Here's a quick monitor of Washington farm and trade policy issues from DTN's well-placed observer.
USDA Now Expects 2021 Rise In Restaurant Prices To Match 2020
The consumer price index for food away from home (restaurant prices) in 2021 is now forecast to be from 2.0% to 3.0%, up from USDA's prior forecast and even with the rate of grocery store price inflation for 2020, according to the Economic Research Service (ERS).
“Forecast ranges for eight of the 22 CPI categories for 2020 have been revised upward this month, with only eggs being revised downward,” ERS said. “The forecast range for food-away-from-home was adjusted upward, while all other categories remained unchanged for 2021.” In September, USDA expected 2021 grocery store prices would rise 1.5% to 2.5% from 2020 levels.
ERS forecasts grocery store prices in 2020 will rise between 2.5% to 3.5% in 2020 with restaurant prices seen rising 2% to 3%.
In 2021, ERS expects grocery store prices to rise between 1% and 2%. Overall food price inflation is looked to be 2.5% to 3.5% in 2020 and then rise 2.0% to 3.0% in 2021.
USDA Announces Another Round of Its Food Box Effort
USDA authorizes $500 million for a fourth round of purchases for the USDA Farmers to Families Food Box Program, with the focus on those who need food during the COVID-19 pandemic. USDA expects to award contracts by Friday for deliveries of food boxes from November 1 through December 31.
The announcement helped fuel milk futures as dairy products are a major focus.
The program will continue the purchase of combination boxes to include fresh produce, dairy products, fluid milk and meat products.
“We recently surpassed 110 million boxes delivered, and millions more are headed to Americans in need,” USDA Secretary Sonny Perdue said. “I'm very pleased that we are able to extend this program and continue our relief efforts for American farmers and families.”
Bloomberg commented this week on expectations for three Group of Seven interest-rate decisions along with data accounting for 40% of global gross domestic product. It expects these will provide a “temperature check for the crisis-disfigured world economy” this week during its most traumatic year for generations.
While the U.S. and euro regions likely have achieved unprecedented growth rebounds in the third quarter, that will only serve to underscore the volatility and disruption inflicted by the coronavirus – as opposed to any meaningful repair to the damage caused, Bloomberg says.
Concurrently, the central banks of Canada, Japan and the euro area are all likely to signal renewed anxiety at the persistence of the disease and its lingering impact at a time of resurgent infections in Europe.
The cumulative snapshot of growth and policy on three continents will form a definitive backdrop on the state of the world economy before the U.S. election the following week, Bloomberg says.
In the aftermath of that vote on Nov. 3, decisions by the Federal Reserve and the Bank of England will then complete the latest sweep of G-7 monetary authorities determining borrowing costs and stimulus across the bloc.
Bloomberg's view is that “the week ahead is set to bring good news about the past, but bad news about the future.” In the U.S., third quarter GDP will show a record expansion, but “with stimulus talks stalled and the virus case count rising, the outlook is darkening.” In Europe, the report says the group expects ECB President Christine Lagarde to acknowledge intensifying risks to the recovery and signal further support ahead.”
Bloomberg also notes that the central bank in Ottawa has made a long-term commitment to keep interest rates at historic lows and will use the upcoming rate decision to reinforce that guidance. That likely means holding the benchmark interest rate at 0.25%, reiterating that it will likely stay there for years and pledging to continue buying government bonds to support that policy.
Yet, with growing concern that the Bank of Canada could end up cornering the market for Canadian debt, officials are under pressure to provide some details on how it could temper its reliance on asset purchases without tightening policy.
With regard to developments in Asia, the report says that Bank of Japan officials are widely expected to hold fire on Thursday as governor Haruhiko Kuroda reiterates the need to monitor the effectiveness of the bank's virus-response measures and his resolve to take swift action if needed. The Bank of Japan will also release updated growth and inflation forecasts that will continue to show prices falling in the current fiscal year.
The BOJ's focus on providing funding for struggling firms and calming markets through asset buying has put its inflation campaign on the back burner for now. Policy makers are likely to argue that with only minor tweaks to the projections, the base scenario for the economy to gradually pick up remains unchanged. Still, the figures will again raise the question of what else the central bank can do to reach its distant 2% inflation target over the long run.
European Central Bank (ECB) policy makers also will meet on Thursday when discussion will be dominated by concerns regarding impacts that the sudden resurgence of the pandemic could have on the recovery – and whether more stimulus is already needed.
What ECB President Christine Lagarde described as a strong rebound over the summer months now risks turning into a double-dip recession after countries from Ireland to France and Germany imposed new restrictions to stop the spike in virus infections.
Most economists expect the ECB to keep its 1.35 trillion euro emergency bond-buying program unchanged for now, with roughly half of the money from the package still waiting to be spent. Officials also have reasons to wait until December to unveil additional stimulus when new forecasts could allow them to better calibrate the response. The expectations are that the program will get additional 500 billion euros and be extended until the end of 2021.
Overall, Bloomberg said its expectations for the evaluation of the U.S. economy likely will conclude that it probably charged ahead in the third quarter at the fastest pace in official data back to the 1940s as pandemic restrictions were lifted and that GDP increased at a 32% annualized rate, with a record gain in consumer spending. However, the devastation wrought by the coronavirus is expected to linger: total inflation-adjusted economic output is seen remaining below the $19.3 trillion at the end of 2019.
The euro-area economy probably expanded more modestly during the quarter – but still by a record. The 9% increase seen by economists likely will be insufficient to erase the contraction of the first half of the year. This could mean that the new data on Friday are overshadowed by negative economic confidence readings, falling consumer prices and forecasts of stagnation in the current three-month period because of a resurgence in coronavirus cases.
So, we will see. The overall picture includes most of the global economy working to confront the impacts of the coronavirus as uncertainty grows as to how best to proceed. These are trends and challenges for all governments and should be watched closely as they intensify, Washington Insider believes.
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