US ECONOMY & POLITICS

Kashkari Says Fed Committed to Slowing Inflation to 2% Goal – Bloomberg, 8/1/2022

• Federal Reserve Bank of Minneapolis President Neel Kashkari said the central bank is committed to doing what’s necessary to bring down demand in order to reach policy makers’ 2% long-term inflation goal, a target that remains far off.
• Inflation that has continued to exceed the Fed’s expectations is “very concerning,” Kashkari said.
• “Families are finding it increasingly hard to make ends meet,” said Kashkari, who served in a key financial stability post at the Treasury Department during the 2008-2009 global crisis. “When they go to the grocery store, when they buy necessities, they’re not able to buy as much because they’re getting a real wage cut.”
• Kashkari said that the Fed will do everything it can to avoid a recession, while acknowledging that it doesn’t have a “great record” of being able to do so.
• “Whether we are technically in a recession or not doesn’t change my analysis,” Kashkari said. “I’m focused on the inflation data. I’m focused on wage data. And so far, inflation continues to surprise us to the upside. Wages continue to grow. So far, the labor market is very, very strong.”
• Kashkari said that while he’s hearing from multinational companies that they’re making progress in resolving global supply chain bottlenecks, “it’s taking a lot longer than they thought, and than I thought.”
• “That means we cannot wait until supply fully heals, we have to do our part with monetary policy,” he said.

US Manufacturing Expands at Slowest Pace in Two Years – Bloomberg, 8/1/2022

• US manufacturing activity continued to cool in July as more factories dialed back production in the face of shrinking orders and rising inventories.
• The Institute for Supply Management’s gauge of factory activity eased to 52.8, the lowest level since June 2020, from 53 a month earlier, according to data released Monday.
• The group’s measure of production also fell to a more than two-year low, and its gauge of new orders remained in contraction territory for a second month.
• The ISM factory inventories index rose to 57.3, the highest since 1984 and suggesting stockpiles are mounting at more manufacturers.
• The July measure of prices paid for materials used in the production process — extremely elevated over much of the last year and a half amid supply and demand imbalances — plunged 18.5 points to the lowest level in almost two years.
• That marked the largest drop since 2010 and reflected declines in crude oil and metals prices. Almost 22% of respondents reported paying lower prices in July, up from 8.3% a month earlier, the report showed.

Home prices cooled at a record pace in June, according to housing data firm – CNBC, 8/1/2022

• Rising mortgage rates and inflation in the wider economy caused housing demand to drop sharply in June, forcing home prices to cool down.
• The annual rate of price appreciation fell two percentage points from 19.3% to 17.3%.
• Still, while this was the sharpest cooling on record nationally, the market would have to see six more months of this kind of deceleration for price growth to return to long-run averages, according to Ben Graboske, president of Black Knight Data & Analytics.
• He calculates that it takes about five months for interest rate impacts to be fully reflected in home prices.
• The cooling in prices coincides with a sharp jump in the supply of homes for sale, up 22% over the last two months, according to Black Knight. Inventory is still, however, 54% lower than 2017-19 levels.
• “With a national shortage of more than 700,000 listings, it would take more than a year of such record increases for inventory levels to fully normalize,” said Graboske.

Apartment Rents Begin Tapering Off After Record Growth – Wall Street Journal, 8/1/2022

• After more than a year of record run-ups in apartment rents, growth is starting to cool off, a trend that could help housing affordability and ease the rise in overall inflation, according to several market measures.
• Nationally, average apartment rents rose 9.4% in the second quarter of 2022 compared with the same quarter in 2021, according to data firm CoStar Group.
• CoStar projects that rent growth will continue to slow in the coming months, finishing the year 6.2% higher than last year. The firm is projecting a 4.9% increase for 2023.
• Rental housing affordability worsened in the first year of the pandemic, with the share of American renters who pay 30% or more of their income on rent rising 2.6 percentage points, the report said. Nearly half of renters now fall into that category.

Joe Manchin Defends Tax Increases in Democrats’ Climate Plan – Wall Street Journal, 8/1/2022

• Sen. Joe Manchin (D., W.Va.) defended the tax increases in the Democrats’ climate and prescription-drug plan and argued that the bill would fight inflation, as the party tries to quickly move the package he negotiated before the August recess.
• In a series of appearances on Sunday news shows, he also said he hoped Sen. Kyrsten Sinema (D., Ariz.) would support the bill despite a provision that would raise taxes on private-equity managers’ carried interest income that she has signaled she opposes.
• According to Senate Democrats, the package would raise roughly $739 billion, with much of the revenue coming from the 15% corporate minimum tax and enhanced tax-enforcement efforts at the Internal Revenue Service, as well as projected savings from allowing Medicare to negotiate some prescription-drug prices.

