President Biden cheered the report in a statement Thursday morning. “For months, doomsayers have been arguing that the U.S. economy is in a recession, and congressional Republicans have been rooting for a downturn,” he said. “But today we got further evidence that our economic recovery is continuing to power forward.”

By one common definition, the U.S. economy entered a recession when it experienced two straight quarters of shrinking G.D.P. at the start of the year. Officially, however, recessions are determined by a group of researchers at the National Bureau of Economic Research, who look at a broader array of indicators, including employment, income and spending.

Most analysts don’t believe the economy meets that more formal definition, and the third-quarter numbers — which slightly exceeded forecasters’ expectations — provided further evidence that a recession had not yet begun.

But the overall G.D.P. figures were skewed by the international trade component, which often exhibits big swings from one period to the next. Economists tend to focus on less volatile components, which have showed the recovery steadily losing momentum as the year has progressed. One closely watched measure suggested that private-sector demand stalled out almost completely in the third quarter.

Mortgage rates passed 7 percent on Thursday, their highest level since 2002.

“Housing is just the single largest trigger to additional spending, and it’s not there anymore; it’s going in reverse,” said Diane Swonk, chief economist at the accounting firm KPMG. “This has been a stunning turnaround in housing, and when things start to go really quickly, you start to wonder, what are the knock-on effects, what are the spillover effects?”

The third quarter was in some sense a mirror image of the first quarter, when G.D.P. shrank but consumer spending was strong. In both cases, the swings were driven by international trade. Imports, which don’t count toward domestic production figures, soared early this year as the strong economic recovery led Americans to buy more goods from overseas. Exports slumped as the rest of the world recovered more slowly from the pandemic.

Both trends have begun to reverse as American consumers have shifted more of their spending toward services and away from imported goods, and as foreign demand for American-made goods has recovered. Supply-chain disruptions have added to the volatility, leading to big swings in the data from quarter to quarter.

Few economists expect the strong trade figures from the third quarter to continue, especially because the strong dollar will make American goods less attractive overseas.

Jim Tankersley contributed reporting.

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A Strong Dollar Is Wreaking Havoc on Emerging Markets. A Debt Crisis Could Be Next.

The average household in Ghana is paying two-thirds more than it did last year for diesel, flour and other necessities. In Egypt, wheat is so expensive that the government has fallen half a billion dollars short of its budget for a bread subsidy it provides to its citizens. And Sri Lanka, already struggling to control a political crisis, is running out of fuel, food and medical supplies.

A strong dollar is making the problems worse.

Compared with other currencies, the U.S. dollar is the strongest it has been in two decades. It is rising because the Federal Reserve has increased interest rates sharply to combat inflation and because America’s economic health is better than most. Together, these factors have attracted investors from all over the world. Sometimes they simply buy dollars, but even if investors buy other assets, like government bonds, they need dollars to do so — in each case pushing up the currency’s value.

That strength has become much of the world’s weakness. The dollar is the de facto currency for global trade, and its steep rise is squeezing dozens of lower-income nations, chiefly those that rely heavily on imports of food and oil and borrow in dollars to fund them.

But much of the damage is already behind us.

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  • “We are in a fragile situation,” Mr. El-Erian said. “Country after country is flashing amber, and some are already flashing red.”

    Many lower-income countries were already struggling during the pandemic.

    Roughly 22 million people in Ghana, or a third of its population, reported a decline in their income between April 2020 and May 2021, according to a survey from the World Bank and Unicef. Adults in almost half of the households with children surveyed said they were skipping a meal because they didn’t have enough money. Almost three-quarters said the prices of major food items had increased.

    Then came Russia’s invasion of Ukraine. The war between two of the world’s largest exporters of food and energy led to a big surge in prices, especially for importers like Ghana. Consumer prices have gone up 30 percent for the year through June, according to data from the research firm Moody’s Analytics. For household essentials, annual inflation has reached 60 percent or more this year, the S&P data shows.

    To illustrate this, consider the price of a barrel of oil in dollars versus the Ghanaian cedi. At the beginning of October last year, the price of oil stood at $78.52 per barrel, rising to nearly $130 per barrel in March before falling back to $87.96 at the beginning of this month, a one-year increase of 12 percent in dollar terms. Over the same period, the Ghanaian cedi has weakened over 40 percent against the dollar, meaning that the same barrel of oil that cost roughly 475 cedi a year ago now costs over 900 cedi, almost twice as much.

    Adding to the problem are large state-funded subsidies, some taken on or increased through the pandemic, that are now weighing on government finances.

    Ghana’s president cut fuel taxes in November 2021, losing roughly $22 million in projected revenue for the government — the latest available numbers.

    In Egypt, spending on what the government refers to as “supply commodities,” almost all of which is wheat for its long-running bread subsidy, is expected to come in at around 7 percent of all government spending this year, 12 percent higher — or more than half a billion dollars — than the government budgeted.

    As costs ballooned throughout the pandemic, governments took on more debt. Ghana’s public debt grew to nearly $60 billion from roughly $40 billion at the end of 2019, or to nearly 80 percent of its gross domestic product from around 63 percent, according to Moody’s.

    It’s one of four countries listed by S&P, alongside Pakistan, Nigeria and Sri Lanka, where interest payments alone account for more than half of the government’s revenues.

