Aurelia Butler

The trade deficit increased 0.8% to $75.1 billion, the Commerce Department’s Bureau of Economic Analysis said on Wednesday. Data for April was revised slightly to show the trade gap rising to $74.5 billion instead of $74.6 billion as previously reported.Economists polled by Reuters had forecast the deficit increasing to $76.2 billion in May.The goods trade deficit widened 0.9% to $100.2 billion, the highest since May 2022. Adjusted for inflation, the goods trade deficit rose 0.5% to $94.5 billion.Trade subtracted from gross domestic product in the first quarter, restricting the economy to a 1.4% annualized growth pace. The economy grew at a 3.4% pace in the October-December quarter. Growth estimates for the second quarter are around a 2% pace.Exports slipped 0.7% to $261.7 billion in May, reflecting a strong dollar as the Federal Reserve keeps interest rates higher, and slowing global demand. Goods exports plunged 1.7% to $169.6 billion. There were decreases in exports of industrial supplies and materials, mostly nonmonetary gold, other petroleum products and fuel oil. Exports of automotive vehicles, parts and engines also fell. Services exports rose $1.1 billion to $92.1 billion, boosted by travel. Imports fell 0.3% to $336.7 billion. Goods imports declined 0.8% to $269.7 billion. There were declines in imports of consumer goods, which were pulled down by pharmaceutical preparations. Imports of cell phones and other household goods, however, increased $1.0 billion. Automotive vehicles, parts and engines imports fell $1.5 billion. But imports of industrial supplies and materials increased $1.4 billion, boosted by crude oil and nuclear fuel materials. Imports of services increased $0.9 billion to $67.0 billion, lifted by transport and travel. More

PARIS (Reuters) -French Prime Minister Gabriel Attal, a close ally of President Emmanuel Macron, said he believed a cross-party bid to deprive Marine Le Pen’s far-right National Rally of a majority in next Sunday’s parliamentary run-off could succeed.However, he dismissed suggestions that Macron’s centrists could look to form a cross-party government in the event of a hung parliament, proposing that moderates in the assembly work together to pass legislation on a case-by-case basis instead.Attal was speaking after more than 200 candidates across the political spectrum agreed to pull out of local contests to clear the path for whoever was best placed to defeat the RN runner in their voting district.”What these withdrawals show is that we can avoid an absolute majority for the far right,” Attal told France Inter radio of the 289-seat tally the RN would require to control France’s 577-seat National Assembly. Asked about calls for the creation of a temporary cross-party government if no grouping achieved a majority, Attal said he would not impose on voters “a coalition they did not choose”.”I hope the (Macron-allied) Ensemble camp is a big as possible,” he said. “After that we will seek to secure majorities on a project-by-project basis.”In a cabinet meeting on Tuesday, Macron rejected the option of a coalition that would include the far-left France Unbowed (LFI) party of Jean-Luc Melenchon, one participant said. It was unclear if he mentioned other coalition options.Their comments underline that, even if the RN does not come to power, France could face months of political uncertainty through to the end of Macron’s term in 2027 – when Le Pen is widely expected to mount a challenge for the presidency itself.The Interior Ministry was due to release the candidate list for the second-round vote later but local media estimated up to 218 candidates had pulled out, reducing the number of districts in which the anti-RN vote risked being split.Before the withdrawals, pollsters had calculated the first round put the RN on track for 250-300 seats.The question remains whether voters will go along with the effort to block the anti-immigrant, eurosceptic party. Centrist voters may baulk at supporting a far-left rival to the RN, while many left-wing supporters are so disillusioned with Macron that they will not stomach backing someone from his alliance.Le Pen said on Wednesday that she could reach out to other parties if the RN falls short of an absolute majority. Her prime ministerial pick Jordan Bardella has said he would decline to form a government without a sufficiently strong mandate. The RN came out well ahead in Sunday’s first-round vote after Macron’s gamble on a snap election backfired, leaving his centrist camp in a lowly third place behind the RN and a hastily formed left-wing alliance.Le Pen has worked for years to soften the image of the RN, but rights groups cite concerns about its “national preference” and anti-migrant policies, while its profound euroscepticism would pose serious threats to future European integration.It has signalled plans to reverse Macron’s reforms, such as his unpopular move to increase the retirement age and economists question whether hefty RN spending plans are fully funded.Financial markets were reassured by the bid to create a so-called “republican front” against Le Pen’s party, lowering the risk premium on France’s sovereign debt.”The strategy would significantly limit the chances of Le Pen winning an outright majority,” Jefferies chief Europe economist Mohit Kumar said in a note.The National Rally has attacked the cross-party bid to block it as anti-democratic and an attempt to undermine voters’ wishes. Bardella told Le Figaro newspaper: “The real ‘republican front’ – that is us.” More

Initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 238,000 for the week ended June 29, the Labor Department said on Wednesday. The report was released a day early because of the Independence Day holiday on Thursday.Economists polled by Reuters had forecast 235,000 claims in the latest week.Claims have moved to the upper end of their 194,000-243,000 range of this year, in part because of a rise in layoffs as higher interest rates dampen demand as well as difficulties adjusting the data for seasonal fluctuations during holidays. Volatility could persist after the July 4 holiday. Auto manufacturers typically idle assembly plants for retooling in the summer, but the timing is uncertain. The labor market is steadily cooling, with the government reporting on Tuesday that there were 1.22 job openings for every unemployed person in May. The vacancy-to-unemployment ratio is close to its average of 1.19 in 2019.Federal Reserve Chair Jerome Powell said on Tuesday that the economy was back on a “disinflationary path,” but policymakers needed more data before cutting rates.Financial markets remain optimistic that the U.S. central bank could start its easing cycle in September. The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. It has hiked its policy rate by 525 basis points since 2022 to stamp out inflation. The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 26,000 to a seasonally adjusted 1.858 million during the week ending June 22, the highest level since late November 2021, the claims report showed. The so-called continuing claims data have been boosted by a policy change in Minnesota that came into effect last year allowing non-teaching educational staff to file for unemployment benefits during the summer break.That bump should fade when schools reopen for the new academic year in the fall. A separate report on Wednesday from global outplacement firm Challenger, Gray & Christmas showed U.S.-based employers announced 48,786 jobs cuts in June, down 23.6% from May. Planned layoffs were, however, 19.8% higher compared to June last year.The government is expected to report on Friday that nonfarm payrolls increased by 190,000 jobs in June after rising 272,000 in May, according to a Reuters survey of economists. The unemployment rate is forecast unchanged at 4.0%. More

SINTRA, Portugal (Reuters) – Some European Central Bank policymakers are urging a review of the aggressive monetary stimulus policies the ECB employed for nearly a decade to tackle low inflation, judging they may have done more harm than good, sources told Reuters.Six policymakers said they want to debate and possibly change a clause in the ECB’s strategy statement that calls for “especially forceful or persistent” action when interest rates are at rock bottom. All spoke on condition of anonymity because the discussion was private and preliminary.Such a debate is expected to take place in a long-planned ECB strategy review that is about to kick off, concluding some time next year. “We bought trillions and trillions of euros of assets and still didn’t get inflation back to target,” one of the sources said. “Years after the end of this stimulus, we are still sitting on more than 3 trillion euros of excess liquidity, so that policy response tied our hands for years.”Their calls represent one of the most direct challenges yet to the logic that underpinned quantitative easing (QE) policies deployed by many central banks following the global financial crisis to stimulate economies and avert the risk of deflation.The ECB bought some 5 trillion euros ($5.4 trillion) of debt – mostly government bonds – over nearly a decade before the COVID pandemic, and also gave banks interest-free loans.While the issue seems distant now that inflation is above target and interest rates high, recent comments by the Bank for International Settlements, a global umbrella group for central banks, have reignited debate about QE’s effectiveness. “The BIS generated a quite a storm this weekend and I think they are right in that we need to reassess how we use some of our tools,” one of the ECB sources said.An ECB spokesman declined to comment.The BIS argued that prolonged use of ultra-easy monetary policy generates diminishing returns and creates unwelcome side-effects, including excessive risk-taking by firms, households and governments.”These limitations were not fully appreciated at the time the measures were first introduced,” it said in its flagship publication. Instead, the sources argued, central banks could simply live with modest inflation undershoots because the cost is relatively small compared to the stimulus effort. EXCESS LIQUIDITYThe ECB ended its QE and TLTRO bank lending programmes in 2022 and has been running down its bond holdings since 2023. But 3 trillion euros of excess liquidity remains in the system even after a string of sharp interest rate hikes and could still take a half a decade to decline to desired levels. All of the six ECB policymakers who spoke to Reuters agreed that asset purchases were the right tool in case of a shock such as the pandemic, for which the euro zone’s central bank launched a separate bond-buying scheme.And some of them defended the ECB’s decade of government and corporate debt purchases, saying it was the correct response given the information available at the time and had prevented ultra-low inflation from damaging the labour market.But others said QE should not be used with such intensity and for so long to respond to long-term issues, particularly structural deficiencies that need to be tackled by governments rather than central banks.All six sources said the ECB should maintain a symmetric approach to its 2% target, but some argued that it should remove its commitment to an especially forceful or persistent response to low prices. Others want a clear acknowledgement that prolonged asset buys are not an appropriate policy instrument.The sources pointed as an example to Switzerland, where the central bank aims to keep inflation in a zero to 2% band, and where the economy still fared well even when price growth was not pinned at 2%.Separately, Irish central bank chief Gabriel Makhlouf questioned the impact of quantitative easing on economic equality.”I have reservations about QE, have had for some time,” Makhlouf told Reuters on the sidelines of the ECB’s annual Forum on Central Banking in Sintra, Portugal. “I think QE played a positive role in supporting employment during very low rates, but I’m not sure whether their impact on asset prices, wealth and inequality, whether we understand well enough to be able to say that overall this was a net positive.”Makhlouf also advocated a deeper look at the net contribution of asset buys when the ECB reviews its strategy.Other ECB policymakers in Sintra defended bond purchases, however, arguing that letting inflation run too low would have meant allowing the economy to operate with spare capacity. If that had gone on for too long, they said, some of that spare capacity would have been destroyed, curbing the economy’s potential for future growth. ($1 = 0.9298 euros) More

