June CPI Report Wednesday Could be Hotter than 8.6% Reading in May

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U.S. tariffs on China | Biden to Mideast | Legislative push on must-have items

 


Washington Focus


U.S. lawmakers return to work for a final legislative push as midterm elections approach.

One issue is a bill called USICA, aka the China bill, which aims to bring semiconductor manufacturers to the U.S. But Senate Minority Leader Mitch McConnell (R-Ky.) late last month said he wouldn’t move forward unless Democrats dropped their efforts to revive economic proposals via reconciliation that Republicans oppose. Some Democrats now want to send the already passed Senate USICA to the House for passage.

Several legislative bills will likely be pushed dealing with abortion issues, but none of them will have the needed votes to clear the Senate. Thus, any measures will just be for optics.

The biggest measure on the Democrats’ wish list ahead of midterm elections is another reconciliation bill. Senate Majority Leader Chuck Schumer (D-N.Y.) is working closely with centrist Sen. Joe Manchin (D-W.Va.) on the Democrats’ climate, prescription drug pricing and tax bill, which Democrats could pass without any Republican votes. Democrats would use a special process called reconciliation that allows it to advance with just a simple majority in the 50-50 Senate, rather than the 60 typically required.

     Some of the tax changes, including the fate of the U.S. piece of the global corporate minimum tax agreement and the $10,000 cap on the state and local tax deduction, remain under discussion. A proposed surtax on people with incomes above $10 million seems less likely to be included. Other ideas, such as about $80 billion of spending on beefed-up tax enforcement, seem more likely to advance. Democrats have settled on at least one tax increase, reports note. They are planning a change that would raise taxes on many business owners with incomes of at least $400,000 for individuals and $500,000 for married couples. The emerging plan would devote the money to extending the life of the Medicare trust fund.

     Last week, Democrats submitted text on a plan to lower the cost of prescription drugs to the Senate parliamentarian for review. The Congressional Budget Office says that plan would lower budget deficits by nearly $300 billion over a decade.

     Extending the subsidies for purchasing health insurance under the Affordable Care Act (ObamaCare) is also favored by Democrats. If the subsidies aren’t extended, millions of consumers will see their premiums rise next year, because additional financial help provided as part of Covid-19 relief ends on Jan. 1.

     Portions of the much-delayed Green New Deal will also be included in any reconciliation measure. This would likely include incentives for Sustainable Aviation Fuel (SAF).

Fiscal year (FY) 2023 begins Oct. 1 and as usual Congress is behind in its work. House Democrats this week will consider six FY 2023 spending bills, including the measures that fund USDA. As usual, amendments on spending measures are important. Wednesday is the deadline for House members to propose amendments, with the Rules Committee deciding which amendments are in order.           

President Joe Biden could lift certain U.S. tariffs on Chinese imports “shortly,” though any action would have to avoid harming American workers, Commerce Secretary Gina Raimondo said. “The president is in the process of making that decision,” Raimondo said on NBC’s Meet the Press. “And so we were briefing him and I expect he’ll make a decision shortly.” Raimondo said last month that the U.S. has decided to keep tariffs on steel and aluminum but may drop them on other goods.

     “We should be clear about what lifting tariffs would and wouldn’t do, right?” Raimondo told NBC. “Like, lifting tariffs isn’t going to bring down top-line inflation in a very significant way… What it will do potentially is help consumers on certain household goods,” she said. Most important to Biden is that any action is done “is without hurting American workers.”

 


Events on Tap This Week


President Joe Biden begins a controversial trip to the Middle East with stops in Israel, the West Bank and Saudi Arabia. An in-person meeting with Crown Prince Mohammed bin Salman would mark the first time Biden directly engages with Saudi Arabia's de facto ruler since taking office. Biden has been highly critical of the Saudis' record on human rights, its war in Yemen and the role its government played in the murder of journalist Jamal Khashoggi.

