US inflation picks up in June, consumer spending rises moderately
The personal consumption expenditures (PCE) price index rose 0.3 per cent last month after an upwardly revised 0.2 per cent gain in May, the Commerce Department's Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had forecast the PCE price index climbing 0.3 per cent following a previously reported 0.1 per cent rise in May. In the 12 months through June, the PCE price index advanced 2.6 per cent after increasing 2.4 per cent in May.
The data was included in the advance gross domestic product report for the second quarter published on Wednesday, which showed inflation cooling, though remaining above the Federal Reserve's 2 per cent target. Economists said businesses were still selling inventory accumulated before President Donald Trump's sweeping import duties came into effect.
They expected goods prices to rise in the second half, with businesses passing on the higher costs from import duties to consumers. Procter & Gamble said this week it would raise prices on some products in the US to offset tariff costs.
The US central bank tracks the PCE price measures for monetary policy. The Fed on Wednesday left its benchmark interest rate in the 4.25-4.50 per cent range, where it has been since December, resisting pressure from Trump to lower borrowing costs. Economists expect the Fed to resume easing monetary policy in September.
Fed Chair Jerome Powell, responding to questions from reporters on the anticipated tariff-related price increases, said "a reasonable base case is that these are one-time price effects," but added "I think we've learned that the process will probably be slower than expected" and take time to fully understand.
Excluding the volatile food and energy components, the PCE price index increased 0.3 per cent last month after rising 0.2 per cent in May. In the 12 months through June, the so-called core inflation advanced 2.8 per cent after rising by the same margin in May.
The BEA also reported that consumer spending, which accounts for more than two-thirds of economic activity, rose 0.3 per cent in June after being unchanged in May. The data was also included in the advance GDP report, which showed consumer spending growing at a 1.4 per cent annualised rate after almost stalling in the first quarter.
In the second quarter, economic growth rebounded at a 3.0 per cent rate, boosted by a sharp reduction in the trade deficit because of fewer imports relative to the record surge in the January-March quarter. The economy contracted at a 0.5 per cent pace in the first three months of the year.
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The Star
13 minutes ago
- The Star
Will China win the renewables race while US pivots to fossil fuels and nuclear?
US President Donald Trump's signature budget bill, signed into law earlier this month, marked a startling pivot towards fossil fuels and nuclear power, reigniting a fierce debate over how best to balance the country's energy future with its national security. The act, known officially as the One Big Beautiful Bill, rolls back Joe Biden era subsidies for solar, wind and electric vehicles – a dramatic reversal of long-standing US support for clean energy in a world racing towards decarbonisation. At the same time, the act preserves subsidies for nuclear projects, particularly fusion, which is framed as a dependable, low-carbon energy source and a long-term strategy to lessen US reliance on rare earths. Washington has described the energy overhaul as a strategic imperative rooted in national security concerns – especially after Beijing leveraged its near-monopoly over rare earths in the renewed US-China trade war. The legislation's supporters say it is a bold attempt to secure energy independence, arguing that the US must close technological gaps and mitigate supply chain vulnerabilities that could hand additional strategic leverage to Beijing. In this view, China's clean tech manufacturing dominance and control over critical minerals – essential to renewable technologies from solar panels and wind turbines to EV batteries – have left the US exposed to supply disruptions and geopolitical manipulation. Critics argue that the act prioritises short-term security and economic gains over long-term sustainability and global competitiveness – potentially ceding US leadership in the clean energy transition and threatening the planet's climate future. They also warn that the rollback of clean energy measures established by the Biden administration's 2022 Inflation Reduction Act (IRA) represents a high-stakes gamble based on a strategic miscalculation. In an illustration of the intensifying competition, just days after Trump's bill became law, Beijing unveiled a state-owned behemoth with a registered capital of 15 billion yuan (US$2.1 billion) and a target to achieve commercialisation of nuclear fusion by 2050. Last week's launch of China Fusion Energy Co Ltd signalled Beijing's ambition to lead in next-generation energy technologies, with thermonuclear power widely regarded as an ultimate energy solution. The Shanghai-based fusion company is backed by a coalition of seven state-owned giants across the nuclear and petroleum sectors, including China National Nuclear Corporation, PetroChina's Kunlun Capital, and the Shanghai Future Industry Fund. Also last week, China and the European Union issued a joint statement reaffirming their commitment to shared climate leadership and underscoring the urgency of global cooperation in the wake of the US withdrawal from the Paris Agreement – for the second time under Trump – earlier this year. And at the Brics summit earlier this month, China joined the major developing nations – including India, Brazil and South Africa – in a pledge to 'intensify global efforts to contain global warming'. According to Li Shuo, director of the Asia Society Policy Institute's China Climate Hub, the legislative changes showed that the green industrial strategy previously pursued by the US had become 'politically unsustainable' in today's Washington. 'The rollback of subsidies for clean tech manufacturing and deployment will reduce domestic supply of these products and in turn dampen demand. This will slow down clean tech development in the US and underscores the challenges ahead for US decarbonisation,' he said. 