Pelosi to Go Ahead With Taiwan Visit – Wall Street Journal, 8/1/2022

• House Speaker Nancy Pelosi is planning to visit Taiwan, with meetings scheduled with government officials on the self-ruled island that China claims as its own, according to a person familiar with the matter, raising the prospect of increased tensions between the U.S. and China.
• People whom Mrs. Pelosi is planning to meet with in Taiwan have been informed of her imminent arrival, this person said, though some details remain in flux.
• Some of Ms. Pelosi’s meetings have been scheduled for Tuesday evening, but most are set for Wednesday, the person said, adding that they include, but aren’t limited to, Taiwanese government officials.
• “She’s definitely coming,” the person said. “The only variable is whether she spends the night in Taipei.”

China Repeats Military Would Take Action If Pelosi Visits Taiwan – Bloomberg, 8/1/2022

• China again warned that its military would take action if House Speaker Nancy Pelosi makes a landmark visit to Taiwan, as speculation mounted in Taipei that she could arrive there as soon as Tuesday.
• The People’s Liberation Army “won’t sit idly by” if Pelosi visited Taiwan, Chinese Foreign Ministry spokesman Zhao Lijian said Monday, echoing similar comments made by the Defense Ministry last week.
• “Her stature as the No. 3 US official means a trip would be highly sensitive,” Zhao told a regular press briefing in Beijing. “As to what measures, let’s wait and see whether she insists on this visit.”
• China has a range of military options that fall well short of an invasion, and there are few signs Beijing is planning a broader attack.
• Beijing has responded to past visits by foreign officials with large sorties into Taiwan’s air defense identification zone or across the median line that divides the strait.

U.S. Eyes Sanctions Against Global Network It Believes Is Shipping Iranian Oil – Wall Street Journal, 8/1/2022

• The U.S. is considering sanctions that would target a United Arab Emirates-based businessman and a network of companies suspected of helping export Iran’s oil, part of a broader effort to escalate diplomatic pressure on Tehran as U.S. officials push to reach a deal on Iran’s nuclear program.
• The firms and individuals under scrutiny have been using ship-to-ship transfers of oil in waters that lie between Iraq and Iran and then forging documents to hide the origin of the cargo, according to corporate documents reviewed by The Wall Street Journal, shipping data and people familiar with the matter.
• By passing off the blended oil as Iraqi, those involved can avoid Western sanctions targeting Iranian oil.
• Yet within the administration, there isn’t consensus on plans to target these sorts of suspected sanctions-evading operations.
• The administration wants to renew a nuclear deal as a way to rein in Iran’s nuclear plans, but is also dealing with opposition to a deal and grappling with the economic impact of Russia’s war in Ukraine and sanctions, current and former officials familiar with the issue said.

EUROPE & WORLD

China’s Stumbling Manufacturing, Property Sectors Show Long Road to Recovery – Wall Street Journal, 8/1/2022

• China’s major economic pillars wobbled in July with weakness in manufacturing and the all-important property sector, showing the pressure on a country that remains a drag on the struggling global economy.
• The official manufacturing purchasing managers index pulled back to 49.0 in July from 50.2 in June, China’s National Bureau of Statistics said Sunday.
• In China’s manufacturing sector, only 10 of the 21 industries surveyed by the statistics bureau showed expansion in July compared with 13 in June.
• China’s export sector, a key growth engine for the country’s initial postpandemic recovery, continued to disappoint.
• In July, the PMI subindex tracking export orders remained in contractionary territory for a 15th consecutive month.
• Joblessness among workers age 16 to 24 has soared, rising to a record 19.3% in June from 18.4% in May. The subindex tracking employment edged down to 48.6 from 48.7 in June, the statistics bureau said Sunday.
• Separately on Sunday, China’s official nonmanufacturing PMI fell to 53.8 in July from a reading of 54.7 in June, the statistics bureau said.
• The subindex measuring service-sector activity pulled back to 52.8 in July from 54.3 in June, while the subindex tracking construction activity rose to 59.2 from 56.6.

