US ECONOMY & POLITICS

US Trade Deficit Widened by Less than Expected in July – Bloomberg, 9/6/2023

• The US trade deficit widened in July by less than forecast, reflecting an increase in exports of cars and services.
• The shortfall in goods and services trade grew to $65 billion from a revised $63.7 billion in the prior month, Commerce Department data showed Wednesday.
• The median estimate in a Bloomberg survey of economists called for a $68 billion deficit.
• The value of exports rose 1.6%, while imports increased 1.7%.
• Exports of industrial supplies and autos increased in the month.
• The advance in imports reflected a rise in consumer goods — largely cell phones and household goods — as well as capital equipment.
• Despite the monthly advance, exports are down 3.5% from a year earlier, constrained by tepid overseas demand.
• On an inflation-adjusted basis, the merchandise trade deficit widened to $88.4 billion in July.
• Travel exports — or spending by visitors to the US — increased 3.6% to the highest since the end of 2019.
• Travel imports — a measure of Americans traveling abroad — rose to for the first time since February.
• The US merchandise-trade deficit with China widened 5.4% to $24 billion.

US Service Gauge Rises to Six-Month High, Topping All Forecasts – Bloomberg, 9/6/2023

• US service sector activity rose to a six-month high in August, bolstered by a pickup in new orders and hiring.
• The Institute for Supply Management’s services index increased almost 2 points to 54.5, data showed Wednesday.
• Readings above 50 indicate expansion, and the figure topped all estimates in a Bloomberg survey of economists.
• Thirteen services industries reported growth in August, led by real estate, rental and leasing as well as accommodation and food services.
• Additional hiring also allowed firms to make progress on backlogged orders.
• Meanwhile, costs for materials and wages continued to accelerate in August, with the group’s prices-paid index rising to a four-month high.
• ISM’s gauge of new orders rose to a six-month high and a measure of business activity edged higher.
• Exports expanded at the fastest pace in nearly a year.
• The group’s inventory sentiment measure jumped to the highest since April 2020, which risks a cutback in orders placed with manufacturers or other service providers in coming months.

Pentagon Plans Vast AI Fleet to Counter China Threat – Wall Street Journal, 9/6/2023

• The Pentagon is considering the development of a vast network of AI-powered technology, drones and autonomous systems within the next two years to counter threats from China and other adversaries.
• Kathleen Hicks, the deputy secretary of defense, will provide new details in a speech later Wednesday about the department’s plans to spend hundreds of millions of dollars to develop an array of thousands of air-, land- and sea-based artificial-intelligence systems that are intended to be “small, smart, cheap.”
• The U.S. is seeking to keep pace with China’s rapidly expanding military amid concerns that the Pentagon bureaucracy takes too long to develop and deploy cutting-edge systems.
• “We’re not at war. We are not seeking to be at war, but we have to be able to get this department to move with that same kind of urgency because the PRC isn’t waiting,” Hicks said during an interview Tuesday, referring to the People’s Republic of China.
• One approach could be to build on the capabilities demonstrated by Task Force 59, the U.S. Navy’s network of drones and sensors designed to monitor Iran’s military activities in the Middle East.

Fed’s Collins says policymakers can ‘proceed cautiously’ on future rate hikes – CNBC, 9/6/2023

• Boston Federal Reserve President Susan Collins on Wednesday advocated a patient approach to policymaking while saying she needs more evidence to convince her that inflation has been tamed.
• In remarks that aligned with sentiment from other key central bankers, Collins said the Fed may be “near or even at the peak” for interest rates.
• “Overall, we are well positioned to proceed cautiously in this uncertain economic environment, recognizing the risks while remaining resolute and data-dependent, with the flexibility to adjust as conditions warrant,” Collins said in prepared remarks for a speech in Boston.
• In her speech, Collins also noted some good news on inflation, as the Fed’s preferred gauge rose just 0.2% in July while wage growth also seems to have slowed.
• However, she cautioned that “it is difficult to extract the signal from the noise in the data.”
• If the improvement is fleeting, “further tightening could be warranted,” she said.
• “There are promising developments, but given the continued strength in demand, my view is that it is just too early to take the recent improvements as evidence that inflation is on a sustained path back to 2%,” said Collins, who is a nonvoting member this year on the rate-setting Federal Open Market Committee.
• However, Collins said that Covid-related factors and the general strength of household and corporate balance sheets could lengthen those lags, calling for more caution on policy.
• “The goal is an orderly slowdown that better aligns demand with supply, which is essential to ensure that inflation is on a sustainable trajectory back to target,” she said.

EUROPE & WORLD

China Bans iPhone Use for Government Officials at Work – Wall Street Journal, 9/6/2023

• China ordered officials at central government agencies not to use Apple’s iPhones and other foreign-branded devices for work or bring them into the office, people familiar with the matter said.
• In recent weeks, staff were given the instructions by their superiors in workplace chat groups or meetings, the people said.
• The directive is the latest step in Beijing’s campaign to cut reliance on foreign technology and enhance cybersecurity, and comes amid a campaign to limit flows of sensitive information outside of China’s borders.
• The move by Beijing could have a chilling effect for foreign brands in China, including Apple.
• It wasn’t clear how widely the orders were being distributed, but similar messages were communicated to employees at some central government regulators.

