Economy

The three-month fiscal year 2025 deficit rose to $710.9 billion, some $200 billion more than the comparable period in the prior year, or 39.4%.
Rising financing costs along with continued spending growth and declining tax receipts have combined to send deficits spiraling and have pushed the national debt past the $36 trillion mark.

A view from the United States Department of the Treasury building in Washington DC, United States on December 30, 2024. The US Treasury Department was cyberattacked by a Chinese state-sponsored actor in early December. 
Celal Gunes | Anadolu | Getty Images

The federal budget sank further into red ink during December, leaving the first fiscal quarter deficit nearly 40% higher than it was the prior year.
For the final calendar month of 2024, the shortfall totaled $86.7 billion, which actually represented a 33% decline for the same period a year prior, according to a Treasury Department report Tuesday. However, that brought the three-month fiscal year total to $710.9 billion, some $200 billion more than the comparable period in the prior year, or 39.4%.

Rising financing costs along with continued spending growth and declining tax receipts have combined to send deficits spiraling, pushing the national debt past the $36 trillion mark.
Though short-term Treasury yields have held fairly steady over the past month, rates at the far end of the duration curve have surged. The benchmark 10-year note most recently yielded close to 4.8%, or about 0.4 percentage point above where it was a month ago.
At the same time, outlays during the first quarter were 11% higher than a year ago while receipts fell by 2%.
Interest on the national debt has totaled $308.4 billion in fiscal 2025, up 7% from a year ago. Financing costs are projected to top $1.2 trillion for the full year, which would surpass 2024’s record.
The government this year has spent more on interest payments than any other category but Social Security, defense and health care.

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SAN FRANCISCO (Reuters) – The biopharmaceutical industry is aiming for a 2025 reversal of last year’s slump in investor returns but remains wary over what President-elect Donald Trump’s priorities might be on hot button issues such as drug pricing reforms and vaccines.The pharma industry faced its biggest regulatory change in decades with the Biden Administration’s Inflation Reduction Act of 2022, which allowed the federal government’s Medicare health plan for the first time to negotiate prices for its costliest prescription drugs.”Nothing kills investment like uncertainty. The IRA led to a lot of uncertainty in the sector,” Steve Ubl, head of industry lobbying group PhRMA, said at the JP Morgan Healthcare Conference this week in San Francisco.PhRMA is hopeful the new administration will be less focused on “attacks to the ecosystem” of the industry and instead seek to reduce inefficiencies that would lower costs for patients, he said.Prices for the first 10 Medicare-negotiated drugs were released last August, with the results largely in line with existing prices after discounts and rebates.Names of the next 15 drugs up for price talks are due by Feb. 1 and could be announced this week, although it is also possible that the final list could change after Trump takes office on Jan. 20.Last year, the Nasdaq Biotechnology Index fell 3%, compared with a gain of 23% for the bellwether S&P 500 and a jump of nearly 29% for the tech-laden Nasdaq. The NYSE Arca Pharmaceutical (TADAWUL:2070) Index rose 1%.The discrepancies came despite all-time stock price highs hit by obesity drug manufacturers Novo Nordisk (NYSE:NVO) and Eli Lilly (NYSE:LLY). Lilly ended 2024 with a gain of 31%, while shares of Novo, which posted underwhelming trial results for a next-generation weight-loss drug, fell 9%.”Growth has been uneven across the sector. There are haves and have nots” as investors assess how drugmakers cope with looming patent expirations, said Roel Van den Akker, pharma deals leader at PwC.PATENT EXPIRATIONS Morgan Stanley (NYSE:MS) estimates that around $175 billion of 2025 U.S. large-cap biopharma revenue – 35% of the total – will go off patent by the end of the decade. To replace that revenue drugmakers need new products, either from their own research or by acquiring companies with promising assets, but those transactions slowed significantly last year.The value of life sciences mergers and acquisitions totaled around $80 billion in the year through November, less than half of 2023’s total, according to the Iqvia Institute for Human Data Science. No deals over $5 billion closed last year.The expectation that the next chair of the Federal Trade Commission will be more deal-friendly than Lina Khan has been is viewed as positive for drugmakers.On Monday, a flurry of deals were announced including a $14.6 billion acquisition by Johnson & Johnson (NYSE:JNJ).Trump nominated current Commissioner Andrew Ferguson to succeed Khan. Investors are less enthusiastic about some of Trump’s other high-profile nominations to top positions in his next administration.”RFK’s views on vaccines could certainly impact some of the major pharmaceutical companies,” said Foley Hoag partner Beth Neitzel, referring to Trump’s pick to lead Health and Human Services, Robert F. Kennedy Jr, who has been an outspoken vaccine skeptic.”I think the objective will also be to find common ground. Making America healthy is what we are all about,” Biogen (NASDAQ:BIIB) CEO Chris Viehbacher said in an interview during the conference.PHARMA EXECS TO EXERT INFLUENCE Pfizer (NYSE:PFE) CEO Albert Bourla underscored the industry’s uncertainty in his session at the conference with investors, but said on Monday he would try to influence the environment. “There are several people that think, for our industry, the risks outweigh the opportunities. There are other people, among them myself, which they think that the opportunities outweigh the risks. I guess we will see,” he said.J&J CEO Joaquin Duato told investors “it’s difficult for me to estimate what’s going to happen,” adding that he would be pushing policies with the Trump administration on innovation and access.Investors are focused on the impact of government policy on drug prices, including any changes to the IRA that could affect how quickly individual medicines become eligible for Medicare price negotiations.Those changes would be difficult to make because they are written into the law, said Priya Chandran, biopharmaceuticals sector leader at Boston Consulting Group.”It is unlikely that anything is going to drastically change in the first year,” she said.Foley Hoag’s Neitzel said reports of Trump’s “warm and cordial” December dinner with pharmaceutical executives in Florida have led to some optimism.However, “the pretty universal statements by both Trump and RFK in the past about drug pricing do not suggest that this incoming Trump administration is going to be helpful to the industry,” she said. More

