Economy

WASHINGTON (Reuters) – The Biden administration on Friday announced it is putting more than $3 billion into two federal programs to help communities deal with floods, wildfires, extreme heat and other problems imposed by climate change. Funding for the Building Resilient Infrastructure and Communities (BRIC) program, which funds projects that protect people and infrastructure from natural hazards and the effects of climate change, will more than double to nearly $2.3 billion.The Flood Mitigation Assistance program, which funds projects to help mitigate flood risks for homes and communities, will see a five-fold increase in funding to $800 million.Some of the funding for the two Federal Emergency Management Agency programs will come from last year’s bipartisan infrastructure law, with $700 million for the flood program, and $200 million for BRIC. The rest will come from FEMA’s Disaster Relief Fund.”Chronic lack of investment in climate resilience has only made matters worse for America’s crumbling infrastructure,” FEMA Administrator Deanne Criswell said in a statement.”Unfortunately, these issues are magnified in historically underserved communities.” Through the funding “we seek to correct this injustice and ensure that every community is better able to prepare before disasters strike,” Criswell said.Last year, in just one example of the type of disaster that scientists say are made worse by climate change, Hurricane Ida https://www.reuters.com/markets/commodities/killer-heatwaves-floods-climate-change-worsened-weather-extremes-2021-2021-12-13 hit Louisiana as a Category 4 storm, killing nearly 100 people and causing an estimated $64 billion in damage.The White House said in April https://www.reuters.com/world/us/exclusive-climate-change-could-cost-us-budget-2-trln-year-by-end-century-white-2022-04-04 that the upper range of climate change’s hit to the U.S. budget by the end of the century could total a 7.1% annual revenue loss, equal to $2 trillion a year in today’s dollars.(This story corrects to fix Criswell’s name on second reference) More

(Reuters) – U.S. import prices fell for the first time in seven months in July, helped by a strong dollar and lower fuel and nonfuel costs, while consumers’ one-year inflation outlook ebbed in August, the latest signs that price pressures may have peaked.Import prices, which exclude tariffs, fell 1.4% last month after rising 0.3% in June, the Labor Department said on Friday.That was the largest monthly drop since April 2020 and exceeded the 1.0% decline expected by economists in a Reuters poll. In the 12 months through July, import prices gained 8.8% after a 10.7% rise in June, marking the annual rate’s fourth straight monthly decline.The report followed other tentative indications earlier this week that inflation was finally coming off the boil. U.S. consumer prices were unchanged in July due to a sharp drop in the cost of gasoline, after advancing 1.3% in June, although underlying price pressures remained elevated. Producer prices also declined last month on the back of lower energy costs.”Declining import prices and producer prices support the … thesis that the economy is past headline peak inflation,” said Jeffrey Roach, chief economist at LPL Financial (NASDAQ:LPLA). GRAPHIC: U.S. import and export prices drop sharply (https://graphics.reuters.com/USA-ECONOMY/INFLATION/lbvgnajkgpq/chart.png) The Federal Reserve is mulling whether to raise its benchmark overnight lending rate by 50 or 75 basis points at its next policy meeting on Sept. 20-21, as the U.S. central bank battles to cool demand across the economy and bring inflation back down to its 2% goal. The Fed has raised its policy rate by 225 basis points since March.Richmond Fed President Thomas Barkin reiterated following Friday’s data that he and his fellow policymakers will not let up on raising rates until they see long-lasting evidence that price pressures are firmly on a downward path.”I’d like to see a period of sustained inflation under control, and until we do that I think we are just going to have to move rates into restrictive territory,” Barkin told CNBC.Imported fuel prices dropped 7.5% last month after surging 6.2% in June. Petroleum prices declined 6.8%, while the cost of imported food fell 0.9%, the largest one-month drop since November 2020 and third straight monthly decline.Excluding fuel and food, import prices dropped 0.5%. These so-called core import prices decreased 0.6% in June. They rose 3.8% on a year-on-year basis in July. The strength of the U.S. dollar is helping keep a lid on core import prices.The dollar has gained around 10% against the currencies of the United States’ main trade partners since the beginning of the year.The report also showed export prices fell 3.3% in July after accelerating 0.7% in June. Prices for agricultural exports declined 3.0%, with the fall led by lower prices for soybeans, wheat and cotton.Nonagricultural export prices fell 3.3%. Export prices rose 13.1% on a year-on-year basis in July after increasing 18.1% in June.GASOLINE PRICESU.S. consumer sentiment ticked further up in August from a record low earlier this summer and American households’ near-term inflation outlook eased again on the back of the sharp drop in gasoline prices, a survey from the University of Michigan showed.The survey’s preliminary August reading on the overall index on consumer sentiment came in at 55.1, up from 51.5 in the prior month. It had hit a record low of 50 in June.The preliminary August reading was above the median forecast of 52.5 among economists polled by Reuters. GRAPHIC: UMich (https://graphics.reuters.com/USA-STOCKS/byprjymgzpe/umich.png) The survey’s one-year inflation expectation fell to a six-month low of 5.0% from 5.2%, while the survey’s five-year inflation outlook edged up to 3.0% from 2.9%, holding within the range that has prevailed for the past year. More

