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Wholesale prices rose 0.2% in October, in line with expectations

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Wholesale prices nudged higher in October, though largely in line with expectations and consistent with the Federal Reserve cutting interest rates again in December, the Bureau of Labor Statistics reported Thursday.

The producer price index, which measures what producers get for their products, increased 0.2% for the month, up one-tenth of a percentage point from September though matching the Dow Jones consensus forecast. On a 12-month basis, headline wholesale inflation was at 2.4%.

Excluding food and energy, core PPI rose 0.3%, also one-tenth more than September and also matching expectations. The 12-month rate was at 3.1%.

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Economics

Donald Trump has again rewritten the history of January 6th

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“THIS IS A big one,” Donald Trump said as he signed a clemency order for nearly 1,600 January 6th rioters just hours after being sworn into office. By evening Enrique Tarrio, the leader of the Proud Boys, a far-right group, who had been serving a 22-year sentence in federal prison for choreographing the attack on the Capitol, was in a holding cell in Louisiana awaiting release. In a phone call with The Economist that night his mother exulted that her boy would be home in Miami within days.

The amnesty proved to be even more sweeping than its beneficiaries had anticipated. “This is leaps and bounds better than I could have hoped,” says John Kinsman, a Proud Boy who served four years in prison. “Never in a million years” did he think that Mr Trump would set every January 6th “hostage” free. All but 14 leaders of the Proud Boys and Oath Keepers, a militia, who breached the Capitol building, were granted full pardons. Their pardons lift penalties that typically arise from felony convictions, such as restrictions on buying guns, visiting certain foreign countries and, in some states, voting. Those who weren’t pardoned had their sentences commuted. In those cases, Mr Trump said, his team needed to do “further research”.

The outcome seemed surprising because just last week J.D. Vance, now the vice-president, told viewers on Fox News that “if you committed violence on that day obviously you shouldn’t be pardoned.” Yet many who had were. Pam Bondi, Mr Trump’s nominee to lead the Department of Justice (DoJ), echoed Mr Vance’s restraint, saying that she planned to look at the January 6th offenders on a “case-by-case” basis. The fact that Mr Trump overruled them suggests that the scope of his final decision was his own idea. Asked why he had ignored Mr Vance’s advice, Mr Trump said that those imprisoned had served enough time and had had their lives upended.

To some career DoJ lawyers who brought the cases, Mr Trump’s actions only reinforce their belief that he sought on January 6th to goad his supporters to sack the Capitol. “This is one of the most candid acknowledgements that what happened that day is what he intended,” says a senior DoJ lawyer. It is indeed reasonable to see the pardons as an endorsement of the mob violence that took place. In the summary of his now-dismissed case published on January 7th, Jack Smith, the special counsel investigating Mr Trump for his role in the Capitol attack, wrote that his office had sufficient evidence to “obtain and sustain a conviction”. But Mr Trump has now made sure that the meaning of the January 6th assault will be long contested. To them the pardons rectify an injustice arising from overreach by Mr Trump’s foes, including Mr Smith.

It is unarguable that soon hundreds of people who punched police, smashed windows and broke through barricades will be home. Though many of them are ordinary doctors and businessmen, at least 200 have pledged allegiance to a militia-like group. In interviews Proud Boys across America say that jail time has subdued their movement—and watch-dog groups like Miami Against Fascism agree that their power has been “severely diminished”.

Nonetheless political violence, both on the left and the right, has soared since 2021; there were two lone-wolf attempts on Mr Trump’s life during the campaign. According to an analysis by Robert Pape of the University of Chicago, the DoJ prosecuted 26 threats against members of Congress between 2022 and 2023. Yet Mr Trump’s administration may not pursue domestic radicals as forcefully as Joe Biden’s administration did.

There is some precedent for a president pardoning citizens who attacked America’s government with physical force, says Kimberly Wehle, a law professor who wrote a book on pardon power. The closest parallel is perhaps Andrew Johnson’s decision to grant amnesty to thousands of Confederate soldiers after the civil war. But he forced them to swear loyalty to the country and free their slaves as a condition of their release, thereby requiring them to admit defeat on the biggest issue they had fought for. Then as now, forgiveness exacerbated the nation’s divides.

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Minimum payments on credit cards hit record level as delinquencies also rise

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In this photo illustration the Visa, Mastercard and American Express logo on various credit cards and debit cards are seen beside US one dollar bills on January 4, 2025 in Somerset, England. 

