U.S. Consumer Prices Trail Estimates, Testing Powell’s View
A key measure of U.S. consumer prices rose by less than expected in April on lower used-car and apparel costs, testing the Federal Reserve’s message that muted inflation will prove transitory while giving President Donald Trump more ammunition to argue for an interest-rate cut. The core consumer price index, which excludes food and energy, rose 0.1% from the prior month, missing estimates, and 2.1% from a year earlier as forecast, according to a Labor Department report Friday. The broader CPI rose 0.3% monthly and 2% annually, with both figures less than projected. The data suggest a sustained pickup in inflation may remain elusive for some time despite the lowest jobless rate in 49 years and consistent wage gains. However, prices could get a boost in coming months after Trump increased tariffs on Chinese imports Friday. Trump tweeted 31 minutes after the inflation report that the CPI was “really good, very low inflation! We have a great chance to ‘really rock!”’ The president has pressured the Fed for a reduction in interest rates to supercharge the economy amid muted inflation, even as the tight labor market has raised wages and lowered unemployment.
Canada Posts Biggest Job Gain on Record as Economy Heats Up
Canada’s economy posted record job gains in April, along with a pick-up in wages, in the strongest sign yet the nation’s economy has emerged from a soft patch. Employment rose by 106,500 in April, Statistics Canada said Friday in Ottawa, the biggest one-month increase in data going back to 1976. Economists had forecast employers would add about 12,000 positions. The country’s jobless rate dropped to 5.7 percent, and is hovering near four-decade lows. The report reaffirms just how much the labor market has been the main driver of Canada’s expansion, and adds to a recent run of other data showing clear signs Canada is on the path back to growth after the economy stalled for much of the past six months. “The details are unambiguously strong across the board: strong full and part-time growth, solid wage growth, increasing participation, and another decline in the unemployment rate,” said Brett House, deputy chief economist at Scotiabank. Canada’s economy has added 426,400 jobs over the past 12 months, the largest one-year increase since 2007 and up 2.3 percent over that time. Over the past two years, the economy has added 700,000 jobs.
China Armed With Powerful Market Weapons in Duel With Trump
China has a powerful financial-market arsenal for its trade tussle with America, including a hoard of Treasuries and its currency. But using those weapons is not without cost. Beijing said it will be forced to retaliate — but didn’t specify how — after U.S. President Donald Trump followed through with his threat to raise tariffs Friday on $200 billion of Chinese imports to 25% from 10% percent. But simply responding with its own tit-for-tat tariffs isn’t China’s most likely move, said Brad Setser, a former Treasury official who’s now a senior fellow for international economics at the Council on Foreign Relations. “Matching the U.S. dollar-for-dollar on the U.S. tariffs would imply raising a 25% tariff on all U.S. imports, including those that go into China’s exports,” Setser said. “China certainly could do that, but it would in many cases damage China directly.” Trump pays attention to financial markets. He has often tweeted about stocks as they’ve zoomed to record highs. After Trump announced the tariff hike on Sunday, the S&P 500 dropped four straight days.
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