NY Fed’s Services Business Survey
IMPORT PRICES IMPORT
Prices for U.S. imports advanced 1.9% MoM in May following increases of 2.0% in April and 0.9% in March. Prices for U.S. imports rose 6.7% YoY in May, the largest advance since the index increased 7.7% in August 2022.
Prices for nonfuel imports increased 0.8% MoM in May, after +0.6% in April. “In May, higher prices for capital goods; nonfuel industrial supplies and materials; consumer goods, excluding automotives; and automotive vehicles, parts, and engines more than offset lower prices for foods, feeds, and beverages.”
Nonfuel import prices increased 3.7% YoY in May, the largest since the index rose 3.9% in August 2022.
- All imports excluding food and fuels rose 0.9%, +3.7% YoY but +8.0% annualized in the last 4 months.
- Industrial supplies & materials ex-petroleum rose 2.2%, +10.4% YoY but +7.1% annualized in the last 4 months.
- Capital goods rose 1.3%, +5.6% YoY but +12.8% annualized in the last 4 months.
- Manufacturing rose 0.9%, +4.7% YoY but +11.5% annualized in the last 4 months.
- Consumer goods, excluding automotives rose 0.2%, +1.7% YoY but +3.3% annualized in the last 4 months.
- Import prices for computer peripherals and parts rose 8.9% MoM and 39.7% YoY.
Import prices from China increased 0.9% in May and rose 1.1% YoY. The increase in May was the largest 1-month advance since the index rose
0.9% in January 2008.
Charts from Ed Yardeni:
Goldman Sachs estimates that “the core PCE price index rose 0.31% in May (unchanged from our expectation prior to today’s import prices report), corresponding to a year-over-year rate of +3.38%. Additionally, we expect that the headline PCE price index increased 0.45% in May, or increased 4.04% from a year earlier.”
Nobody cares about inflation, more so since the apparent cease fire. Will the Fed care?
While on inflation:
“And now what’s happening is the cost of tokens are far higher than the actual value that these tokens are generating at scale. And so what ends up happening, and the big risk in the market is, if you don’t create an equilibrium there, then people just pull back on using tokens, and that’s actually not good for anyone.” – Cisco President Jeetu Patel
China Moves to Boost the Use of Yuan Globally China will launch pilot program for offshore yuan foreign exchange trading
Chinese authorities rolled out more measures to promote the use of the yuan globally, their latest effort to build more resilient financial infrastructure to shield its economy from external shocks.
Pan Gongsheng, head of the People’s Bank of China, announced Wednesday that Beijing will set up a new repo facility. This facility will let foreign monetary authorities, including sovereign-wealth funds, obtain yuan liquidity from the Chinese central bank with bonds as collateral.
He also revealed that China will launch a pilot program for offshore yuan foreign exchange trading in the Shanghai Free Trade Zone, as he spoke to financial executives at Shanghai’s Lujiazui forum on Wednesday. This program is aimed at turning the coastal city into a global hub for yuan-denominated asset allocation and risk management. (…)
AI CORNER
Why Does Trump Hate Anthropic? The de facto ban on its Fable 5 model is a dangerous precedent.
The WSJ Editorial Board:
Which is a greater threat—China or Anthropic? The Trump Administration can’t seem to decide judging from its order to restrict access to Anthropic’s frontier artificial intelligence models. The fallout could undermine America’s AI lead and cyber defenses.
The White House’s simmering feud with Anthropic erupted again last week after the company released its new advanced Fable 5 model. Trump officials have demanded that Anthropic restrict access to its powerful Mythos model over concerns adversaries could exploit its tools for cyber warfare. Fable 5 is Anthropic’s attempt at a compromise.
Fable 5 boasts advanced coding, research, analytic, agentic and other capabilities similar to those of its Mythos model, but it also includes safeguards to prevent its use for cyber. The goal was to provide enterprise customers more powerful tools while assuaging the White House’s concerns that they could be weaponized by bad actors.
At least that was the idea. But on Friday evening the Administration abruptly ordered the company to restrict Fable 5’s access to foreigners after Amazon flagged that users could trick the model into bypassing its cyber safeguards. This is what the industry calls a jailbreak.
The export control amounts to a de facto ban on the model since Anthropic has no way of ascertaining the nationality of its users. Even its U.S. customers employ foreigners. The Administration appears to have overreacted to the Amazon report or used it as a pretext to renew its feud fight with Anthropic.
Trump officials and Anthropic disagree about the seriousness of the jailbreak. (…) Anthropic also stressed it’s probably not possible to build a 100% fail-safe model (…).
President Trump lambasted Anthropic as “some out-of-control, Radical Left AI company,” echoing comments by AI adviser David Sacks, who criticized the company for hiring former Biden officials and supporting “Woke AI.” (…)
Trump officials overlook that it will also impede U.S. AI innovation by setting a precedent that the government can at any moment order a model off the market. (…)
The NYT’s Ross Douthat sees broader consequences (my emphasis):
(…) the battle over Anthropic’s cutting-edge artificial intelligence models, is the beginning of a new kind of conflict, with private powers and national governments struggling to determine who actually rules an A.I.-dominated world. (…)
It’s a conflict rich in ironies. A White House that sees itself as favoring a free-market approach to A.I. has now twice used heavy-handed regulatory weapons against America’s leading A.I. company. (…) Meanwhile Anthropic sees itself as the A.I. company that’s most attuned to safety issues and eager for democratic oversight, but each move from the Trump administration has prompted the company to shout, “No, not like that!”