KARACHI (Reuters) -Pakistan is looking to clinch a staff level agreement on an International Monetary Fund bailout of more than $6 billion this month after addressing all of the lender’s requirements in its annual budget, its junior finance minister told Reuters. The South Asian country has set challenging revenue targets in its annual budget to help it win approval from the IMF for a loan to stave off another economic meltdown, even as domestic anger rises at new taxation measures. “We hope to culminate this (IMF) process in the next three to four weeks,” Minister of State for Finance, Revenue and Power Ali Pervaiz Malik said on Wednesday, with the aim of thrashing out a staff level agreement before the IMF board recess. “I think it will be north of $6 billion,” he said of the size of the package, though he added at this point the IMF’s validation was primary focus. The IMF did not respond immediately to a request for comment.Pakistan has set a tax revenue target of 13 trillion rupees ($47 billion) for the fiscal year that began on July 1, a near-40% jump from the prior year, and a sharp drop in its fiscal deficit to 5.9% of gross domestic product from 7.4% the previous year.Malik said the point of pushing out a tough and unpopular budget was to use it a stepping stone for an IMF programme, adding the lender was satisfied with the revenue measures taken, based on their talks.”There are no major issues left to address, now that all major prior actions have been met, the budget being one of them,” Malik said.While the budget may win approval from the IMF, it could fuel public anger, according to analysts. “Obviously they (budget reforms) are burdensome for the local economy but the IMF program is all about stabilisation,” Malik said. Sakib Sherani, an economist who heads private firm Macro Economic Insights, said a quick deal with the IMF was needed to avoid pressure on Pakistan’s foreign exchange reserves and the currency given the country’s maturing debt repayments and the effects of unwinding of capital and import controls that were applied earlier.”If it takes longer, then the central bank may be forced to temporarily re-instate import and capital controls,” he said. “There will be a period of uncertainty, and one casualty is likely to be the rally in equities.”Pakistan’s benchmark share index closed up 0.9% on Wednesday, reaching a record intraday high of 80,405 points before closing at 80,332 points. The index has rallied roughly 10% since the budget was presented on June 12, helped by continued optimism on getting an IMF bailout package to bolster the struggling economy.Pakistan’s sovereign dollar bonds rallied, with the 2036 maturity gaining the most, rising by 1.19 cents to trade at 74.79 cents on the dollar by 1132 GMT. More