'In recent years, Washington has opted not to rely on Chinese technologies yet. With what happened to the IRA, it will continue to struggle to develop viable alternatives.' Scott Moore, director of China Programmes and Strategic Initiatives at the University of Pennsylvania, said it was 'pretty clear' that Trump's goal of cutting US dependence on China in critical minerals and other areas aligned with his predecessor's approach. 'That objective has been present for some time,' he said, adding that the second Trump administration had been 'even more forward-leaning' and assertive on that front. According to Moore, 'one of the most telling examples' that the Trump White House particularly prioritises reducing US dependence on rare earths is the MP Materials deal announced earlier this month. Under the multibillion-dollar partnership deal, Washington has acquired a 15 per cent stake in the company, which owns the only operational rare earths mine in the US, Mountain Pass in California, supplying roughly 15 per cent of global rare earth elements. 'There are alternatives, but it's difficult to replicate the entire supply chain – especially the processing [that] involves highly toxic materials, which makes it challenging to get local approvals and overcome community opposition. But it's still possible,' Moore said. While the US could still narrow the gap with China on rare earths and clean energy, success would ultimately depend on cost, he suggested. Anders Hove, a senior research fellow at the Oxford Institute for Energy Studies, also highlighted the challenge of processing toxic rare earth materials as posing a critical gap in the US supply chain. Hove said the legislation's fossil fuel emphasis reflected deep political divides and ideological differences in the US that could be traced back to the oil shocks of the mid-1970s. 'Since the 1970s, the two parties have grown more polarised in their positions on almost every issue,' he said. 'But starting in the 2000s, the Republican Party began to oppose any action on climate change, and renewable energy began to lose its bipartisan character. At the same time, supporting coal became a symbol of the culture war, more than [something] substantive or strategic.' Hove – whose public and private sector experience in energy policy and markets includes 12 years in China and nine on Wall Street – noted that the US under Trump and Biden, as well as Europe, each had distinct strategies to reduce their reliance on foreign sources. 'The Biden approach was more similar to Europe's, in the sense of working with trading partners like Canada or Chile to diversify critical minerals supply – including processing,' he said. Sun Haiyong, a researcher at the American Studies Centre of the Shanghai Institutes for International Studies, observed that fossil fuel interests were a core base for the Republican Party, which often downplayed climate mitigation in favour of economic and political priorities. 'The current US shift towards fossil fuels is driven mostly by the interest groups behind the Trump administration,' he said, adding that the lack of competitiveness in clean energy equipment manufacturing was also contributing to its retreat from renewables. 'Most production capacity for wind and solar technologies, energy storage systems and other related equipment is concentrated in China, which also holds technological and production advantages in processing and raw material extraction – particularly for critical minerals needed in energy transition technologies like wind turbines and energy storage.' Sun noted that there were also 'short-term economic benefits' for the Trump administration in ramping up fossil fuel production and exports – including greater economic leverage over Europe and support for the increasingly unstable US dollar. Meanwhile, China is projected to contribute 60 per cent of the world's expansion in renewable energy capacity by 2030, according to the International Energy Agency. The country produced roughly half of global solar capacity in 2023, while accounting for more than 60 per cent of global EV production. Tom Moerenhout, head of the Critical Materials Initiative at Columbia University's Centre on Global Energy Policy, said the US' entrenched status as a major producer, consumer, and exporter of fossil fuels was a driving force behind the sweeping policy shift. 'There's a refocus on those sectors,' he said, referring to renewed investment in natural gas power plants and internal combustion engine vehicles – developments shaped by both market forces and political priorities. 'The US is the world's biggest producer of both oil and gas – they get enormous revenue from that. They have deep market knowledge and strong technological expertise in fossil fuels,' Moerenhout said. 'It would make no sense for the US to suddenly abandon fossil fuels from an industrial or know-how perspective,' he noted, acknowledging that they yielded 'far more immediate cash than renewables'. Nevertheless, the refocus on fossil fuels is 'pure short-termism', according to Moerenhout, who described the legislation as a serious setback for US clean energy ambitions, with Washington widely perceived internationally as 'throwing in the towel' on renewables. 'I don't think [pulling back from clean energy] is necessarily wrong. It's just that the US is not going to compete globally,' he said. 'It's a very immature and problematic industrial policy if your goal is to be a player in tomorrow's world rather than someone left behind.' The new legislation is also designed to insulate the US economy by disqualifying products made with Chinese components or resources from federal subsidies – a move that has prompted several critical questions. Li, from the Asia Society Policy Institute, noted that with the scrapping of the IRA and the new legislation's rules limiting access to Chinese green technologies, the US cleantech landscape faced constraints on two fronts. '[The US] refuses to import Chinese clean technologies – as per Biden's original stance – and, with Trump's repeal of the IRA, it has also surrendered much of its domestic manufacturing capacity,' he said. 