    “We can’t forget that this is happening on the back end of a once-in-a-century pandemic in which governments, to try and support families as best they could, did borrow more,” said Frank Gill, an analyst at S&P. “This is a shock following up on another shock.”

    In May, Sri Lanka defaulted on its government debt for the first time in its history. Over the past month, the governments of Egypt, Pakistan and Ghana have all reached out to the International Monetary Fund for a bailout as they struggle to meet their debt financing needs, no longer able to turn to international investors for more money.

    “I don’t think there is a lot of appetite to lend money to some of these countries,” said Brian Weinstein, co-head of credit trading at Bank of America. “They are incredibly vulnerable at the moment.”

    That vulnerability is already reflected in the bond market.

    In 2016, Ghana borrowed $1 billion for 10 years, paying an interest rate of just over 8 percent. As the country’s financial position has worsened and investors have backed away, the yield — indicative of what it would now cost Ghana to borrow money until 2026 — has risen to above 35 percent.

    It’s an untenable cost of debt for a country in Ghana’s situation. And Ghana is not alone. For bonds that also mature in 2026, yields for Pakistan have reached almost 40 percent.

    “We have concerns where any country has yields that calls into question their ability to refinance in public markets,” said Charles Cohen, deputy division chief of monetary and capital market departments at IMF.

    The risk of a sovereign debt crisis in some emerging markets is “very, very high,” said Jesse Rogers, an economist at Moody’s Analytics. Mr. Rogers likened the current situation to the debt crises that crushed Latin America in the 1980s — the last time the Fed sought to quell soaring inflation.

    Already this year, more than $80 billion has been withdrawn from mutual funds and exchange-traded funds — two popular types of investment products — that buy emerging market bonds, according to EPFR Global, a data provider. As investors sell, the United States is often the beneficiary, further strengthening the dollar.

    “It’s by far the worst year for outflows the market has ever seen,” said Pramol Dhawan, head of emerging markets at Pimco.

    Even citizens in some of these countries are trying to exchange their money for dollars, fearful of what’s to come and of further currency depreciation — yet inadvertently also contributing to it.

    “For pockets of emerging markets, this is a really challenging backdrop and one of the most challenging backdrops we have faced for many years,” Mr. Dhawan said.

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    How the Car Market Is Shedding Light on a Key Inflation Question

    In a recent speech pointedly titled “Bringing Inflation Down,” Lael Brainard, the Federal Reserve’s vice chair, zoomed in on the automobile market as a real-world example of a major uncertainty looming over the outlook for price increases: What will happen next with corporate profits.

    Many companies have been able to raise prices beyond their own increasing costs over the past two years, swelling their profitability but also exacerbating inflation. That is especially true in the car market. While dealerships are paying manufacturers more for inventory, they have been charging customers even higher prices, sending their profits toward record highs.

    Dealers could pull that off because demand has been strong and, amid disruptions in the supply of parts, there are too few trucks and sedans to go around. But — in line with its desire for the economy as a whole — the Fed is hoping both sides of that equation could be on the cusp of changing.

    data, and several industry experts said they didn’t see a return to normal levels of output for years as supply problems continue. Prices are still increasing swiftly, and dealer profits remain sharply elevated with little sign of cracking.

    Ford Motor said on Monday that it would spend $1 billion more on parts than it was planning to in the third quarter because some components had become more expensive and harder to find.

    By contrast, the supply of used cars has rebounded after plunging in the pandemic, and prices have begun to depreciate at a wholesale level, where dealers buy their stock. But, so far, those dealers aren’t really passing those savings along to consumers. The price of a typical used car has stabilized around $28,000, up 9 percent from a year ago, based on Cox Automotive data. Official used-car inflation data is easing, but only slightly.

    Why consumer used-car prices — and dealer profits — are taking time to moderate is something of a mystery. Jonathan Smoke, chief economist at Cox Automotive, said dealers might be basing their prices on what they paid earlier in the year, when costs were higher, for the cars sitting on their lots.

    “Dealers are feeling it,” Mr. Smoke said of the price moderation. “But because they price their vehicles based on what they pay for them, the consumer isn’t seeing the price discounts yet.”

    Some early instances of discounting are showing up. At the Buick and GMC dealership that Beth Weaver runs in Erie, Pa., demand for used cars has begun to slow down, and the business has sold a few vehicles at a loss.

    rolling lockdowns in China.

    The Fed could raise rates so much that it snuffs out demand, but given how much pent-up car-buying appetite exists, Mr. Murphy thinks it would take a lot.

    “You probably would have to go farther on rates than they have so far, or even than they are expected to go,” he said. “There may be a point at which you have enough pain that you see a pause on demand.”

    If demand continues to outstrip new-car supply and dealers continue to reap big profits, that could limit how quickly inflation will ease. If the mismatch is large enough for sellers to keep pushing up prices without losing customers, it could even continue to fuel inflation.

    While the car market is just one industry, the uncertainty of its return to normal holds a few lessons for the Fed. For one thing, new-car production makes it clear that supply chain disruptions are improving but not gone.

    More hopefully, the car industry could offer evidence that the laws of economics are likely to reassert themselves eventually. Used-car prices have at least stopped their ascent as inventory has grown, and experts say discounting is likely around the corner. If that happens, it could be evidence that companies won’t be able to keep prices and profits high indefinitely once supply catches up with demand.

    But cars reinforce the prospect that the readjustment period could last a while.

