US CPI Falls for the First Time Since 2020, Core Gauge Flat
The consumer price index fell 0.4% from May, dragged down by the biggest decline in gasoline prices since 2022, according to Bureau of Labor Statistics data out Tuesday. Excluding food and energy, the index was flat from the prior month. (…)
The headline index was up 3.5% from a year earlier and the core measure was 2.6% higher. (…)
A services gauge that Fed officials watch closely, which strips out housing and energy costs, fell by 0.2%, matching the biggest decline since the onset of the pandemic. It was dragged down by outsize declines in motor vehicle insurance premiums, which also fell by the most since 2020, and communication services.
The core CPI was also restrained by monthly declines in goods prices, including those for apparel and used cars.
Gasoline prices fell nearly 10%, rents rose modestly and grocery prices advanced for a third month on increases in beef, eggs and dairy. Hotel rates, meanwhile, declined by the most in more than a year after four straight months of gains. Restaurant prices rose only modestly.
Computer software and accessories prices jumped 2.3% on the month and a record 17.4% from a year earlier. (…)
Thanks to the drop in gasoline prices, Americans saw real average hourly earnings rise 0.1% from a year earlier after declines in the prior two months. (…)
On a YoY basis, headline CPI is up 3.5% in June. Core CPI: +2.4%. CPI-Essentials: +4.4%. Supercore: +3.2% (not charted).
But the war is back on…
Trump held Situation Room meeting on massive new Iran strikes
President Trump held a Situation Room meeting Tuesday to discuss a massive offensive in Iran that will be wider in scope than the current strikes around the Strait of Hormuz, three sources with knowledge said. (…)
The sources said the meeting focused on new plans for devastating strikes on strategic targets in Iran, in addition to the strikes against Iranian targets in the Strait of Hormuz.
In an interview with Fox News before the Situation Room meeting, Trump said the strikes would expand in the coming days.
- The U.S. military is going to hit Iran “hard” over the next three days, he said, before stressing that strikes could significantly escalate after that.
- “Next week, it gets really bad for them because next week comes the power plants,” Trump said. “Next week comes the bridges. We’re gonna knock out all their power plants. We’re gonna knock out all their bridges unless they get to the table and negotiate.” (…)
Meanwhile, the Atlanta Fed GDP Now is down to +1.3% (is there a demand problem in June’s CPI numbers?) …
… in spite of surprisingly good eco data as Ed Yardeni illustrates:
China’s Economy Stumbles With Growth Unexpectedly Below Target
Gross domestic product grew 4.3% from a year ago, according to data released by the National Bureau of Statistics on Wednesday, below the bottom of this year’s official target range of 4.5% to 5%. (…)
Taken together, growth in the first half of the year was 4.7%. GDP expanded 0.9% on a quarter-on-quarter basis, the slowest in more than two years. (…)
While first-half growth is comfortably within Beijing’s targeted corridor, Premier Li Qiang didn’t rule out the possibility of rolling out extra stimulus, calling for “preparing and studying additional policies” at a meeting earlier this week.
The latest data also showed fixed-asset investment was down 5.7% in the first half from a year ago, lower than estimated and worsening from the 4.1% decline recorded in the first five months.
In a surprise to most economists who predicted a slight fall in retail sales, they grew 1% after a 0.6% drop in May. Industrial production beat forecasts and rose 5.3%. The surveyed urban jobless rate eased to 5% from 5.1% in May.
“The slowdown in second-quarter growth is mainly due to short-term and external factors,” said Mao Shengyong, deputy head of NBS. While “temporary factors” affected some sectors like coal mining, he said “other industries were normal, and the economy’s fundamentals, which are stable and upgrading in structure, are unchanged.” (…)
Retail sales of goods excluding cars rose 3% on year in June, while purchases of autos plummeted more than 16%. Declines in sales of goods such as home appliances narrowed during the annual “618” mid-year online shopping festival, according to some onshore economists. (…)
Almost all types of capital spending shrank in June. Property investment fell 18% in the first half from a year ago, its steepest decline in data going back to 1992, even though the drop in home prices eased in June. (…)
Li, the government adviser, estimates about 24 million people have left the workforce because they couldn’t find a job for a long time, with over half of those dropping out aged 16 to 24. Taking into account people who’ve involuntarily exited the labor market, a broader unemployment rate would be at 10.2%, he said in a recent speech.
