US ECONOMY & POLITICS

US Personal Spending Is Revised Sharply Lower in First-Quarter Data – Bloomberg, 6/29/2022

• US consumer spending expanded in the first quarter at the softest pace of the pandemic recovery, marking a surprise sharp downward revision that suggests an economy on weaker footing than previously thought.
• Outlays on goods and services rose an annualized 1.8%, compared with a 3.1% pace in the previous estimate, according to Commerce Department data out Wednesday.
• Overall gross domestic product was revised down slightly to a 1.6% annualized decline in the first quarter.
• Private inventory investment was revised sharply higher, rising nearly $189 billion from the prior quarter compared with a previously estimated change of about $150 billion.

Powell Says Fed Must Accept Higher Recession Risk to Combat Inflation – Wall Street Journal, 6/29/2022

• Federal Reserve Chairman Jerome Powell said he was more concerned about the risk of failing to stamp out high inflation than he was about the possibility of raising interest rates too high and pushing the economy into a recession.
• “Is there a risk we would go too far? Certainly there’s a risk,” Mr. Powell said Wednesday. “The bigger mistake to make—let’s put it that way—would be to fail to restore price stability.”
• “There’s a clock running here,” Mr. Powell said during a moderated discussion Wednesday at the European Central Bank’s annual economic policy conference in Portugal on Wednesday.
• “The risk is that because of the multiplicity of shocks, you start to transition into a higher-inflation regime. Our job is to prevent that from happening.”

Fed’s Mester Says Supply Shocks Potentially Require Policy Response – Wall Street Journal, 6/29/2022

• Federal Reserve Bank of Cleveland President Loretta Mester said Wednesday that the central bank might no longer be able to ignore sources of inflation that monetary policy can’t easily address given how those types of rising prices can affect consumers’ moods.
• Ms. Mester, who is a voting member of the rate-setting Federal Open Market Committee this year, assessed in her prepared text what inflation expectations mean for central-bank policy. She didn’t address the near-term monetary-policy outlook.
• The challenge is that there is no settled science for measuring inflation expectations. Meanwhile, much of what drives inflation now are supply-related shocks from food and energy factors that monetary policy can’t do much to address, according to many economists.
• Ms. Mester said the impact that supply-related shocks have on expectations suggest that the Fed should take on board and react to these price changes, in large part to help keep inflation expectations from rising.

Home-Price Growth Slowed in April – Wall Street Journal, 6/29/2022

• Home-price growth slowed slightly in April as competition for homes remained fierce despite rising mortgage-interest rates.
• The S&P CoreLogic Case-Shiller National Home Price Index, which measures average home prices in major metropolitan areas across the nation, rose 20.4% in the year that ended in April, down from a 20.6% annual rate the prior month.
• The Case-Shiller index, which measures repeat-sales data, reports on a two-month delay. The median existing-home price rose 14.8% in May from a year earlier and topped $400,000 for the first time on record, NAR said.
• The Case-Shiller 10-city index gained 19.7% over the year ended in April, compared with a 19.5% increase in March. The 20-city index rose 21.2%, after an annual gain of 21.1% in March. Price growth decelerated in 11 of the 20 cities.
• A separate measure of home-price growth by the Federal Housing Finance Agency also released Tuesday found an 18.8% increase in home prices in April from a year earlier.

Consumers’ Outlook on the Economy Hits Lowest Point in Nearly a Decade – Wall Street Journal, 6/29/2022

• Consumers’ short-term outlook for the U.S. economy dropped sharply to its lowest point in nearly a decade on concerns about inflation, the Conference Board’s consumer-confidence survey showed.
• The consumer-confidence index, which hints at American attitudes toward jobs and the economy, also fell, dropping to 98.7 in June, down 4.5 points from 103.2 in May, the Conference Board said on Tuesday. The board’s expectations index, which measures consumers’ short-term outlook about the labor market, business and income, reached a low of 66.4 in June from 73.7 the prior month.
• Nearly 30% of those surveyed in June expect business conditions to worsen, according to the Conference Board survey. And 23% of consumers said business conditions were “bad,” up from 21.7% the prior month.

