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Post by thelivyjr »


"US business activity rises to 13-month high in May, S&P Global survey shows"


May 23, 2023

WASHINGTON, May 23 (Reuters) - U.S. business activity increased to a 13-month high in May, lifted by strong growth in the services sector, the latest indication that the economy regained momentum early in the second quarter despite rising risks of a recession.

S&P Global said on Tuesday its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to a reading of 54.5 this month.

That was the highest level since April 2022 and followed a final reading of 53.4 in April.

It was the fourth straight month that the PMI remained above 50, indicating growth in the private sector.

The survey data, which was collected between May 12-22, added to data this month that showed labor market resilience, with job growth accelerating in April and the unemployment rate falling back to a 53-year low of 3.4%.

Retail sales excluding motor vehicles, gasoline, building materials and food services rebounded strongly, while production at factories and homebuilding picked up.

The upbeat reports prompted the Atlanta Federal Reserve to raise its second-quarter gross domestic product estimate to a 2.9% annualized rate from a 2.6% pace.

The economy grew at a 1.1% rate in the first quarter.

Most economists expect a recession in the second half of this year, citing the 500 basis points worth of interest rate increases from the Federal Reserve since March 2022, when the U.S. central bank embarked on its fastest monetary policy tightening campaign since the 1980s to quell inflation.

Tightening credit conditions and a stand-off over raising the federal government's borrowing cap have also raised the risks of a downturn.

The survey's measure of new orders received by private businesses jumped to 54.3 this month, the highest reading since last May, from 51.9 in April.

The services sector drove the increase, keeping services inflation elevated.

Price pressures at factories eased.

The survey's measure of prices paid by businesses for inputs slipped to 58.5 from 61.2 in April.

"Whereas manufacturing prices spiked higher during the pandemic due to strong demand and deteriorating supply, it is now the service sector's turn to be hiking prices amid resurgent demand and an inability to cope with order inflows due to a lack of capacity," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Businesses also increased headcount, with companies reporting that vacancies were being more easily filled.

The survey's flash services sector PMI rose to 55.1, also a 13-month high, from 53.6 in April.

Economists polled by Reuters had forecast the services PMI would fall to 52.6.

Its flash manufacturing PMI dropped to 48.5 from 50.2 in April.

Economists had forecast that index would be at 50.

New orders fell after expanding in April for the first time in six months, with manufacturers reporting that customers were focused on working through current inventory.

Manufacturers were, however, upbeat about business conditions over the next year.

A measure of prices paid by factories for inputs fell below 50 for the first time in three years.

Reporting by Lucia Mutikani; Editing by Paul Simao ... 023-05-23/
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Post by thelivyjr »


"US Treasury cash balance rises to $76.55 bln as of Tuesday"

By Reuters Staff

MAY 24, 2023

WASHINGTON, May 24 (Reuters) - The U.S. Treasury said on Wednesday that its cash balance as of Tuesday was $76.55 billion, compared to $68.34 billion on Monday and $94.63 billion a week earlier, amid tense negotiations over raising the federal debt ceiling.

U.S. Treasury Secretary Janet Yellen has said the Treasury could run short of sufficient cash and borrowing resources to pay all of the U.S. government’s bills as soon as June 1 without action by Congress to increase the debt ceiling.

As of May 17, the Treasury had $92 billion in borrowing capacity remaining under available extraordinary cash management measures to avoid breaching the debt limit.

An update on this capacity is expected on Friday.

Reporting by David Lawder; Editing by Katharine Jackson ... SW1N370018
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Post by thelivyjr »


"US business borrowing for equipment falls 8% in April - ELFA survey"

By Reuters Staff

MAY 24, 2023

(Reuters) - U.S. companies borrowed nearly 8% less in April than last year to finance equipment investments, industry body Equipment Leasing and Finance Association (ELFA) said on Wednesday.

The companies signed up for new loans, leases and lines of credit worth $9.7 billion last month, compared with $10.5 billion a year earlier.

