US economy rebounds in second quarter despite tariff volatility
Gross domestic product (GDP), a measure of total goods and services produced, rose 3 per cent, when adjusted for seasonality and inflation, during the April-June period, the Commerce Department said in its advance second-quarter estimate on Wednesday.
A Reuters survey of economists had forecast GDP to increase at a 2.4 per cent annualised rate.
Last quarter's growth followed a 0.5 per cent contraction in the January-March period as business rushed to stockpile imports ahead of President Donald Trump's tariffs.
The Commerce Department attributed the second-quarter rebound to a decrease in imports and an increase in consumer spending. Those were partly offset by decreases in investment and exports.
Mr Trump's initial April 2 announcement – a blanket 10 per cent tariff on nearly all trading partners and harsher 'reciprocal' tariffs – shook financial markets before he reversed course a week later.
Most investors were largely fearful that the sweeping tariff announcement would spark an economic slowdown, and his stop-start approach towards the charges' implementation brought more uncertainty.
Markets have since come back in force as he delayed tariffs' implementation date and agreed to a temporary trade truce with China following escalatory tit-for-tat charges.
The S&P 500 recorded a six-day streak of record-highs before closing lower on Tuesday following stalled trade talks between the US and China in Sweden.
Wednesday's report is the latest in a series of macroeconomic data this week that was expected clarify the state of the US economy as it contends with high interest rates and the effects of tariffs.
The latest report also comes hours before the Federal Reserve was expected to announce it was holding interest rates steady yet again, with the UAE Central Bank mirroring its decision. The Fed has kept its target rate unchanged at 4.25 per cent and 4.50 per cent this year.
The Fed cut US interest rates in 2024, with the most recent in December, but has held pat this year owing to uncertainty surrounding tariffs.
Meanwhile, data released earlier this week pointed to signs of a labour market that is continuing to cool.
The US Bureau of Labour Statistics on Tuesday reported that job openings and hirings declined last month. The hiring rate also fell to 3.3 per cent while the quits rate remained unchanged at 2 per cent.
'Persistently low churn also leaves the labour market looking more fragile than headline numbers suggest,' Wells Fargo economists Sarah House and Nicole Cervi wrote to clients on Tuesday.
Also on Tuesday, the Conference Board reported that US consumers' outlook on the current level of job availability weakened for a seventh month in a row, reaching its lowest level since March 2021.
Separate data this week was expected to provide further clues on the economy, including the Fed's preferred inflation metric on Thursday and June's unemployment report on Friday.
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Dubai Eye
3 hours ago
- Dubai Eye
Trump fires lead official on economic data
President Donald Trump on Friday fired a top Labor Department official on the heels of a market-shocking weak scorecard of the US job market, accusing her of manipulating the figures and adding to already growing concerns about the quality of economic data published by the federal government. In a second surprise economic policy development, the door for Trump to make an imprint on a Federal Reserve with which he clashes almost daily for not lowering interest rates opened much earlier than anticipated when Fed Governor Adriana Kugler unexpectedly announced her resignation on Friday afternoon. The two developments further rattled a stock market already reeling from his latest barrage of tariff announcements and the weak jobs data. The benchmark S&P 500 Index .SPX sank 1.6 per cent in its largest daily drop in more than two months. Trump accused Erika McEntarfer, appointed by former President Joe Biden, of faking the jobs numbers. There is no evidence to back Trump's claims of data manipulation by the Bureau of Labor Statistics, the statistical agency that compiles the closely watched employment report as well as consumer and producer price data. A representative for the BLS did not respond to a request for comment. Friday began with BLS reporting the US economy created only 73,000 jobs in July, but more stunning were net downward revisions showing 258,000 fewer jobs had been created in May and June than previously reported. "We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She will be replaced with someone much more competent and qualified," Trump said in a post on Truth Social. DATA CONCERNS A Trump administration official who requested anonymity said that while all economic data is noisy, the White House has been dissatisfied with how large the revisions have been in the recent data and issues with lower survey responses. The problem started during COVID and has not been addressed in the years since. "There are these underlying problems that have been festering here for years now that have not been rectified," the person said. "The markets and companies and the government need accurate data, and