2024-08-30 19:03
Consumer spending increases 0.5% in July PCE price index rises 0.2%, advances 2.5% year-on-year Core PCE inflation gains 0.2%; up 2.6% year-on-year Personal income climbs 0.3%; saving rate falls to 2.9% WASHINGTON, Aug 30 (Reuters) - U.S. consumer spending increased solidly in July, suggesting the economy remained on firmer ground early in the third quarter and arguing against a half-percentage-point interest rate cut from the Federal Reserve next month. The report from the Commerce Department on Friday also showed prices rising moderately last month, curbing inflation. A jump in the unemployment rate to a near three-year high of 4.3% in July stoked fears of a recession, leading financial markets and some economists to put a 50-basis-points rate reduction on the table when the U.S. central bank embarks on a widely anticipated policy easing in September. Fed Chair Jerome Powell last week signaled that a rate cut was imminent, in a nod to the worries over the labor market. "There is nothing here to push the Fed to a half-point cut," said Conrad DeQuadros, senior economic advisor at Brean Capital. "This is not the kind of spending growth associated with recession." Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month after advancing by an unrevised 0.3% in June, the Commerce Department's Bureau of Economic Analysis reported. The increase was in line with economists' expectations. After adjusting for inflation, consumer spending gained 0.4% after rising 0.3% in June, and implied that spending retained the momentum from the second quarter, when it helped to boost gross domestic product growth to a 3.0% annualized rate. The economy grew at a 1.4% pace in the January-March quarter. The Atlanta Fed raised its third-quarter GDP growth estimate to a 2.5% rate from a 2.0% pace. The increase in spending was across both goods and services, with outlays on motor vehicles and parts leading the charge. Consumers also spent more on housing and utilities, food and beverages, recreation services as well as financial services and insurance. They also boosted spending on healthcare, visited restaurants and bars and stayed at hotels. Consumers also bought more recreational goods and vehicles as well as furnishings and long-lasting household equipment. While the labor market momentum has slowed, it continues to generate decent wage growth that is helping to underpin spending. The slowdown in the labor market is mostly driven by a step down in hiring rather than layoffs. Personal income rose 0.3% last month after gaining 0.2% in June. Wages climbed 0.3% after increasing 0.2% in June. SAVING RATE DROPS The saving rate dropped to 2.9%, the lowest level since June 2022, from 3.1% in June. Economists were, however, not in agreement on the implications of the decline with some arguing that the government was not fully capturing income earned by undocumented immigrants. Others argued that households were drawing down on savings to maintain spending, which could imperil future consumption. Yet another group was unperturbed by the decline in the saving rate, pointing to strong household balance sheets against the backdrop of higher house and stock prices. Undocumented immigrants have also been cited as one of the factors behind the Labor Department's Bureau of Labor Statistics estimate last week that employment gains were overstated by 68,000 jobs per month in the 12 months through March. The so-called benchmark revision estimate is based on a data set derived from reports by employers to the state unemployment insurance programs. The data does not include undocumented immigrants, a group that economists believe contributed to strong job growth last year. "The BEA could be undercounting income earned by recent immigrants, whose economic activity is harder to measure than workers who have been in the U.S. longer," said Bill Adams, chief economist at Comerica Bank. "That could mean the saving rate is higher than is currently reported, and would be revised higher when more accurate employment and earnings data become available." Stocks on Wall Street were trading higher. The dollar rose against a basket of currencies, while U.S. Treasury prices fell. August's employment report scheduled to be released next Friday will likely determine the size of the September rate cut. The personal consumption expenditures (PCE) price index rose 0.2% last month after an unrevised 0.1% gain in June, the report also showed. Goods prices were unchanged after falling for two straight months. Declines in the prices of motor vehicles and other