“It is not clear whether increased borrowing rates are constraining liquidity or if this decrease in originations is merely a blip in an otherwise healthy marketplace,” ELFA Chief Executive Ralph Petta said.

ELFA, which reports economic activity for the nearly $1-trillion equipment finance sector, said credit approvals totaled 77.3%, up from 75.3% in March.

Washington-based ELFA’s leasing and finance index measures the volume of commercial equipment financed in the United States.

The index is based on a survey of 25 members, including Bank of America Corp and financing affiliates or units of Caterpillar Inc, Dell Technologies Inc, Siemens AG, Canon Inc and Volvo AB.

“Separately, (the) survey indicates that a growing segment of business heads is somewhat pessimistic about the short-term outlook for the economy, in general, and the equipment finance industry, specifically,” Petta said.

The Equipment Leasing & Finance Foundation, ELFA’s non-profit affiliate, said its confidence index in May stood at 40.6, a decrease from 47.0 in April.

A reading above 50 indicates a positive business outlook.

Reporting by Pratyush Thakur in Bengaluru; Editing by Shilpi Majumdar ... SL4N37L3S5
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Post by thelivyjr »


"Fed agreed need for more rate hikes after May meeting was 'less certain'"

By Howard Schneider

May 24, 2023

WASHINGTON, May 24 (Reuters) - Federal Reserve officials "generally agreed" last month that the need for further interest rate increases "had become less certain," with several saying that the quarter-percentage-point hike they approved might be the last, according to minutes of the May 2-3 meeting released on Wednesday.

Others cautioned the U.S. central bank needed to keep its options open given the risks of persistent inflation, which is still running at more than two times the Fed's 2% target.

"Several participants noted that if the economy evolved along the lines of their current outlooks, then further policy firming after this meeting may not be necessary," the minutes said, adding weight to expectations the Fed is likely to pause its aggressive rate-hike campaign at its June 13-14 meeting.

Yet there was division about the path ahead.

With Fed staff continuing to project a mild recession later this year, some policymakers "saw evidence that the past year's tightening was beginning to have its intended impact," with "almost all participants" seeing risks to economic growth due to a tightening of bank credit after a string of bank failures.

Still, "almost all" also saw upside risks to inflation, and "many participants focused on the need to retain optionality" to either hold rates steady or increase them.

Some saw the need for further rate hikes as "likely."

In addition, "some participants stressed that it was crucial" not to convey that rate cuts are likely or that further increases in borrowing costs "had been ruled out."

"Whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks," Fed Governor Christopher Waller said on Wednesday at an event in California.

"Between now and then, we need to maintain flexibility on the best decision to take in June," said Waller, showing openness to a pause after months in which he has been a leading voice for continued rate increases.

BMO Capital Markets said in a note that the "most prominent theme within the minutes of the May FOMC (Federal Open Market Committee) meeting was the collective caution, and uncertainty, around the credit tightening implications from the regional banking crisis."


The May meeting took place against the backdrop of a political standoff between the Biden administration and Republicans in Congress over raising the U.S. debt limit, a step which, if not taken, could lead the country to default on payments to bondholders.

Fed officials noted the risks.

Failure to raise the debt ceiling threatens "significant disruptions to the financial system and tighter financial conditions that weaken the economy," some participants noted.

"A number" of participants said the central bank "should maintain readiness to use its liquidity tools" to offset the damage of a possible default.

Short-term interest rate futures were little changed after the release of the minutes, with traders seeing about even odds the Fed will raise rates one more time, if not in June then in July.

Traders continue to see the Fed's policy rate dropping from its current level by December.

The May 3 rate hike had "very strong across-the-board support," Fed Chair Jerome Powell said in his post-meeting press conference three weeks ago, but also came with language in the policy statement that opened the door to holding rates steady from there to let the economy and financial system fully adjust to the rapid rises in borrowing costs of the past 14 months.

"Participants emphasized the importance of communicating to the public the data-dependent approach," the minutes said of the Fed's decision to change its policy guidance.

The 5.00%-5.25% policy rate set by the Fed earlier this month matches the peak median rate anticipated by policymakers in the economic projections released by the central bank in March and last December.

