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  • House speaker crisis is a symptom of historic Republican divisions | CNN Politics

    House speaker crisis is a symptom of historic Republican divisions | CNN Politics

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    CNN
     — 

    You might have thought it was a Democrat who recently said that House Republicans were in the “same stupid clown car with a different driver.” And while I’m sure many Democrats feel that way, it was Republican Rep. Dusty Johnson who uttered that memorable phrase.

    The South Dakota congressman was referring to the current House mess after eight Republicans voted (with Democrats) to oust Kevin McCarthy as speaker.

    But whether or not the House Republican majority elects a new speaker anytime soon is irrelevant. What we’re seeing now is something we haven’t seen in modern times.

    This episode is symptomatic of a historic Republican divide in the House: It’s not just over ideology but also over trust in their leaders to compromise in a way that makes the party happy.

    Much of the recent discussion over House Republican divisions tries to frame it along the right-left ideological spectrum. Those who voted against McCarthy are more conservative, on average, than the GOP at large – and this is a very conservative House majority. But there are plenty of Republicans who are quite conservative and didn’t vote McCarthy out (think Texas Rep. Chip Roy, for example).

    What’s also going on is a split over whether Republicans should try to govern by way of compromise. Are people willing to line up behind the compromises House GOP leaders have made with Democrats to keep the government going?

    Analyzing roll call votes in Congress can offer some answers. Not surprisingly, the Republican representative who has been the least friendly to party leadership this Congress is Florida’s Matt Gaetz, according to a metric produced by the academics at Voteview.

    More importantly, the difference on this score between those House Republicans most open to compromise and friendly to party leadership and those most opposed (i.e., the top fifth and bottom fifth percentiles) is wider than it has been in the past 80 years. These lawmakers on the edges of the conference are so important because of how narrow the current GOP majority is – all it takes is a few members to topple the speaker, as we saw earlier this month.

    Representatives like Gaetz didn’t pop out of nowhere. They are in the Congress because people elected them.

    Specifically, many of the same people who really like former President Donald Trump.

    Take a look at a question asked in our latest CNN/SSRS survey published on Thursday. We asked whether Republicans in Congress should “stand firm on beliefs without compromise, even if not much gets done in Washington, or work across the aisle to get things done in Washington, even if it means losing out on some high-priority policies?”

    A majority of voters who are behind Trump in the 2024 GOP primary contest (52%) wanted Republicans in Congress to stand firm. Among Republicans not behind Trump, just 23% preferred lawmakers who didn’t compromise. Most (77%) yearned for congressional Republicans who worked across the aisle.

    Of course, most Republicans (58%) are backing Trump in the primary, the CNN poll found. Part of Trump’s appeal is that he isn’t a conventional Republican who does business as usual.

    Therefore, it shouldn’t be surprising that a majority of Trump supporters (56%) approve of McCarthy being removed as speaker after he made a deal with Democrats to avoid a government shutdown.

    Among all other Republicans, only 37% approved of McCarthy’s ousting.

    I should note that among Republican voters, the idea of compromising to avert a government shutdown isn’t terribly different than it was a decade ago. What does seem to have changed, to some degree, is the people in Congress.

    GOP lawmakers who were seen as anti-establishment a decade ago – like Kentucky’s Thomas Massie, who voted to retain McCarthy as speaker – are apparently not anti-establishment enough these days.

    Folks like Massie have been pushed aside for folks like Gaetz. For at least some Republicans in Congress, this now is the party of Trump.

    Another key difference is that the current size of the House GOP majority is more reminiscent of the late 1990s and early 2000s than the tea party era of a decade ago.

    Some 25 years ago, NBC polling found that Republicans were far more open to compromise than they were to standing on principle. When it came to negotiations with Democratic President Bill Clinton, 63% of Republicans wanted compromise and only 28% wanted to stand on principles when forced to pick between the two choices.

    Today, Republicans again have a slim majority in the House – but with a party electorate willing to tolerate a lot in the name of principle. It’s no surprise then that we’re dealing with a House GOP leadership fight that seems more fitting of an Aaron Sorkin script than the real world.

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  • Google’s antitrust showdown: What’s at stake for the internet search titan | CNN Business

    Google’s antitrust showdown: What’s at stake for the internet search titan | CNN Business

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    CNN
     — 

    Google will face off in court Tuesday against government officials who have accused the company of antitrust violations in its massive search business, kicking off a long-anticipated legal showdown that could reshape one of the internet’s most dominant platforms.

    The trial beginning this week in Washington before a federal judge marks the culmination of two ongoing lawsuits against Google that started during the Trump administration. Legal experts describe the actions as the country’s biggest monopolization case since the US government took on Microsoft in the 1990s.

    In separate complaints, the Justice Department and dozens of states accused Google in 2020 of abusing its dominance in online search by allegedly harming competition through deals with wireless carriers and smartphone makers that made Google Search the default or exclusive option on products used by millions of consumers. The complaints eventually consolidated into a single case.

    Google has maintained that it competes on the merits and that consumers prefer its tools because they are the best, not because it has moved to illegally restrict competition. Google’s search business provides more than half of the $283 billion in revenue and $76 billion in net income Google’s parent company, Alphabet, recorded in 2022. Search has fueled the company’s growth to a more than $1.7 trillion market capitalization.

    Now, the company is set to defend itself in a multiweek trial that could upend the way Google distributes its search engine to users. The case is expected to feature testimony from high-profile witnesses including former employees of Google and Samsung, along with executives from Apple, including senior vice president Eddy Cue. It is the first case to go to trial in a series of court challenges targeting Google’s far-reaching economic power, testing the willingness of courts to clamp down on large tech platforms.

    “This is a backwards-looking case at a time of unprecedented innovation,” said Google President of Global Affairs Kent Walker, “including breakthroughs in AI, new apps and new services, all of which are creating more competition and more options for people than ever before. People don’t use Google because they have to — they use it because they want to. It’s easy to switch your default search engine — we’re long past the era of dial-up internet and CD-ROMs.”

    The trial may also be a bellwether for the more assertive antitrust agenda of the Biden administration.

    In its initial complaint, the US government alleged in part that Google pays billions of dollars a year to device manufacturers including Apple, LG, Motorola and Samsung — and browser developers like Mozilla and Opera — to be their default search engine and in many cases to prohibit them from dealing with Google’s competitors.

    As a result, the complaint alleges, “Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States.”

    The lawsuit also alleges that Google’s Android operating system deals with device makers are anticompetitive, because they require smartphone companies to pre-install other Google-owned apps, such as Gmail, Chrome or Maps.

    At the time the lawsuit was first filed, US antitrust officials did not rule out the possibility of a Google breakup, warning that Google’s behavior could threaten future innovation or the rise of a Google successor.

    Separately, a group of states, led by Colorado, made additional allegations against Google, claiming that the way Google structures its search results page harms competition by prioritizing the company’s own apps and services over web pages, links, reviews and content from other third-party sites.

    But the judge overseeing the case, Judge Amit Mehta in the US District Court for the District of Columbia, tossed out those claims in a ruling last month, narrowing the scope of allegations Google must defend and saying the states had not done enough to show a trial was necessary to determine whether Google’s search results rankings were anticompetitive.

    Despite that ruling, the trial represents the US government’s furthest progress in challenging Google to date. Mehta has said Google’s pole position among search engines on browsers and smartphones “is a hotly disputed issue” and that the trial will determine “whether, as a matter of actual market reality, Google’s position as the default search engine across multiple browsers is a form of exclusionary Conduct.”

    In January, meanwhile, the Biden administration launched another antitrust suit against Google in opposition to the company’s advertising technology business, accusing it of maintaining an illegal monopoly. That case remains in its early stages at the US District Court for the Eastern District of Virginia.

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  • Bipartisan House caucus leaders say ‘all options are on the table’ as shutdown looms | CNN Politics

    Bipartisan House caucus leaders say ‘all options are on the table’ as shutdown looms | CNN Politics

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    CNN
     — 

    With government funding slated to run out September 30, the leaders of the bipartisan House Problem Solvers Caucus told CNN on Sunday that “all options are on the table” to force a vote on their alternative stopgap plan to avert a shutdown.

    There is no consensus plan to keep the government funded, and persistent opposition by a bloc of conservatives to House GOP leadership’s agenda has made any effort to pass a stopgap bill in the House a major challenge.

    While the caucus leaders, Reps. Brian Fitzpatrick and Josh Gottheimer, said they hope House Speaker Kevin McCarthy puts the measure on the floor, they said they have spoken with the parliamentarian about other avenues and raised the possibility of using a discharge petition – an arcane procedural step – to force a vote.

    The procedural tool can be used to force a floor vote, but only if a majority of House members sign on in support. Discharge petitions rarely succeed because of how high the threshold is to clear.

    “We’re going to do whatever it takes to get that bill on the floor. … A discharge petition is one of several options, and a group of us met with the parliamentarian this past week to discuss all the options we have to force a vote on our bill,” Fitzpatrick, a Pennsylvania Republican, told CNN’s Dana Bash on “State of the Union.”

    Gottheimer, a New Jersey Democrat, added: “I think our plan is reasonable. And it deals with the extremes and … instead of burning the place down as, Speaker McCarthy said of the far right, it actually provides a reasonable, commonsense solution working with people like Brian Fitzpatrick who want to get things done.”

    The caucus last week endorsed a potential backup plan if House Republicans are unable to pass their stopgap bill alone. The bill would fund the government through January 11 and include Ukraine aid, disaster response and border security provisions.

    “This is a decision the speaker is gonna have to make. He can bring that reasonable bill to the floor that we’ve proposed, and I guarantee you’re gonna get Democrats (and) Republicans coming together to support it and we can keep the lights on,” Gottheimer said.

    McCarthy, who is under pressure and has faced threats of an ouster, said Saturday he still lacks support from a handful of GOP hardliners to put a stopgap measure on the floor, making a shutdown likely.

    Rep. Tim Burchett, one of the holdouts, told CNN on Sunday he is still a “no” on passing a stopgap funding bill.

    “No, ma’am,” the Tennessee Republican told Bash. “I think it’s completely blowing away our duties. We have a duty to pass a budget.”

    He also said he would strongly consider support for ousting McCarthy if the California Republican cuts a deal with Democrats to keep the government open.

    “That would be something I’d look strongly at, ma’am, if we do away with our duty that we said we’re going to do,” Burchett said.

    McCarthy has been hoping the momentum of a handful of appropriations bills, which will head to the House floor this week, would bring some of those holdouts into the fold. But Burchett’s comments Sunday are the latest indication that hope may be in vain.

    “We’re sticking to our guns and all of a sudden we’re the bad guys because we want to balance our budget,” Burchett said.