    Automakers are flirting with the idea of keeping production lower so there are fewer cars in the market and price cuts are less common. Mr. Smoke is skeptical that they will hold that line once it means ceding market share to competitors — but the process could take months or years.

    “I’m hesitant to say that we won’t have discounting again,” Mr. Smoke said. “But it’s going to take a while to get back to that world.”

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    Analysis: Industrial users flee LME nickel, deepening market fissures

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    Traders work on the floor of the London Metal Exchange, in London, Britain September 27, 2018. REUTERS/Simon Dawson/File Photo

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    • Nickel deliverable against LME contract only 21% of market
    • Nickel pig iron 50% of global market

    LONDON, Sept 14 (Reuters) – The London Metal Exchange faces a struggle to regain its dominant position in global nickel trading as volumes slide and participants flee an increasingly volatile market in the wake of trade mayhem earlier this year.

    Nickel volumes on the world’s oldest and largest venue for trading metals collapsed after the LME suspended its contract for a week and cancelled all trades on March 8, when prices doubled in a few hours to a record above $100,000 a tonne.

    LME data shows many participants have abandoned the nickel market, a trend several traders say looks set to continue leading to even lower volumes and more volatility as more people opt to negotiate prices directly.

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    Average daily volumes of nickel traded on the LME plunged 50% last month to 203,856 tonnes from the same period last year. This follows drops of 28%, 35%, 25% and 42% in April, May, June and July respectively.

    “Volumes may well be down because there is still a certain lack of trust in the LME after the debacle in March,” said Wood Mackenzie analyst Andrew Mitchell. “LME nickel does not represent the bulk of the market.”

    The nickel that can be delivered against the LME’s contract will this year amount to only 650,000 tonnes or around 21% of global production compared with 50% in 2012, Macquarie analyst Jim Lennon said.

    The exchange says it is working on potential improvements.

    “The LME is actively engaging with nickel market users to consider…potential enhancements to its nickel contract and additional measures to address the growing market in nickel and its different forms,” the exchange told Reuters in response to a request for comment. “We look forward to sharing plans in due course.”

    LME nickel volumes

    VOLATILITY DOOM LOOP

    Several traders believe the LME’s nickel contract will never recover as the low liquidity has created a vicious circle of falling volumes and extreme price volatility.

    They say trying to trade even 10-20 lots or 60-120 tonnes of nickel is tough without moving the price, compared with 200-250 lots or 1,200-1,500 tonnes prior to March.

    Volatility and rising supplies of Indonesian nickel pig iron (NPI) used to make stainless steel are spurring the shift away from the LME contract. NPI is a low grade cheaper alternative to pure nickel metal.

    NPI, which can’t be delivered against the LME’s contract, is expected to account for more than 50% of global supplies this year at 3.1 million tonnes from 12% in 2010, Mitchell said.

    “There is an oversupply of nickel pig iron,” said Lennon. “NPI is priced at around $16,500.”

    LME nickel is around $24,500 a tonne.

    NPI is not traded on the Shanghai Futures Exchange either. ShFE offers a nickel metal contract that is highly correlated with the benchmark LME nickel contract.

    “The LME contract is imperfect in the context of how the market has evolved. There are different pockets and the LME contract caters for just one of those pockets,” said Michael Widmer, an analyst at Bank of America.

    Nickel sulphate, used to make the cathode component of electric vehicle batteries is another product. Sulphate can be made from nickel briquettes stored in LME registered warehouses , .

    But LME nickel stocks are depleted and sulphate is now being made from nickel matte, a product that can be made from nickel pig iron (NPI), and another intermediate product known as mixed hydroxide precipitate (MHP) produced in Indonesia.

    Rival exchange CME Group is looking into launching a nickel sulphate contract, according to sources. It declined to comment on how its plans were progressing.

    Stainless steel mills, many in China, consume about two-thirds of global nickel supplies. Electric vehicle batteries are expected to take a larger share as sales surge due to the energy transition; around 30% by 2030 compared with 15% last year.

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    Reporting by Pratima Desai; editing by Veronica Brown and Emelia Sithole-Matarise

    Our Standards: The Thomson Reuters Trust Principles.

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    Exclusive: Wall Street revives Russian bond trading after U.S. go-ahead

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    NEW YORK, Aug 15 (Reuters) – Several major Wall Street banks have begun offering to facilitate trades in Russian debt in recent days, according to bank documents seen by Reuters, giving investors another chance to dispose of assets widely seen in the West as toxic.

    Most U.S. and European banks had pulled back from the market in June after the Treasury Department banned U.S. investors from purchasing any Russian security as part of economic sanctions to punish Moscow for invading Ukraine, according to an investor who holds Russian securities and two banking sources.

    Following subsequent guidelines from the Treasury in July that allowed U.S. holders to wind down their positions, the largest Wall Street firms have cautiously returned to the market for Russian government and corporate bonds, according to emails, client notes and other communications from six banks as well as interviews with the sources.

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    The banks that are in the market now include JPMorgan Chase & Co (JPM.N), Bank of America Corp (BAC.N), Citigroup Inc (C.N), Deutsche Bank AG (DBKGn.DE), Barclays Plc (BARC.L) and Jefferies Financial Group Inc (JEF.N), the documents show.

    The return of the largest Wall Street firms, the details of the trades they are offering to facilitate and the precautions they are taking to avoid breaching sanctions are reported here for the first time.