New projections will be published at the end of next month's meeting, but the most recent data has given little clarity about where the Fed's inflation battle is heading and how fast.

The pace of price increases is slowing, but only modestly, and the economy remains stronger than expected in key ways, particularly in terms of job and wage growth.

Yet there are also signs that the economy is cooling, and a bout of stress in the financial system has led to expectations of a tightening of credit for businesses and households.

Reporting by Howard Schneider; editing by Paul Simao ... 023-05-24/
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Post by thelivyjr »


"Fed officials less confident on the need for more rate hikes, minutes show"



Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes released Wednesday showed.

Though the decision to increase the Fed’s benchmark rate by a quarter percentage point was unanimous, the meeting summary reflected disagreement over what the next move should be, with a tilt toward less aggressive policy.

At the end, the rate-setting Federal Open Market Committee voted to remove a key phrase from its post-meeting statement that had indicated “additional policy firming may be appropriate.”

The Fed appears now to be moving toward a more data-dependent approach in which myriad factors will determine if the rate-hiking cycle continues.

“Participants generally expressed uncertainty about how much more policy tightening may be appropriate,” the minutes said.

“Many participants focused on the need to retain optionality after this meeting.”

Essentially, the debate came down to two scenarios.

One that was advocated by “some” members judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes.

The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.”

The minutes do not identify individual members nor do they quantify “some” or “several” with specific numbers.

However, in Fed parlance, “some” is thought to be more than “several.”

The minutes noted that members concurred inflation is “substantially elevated” relative to the central bank’s goal.

‘Closely monitoring incoming information’

While the future expectations differed, there appeared to be strong agreement that a path in which the Fed has hiked rates 10 times for a total of 5 percentage points since March 2022 is no longer as certain.

“In light of the prominent risks to the Committee’s objectives with respect to both maximum employment and price stability, participants generally noted the importance of closely monitoring incoming information and its implications for the economic outlook,” the document said.

FOMC officials also spent some time discussing the problems in the banking industry that have seen multiple medium-sized institutions shuttered.

The minutes noted that members are at the ready to use their tools to make sure the financial system has enough liquidity to cover its needs.

At the March meeting, Fed economists had noted that the expected credit contraction from the banking stresses likely would tip the economy into recession.

They repeated that assertion at the May meeting and said the contraction could start in the fourth quarter.

They noted that if the credit tightness abated that would be an upside risk for economic growth.

The minutes noted that the scenario for less impact from banking is “viewed as only a little less likely than the baseline.”

The minutes also reflect some discussion on the talks to raise the national debt ceiling.

“Many participants mentioned that it is essential that the debt limit be raised in a timely manner to avoid the risk of severely adverse dislocations in the financial system and the broader economy,” the summary stated.

Markets betting May was last hike

Release of the minutes comes amid disparate public statements from officials on where the Fed should go from here.

Markets expect that the May rate increase will be the last of this cycle, and that the Fed could reduce rates by about a quarter percentage point before the end of the year, according to futures market pricing.

That expectation comes with the assumption that the economy will slow and perhaps tip into recession while inflation comes down closer to the Fed’s 2% target.

However, virtually all officials have expressed skepticism if not outright dismissiveness toward the likelihood of a cut this year.

Most recently, Governor Christopher Waller said in a speech Wednesday that while the data hasn’t presented a clear case for the June rate decision, he’s inclined to think that more hikes will be needed to bring down stubbornly high inflation.

“I do not expect the data coming in over the next couple of months will make it clear that we have reached the terminal rate,” Waller said, referring to the end point for hiking.

“And I do not support stopping rate hikes unless we get clear evidence that inflation is moving down towards our 2% objective."

"But whether we should hike or skip at the June meeting will depend on how the data come in over the next three weeks.”

Chair Jerome Powell weighed in last week, providing little indication he ’s thinking about rate cuts though he said that the banking issues could negate the need for increases.

Economic reports have shown that inflation is tracking lower though it remains well above the central bank’s goals.

