US ECONOMY & POLITICS

U.S. Consumer Spending Increases Strongly; Rise in Inflation Slows – Reuters, 5/27/2022

• U.S. consumer spending rose more than expected in April as households boosted purchases of goods and services, and the increase in inflation slowed, which could underpin economic growth in the second quarter amid rising fears of a recession.
• The economy’s near-term prospects were also brightened by other data from the Commerce Department on Friday showing the goods trade deficit narrowed sharply last month.
• Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.9% last month.
• Data for March was revised higher to show outlays racing 1.4% instead of 1.1% as previously reported.
• Consumers bought more new motor vehicles, clothing, recreational goods as well as furnishings and household equipment.
• The economy contracted at a 1.5% pace in the January-March quarter, weighed down a record trade deficit and slower inventory accumulation relative to the fourth-quarter’s robust rate.
• In a second report, the Commerce Department said the goods trade deficit dropped 15.9% to $105.9 billion in April.
• The personal consumption expenditures (PCE) price index rose 0.2%, the smallest gain November 2020, after shooting up 0.9% in March.
• In the 12 months through April, the PCE price index advanced 6.3% after jumping 6.6% in March.
• Excluding the volatile food and energy components, the PCE price index gained 0.3%, rising by the same margin for three straight months.
• The so-called core PCE price index increased 4.9% year-on-year in April, the smallest gain since last December, after rising 5.2% in March.

Americans’ Savings Rate Drops to Lowest Since 2008 as Inflation Bites – Bloomberg, 5/27/2022

• The personal savings rate as a share of disposable income dropped to 4.4% in April, the lowest since September 2008, according to data from the Bureau of Economic Analysis released Friday.
• Consumers so far appear to be largely undeterred by the highest inflation in about 40 years, eager to spend after pandemic-era restrictions.
• Americans are also putting more on their credit cards, and borrowing soared the most on record in March as everyday essentials become more expensive.
• The spending binge is at risk of slowing as gas prices are now back at record highs and grocery bills are climbing, taking a bigger chunk out of household budgets.

US Consumer Sentiment Falls to Fresh Decade Low on Inflation – Bloomberg, 5/27/2022

• The University of Michigan’s final May sentiment index decreased to 58.4 from a preliminary reading of 59.1, data released Friday showed. In April, the gauge stood at 65.2.
• A gauge of current conditions fell to a 13-year low of 63.3, while a measure of future expectations dropped to 55.2.
• Consumers expect prices to rise 5.3% over the next year, holding close to a four-decade high.
• They expect prices will climb at an annual rate of 3% over the next five to 10 years.
• The university’s index of buying conditions for durable goods dropped in May to the lowest level on record.
• Inflation is outpacing wage gains, stressing Americans’ finances and leaving less discretionary income after covering for higher costs of food and gas.

EUROPE & WORLD

China’s Pinduoduo Beats Quarterly Revenue Estimate, Warns of Slower Growth – Reuters, 5/27/2022

• Chinese e-commerce platform Pinduoduo on Friday reported better-than-expected quarterly revenue, as more people shopped online due to a resurgence in COVID-19 cases in parts of the country.
• However, the firm warned that its growth rate might slow due to adjustments to its business strategy that are underway.
• As China fights its worst coronavirus outbreak since March, its uncompromising “zero-COVID” policy has placed hundreds of millions of people under strict lockdown.
• Government enforced control measures continued to disrupt logistics in China in April, hurting e-commerce sellers’ ability to deliver purchases.
• Total revenue rose 7% to 23.79 billion yuan ($3.55 billion) in the first quarter, compared with estimates of 20.61 billion yuan, according to IBES data from Refinitiv.
• The company’s net income attributable to ordinary shareholders was 2.6 billion yuan during the quarter ended March 31, compared with a loss of 2.91 billion yuan a year ago.
• On an adjusted basis, the interactive e-commerce platform earned 2.95 yuan per share, compared to Wall Street estimates of 1.68 yuan per share, according to Refinitiv IBES data.

Colombia Election This Weekend Sees Leftist Petro in Pole Position – Reuters, 5/27/2022

• Gustavo Petro, the leftist, has consistently led opinion polls, with around 40% of voting intentions.
• If no one secures more than 50% a run-off will take place on June 19, which surveys suggest Petro would win.
• Petro, a former mayor of capital Bogota, has promised to address profound income inequality and provide free public university education, as well opposing expansion of the oil and gas industry.
• Petro will likely face off against either Federico Gutierrez, the center-right former mayor of Colombia’s second city of Medellin, or business magnate Rodolfo Hernandez in a second round.
• Gutierrez and Hernandez counted on support of 27.1% and 20.9% respectively in a recent Invamer poll.
• Gutierrez is supported by a mix of Colombia’s traditional political parties and is seen as the ideological heir to current President Ivan Duque.
• Hernandez, who is running independently with his own funds, has won support with whimsical social media videos and anti-corruption promises.
• Polls will close at 4 p.m. local time (2100 GMT) and officials expect the result around four hours after.

China Eases Covid Rules for Students to Avoid Tiananmen Linkages – Bloomberg, 5/27/2022

• Chinese officials eased Covid restrictions at Beijing universities in recent days to avoid the possibility any protests over virus measures would be linked to the anniversary of the Tiananmen Square massacre on June 4, people familiar with the matter said.
• Officials allowed students at Beijing universities to leave campus and return to their homes following a series of demands.
• Beijing Normal University also reopened canteens after students said they were forced to eat outside on the road due to cramped living conditions, a move that other schools soon followed.
• Beijing has pledged to strengthen virus controls among essential workers such as security guards, maintenance staff and workers at internal dining halls.
• But protests such as those by university students point to mounting frustration with President Xi Jinping’s zero-tolerance Covid-19 policy.

Factmonster – TODAY in HISTORY

• St. Petersburg was founded by Czar Peter the Great. (1703)
• The Queen Mary left England on its maiden voyage, arriving in France four hours later. (1936)
• Golden Gate Bridge in San Francisco opened. (1937)
• British ships sank the German battleship Bismarck off the coast of France, resulting in the loss of 2,300 lives. (1941)
• After a year and a half of bloodshed, Russian President Boris Yeltsin met with the leader of the Chechen rebels and negotiated a cease-fire. (1996)
• Slobodan Milosevic was indicted by the International War Crimes Tribunal at the Hague for crimes against humanity. (1999)