    Bank of America, Barclays, Citi and JPMorgan declined to comment.

    A Jefferies spokesperson said it was “working within global sanctions guidelines to facilitate our clients’ needs to navigate this complicated situation.”

    A source close to Deutsche Bank said the bank trades bonds for clients on a request-only and case-by-case basis to further manage down its Russia risk exposure or that of its non-U.S. clients, but won’t do any new business outside of these two categories.

    STRANDED ASSETS

    Some $40 billion of Russian sovereign bonds were outstanding before Russia began what it calls a “special military operation” in Ukraine in February. Roughly half was held by foreign funds. Many investors got stranded with Russian assets, as their value plummeted, buyers disappeared and sanctions made trading hard.

    In May, two U.S. lawmakers asked JPMorgan and Goldman Sachs Group Inc (GS.N) for information about trades in Russian debt, saying they may undermine sanctions. read more The following month the Treasury’s Office of Foreign Assets Control banned U.S. money managers from buying any Russian debt or stocks in secondary markets, prompting banks to pull back.

    Regulators have since taken steps to help ease the pain for investors.

    The Treasury provided further guidance on July 22 to help settle default insurance payments on Russian bonds. It also clarified that banks could facilitate, clear and settle transactions of Russian securities if this helped U.S. holders wind down their positions. read more

    Separately, European regulators have also eased rules to allow investors to deal with Russian assets by allowing them to put them into so-called side pockets on a case-by-case basis. read more

    The price of some Russian bonds has jumped alongside the renewed trading activity since late July. That could make the trades more attractive to investors and also help companies that sold protection against Russian default.

    For example, U.S. bond manager PIMCO – which was on the hook for a payout of around $1 billion after Russia defaulted on its dollar debt in June – could now save around $300 million, one investor estimated. PIMCO declined to comment.

    “There’s some bid emerging for both local and external bonds for the first time in a while,” said Gabriele Foa, portfolio manager of the Global Credit Opportunities Fund at Algebris, who follows the market for Russian securities. “Some banks and brokers are using this bid to facilitate divestment of Russian positions for investors that want to get out.”

    Reuters could not establish who was buying the bonds.

    Reuters Graphics Reuters Graphics

    LOTS OF RULES

    Some banks are offering to trade Russian sovereign and corporate bonds, and some are offering to facilitate trades in bonds denominated in both roubles and U.S. dollars, according to the documents and the investor who holds Russian securities. But they are also demanding additional paperwork from clients and remain averse to taking on risk.

    In a research update to clients on Wednesday, for example, Bank of America declared in capital letters in red: “Bank of America is now facilitating divestment of Russian sovereign and select corporate bonds.”

    But it added that it would be acting as “riskless principal on client facilitation trades,” meaning a situation where a dealer buys a bond and immediately resells it. It also warned there were “a lot of rules around the process” which remained subject to “protocol and attestation.”

    The approaches also differ among banks. In some cases, for example, banks are offering clients to help divest their holdings as well as other types of trades that would reduce exposure to Russian assets, while others are limiting trades to asset disposals only.

    At times they are asking investors to sign documents prior to trade execution that would allow the banks to cancel trades if settlement does not go through and risks leaving the banks with Russian paper on their books, according to one of the documents and the investor.

    One bank warned clients that settlements would take longer than usual.

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    Reporting by Davide Barbuscia in New York; Additional reporting by Rodrigo Campos.
    Editing by Megan Davies, Paritosh Bansal and Edward Tobin

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    U.S. Inflation Slips From 40-Year Peak But Remains High At 8.5%

    By Associated Press

    and Newsy Staff
    August 10, 2022

    Consumer prices jumped 8.5% in July compared with a year earlier, down from a 9.1% year-over-year jump in June, according to government data.

    Falling gas prices gave Americans a slight break from the pain of high inflation last month, though the surge in overall prices slowed only modestly from the four-decade high it reached in June.

    Consumer prices jumped 8.5% in July compared with a year earlier, the government said Wednesday, down from a 9.1% year-over-year jump in June. On a monthly basis, prices were unchanged from June to July, the smallest such rise more than two years.

    Still, prices have risen across a wide range of goods and services, leaving most Americans worse off. Average paychecks are rising faster than they have in decades — but not fast enough to keep up with accelerating costs for such items as food, rent, autos and medical services.

    Last month, excluding the volatile food and energy categories, so-called core prices rose just 0.3% from June, the smallest month-to-month increase since April. And compared with a year ago, core prices rose 5.9% in July, the same year-over-year increase as in June. 

    President Joe Biden has pointed to declining gas prices as a sign that his policies — including large releases of oil from the nation’s strategic reserve — are helping lessen the higher costs that have strained Americans’ finances, particularly for lower-income Americans and Black and Hispanic households.

    Yet Republicans are stressing the persistence of high inflation as a top issue in the midterm congressional elections, with polls showing that elevated prices have driven President Biden’s approval ratings down sharply.

    On Friday, the House is poised to give final congressional approval to a revived tax-and-climate package pushed by the president and Democratic lawmakers. Economists say the measure, which its proponents have titled the Inflation Reduction Act, will have only a minimal effect on inflation over the next several years.

    While there are signs that inflation may ease in the coming months, it will likely remain far above the Federal Reserve’s 2% annual target well into next year or even into 2024. Chair Jerome Powell has said the Fed needs to see a series of declining monthly core inflation readings before it would consider pausing its rate hikes. The Fed has raised its benchmark short-term rate at its past four rate-setting meetings, including a three-quarter-point hike in both June and July — the first increases that large since 1994.