(…) the kind of conflict we’re seeing here is overdetermined by the trajectory of the A.I. models: There is too much potential power here not to have ongoing, escalating struggles over who actually gets to rule. (…)
There is a path here that leads to nationalization in all but name and a path that leads to a kind of de facto corporate takeover of the government, or at least a too-big-to-fail symbiosis. And along the way there may be not just conflicts between presidents and A.I. executives but also increasingly ruthless corporation-on-corporation action, out of fear that the A.I. landscape is winner-take-all to an extent we’ve never seen in capitalism before. (…)
Then alongside the struggle to control A.I. power within American borders, there is the geopolitical struggle to maximize global power (where the only real players are probably the United States and China) and maintain sovereignty (where everyone else is likely to be scrambling to maintain some independence).
The use of export controls to shut down Fable presumably reflected U.S. fears of Chinese access to a jailbroken version of the model, but it was also a warning to every other country in the world: If we end up with economy-permeating A.I. models that are made and regulated in America, the American government will control the on-off switch.
One possibility for what that means is spun out in “Europe 2031,” a futurist scenario written by European A.I. researchers and investors in which the European Union ends up choosing political and economic vassalage to either the United States or China, because it lacks sufficiently powerful A.I. models that are under its own control. (…)
But at the very least, American and Chinese A.I. dominance is going to create new issues for sovereignty, new forms of dependence and coercion, that will weigh heavily on middle powers as their economies become more and more dependent on specific models and access to computing power. (…)
This “winner-takes-all or almost all” potential of AI is why so many companies are hastily spending so much money. “There is more risk in underspending then in overspending”. Good for economies and investors but, eventually, a few big winners will kill several also big losers.
There is just no way that all that capital deployed will earn a reasonable return. There will be blood.
How to deal with or control the winners’ huge power? “There is a path here that leads to nationalization in all but name”. Yes, and that possibility has immediate consequences.
How do companies/governments justify using a particular LLM model/application if models and their apps can eventually be “nationalized”, controlled or even banned in some ways, shape or forms by governments worried of a loss of sovereignty or regional/global power?
How can investors properly value AI developers if even an assumed free-market government can step in and regulate in ways that can jeopardize the business model?
Holman W. Jenkins, Jr., also in today’s WSJ:
(…) All this will be magnificently beside the point, moreover, if the latest AI models, after billions invested, can’t be released to the public because they’re too dangerous—or if they’re swallowed up in a standardless, jury-rigged licensing system run by the Trump administration.
Suddenly the barriers to America’s AI companies getting paid for their innovations seem daunting. Ditto America maintaining its technology lead.
Blame is dished by some at a chaotic administration, seen as abandoning its pro-innovation “let it rip” attitude. But it’s the CEOs of the leading companies, OpenAI and Anthropic, who’ve told us for years their products were dangerous, who called for prescriptive regulation, not least, some suspect, to lock in their dominance. Be careful what you wish for. (…)
By June 12, the administration was reaching for draconian export controls to prevent a supposedly safer version, known as Fable 5, from being accessed even by Anthropic’s own non-U.S. employees, much less the 96% of the potential market consisting of non-U.S. users. (…)
Experts debate how serious these risks really are but the momentum toward government control is unmistakable. Waiting in the wings is the Defense Production Act of 1950, enabling stringent U.S. authority over industries deemed vital for national defense.
This holds out a troubling prospect: Either AI progress will stop as investors abandon it, or progress will be funded by government, the only user allowed access to cutting-edge models—essentially confiscation by other means.
For small investors, the debate arrives at an inconvenient moment. Never mind whether last week’s SpaceX IPO was really as AI-centric as Mr. Musk claims. On the same day it began trading, the administration imposed its sweeping export ban on Fable 5. (…)
Will SpaceX’s now be the last AI IPO? It isn’t impossible at the rate top-tier developers find themselves caught in an avalanche of national-security attention. OpenAI co-founder Greg Brockman was recently reported to have mused puckishly about the company offering its services to the highest bidder among America’s geopolitical rivals. His impolitic remark is seen now as a dark reflection on the national-security trap AI was about to fall into.
Anthropic founder Dario Amodei warns incessantly about a Chinese AI threat even as his company attracts a trillion-dollar valuation that makes sense only if it will be free to commercialize its innovations rather than see them absorbed into an all-embracing military-cyber-industrial complex.
Hang on. It’s going to be a bumpy ride.
And bloody.
Trump Invokes Cold War-Era Law to Boost Munitions Production Concerns have grown that the U.S. has burned through a lot of weapons during the war with Iran
Great timing, no?
1 thought on “YOUR DAILY EDGE: 17 June 2026:”
I appreciate the fact that you are willing to present FACTS and that you are willing to challenge Donald Trump, who is literally going to destroy the U.S. economy with his non-stop spending of taxpayer’s money (in the $-trillions) and money printing. The bills will come due in a few years. Trump = profitable bubble now (and for another 2.5 years?), BUT… Trump = destructive and gigantic pop later that may take MORE than a decade to recover from.