Bank of Canada Holds Rates at 5%, Sees Excess Demand Easing – Bloomberg, 9/6/2023

• The Bank of Canada held interest rates steady, but kept the door open to further hikes as inflation proves sticky.
• Policymakers led by Governor Tiff Macklem kept the benchmark overnight lending rate at 5% on Wednesday, the highest level in 22 years.
• The move was expected by economists in a Bloomberg survey and marks the third time policymakers sat on the sidelines this tightening cycle.
• “With recent evidence that excess demand in the economy is easing, and given the lagged effects of monetary policy, governing council decided to hold,” the bank said.
• Officials, however, remain “concerned about the persistence of underlying inflationary pressures” and are “prepared to increase the policy rate further if needed.”
• Canada’s economy contracted in the second quarter, far below the bank’s estimate for a 1.5% annualized expansion.
• The labor market is loosening — job vacancies are falling and the unemployment rate continues to tick up — and the housing market has slowed.
• “The Canadian economy has entered a period of weaker growth, which is needed to relieve price pressures,” the bank said.
• “This reflected a marked weakening in consumption growth and a decline in housing activity, as well as the impact of wildfires in many regions of the country.”
• “The longer high inflation persists, the greater the risk that elevated inflation becomes entrenched, making it more difficult to restore price stability.”

Russian Shelling Leaves 16 Dead in Ukraine Town North of Donetsk – Bloomberg, 9/6/2023

• Ukrainian President Volodymyr Zelenskiy said Russia shelled a market in a town north of Donetsk, killing at least 16 people in what may be one of the deadliest attacks against civilians in the past few months.
• The artillery shelling also left many wounded in Kostyantynivka, a town situated some 50 kilometers (31 miles) north of Donetsk, and the casualty count may rise, Zelenskiy said on Telegram on Wednesday.
• The attack took place in the Donetsk region in the country’s east, where Russian forces are trying to advance.
• Kyiv’s troops continue their counteroffensive in the south, aimed at cutting off Moscow’s land bridge to Crimea.

Toyota to Offer $170,000 Luxury Model to Select Few Outside Japan – Wall Street Journal, 9/6/2023

• Toyota thinks the world outside of Japan may finally be ready to embrace its six-figure superluxury flagship car.
• Toyota’s Century—often described as the Rolls-Royce of Japanese cars—is a frequent choice of corporate chieftains and government leaders in Japan, including the emperor.
• Since it made its debut in 1967, the Century has been sold almost exclusively in Japan and the model has changed little from its original boxy sedan shape and classic styling.
• Toyota on Wednesday showed off a new, larger, plug-in hybrid version of the model that “from the start had its eye on the world,” Executive Vice President Hiroki Nakajima said, speaking at the unveiling event in Tokyo.
• The new Century model will be introduced this year in Japan at a suggested retail price equivalent to around $170,000 and will be offered to customers in all regions of the world, Nakajima said.
• Toyota said select dealers in Japan would sell the model but didn’t describe sales procedures in other countries such as the U.S.

Blinken Visits Kyiv at Key Moment for War, Ukraine Ties – Wall Street Journal, 9/6/2023

• Secretary of State Antony Blinken signaled long-term support for Ukraine’s defense against Russia’s invasion during a visit here Wednesday, amid a slow-going counteroffensive and disquiet among some Republicans about the level of U.S. assistance for the country.
• “I’m here first and foremost to demonstrate our ongoing and determined support for Ukraine as it deals with this aggression,” Blinken said upon arriving in the capital Kyiv by train.
• The secretary of state is expected to use the unannounced visit to pledge more than $1 billion in additional aid for Ukraine as it attempts to push through Russia’s thick lines of defense and break into Russian-held territory.
• The commitment will be welcomed not just in Kyiv but in European capitals where leaders have doubted the U.S.’s staying power in Ukraine, fearing they could be left to shore up Ukrainian defenses without Washington’s significant support as the war drags into its 19th month.

China’s Top Chipmaker Appears to Have Violated Sanctions, US Congressman Says – Bloomberg, 9/6/2023

• China’s top chipmaker, Semiconductor Manufacturing International, “warrants investigation” as the company appears to have violated US sanctions by supplying components to Huawei Technologies, a US lawmaker said.
• “It sure looks like it did” violate sanctions, Congressman Michael McCaul said Wednesday at a briefing at the US embassy in the Hague.
• SMIC continues “to try to get our intellectual property.”
• Huawei uses an advanced 7-nanometer processor built by SMIC to power its latest smartphone, indicating that China is making headway in its push to produce cutting-edge semiconductors despite US sanctions.
• Existing rules require any company that intends to supply Huawei with any US technology, which is present throughout SMIC’s operations, to get approval from Washington.
• It’s unclear whether SMIC has a US license to supply Huawei.

Factmonster – TODAY in HISTORY

• President William McKinley was shot by anarchist Leon Czolgosz at the Pan American Exposition in Buffalo, N.Y. McKinley died on September 14th. – 1901
• Nazi Germany required all Jews over the age of six to wear a yellow Star of David on their clothes. – 1941
• More than 2 billion people watched Princess Diana’s funeral on TV. – 1997