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Prices of new and used vehicles are at record highs, bolstered by a semiconductor supply crunch that has kept a lid on car production just as consumers are itching to get out and shop for them, the Wall Street Journal reported. Used cars and trucks were 45.2% more expensive in June than they were a year earlier, while new cars were 5.3% pricier, according to the Labor Department. Monthly payments don’t look all that different to consumers, though, thanks to lower rates, longer terms, or putting up more cash. For new cars, average monthly loan payments increased just $7 in the first quarter of 2021 compared with a year earlier, according to consumer-credit reporting company Experian. Monthly loan payments for used cars rose $19, or 5%, in the same period. Loan durations had been getting longer even before the pandemic. The average length of an auto loan was 70 months for new cars and 68.9 months for used cars in the second quarter, according to data from Edmunds; 10 years ago, they averaged 64 months and 62 months, respectively. Much of that happened as competition grew among lenders and as car prices gradually increased, with auto makers adding new technology and customization options on vehicles. Longer payment terms were designed to make vehicles look more affordable.

U.S. factory output slid last month as a shortage of computer chips disrupted auto production, the Associated Press reported. Manufacturing production dipped 0.1% in June — third drop in five months, the Federal Reserve reported Thursday. Overall, industrial production — including output at factories, mines and utilities — rose 0.4% last month after increasing 0.7% in May. Industrial output is up 9.8% from a year earlier. The chip shortage pushed production of cars, trucks and auto parts down 6.6% in June. Excluding autos, industrial production rose 0.4% last month. Utility output climbed 2.7% in June as Americans cranked up the air conditioning to battle a heat wave across much of the country. Mining output rose 1.4% on an uptick in oil and gas production.

Delta Air Lines Inc. is offering to buy back up to $1 billion of high-cost bonds issued at the height of the pandemic last year, as the company begins to look at ways to scale back its balance sheet, Bloomberg News reported. The tender offer is for three bonds issued between April and September 2020, according to a news release. The airline raised cash to survive the crisis as travel collapsed worldwide amid lockdowns to try to contain the COVID-19 outbreak. The notes are:
- $3.5 billion 7% secured notes maturing in 2025, issued in April 2020
- $1.25 billion 7.375% unsecured notes maturing in 2026, issued in June 2020
- $2.5 billion 4.5% secured notes maturing 2025, issued in September 2020 and secured against the company’s SkyMiles rewards program
The offer, which investors can choose to accept or not, shows that the airline is beginning to chip away at its balance sheet that has seen debt swell over the last year. Delta’s adjusted net debt was $18.3 billion through the June quarter, or $7.8 billion higher than December 2019, it said in a report earlier this week. The company finally reversed a cash burn and generated $1.5 billion of cash in the latest quarter. 

Carnival Corp. is looking to slash borrowing costs with the sale of new junk bonds that would refinance debt that the cruise operator sold at the height of the pandemic at almost triple the cost, Bloomberg News reported. The new offering may be sold as soon as next week, and early pricing discussions are in the 4%-4.125% range. The proceeds will finance a tender offer, launched last week, to buy back as much as half of Carnival’s $4 billion three-year secured notes with a whopping 11.5% coupon. Carnival issued those notes in April of last year to raise cash as cruise travel halted around the globe. If the company were to buy back $2 billion of that debt at a rate of 4%, it would save $150 million per year in interest costs, according to Bloomberg calculations.

An Atlanta-based federal appeals court yesterday dealt another blow to landlords seeking to end a nationwide eviction freeze put in place amid the pandemic, The Hill reported. The ruling by a divided three-judge panel of the 11th Circuit Court of Appeals leaves intact the Centers for Disease Control and Prevention's (CDC) eviction moratorium, which is set to run through July. The move comes after the Supreme Court last month voted 5-4 to reject an emergency request from a separate group of landlords who also sought to have the eviction ban lifted, arguing it amounts to unlawful government overreach at a cost of some $13 billion each month to property owners. The eviction pause has faced numerous legal challenges, leading to a patchwork of legal interpretations nationwide on the moratorium's lawfulness. A federal judge in Washington, D.C., held in May that the moratorium was an invalid exercise of the CDC's authority. But the judge, U.S. District Judge Dabney Friedrich, a Trump appointee, delayed enforcement of her ruling, citing the risk to public health if evictions were allowed to proceed. Four of the Supreme Court’s more conservative justices indicated last month that they would have allowed Friedrich's ruling to take immediate effect while the Biden administration appeals. The 11th Circuit case arose when a group of landlords seeking to evict tenants for nonpayment of rent and a rental trade association sued in September. A district court judge rejected their request for a preliminary injunction, prompting their appeal to the 11th Circuit.

Federal Reserve Chair Jerome Powell said yesterday that inflation, which has been surging as the recovery strengthens, “will likely remain elevated in coming months” before “moderating,” the Associated Press reported. At the same time, in testimony to the House Financial Services Committee, Powell signaled no imminent change in the Fed’s ultra-low-interest rate policies. The Fed chairman reiterated his long-held view that high inflation readings over the past several months have been driven largely by temporary factors, notably supply shortages and rising consumer demand as pandemic-related business restrictions are lifted. Still, House members peppered Powell with questions about rising inflation in recent months, with some expressing concern that prices will continue to accelerate. The Fed chair replied that the central bank would not respond to short-term price spikes by raising rates and risk weakening the economic recovery. “By inflation, we mean year after year after year prices go up,” Powell said. “If something is a one-time price increase...you wouldn’t react to something that is likely to go away.” “We really do believe,” he added, “that these things will come down of their own accord.” Powell’s remarks coincided with rising concerns, among economists as well as ordinary households, that intensifying inflation pressures are creating a burden for many people and posing a potential threat to the recovery from the pandemic recession. On Wednesday, the government reported that wholesale prices, which businesses pay, jumped 7.3% in June from a year earlier. It was the fastest such 12-month increase on records dating to 2010.

A Brooklyn Starbucks supervisor who aspires to be a doctor will pay the rent and build savings for her son. Across the country, a San Francisco area mother who attends college is getting back to class herself now that she can more easily afford after-school care for her youngest child. Those are some of the ways about 39 million U.S. households could benefit once they start receiving monthly federal checks today as part of a massive expansion of the child tax credit, Reuters reported. The Center on Poverty and Social Policy at Columbia University estimates that the expansion can reduce the U.S. child poverty rate by up to 45%. The approach is notable both for its wide reach — the checks issued this week will reach nearly 90% of U.S. children, according to Internal Revenue Service estimates — and for distributing half the money monthly instead of in one lump at tax time. The program, which is not limited to low-income families, is being likened to a universal basic income for children. Single parents earning up to $75,000 and couples making up to $150,000 can receive the full credit. Under changes made by the American Rescue Plan passed in March, families will receive up to $3,600 for every child under age 6 and $3,000 for those ages 6 to 17, up from $2,000 per child. A minimum income requirement was removed and the credit was made fully refundable, making it more accessible to parents who don't work and those with low tax bills.