like, we just weren't getting that," the official said. The BLS has already reduced the sample collection for consumer price data as well as the producer price report, citing resource constraints. The government surveys about 121,000 businesses and government agencies, representing approximately 631,000 individual worksites for the employment report. The response rate has declined from 80.3 per cent in October 2020 to about 67.1 per cent in July, BLS data shows. A Reuters poll last month found 89 of 100 top policy experts had at least some worries about the quality of US economic data, with most also concerned that authorities are not addressing the issue urgently enough. In addition to the concerns over job market data, headcount reductions at BLS have resulted in it scaling back the scope of data collection for the Consumer Price Index, one of the most important gauges of US inflation, watched by investors and policymakers worldwide. Trump's move fed into concerns that politics may influence data collection and publication. "Politicizing economic statistics is a self-defeating act," said Michael Madowitz, principal economist at the Roosevelt Institute's Roosevelt Forward. "Credibility is far easier to lose than rebuild, and the credibility of America's economic data is the foundation on which we've built the strongest economy in the world. Blinding the public about the state of the economy has a long track record, and it never ends well." FED CHANGE SOONER THAN EXPECTED Meanwhile, Kugler's surprise decision to leave the Fed at the end of next week presents Trump an earlier-than-expected opportunity to install a potential successor to Fed Chair Jerome Powell on the central bank's Board of Governors. Trump has threatened to fire Powell repeatedly because the Fed chief has overseen a policymaking body that has not cut interest rates as Trump has demanded. Powell's term expires next May, although he could remain on the Fed board until January 31, 2028, if he chooses. Trump will now get to select a Fed governor to replace Kugler and finish out her term, which expires on January 31, 2026. A governor filling an unexpired term may then be reappointed to a full 14-year term. Some speculation has centered on the idea Trump might pick a potential future chair to fill that slot as a holding place. Leading candidates for the next Fed chair include Trump economic adviser Kevin Hassett, Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh and Fed Governor Chris Waller, a Trump appointee who this week dissented with the central bank's decision to keep rates on hold, saying he preferred to start lowering them now. Trump, as he was leaving the White House to spend the weekend at his Bedminster, New Jersey, estate, said he was happy to have the open slot to fill. "I would not read any political motivation into what [Kugler is] doing, although the consequence of what she's doing is she's calling Trump's bluff," said Derek Tang, an analyst at LH Meyer, a research firm. "She's putting the ball in his court and saying, look, you're putting so much pressure on the Fed, and you want some control over nominees, well, here's a slot."
ARN News Center
3 hours ago
- ARN News Center
Trump fires lead official on economic data
President Donald Trump on Friday fired a top Labor Department official on the heels of a market-shocking weak scorecard of the US job market, accusing her of manipulating the figures and adding to already growing concerns about the quality of economic data published by the federal government. In a second surprise economic policy development, the door for Trump to make an imprint on a Federal Reserve with which he clashes almost daily for not lowering interest rates opened much earlier than anticipated when Fed Governor Adriana Kugler unexpectedly announced her resignation on Friday afternoon. The two developments further rattled a stock market already reeling from his latest barrage of tariff announcements and the weak jobs data. The benchmark S&P 500 Index .SPX sank 1.6 per cent in its largest daily drop in more than two months. Trump accused Erika McEntarfer, appointed by former President Joe Biden, of faking the jobs numbers. There is no evidence to back Trump's claims of data manipulation by the Bureau of Labor Statistics, the statistical agency that compiles the closely watched employment report as well as consumer and producer price data. A representative for the BLS did not respond to a request for comment. Friday began with BLS reporting the US economy created only 73,000 jobs in July, but more stunning were net downward revisions showing 258,000 fewer jobs had been created in May and June than previously reported. "We need accurate Jobs Numbers. I have directed my Team to fire this Biden Political Appointee, IMMEDIATELY. She will be replaced with someone much more competent and qualified," Trump said in a post on Truth Social. DATA CONCERNS A Trump administration official who requested anonymity said that while all economic data is noisy, the White House has been dissatisfied with how large the revisions have been in the recent data and issues with lower survey responses. The problem started during COVID and has not been addressed in the years since. "There