US ECONOMY & POLITICS

Inflation Stayed High in May, According to Fed’s Preferred Measure – Wall Street Journal, 6/30/2022

• Inflation remained elevated in May, measured by the Federal Reserve’s preferred gauge, driven in large part by a jump in energy and food prices.
• Consumer prices rose 6.3% in May from a year earlier, the same as in April but down slightly from 6.6% in March, as measured by the Commerce Department’s personal-consumption expenditures price index, which it reported Thursday.
• The so-called core PCE index—which excludes volatile food and energy prices—increased 4.7% in May from a year ago, down from 4.9% in April.
• On a monthly basis, core prices rose a seasonally adjusted 0.3% in May, the same pace as in each of the prior three months.
• The CPI usually runs somewhat higher than the PCE index due to differences in how the indexes are constructed. However, the gap between the two inflation measures is near the widest since 1981.
• The CPI reflects out-of-pocket spending by urban consumers, while the PCE price index is much broader, including expenditures on behalf of households—for example, those made by employer-sponsored healthcare plans.
• Energy and housing costs, which have both risen sharply, make up a much larger share of the basket of items used for the CPI than for the PCE price index.

Cooling Consumer Spending Points to Further Economic Slowdown – Wall Street Journal, 6/30/2022

• U.S. household spending slowed in May as Americans faced historically high inflation, raising the prospect that the economy could contract for a second straight quarter this year.
• Consumer spending cooled to a 0.2% advance in May, the Commerce Department said Thursday.
• Thursday’s report showed personal income grew by 0.5% in May, the same as April’s rate. Adjusted for inflation, after-tax income declined by 0.1% in May, showing that wage increases have been struggling to keep up with price rises.
• Inflation-adjusted spending declined by 0.4% in May, the first decline in real spending since December.
• In May, the saving rate rose modestly to 5.4%, after the rate fell to its lowest level in more than a decade in April.

U.S. Jobless Claims Edged Lower Last Week – Wall Street Journal, 6/30/2022

• New applications for unemployment benefits inched down last week, a sign the labor market remains tight as the broader economy shows signs of slowing.
• Initial jobless claims, a proxy for layoffs, declined to a seasonally adjusted 231,000 last week from a revised 233,000 the week before, the Labor Department said Thursday.
• The four-week moving average for claims, which irons out weekly volatility, rose to 231,750, an increase of  7,250 from the previous week’s revised average.
• Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, edged down to 1,328,000 in the week ended June 18 from a revised 1,331,000 in the week ended June 11.

Supreme Court Limits Power of EPA, Other Regulatory Agencies – Wall Street Journal, 6/30/2022

• The Supreme Court on Thursday curtailed the Environmental Protection Agency’s powers to restrict greenhouse-gas emissions from power plants, in a decision that could limit the authority of government agencies to address major policy questions without congressional approval.
• The decision was in line with several Supreme Court decisions in recent years that reined in federal agencies by striking down regulations on the grounds that agencies had usurped power from Congress and the judicial branch.
• The case before the high court was unusual because it involved regulations put forth by the Obama administration that never went into effect and were replaced in 2019 under the Trump administration.
• At issue was the Clean Power Plan, an Obama-era set of rules devised by the EPA that sought to mandate a national shift away from coal to cleaner sources of power, including natural gas, wind and solar.
• The Supreme Court in 2016 halted the Clean Power Plan from taking effect, but the justices never directly addressed whether the rule was unlawful.
• The Trump administration in 2019 overturned the plan, replacing it with industry-friendly rules allowing older power plants to continue operating.

Biden Says He Supports Exception to Filibuster to Codify Roe v. Wade Into Law – Wall Street Journal, 6/30/2022

• President Biden said on Thursday that he supports temporarily suspending the filibuster, if necessary, to pass legislation codifying Roe v. Wade into law.
• Changing the filibuster rules of the Senate would allow legislation protecting abortion access to pass the chamber with 51 votes rather than the 60 votes usually required for bills to advance.
• Mr. Biden had previously backed an exception to filibuster rules to pass long-stalled election bills.
• The filibuster could be changed with a simple majority vote, but not all Democrats in the 50-50 Senate are on board with such a move, saying it would fundamentally change the nature of the Senate and could backfire if the GOP takes control of the chamber.
• It was the first time that the president publicly backed changing the filibuster rules to pass legislation codifying Roe v. Wade into law.