    Another holdout, Rep. Matt Gaetz of Florida, said Sunday that McCarthy is in “breach” of promises he made regarding government spending when elected speaker.

    “We should have separate single-subject spending bills. Kevin McCarthy promised that in January, he is in breach of that promise, so I’m not here to hold the government hostage, I’m here to hold Kevin McCarthy to his word,” Gaetz said on Fox News’ “Sunday Morning Futures.”

    Gaetz added it would be fine if some departments shut down for a few days if it meant measures such as the Homeland Security appropriations bill passed first.

    “If, you know, the (departments) of Labor and Education have to shut down for a few days as we get their appropriations in line, that’s certainly not something that is optimal, but I think it’s better than continuing on the current path we are to America’s financial ruin,” Gaetz said.

    The holdouts’ comments come as the White House urges Republicans to find a solution, warning that a government shutdown could threaten crucial federal programs.

    “Funding the government is one of the most basic responsibilities of Congress, and it’s time for Republicans to start doing the job America elected them to do,” President Joe Biden said Sunday at an event held by the Congressional Black Caucus Foundation.

    Speaking on Sunday to CNN’s Bash, Transportation Secretary Pete Buttigieg called on House Republicans to “come to their senses and keep the government running.”

    “This is something that can and should be prevented,” Buttigieg said on “State of the Union.” He echoed Biden administration talking points, saying Republicans should hold up their end of the agreement made this year during debt ceiling negotiations.

    The White House has warned of massive disruptions to air travel if the government shuts down, as tens of thousands of air traffic controllers and Transportation Security Administration personnel will have to work without pay.

    “They’re under enough stress as it is doing that job without having to come into work with the added stress of not receiving a paycheck,” Buttigieg said of air traffic controllers.

    He added, “The American people don’t want to shutdown. From what I can tell, the Senate is ready to go. The administration is ready to go. House Republicans need to come to their senses and keep the government running.”

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  • House Republicans are making a gamble with a possible Jim Jordan speakership | CNN Politics

    House Republicans are making a gamble with a possible Jim Jordan speakership | CNN Politics

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    CNN
     — 

    If House Republicans elect hard-charging Jim Jordan as speaker on Tuesday, they will be picking an election denier who is known for working to shut down the government rather than running it.

    The party would be ending its two-week speakership debacle, but it’d be elevating a ringleader in former President Donald Trump’s attempt to overthrow the 2020 election into a position that is second in the line of succession behind President Joe Biden.

    A Jordan speakership would represent a huge victory for Trump, given the Judiciary chairman’s record of using his power to target Democratic presidential candidates, including Biden and 2016 nominee Hillary Clinton. Before the midterm elections last year, for instance, Jordan said at the Conservative Political Action Conference that he’d use probes into the Biden administration to “frame up the 2024 race” for Trump.

    He has been as good as his word, working to highlight the ex-president’s claims that the federal government has been “weaponized” against him in an effort to distract from the four criminal trials the GOP front-runner is now facing. And Jordan has been a prominent player in the impeachment investigation opened against Biden, despite the failure of the GOP to provide evidence that the president personally profited from the business ventures of his son in places like China and Ukraine.

    Jordan’s hopes of becoming speaker increased dramatically over the weekend as he began to turn holdouts amid an intense lobbying campaign. Some key moderates who had previously said they wouldn’t back the Ohio Republican had changed course by Monday. But given the tiny House GOP majority, Jordan can only lose a small number of Republicans and still win the job in a vote in the full House, which is expected at noon on Tuesday. Florida Rep. Gus Bilirakis will be away from the Capitol on Tuesday, further complicating the vote math for Jordan, making it so that he can only lose three Republicans.

    But this is a temporary drop until the Florida congressman returns to Washington on Tuesday evening.

    Several high-profile dissidents still insist they will only vote for former Speaker Kevin McCarthy or are firmly against Jordan, who co-founded the conservative Freedom Caucus that was instrumental in the demise of the last three Republican speakers. Jordan’s opponents have cited his role in the run-up to the January 6, 2021, insurrection – when he discussed plans to object to the results – and have concerns that his hardline positions could alienate crucial swing voters next year.

    If Jordan wins the speakership, his reputation for resistance to compromise is likely to immediately fuel fresh fears of a government shutdown caused by Republican demands for massive spending cuts. Facing a right-wing revolt, McCarthy was forced to use Democratic votes to pass a stopgap funding measure. And he paid for his effort to stave off a national crisis, which could have hurt millions of Americans, with his job. Jordan has been among the right-wing Republicans who want to use their power to bulldoze through their agenda despite the fact that Democrats control the Senate and the White House.

    As speaker, Jordan would be in control of half of one of the three branches of the US government – a role that confers duties to the Constitution and the national interest far greater than those that weigh on individual members. By definition, he’d be an insider after years as an insurgent, a switch that could be a challenge. Fellow Ohioan and former Republican House Speaker John Boehner told CBS News in a 2021 interview referring to Jordan: “I just never saw a guy who spent more time tearing things apart – never building anything, never putting anything together.”

    A Jordan victory would mark one of the most significant milestones in Washington Republicans’ embrace of an extreme right-wing populist, nationalist ideology that is more dedicated to tearing political institutions down than using them to forge change. And it would reward the eight Republicans who voted with Democrats to topple McCarthy. More broadly, it would remove power from the party’s traditional Washington, DC, political establishment, which many of the party’s grassroots voters despise, and place the Freedom Caucus at the pinnacle of power in the House.

    The shift toward Jordan over the weekend, however, may also reflect a realization by lawmakers that the optics of continued chaos in the House are disastrous for the party and sends a message of American weakness amid a raging crisis in the Middle East.

    New York Rep. Marc Molinaro, who represents a district Biden would have won in 2020 under redrawn lines, announced Monday evening that he’s backing Jordan. “What I care deeply about is getting back to governing. And having been home over the weekend, I can tell you that most people I talk to just want us to fight inflation, just want us to secure the border, just want us to govern on their behalf. And truly they just want this House to function,” he told CNN.

    And if there is anyone who could keep far-right flamethrowers in line, it is Jordan. After all, he’s one of them. If wins the speakership, he’d potentially face a choice whether to at least seek a modicum of governance to show voters that the GOP can get results ahead of the 2024 election. Just as President Richard Nixon had the political cover as a hardline anti-Communist to forge an opening to Maoist China, Jordan might have more leeway than other potential Republican leaders to make painful concessions and keep his hardliners in line.

    But choosing Jordan to end the impasse would also represent a huge risk for the GOP. His close alliance with Trump, who has endorsed the Ohio Republican for the top job, could alienate moderate voters in districts that paved the way to the party’s narrow majority in last year’s midterms. His record of full bore confrontation could exacerbate a showdown with the Democratic Senate and the White House over spending that could shut down the government by the middle of November and cause a backlash against Republicans.

    And the qualities that his supporters see in Jordan – the fearsome use of power to drum up investigations against political opponents and a pugilistic refusal to find middle ground – are not those traditionally associated with successful speakers. Jordan has no history of bringing disparate factions of his party together – quite the opposite. His brand of politics is built around his history as a champion wrestler in college. “I look at it like a wrestling match,” Jordan told the New York Times earlier this year, referring to his staccato interrogations of witnesses in hearings that made him a hero on conservative media and a Trump favorite.

    Another knock on Jordan is that he’s not known as a prolific fundraiser – one of the most important jobs of a party leader in the House. McCarthy was known for his lucrative hauls that he used to boost candidates and foster loyalty from his supporters. In fact, Jordan has actively worked against some fellow members in the past, with the political arm of the Freedom Caucus backing primary challengers to 10 GOP incumbents over the last few cycles.

    The job of the House has traditionally been to pass laws. And by that measure, Jordan is one of the least effective legislators of his generation, according to the Center For Effective Lawmaking, a joint project of the University of Virginia and Vanderbilt University.

    Still, Jordan’s supporters worked to mitigate his liabilities heading into a floor vote that would force opponents to publicly renounce him at the risk of drawing primary challenges. House Armed Services Chairman Mike Rogers of Alabama, who had been vehemently anti-Jordan, flipped after what he described as “two cordial, thoughtful and productive” conversations with the prospective speaker and securing his support for a strong defense bill. Sources familiar with Jordan’s pitch to the GOP conference told CNN’s Annie Grayer and Melanie Zanona Monday that the Ohio congressman had promised to fundraise hard for Republicans across the country and that he would also do what he could to protect moderates – potentially by ensuring that they don’t face primary challenges next year from hardline pro-Trump candidates.

    However, Zanona and Grayer also reported that some big GOP donors had vowed not to invest in the House majority under Jordan and would instead concentrate their resources on flipping the Senate next year. That GOP coolness highlights how a 2024 Republican slate featuring Trump, the front-runner for the presidential nomination, and Jordan as the most powerful Republican in Washington could delight Democrats campaigning in the battleground districts that could decide the election.

    Rep. Don Bacon, who represents a swing district in Nebraska, emerged from a meeting of Republican lawmakers on Monday evening resolved not to support Jordan, after expressing concerns that handing him the speaker’s gavel would represent a victory for the hardliners who ended McCarthy’s tenure. Bacon said he was inclined to vote for McCarthy even though the former speaker is not standing, at least in a first ballot. “I’m going to vote tomorrow and we’ll take it after that one at a time,” Bacon said.

    Another anti-McCarthy holdout is Rep. Ken Buck of Colorado, who has said “part of” the reason he is opposed to Jordan is his behavior after the 2020 election. According to the House select committee that investigated the January 6, 2021, attack on the US Capitol, Jordan was a “significant player” in Trump’s efforts to overturn the election and to block the certification of Biden’s victory in Congress, including in multiple conversations with Trump and senior White House officials.

    But some key lawmakers appear to have made their peace with Jordan’s potential speakership, partly because of the damage being done to the GOP and their potential reelection prospects by self-indulgent internal battles. New York Rep. Mike Lawler, a freshman who is one of the most endangered Republicans next year and has been a strong supporter of McCarthy, called on the House to get back to work. “At the end of the day, we need to get back to the work of the American people,” Lawler told CNN’s Jake Tapper on Monday. He said he told Jordan on Friday that he was not a “hell no” and that he’d only back him if he had the votes to become speaker.

    He shrugged off attacks that are already coming from Democrats over his possible vote for Jordan.

    “They are going to attack me no matter what I do. That’s their job, that’s their objective. They want to get back into the majority,” Lawler told Tapper.

    “My constituents know who I am, they know where I stand on these issues,” Lawler said, noting how he had fought to raise the government’s borrowing limit earlier this year, averting a debt default, and to keep the government open.

    Lawler might be right. But the potential chaos and discord Jordan could sow may give voters fresh reasons to vote against Lawler by November of next year.

    This story has been updated with additional reporting.