are these underlying problems that have been festering here for years now that have not been rectified," the person said. "The markets and companies and the government need accurate data, and like, we just weren't getting that," the official said. The BLS has already reduced the sample collection for consumer price data as well as the producer price report, citing resource constraints. The government surveys about 121,000 businesses and government agencies, representing approximately 631,000 individual worksites for the employment report. The response rate has declined from 80.3 per cent in October 2020 to about 67.1 per cent in July, BLS data shows. A Reuters poll last month found 89 of 100 top policy experts had at least some worries about the quality of US economic data, with most also concerned that authorities are not addressing the issue urgently enough. In addition to the concerns over job market data, headcount reductions at BLS have resulted in it scaling back the scope of data collection for the Consumer Price Index, one of the most important gauges of US inflation, watched by investors and policymakers worldwide. Trump's move fed into concerns that politics may influence data collection and publication. "Politicizing economic statistics is a self-defeating act," said Michael Madowitz, principal economist at the Roosevelt Institute's Roosevelt Forward. "Credibility is far easier to lose than rebuild, and the credibility of America's economic data is the foundation on which we've built the strongest economy in the world. Blinding the public about the state of the economy has a long track record, and it never ends well." FED CHANGE SOONER THAN EXPECTED Meanwhile, Kugler's surprise decision to leave the Fed at the end of next week presents Trump an earlier-than-expected opportunity to install a potential successor to Fed Chair Jerome Powell on the central bank's Board of Governors. Trump has threatened to fire Powell repeatedly because the Fed chief has overseen a policymaking body that has not cut interest rates as Trump has demanded. Powell's term expires next May, although he could remain on the Fed board until January 31, 2028, if he chooses. Trump will now get to select a Fed governor to replace Kugler and finish out her term, which expires on January 31, 2026. A governor filling an unexpired term may then be reappointed to a full 14-year term. Some speculation has centered on the idea Trump might pick a potential future chair to fill that slot as a holding place. Leading candidates for the next Fed chair include Trump economic adviser Kevin Hassett, Treasury Secretary Scott Bessent, former Fed Governor Kevin Warsh and Fed Governor Chris Waller, a Trump appointee who this week dissented with the central bank's decision to keep rates on hold, saying he preferred to start lowering them now. Trump, as he was leaving the White House to spend the weekend at his Bedminster, New Jersey, estate, said he was happy to have the open slot to fill. "I would not read any political motivation into what [Kugler is] doing, although the consequence of what she's doing is she's calling Trump's bluff," said Derek Tang, an analyst at LH Meyer, a research firm. "She's putting the ball in his court and saying, look, you're putting so much pressure on the Fed, and you want some control over nominees, well, here's a slot."
Crypto Insight
3 hours ago
- Crypto Insight
GENIUS sets new stablecoin rules but remains vague on foreign issuers
The signing of the GENIUS Act into law established the first comprehensive regulatory framework for US-issued stablecoins. Supporters argue it will enhance trust, drive mainstream adoption and bolster the dollar's status as the global reserve currency. With stablecoins now gaining traction in global finance, the GENIUS Act could also prove a boon for the developing world, attract institutional interest and drive a resurgence in decentralized finance (DeFi). However, concerns remain over unresolved issues, such as the regulation of foreign issuers, doubts about the ban on yield-bearing stablecoins and the potential dominance of corporate and traditional finance players. Industry experts surveyed by Cointelegraph agree that the GENIUS Act is a landmark event for the US blockchain and stablecoin sector, if not the global crypto industry. 'Banks, fintechs and even large retailers — essentially anyone with significant consumer or institutional distribution — will all be considering issuing their own stablecoin,' Christian Catalini, founder of the MIT Cryptoeconomics Lab, told Cointelegraph, adding that a stablecoin strategy will now be an integral part of all payments and financial services companies. GENIUS Act's foreign stablecoin 'loophole' A major weakness of the GENIUS Act is what the Atlantic Council calls the 'Tether loophole.' The US think tank argued in a blog post that the US stablecoin law did not 'adequately' regulate offshore stablecoin issuers. The law aims to bring order to US stablecoins by imposing strict rules on reserves, financial disclosures and sanctions compliance. This could put local issuers at a competitive disadvantage and potentially encourage new issuers to incorporate in less-demanding jurisdictions offshore. 