    A blockbuster jobs report for July that the government issued Friday — with 528,000 jobs added, rising wages and an unemployment rate that matched a half-century low of 3.5% — solidified expectations that the Fed will announce yet another three-quarter-point hike when it next meets in September. Robust hiring tends to fuel inflation because it gives Americans more collective spending power.

    One positive sign, though, is that Americans’ expectations for future inflation have fallen, according to a survey by the Federal Reserve Bank of New York, likely reflecting the drop in gas prices that is highly visible to most consumers.

    Inflation expectations can be self-fulfilling: If people believe inflation will stay high or worsen, they’re likely to take steps — such as demanding higher pay — that can send prices higher in a self-perpetuating cycle. Companies then often raise prices to offset their higher labor costs. But the New York Fed survey found that Americans foresee lower inflation one, three and five years from now than they did a month ago.

    Supply chain snarls are also loosening, with fewer ships moored off Southern California ports and shipping costs declining. Prices for commodities like corn, wheat and copper have fallen steeply.

    Yet in categories where price changes are stickier, such as rents, costs are still surging. One-third of Americans rent their homes, and higher rental costs are leaving many of them with less money to spend on other items.

    Data from Bank of America, based on its customer accounts, shows that rent increases have fallen particularly hard on younger Americans. Average rent payments for so-called Generation Z renters (those born after 1996) jumped 16% in July from a year ago, while for baby boomers the increase was just 3%.

    Stubborn inflation isn’t just a U.S. phenomenon. Prices have jumped in the United Kingdom, Europe and in less developed nations such as Argentina.

    In the U.K., inflation soared 9.4% in June from a year earlier, a four-decade high. In the 19 countries that use the euro currency, it reached 8.9% in June compared with a year earlier, the highest since record-keeping for the euro began.

    Additional reporting by The Associated Press.

    Source: newsy.com

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    U.S. Economy Shows Another Decline, Fanning Recession Fears

    A key measure of economic output fell for the second straight quarter, raising fears that the United States could be entering a recession — or perhaps that one had already begun.

    Gross domestic product, adjusted for inflation, fell 0.2 percent in the second quarter, the Commerce Department said Thursday. That drop followed a decline of 0.4 percent in the first quarter. The estimates for both periods will be revised in coming months as government statisticians get more complete data.

    News of the back-to-back contractions heightened a debate in Washington over whether a recession had begun and, if so, whether President Biden was to blame. Economists largely say that conditions do not meet the formal definition of a recession but that the risks of one are rising.

    a bid to tame inflation, and the White House has argued that the slowdown is part of an inevitable and necessary transition to sustainable growth after last year’s rapid recovery.

    “Coming off of last year’s historic economic growth — and regaining all the private-sector jobs lost during the pandemic crisis — it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation,” Mr. Biden said in a statement issued after the release of the G.D.P. report. “But even as we face historic global challenges, we are on the right path, and we will come through this transition stronger and more secure.”

    rising consumer prices and declining spending, the American economy is showing clear signs of slowing down, fueling concerns about a potential recession. Here are other eight measures signaling trouble ahead:

    “When you’re skating on thin ice, you wonder about what it would take to push you through, and we’re on thin ice right now,” said Diane Swonk, the chief economist for KPMG.

    Matthew Martin, 32, is paying more for the butter and eggs that go into the intricately decorated sugar cookies he sells as part of a home business. At the same time, his sales are falling.

    “I guess people don’t have as much money to toss at cookies right now,” he said.

    Mr. Martin, a single father of two, is trying to cut back on spending, but it isn’t easy. He has replaced trips to the movies with day hikes, but that means spending more on gas. He is hoping to sell his house and move into a less expensive place, but finding a house he can afford to buy has proved difficult, especially as mortgage rates have risen. He has thought about finding a conventional 9-to-5 job to pay the bills, but he would then need to pay for child care for his 4-year-old twins.

    “Honestly, I’m not 100 percent sure what I’m going to do,” he said.

    defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months,” and it bases its decisions on a variety of indicators — usually only months after the fact.

    Some forecasters believe a recession can be avoided, if inflation cools enough that the Fed can slow interest rate increases before they take too much of a toll on hiring and spending.

    The economy still has important areas of strength. Job growth has remained robust, and, despite a recent uptick in filings for unemployment insurance, there is little sign of a broad increase in job losses.

    Households, in the aggregate, are sitting on trillions of dollars in savings built up earlier in the pandemic, which could allow them to weather higher prices and interest rates.

    “What drives the U.S. consumer is the healthy labor market, and we should really focus on job growth to capture the turning point in this business cycle,” said Blerina Uruci, an economist at T. Rowe Price. The Labor Department will release data on July’s hiring and unemployment next week.

    The lingering effects of the pandemic are making the economy’s signals harder to interpret. Americans bought fewer cars, couches and other goods in the second quarter, but forecasters had long expected spending on goods to fall as consumers shifted back toward prepandemic spending patterns. Indeed, economists argue that a pullback in spending on goods is needed to relieve pressure on overstretched supply chains.

    At the same time, spending on services accelerated. That could be a sign of consumers’ resilience in the face of soaring airfares and rental car rates. Or it could merely reflect a temporary willingness to put up with high prices, which will fade along with the summer sun.