The employment and investment issues “must be paid serious attention,” Li said in the Saturday speech during an online event. “If we don’t address them, we’ll have trouble achieving various goals with the economy.”
- Two Million Workers Are Locked Out of an Improving Job Market The share of job seekers out of work for six months or longer is hovering near highest level in five years
By most key metrics, the U.S. labor market is in fine shape: the economy has added jobs for four straight months, much improved from late last year, and the unemployment rate has drifted down to 4.2%.
Yet nearly two million Americans have been locked out of the job market for at least half a year.
The long-term unemployed—people without work for 27 weeks or more, the longest period the Labor Department reports in each monthly jobs report—accounted for 27.3% of all unemployed people in June, up 4 percentage points from a year earlier. (…)
This can be perilous, since the six-month mark is when many job seekers lose severance or unemployment benefits. (…)
Labor Department data show long-term unemployment hitting people most heavily in their prime working years, between 25 and 54. Within this group, workers from their mid-20s to mid-30s represent both the highest number of overall jobless people and, at 27%, the highest portion of the long-term unemployed. (…)
The jobless drought appears to be hitting white-collar workers especially hard. For example, more than a third of people out of work in the professional-services sector have been unemployed for six months or more, federal data show. Other fields with lots of long-term unemployed people include government workers—a group hit by federal cuts—finance and information technology.
“If you become unemployed, hires are very low right now, so it’s hard to get a job especially in certain [white-collar] sectors where we haven’t seen a lot of growth,” said Laura Ullrich, director of economic research at jobs site Indeed. (…)
The fallout from long unemployment stretches can include running down savings and temporarily halting the buildup of retirement accounts. (…)
IBM Loses $69 Billion of Market Value in One Day in Latest AI-Fueled Selloff Shares of the corporate stalwart plunged 25% as AI purchases crowd out traditional tech spending in many companies’ budgets
Shares fell more than 25% Tuesday, the largest one-day drop on record after the company issued a rare profit warning, citing a shift in customer spending from software to artificial-intelligence hardware and memory chips. IBM is scheduled to release its official second-quarter figures next week and could offer a preview of the toll corporate America’s AI bills might take on software spending.
The selloff in software stocks like Adobe and Salesforce earlier this year was triggered by fears that AI companies like Anthropic would enable people to easily make cheaper copies of the software-as-a-service products sold by traditional firms. However, the selloff in IBM’s shares, which wiped out $69 billion in market capitalization, is being driven by a different phenomenon: worries that new AI purchases will crowd out more traditional tech spending in company budgets.
The rapid rise of AI has made chips more expensive, which in turn has driven up prices for everything from laptops and gaming consoles to AI data-center servers. That run-up in costs has squeezed tech budgets at big institutions including banks—a core customer base for IBM—that buy an enormous amount of computing power from cloud companies to run in-house AI tools.
IBM Chief Executive Arvind Krishna said that in June, clients shifted their quarterly capital expenditures toward servers, storage and memory to secure supply-constrained infrastructure ahead of anticipated price increases.
“While we anticipated some supply chain-related impact in our expectations, we did not anticipate the magnitude of the capex reprioritization.” (…)
IBM’s mainframe computing and consulting businesses compete directly with AI models like Claude Code, and its infrastructure business faces threats from the rising deployment of massive AI data-center clusters, which offer enterprise clients access to the computing resources they need, often at more competitive prices. (…)
Chris Versace, chief investment officer at Tematica Research, said that IBM’s comments, paired with recent statements made by some of its major customers, including J.P. Morgan and Goldman Sachs, represented “confirmation that AI adoption and usage are rising and companies are prioritizing it to drive efficiencies and productivity.” (…)