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  • Plunging sales of new homes show China’s real estate crisis isn’t over | CNN Business

    Plunging sales of new homes show China’s real estate crisis isn’t over | CNN Business

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    Hong Kong
    CNN
     — 

    Plunging sales of new homes and the reported cancellation of a share placement by China’s biggest property developer on Tuesday underscored the depth of the country’s real estate crisis.

    Reports that Country Garden had abruptly pulled an attempt to raise $300 million by issuing new shares in Hong Kong coincided with the release of data late Monday showing new home sales by China’s 100 biggest developers dropped by 33% in July from a year ago.

    “No definitive agreement has been entered into with respect to the proposed transaction and the company is not considering the proposed transaction at this stage,” Country Garden said in a statement. Its shares fell as much as 11% on the Hong Kong stock exchange. They were last down 7%.

    The drop in new home sales in China is the steepest monthly decline since July 2022. For the first seven months of this year, new home sales by the 100 developers fell 4.7% from a year earlier.

    “Overall, the current market demand and purchasing power are overdrawn, and industry confidence is still at a low level,” the China Real Estate Information Corp. — a leading industry data provider — said in a statement.

    China’s huge property industry was long an important engine of economic growth, accounting for as much as 30% of the country’s GDP. Investors see the revival of the sector as crucial to the recovery of the world’s second largest economy following three years of self-imposed coronavirus pandemic isolation.

    “Recent signals from top policymakers… suggest Beijing is getting increasingly worried about growth and have clearly recognized the need to bolster the faltering property sector,” said Nomura analysts on Monday.

    “They are starting a new round [of] property easing, and may introduce some stimulus to redevelop old districts of large cities.”

    Premier Li Qiang pledged Monday to “adjust and optimize” policies to ensure the healthy and stable development of the property market, according to a readout from a State Council meeting. Cities should roll out measures that meet their own needs, he added, without elaborating on the details.

    Four of the biggest cities in China said they would introduce measures to boost local property markets, also without announcing specific new policies.

    Shanghai’s housing regulator said Monday it would implement the pledges of the top policymakers. Guangzhou, Shenzhen, and Beijing also made similar statements over the weekend.

    “So far these steps are still far from enough to stem the downward spiral of the property sector, in our view,” Nomura analysts said, adding that there is no clear policy roadmap to boost the sector at a time of slow growth in household income, weak confidence about the future and a shrinking population.

    Chinese households have grown reluctant to purchase new homes, as the now-defunct Covid curbs, falling home prices and rising unemployment have discouraged would-be buyers.

    A series of major defaults by property giants in 2021 also undermined confidence in the sector and led to many home buyers paying for apartments they never received, sparking protests.

    As a result China’s property industry has been mired in a historic downturn in the past two years.

    New home prices had fallen for 16 straight months through last December. They stabilized earlier this year, but then resumed their decline in June, highlighting the challenges of reviving demand.

    Last month, the People’s Bank of China said it would give developers another 12 months to repay their outstanding loans due this year.

    And late last year Beijing unveiled a 16-point plan to ease a liquidity crisis in the real estate sector. Key measures include allowing banks to extend maturing loans to developers and boosting other funding channels for property firms.

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  • China tries to boost consumer spending as factory sector contracts for fourth month | CNN Business

    China tries to boost consumer spending as factory sector contracts for fourth month | CNN Business

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    Hong Kong
    CNN
     — 

    China unveiled a series of measures to boost domestic consumption Monday after more gloomy data about the health of the economy. But it stopped short of announcing a major package of new spending or tax cuts.

    The official Purchasing Managers’ Index (PMI), which measures activity in the manufacturing sector at mainly larger business and state-owned firms, came in at 49.3 in July, according to data released by the National Bureau of Statistics on Monday.

    That result was slightly up compared with 49 in June but the industry has now contracted each month since April. A PMI reading above 50 indicates expansion, while anything below that level shows contraction.

    The official non-manufacturing PMI, which looks at activities in services and construction, also fell, to 51.5. That is the lowest rate since December, when the index hit its weakest level since February 2020 at the start of the coronavirus pandemic.

    By the end of last year, Covid infections were sweeping through China after Beijing abruptly ended nearly three years of draconian pandemic restrictions that initially kept the virus at bay while hammering local businesses and isolating the world’s second largest economy.

    “Boosting consumption is the key in stimulating recovery and expanding demand,” said Li Chunlin, deputy director of the National Development and Reform Commission (NDRC), the country’s top economic planner, at a press conference in Beijing.

    The NDRC on Monday released a policy document containing 20 measures to restore and expand consumption.

    “China’s official PMI data provides little encouragement that the economy is turning the corner,” said Robert Carnell, regional head of research for Asia-Pacific at ING Group.

    Monday’s manufacturing and service sector figures are just latest data points that show how China’s economy is struggling.

    China’s GDP grew just 0.8% in the second quarter of this year, down significantly from tepid 2.2% growth it registered in the first three months of 2023. Consumer spending has weakened, the housing market has slumped, and the youth unemployment rate has soared to a fresh record of 21.3%.

    Much like many other parts of the world this summer, extreme weather has also posed a threat to economic growth.

    In recent weeks parts of China have been hit by a double whammy of heat waves and torrential rain, threatening to strain power supplies and disrupt factory production as well as crop yields.

    The frail data has prompted Beijing to increase efforts to shore up growth, with a series of announcements in recent weeks.

    The measures announced by the NDRC on Monday cover a wide range of industries, including automobile, real estate, electronic products, and services industry.

    Officials from four other central agencies, including the Ministry of Industry and Information Technology and the Ministry of Culture and Tourism, also said at the press conference that they would roll out specific measures to support their respective industries.

    They include increasing consumer loans to encourage car purchases, building more EV charging facilities, building more affordable homes for young people, supporting the consumption of wearable devices and smart products, and encouraging local governments to hold food, music, and sports festivals to attract tourists.

    On Friday, China unveiled a two-year plan to boost so-called “light industry,” which includes consumer packaged goods, consumer durables, sports and leisure equipment, and light industrial machinery, according to a statement jointly published by the NDRC, MIIT, and the Ministry of Commerce.

    The goal is to speed up the industry’s growth to 4% for 2023 and 2024, after it only registered a 0.4% expansion in the first half of the year, the statement said.

    In the past weeks, authorities have tried to appear more proactive in supporting the private sector, a key growth driver that has been hammered by Covid restrictions as well as a sweeping regulatory crackdown under Chinese leader Xi Jinping that targeted sectors from technology to private education.

    However, these micro measures have not translated into the sort of “sizable fiscal policy stimulus” many have expected, Carnell said.

    “Looking forward, policy support is needed to prevent China’s economy from slipping into a recession,” said analysts from Capital Economics.

    “Unless concrete support is rolled out soon, the recent downturn in demand risks becoming self-reinforcing.”

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  • Pelosi says McCarthy is ‘playing politics’ with impeachment expungement | CNN Politics

    Pelosi says McCarthy is ‘playing politics’ with impeachment expungement | CNN Politics

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    CNN
     — 

    Nancy Pelosi said on Sunday that House Speaker Kevin McCarthy was “playing politics” with the idea of expunging former President Donald Trump’s two impeachments.

    “Kevin is, you know, playing politics. It is not even clear if he constitutionally can expunge those things. If he wants to put his members on the spot, his members in difficult races on the spot, that is a decision he has to make. But this is not responsible,” Pelosi told CNN’s Dana Bash on “State of the Union.”

    McCarthy said in a private call with Trump that he personally backed the idea of expunging the former president’s two impeachments and would bring it up to the conference to gauge support. However, he has not scheduled a floor vote, and when asked about the idea on Thursday, McCarthy said it should “go through committee like anything else.”

    The California Republican has been working overtime to placate Trump after an interview last month in which McCarthy said he thinks the former president can win in 2024 but did not know if he was the “strongest” candidate, prompting outrage from Trump advisers and allies. McCarthy called Trump to apologize after the interview, claiming he misspoke on CNBC, sources told CNN.

    “This is about being afraid. As I have said before, Donald Trump is the puppeteer. And what does he do all the time but shine the light on the strings? These people look pathetic,” Pelosi said Sunday.

    Pelosi also labeled the recent “Weaponization of the Federal Government” hearing from a GOP-led panel as “clown show.”

    The hearing saw Robert F. Kennedy Jr. testify that he has never been anti-vaccine, racist or antisemitic, despite the fact that he has promoted a litany of conspiracies and discriminatory statements over the years.

    Republicans had called Kennedy and others as witnesses as part of their probe into alleged censorship against conservatives at large technology companies.

    “What a ridiculous clown show, again, on the part of the Republicans,” Pelosi said.

    A member of the House of Representatives since 1987, Pelosi would not say whether she plans to run for reelection.

    Turning to the economy, Pelosi said Sunday she was “so proud” of President Joe Biden’s record but urged him to “get out there” and tout recent economic trends.

    “This president did such a remarkable job. He is a person of such knowledge, such vision for the country, such knowledge of the issues, such strategic thinking and such a legislator, and, on top of it all, a person who connects with the American people,” she said.

    US annual inflation slowed to 3% last month, according to the Consumer Price Index by the Bureau of Labor Statistics. That’s a sharp cooldown from June of last year, when surging energy costs helped inflation spike to 9.1%

    The US economy added 209,000 jobs in June and the unemployment rate was 3.6%, the BLS reported. The monthly job gains represent a significant slowing from the breakneck pace of employment growth seen during the recovery from the pandemic; however, the current labor market is outpacing what was seen in and prior to February 2020.

    “He’s just going to have to make sure the American people know at that kitchen table what this means to them,” she said.

    Pelosi separately called it “completely, totally ridiculous” that Alabama GOP Gov. Kay Ivey approved a new congressional map with just one majority-Black district, despite a court order calling for the redrawn lines to create two majority-Black districts or “something quite close to it.”

    “Something is wrong with that picture, and it’s larger. You see the racism that is happening in our country,” Pelosi said Sunday.

    She added: “What has happened to the Republican Party that they have taken it to this?”

    This story has been updated with additional information.

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  • Why are far-right parties on the march across Europe? | CNN

    Why are far-right parties on the march across Europe? | CNN

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    CNN
     — 

    While the Anglosphere was wracked by a burst of populism in 2016, most European countries proved remarkably resilient. Long-held grievances in the United Kingdom and United States fueled Brexit and took Donald Trump to the White House, but Europe – seeming at times to look aghast across the Channel and Atlantic – appeared largely immune. Brussels had fretted about a “Brexit domino effect.” In reality, the opposite came to be.

    In the five years from 2016, French centrism spurted out a new political party led by Emmanuel Macron that quelled the National Front. Angela Merkel’s resignation passed without populist fanfare and delivered a moderate successor. Mario Draghi, the technocrat par excellence, slid seamlessly from the European Central Bank to Italy’s premiership. Spain even went left.