Treasury Secretary Janet Yellen will hold a livestreamed press conference at the G20 Finance Ministers and Central Bank Governors Meeting in Indonesia on Friday and Saturday; prior to the G20, Yellen will attend meetings on Tuesday and Wednesday in Tokyo.

Federal Reserve Board Governor Christopher Waller will give the keynote address Thursday at the Fourteenth Annual Rocky Mountain Economic Summit. The two-day event will also include talks from Ellen Zentner, Morgan Stanley chief economist, and former House Speaker Paul Ryan.

CFTC update. The D.C. Bar Association will hold its first of three events to introduce the four new Senate-confirmed commissioners of the Commodity Futures Trading Commission. Tuesday's event will feature Commissioner Kristin Johnson, who was sworn into the CFTC in March.

Big names to talk about economic outlook. World Bank Group President David Malpass will speak at the Brookings Institution's "State of the global economy" meeting on Wednesday and former Treasury Secretary Larry Summers will join the Economic Club of New York for a webinar the same day.

Focus on semiconductors. Intel Corp. Chief Executive Pat Gelsinger will join the Washington Post's The Path Forward on Tuesday to discuss American competitiveness and global efforts to produce more semiconductors. The following day, the Biden administration will hold a classified briefing with all senators about global competitiveness, according to Senate Majority Leader Chuck Schumer (D-N.Y.), in a bid to emphasize the impacts of China competitiveness legislation on national security and innovation.

Federal Communications Commission will hold its July Open Meeting on Thursday. Commissioners are expected to vote on several items, including one that Chair Jessica Rosenworcel (D) said would create a program to use incentives to help make more underutilized spectrum available for small, rural and tribal wireless carriers.

The future of transportation is the topic Monday when the Brookings Institution hosts a panel of state legislators. Lawmakers from Florida, Oregon and Colorado will speak about their state's policies after the Biden administration last week unveiled a proposed rule to require states and cities to measure their transportation-related emissions and develop their own reduction targets.

The House Agriculture Committee will have a subcommittee hearing Wednesday on forestry programs followed by a full committee hearing Thursday on credit needs of young, beginning and underserved producers.

Monday is World Population Day. According to the United Nations, the world's population will hit 8 billion this year, up from 7 billion in 2021.
 


Economic Reports and Events for the Week


The Labor Department releases its June CPI report Wednesday at 8:30 a.m. ET. The Consumer Price Index (CPI) for May came in hot, increasing 8.6% from a year earlier — its biggest annual jump since December 1981. June's inflation reading could be even higher, with fast-rising prices for some goods and services, including gas, rent, food, autos and airfares. Core inflation, excluding food and energy, could be lower as there are some signs inflation could ease this summer amid growing recession fears. 

Monday, July 11

  • New York Fed President John Williams speaks
     

Tuesday, July 12

  • NFIB survey: The National Federation of Independent Business releases its Small Business Optimism Index for June. Consensus estimate is for a 92.8 reading, roughly even with May’s, which marked the fifth consecutive month below the 48-year average of 98. In May, the tally of small-business owners expecting better conditions over the next six months decreased four points, to a net negative 54%, the lowest level recorded for the survey.
  • Richmond Fed President Thomas Barkin speaks
     

Wednesday, July 13

  • MBA Mortgage Applications
  • CPI: Bureau of Labor Statistics (BLS) releases the consumer price index for June. Economists forecast an 8.8% year-over-year jump, compared with an 8.6% increase in May, which is a 40-year high. Core CPI, which excludes volatile food and energy prices, is seen rising 5.7%, compared with 6%. Core CPI has cooled a bit since hitting its recent peak of 6.5% in March.
  • Federal budget
  • Federal Reserve releases the beige book for the fifth of eight times this year. The report gathers anecdotal evidence on current economic conditions from the central bank’s 12 districts.
     