long-lasting manufactured goods were offset by gains in take-out food and other nondurable goods. The cost of services increased 0.2% for a third straight month, lifted by rises in housing and utilities, recreation services as well as financial services and insurance. Healthcare prices were unchanged while the cost of transportation services decreased for the fourth consecutive month. In the 12 months through July, the PCE price index increased 2.5%, matching June's gain. The increase in PCE inflation was in line with economists' expectations. Excluding the volatile food and energy components, the PCE price index rose 0.2% last month, matching the increase in June. In the 12 months through July, core inflation increased 2.6% after advancing by the same rate in June. Core inflation increased at a 1.7% annualized rate in the three months through July. The Fed tracks the PCE price measures for its 2% inflation target, and has maintained its policy rate in the current 5.25%-5.50% range for more than a year, having raised it by 525 basis points in 2022 and 2023. "The data suggest inflation is on track to hit the Fed's 2% target," said Pooja Sriram, an economist at Barclays. "We maintain our baseline call for three Fed rate cuts this year." Sign up here. https://www.reuters.com/markets/us/us-consumer-spending-picks-up-inflation-rises-moderately-july-2024-08-30/
2024-08-30 19:03
GE Vernova reports unrelated turbine blade failures Latest blade accident blamed on strong winds during storm Three blade accidents in 4 months raise concerns for GE Vernova Aug 30 (Reuters) - Energy equipment maker GE Vernova (GEV.N) , opens new tab on Friday said recent turbine blade failures at two offshore wind farms in the United States and the United Kingdom are unrelated and blamed the latest mishap on strong winds. The statement comes as the company has been grappling with fallout from three separate blade accidents in four months at two wind farms that are still under construction. GE Vernova shares were up 3% following the announcement. The most recent occurred on Aug. 22 at the Dogger Bank wind farm off the coast of Yorkshire in the North Sea, a little over a month after a blade fell apart at the Vineyard Wind project off the coast of Massachusetts and sent debris onto nearby beaches. A blade at Dogger Bank was also damaged in May during installation. The Vineyard Wind blade damage was blamed on a manufacturing flaw, raising concerns about a more widespread issue. The failure this month occurred when the turbine rotor was locked in place and the yaw system, which orients the rotor towards the wind, was disabled, the company said, leaving it vulnerable during a large storm. The turbine was in the process of being commissioned. GE Vernova said it was taking corrective actions to eliminate risks during such events. "We continue to investigate the recent offshore wind events involving our blades and are taking every necessary step with customers and authorities to safely move forward with the installation of the Dogger Bank and Vineyard Wind farms," GE Vernova said in a statement. "Our current analyses indicate that the causes of the recent blade events are unrelated." Two analysts, Chris Dendrinos of RBC Capital Markets and Graham Price of Raymond James, said the news was positive for GE Vernova because it did not point to a broader manufacturing problem. "It is unfortunate especially given the concerns and tensions stemming from the blade failure at Vineyard, but this appears to be an isolated event and a risk the company has to deal with due to unpredictable operating conditions in the North Sea," Dendrinos said in an email. Dogger Bank is a partnership between Britain's SSE Renewables and Norwegian companies Equinor (EQNR.OL) , opens new tab and Vargronn. Vineyard Wind is a joint venture between Avangrid (AGR.N) , opens new tab, the U.S. arm of Spain's Iberdrola (IBE.MC) , opens new tab, and Denmark's Copenhagen Infrastructure Partners. GE Vernova shares were up $5.66, or 3%, at $197.02 in afternoon trading on the New York Stock Exchange. Sign up here. https://www.reuters.com/business/energy/ge-vernova-blames-latest-offshore-wind-blade-failure-high-winds-shares-rise-2024-08-30/
2024-08-30 18:31