Fed’s Inflation Fight Made Tougher by State Relief Efforts – Bloomberg, 6/29/2022

• States’ efforts to provide inflation relief to US consumers with tax rebates may go over well with recipients — yet they risk adding even more fuel to spending and making it tougher for Federal Reserve policy makers to cool inflation.
• California officials over the weekend announced a relief package that will give $9.5 billion of tax rebates to residents. The checks of $200 to $1,050 are likely to go out in October to about 17 million families.
• States including Colorado, Maine, Indiana and Delaware are implementing similar measures to help people cope with high prices, particularly for necessities like gas and food.
• Under the California relief plan, individuals making as much as $75,000 a year, or joint filers making up to $150,000, would get $350 each plus $350 for one dependent for a maximum of $1,050. The amounts and caps are smaller for higher income brackets.

EUROPE & WORLD

UK Sanctions Richest Russian, Sparking Metal Supply Fears – Bloomberg, 6/29/2022

• The UK government imposed sanctions on Vladimir Potanin, Russia’s richest man and the president of MMC Norilsk Nickel PJSC, in the latest escalation of economic measures against Moscow.
• It wasn’t clear whether the sanctions on Potanin would extend to Nornickel, which is one of the world’s largest producers of nickel, palladium and copper.
• Potanin is the company’s top executive and owns over 30% through his investment company Interros. Palladium rose as much as 7.7% on the news, while nickel prices jumped 9.2% before paring gains.
• In its updated sanctions list, the UK said Potanin “is obtaining a benefit from or supporting the Government of Russia by owning or controlling Rosbank.” It made no mention of Nornickel.

Swiss Franc Rises to Parity With Euro for First Time Since March – Bloomberg, 6/29/2022

• The Swiss franc rose to parity with the euro for the first time since the outbreak of the war in Ukraine, with traders piling into the so-called haven currency as concern about risks to global growth intensified.
• The euro-Swiss franc pair fell as much as 0.8% to 0.99922 per euro, the lowest level since March 7.
• The currency has been strengthening since the Swiss National Bank unexpectedly hiked rates by 50 basis points earlier this month and remains ready to hike again to tame inflation if necessary.

Novartis to Cut up to 8,000 Jobs World-Wide – Wall Street Journal, 6/29/2022

• Swiss pharmaceutical giant Novartis said it plans to shed as many as 8,000 jobs globally, including 1,400 in Switzerland, as part of a previously disclosed restructuring plan aimed at saving some $1 billion in costs.
• The cuts would affect 7.4% of Novartis’s jobs globally and 12% of its Switzerland-based workers, the company said in a statement.
• Novartis employs some 108,000 people globally and 11,600 in Switzerland. The company said in a statement that the new structure would “accelerate growth, strengthen pipeline and increase productivity.”

Sri Lanka Restricts Fuel Use to Essential Services – Wall Street Journal, 6/29/2022

• Sri Lanka has sharply restricted fuel use and urged residents to stay home as it struggles to shore up energy supplies amid its deepening sovereign debt crisis.
• The South Asian nation’s wilting economy has seen Sri Lankans endure months of double-digit inflation, rolling power blackouts and severe shortages in food and medicines, sparking nationwide antigovernment protests.
• Sri Lanka’s foreign reserves are depleted to the point that it can no longer afford to pay for essential imports, and the country defaulted for the first time in its history last month.
• The country’s economy faced complete collapse, Prime Minister Ranil Wickremesinghe said last week.
• Late Monday, authorities shut schools and urged all to work from home until July 10, with rationed fuel supplies reserved for public transport, medical services and food transportation.
• Sri Lanka’s fuel shortage has worsened in recent weeks, with residents lining up for hours and sometimes days to obtain gasoline in queues that snake for miles around city blocks.

Factmonster – TODAY in HISTORY

• • London’s Globe Theatre burned down during a performance of Shakespeare’s Henry VIII. (1613)
  • The British Parliament approved the Townshend Acts. (1767)
  • The Supreme Court ruled in Furman v. Georgia that the death penalty could constitute “cruel and unusual” prompting some states to revise their laws. (1972)
  • Actress Katharine Hepburn died. (2003)