Core inflation as measured by the Fed’s preferred personal consumption expenditures index excluding food and energy increased 4.6% on an annual basis in March, a level it has hovered around for months.

A bustling labor market has kept the pressure on prices, with a 3.4% unemployment rate that ties a low going back to the 1950s.

Wages have been rising as well, up 4.4% from a year ago in April, and a research paper this week from former Fed Chairman Ben Bernanke said the trend represents the next phase in the inflation fight for his former colleagues.

As for the broader economy, purchasing managers’ indexes from S&P Global hit a 13-month high in May, indicating that while recession could be a story later in the year, there are few signs of a contraction now.

The Atlanta Fed’s GDPNow tracker of economic data shows growth at a 2.9% annualized pace in the second quarter. ... -show.html
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Post by thelivyjr »


Paul R. Plante says:

Recapping events in here, this was American dictator and autocrat Joseph Robinette Biden, Junior on July 19, 2021 in his “Remarks by President Biden on the Economy,” where we had from Joe as follows, to wit:

I’ve said it before, and it’s true: This is a blue-collar blueprint for building an American economy back.

Let me close with this: When I arrived in office, it had been a long time since the government had worked for the people.

Things had been great for big corporations and folks at the top.

Our economy has come a long way over the last six months.

We can’t slow down now.

We can make this boom we’re experiencing today one that will ensure that all Americans have an opportunity to share in it for years to come.

And we can show the world that American democracy can deliver for the people.

I look forward to continuing to build this economy.

And I’m incredibly optimistic about what we’re going to be able to build together in the next six months and the years to come.

Thank you all for listening.

May God bless you.

end quotes

And this is economic reality today in America for those of us who are not rich and well-to-do Democrats, to wit:


“US household debt just hit a record high of $17 trillion — while credit card balances are up nearly 20% compared to last year.”

Story by Serah Louis

21 MAY 2023

U.S. household debt surged to a record $17.05 trillion, with consumers owing $986 billion on their credit cards in the first quarter of 2023, the New York Fed reported May 15.

Credit card balances are also up nearly 20% from last year, according to a separate report from credit reporting company TransUnion on May 11.

“As inflation rose to near 40-year high levels, many consumers have used credit to help manage their budgets, leading to record- or near-record high balances,” Michele Raneri, vice president of U.S. research and consulting at TransUnion, said in a press release.



“Americans are not paying off their credit-card debt. We should be concerned.”

Story by Quentin Fottrell

21 May 2023

Credit-card balances hit $986 billion in the fourth quarter last year and remained largely unchanged in the first quarter of this year, the Federal Reserve Bank of New York said in its most recent quarterly report on household debt.

It looks increasingly likely that credit-card debt is on track to hit the $1 trillion mark this year, and experts say that this number could be an indicator of a looming economic downturn.

This has raised eyebrows among some observers, because people typically pay off their debts from the holiday season in the first quarter of the year.

That did not happen this year.

“Although inflation is slowing and wages are starting to rise, inflation is still squeezing people’s budgets,” said Mary Eschelbach Hansen, a professor of economics at the American University in Washington, D.C., and author of “Bankrupt in America: A History of Debtors, Their Creditors, and the Law in the Twentieth Century.”

“It seems likely that part of the fourth-quarter run-up in balances went towards groceries and other everyday bills rather than holiday expenditures, and folks are having a harder time paying that back,” she said.

Others shared her concerns.

“I see several worrying trends here,” said Ted Rossman, senior industry analyst at

“Credit-card debt is something that’s easy to get into and hard to get out of.”

“More people carrying balances at higher rates for longer periods of time is definitely a bad combination.”

“We’re seeing more people financing day-to-day essentials on credit cards.”

Interest rates are also making it more difficult for people to pay off their cards.

“The average credit card charges a record-high 20.33%,” Rossman noted.

“We also see more people carrying balances and holding onto them for longer periods of time.”

“All of this says a lot about the K-shaped economy: Basically, the rich get richer and the poor get poorer.”

end quotes

Exactly as Joe Biden planned it, people – we are nothing more than cash cows to be milked for all we are worth.