    There were outliers: Jaroslaw Kaczynski in Poland and Viktor Orban in Hungary continued to shape their nations in their populist parties’ image. The far-right Alternative for Germany (AfD) surged to third place in the 2017 federal elections. The billionaire tycoon Andrej Babis gained power that same year – but told CNN at the time he was more like the Czech Michael Bloomberg than the Czech Donald Trump. The story of that period was the so-called populist “wave” cresting early, and not sweeping much away. Voters in European nations largely toed the line.

    Today, there is not that same cohesion. The far right is on the march across the continent. Italy’s government under Giorgia Meloni is further to the right than at any point since the rule of Mussolini. The AfD recently won a district council election for the first time, with more victories expected to follow. In France, the perma-threat of a Marine Le Pen presidency grows with every protest against Macron’s government, whether over police violence or pension reform. Far-right parties are propping up coalitions in Finland and Sweden. Neo-Nazi groups are growing in Austria.

    And in Spain, the center-left coalition looks set to crumble after elections this weekend, paving the way for the far-right Vox party to enter government for the first time as part of a coalition.

    Why did Europe largely avoid the sort of populism that took root in the US and UK in 2016? And why are populist parties now steadily marching into the mainstream across the continent?

    It is often said that majoritarian electoral systems – as in the US and UK – help to shut extreme views out, while proportional systems – more common in Europe – welcome them in. Proportional systems give a louder legislative voice to parties like the AfD and Vox; winner-takes-all systems keep them quiet.

    For example, the UK Independence Party (UKIP), despite winning more than 12% of the vote, secured only one seat in Parliament in the 2015 general election. Thanks to the UK’s first-past-the-post system, while there was significant support for UKIP’s anti-European Union, anti-immigration platform, it was not concentrated enough in any single constituency to deliver many seats. Nigel Farage, the former leader of UKIP, ran in seven elections but never won a seat – a supposed benefit of majoritarian systems.

    But it’s not that simple. Afraid of losing voters to UKIP (and other far-right parties), the governing Conservatives ended up adopting many of its positions. First, holding a referendum on Brexit – then pursuing a hardline form of it. Middle-of-the-road Conservatives found they had to make room in their party for more extreme views, or face losing electoral ground to parties that championed them. The system that was meant to shut extremists out of the building ended up welcoming in their ideas. Farage saw many of his policies implemented without having to win a seat.

    By contrast, despite often having extremist parties in the building, almost all mainstream European parties would simply refuse to consider them as potential coalition partners, under the principle of the “cordon sanitaire.” For instance, when the then-National Front leader Jean-Marie Le Pen (father of Marine) unexpectedly defeated the Socialist candidate Lionel Jospin in the 2002 French Presidential election, the Socialists swung their weight behind the center-right candidate Jacques Chirac, delivering him a landslide in the second-round runoff. Despite their ideological differences, the mainstream parties simply refused to cooperate with extremists.

    Now, that dynamic has been reversed. Extremist parties that were once excluded from governing coalitions are increasingly propping them up, and the membrane separating the far and center right is proving increasingly permeable.

    In Finland, Petteri Orpo – largely seen as dependable and level-headed – only replaced Sanna Marin as Prime Minister in April after allying with the nationalist Finns Party. The party’s Vilhelm Junnila lasted barely a month as finance minister before resigning after allegations he had joked about Nazism at a far-right event in 2019. Swedish Prime Minister Ulif Kristersson relies on the votes of the increasingly Euroskeptic, anti-immigrant Sweden Democrats.

    One peculiar feature of this new dynamic is how the far right and center right increasingly use each other’s language. Mainstream center-right parties, fearful of losing votes to more extreme groups, have increasingly begun to adopt their policies. In the Netherlands, Mark Rutte’s run as the second-longest serving leader in Europe ended this month after his new, hardline stance on asylum seekers proved too extreme for his more moderate coalition partners, causing his government to collapse.

    Marine Le Pen, leader of the French far-right party Rassemblement National (National Rally), has begun to use more moderate language of late.

    Conversely, far-right parties have attempted to sanitize some of their rhetoric, hoping to appear a more credible electoral prospect. After the fatal police shooting of an unarmed teenager, which sparked huge protests in France, Marine Le Pen’s response was markedly restrained.

    Philippe Marlier, a professor of French politics at University College London, told CNN that rather than seizing on traditional far-right rallying calls of “riots, ethnic minorities, rebelling against public authorities,” Le Pen’s “low-key” response was tempered “to appeal to a much broader audience than typical far-right voters.” This is part of a “long-term strategy of coming across no longer as a far-right politician, but as someone who eventually – in four years’ time – could be seen as a credible replacement for Macron.”

    Italy’s Meloni provided the model for this. When Lega leader Matteo Salvini, a long-term admirer of Vladimir Putin, planned a trip to visit the Russian President in June last year, Meloni took the opposite stance, restating her support for Ukraine and pledging to uphold sanctions against Russia if she was elected, as she then was in September. Using more moderate rhetoric is reaping electoral success for far-right politicians across the continent.

    Similarly, Germany’s AfD has begun to speak more seriously about economic policy, echoing traditional conservative values of fiscal prudence. While its flirtation with anti-vax politics may have cost it votes in the 2021 election, it has since enjoyed success in the east of the country, arguing that the government’s commitment to climate policies and supporting Ukraine’s war effort are placing overly burdensome costs on the German taxpayer. These moves suggest far-right parties, while not abandoning their extremist positions, are learning to speak the language of the mainstream to great effect.

    Co-leaders of the AfD Tino Chrupalla, left center, and Alice Weidel, right center, at the party's 10th anniversary celebration on February 6, 2023.

    All this is to say that the “supply side” of populism warrants as much attention as its “demand side.” It matters not just what voters want to buy, but what – and how – parties are selling. A bottom-up theory of populism suggests that dramatic shifts in public opinion create irresistible “waves” of support that mainstream parties are unable to resist. But, as the American political scientist Larry Bartels points out, there is also a top-down theory: Rather than an unexpected “wave,” there has long been a “reservoir” of populist sentiment in Europe. What matters is how politicians draw on it.

    The “demand side” often attributes the rise of populism to economic grievances and a cultural backlash. Financial crises, like that of 2008-2009, or big social shifts, like the European migrant crisis of 2015, are said to provide fertile ground for the seeds of populism to take root. Often the two factors can complement each other: The AfD, for instance, was founded during the Eurozone crisis in opposition to the common currency, but gained more support after adopting anti-Islamic policies following Germany’s welcoming of migrants mostly from the Middle East.

    The early 2020s, then, may seem to provide ground more fertile than the previous decade for these sorts of sentiments to grow. The continent has seen the return of inflation and the soaring cost of living; the end of quantitative easing and rising interest rates; increased tax burdens as government balance sheets recover from the Covid-19 pandemic and look to fund net-zero policies and increased defense spending. Recent opinion polls show the issue of immigration is also increasing in salience, as migrants continue to turn up on Europe’s shores.

    And yet, recent Eurobarometer polling shows that the public’s perception of the European economy is less bleak than we might expect – and far better than during previous crises. Negative perceptions of Europe’s economy rocketed after the financial crisis, and rose again after the start of the pandemic, but are now net positive. Similarly, trust in the European Union has been on an upward trend since 2015, and trust in national governments has remained broadly constant, but improved since the financial crisis.

    Former British Prime Minister Boris Johnson on a run near his Oxfordshire home on June 15, 2023.

    And so the recent successes of far-right parties cannot be explained by dramatic shifts in public opinion. Europe has weathered financial and migrant crises before, which did not translate into widespread support for populism.

    Instead, what we are seeing is a different sort of populism to the one that wracked the US and UK in 2016: A populism fueled by the collapse of the cordon sanitaire between mainstream conservatives and the far right, and one which may have learned the lessons of its short-lived predecessors.

    The defenestration of Boris Johnson and legal travails of Donald Trump perhaps offered the comforting conclusion that populism will inevitably implode: Its policy failures will be too great, the personal foibles of its leaders too unbearable, crass – and potentially criminal.

    But, on the continent, there is a newer, smarter brand of populism taking root. Whereas the UK has been content to break international law in pursuit of Brexit and its crackdown on asylum seekers, populist leaders in Europe are taking greater care not to renege on their international commitments. Many are content to wage culture wars at home, while remaining reliable partners abroad.

    Italy's Prime Minister Giorgia Meloni speaks with her Hungarian counterpart Viktor Orban at the NATO summit in Vilnius on July 12, 2023.

    Orban, then Kaczynski, provided the model for this. Meloni, since, has taken quickly to the craft: Remaining responsible on the continental stage while coldly implementing far-right policies on the domestic one. This weekend, Spain may also set out on this path. After Rutte’s resignation, the Netherlands may too.

    A lot depends on the ability of mainstream parties – particularly on the left – to build tents big enough to accommodate their differences, rather than compromising with far-right parties to prop up their coalitions. Spain’s Prime Minister Pedro Sanchez has managed this since 2018, though with dwindling success. His ability – or otherwise – to do so again this weekend may serve as a harbinger of the continent’s future.

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  • Americans’ wages are finally outpacing inflation. But could it last? | CNN Business

    Americans’ wages are finally outpacing inflation. But could it last? | CNN Business

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    Minneapolis
    CNN
     — 

    US wages have been on the rise, but it sure hasn’t felt like it. For more than two years, persistent and pervasive inflation has taken big bites out of Americans’ paychecks.

    That’s finally starting to change now that inflation is waning.

    In June, for the first time in 26 months, US workers’ real weekly earnings (a week’s worth of wages adjusted for inflation) grew on an annual basis, according to data released this week from the Bureau of Labor Statistics. Annual real weekly wages were up 0.6% last month, a rate that’s a tick below the 0.7% gain seen in February 2020.

    June also marked the second consecutive month of year-over-year real hourly wage growth — the first back-to-back months of gains since early 2021.

    “The big problem for most consumers is when wage increases do not keep pace with inflation, then we lose real purchasing power,” said William Ferguson, the Gertrude B. Austin professor of economics at Grinnell College in Iowa. “And that’s actually what hurts people.”

    Although long overdue, this development is landing at a sticky time in the economy and the Federal Reserve’s knock-down-drag-out fight to tame inflation. The Fed has been laser-focused on dampening demand, and central bankers have frequently noted they’re keeping close watch on how much wage growth could stoke that demand and, in turn, inflation.

    Alternatively, if a cooling labor market turns frigid, that could also make this recent growth short-lived.

    “If inflation is moderate and the labor market is very strong, it’s a reason for vigilance, but it’s not a reason on its own to continue hiking,” said Alex Pelle, Mizuho Securities US economist. “It’s one of those things that you need to watch, because there’s the argument that will add to inflationary pressures.”