The Treasury, releasing its final budget report before President-elect Donald Trump takes office next week, said that the $711 billion October-December deficit was $201 billion, or 39% higher, than the $510 billion deficit in the same period a year earlier as outlays grew sharply and revenues declined slightly.For December, the $87 billion deficit was reduced by $51 billion by the calendar benefit shift, and compared to a $129 billion deficit in December 2023. Receipts for the month were up 6% to $454 billion, while outlays as reported were down 3% to $541 billion. More

Unlock the White House Watch newsletter for freeYour guide to what the 2024 US election means for Washington and the worldThe US economy is in a “fragile place”, the chief executive of Goldman Sachs said on Tuesday, as the incoming Donald Trump administration promises policies that could stoke or constrain growth and fuel government deficits. David Solomon said he was “incredibly optimistic” and expected the sweeping deregulation Trump promised would catalyse business investment. But he also warned about the potential effects of Trump’s plans to clamp down on immigration, including deporting millions of immigrants who are living in the US illegally. Solomon said the recent rise in long-dated interest rates — the yield on 10-year Treasury notes reached 4.79 per cent on Tuesday — primarily reflected market expectations of continued growth of US government debt. “I’m quite optimistic, but we’re in a more fragile place,” he said at a New York conference hosted by the National Retail Federation, a trade association. Solomon claimed regulations imposed by Joe Biden’s administration had caused CEOs to defer investment. The incoming Trump administration “has sent a clear message that they want to back that off. That’s very constructive for growth and investment, and so I think that’s a positive,” he added. He said the renewal of tax cuts passed during Trump’s first time in the White House, many of which are due to expire this year, “can be stimulative”. “But there are other things that the administration is talking about that we really need to see how they go forward,” Solomon said, including Trump’s threats to impose new tariffs on trading partners and restrict immigration. Secure borders were important, he said. “But when you think about deportations, it’s very, very important that we balance all that with continued immigration growth, and we’ve got to get that balance right,” Solomon said. “So you’ve got this cocktail of change, some of which can be quite constructive for growth, some of which has the potential to slow growth, and I think the thing we have to watch very carefully is how it’s all balanced,” he said. Government bond markets have sold off in recent months, and rates jumped further after an unexpectedly strong US jobs report last week.Solomon said he did not think the recent rise in yields reflected expectations of a more hawkish Federal Reserve or concerns strong inflation will persist. He said: “We’ve really grown the debt stack. You really look at the deficit as a per cent of GDP. You look at some of the policy decisions and, I think it’s super important that we really get our spending and our deficit and the debt levels under control.”Solomon added: “And I think one of the things that’s happening is real bond buyers are looking and saying, we’ve got a lot of financing coming forward as we go through the rest of the decade, and that’s pushing long rates higher. We haven’t seen that in a long time, that’s a change, and I think that’s something to watch.” More