Thursday, July 14

  • Jobless Claims
  • PPI: BLS releases the producer price index for June. Expectations are for a 10.7% annual spike and an 8.2% jump in core PPI. This compares with increases of 10.8% and 8.3%, respectively, in May. Both the PPI and core PPI are slightly lower than their record highs, set in March.
  • Fed Balance Sheet
  • Money Supply  
  • Fed Governor Christopher Waller
     

Friday, July 15

  • Retail Sales: Census Bureau reports on retail sales for June. Retail sales are expected to have increased by 0.8%, month over month, after declining 0.3% in June. Excluding autos, sales are seen rising 0.6% compared with 0.5% previously. Despite high inflation and dour sentiment, consumer spending has held up relatively well.
  • Import prices
  • Empire State Manufacturing: Federal Reserve Bank of New York releases its Empire State Manufacturing Index for July. The index, along with three other regional Federal Reserve Bank manufacturing indexes, had negative readings in June, indicating contraction in that sector of the economy.
  • Industrial production
  • Consumer sentiment: University of Michigan releases its Consumer Sentiment Index for July. The consensus call is for a 50 reading, even with June, which is a record low for the index, which dates back to 1978.
  • Business inventories
  • Atlanta Fed President Raphael Bostic
     

Key USDA & international Ag & Energy Reports and Events 


Tuesday brings USDA’s monthly updates via WASDE.

Monday, July 11

     Ag reports and events:

  • Export Inspections
  • Crop Progress  
  • Brazil’s Unica to release cane crushing and sugar output data (tentative)
  • Holiday: Singapore, Malaysia, Pakistan, Bangladesh
     

Tuesday, July 12

     Ag reports and events:

  • WASDE
  • Crop Production
  • Cotton: World Markets and Trade
  • Grain: World Markets and Trade
  • Oilseeds: World Markets and Trade
  • World Agricultural Production
  • Livestock: World Markets and Trade
  • China’s agriculture ministry (CASDE) releases monthly report on supply and demand for corn and soybeans
  • Malaysian Palm Oil Board palm oil stockpiles, output and export data for June
  • World Coffee Producers Forum (virtual session)
  • France agriculture ministry 2022 crop production estimates
  • EU weekly grain, oilseed import and export data
     

     Energy reports and events:

  • API weekly U.S. oil inventory report
  • EIA Short-Term Energy Outlook (STEO)
  • Sydney Energy Forum, through July 13
  • OPEC’s Monthly Oil Market Report
     

Wednesday, July 13

     Ag reports and events:

  • Broiler Hatchery
  • Feed Grains Database
  • Meat Price Spreads
  • Dairy Monthly Tables
  • Season Average Price Forecasts
  • Wheat Data
  • Turkey Hatchery
  • China’s first batch of June trade data, incl. soybean, edible oil, rubber and meat imports
  • France AgriMer monthly grains outlook
  • Holiday: Thailand
     

     Energy reports and events:

  • EIA weekly U.S. oil inventory report
  • U.S. weekly ethanol inventories
  • President Joe Biden begins a four-day trip to the Middle East
  • Genscape weekly crude inventory report for Europe’s ARA region
  • China’s first batch of June trade data, including oil, gas and coal imports; oil products imports and exports
  • IEA monthly Oil Market Report
     

Thursday, July 14

     Ag reports and events:

  • Weekly Export Sales
  • Cotton and Wool Outlook
  • Oil Crops Outlook
  • Feed Outlook
  • Rice Outlook
  • Wheat Outlook
  • Holiday: France
     

     Energy reports and events:

  • EIA natural gas storage change
  • Insights Global weekly oil product inventories in Europe’s ARA region
     

Friday, July 15

     Ag reports and events:

  • CFTC Commitments of Traders report
  • Peanut Prices
  • Feed Grains: Yearbook Tables
  • China’s 1H pork output and hog inventory
  • Malaysia’s July 1-15 palm oil export data
  • FranceAgriMer weekly update on crop conditions
     

     Energy reports and events:

  • Baker Hughes weekly U.S. oil/gas rig counts
  • China June output data, including crude oil and refining

 

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