    The Fed is in the midst of a wait-and-see period. After 10 consecutive rate hikes in 15 months, the Fed’s policymakers in June voted to hold the benchmark rate steady so they could evaluate the effects of the tightening to date, as well as the activity within the banking sector and broader economy.

    Although the major economic reports of the past two weeks did show key data was moving in the preferred direction — slowing job growth, a slight slackening within the labor market, cooling consumer price inflation and practically flat producer prices — markets largely expect the Fed to continue with a well-telegraphed quarter-point increase when it meets later this month.

    “The Fed does not want to repeat the mistake of the 1970s, when they stopped the tightening and inflation bounced back up,” said Sung Won Sohn, professor of finance and economics at Loyola Marymount University and chief economist at SS Economics.

    Fears of a dreaded “wage-price spiral” — when rising wages and prices feed into each other — have made a bogeyman out of wage growth. However, recent economic research from the likes of the San Francisco Fed and former Fed chair Ben Bernanke noted that wages gains have had little, and certainly not overwhelming, effects on this inflationary cycle.

    Wage gains “will fuel spending, and I do think it will be something that keeps a floor on inflation that’s above [the Fed’s target of] 2%, but let’s see how it evolves over time,” Pelle said. “I don’t want to jump the gun and say absolutely that this is something that the Fed needs crushed.”

    If a data point from the June jobs report proves to be a trend and not a one-month blip, the wage gains seen now could be short-lived.

    In June, the number of people employed part-time for economic reasons grew by 452,000 to 4.2 million, an increase that was partially reflective of people “whose hours were cut due to slack work for business conditions,” the BLS noted.

    Still, the broader labor market trends, including hiring activity, labor movements and businesses’ budgets are favorable to workers maintaining these real wage gains, said Julia Pollak, chief economist with ZipRecruiter.

    Job growth is slowing somewhat, but the gains are still above pre-pandemic averages as companies continue to backfill shortfalls left by the pandemic and respond to continued demand. Also, some workers who have felt they’ve been given short shrift or are discouraged about two years of negative real wages are responding with labor strikes, she noted.

    And finally, supply-side inflation has drastically cooled to the point where annual inflation is practically flat — which, ideally, gives firms more wiggle room to pay workers, she said.

    “For the most part, this is still a tight labor market, still very low unemployment, still healthy business activity in lots and lots of industries where businesses have little choice but to staff up or at least maintain the staff they have,” she said.

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  • Key US inflation gauge cooled last month to the lowest level in nearly three years | CNN Business

    Key US inflation gauge cooled last month to the lowest level in nearly three years | CNN Business

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    Minneapolis
    CNN
     — 

    Wholesale inflation continued its yearlong slowdown last month, rising by just 0.1% for the 12 months ended in June, according to the Bureau of Labor Statistics’ Producer Price Index released Thursday.

    The PPI index, a key inflation gauge that tracks the average change in prices that businesses pay to suppliers, has cooled significantly since peaking at 11.2% in June 2022 and has now declined for 12 consecutive months. Annual producer price inflation is at its lowest level since August 2020, BLS data shows.

    Economists were expecting an annual increase of 0.4%, according to Refinitiv.

    On a monthly basis, prices increased by 0.1%.

    Goods prices held steady for the month, after tumbling 1.6% in May, according to the BLS report. As such, prices for services — which increased 0.2% from May — were the primary driver behind June’s slight increase.

    PPI is a closely watched inflation gauge since it captures average price shifts before they reach consumers and is a proxy for potential price changes in stores.

    While the PPI doesn’t directly correlate into exactly what will come from the following month’s Consumer Price Index — a major inflation gauge that tracks price shifts for a basket of goods and services — it provides a look at whole economy inflation, minus rents, said Alex Pelle, Mizuho Securities US economist.

    And that picture right now is looking pretty sharp.

    “It’s definitely a good month for inflation,” Pelle told CNN. “You saw that in CPI, and now you’re seeing it in PPI.”

    In June, inflation as measured by the CPI cooled to 3% annually, its lowest rate since March 2021, the BLS reported Wednesday.

    Both the CPI and PPI have declined monthly since their peaks in June 2022, when record-high energy and gas prices fueled the spikes to 9.1% and 11.2%, respectively.

    As such, the base effects of year-over-year comparisons are playing a part in the indexes’ sharp retreats.

    Still, underlying inflation is showing a cooling trend as well — albeit more muted.

    In the case of PPI, when stripping out the more volatile categories of food and energy, this “core” index rose 2.4% for the 12 months ended in June. That’s a step back from the 2.6% increase seen in May and economists’ expectations of 2.6%.

    Core PPI, which ticked up 0.1% on a monthly basis, is at its lowest annual level since February 2021.

    Inflation is looking a heck of a lot better than last year, when the Federal Reserve embarked on a campaign to combat price hikes with rate hikes, but economists don’t expect the latest CPI and PPI prints will dissuade central bankers from giving another crank to tighten monetary policy.

    Starting in March 2022, the central bank rolled out 10 consecutive interest rate hikes to tame inflation, finally hitting pause last month. The Fed is widely expected to raise rates by another quarter point when it meets later this month.

    “[The June data] means that the doves are going to have a little bit better of an argument to hold sooner rather than later, so that does reduce the probability of a second hike this year,” Pelle said, noting the commonly used terms to describe Fed members’ differing monetary policy approaches.

    Doves tend to favor looser monetary policy and issues like low unemployment over low inflation, while hawks favor robust rate hikes and keeping inflation low above all else.

    But just how long a hold could last is another matter, said Pelle.

    The job market is cooling from a scorching state, but it remains historically hot and tight. Considering ongoing demographic shifts (including the massive Baby Boomer generation aging out of the workforce), that tightness could continue, Pelle said.

    “Do we really need to be cutting rates if you have GDP running around trend and the labor market still very tight,” he said. “Inflation is coming down, but the economy is maybe growing a little bit into these higher rate levels. So the hold could be longer than people expect. But we might have some of the sting out on getting even higher.”

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  • Will cooling inflation help sell Bidenomics? | CNN Politics

    Will cooling inflation help sell Bidenomics? | CNN Politics

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    A version of this story appears in CNN’s What Matters newsletter. To get it in your inbox, sign up for free here.



    CNN
     — 

    The unofficial rulebook of American politics includes these general guidelines:

    • Elections follow the economy.
    • Presidents try to claim too much credit when things are good.
    • They get too much blame when things are bad.

    But this weird post-pandemic, inflation-addled economy has been scrambling preconceived notions for years. And it is with that background that anyone should read this decidedly good economic news: Inflation is unquestionably cooling.

    What we don’t know: Will cooling inflation neutralize Republicans’ potent argument that massive amounts of government spending on everything from infrastructure to fighting climate change helped cause inflation?

    Will it help President Joe Biden with selling “Bidenomics,” the idea he’s pushing to support the economy from the middle and bottom up rather than the top down?

    Inflation is cooling. From CNN Business’ report by Alicia Wallace: “US annual inflation slowed to 3% last month, according to the latest Consumer Price Index released Wednesday by the Bureau of Labor Statistics.”

    What that means: Prices generally aren’t rising as fast. There have been 12 straight months in which inflation has cooled, and the annual rate has fallen from historic highs of above 9% last June.

    What that does not necessarily mean: The sour feeling so many Americans have about the economy will suddenly end. Most prices aren’t going down, so anyone feeling the pinch of higher prices is still going to be feeling it.

    Elements of the economy are good – extremely low unemployment suggests that if an American wants a job, that person can have it. But investors actually gave a thumbs down to unexpectedly large job gains because it was read as a sign the Federal Reserve would continue to raise interest rates to further contain inflation. Its target inflation rate is 2% annually.

    Inflation has made everyday life feel much more expensive since the pandemic ended. Interest rates have shot up. But prices of big-ticket items like houses have not fallen, meaning some trappings of economic stability, like home ownership, feel farther away for many Americans.

    RELATED: Grocery prices held steady in June, offering some relief

    Meanwhile, perceptions of the economy are that people have been left behind.

    CNN’s Krystal Hur and Bryan Mena talked earlier this month to Americans who feel like a recession has already hit – like Al Brown, laid off from his job at a software company in North Carolina, and trying now to figure out how to support his fiancee and their two children. His gym membership is gone. They’re selling things from around the house. It’s a far different story at Brown’s kitchen table than the one told by government spreadsheets. Read the full story.

    Even the Fed acknowledges that raising rates should ultimately make the unemployment rate rise too. Part of the medicine for inflation is bound to put some Americans out of work.

    Inflation is also not being felt evenly. CNN reported this month about how Florida has become the nation’s inflation hotpost, largely due to housing costs.

    People don’t feel financially secure. As CNN’s Jeanne Sahadi recently wrote: “More than 2,500 US adults said they would need to earn, on average, $233,000 a year to feel financially secure and $483,000 annually to feel rich or to attain financial freedom, according to a new survey from Bankrate. Just for comparison’s sake, the median earnings for a full-time, year-round worker in 2021 was $56,473, according to the US Census Bureau.”

    A CNN poll conducted by SSRS in May found the vast majority of Americans – just over three-quarters – think the economy is in bad shape and two-thirds disapprove of Biden’s handling of it.

    Selling ‘Bidenomics.’ All of this will affect how Americans view Biden’s pitch to rewire how the government supports the economy and do a U-turn away from the low-tax ethos of Reaganomics, named for former President Ronald Reagan. The idea was that allowing corporations and the wealthy to pay lower taxes would let money “trickle down” into society.

    At a speech in Chicago in late June to frame his economic outlook, Biden said it was the media that coined the term Bidenomics. But much like former President Barack Obama eventually embraced the term Obamacare as shorthand for the Affordable Care Act, Biden is leaning into branding his plans for the economy.

    “That’s Bidenomics in action,” the president bragged in a statement after Wednesday’s inflation report.

    CNN’s Tami Luhby explained the concept: “Growing the economy from the middle out and the bottom up – not the top down – is Biden’s mantra.”

    So look for the economic portion of the coming presidential campaign to be framed around how much the government should spend to help build up infrastructure and education as opposed to whether it should be keeping taxes as low as possible to foster corporate growth and wealth.

    That policy debate will take place as people continue to grapple with the new cost of American life. Taming inflation, even though it is very good news, probably will not give most people a sense of ease about the economy.

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  • Could the June CPI report change the Fed’s rate trajectory? | CNN Business

    Could the June CPI report change the Fed’s rate trajectory? | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.



    CNN
     — 

    After the June jobs report showed a cooling but still-hot picture of the labor market, investors are looking to a key inflation report due Wednesday for more clues on the economy’s health. But some investors say the results will likely do little to sway the Federal Reserve’s interest rate trajectory.