Anna Barclay | Getty Images

Consumer stress has intensified, with an escalating share of credit card holders making only minimum payments on their bills, according to a Philadelphia Federal Reserve report.

In fact, the share of active holders just making baseline payments on their cards jumped to a 12-year high, data thorough the third quarter of 2024 shows.

The level rose to 10.75% for the period, part of a continuing trend that began in 2021 and has accelerated as average interest rates have soared and delinquencies also have accelerated. The increase also marked a series high for a data set that began in 2012.

Along with the trend in minimum payments came a move higher in delinquency rates.

The share of card holders more than 30 days past due rose to 3.52%, an increase from 3.21%, for a gain of more than 10%. It also is more than double the delinquency level of the pandemic-era low of 1.57% hit in the second quarter of 2021.

The news counters a general narrative of a healthy consumer who has kept on spending despite inflation hitting a more than 40-year high in mid-2022 and holding above the Fed’s 2% target for nearly four years.

Signs of strength

To be sure, there remain plentiful positive signs. Even with the rising delinquency rate, the pace is still well below the 6.8% peak during the 2008-09 financial crisis and not yet indicative of serious strains.

“A lot remains unknown. We’ve seen in the past few days how quickly things might be changing,” said Elizabeth Renter, senior economist at personal finance company NerdWallet. “The baseline expectation is consumers in aggregate economywide will remain strong.”

Adjusted for inflation, consumer spending rose 2.9% on an annual basis in November, according to Goldman Sachs, which noted Tuesday that it sees consumers as “a source of strength” in the economy. The firm estimates that consumer spending will slow some in 2025, but still grow at a healthy 2.3% real rate in 2025, and Goldman sees delinquency rates showing signs of leveling.

PepsiCo CEO: Trump administration will be pro-growth and help consumer confidence

However, if the trend of solid consumer spending holds, it will come against some daunting headwinds.

Average credit card rates have climbed to 21.5%, or about 50% higher than three years ago, according to Fed data. Investopedia puts the average rate even higher, at 24.4%, noting that so-called low-cost cards that are given to borrowers with poor or no credit history have topped 30%. Consumers haven’t gotten any help from the Fed: Even as the central bank cut its benchmark interest rate by a full percentage point last year, credit card costs remained elevated.

Those rates are hitting much higher balances, with money owed on revolving credit swelling to $645 billion, up 52.5% since hitting a decade low of $423 billion in the second quarter of 2021, according to the Philadelphia Fed.

Renter noted that an increasing number of respondents — now at 48% — to the firm’s own consumer survey reported using credit cards for essentials. Moreover, the NerdWallet survey also found an even higher level, more like 22%, saying they are only making minimum payments.

With average credit card balances at $10,563, it would take 22 years and cost $18,000 in interest when just paying the minimum, according to NerdWallet.

“With higher prices, people are going to turn to credit cards more to use for necessities. You tack on higher interest rates and then you have more difficulty getting by,” Renter said. “If they’re only making the minimum payment, you can go very quickly from getting by to drowning.”

The trend in that direction is not encouraging. A recently released New York Fed survey for December found that the average perceived probability for missing a minimum debt payment over the next three months stood at 14.2%, tied with September for the highest since April 2020.

Home loans slow

It’s also not just credit cards where households are feeling the pinch.

Mortgage originations hit a more than 12-year low in the third quarter as well, according to the Philadelphia Fed report. After peaking at $219 billion in third quarter of 2021, originations are just $63 billion three years later.

“With high mortgage rates, consumers who have locked in low fixed-rate mortgages have little motivation to refinance, reducing mortgage demand,” the central bank branch said in the report.

Moreover, debt-to-income ratios on home loans also are on the rise, hitting 26% most recently, or 4 percentage points higher over the past five years.

The typical 30-year mortgage rate recently has swelled above 7%, posing another obstacle for housing and homeownership.

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Economics

America really could enter a golden age

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Maybe you are in the habit of applying a hefty discount to claims by Donald Trump; no one could blame you. But he really does have the chance to lead America into the golden age he proclaimed in his second inaugural address. Historic circumstances, political dynamics and his own audacity could also enable him to achieve the legacy he wants as “a peacemaker and a unifier”. His party has fallen into lockstep; his adversaries at home are confounded and enervated, and America’s opponents abroad are preoccupied with their own troubles. Mr Trump has battled for ten years against anyone he perceived to have crossed him. His most formidable adversary still standing is probably himself.