But stay tuned because this sad story of the fleecing of the American people does not end there! ... ent-803006
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Post by thelivyjr »


"US labor market resilient; declining profits a red flag for economy"

By Lucia Mutikani

May 25, 2023


* Weekly jobless claims increase 4,000 to 229,000

* Claims data for the prior two weeks revised sharply lower

* First-quarter GDP growth revised up to 1.3%

* Corporate profits decline in first quarter

WASHINGTON, May 25 (Reuters) - The number of Americans filing new claims for unemployment benefits increased moderately last week and data for the prior two weeks was revised sharply lower as fraudulent applications from Massachusetts were stripped out, indicating persistent labor market strength.

The report from the Labor Department on Thursday, which also showed fewer people collecting unemployment checks in mid-May, suggested that the economy was enjoying another month of strong employment gains and a lower jobless rate.

The government is scheduled to publish its closely watched employment report for May next Friday.

Some economists said labor market resilience raised the risk that the Federal Reserve could raise interest rates again in June.

Minutes of the Fed's May 2-3 policy meeting published on Wednesday showed U.S. central bank officials "generally agreed" that the need for further rate hikes "had become less certain."

"The worrisome trend of more layoffs just got completely revised away where the labor market isn't loosening up as much as Fed officials and markets had thought," said Christopher Rupkey, chief economist at FWDBONDS in New York.

"The Fed looks further behind the inflation-fighting curve than ever with the labor market tightness refusing to budge."

Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 229,000 for the week ended May 20.

Data for the prior week was revised to show 17,000 fewer applications received than previously reported.

Claims for the week ending May 6 were revised down by 33,000, leaving filings substantially lower during the period that the government surveyed businesses for the nonfarm payrolls portion of May's employment report.

The economy added 253,000 jobs in April.

Economists polled by Reuters had forecast 245,000 claims for the latest week.

Massachusetts' Department of Unemployment Assistance said this month it was "experiencing an increase in fraudulent claim activities."

Unadjusted claims for Massachusetts fell 2,190 last week.

The labor market has slowed only marginally despite 500 basis points worth of interest rate increases from the Fed since March 2022, when it embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.

There were 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range that is consistent with a jobs market that is not generating too much inflation.

Employers have been hoarding workers after experiencing difficulties finding labor in the wake of the COVID-19 pandemic.

Economists expected layoffs to increase as the effects of the punitive rate hikes spread through the economy and tightening financial conditions make it harder for small businesses to access credit.

That sentiment is shared by policymakers.

The Fed meeting minutes showed that while "participants noted that the labor market remained very tight," they "anticipated that employment growth would likely slow further, reflecting a moderation in aggregate demand coming partly from tighter credit conditions."

The number of people receiving benefits after an initial week of aid, a proxy for hiring, fell 5,000 to 1.794 million during the week ending May 13, the claims report showed.

The so-called continuing claims covered the period during which the government surveyed households for May's unemployment rate.

Continuing claims dropped between the April and May survey weeks.

The unemployment rate fell back to a 53-year low of 3.4% in April.

The low claims align with recent data on retail sales, factory production and business activity that have suggested the economy regained speed at the start of the second quarter.

U.S. stocks were trading higher.

The dollar rose against a basket of currencies.

U.S. Treasury prices fell.


Nevertheless, the economy is on shaky ground amid declining profits, which could hamper hiring and investment down the road.

A stalemate over raising the government's borrowing cap also poses a risk to the economy.

Gross domestic product increased at a 1.3% annualized rate in the first quarter, the Commerce Department said in its second GDP estimate on Thursday, revised up from the 1.1% pace reported last month.

The economy grew at a 2.6% pace in the fourth quarter.

There were upgrades to inventory investment, state and local government spending, business investment as well as exports.

Investment in homebuilding was revised lower.

After-tax profits without inventory valuation and capital consumption adjustment, which correspond to S&P 500 profits, decreased at a 2.1% rate, the third straight quarterly drop.

