US ECONOMY & POLITICS

US Inflation Quickens to 9.1%, Amping Up Fed Pressure to Go Big – Bloomberg, 7/13/2022

• US inflation accelerated in June by more than forecast, underscoring relentless price pressures that will keep the Federal Reserve on track for another big interest-rate hike later this month.
• The consumer price index rose 9.1% from a year earlier in a broad-based advance, the largest gain since the end of 1981, Labor Department data showed Wednesday.
• The widely followed inflation gauge increased 1.3% from a month earlier, the most since 2005, reflecting higher gasoline, shelter and food costs.
• The so-called core CPI, which strips out the more volatile food and energy components, advanced 0.7% from the prior month and 5.9% from a year ago, above forecasts.
• Gas prices rose 11.2% in June from a month earlier. Prices for energy services, which includes electricity and natural gas, increased 3.5%, the most since 2006. Food costs, meanwhile, climbed 1% and 10.4% from a year ago, the largest increase since 1981.
• Rent of primary residence rose 0.8% from May, the largest monthly advance since 1986. Shelter costs overall — which are the biggest services component and make up a third of the overall CPI index — climbed 0.6%, matching the prior month.
• Used car prices, which were a major contributor to inflation last year, rose 1.6% from a month ago, while new vehicle prices increased 0.7%.
• Inflation-adjusted average hourly earnings dropped 3.6% in June from a year earlier, the 15th straight decline and largest in data back to 2007, separate data showed Wednesday.

Fed Swaps Price In One-in-Three Chance of Full Point July Rate Hike – Bloomberg, 7/13/2022

• Swap markets show traders are now pricing in a significant possibility that the Federal Reserve will implement a 100-basis-point hike in July in the wake of hotter-than-anticipated inflation data.
• The rate on the July contract rose as high as 2.416% after the consumer-price inflation data, some 83.6 basis points above the current effective fed funds rate.
• That implies a hike of at least 75 basis points is seen as definite and around a one-in-three chance that it could be a full percentage point.
• The market had already shifted earlier in the day to fully price in a 75-basis-point increase.
• The market also moved to almost fully price in a total of 1.5 percentage points of increases over the July and September meetings, while expectations for where the fed benchmark will max out in the first part of 2023 jumped to around 3.6%.

Biden Arrives in Israel in High-Stakes Middle East Trip to Boost Ties – Wall Street Journal, 7/13/2022

• President Biden arrived in Israel on Wednesday to kick off a trip to the Middle East that his administration hopes will bolster U.S. ties in the region, but could yield limited progress on American priorities.
• U.S. officials framed the four-day trip to Israel and Saudi Arabia as an opportunity to strengthen ties and promote stability, including by bringing the two countries he is visiting closer together, while countering threats from Iran.
• But the president’s allies worry he could conclude without substantial progress on energy or human-rights issues, returning largely empty-handed to the U.S., where he is struggling with low approval ratings and high prices ahead of the midterm elections.
• In recent days, White House officials have sought to lower expectations for the trip, contending that it could take months or longer to reach agreements to address high energy prices and establish normal relations between Israel and countries in the region like Saudi Arabia.

Union Organizing Efforts Rise in First Half of Year – Wall Street Journal, 7/13/2022

• The number of U.S. workplaces where employees have started trying to organize unions jumped this year to the highest level in half a dozen years, a rise that reflects warming public attitudes toward unions amid a strong labor market.
• In the first half of the year, workers at 1,411 U.S. workplaces filed petitions with the National Labor Relations Board, the first step in joining a union, according to a Wall Street Journal analysis of federal data.
• That represents a 69% increase from the same period in 2021 and the most of any year since 2015.
• The union push comes as public opinion about organized labor is the most positive in decades. A Gallup poll last year found that 68% of Americans approve of unions, the highest share since 1965.
• Still, the share of American workers who belong to unions has fallen steeply over past decades and remains low by historical standards.
• About 10.3% of American workers were union members last year, down from 29.3% in 1964, according to researchers from Georgia State University, Trinity University and the Urban Institute.