China Home Sales Plunge in July, as Mortgage Revolt Deters Buyers – Wall Street Journal, 8/1/2022

• A nascent two-month recovery in China’s home sales ended in July, as a widespread mortgage revolt over concerns that ailing property developers wouldn’t be able to deliver still-unfinished apartments weighed on demand.
• Sales at the country’s top 100 property developers fell 39.7% in July from the same period last year to the equivalent of $77.6 billion, or 523.14 billion yuan, according to data released Sunday by CRIC, a Chinese real-estate data provider.
• July sales were down 28.6% from June, ending a two-month recovery in month-to-month sales growth.
• Week-over-week data put together earlier by CRIC to study the impact of the mortgage revolt had signaled the July decline.
• In 30 cities CRIC determined to have been seriously affected by the revolt, new home sales dropped by 12% in the week ended July 10 from the week before, then fell 41% in the week ended July 17.

Ukraine Grain Shipment Departs for First Time Since Russian Invasion – Wall Street Journal, 8/1/2022

• Ukraine dispatched its first grain shipment since the start of Russia’s invasion on Monday, under a deal aimed at easing global food shortages.
• The ship departed the Odessa port carrying 26,000 metric tons of corn headed for Tripoli, Lebanon, according to Ukrainian officials and the Turkish government, which helped broker the deal.
• The shipment is the first test for a deal reached last month to allow Ukraine, one of the world’s largest grain exporters, to begin shipping some 18 million metric tons that Russia’s invasion in February has trapped in the country.
• The U.S. Department of Agriculture predicts Ukraine will export 30.6 million metric tons of grains and seeds over the 2022-23 season, almost half the tonnage of the season before.
• Further ships are expected to depart in the coming days, with several already loaded before the Russian invasion began. Ukrainian President Volodymyr Zelensky on Friday oversaw the first loading of a ship with grain since February at Chornomorsk port, near Odessa.

War With Russia Enters New Phase as Ukraine Readies Southern Counterblow – Wall Street Journal, 8/1/2022

• After months of Russian forces making painfully slow gains in Ukraine’s east, the focus of the war is moving to the south, where a potentially decisive phase of the conflict will play out.
• Ukraine has used long-range artillery and rocket systems, including the American M142 Himars, to halt Russia’s grinding advances in the east, destroying ammunition dumps, command-and-control centers and air-defense systems that appear to have limited Moscow’s ability to supply its front lines.
• Now, with the help of these Western weapons, Ukraine says it is mounting a counteroffensive to take back the Southern port city of Kherson.
• Russia continues its bombardment of cities across Ukraine including in the early hours of Sunday, when it launched an assault on the port of Mykolaiv, killing a prominent businessman.
• But for Ukraine, Kherson is an important strategic objective as the largest population center occupied by the Russians and the first city to fall.
• As a port, it is economically important to the Ukrainians and taking it back would deny Russian forces access to the southern coast toward Odessa.

Evergrande Told to Cough Up $1.1 Billion for Previously Undisclosed Guarantees – Wall Street Journal, 8/1/2022

• Embattled property developer China Evergrande Group said one of its units has been told to honor a $1.1 billion guarantee, revealing yet another large financial obligation that wasn’t previously disclosed.
• Evergrande, in a regulatory filing on Sunday, said one of its subsidiaries in China had provided counter guarantees to an unnamed entity by pledging its shares in Shengjing Bank, a regional lender based in the city of Shenyang, the capital of northeastern Liaoning province.
• The pledged shares represent Evergrande’s entire 14.6% stake in the Chinese bank, which is listed in Hong Kong. They were part of a convoluted financial arrangement where the unnamed entity provided guarantees in July 2021 for borrowers that were ultimately controlled by Evergrande.

Alibaba Drops as Inclusion in US Delisting List Fuels Jitters – Bloomberg, 8/1/2022

• Alibaba Group fell on Monday amid escalating concerns that the stock may be booted off American stock exchanges for failing to comply with US disclosure rules.
• The e-commerce giant’s shares declined 3.8% in Hong Kong to lead a drop in the Hang Seng Tech Index, which closed down 0.2%.
• The US securities watchdog on Friday added the stock to a growing roster of companies facing removal because of Beijing’s refusal to permit American officials to review their auditors’ work.
• Alibaba said it will seek to maintain its listing status on both the NYSE and HKEX and will comply with applicable laws and regulations, according to a statement to the Hong Kong stock exchange.

Factmonster – TODAY in HISTORY

• The first U.S. census was completed, showing a population of 3,929,214 people. (1790)
• Colorado became the 38th state in the United States. (1876)
• Adolf Hitler presided over the opening of the Berlin Olympic Games. (1936)
• President Truman signed the congressional acts that established the Atomic Energy Commission and the Fulbright Scholarship program. (1946)
• MTV made its debut at 12:01 AM. The first video shown was Video Killed the Radio Star by the Buggles. (1981)