They were down 6.0% on a year-on-year basis, the largest decline since the second quarter of 2020, a sign that companies were struggling to pass on higher costs to customers.

With profits falling, economic output contracted at a 2.3% pace in the first quarter when measured from the income side.

Gross domestic income declined at a 3.3% rate in the fourth quarter, revised down from the previously reported 1.1% pace of contraction.

That reflected downward revisions to fourth-quarter wages and salaries growth.

In principle, GDP and GDI should be equal, but in practice differ as they are estimated using different and largely independent source data.

The gap between GDI and GDP, also known as the statistical discrepancy, widened sharply in 2021, catching the attention of policymakers.

The statistical discrepancy in 2021 subsequently narrowed when the government carried out its annual revision of the data in 2022, with GDP revised higher and GDI lower.

"This weakness in GDI suggests that real GDP growth in recent quarters may be revised lower," said Jay Bryson, chief economist at Wells Fargo in Charlotte, North Carolina.

"Although one side of the economic accounts may be contracting, the U.S. economy is probably not in recession at present."

The average of GDP and GDI, also referred to as gross domestic output and considered a better measure of economic activity, fell at a 0.5% rate last quarter after slipping at a 0.4% pace in the fourth quarter.

"The true health of the economy likely lies somewhere in-between as neither measure is perfect," said Ryan Sweet, chief economist at Oxford Economics in West Chester, Pennsylvania.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci ... 023-05-25/
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Post by thelivyjr »


"Fed 'pause' on rate hikes in doubt after strong US data"

By Ann Saphir and Michael S. Derby

May 26, 2023

May 26 (Reuters) - Federal Reserve policymakers got a dose of unexpectedly strong U.S. economic data on Friday that bolstered the case for further monetary policy tightening to bring down persistently high inflation.

Consumer spending surging 0.8% last month from March was good news in showing the economy is not on the precipice of a recession, but discomforting for policymakers looking for a slowdown that could ease upward pressure on prices.

And an increase in underlying core inflation to 4.7%, up from a 4.6% pace in March, underscored the less-than-steady progress on the Fed's inflation fight.

The U.S. central bank targets a 2% inflation goal.

Coupled with what appeared to be some progress in Washington on a deal to raise the debt limit and avoid a catastrophic U.S. default, the latest clutch of data throws doubt on whether the Fed will indeed "pause" its rate-hike campaign, as Chair Jerome Powell signaled it might earlier this month.

"Right now, when I look at the data and when I look at what's happening with the inflation numbers, I do think we are going to have to tighten a bit more," Cleveland Fed President Loretta Mester told CNBC.

In March Mester had already expected the Fed to raise the policy rate beyond its current 5.00%-5.25% range.

But, in a tacit nod to the dovish wing of the Fed policysetting committee who favor a more wait and see approach, she also said it is too soon to precommit to a June hike.

"We've made progress; now it's this calibration exercise, and that's what's difficult," she said.

Interest-rate futures traders see less subtlety in the numbers and are now betting the Fed will deliver an 11th straight interest rate hike in June, a reversal from bets on a June pause as of earlier in the day and on most days since the Fed's last rate hike on May 3.

Analysts at LHMeyer, who previously figured the Fed was done raising rates, on Friday said they now see the Fed taking its benchmark up two more notches, to 5.6%, before stopping.


A rate hike next month is not a done deal: still to come before the Fed's June 13-14 meeting is a key read on the labor market due next Friday and fresh data on inflation expected on June 13.

Fed policymakers also say they are watching credit conditions closely, though Mester on Friday said that so far she's not seeing worrisome "extra" tightening from the recent regional bank failures.

Expectations are growing though that even if the Fed leaves rates unchanged in June, it will pull the trigger in July.

Odds in futures markets are running three to one in favor of a rate hike by then.

Fed Governor Christopher Waller - one of the Fed's more hawkish voices - teed up that notion earlier this week.

While key data in coming weeks as well as uncertainty over credit conditions could support temporarily leaving rates on hold, he said, the lack of progress on inflation points to the need for further tightening.