BRASILIA, Aug 30 (Reuters) - Brazil Finance Minister Fernando Haddad said on Friday that the government should close this year within the tolerance band of its fiscal target if Congress approves the compensation for payroll tax waivers. The government's goal this year is to eliminate the primary deficit, which excludes interest payments, with a tolerance band of 0.25% of GDP, either up or down. This means that the primary deficit could be close to 29 billion reais ($5.13 billion). Central bank data released on Friday showed that the central government posted a primary deficit of 8.6 billion reais in July and a deficit of 269 billion reais over the past 12 months. Haddad, speaking at an event in Sao Paulo, said that the July figure was in line with the year's target. Government members have stressed that fiscal results in the second half of the year will be better than in the first, which saw the anticipation of significant expenditures, including court-ordered payments. Haddad noted that if the government had approved 100% of what was proposed last year, it would be on track for a zero primary deficit this year, making it sustainable. The minister assessed that the labor market is overheated, and now is the time to adjust social programs. He also said that Latin America’s largest economy is expanding by a rate of 3%, and given its potential, it should not settle for growth below the global average. ($1 = 5.6489 reais) Sign up here. https://www.reuters.com/markets/brazils-government-end-2024-within-fiscal-target-tolerance-band-finance-minister-2024-08-30/
2024-08-30 18:31
Canadian dollar falls 0.1% against the greenback For the month, the loonie was up 2.3% Canadian second-quarter GDP rises 2.1% Ten-year yield climbs to three-week high at 3.160% TORONTO, Aug 30 (Reuters) - The Canadian dollar held on to much of its monthly gain against its U.S. counterpart on Friday as investors bet the global economy would avoid recession and Canadian GDP data did little to alter expectations for Bank of Canada interest rate cuts. The loonie was trading 0.1% lower at 1.35 to the U.S. dollar, or 74.07 U.S. cents, as the U.S. dollar clawed back some recent declines against a basket of major currencies. Still, the Canadian currency was up 2.3% for the month, its biggest monthly gain since December. The move in August was driven by broad-based weakness in the U.S. dollar, said Erik Nelson, a macro strategist at Wells Fargo Securities in London. "It tracks with widespread pricing of a global 'soft landing' with inflation receding, growth expectations and risk assets still elevated and central banks firmly on the path to lower rates," Nelson said. Canada's economy grew at an annualized rate of 2.1% in the second quarter, beating estimates for a gain of 1.6%. Still, the mix of growth, which was led by government expenditures, failed to impress some economists, while monthly data showed activity stalling in June and likely again in July. The BoC will cut its benchmark rate by 25 basis points for a third straight meeting on Sept. 4 and again in October and December, faster reductions in borrowing costs than previously thought, according to a majority of economists canvassed in a Reuters poll. The price of oil, one of Canada's major exports, fell 2.8% to $73.76 a barrel on Friday, pressured by concerns of more supply entering the market from the OPEC+ producers. Canadian government bond yields moved higher across the curve, tracking moves in U.S. Treasuries. The 10-year was up 2.6 basis points at 3.160%, its highest level since Aug. 8. Sign up here. https://www.reuters.com/markets/currencies/canadian-dollar-notches-biggest-monthly-advance-this-year-2024-08-30/
2024-08-30 17:37
Aug 30 (Reuters) - U.S. energy firms this week cut the number of oil and natural gas rigs operating for a third week in a row for the first time since late June, energy services firm Baker Hughes (BKR.O) , opens new tab said in its closely followed report on Friday. The oil and gas rig count, an early indicator of future output, fell by two to 583 in the week to Aug. 30, to their lowest since June. , , Baker Hughes said that puts the total rig count down 48, or 8% below this time last year. Baker Hughes said oil rigs were unchanged at 483 this week, while gas rigs fell by two to 95, their lowest since April 2021. For the month, the total oil and gas rig count was down six after rising by eight last month. Oil rigs were up one in August, while gas rigs were down six for the month. In the Marcellus shale in Pennsylvania, Ohio and West Virginia, the nation's biggest gas-producing basin, drillers cut two rigs, bringing the total down to 23, the lowest since August 2016. In Pennsylvania, meanwhile, drillers cut three rigs, bringing the total down to 18, the lowest since December 2021. The oil and gas rig count dropped about 20% in 2023 after rising by 33% in 2022 and 67% in 2021, due to a decline in oil and gas prices, higher