    “There is going to be this element of, ‘We haven’t had a summer vacation in three years, so we’re just going to take one, no matter how much it costs,’” said Aditya Bhave, a senior economist for Bank of America. “The question is what happens after the summer.”

    Avital Ungar is trying to interpret the conflicting signals in real time. Ms. Ungar operates a small business running food tours for tourists and corporate groups in San Francisco, Los Angeles and New York.

    When restaurants closed and travel stopped early in the pandemic, Ms. Ungar had no revenue. She made it through by offering virtual happy hours and online cooking classes. When in-person tours came back, business was uneven, shifting with each new coronavirus variant. Ms. Ungar said demand remained hard to predict as prices rise and the economy slows.

    “We’re in two different types of uncertainty,” she said. “There was the pandemic uncertainty, and then there’s the economic uncertainty right now.”

    In response, Ms. Ungar has shifted her focus to higher-end tours, which she believes will hold up better than those aimed at more price-sensitive customers. And she is trying to avoid long-term commitments that could be difficult to get out of if demand cools.

    “Every annual plan I’ve done in the past three years has not happened that way,” she said. “It’s really important to recognize that what worked yesterday isn’t going to work tomorrow.”

    Lydia DePillis contributed reporting.

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    Sec. Yellen Downplays U.S. Recession Risk As Economic Reports Loom

    By Associated Press
    July 25, 2022

    Reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates.

    Treasury Secretary Janet Yellen on Sunday said the U.S. economy is slowing but pointed to healthy hiring as proof that it is not yet in recession.

    Yellen spoke on NBC’s “Meet the Press” just before a slew of economic reports will be released this week that will shed light on an economy currently besieged by rampant inflation and threatened by higher interest rates. The data will cover sales of new homes, consumer confidence, incomes, spending, inflation, and overall output.

    The highest-profile report will likely be Thursday, when the Commerce Department will release its first estimate of the economy’s output in the April-June quarter. Some economists forecast it may show a contraction for the second quarter in a row. The economy shrank 1.6% in the January-March quarter. Two straight negative readings is considered an informal definition of a recession, though in this case economists think that’s misleading.

    Instead, the National Bureau of Economic Research — a nonprofit group of economists — defines a recession as “a significant decline in economic activity that is spread across the economy and lasts more than a few months.”

    Yellen argued that much of the economy remains healthy: Consumer spending is growing, Americans’ finances, on average, are solid, and the economy has added more than 400,000 jobs a month this year, a robust figure. The unemployment rate is 3.6%, near a half-century low.

    “We’ve got a very strong labor market,” Yellen said. “This is not an economy that’s in recession.”

    Still, Yellen acknowledged the economy is “in a period of transition in which growth is slowing,” from a historically rapid pace in 2021.

    She said that slowdown is “necessary and appropriate,” because “we need to be growing at a steady and sustainable pace.”

    Slower growth could help bring down inflation, which at 9.1% is the highest in two generations.

    Still, many economists think a recession is on the horizon, with inflation eating away at Americans’ ability to spend and the Federal Reserve rapidly pushing up borrowing costs. Last week, Bank of America’s economists became the latest to forecast a “mild recession” later this year.

    And Larry Summers, the treasury secretary under President Bill Clinton, said on CNN’s “GPS” Sunday that “there’s a very high likelihood of recession,” as the Fed lifts interest rates to combat inflation. Those higher borrowing costs are intended to reduce consumer spending on homes and cars and slow business borrowing, which can lead to a downturn.

    On Wednesday, the Federal Reserve is likely to announce its second 0.75% point increase in its short-term rate in a row, a hefty increase that it hasn’t otherwise implemented since 1994. That will put the Fed’s benchmark rate in a range of 2.25% to 2.5%, the highest level since 2018. Fed policymakers are expected to keep hiking until its rate reaches about 3.5%, which would be the highest since 2008.

    The Fed’s hikes have torpedoed the housing market, as mortgage rates have doubled in the past year to 5.5%. Sales of existing homes have fallen for five straight months. On Tuesday, the government is expected to report that sales of new homes dropped in June.

    Fewer home sales also means less spending on items that typically come with purchasing a new house, such as furniture, appliances, curtains and kitchenware.

    Many other countries are also grappling with higher inflation, and slower growth overseas could weaken the U.S. economy. Europe is facing the threat of recession, with soaring inflation and a central bank that just last week raised interest rates for the first time in 11 years.

    European Central Bank President Christine Lagarde also sought to minimize recession concerns in a news conference last Thursday.

    “Under the baseline scenario, there is no recession, neither this year nor next year,” Lagarde said. “Is the horizon clouded? Of course it is.”

    Additional reporting by The Associated Press.

    Source: newsy.com

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    How Republican-led states are targeting Wall Street with ‘anti-woke’ laws

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    WASHINGTON, July 6 (Reuters) – Republican-led states have unleashed a policy push to punish Wall Street for taking stances on gun control, climate change, diversity and other social issues, in a warning for companies that have waded in to fractious social debates.

    Abortion rights are poised to be the next frontier.

    This year there are at least 44 bills or new laws in 17 conservative-led states penalizing such company policies, compared with roughly a dozen such measures in 2021, according to a Reuters analysis of state legislative agendas, public documents and statements.