As he assumes office again, Mr Trump has embarked on a marketing offensive, a familiar routine, albeit this time with a twist: rather than having to persuade people something is grander than it is—that the Trump Tower in Manhattan has 68 floors rather than 58—he has to assign himself credit for things that are truthfully better than Americans may yet realise. America’s economy is the envy of the world. America is already exporting record amounts of gas and oil, and its biggest obstacle to pumping more is global demand. But Mr Trump’s declaration in his inaugural address of a “national energy emergency” may help him vault to the head of the kind of parade celebrating American glory that poor President Joe Biden lacked the wherewithal to summon.

Similar gamesmanship explains Mr Trump’s inaugural commitment that Americans would now “be able to buy the car of your choice”, which was equally true under Mr Biden (and equally untrue for those who chose a Ferrari but could not afford one), and his pledge to use troops to “repel the disastrous invasion of our country” at the southern border, where arrests for illegal crossings are below the level when Mr Trump left office.

Yet Mr Trump’s initial executive orders are meant to do more than gild the lily. In some cases they call for drastic action, particularly on immigration. As with Mr Trump’s promises of tariffs and his exhumation of “manifest destiny”, no one knows how far he may go with his deportation initiative. But there is also a bigger, more hopeful possibility: Could his showy crackdown be part of a grand plan for the golden age?

In Mr Trump’s first term some of his aides saw the potential of linking enhanced border security to broader reform of America’s immigration system. For all his harsh oratory about immigrants, Mr Trump has sometimes sounded sympathetic, particularly about people brought as children. Last October, he told the editorial board of the Wall Street Journal he had a practical reason for his tough talk about illegal immigration: “The nicer I become, the more people that come over illegally.” (The Biden administration learned that lesson to its sorrow.) But, Mr Trump said, “We have a lot of good people in this country, and we have to do something about it.” In general, said Mr Trump, who is married to an immigrant, and not for the first time, “I want a lot of people to come in, but I want them to come in legally.”

Mr Trump tries to win over any room he walks into, and that may explain his comments to the Journal editors. But he may also recognise that he has amassed more credibility with immigration hardliners than any president in memory, and thus has an opening to achieve what his recent predecessors could not. Comprehensive immigration reform has eluded presidents since 1986, when Ronald Reagan signed into law heightened border security along with amnesty for almost 3m people in America illegally.

Other grand, bipartisan bargains are possible for Mr Trump. He has not displayed interest in the kind of far-reaching tax reform that Reagan achieved, but in his first term he showed a flash of ambition for the sort of gun-safety legislation that polls show a majority of Americans want. “It’s not going to be talk like it has been in the past,” he told grieving parents and students after a 19-year-old gunman killed 17 people at a Florida high school in 2018. “It’s been going on too long, too many instances, and we’re going to get it done.” He scolded Republican lawmakers for being “scared” of the National Rifle Association (but then, after talking to NRA officials himself, backed off).

Such deals at home would realise Mr Trump’s vision of being a unifier. His opportunities to prove himself a peacemaker, extending America’s golden aura beyond its shores, await not in Panama but in Eastern Europe and the Middle East, where war may have wearied America’s allies but has surely weakened its adversaries, Russia and Iran. The test for Mr Trump is whether he can insist on fair deals for Ukraine, and for the Palestinians.

With malice toward some

From Abraham Lincoln to Franklin Roosevelt to Reagan, presidents who accomplished great things appear more as unifiers in the eyes of history than they did in those of their contemporaries. They were all dividers, too. They were also subjected to vicious criticism and even violent attack.

But Mr Trump has yet even to hint at the grandeur of spirit that those presidents brought to the job. The petty partisanship of his inaugural address, along with his pardons of even violent January 6th convicts, bode poorly for the chances he will ever overcome the weaknesses likely to cast a shadow over what could be a golden age: self-pity, a flickering attention span, a vulnerability to flattery and a reverence for strongmen. “Trump’s sense of aggrievement reinforced his penchant for seeking affirmation from his most loyal supporters rather than broadening his base of support,” General H.R. McMaster concludes in “At War With Ourselves”, his memoir about his time as Mr Trump’s national security adviser during the first term. “Trump’s indiscipline made him the antagonist in his own story.” And in America’s.

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