President Biden faces deadline in U.S. railroad labor standoff – Reuters, 7/13/2022

• U.S. President Joe Biden faces a deadline next week to intervene in nationwide U.S. railroad labor talks covering 115,000 workers, or open the door to a potential strike or lockout that could threaten an already fragile economy and choke supplies of food and fuel.
• The stakes are high for Biden, who wants to tackle inflation-stoking supply-chain woes and is already working to reach a deal in the critical labor talks at West Coast seaports.
• If the president declines to intercede in the railroad labor negotiations by appointing a Presidential Emergency Board (PEB) before 12:01 a.m. EDT on Monday, the railroads and unions could opt for operational shutdowns or strikes, respectively.
• Parties in the current talks expect Biden to appoint a board as President Barack Obama did to help resolve a wage and healthcare benefit standoff at the largest freight railroads in 2011.
• “People in the executive branch and in Congress know how vital our freight rail system is to our economy,” said Greg Regan, president of the AFL-CIO Transportation Trades Department that represents several railroad unions.
• The railroad talks come at a bad time for Biden, whose administration is also dealing with negotiations covering more than 22,000 U.S.
• West Coast workers at 29 seaports stretching from Washington to California, including the nation’s busiest at Los Angeles/Long Beach. The contract expired on July 1 and the two sides are wrestling over issues ranging from pay to automation.

EUROPE & WORLD

Shanghai Lockdown Concerns Rise Even as Covid Outbreak Eases Across China – Wall Street Journal, 7/13/2022

• Fears that Shanghai will be caught in a new lockdown mounted Wednesday, even as the official daily tally of Covid-19 infections eased across most of the country.
• China reported fewer than 300 new locally transmitted cases for the first time in 11 days on Wednesday, with infections dropping sharply in Anhui and Jiangsu—provinces that had been experiencing the biggest outbreaks in recent weeks.
• Two neighborhood committees confirmed online reports that they had advised residents to stockpile supplies to last 14 days, according to state media.
• Such committees are low-level groups that oversee neighborhood matters but whose powers over residents’ everyday lives shot to prominence during the city’s lockdown ordeal that began late March.
• Shanghai authorities said all the new infections added Wednesday were traced to people who were already under quarantine, as they further restricted movements in more areas of the city in light of the higher risk of transmission from neighborhoods where these people lived.
• State media reported that 15 zones were designated high-risk and 196 medium risk in the city, up from seven deemed high risk and 74 medium risk a week ago.

EU Plans Steps to Cushion Impact of Sudden Russian Gas Halt – Bloomberg, 7/13/2022

• The European Union is planning a set of urgent actions across the entire economy — including reductions to heating and cooling use and some market-based measures — to mitigate the impact of a possible natural gas supply cut-off by Russia, its biggest source of imports.
• The European Commission, the 27-nation bloc’s executive arm, sees a sizable risk that Moscow will halt the shipments of the fuel this year in an abrupt and unilateral way, according to a draft document seen by Bloomberg News.
• To prepare for this scenario, the commission plans to recommend additional measures the region should consider to curb gas consumption and lower future costs for businesses and consumers.
• Simulations by EU gas system operators show that in case of a full disruption as of July, storage could be as low as 65% to 71% at the beginning of November, significantly below the 80% target, according to the document.
• If a disruption occured at a later stage, in October or in the following months, the risk of a gap would be lower but there would be less time to address the situation.
• Overall flows from Russia are now less than 30% of the average from 2016 to 2021, according to the document.
• Curtailments in Russian shipments have affected 12 member states and prompted Germany to raise its gas-risk alert to the second-highest “alarm” level last month.

China’s Exports Picked Up in June as Logistics Problems Eased – Wall Street Journal, 7/13/2022

• Chinese exports to the rest of the world grew strongly in June as trade picked up following the easing of pandemic lockdowns and logistics bottlenecks in its ports.
• Chinese exports rose 17.9% in June compared with a year earlier, China’s General Administration of Customs said Wednesday.
• This beat the 12% forecast of economists polled by The Wall Street Journal and exceeded the 16.9% pace recorded in May.
• Exports to the U.S. rose 19.3% on the year, accelerating from a 15.8% annual pace in May.
• Export growth to the European Union slowed as an energy crunch caused by Russia’s invasion of Ukraine and Western sanctions in response suppressed consumer and business demand.
• Chinese imports rose 1.0% from a year earlier in June, weakening from a 4.1% increase in May, suggesting that demand for foreign goods and services remains weak.
• That pushed China’s trade surplus to $97.94 billion in June, compared with $78.8 billion in May, much bigger than the $76.9 billion surplus forecast by economists.