    What happened: The labor market added just 209,000 jobs in June, below economists’ expectations for a net gain of 225,000 jobs. That’s the smallest monthly gain since a decline in December 2020.

    But beneath the surface, the jobs market remains hot. Average hourly earnings growth remained steady at 0.4% from May and also unchanged at 4.4% year-over-year, suggesting that wage inflation remains sticky. The unemployment rate also fell to 3.6% from 3.7%, though jobless rates for Black and Hispanic workers rose sharply.

    There is “nothing in the release that would change our expectation that the Fed has more work to do,” said Joseph Davis, global chief economist at Vanguard.

    Accordingly, traders continued to overwhelmingly expect a quarter-point rate hike at the Fed’s July meeting. Traders saw a roughly 92% chance of such a decision as of the market close on Friday, according to the CME FedWatch Tool.

    What’s next: The June Consumer Price Index report, a key inflation reading, is due on Wednesday.

    Economists expect a 3.1% increase in consumer prices for the year ended in June, which would be a cooldown from a 4% annual increase in May, according to Refinitiv.

    Recent data has suggested that inflation is coming down, though it remains above the Fed’s 2% target. The Personal Consumption Expenditures price index, the Fed’s favorite inflation gauge, rose 3.8% for the 12 months ended in May. That’s down from the revised 4.3% annual rise seen in April.

    But it’s unlikely that the June CPI report will change the Fed’s interest rate trajectory, barring a huge upside or downside surprise, especially considering that Fed officials in recent weeks have been vocal that more rate hikes are likely coming, said James Ragan, director of wealth management research at DA Davidson.

    Still, that doesn’t mean investors should expect infinite rate hikes from the Fed.

    “We continue to expect that [the] Fed will soon reach its terminal rate, bringing it closer toward the end of its most aggressive tightening campaign in generations,” said Candice Tse, global head of strategic advisory solutions at Goldman Sachs Asset Management.

    The Producer Price Index report for June is due on Thursday.

    UPS and the Teamsters union are in contract negotiations. Without a deal, 340,000 Teamsters could go on strike on August 1.

    Such an event could be damaging to the US economy, reports my colleague Chris Isidore.

    UPS carries 6% of the country’s gross domestic product in its trucks. The company carried an average of 20.8 million US packages a day through last year, and that number is down only slightly this year.

    In other words, the company’s services are critical to keeping the gears moving seamlessly in supply chains that saw massive snarls during the height of the Covid pandemic. A strike could potentially bring back the problems that were so prominent just a couple years ago, including shipping delays and higher prices.

    The Biden administration is keeping an eye on negotiations between both parties in “recognition of the role UPS plays in our economy and of the important work that UPS workers did through the pandemic and continue to do today,” acting labor secretary Julie Su told CNN on Friday.

    But the company and union broke off last week, with both sides claiming the other walked away from the bargaining table.

    Read more here.

    Monday: Consumer credit for May and NY Federal Reserve’s Survey of Consumer Expectations for June.

    Tuesday: NFIB small business optimism survey for June.

    Wednesday: Consumer Price Index report and housing starts for June.

    Thursday: Producer Price Index report for June.

    Friday: University of Michigan consumer sentiment and inflation expectations for July.

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  • The world is big enough for US and China, Yellen says as she concludes Beijing trip | CNN Business

    The world is big enough for US and China, Yellen says as she concludes Beijing trip | CNN Business

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    Beijing/Hong Kong
    CNN
     — 

    The world is big enough for both the United States and China to thrive, US Treasury Secretary Janet Yellen said Sunday as she wrapped up a visit to Beijing aimed at stablizing the relationship between the world’s two largest economies.

    Yellen said she had “direct, substantive, and productive” talks with China’s new economic leadership, including Premier Li Qiang and Pan Gongsheng, the newly appointed Communist Party chief of China’s central bank.

    “No one visit will solve our challenges overnight. But I expect that this trip will help build a resilient and productive channel of communication,” Yellen told a news conference in Beijing.

    “Broadly speaking, I believe that my bilateral meetings — which totaled about 10 hours over two days — served as a step forward in our effort to put the US-China relationship on surer footing.”

    Yellen’s trip marked the second visit by a US cabinet official to the Chinese capital in a matter of weeks as Washington seeks to steer relations with Beijing back on course after months of inflamed tensions.

    In recent months, while pushing to resume high-level diplomatic talks, the US has imposed sanctions on Chinese companies, successfully pushed allies in Japan and the Netherlands to restrict sales of advanced semiconductors to China and rallied other advanced economies to counter Beijing’s “economic coercion.

    But Yellen reiterated that the United States is not seeking to decouple from China, which she said would be “disastrous for both countries and destabilizing for the world” and “virtually impossible to undertake.”

    “There is an important distinction between decoupling, on the one hand, and on the other hand, diversifying critical supply chains or taking targeted national security actions,” she said.

    She said the United States would continue to take “targeted actions” to protect its own national security interests and those of its allies, while making sure these actions are “transparent, narrowly scoped and targeted to clear objectives.”

    Following Yellen’s meeting with China’s Vice Premier He Lifeng Saturday, a report from the official Xinhua news agency appeared to suggest the Chinese side took issue with this approach.

    “China believes that generalizing national security is not conducive to normal economic and trade exchanges,” it said. “The Chinese side has expressed concerns about US sanctions and restrictive measures against China.”

    Yellen said the US and China have “significant disagreements” that need to be communicated “clearly and directly,” but noted that the Biden administration does not see US-China relations “through the frame of great power conflict.”

    “We believe that the world is big enough for both of our countries to thrive. Both nations have an obligation to responsibly manage this relationship: to find a way to live together and share in global prosperity,” she said.

    Yellen said she pressed Chinese officials on Washington’s “serious concerns about China’s unfair economic practices” — including barriers to market access for foreign firms and issues involving intellectual property — and “worries about a recent uptick in coercive actions against American firms.”

    Beijing’s updated counter-espionage law and crackdown against Western consulting and due diligence firms have unnerved US businesses.

    Over the past months, Chinese authorities have questioned staff at the Shanghai office of US consultancy Bain & Company, and closed the Beijing office of Mintz Group, an American corporate due diligence firm, while detaining five of its local staff.

    Yellen said no final decision has been made to limit outbound investments by US companies in China, when asked about potential upcoming foreign investment curbs that might be implemented by Washington.

    “I was able to explain to my Chinese counterparts that if we do implement such restrictions, that we will do so in a transparent way,” she said, adding any new curbs or sanctions would “be highly targeted and clearly directed narrowly at a few sectors where we have specific national security concerns.”

    “I want to allay their fears that we would do something that would have broad-based impacts on the Chinese economy. That’s not the case. That’s not the intention,” she said.

    The Biden administration is preparing new rules that could restrict US investment in certain sectors in China, according to multiple media reports including from the The Wall Street Journal and Politico.

    Yellen said she discussed with Chinese officials areas of cooperation on global challenges, including working together to mobilize multilateral financing for climate action. US climate envoy John Kerry is expected to visit China next, according to US Ambassador to China Nicholas Burns, though he did not provide a timetable for the trip.

    Yellen said she also raised “the importance of ending Russia’s brutal and illegal war against Ukraine,” and said it was “essential” that Chinese firms avoid providing Russia with material support for the war or in evading sanctions.

    Yellen’s trip came just days after China retaliated in a tech war with the US by announcing restrictions on exports of two strategic materials needed to make semiconductors.

    The move was widely seen as a response to the Biden administration’s ban on advanced chip sales to China, which was announced last October. According to multiple media reports, the curbs will be expanded to restrict the sale of some artificial intelligence chips.

    The sanctions strike at the heart of Beijing’s tech ambitions, as chips are vital for everything from smartphones, self-driving cars, and advanced computing to weapons manufacturing.

    Jake Werner, an East Asia Research fellow at the Quincy Institute in Washington, said it was unlikely Yellen’s Chinese counterparts would be persuaded by her argument that the US ban is not meant to stifle China’s economy.

    “US and Chinese leaders alike consider these technologies foundational to the future of growth. Chinese leaders see the restrictions as an attempt to permanently subordinate China to US power and to coercively exclude Chinese business from the most important industries of the future,” Werner said.

    “This issue will continue to be one of the most poisonous areas of contention within the relationship.”

    A former Chinese official has indicated that further retaliatory measures may be on the cards.

    Even as both Beijing and Washington indicate high-level discussions will continue, the thorniest aspect of bilateral ties — particularly the tussle over access to advanced technology — may fuel more tension in the relationship.

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  • In world’s most expensive property market, homes for the dead can cost more than for the living | CNN

    In world’s most expensive property market, homes for the dead can cost more than for the living | CNN

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    Hong Kong
    CNN
     — 

    Starting at $53,000 for a space not much larger than a shoebox, it is a pricey place to stay, even in a city famed for the world’s most expensive property market.

    But then the ornate white marble interiors of the 12 story Shan Sum tower in Hong Kong are not aimed at your average sort of buyer. They are meant for a more discerning type of customer altogether, one seeking that little something extra: a resting spot for the afterlife.

    This privately run high-rise columbarium, housed in a wavy, fan-shaped building designed by a German architect, is meant to store the cremated remains of 23,000 people. And it doesn’t come cheap.

    In addition to its single urn entry units, niches that can store two urns can go for up to $76,000 (HK$598,000), while family units that can house the ashes of up to eight people reach as much as $430,000 (HK$3.38 million).

    With standard niches measuring about one cubic square foot, it could be argued that a spot in this tower is relatively more costly than the city’s most expensive property for the living – a mansion in the ultra exclusive area of The Peak that in March attracted a bid of US$32,000 per square foot.

    But Shan Sum, which is tucked away in an old industrial district of Kwai Chung is not even Hong Kong’s most expensive place for the dead.

    According to Hong Kong’s Consumer Council, the most expensive niche of all is at a temple-like complex in the northern outskirts of Fanling. That auspicious resting spot goes for $660,000 (HK$5.2 million) – and that figure doesn’t even include the management fees of at least $25,000 (HK$200,000) to cover the upkeep and surcharges.

    Such an investment might still not seem too bad, given the long-term horizon of the afterlife, but private columbariums like Shan Sum are not offering a resting place for eternity. Ashes can be stored there only for the duration of the facility’s private license, which is issued by Hong Kong government. These licenses have a limit of 10 years and can take years of inspections to obtain. Shan Sum’s runs through 2033.

    Even so, at Shan Sum – whose name translates to “benevolent heart” – it’s more than just the urn space you pay for.

    Its architect Ulrich Kirchhoff told CNN there is an accessible rooftop and winding balconies lined with pocket gardens for families visiting their ancestors, while about a fifth of the building’s area is open space.