EUROPE & WORLD

China’s Economy Returns to Growth Mode as Covid-19 Lockdowns Lift – Wall Street Journal, 6/30/2022

• Economic activity in China expanded in June after three straight months of contraction, according to official surveys of businesses and factories that point to a modest recovery after Covid-19 restrictions were eased in the world’s second-largest economy.
• China’s official purchasing managers index for nonmanufacturing sectors posted a reading of 54.7 in June, a big jump from the previous month’s 47.8, the National Bureau of Statistics said Thursday.
• The surge was led by a rebound in construction and the services sector, where the lifting of Covid-19 restrictions unclogged transportation blockages and allowed people to return to stores and restaurants.
• The purchasing managers index for the manufacturing sector notched up a reading of 50.2, higher than the previous month’s 49.6, but lower than the 50.5 reading expected by analysts polled by The Wall Street Journal.
• Overall production rose, but new export orders were weak, the survey showed, highlighting fading global demand.
• A subindex tracking service-sector activity surged to 54.3 from 47.1, while a subindex for construction activity reached 56.6 as infrastructure investment accelerated.
• Separately on Thursday, a survey of 102 member companies by the American Chamber of Commerce in China found that 44% of respondents had reduced or delayed planned investment in China as a result of recent Covid-19 outbreaks, highlighting the strain on foreign businesses from Beijing’s zero-tolerance approach to the virus.
• Forty-six percent reported lingering production difficulties even after lockdowns were eased, citing staff shortages, supply issues and other problems, according to the survey, which was conducted between June 22 and 24.

Russian Troops Withdraw From Ukraine’s Snake Island – Wall Street Journal, 6/30/2022

• Russia said its forces had withdrawn from a strategically important Ukrainian island on the Black Sea even as Russian President Vladimir Putin said he wouldn’t set a deadline for the end of his war on the country, now in its fifth month.
• Ukraine’s southern command confirmed the pullout on Thursday morning and said it came after Ukrainian forces targeted the island with missile and artillery strikes overnight, causing the remnants of the occupying forces to evacuate in two speedboats. The statement also said the island is on fire.
• Snake Island has been an offshore platform for Russia to aim weapons at Ukraine. Control over the island also allowed Russia to monitor shipments from Ukrainian ports.

Europe Moves to Defuse Tension With Moscow Over Russian Exclave Kaliningrad – Wall Street Journal, 6/30/2022

• The European Union is trying to defuse tensions with Moscow after Lithuania invoked Western sanctions to block some Russian goods from entering the Russian exclave of Kaliningrad.
• Some EU capitals, including Germany, are concerned that Lithuania’s enforcement of the sanctions could trigger a dangerous escalation from the Kremlin, in part because it targets commerce between two regions of Russia rather than Russian imports and exports, according to European officials.
• Russian officials have bristled at the move, accusing Lithuania of imposing a blockade of Kaliningrad. The former German port city of Königsberg on the Baltic Sea was given to Russia after World War II and is sandwiched between Lithuania and Poland, both NATO members, with no direct land link to the Russian mainland.
• Lithuanian officials say their restrictions on freight have only affected around 1% of the trade flows between mainland Russia and the city.
• That will change in coming months, however, as the sanctions extend to coal, luxury goods, oil, and other products.

Factmonster – TODAY in HISTORY

• A powerful natural explosion from an unknown cause rocked the Tunguska Basin, in eastern Siberia, flattening hundreds of square miles of forest and resulting in tremors that could be felt hundreds of miles away. (1908)
• President Warren G. Harding appointed former president William H. Taft chief justice of the United States. (1921)
• Margaret Mitchell’s Gone with the Wind was published. (1936)
• The remains of a Vietnam War serviceman buried in the Tomb of the Unknown Soldiers were identified as those of Air Force pilot Michael J. Blassie. (1998)