Europe’s Economies Show Resilience as Fresh Energy Threat Looms – Wall Street Journal, 7/13/2022

• Europe’s economies showed resilience in May but remain vulnerable and could suffer a steep downturn should Russia stop supplying natural gas to the region.
• Economic data released Wednesday showed output at factories across the eurozone jumped in May, while the U.K. economy rebounded from a contraction in April.
• However, the rise in eurozone factory output was almost entirely down to U.S. businesses that operate in Ireland, while U.K. growth was partly driven by the lifting of two years of restricted access to local health services.
• Figures released by the European Union’s statistics agency Wednesday showed industrial output was 0.8% higher in May than in April. However, output fell in France, Italy and Spain and was only slightly higher in Germany.
• By contrast, Irish output surged 13.9%, driven by a rise in output from U.S. factories based in the country, which accounts for 5.1% of the eurozone’s total industrial production.
• Without Ireland, eurozone output was stagnant.

China’s Plunging Markets Flash Fresh Warning Signs on Economy – Bloomberg, 7/13/2022

• Chinese financial markets are flashing warning signs that another round of Covid shutdowns could create more turmoil for the economy.
• The Hang Seng China Enterprises Index of stocks has lost almost 9% since June 28 as a new Covid subvariant threatens to paralyze factories, dampen consumer spending and hurt construction activity.
• China’s yuan, meanwhile, is renewing losses against the dollar, with the onshore rate the weakest in a month.
• Credit stress is also intensifying as China Evergrande Group teeters near its first onshore default, after another developer’s $1 billion delinquency revived broader contagion fears.
• While official data Friday is set to show China’s economy expanded just 1.2% in the second quarter, some alternative indicators suggest activity actually shrank.
• At the same time, the central bank is scaling back liquidity injections, which could create tighter financial conditions for the rest of the year.

Sri Lanka Imposes State of Emergency After President Flees Country – Wall Street Journal, 7/13/2022

• Sri Lanka’s president fled the country and appointed the prime minister as acting leader, the speaker of parliament said, as protesters breached the prime minister’s office and the island was placed under a state of emergency.
• President Gotabaya Rajapaksa left Sri Lanka on a military aircraft bound for the Maldives in the early hours of Wednesday morning with his wife and two bodyguards, the country’s air force and an immigration official said.
• He had been due to formally resign that day to make way for an interim all-party government. The prime minister, Ranil Wickremesinghe, has also said he would resign.
• The developments were met with anger from demonstrators who for months have been protesting the government’s handling of Sri Lanka’s worst economic crisis in decades.
• Army helicopters flew overhead and police deployed water cannons and tear gas but were unable to hold back hordes of protesters from storming inside the prime minister’s office, in scenes reminiscent of Saturday’s popular uprising that saw thousands occupy the president’s official residence, his oceanfront office, and the prime minister’s home.
• Also on Wednesday, Sri Lanka’s state broadcaster temporarily halted transmission after protesters entered the studio during a live broadcast.

Airbus in talks to sell more A220 jets to Delta -sources – Reuters, 7/13/2022

• European planemaker Airbus is in talks with Delta Air Lines to expand the U.S. carrier’s existing order for A220 small jetliners, two people familiar with the matter said.
• The deal for a top-up order of around a dozen aircraft could be signed at next week’s Farnborough Airshow where the U.S. carrier is also widely expected to finalise an order for at least 100 Boeing 737 MAX airliners.
• The airline has ordered 95 Canadian-designed A220s of which it has taken delivery of 56, according to end-June Airbus data.

Factmonster – TODAY in HISTORY

• The draft riots, protesting unfair conscription in the Civil War, began in New York City. (1863)
• The first World Cup soccer competition began in Montevideo, Uruguay. (1930)
• The Battle of Kursk, the largest tank battle in history—involving some 6,000 tanks, 2,000,000 troops, and 4,000 aircraft—ended in German defeat. (1943)
• A 25-hour blackout hit New York City, engendering widespread rioting and looting. (1977)
• Iraq’s interim governing council was inaugurated. (2003)