Other Fed policymakers have echoed that hawkish call. "Inflation so far doesn't show much signs of cooling, which all being said suggests maybe we have more work to do with monetary policy,” Minneapolis Fed President Neel Kashkari told Reuters on Monday.

Households do project inflation to ebb in the next year, to 4.2%, a University of Michigan survey showed Friday.

The Fed believes expectations about future price pressures exert a strong influence on current readings.

Reporting by Ann Saphir and Michael S. Derby with reporting by Shristi Achar; Editing by Jason Neely, Chizu Nomiyama and Andrea Ricci ... 023-05-26/
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Post by thelivyjr »


"Senators urge Commerce to prioritize national security in chips funding"

By David Shepardson

May 25, 2023

WASHINGTON, May 25 (Reuters) - Two key U.S. senators said on Thursday they want the Commerce Department to prioritize national and economic decisions in awarding $39 billion in semiconductor manufacturing subsidies rather than using the funds to aid ailing companies.

Senate Intelligence Committee chair Mark Warner and Republican Senator John Cornyn said in a letter the success of the program funded by Congress in August 2022 "depends on a strategic approach that aligns with our national priorities ..."

"We implore you to take time to go through every application and determine which ones are most worthy based on national security concerns."

The Commerce Department did not immediately comment on Thursday.

The department said last week it had received more than 300 statements of interest covering 37 states seeking incentives for facilities for commercial fabrication, packaging, and R&D, and from material suppliers and equipment manufacturers.

"The intent of the CHIPS Act is not to bailout the semiconductor industry that is currently experiencing a cyclical industry downturn," Warner and Cornyn wrote.

"Given that individual fabs can cost over $20 billion, we urge you to ... selectively provide incentives to projects deemed to be of national importance."

The Commerce Department plans to begin accepting applications in late June.

The CHIPS law also creates a 25% investment tax credit for building chip plants, estimated to be worth $24 billion.

They added that Commerce should seek "assurances that the recipient will secure supply chains and use domestic suppliers where possible" and noted some competitive applications "may not receive funding."

The Biden administration has proposed rules to limit recipients of U.S. funding from investing in the expansion of semiconductor manufacturing in foreign countries of concern such as China and Russia, and limits recipients of incentive funds from engaging in joint research or technology licensing efforts with a foreign entity of concern.

In October, the department issued new export controls to cut off China from certain semiconductor chips made anywhere in the world with U.S. equipment, vastly expanding its reach in its bid to slow Beijing's technological and military advances.

Reporting by David Shepardson in Washington; Editing by Matthew Lewis ... 023-05-25/
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Post by thelivyjr »


"Strong US consumer spending, inflation readings put Fed in tough spot"

By Lucia Mutikani

May 26, 2023


* Consumer spending increases 0.8% in April

* Core PCE price index rises 0.4%; up 4.7% year on year

* Core capital goods orders rebound 1.4%; shipments up 0.5%

WASHINGTON, May 26 (Reuters) - U.S. consumer spending increased more than expected in April, boosting the economy's growth prospects for the second quarter, and inflation picked up, which could prompt the Federal Reserve to raise interest rates again next month.

The growth picture was further brightened by other data from the Commerce Department on Friday showing a surprise rebound last month in orders of manufactured non-defense capital goods excluding aircraft, a closely watched proxy for business spending plans.

The reports added to labor market resilience, a rebound in factory production and a pickup in business activity in suggesting the economy was experiencing a spring revival after hitting a speed bump in the first quarter.

They also increased the chances that the U.S. central bank would hike rates in June.

Minutes of the Fed's May 2-3 policy meeting, which were published on Wednesday, showed policymakers "generally agreed" the need for further rate hikes "had become less certain."

"Companies and consumers are in agreement that there are plenty of green shoots to like at the start of springtime and right now the economy is miles and miles away from the cliffs of recession," said Christopher Rupkey, chief economist at FWDBONDS in New York.

"Fed officials won't be able to pause their rate hikes, it looks like demand is picking up, not slowing down as it is supposed to do when the Fed hikes rates."