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    While some of the individual moves have been reported, the scale and speed at which such “anti-woke” state laws and policies are ballooning and the challenges they are creating for Wall Street companies is detailed here for the first time.

    The Merriam-Webster dictionary defines “woke” as being aware of and actively attentive to issues of racial and social justice, but it is often used by conservatives to disparage progressive policies. The term has gained traction as America has become more politically polarized over issues from racial justice and LGBTQ rights to the environment and COVID-19 vaccines.

    Reuters counted bills considered and state laws passed in 2021 and 2022, although some state officials are also using executive powers to punish Wall Street.

    The growing restrictions show how America’s culture wars are creating new risks for some of the most high-profile U.S. companies, forcing them to balance pressure from workers and investors to take stances on hot-button issues with potential backlash from conservative policymakers.

    West Virginia and Arkansas this year, for example, stopped using BlackRock Inc (BLK.N) for certain services, due to its climate stance, according to West Virginia’s Republican treasurer Riley Moore and Arkansas media reports.

    In Texas, JPMorgan Chase & Co (JPM.N), Bank of America (BAC.N) and Goldman Sachs (GS.N) have been sidelined from the municipal bond market due to laws passed last year barring firms that “boycott” energy companies or “discriminate” against the firearms industry from doing new business with the state.

    In many cases, the measures target a range of companies, restricting their ability to conduct state business. But financial institutions have been primary targets due to the pivotal roles they play in the economy and the early stances many took on such issues as fossil fuel and firearms financing.

    Republicans say the policies of such companies deprive legitimate businesses of capital.

    “They’re using the power of their capital to push their ideas and ideology down onto the rest of us,” said Moore. He spearheaded a law, passed in March, refusing business to banks that “boycott” fossil fuel companies and has rallied officials from 16 other states to promise to adopt similar policies. read more

    With several major financial companies stepping in to cover travel costs for employees seeking abortions after the Supreme Court last month reversed federal abortion rights, the Republican push to sanction Wall Street for “woke” stances is likely to grow. read more

    Republican Texas lawmaker Briscoe Cain said he plans legislation to outlaw such coverage and prohibit companies that provide it from receiving any Texas state business or contracts.

    “No corporation doing business in Texas will be allowed to subsidize abortions or abortion travel in any manner,” Cain told Reuters in an email.

    NO BOYCOTTS

    The new curbs will make it harder for financial firms to do a range of state business, from bond underwriting to managing state funds, depository accounts and government credit cards, according to interviews with more than a dozen industry sources, bank lobbyists and lawyers.

    Such contracts can be worth several million dollars each, public procurement data shows.

    JPMorgan, for example, underwrote $3.2 billion worth of Texas muni bonds last year, compared with $210 million so far this year, Refinitiv data shows. Bank of America, which underwrote $3.7 billion in Texas muni bonds last year, has done none this year.

    Some smaller firms, including Ramirez & Co Inc and Loop Capital Markets, meanwhile, have jumped more than 10 places so far this year in the Texas muni bond market bookrunner rankings, based on deal values.

    To be sure, some Democratic-led states are also looking to tilt the scales. Washington state floated a “climate resiliency fee” for institutions that fund fossil fuel projects. California is considering a bill that would stop its pension plans, the country’s largest, from investing in fossil fuel companies.

    But states led by Democrats are not pursuing as many punitive measures, according to the review and sources.

    “We’re going to see a lot more of these statutes on one side of the coin or the other,” said John Crossley, a partner at K&L Gates who focuses on energy. “It’s going to make it more and more difficult for people to operate in these markets.”

    Spokespeople for the above financial firms declined to comment or did not respond to requests for comment.

    Financial firms say they aim to provide comprehensive healthcare benefits. They also argue government restrictions will drive up costs for Americans, and they dispute the characterization of their policies as boycotts.

    BlackRock, the world’s largest asset manager and a frequent target of Republican attacks, for example, has told Texas officials that while it has joined various efforts to cut greenhouse gas emissions, it supports fossil fuel companies. read more

    “The economy and financial system are best served when banks of all sizes can make their own banking and lending decisions about how to meet the needs of their communities based on their business model and risk tolerance,” said Joseph Pigg, senior vice president at the American Bankers Association.

    ANTI-WOKE PUSH

    The review shows “anti-woke” measures are gaining ground not only in traditional conservative strongholds such as Texas and Kentucky but also in so-called purple states – whose voters swing Democratic or Republican – such as Arizona and Ohio.

    The issues such measures target are also mushrooming.

    Guns and energy were the focus of the roughly dozen state laws and bills last year andof at least 30 legislative measures this year.

    But this year there were also more than a dozen bills relating to social and other issues, including “divisive concepts” like critical race theory – an academic theory that racial bias is baked in to U.S. laws and institutions – mandatory COVID-19 vaccines, or the use of “social credit scores,” the Reuters analysis shows.

    The latter is a theory that companies may take into account an individual’s political leanings when providing and pricing services.

    In April, for example, Florida made it illegal for companies to require training that might make staff feel “guilt” or “anguish” because of past actions by members of the same race. Unveiling the bill, Florida Governor Ron DeSantis flagged Bank of America as one company conducting such “woke” training.

    A bank spokesman said the materials were offered to hundreds of companies by a nonprofit and were not part of the bank’s training materials.

    While the measures reviewed do not target corporate abortion policies, Cain said he expected other Republican-led states to pursue business restrictions on companies with such policies.