    The wavy exterior of Shan Sum, a private columbarium tower in the Kwai Chung district of Hong Kong on June 2.

    It has also been designed with aesthetics in mind, with its wavy, high-rise profile intended to mimic traditional Chinese graveyards and their preferred location on mountainsides to attract good Feng Shui.

    There are hints of modernity, too, such as dehumidifiers and air-conditioning systems and even an app through which families pre-book a time slot to bring offerings to deceased ancestors.

    The tower is the brainchild of Margaret Zee, a septuagenarian businesswoman who made her fortune in the jewelry and real estate businesses and now runs a charitable foundation in her name.

    Paying respect to the dead is important in Chinese culture, Zee told CNN, and many people are willing to go all out to honor the tradition.

    “Our loved ones’ last journey is not just so they can cross over to the afterlife, but it’s also for us who are left here on Earth to bid them farewell,” Zee said. “It’s not only to lay them to rest, but to give peace to those they’ve departed from.”

    Zee realized there was a shortage of homes to honor the dead when she struggled to find a place to hold a memorial for and bury her late husband in 2007 and she felt compelled to act.

    Architect Ulrich Kirchhoff at Shan Sum, a private columbarium tower in the Kwai Chung district of Hong Kong on June 2.

    In Hong Kong, the same mismatch of supply and demand that has driven up real estate prices to nosebleed levels also affects columbariums.

    Essentially, in a city home to more than 7 million people and some of the world’s most densely populated neighborhoods, competition for space is heating up – for both the living and the dead.

    While Hong Kong is not a small place – its area of 1,110 square kilometers is about 1.4 times the size of New York City – its mountainous terrain makes much of its land unsuitable for development.

    With space at a premium, property developers have traditionally favored high-rise towers that – not unlike the Shan Sum building – can pack in as many plots as possible. As a consequence, the average home size is just 430 square feet, according to the 2021 census, among the tiniest in the world, even though average home prices are north of a million dollars.

    This squeeze on space continues in the afterlife, exacerbated by Hong Kong’s rapidly aging population. More than one in five Hong Kongers is over 65, according to census data, and that number is projected to jump to more than one in three by 2069.

    Cemeteries in Hong Kong are running out of space.

    Even though more than 90% of Hong Kongers opt for cremation, space to store their remains is running out. This is partly because, rather than scattering the ashes, traditionally minded Chinese prefer a physical place where they can pay respects and give offerings to the dead.

    With the city’s death rate running at about 46,000 per year (roughly double the capacity of Shun Sum) in the past decade urn capacity has at times struggled to keep up.

    There are currently just under 135,000 public niches available in government-run facilities, where a 20-year lease goes for about $300, but competition for these is fierce and in recent years some families have reported waiting years to get a spot.

    The response by the government has been two-fold, boosting the number of public facilities while also approving the licenses of 14 privately-run columbarium operators, including Shan Sum, since 2017.

    The entrance of Shan Sum, a private columbarium tower in the Kwai Chung district of Hong Kong on June 2.

    A spokesperson for the Food and Environmental Hygiene Department told CNN that between 2020 and 2022, around 77,000 urns had been allocated a niche “without the need to wait.” Another four new locations to be completed by 2025 would provide a further 167,000 units.

    “There is a marked improvement in the supply of public niches over the past few years. As of now, the supply of public niches is adequate,” the spokesperson said.

    Still, as with many things in this commercially-minded city, where the median monthly wage is just US$2,400 but there are plenty of billionaires (more than 100, according to Wealth X, a company that tracks high-net-worth individuals), there are options for those eager to splash out on something a little more distinguished.

    And that’s where places like Shan Sum really come in to their own.

    Niche compartments to store urns at Shan Sum, a private columbarium tower in the Kwai Chung district of Hong Kong on June 2.

    At the tower in Kwai Chung different floors are dedicated to different religions to suit a range of death customs, said Pan Tong, Zee’s son and the operational director of the building.

    For instance, he says, there are light and bright airy nooks designed to appeal to Buddhists and a section for followers of Guanyin, the Chinese goddess of mercy, whose image adorns the doors of the small compartments.

    There is even a separate secular floor, where each compartment has a Chinese-style “roof” and double doors decorated with gold coins to symbolize a prosperous afterlife.

    “I really had to imagine myself as someone ‘living’ inside one of these niches, and think about what kind of home I wanted to stay at when I’m gone,” Tong said.

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  • Expect more rate hikes from the Fed after the latest jobs report | CNN Business

    Expect more rate hikes from the Fed after the latest jobs report | CNN Business

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    Washington, DC
    CNN
     — 

    An interest rate hike later this month was already in the cards for the Federal Reserve. But after the June jobs report, the timing of a second hike remains unclear.

    Job gains remain robust, wage growth is still going strong, and unemployment continues to hover near historic lows. That means the job market is still fueling demand in the economy, which the Fed has been trying to slow through rate hikes. And Fed officials have made it clear they think the central bank still has more work to do to bring down inflation, which is still running well above the 2% goal.

    Federal Reserve Bank of Chicago President Austan Goolsbee, a voting member of the Fed committee that decides interest rates, said in an interview Friday that he sees “a decent chance of further tightening down the pipeline” and that inflation “needs to come down more.”

    Other Fed officials have struck a similarly hawkish tone on inflation, hinting strongly at a hike in July.

    “I remain very concerned about whether inflation will return to target in a sustainable and timely way,” said Federal Reserve Bank of Dallas President Lorie Logan on Thursday during a meeting hosted by the Central Bank Research Association. “I think more restrictive monetary policy will be needed to achieve the Federal Open Market Committee’s goals of stable prices and maximum employment.”

    Fed officials voted last month to hold the key federal funds rate steady at a range of 5-5.25% to reassess the economy after a string of 10 consecutive rate hikes and to monitor the effects of bank stresses in the spring, according to minutes from that meeting released Wednesday.

    “We can take some time and assess and collect more information and then be able to act, knowing that we also communicated through our projections that we don’t think we’re done, based on what we know,” said New York Fed President John Williams Wednesday during a moderated discussion in New York. “And obviously we’re absolutely committed to achieving our 2% inflation goal.”

    And Fed Chair Jerome Powell himself has doubled down on the need for more rate increases in recent speeches, not ruling out back-to-back hikes, despite economic indicators showing slight progress on inflation.

    Financial markets are pricing in a more than a 90% chance of a rate hike later this month, according to the CME FedWatch Tool.

    The Fed wants to see the labor market slow down broadly, bringing it into “better balance,” as Powell has frequently described it. That means wage growth would need to cool consistently, monthly payroll growth would need to be close to a range of 70,000 and 100,000 — the smallest job gain needed to keep up with population growth — and unemployment would need to rise, according to economists. Job market conditions don’t resemble that just yet.

    “This is clearly a very tight labor market, so I expect the Fed to look at this data and say there is justification here for continued small rate increases because the labor market is not cooling enough,” Dave Gilbertson, labor economist at payroll software company UKG, told CNN.

    Labor costs are higher because of a persistent difficulty in hiring, weighing on labor-intensive service providers such as hospitals and restaurants, which has put upward pressure on consumer prices since businesses typically raise wages to address hiring challenges.

    Powell homed in on that dynamic in recent remarks, and research from top economists argues the Fed will have to slow the economy further to fully address the labor market’s stubborn impact on inflation. Whether that means a full-blown recession or a so-called soft landing remains to be seen, but some Fed officials are optimistic.

    “I feel like we are on a golden path of avoiding recession,” Goolsbee told CNBC Friday.

    And there has been some progress on bringing the job market back into better balance while inflation has come down. Job openings fell to 9.82 million in May, down from a peak of 12 million in March 2022, though they still greatly exceed the number of unemployed people seeking work. And June’s jobs total of 209,000 is still robust by historical standards.

    But Gilbertson said labor shortages have been largely driven by demographic shifts, which might keep the job market tight for the foreseeable future.

    Beyond the expected hike in July, the Fed is going to remain laser-focused on wage growth to inform its decision-making later in the year. Central bank officials will pay particular attention to the Employment Cost Index, which recently showed that pay gains picked up in the first three months of the year. The index for the second quarter will be released in late July — after the Fed meets.

    “The focus is on the path of wage inflation because of its pass-through to services inflation,” said Sonia Meskin, head of US Macro at BNY Mellon IM.

    The June jobs report showed that average hourly earnings growth was unchanged at 0.4% from the month before and also unchanged at 4.4% year-over-year — not a welcome development.

    Core inflation hasn’t decelerated as fast as the headline measure because of the tightness in the labor market. The Personal Consumption Expenditures price index, the Fed’s preferred inflation gauge, rose 3.8% in May from a year earlier, down from April’s 4.3% rise; while the core measure edged lower to 4.6% from 4.7% during the same period.

    Within the core measure, services inflation also remains sticky and Powell said in last month’s post-meeting news conference that “we see only the earliest signs of disinflation there” and that the services sector’s “largest cost would be wage cost.”

    The Fed’s strategy to address services inflation is simply by curbing demand through more rate hikes. So, in addition to the labor market, the Fed is highly attentive to consumer spending, which has cooled in the past several months, according to figures from the Commerce Department.

    Other headwinds are expected to weigh on consumers in the months ahead, such as the resumption of student loan payments and the Supreme Court blocking President Joe Biden’s student loan forgiveness program. Americans are also running down their savings accounts while racking up debt, so US consumers may need to start cutting back soon.

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  • Inflation in Europe falls again in June | CNN Business

    Inflation in Europe falls again in June | CNN Business

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    London
    CNN
     — 

    Inflation in Europe slowed for the second straight month in June.

    Consumer prices in the 20 countries that use the euro rose 5.5% this month compared with a year ago, according to a preliminary estimate released by the European Union’s statistics agency Friday. That’s down from 6.1% in May.

    Economists polled by Reuters had expected inflation to ease to 5.6%.

    — This is a developing story and will be updated.

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  • Turkey hikes interest rates to 15% as Erdogan reverses policy on fighting inflation | CNN Business

    Turkey hikes interest rates to 15% as Erdogan reverses policy on fighting inflation | CNN Business

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    London
    CNN
     — 

    Turkey’s central bank almost doubled interest rates to 15% Thursday in a dramatic reversal of its unorthodox policy of cutting the cost of borrowing to tame painfully high inflation.

    Annual consumer price inflation has come down from a two-decade high of 85.5% in October but was still 39.6% in May.

    The central bank said that there were indications that underlying inflation in Turkey was increasing, even as inflation in many other countries trends downwards.

    “The strong course of domestic demand, cost pressures and the stickiness of services inflation have been the main drivers,” the central bank said in a statement.

    This is the first rate decision by Turkey’s central bank since last month’s reelection of President Recep Tayyip Erdogan.