'The foreign issuer loophole was not sufficiently fixed,' Timothy Massad, a research fellow at the Kennedy School of Government at Harvard University and former chairman of the US Commodity Futures Trading Commission, told Cointelegraph. Massad is a co-author of the Atlantic Council blog. The GENIUS Act requires Tether and other foreign issuers to meet standards 'comparable' to those of US issuers, but what qualifies as 'comparable' isn't clearly defined, Massad added. But Christopher Perkins, president of CoinFund, said that regulated US stablecoins give end users confidence that their holdings are fully backed, paving the way for more companies to set up shop in the US. 'I think many investors will choose the onshore regulated version of stablecoins because of the incremental confidence they deliver.' In a recent media interview, Tether CEO Paolo Ardoino said that the company's 'foreign stablecoin' USDt will comply with the GENIUS Act. It is also planning to launch a domestic stablecoin under the new law. Stablecoin issuance goes mainstream with GENIUS The GENIUS Act opens doors for giant US commercial banks like Bank of America to issue their own stablecoins, while mega retailers like Walmart and Amazon are also reportedly exploring stablecoin issuance. The prospect of regulated corporate stablecoin issuers raises questions about how crypto-native stablecoins like Tether and USDC will be affected. 'Tether less so, as its lead offshore is substantial,' Catalini said. He added that most of the new competition will focus on the US market, which presents 'a more significant challenge for USDC.' Meanwhile, Keith Vander Leest, US general manager at London-based stablecoin infrastructure startup BVNK, said that new players won't necessarily flood the market. Non-crypto native firms launching stablecoins will probably move cautiously, beginning with small-scale pilot programs to build comfort and competency. 'It is more likely for banks to move quicker into issuing than corporates,' Vander Leest told Cointelegraph. Many will be 'use-case specific' stablecoins. The number of new stablecoins that 'reach scale' will be limited, he said. GENIUS and stablecoins increase US debt demand The White House claims that the GENIUS Act will increase demand for US debt and cement the dollar's status as the world's reserve currency. Treasury Secretary Scott Bessent said that dollar-linked stablecoins could eventually reach at least $2 trillion in market capitalization, up from today's market cap of about $267 billion. Markus Hammer, a consultant and principal at HammerBlocks, said that because US-issued stablecoins must be 100% backed by US dollars or their equivalents, they will naturally drive up demand for US debt. 'Emerging markets, in particular, may become significant users of US dollar stablecoins, as these offer more stability and efficiency compared to their often fragile local financial systems,' he told Cointelegraph. But Hammer disagreed on the dollar's renewed dominance, claiming that trust in US-based currencies is gradually eroding. According to Massad, the act's impact will depend on whether stablecoins become an important means of payment or remain a niche use case. Business-to-business payments make up the bulk of international payments, and it's not clear whether there will be significant growth in the use of stablecoins for that purpose, he said. GENIUS reshapes stablecoin utility The GENIUS Act prohibits stablecoin issuers from paying 'interest or yield' to individuals holding stablecoins. Could that put US-issued stablecoins at a competitive disadvantage? 'Without yield, stablecoins are a depreciating asset,' Perkins said. 'And while many believe that payments are the killer use case for stablecoins, they also serve as an important store of value in the developing world. Holders will turn to DeFi to reconstitute yield.' In time, it is possible that yield-bearing securities or tokens will become more accessible, continued Perkins. Until then, institutional investors, who have a fiduciary duty to earn interest on their holdings, may need to explore other ways to earn interest. They could offer compliant revenue-sharing agreements with issuers to gain yield exposure, for instance. It almost seems counterintuitive, but the removal of yield on stablecoins could actually be good news for Ethereum-based DeFi as the main alternative for passive income generation. Overall, 'the signing of the Act is a significant milestone,' Massad said. 'Stablecoins are the most useful application of blockchain technology to date, and even if they don't become a major means of payment, they will generate useful competition into payments — we may see tokenized bank deposits soon.' Catalini of MIT Cryptoeconomics Lab called stablecoins 'the first tokenized assets to start its journey towards mainstream adoption.' He added that assets such as bonds and securities will soon follow. The GENIUS Act sets a regulatory foundation for stablecoin issuance in the US and signals mainstream adoption is underway. Despite concerns over unresolved issues such as the vague language around foreign issuers, industry leaders view the law as a critical step for regulated dollar-backed tokens. Source:
