaccination more effectively.

Looking at Arizona's data, we would say the magic percentage for vaccinations to achieve useful COVID herd immunity is somewhere between 55% and 64% of the population. That's because there is almost certainly a good amount of overlap between those who have recovered from COVID and those who have been vaccinated. It would be more beneficial and less wasteful for public health officials to target the COVID vaccines to those who have not developed any antibodies to SARS-CoV-2 coronavirus infections.

References

Arizona Department of Health Services. COVID-19 Data Dashboard: Vaccine Administration. [Online Database]. Accessed 10 June 2021.

Consumer prices are rising rapidly these days. Just last month, we found the discounted sale price of Campbell's Condensed Tomato Soup had risen to $0.96 per can, a rise of 13% above pre-pandemic levels.

One reason we track the price of Campbell's iconic tomato soup because the product itself has proven to be remarkably stable over time. If you stepped into a time machine and traveled back to nearly any point in time from January 1898 to the present, you could likely find the same 10.75 ounce size can of condensed tomato soup stocked for sale in American grocery stores.

That makes Campbell's iconic soup unlike other products, whose producers engage in a market tactic called shrinkflation, where they keep the sale prices the same, but shrink the size of the goods they sell. If the phrase sounds familiar, it is because the topic is increasingly popping up in the news.

There are lots of reasons for companies to engage in shrinkflation, but the end result is the same. You get less stuff for the same amount of spending. Whether its toilet paper, cat food, or packages of Hershey's chocolate kisses.

Things that don't change don't have that option. Unlike these other kinds of products, they cannot get away with shrinking the amount of goods inside their packaging. Because these goods cannot get smaller, producers are forced to pass along their higher costs from the escalating prices of the things they have to buy, which consumers see as rising prices. That difference makes these goods very useful for keeping track of how inflation is affecting your personal finances.

Speaking of which, keeping track of those price changes can be a time intensive activity. When we track Campbell's tomato soup prices, we review dozens of weekly ads to identify the prices at which retailers are selling them each time we update our database of monthly price data for the product. Our price database for Campbell's tomato soup extends back to January 1898.

With prices now escalating rapidly enough to become a regularly featured news topic, we were excited to find that Microsoft has introduced a new capability into its Edge web browser, which makes it easy to track the recent price history of products like Campbell's Condensed Tomato Soup. Here's the announcement from the rollout of Microsoft Edge's price history tracking capability:

Before making a purchase, I like to make sure that I’m getting the best deal possible. Because prices on certain items fluctuate over time, knowing when to buy can make all the difference. This is why I’m excited to share that, this month, Microsoft Edge is releasing a new feature called price history.  It shows me historical online prices to help me decide if I should wait a few days before making a purchase. To see an item’s price history, all you have to do is click on the blue tag in the address bar. Learn more about which retailers are supported. This is just another way we’re helping you save time and money.

In our case, it provides a very easy way to track recent price trends for our favorite inflation-tracking product! Here are two snapshots of what we found when we looked at its price history on 28 May 2021 and again, 10 days later, on 7 June 2021.

Recognizing that we're looking at a limited sample of just three large retailers (Amazon, Wal-Mart, and Target), it's interesting to see the historical prices that MS Edge reports over the past month generally agree with what we've documented using our well-established tracking methods.

Obviously, there are more consumer goods than just Campbell's Tomato Soup to consider in assessing how fast inflation is growing in the U.S. At this writing, Microsoft Edge's price history tool pulls its data from products sold at eight large retailers, including Amazon, Wal-Mart, Etsy, Macy's, Nordstrom, Home Depot, Target, and Best Buy.

If you have Microsoft Edge, check out its price history tracking capability out for yourself by picking out a basket of goods and watching their price changes over time. If nothing else, you might get a very good idea of how today's inflation is directly affecting you and your quality of life.

Bonus update! Campbell Soup (NYSE: CPB) is reporting its previously projected profits will be negatively impacted by rising material and transportation costs. That confirmed upward cost pressure will make it less likely for significant discounting of tomato soup prices in the next several months, even as demand declines to its seasonal low.