    It is also the first rate increase in more than two years, and the central bank’s first decision since the appointment earlier this month of new governor Hafize Gaye Erkan, a former Goldman Sachs banker and the first woman to hold the position.

    In its statement, the central bank said it hiked rates to bring down inflation “as soon as possible,” and that it would continue to do so gradually “until a significant improvement in the inflation outlook is achieved.”

    Liam Peach, senior emerging markets economist at Capital Economics, wrote in a Thursday note that there were “encouraging signs” from the central bank that further rate hikes were ahead.

    The London-based research firm expects Turkish interest rates to rise as high as 30% later this year.

    Erdogan had ordered his central bank to cut rates nine times since late 2021, taking them to 8.5%, even as inflation around the world started to accelerate and most economies were doing the opposite. In that time, the value of the Turkish lira crashed 170% to a record low against the US dollar.

    A weaker lira has aggravated Turkey’s cost-of-living crisis by making foreign imports more expensive, and pushed the government to use up billions of its foreign currency reserves in an attempt to boost the currency’s value.

    Erdogan — who has fired four central bank governors in as many years — has since tried to reassure investors that he intends to normalize Turkish economic policy by filling key posts with more orthodox figures such as Erkan.

    This month, Erdogan also appointed Mehmet Simsek, Turkey’s former deputy prime minister and finance minister, and a former economist for US wealth management firm Merrill Lynch, as his finance minister.

    But the lira weakened further after Thursday’s rate hike news, dropping more than 2% to a new record low of 24 to the US dollar.

    Craig Erlam, senior market analyst at Oanda, noted that the rate hike had come in at the lower end of market forecasts, and investors couldn’t afford to relax too soon.

    “Erdogan hasn’t really hesitated to sack [central bank] governors that raise rates in the past, so investors will never feel fully at ease as long as he’s president,” he wrote in a note.

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  • Why do businesses keep raising their prices? | CNN Business

    Why do businesses keep raising their prices? | CNN Business

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    Los Angeles
    CNN
     — 

    After two years of surging prices, economists still can’t agree on what has caused the world’s worst inflation crisis in decades.

    While the usual culprits cited by economists include pandemic-era supply chain bottlenecks, the war in Ukraine and various US economic policies, others say it’s due to “greedflation,” the idea that companies use higher inflation rates as an excuse to jack up prices and grow their margins.

    However, according to preliminary findings in a New York Federal Reserve survey, there might be something else at play.

    The survey of 700 businesses across New York, Atlanta and Cleveland found that strength of customer demand outranked all other factors that companies weigh when setting prices, including steady profit margins and overall inflation.

    That means a business can essentially set prices as high as it wants, as long as they aren’t so high that they drive away the customer base. In other words, it’s Econ 101: Good, old-fashioned supply and demand.

    More than 82% of businesses surveyed said demand factored into their pricing decisions, while only 52% of businesses said they take the overall rate of inflation into account when setting prices.

    Customers have become trained to tolerate price hikes, said John Zheng, a professor of marketing at the Wharton School at the University of Pennsylvania.

    “As a consumer during inflation, you know the costs for companies are increasing, so, therefore, you become more receptive to a higher price,” he said.

    Approval of price increases could fuel even higher pricing in the future — a cycle that can be hard to break, said Zheng.

    Mr. Mac’s mac and cheese restaurant in Manchester, New Hampshire tried boosting prices a little at a time to keep up with inflation in 2021, but it wasn’t enough to cover the cost increases to the business, vice president of operations Mark Murphy told CNN. Fearing customer backlash, the restaurant accepted smaller margins instead of pricing out their diners.

    When the business finally hiked prices, Murphy said the decision was “painful.”

    “We were looking at our sales and our orders daily, and we were checking every review to see what people were saying,” Murphy said. “It was very scary.”

    Despite those fears, Mr. Mac’s elevated prices did not cut into business.

    “What we ended up finding was customers may not have been happy about it, but they were not surprised. I think they kind of understood that prices are increasing. They see it everywhere they go,” he said.

    Murphy said the restaurant has since raised prices more than once to keep up with inflation.

    Multinational companies Colgate, Procter & Gamble and PepsiCo have raised prices by double-digit percentages over the past year, according to their first-quarter earnings reports, outpacing the US inflation rate.

    However, as the Federal Reserve hikes interest rates and the economy slows down, customers may soon be less keen to pay through the nose for goods and services, Zheng said.

    Businesses may already be in tune with the change: Those surveyed by the New York Fed said they expect lower cost and price pressures in the coming year.

    Emily Netti, a wedding photographer in Syracuse, New York, said she has raised prices by a few hundred dollars multiple times over the past two years to pay competitive rates to the additional photographers and editors she hires. However, she said she is mindful that her local customer base may soon want to cut back on expenses.

    “I’ve started to slow down in my own market within Syracuse,” she said.

    “I do see myself raising by $100 rather than $300 for now, so I can match the market.”

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  • Freedom Caucus member says hard-line group ‘failed’ with passage of ‘Democratic’ debt limit bill | CNN Politics

    Freedom Caucus member says hard-line group ‘failed’ with passage of ‘Democratic’ debt limit bill | CNN Politics

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    CNN
     — 

    House Freedom Caucus member Rep. Ken Buck criticized the bipartisan debt ceiling deal reached between House Republicans and the White House as a “Democratic bill,” and said his hard-line, conservative group had “failed” in its efforts to influence legislation more to its liking.

    The caucus “still retains a lot of influence in the House,” the Colorado Republican told CNN’s Dana Bash on “State of the Union” on Sunday. “The key is that we use that influence in a way that brings conservative results. And I think that that’s what we tried to do with this case, and we failed, honestly.”

    “This bill is a Democrat bill. It is a bill that not only avoided a default but also locked in the progressive gains that the president made in the last two years,” he added.

    President Joe Biden signed into law Saturday the legislation to suspend the nation’s debt limit through January 1, 2025, helping avert a first-ever US default. The deal has faced backlash from conservatives and progressives but ultimately won support from a wide array of lawmakers on both sides of the aisle, many of them moderates.

    House Speaker Kevin McCarthy said Sunday he felt good about Biden signing the agreement “because we’re finally spending less than we spent the year before.”

    “We actually got more than you thought in the process you could get at this point,” McCarthy, a California Republican, told Fox News.

    Meanwhile, in a separate interview on “State of the Union,” White House budget chief Shalanda Young, a top debt ceiling negotiator, declined to call the new law an outright win for the Democrats despite suggestions from some in the party that they downplayed their initial approval of the bill to garner more Republican support.

    Biden budget chief: McCarthy was ‘very professional’ in talks

    “At the end of the day, the long view, the short and the medium view is default was not an option. So, not who can win,” Young told Bash when asked about a Democratic congressman saying his party had “rolled” Republicans.

    “I have done this a long time, and we had to talk about the budget at some point this year. And this is about what you would expect to see out of a budget agreement with divided Congress,” Young said.

    Buck said Sunday that while he believes McCarthy has credibility issues following passage of the debt ceiling deal, he’s not sure a vote to oust the California Republican from his speakership – also known as a “motion to vacate” – would happen “right away.”

    “We continue to see the swamp, the folks in Washington, DC, who want to spend more money, winning, and we continue to see the folks who want to spend less money and really act responsibly losing. And so I think that Kevin McCarthy has an issue in a broader sense,” Buck said.

    Among the concessions agreed to by McCarthy to secure his speakership earlier this year was that any member can call for a motion to vacate the speaker’s chair, making it easier to trigger what is effectively a no-confidence vote in the speaker.

    When asked by Bash what would lead him and his colleagues to employ such a move, Buck said that was something that should be done with “consensus” in the House Republican Conference.

    “I don’t think it can be used by just a few people,” he said. “I applaud Kevin McCarthy for saying he wants to bring people back together again. Let’s see if he does that in a way that involves spending responsibly in the future.”

    CNN has previously reported that while some of McCarthy’s fiercest critics have had private discussions about the motion to vacate, there is less appetite among the Freedom Caucus as a whole to go that route with the group’s chairman calling it “premature” in a caucus call earlier this week.

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  • Why one popular shoe brand is lowering prices in the face of inflation | CNN Business

    Why one popular shoe brand is lowering prices in the face of inflation | CNN Business

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    New York
    CNN
     — 

    As inflation continues to strain family budgets, forcing people to prioritize purchasing daily necessities over discretionary buys, one maker of popular footwear is lowering prices on its products to provide some relief to weary consumers.

    Oregon-based Keen, which makes walking shoes, boots and water sandals for toddlers to adults in addition to work boots, is moving in the opposite direction of most of its industry, It’s lowering prices as many of its customers start cutting out their shoe budget.

    According to a survey in January by market research firm Circana (formerly IRI and The NPD Group), 56% of consumers (up from 52% in July 2022) said they had delayed or skipped a footwear purchase or chosen a less expensive option in the past six months due to price increases on either footwear or other goods.

    Circana also noted that households with kids are pulling back on footwear spending more so than those without, as parents are forgoing footwear purchases for themselves.

    “Families are obviously feeling the pressure from inflation,” Beth Goldstein, footwear and accessories analyst at Circana, said in the report. “Without the government assistance that many households with children had previously received, they are now prioritizing their kids’ footwear replacement needs over their own.”

    The company said it’s started reducing prices across its portfolio of products, which range from $36 for kids’ shoes to about $250 for adult shoes.

    “On average, we are bringing prices down by 5% across the board,” John Evons, president of Keen said Friday in an interview with CNN. The company announced the move on its website on Thursday.

    “We believe we are doing the right thing to help people in this inflationary environment. We want people to continue to enjoy the outdoors and be able to go to work with safe shoes,” he said.

    Keen, which employs around 350 people in the US, makes its footwear in Portland and in factories in the Dominican Republic and Thailand. While Evons declined to disclose the company’s annual sales, he said the business sells millions of pairs of shoes annually in the US and globally.

    But being a vertically integrated business is what has allowed Keen to lower prices, he said. Keen owns 40% of its supply chain, from raw material sourcing to manufacturing plants to distribution centers.

    “This helped us as we went into 2020 and faced supply chain challenges, mounting freight costs and disruptions because of the pandemic,” said Evons. “We were able to respond quickly to the evolving marketplace in 2021 and 2022.”

    As supply chain and shipping costs have eased post-pandemic, Evons said the company wanted to also pass on some savings to its customers.

    Keen is lowering prices by about 5% across its products.

    “We expect to stand behind this for the foreseeable future,” Evons said.

    Given these trends, Goldstein said Keen’s move is noteworthy.

    “Most brands are reacting to consumers pulling back by offering increased promotions and not bringing the original product price down,” she said to CNN. “This is unique, and it will be interesting to see if other companies follow suit.”

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