LONDON (Reuters) – Hopes of a ceasefire deal to end the war in Gaza lifted the region’s government bond markets and Israel’s shekel on Tuesday as investors sensed relief after 15 months of conflict.Negotiators were meeting in Qatar hoping to finalise a ceasefire and hostage release agreement after U.S. President Joe Biden indicated that one was within reach. More than six hours after talks began there was still no word on an outcome but Israel’s bonds and those of Lebanon, Egypt and Jordan were all edging higher as optimism built. Israel’s shekel and Egypt’s pound were also both fractionally higher in the currency markets. Clinching a ceasefire deal would cap a historic few months in the Middle East. It has included the killing by Israel of Hamas leader Yahya Sinwar, Iran-backed Hezbollah being weakened enough to allow Lebanon to elect a new president and perhaps most surprising of all, Syria’s veteran leader Bashar Al-Assad being toppled.Marten Bressel, a portfolio manager and rates trader at FIM partners, said the combination of events was helping to lift sentiment towards the region after a difficult couple of years.”The ceasefire deal is one part of that and hopes are pretty high at the moment that the new government of Syria will open up the country more to the West,” he said. Lebanon has been the biggest trade for investors, though.Its bonds have almost trebled over the last few months amid hopes that it can start addressing its dire financial woes now that nearly two years of near complete political paralysis look to be over. Israel’s markets bear the scars of the last 15 months of conflict in Gaza. The heavy cost of the fighting has seen the country’s sovereign credit rating downgraded multiple times despite never having been cut before last year. More

The producer price index rose 0.2% in December, less than the 0.4% increase in November and below the Dow Jones consensus estimate for 0.4%.
Excluding food and energy, the so-called core PPI was flat compared with the forecast for a 0.3% rise.
The release is the first of two key inflation readings this week that likely will figure into the Federal Reserve’s interest rate decision later in January.

A measure of wholesale prices increased less than expected in December, providing indication that pipeline inflation pressures eased to close the year though likely not enough to provoke another Federal Reserve interest rate cut anytime soon.
The producer price index rose just 0.2% on the month, less than the 0.4% increase in November and below the Dow Jones consensus estimate for 0.4%, according to a Bureau of Labor Statistics report Tuesday.

Excluding food and energy, the so-called core PPI was flat compared with the forecast for a 0.3% rise. Excluding food, energy and trade services, the measure rose just 0.1%.
On an annual basis, headline PPI rose 3.3% for the full year, well ahead of the 1.1% increase in 2023.
Goods prices increased 0.6%, pushed by a 9.7% surge in gasoline prices. Upward moves in several food- and energy-related measures were offset by a 14.7% slide in prices for fresh and dry vegetables.
On the services side, prices were flat, despite a 7.2% increase in passenger transportation that was offset by a fall in prices for traveler accommodation.
Stock market futures shot higher following the report while Treasury yields moved lower after pushing sharply higher in the early days of 2025.

The release is the first of two key inflation readings this week that likely will figure into the Federal Reserve’s interest rate decision later in January.
On Wednesday, the BLS will release its more closely watched reading on the consumer price index. That is expected to show 0.3% monthly gains on both the headline and core readings and respective annual inflation rates of 2.9% and 3.3%.
Though the central bank focuses more on the Commerce Department’s personal consumption expenditures price index as its main inflation gauge, the PPI and CPI readings figure into that calculation.
Markets pricing overwhelmingly points to the Fed staying on hold at the Jan. 28-29 meeting. However, policymakers, and Chair Jerome Powell in particular, could lay the groundwork for what is ahead as far as rates go.
Fed funds futures pricing Tuesday implied just one rate cut through the rest of the year; Bank of America economists on Monday said they think the Fed could be done this year. Fed officials at their December meeting penciled in the equivalent of two cuts this year, assuming quarter percentage point moves.