'This combination sets the stage for major setbacks in decarbonisation efforts over the medium to long term [and] marks a critical inflection point – not just for US-China climate dynamics, but for the global climate agenda as a whole.' 'The US is simply stepping off the field,' according to Li, who predicted that US-China climate relations would become increasingly asymmetrical. 'The US is retreating both politically and economically from climate action while China is gradually realising that decarbonisation serves its commercial interests,' he said. 'The long-standing global climate storyline, in which developed countries push developing ones to accelerate action, may well be rewritten in reverse. And we are only at the beginning of this shift.' The long-standing global climate storyline, in which developed countries push developing ones to accelerate action, may well be rewritten in reverse In Shanghai, Sun raised similar doubts about the long-term viability of Washington's pivot to fossil fuels, which he said 'cannot serve as a long-term energy solution for the US'. He said this was mainly because of the growing environmental impacts of fracking, the urgent need to address climate change, and the inevitable policy shifts driven by changes in political leadership. 'As for nuclear fusion, while the technology pathway is viable, its commercialisation is still a long way off,' he said, adding that construction of new nuclear power projects or the restart of previously halted ones in the US had long been plagued by delays, cost overruns and cancellations. Sun also cautioned against overstating the importance of the new legislation, pointing out that there were 'significant hurdles in advancing re-industrialisation'. The Oxford Institute's Hove shared this view, adding that nuclear power tended to get more expensive over time, while renewable energy was more likely to benefit from rapid learning and cost declines. 'Fusion plant [technology] is decades from being demonstrated at scale – presumably funded by the government – and commercialisation decades beyond that, if it even has any economic viability, which right now is a huge unknown,' he said. Hove also highlighted the impact of trade disputes on securing critical supplies from abroad, adding that slowing demand for wind and electric vehicles in the US was weakening incentives for companies to invest in long-term supply chains or upstream innovation. Moore, from the University of Pennsylvania, questioned whether fossil fuels should remain a long-term option, even if they could. He also predicted that wind and solar would likely remain central to the energy mix. In contrast, fusion, due to capital intensive and its dependency on specialised infrastructure, would probably remain a centralised power source, he said. Columbia University's Moerenhout rejected the notion that fossil fuels were simply a place holder until nuclear fusion became viable, noting that the technology remained a distant, expensive gamble that was often hyped by those with vested interests. 'It's not illogical to think fusion may eventually produce electricity commercially – but that day isn't coming in the next decade,' said Moerenhout, who described the legislation as a 'mixed bag'. In his view, small modular reactors are 'much closer to economic competitiveness than fusion', though they would still need real-world deployment to prove their viability. And while fusion and small modular reactors may hold long-term promise, meaningful cost reductions were already happening in proven technologies such as renewables and smart grid technologies, Moerenhout said. 'If you want to see where the biggest cost reductions for reliable electricity are happening, it's in clean energy [like] wind, solar, in demand-side management, smart meters, and so forth ... There the cost reductions are real. They're clear. They're visible. They're already happening.' - SOUTH CHINA MORNING POST
The Star
13 minutes ago
- The Star
Asian currencies fall to two-month low as tariff deadline nears
MANILA (Bloomberg): Asian currencies slid to a two-month low, weighed by a resilient dollar and uncertainty over US tariff talks with some countries. The Bloomberg Asia Dollar Index fell as much as 0.2% in early trading to the lowest level since May 19. The Philippine peso led declines, as elevated oil prices fueled concerns over the nation's crude import bill. The Indian rupee hovered near record lows. Regional currencies were set to cap their biggest monthly loss this year as the greenback surged after the Federal Reserve held benchmark interest rates. Expectations for a September rate cut have also eased following robust US economic data. Meanwhile, sentiment remains cautious with some countries yet to finalize trade agreements with the US ahead of the Aug. 1 deadline. "Asian FX markets continue to be shaped by persistent US dollar strength,' said Shier Lee Lim, lead FX strategist at Convera in Singapore. "The upcoming tariff deadlines and ongoing negotiations involving Malaysia and Thailand remain key flashpoints for market sentiment, as investors look for signs of progress or further escalation.' Central banks across the region have stepped up intervention efforts to stabilize their currencies. The Hong Kong Monetary Authority stepped in to buy HK$3.925 billion to defend the currency peg, while Indonesia's central bank intervened in the foreign-exchange markets. The People's Bank of China set a stronger-than-expected fixing to support the yuan. The Mexican peso led gains among emerging market peers after people familiar with the plans said President Donald Trump and his Mexican counterpart, Claudia Sheinbaum, plan to speak by phone, raising hopes for progress in trade discussions. Over in stocks, the MSCI Emerging Market Index fell to a two-week low. Stocks on mainland China and Hong Kong declined more than 1.5% following weaker-than-expected PMI data and as traders await the outcome of US-China trade talks. Benchmarks in South Korea also fell as disappointing earnings from Samsung Electronics Co. weighed. "Tariffs continue to impact sentiment and activity,' said Tony Sycamore, an analyst at IG in Sydney. "There remains some uncertainty as to whether China and the US can extend their trade pause for another 90 days.' --With assistance from Matthew Burgess. -- ©2025 Bloomberg L.P.