    WALL STREET DIVISIONS

    The financial industry is struggling to repel the onslaught, the sources said. Its trade groups are mainly registered to lobby the federal government, while state-based groups are not always aligned with Wall Street companies’ priorities.

    Moore, for example, said West Virginia’s community banks supported his measures. The West Virginia Bankers Association declined to comment. The Texas Bankers Association said the group had not opposed the Texas curbs because its members were not in “consensus.”

    Wall Street’s adversaries, on the other hand, are united.

    Galvanized by what they say are efforts by Democrats in the federal government to push “woke” policies, oil and gas, firearms and conservative groups, including the Texas Public Policy Foundation and the National Shooting Sports Foundation (NSSF), are successfully pushing such curbs, according to industry sources and advocates. read more

    “Banks should stay out of making policy choices,” said Lawrence Keane, general counsel at the NSSF, which advocated for the Texas law targeting lenders’ firearms policies.

    The American Petroleum Institute, a major energy group, said it opposes discriminatory policies toward the industry.

    Jason Isaac, a former Texas lawmaker who leads energy advocacy for the Texas Public Policy Foundation and helped craft the Texas fossil-fuel law, said he was discussing similar laws with other states, adding: “This woke political ideology will continue unless we get it in check.”

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    Reporting by Pete Schroeder in Washington
    Additional reporting by Chris Prentice in Washington and Ross Kerber in Boston
    Editing by Michelle Price, Paritosh Bansal and Matthew Lewis

    Our Standards: The Thomson Reuters Trust Principles.

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    Payment Data Could Become Evidence of Abortion, Now Illegal in Some States

    Digital payments are the default for millions of women of childbearing age. So what will their credit and debit card issuers and financial app providers do when prosecutors seek their transaction data during abortion investigations?

    It’s a hypothetical question that’s almost certainly an inevitable one in the wake of the overturning of Roe v. Wade last week. Now that abortion is illegal in several states, criminal investigators will soon begin their hunt for evidence to prosecute those they say violated the law.

    Medical records are likely to be the most definitive proof of what now is a crime, but officials who cannot get those may look for evidence elsewhere. The payment trail is likely to be a high priority.

    HIPAA — which governs the privacy of a patient’s health records — permits medical and billing records to be released in response to a warrant or subpoena.

    “There is a very broad exception to the HIPAA protections for law enforcement,” said Marcy Wilder, a partner and co-head of the global privacy and cybersecurity practice at Hogan Lovells, a law firm. But Ms. Wilder added that the information shared with law enforcement officials could not be overly broad or unrelated to the request. “That is why it matters how companies and health plans are interpreting this.”

    Card issuers and networks like Visa and Mastercard generally do not have itemized lists of everything that people pay for when they shop for prescription drugs or other medications online, or when they purchase services at health care providers. But evidence of patronage of, say, a pharmacy that sells only abortion pills could give someone away.

    a new state law authorizes residents to file lawsuits against anyone who helped facilitate an abortion.

    “With the ruling only coming down late last week, it’s premature to understand the full impact at the state level,” Brad Russell, a USAA spokesman, said via email. “However, USAA will always comply with all applicable laws.”

    American Airlines Credit Union, Bank of America, Capital One, Discover, Goldman Sachs, Prosperity Bank USA, Navy Federal Credit Union, US Bank, University of Wisconsin Credit Union, Wells Fargo and Western Union did not return at least two messages seeking comment.

    American Express, Bank of America, Goldman Sachs, JPMorgan and Wells Fargo have all announced their intentions to reimburse employees for expenses if they travel to other states for abortions. So far, none have commented about how they would respond to a subpoena seeking the transaction records of the very employees who would be eligible for employer reimbursement.

    Amie Stepanovich, vice president of U.S. policy at the Future of Privacy Forum, a nonprofit focused on data privacy and protection, said warrants and subpoenas can be accompanied by gag orders, which can prevent companies from even alerting their customers that they’re being investigated.

    “They can choose to battle the use of gag orders in court,” she said. “Sometimes they win, sometimes they don’t.”

    In other instances, prosecutors may not say exactly what they’re investigating when they ask for transaction records. In that case, it’s up to the financial institution to request more information or try to figure it out on its own.

    Paying for abortion services with cash is one possible way to avoid detection, even if it isn’t possible for people ordering pills online. Many abortion funds pay on behalf of people who need financial help.

    But cash and electronic transfers of money are not entirely foolproof.

    “Even if you are paying with cash, the amount of residual information that can be used to reveal health status and pregnancy status is fairly significant,” said Ms. Stepanovich, referring to potential bread crumbs such as the use of a retailer’s loyalty program or location tracking on a mobile phone when making a cash purchase.

    In some cases, users may inadvertently give up sensitive information themselves through apps that track and share their financial behavior.

    “The purchase of a pregnancy test on an app where financial history is public is probably the biggest red flag,” Ms. Stepanovich said.

    Other advocates mentioned the possibility of using prepaid cards in fixed amounts, like the kinds that people can buy off a rack in a drugstore. Cryptocurrency, they added, usually does leave enough of a trail that achieving anonymity is challenging.

    One thing that every expert emphasized is the lack of certainty. But there is an emerging gut feeling that corporations will be in the spotlight at least as much as judges.

    “Now, these payment companies are going to be front and center in the fight,” Ms. Caraballo said.

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