Consumer spending jumped 0.8% last month after gaining 0.1% in March.

Economists polled by Reuters had forecast consumer spending, which accounts for more than two-thirds of U.S. economic activity, would rise 0.4%.

Consumers stepped up purchases of new light trucks and spent more on pharmaceutical products.

Spending on goods rebounded 1.1% after two straight monthly declines.

Services outlays increased 0.7%, lifted by gains in financial services and insurance, healthcare, recreation, and housing and utilities.

Adjusting for inflation, consumer spending shot up 0.5% after being unchanged in March.

Last month's surge in consumer spending tempered economists' expectations for a sharp slowdown this quarter.

Though consumer spending accelerated at its fastest pace in nearly two years in the first quarter, much of the growth was in January.

Sluggishness in February and March set consumer spending on a slower growth trajectory heading into the second quarter.

Consumer spending is being supported by strong wage gains in a tight labor market.

Wages increased 0.5% after rising 0.3% in March.

That helped lift personal income 0.4% after a gain of 0.3% in March.

Growth estimates for the second quarter are currently as high as a 2.9% annualized rate.

The economy grew at a 1.3% pace in the first quarter.

Stocks on Wall Street were trading higher.

The dollar edged up against a basket of currencies.

U.S. Treasury prices were mixed.


Strong demand was underscored by another report from the Commerce Department showing imports of goods climbed 1.8% in April, mostly reflecting motor vehicles and consumer goods.

But the rising imports and a 5.5% drop in exports caused the goods trade deficit to widen 17.0% to $96.8 billion, a development that could subtract from growth this quarter.

The current pace of consumer spending is, however, unlikely to be sustained as Americans grow weary of inflation.

Government social benefits are also dwindling and most lower-income households have depleted the savings accumulated during the COVID-19 pandemic.

The saving rate fell to 4.1% in April from 4.5% in March.

Credit has also become more expensive following 500 basis points worth of rate increases from the Fed since March 2022, when it embarked on its fastest monetary policy tightening campaign since the 1980s to tame inflation.

Banks are also tightening lending following recent financial market turmoil spurred by the collapse of several U.S. lenders.

The personal consumption expenditures (PCE) price index increased 0.4% in April after rising 0.1% in March.

In the 12 months through April, the PCE price index increased 4.4% after advancing 4.2% in March.

Food prices were unchanged, while the cost of energy goods and services jumped 0.7%.

Excluding the volatile food and energy components, the PCE price index was up 0.4% after a 0.3% rise in March.

The so-called core PCE price index jumped 4.7% on a year-on-year basis in April after gaining 4.6% in the 12 months through March.

The Fed tracks the PCE price indexes for its 2% inflation target.

Economists estimated that core services excluding housing, closely watched by policymakers, increased 0.4% after rising 0.3% in March.

There was, however, some encouraging news for Fed officials.

Consumers' inflation expectations over the next 12 months dropped to a final reading of 4.2% in May after spiking to 4.5% earlier in the month, a survey from the University of Michigan showed.

The five-year inflation outlook eased to 3.1% from 3.2% in early May.

Financial markets saw a nearly 60% chance of the Fed raising its policy rate by another 25 basis points at its June 13-14 meeting, according to CME Group's FedWatch Tool.

Much will, however, depend on whether an agreement is reached to raise the government borrowing cap.

April's employment report next Friday as well as consumer price data will also be crucial.

"If the debt ceiling is resolved without too much damage to sentiment, and banking troubles don't resurface, then the broad sweep of data so far could make for an interesting debate at next month's meeting, though we still believe the Fed will leave rates unchanged," said Michael Feroli, chief U.S. economist at JPMorgan in New York.

In another report, the Commerce Department said orders for non-defense capital goods excluding aircraft surged 1.4% last month after falling 0.6% in March, confounding economists who had expected a 0.2% drop.

Shipments of these so-called core capital goods rebounded 0.5% after slipping 0.2% in March.

"This supports a pickup in business investment," said Kathy Bostjancic, chief economist at Nationwide in New York.

Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao ... 023-05-26/
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