labor and equipment costs from soaring inflation and as companies focused on paying down debt and boosting shareholder returns instead of raising output. U.S. oil futures were up about 3% so far in 2024 after dropping by 11% in 2023, while U.S. gas futures were down about 16% so far in 2024 after plunging by 44% in 2023. Even though oil prices were up so far this year, the drop in gas futures for a second year in a row prompted many energy firms to cut capital spending in 2024. That drop in spending was expected to reduce gas production in 2024 for the first time since 2020. The 26 independent exploration and production (E&P) companies tracked by U.S. financial services firm TD Cowen said they planned to cut spending by around 2% in 2024 versus 2023. That compares with year-over-year spending increases of 27% in 2023, 40% in 2022 and 4% in 2021. Sign up here. https://www.reuters.com/markets/commodities/us-drillers-cut-oil-gas-rigs-third-week-row-baker-hughes-2024-08-30/
2024-08-30 17:31
Aug 30 (Reuters) - Donald Trump’s presidential campaign has laid out an energy policy platform centered around maximizing U.S. fuel and power output, in part by dismantling the Biden administration’s centerpiece efforts to fight climate change. The Republican former president’s campaign has said that In an ironic twist, the United States has become the world’s top producer of oil and gas during Biden’s tenure, and his agencies have been approving projects at a more rapid pace than under Trump. Even so, Biden passed legislation through Congress and issued regulations that aim to speed the transition to cleaner energy. Here are some of Biden administration climate initiatives that Trump would seek to target should he win against Democratic Vice President Kamala Harris in November’s election: POWER PLANT RULE In April, Biden's Environmental Protection Agency finalized rules targeting carbon, air and water pollution from power plants, an industry responsible for nearly 25% of U.S. carbon emissions. The rules will effectively require coal-fired power plants and new natural gas-fired generators in the coming decade to capture emissions before they reach the atmosphere. In a call with reporters on Aug. 29, Trump’s former Interior Secretary David Bernhardt said Trump would overturn the rules and “put coal country back to work so that all Americans have access to affordable energy." He did not elaborate. Employment in U.S. coal fields and production of the mineral fell during Trump's four-year term. VEHICLE EFFICIENCY RULES The Biden administration announced new U.S. auto-emissions regulations in March intended to slash tailpipe pollution and push automakers to expand the production of electric and hybrid vehicles. The final rules were a watered-down version of the original proposal, giving automakers more leeway in how to meet the standards. But they’ve still drawn the ire of the Trump campaign, which has lumped it into a group of Biden’s green initiatives that it says are distorting the markets, driving up prices, and limiting consumer choice. Despite Trump’s opposition to widespread adoption of EVs, his campaign has won the support of Tesla (TSLA.O) , opens new tab founder Elon Musk, whose company may be able to eke out an advantage against rivals even if Trump axes vehicle pollution limits further or rolls back EV subsidies. INFLATION REDUCTION ACT Trump has repeatedly said he may repeal EV subsidies, a core provision of Biden’s signature climate law, the Inflation Reduction Act, if he is elected. The 2022 IRA contains billions of dollars of additional subsidies for clean energy, including for wind and solar energy, and high-tech batteries, but it is unclear whether Trump would also aim to target those provisions. Any changes to the law would require an act of Congress. Corey Lewandowski, a Trump campaign adviser, avoided the question when asked on an Aug. 29 call with reporters whether Trump would support the repeal of parts of the IRA. PARIS DEAL During his 2017-2021 term as U.S. president, Trump withdrew the United States from the Paris Deal, an international pact to fight climate change, arguing it was unnecessary and put the country at a competitive disadvantage to China. Trump’s campaign said he’d do it again if he wins in November. At the moment, the U.S. is a full participant in the accord, after Biden swiftly rejoined in 2021 and sought to restore U.S. climate leadership on the global stage. Sign up here. https://www.reuters.com/sustainability/climate-energy/how-trump-would-seek-dismantle-bidens-climate-legacy-2024-08-30/
