Date: July 10, 2018
U.S. Producer Prices Rise From Year Ago by Most Since 2011
U.S. wholesale prices rose in the 12 months ended in June by the most since November 2011 as the costs of services accelerated, a Labor Department report showed Wednesday in Washington. The figures, which measure wholesale and other selling prices at businesses, indicate that inflation pressures in the production pipeline are firming amid rising demand and tariffs on steel and other goods. The June index for final demand services climbed 0.4 percent from a month earlier, the most since January, and 2.8 percent from the same month a year ago. More than 40 percent of the advance was due to higher retail margins for fuel. The gain also reflected a 1.3 percent month-over-month jump in truck transportation of freight, the largest in data back to July 2009. In contrast, the cost of goods rose 0.1 percent in June from a month earlier, reflecting cooling energy prices, after a 1 percent May surge. While the consumer price index — due Thursday — is considered a more important indicator of inflation, producer prices help provide insights into the direction of input costs that businesses are facing. Concern about higher materials and services costs remains elevated after the U.S. imposed tariffs on aluminum earlier this year, followed by additional levies on other Chinese imports. The Trump administration announced Tuesday that it’s ready to impose tariffs on $200 billion of Chinese-made products, ranging from clothing to television parts to refrigerators.
U.S. Poised to Publish $200 Billion China Tariff List
President Donald Trump is preparing to release a list of an additional $200 billion in Chinese products to be hit with tariffs, according to two people familiar with the matter. The list could be released as soon as Tuesday, and likely this week, according to the people, who spoke on condition of anonymity because the matter isn’t public. The publication of the list starts a weeks-long process that includes a public-comment period and hearings. Stock futures fell and yields on 10-year Treasuries declined on concern of a widening trade war. The Trump administration on July 6 imposed 25 percent duties on $34 billion in Chinese imports, the first time the president has implemented tariffs directly on Beijing after threatening to do so for months. China immediately retaliated with duties on the same value of U.S. goods, including soybeans and cars. The U.S. is currently considering levying duties on a further $16 billion in Chinese goods, after a public hearing later this month. China has vowed to retaliate dollar-for-dollar to any further U.S. tariffs. The new list would mark the latest escalation of the trade war between the world’s two biggest economies. Financial markets have so far shrugged off the first round of tariffs, which were long-telegraphed, with U.S. stocks up since Friday. The press offices for the U.S. Trade Representative’s office and White House didn’t immediately comment when Bloomberg News contacted them.
U.K. Politics Is the Wild Card for BOE’s August Rate Increase
Political turmoil fanned by Brexit may be the last hurdle for a Bank of England interest-rate increase in August. With the U.K. economy bouncing back and consumers willing to spend again amid good weather and World Cup fever, politics is the big unknown three weeks before Governor Mark Carney and fellow officials announce their next policy decision. For now, investors are betting on a quarter-point hike. Prime Minister Theresa May appears to have survived the loss of two high profile ministers this week, but anger within the Conservative Party over Brexit is keeping alive the prospect of a leadership challenge or general election. Two more Tories quit their party roles on Tuesday, while some euroskeptics are said to be considering a radical last ditch move that could bring down her minority government later this year. While the central bank has always said Brexit may restrain the U.K. economy, it has thus far seemed prepared to push ahead with tightening as the nation thrashes out a deal with the European Union. But an election, or the growing risk of leaving the EU without new trading arrangements in place, would add additional uncertainty when investment is already being hit and companies are complaining about the lack of clarity. “If the current political chaos affects negotiations, I’d expect the BOE to be pretty worried,” said Victoria Clarke, an economist at Investec in London. “If the BOE faces the prospect of no deal, they will be really nervous about doing anything to tighten policy.” Foreign Secretary Boris Johnson quit on Monday just hours after the resignation of the Brexit Secretary David Davis. While they were protesting May’s plans for a closer relationship with the EU, the risk that more walkouts would lead to the government’s fall pushed the odds of an August rate hike to 70 percent from around 80 percent previously. The probability assigned by investors rebounded after the latest growth figures.
China Vows Retaliation Against Trump’s $200 Billion Trade Threat
China vowed to fightback against the Trump administration’s plans to impose tariffs on an additional $200 billion in Chinese goods, escalating a trade war between the world’s two biggest economies. Beijing described the latest U.S. move as “totally unacceptable” bullying, and urged other countries to join China to protect free trade and multilateralism. China promised to lodge complaints at the World Trade Organization but didn’t detail what its retaliatory measures would be. “China is shocked at the U.S. action,” the Commerce Ministry said in a statement on its website Wednesday. “To protect the core interests of the nation and its people, China’s government is, as in the past, forced to retaliate.” The response came hours after the Trump administration released a proposed list of thousands of products on which it plans to impose 10 percent tariffs, ranging from vacuum cleaners and windshield wipers to sterling silver spoons and badger hair. The U.S. omitted some high-profile items like mobile phones. The news sent markets lower as stocks fell, the dollar gained and commodities slid. China’s yuan weakened. If the proposed tariffs go into effect after public consultations end on Aug. 30, duties implemented by the administration aimed squarely at China will cover nearly half of all U.S. imports from the Asian nation. Some members of Trump’s own Republican party are calling the trade war unwise while American businesses and economists warn it could derail the strongest global upswing in years. Fresh U.S. tariffs would also come at a time when the Trump administration is seeking Beijing’s help reining in North Korea’s nuclear-weapons program. With little sign of continued formal negotiations, the two powers appear headed toward a protracted trade conflict that may undermine growth and shake up corporate supply chains.