The Sun
13 minutes ago
- The Sun
Slower US job growth in July likely, unemployment seen at 4.2%
WASHINGTON: US job growth likely slowed in July, with the unemployment rate forecast rising back to 4.2%, but that probably would be insufficient to spur the Federal Reserve (Fed) to resume cutting interest rates soon as tariffs are starting to fan inflation. The anticipated slowdown in nonfarm payrolls in the Labour Department's closely watched employment report yesterday would mostly be payback after a surprise surge in state and local government education boosted employment gains in June. The US central bank on Wednesday left its benchmark interest rate in the 4.25-4.5% range. Fed Chair Jerome Powell's comments after the decision undercut confidence the central bank would resume policy easing in September as had been widely anticipated by financial markets and some economists. Though Powell described the labour market as being in balance because of supply and demand both declining at the same time, he acknowledged that this dynamic was 'suggestive of downside risk.' Job growth has slowed amid uncertainty over where President Donald Trump's tariff levels will eventually settle. Trump on Thursday slapped dozens of trading partners with steep tariffs ahead of yesterday's trade deal deadline, including a 35% duty on many goods from Canada. The White House's immigration crackdown has reduced labour supply as has an acceleration of baby boomer retirements. 'We just don't have a roadmap yet with respect to tariffs, and now that it's coming into place, I think that can certainly help, but if you're thinking about what you're planning for your business over the next two to three years ... you don't want to make that decision until you know what your costs of running your business are going to be,' said Michael Reid, senior US economist at RBC Capital Markets. Nonfarm payrolls likely increased by 110,000 jobs last month after rising by 147,000 in June, a Reuters survey of economists showed. That reading would be below the three-month average gain of 150,000. Estimates ranged from no jobs added to an increase of 176,000 positions. An economist predicting no change in payrolls pointed to the jump in state and local government education jobs in June, which accounted for nearly half of the employment gains that month. 'When the academic year ends, there is a huge drop in payroll levels at schools,' said Stephen Stanley, chief US economist at Santander US Capital Markets. 'The fact that there were fewer reductions than usual in June suggests to me that more of the usual wave of reductions came in July.' Stanley also argued that there had been a torrent of anecdotal and survey evidence suggesting that businesses large and small slowed their hiring activity this summer in the face of elevated policy uncertainty. This led Stanley to anticipate private sector payrolls growth slowed further in July rather than accelerated as most economists expected after the economy added the fewest jobs in eight months in June. Federal government job losses as the Trump administration wields the axe on headcount and spending, excluding immigration enforcement, could mount after the Supreme Court gave the White House the green light for mass firings. But the administration has also said several agencies were not planning to proceed with layoffs. The reduction in immigration flows means the economy now needs to create roughly 100,000 jobs per month or less to keep up with growth in the working age population. The decline in the unemployment rate to 4.1% in June was in part due to people dropping out of the labour force. July's anticipated rise would still leave the jobless rate in the narrow 4%-4.2% range that has prevailed since May 2024. 'The July jobs report is unlikely to shake the Fed out of its 'wait-and-see' posture,' said Gregory Daco, chief economist at EY-Parthenon. 'But it will add further evidence that the labour market is gradually losing momentum.' Financial markets have pushed back an anticipated September rate cut to October. With tariffs starting to raise inflation, some economists believe the window for the Fed resuming policy easing this year is closing. But others still believe the Fed could still cut rates in September, especially if the Bureau of labour Statistics' preliminary payrolls benchmark revision in September projects a sharp decline in the employment level from April 2024 through March this year. The Quarterly Census of Employment and Wages, derived from reports by employers to the state unemployment insurance programs, has indicated a much slower pace of job growth between April 2024 and December 2024 than payrolls have suggested. 'If it's an ugly downward revision, the Fed will move, there is no question,' said Brian Bethune, an economics professor at Boston College. – Reuters