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MEXICO CITY (Reuters) – In late November, U.S. President-elect Donald Trump sent shockwaves through global trade by threatening 25% tariffs on Mexico and Canada, effectively ripping up a regional trade agreement, if the two countries didn’t do more to curb migration and the flow of drugs. It was a big test for Mexico’s new President Claudia Sheinbaum, the country’s first female leader who had taken office just eight weeks earlier. Analysts thought the scientist-turned-politician might be too rigid and reserved to navigate the volatile U.S. leader with the relative aplomb of her predecessor Andres Manuel Lopez Obrador. Now, as Trump prepares to take office, Sheinbaum has publicly sparred with the incoming U.S. president, but also shown concrete results that could help show Mexico is serious about cooperating on migration, security and China.It is hard to know if that will be enough, or if the threat of tariffs on Trump’s first day in power is wholly realistic, but experts and former diplomats say Sheinbaum has made a solid start. “It’s a very pragmatic and proactive approach by Sheinbaum and her team,” said Gema Kloppe-Santamaria, a global fellow of the Wilson Center’s Mexico Institute. Trump has repeatedly accused the Mexican government of not doing enough to stop migrants and drugs from entering the U.S. and has threatened sweeping tariffs to force more action. He has also railed against Chinese plants setting up shop in Mexico.But since taking office, Sheinbaum has intensified an already historic crackdown against migrants traveling toward the U.S. border by detaining an unprecedented 475,000 migrants between October and December and has left open the possibility that Mexico might be willing to accept non-Mexicans deported from the United States.Her government has also seized a record 1,100 kilograms of illicit fentanyl, and unveiled new tariffs against some Asian goods and confiscated counterfeit Chinese products in several Mexican cities.”She’s sending this message that she is a strong political leader,” said Kloppe-Santamaria, pointing to recent polling that shows Sheinbaum has increased her popularity to a staggering 80% approval rating after her first 100 days in office. “Trump without a doubt comes with a lot of power and legitimacy, but she does as well,” Kloppe-Santamaria added.Reuters spoke to seven economic analysts, former Mexican diplomats, and academic experts in Mexican politics. Most praised Sheinbaum’s strategy for engaging with Trump.”This commitment that Mexico has shown to fully align its interests with those of the U.S. is what makes us more confident that President Claudia Sheinbaum and President-elect Donald Trump will pull through the initial threats and uncertainty,” said Rodolfo Ramos, an analyst at Banco Bradesco.MEXICO HAS MUCH TO LOSEThe incoming U.S. leader is known for being unpredictable, but Sheinbaum has also maintained an element of surprise, said Jorge Guajardo, a former Mexican ambassador to China. While she’s suggested Mexico could retaliate with its own tariffs, she’s refrained from tipping her hand.”She’s been very smart and strategic,” he said. “She wants to keep her powder dry.”Mexico is one of the countries with the most to lose in a second Trump presidency, said former Mexican ambassador to the United States Arturo Sarukhan.The U.S. is far and away Mexico’s largest trading partner, and the Republican leader’s threatened tariffs could send shockwaves through Mexico’s economy. He has also vowed mass deportations that could strain Mexico’s job market and spark humanitarian and security challenges in a country already grappling with violence, internal displacement, and sluggish economic growth. Then there’s Trump’s threats of unilateral U.S. military action against drug cartels inside Mexico, which “is basically an act of war,” Sarukhan said.Sarukhan warned that U.S.-Mexico relations could be more volatile than in decades and that Mexico City needed to be prepared for Trump’s second administration to be even more difficult for Mexico than the first.But Sheinbaum appears to have a well-prepared playbook. The steps her government has taken might be sufficient, for now.”I think these measures are enough to establish a floor for the negotiations and keep Trump from imposing tariffs on day one,” said Matias Gomez, an analyst at consulting firm Eurasia Group.”However, this threat will act as a sword of Damocles throughout 2025 as a latent risk that will allow Trump to pressure Sheinbaum on multiple fronts.” More