WASHINGTON (Reuters) – A corporate minimum tax in a congressional spending bill set for passage on Friday will not bring the United States into compliance with a separately negotiated 137-country deal for a global minimum tax.Although both taxes are the same rate – 15% – they are separate items that apply differently to companies.The U.S. House of Representatives was scheduled to vote on Friday on the $430 billion legislation, already passed by the Senate, and send it to President Joe Biden’s desk for signing into law, a political triumph for his Democratic Party ahead of the Nov. 8 midterm election. Maverick Democratic Senator Joe Manchin, who struck the legislative deal with Senate Majority Leader Chuck Schumer, his fellow Democrat, has not backed the global tax plan.Manchin told West Virginia Metro News radio that the bill does not include an “offshore” minimum tax, adding: “Our international corporations, we didn’t do anything that would cause them to be uncompetitive in the global market.”Once signed into law, the climate and healthcare investment bill will leave the U.S. Treasury without a path to implement the 15% global minimum tax deal approved by Organisation for Economic Cooperation and Development countries in October 2021. To comply, the Treasury would need to raise the current overseas minimum corporate tax known as “GILTI” from 10.5% to 15% – a move opposed by Republicans and by Manchin in the past. Biden has supported the corporate minimum tax bill, which would fulfill a campaign promise to make U.S. corporations pay more than the dwindling percentage of the federal budget they have contributed since the 1940s. It will finance the Democrats’ slimmed-down $430 billion climate change and prescription drugs bill. But lawmakers, congressional aides, and tax experts say it will not bring the country into compliance on the global minimum tax. The U.S. Treasury also acknowledged that additional compliance steps were needed. The legislation’s proposed 15% domestic tax on companies’ “book income” of at least $1 billion annually is distinct from the global minimum tax plan, said KPMG’s Washington National Tax practice chief Manal Corwin.”Accordingly, its adoption does not bring the U.S. rules into alignment with the global minimum tax architecture embodied in Pillar Two of the OECD proposal,” Corwin said.A key distinction in the Schumer-Manchin bill are allowances for certain business tax credits, such as for research and development and other investments, unlike in the global minimum tax plan. Under the global minimum tax, U.S. companies with big tax credits could comply with the proposed domestic minimum but still be subject to a top-up tax on overseas profits, Corwin said.Some who oppose the global minimum tax, including Manchin, say this would diminish the benefits of such credits.U.S. Treasury Secretary Janet Yellen, who was a driving force behind the 15% global minimum tax deal last year and has cajoled holdout countries to support it, is not giving up on U.S. implementation.Referring to the new legislation, a U.S. Treasury official said: “The Inflation Reduction Act’s domestic corporate minimum tax is an important provision to ensure large corporations pay their fair share in taxes. The global minimum tax remains a top priority of the Biden Administration and there are still steps needed to bring the United States into compliance.”Yellen has said she will look for every opportunity to enact the global corporate minimum tax, which she helped negotiate.If other countries move ahead with the minimum tax plan, they would be able to collect top-up taxes from U.S. companies that would otherwise flow to the Treasury, Yellen has argued, putting pressure on U.S. lawmakers to implement the tax and keep those revenues in the United States instead. More

Children are feeling the effect of the UK’s cost of living crunch, with almost a third of parents cutting back on pocket money.Halifax’s annual Pocket Money survey reveals that average weekly pocket money has fallen by 23 per cent, from £6.48 last year to £4.99 now.The cost of energy is the biggest worry for British parents, according to the survey, with 71 per cent of those surveyed naming it as their top concern.Energy bills are forecast to rise by up to 70 per cent in October, with a further rise expected in January 2023. Last week, the Bank of England warned UK inflation could hit 13 per cent by the autumn.In spite of a worsening economic climate, half of British parents said they were willing to sacrifice their own spending to maintain their children’s weekly funds. Leisure costs such as eating out as well as “treats” such as designer items were among the things parents said they were willing to cut back on.Since Halifax began tracking pocket money in 1987, interest rates and inflation have been clear influences on the amounts parents hand out.“In the main, periods of low inflation and therefore lower interest rates tend to correspond with higher or growing levels of pocket money,” Halifax said.A period of economic stability in the late 1990s and early 2000s led to a large increase in average pocket money, when it reached a peak of more than £8 a week in 2007. It fell back after the financial crisis, when interest rates fell sharply but inflation rose.There was another drop during the pandemic, as millions of parents faced an uncertain economic future.“More recently, a sharp increase in inflation has corresponded with a sharp fall in pocket money,” Halifax added.The most popular purchases using pocket money remain gaming and sweets, according to parents’ votes. Toys follow closely, as well as clothing, then hobbies such as books. More

UK prime minister Boris Johnson on Friday admitted that the government’s existing £37bn cost of living package may not be enough to support struggling households, as Liz Truss, the frontrunner to replace him, rejected calls for windfall taxes to limit the pain of rising energy bills.Johnson, who will leave office next month, said in north Wales that he would not “pretend” the economic situation was easy for the public, adding that ministers were focused on ensuring that the Treasury had “fiscal firepower” to help households in autumn.Asked if current support measures were enough, he said: “No, because what I’m saying what we’re doing in addition is trying to make sure that by October, by January, there is further support and what the government will be doing, whoever is the prime minister, is making sure there is extra cash to help people.”Earlier this year, the UK announced a £37bn package of measures, including one-off payments of £650 to those on means-tested benefits; £400 to ease the cost of energy bills; and £300 to the estimated 8mn pensioner households in receipt of the winter fuel payment. “I think it is very important for people to understand, most people have not yet received the help the government has already allocated,” Johnson added. “So over the course of the next couple of months you will see about 8mn households get another £326, you will see everybody in October get help with the energy support scheme.”Downing Street has ruled out making any major fiscal interventions before September 5, when a new prime minister is announced, despite warnings from Martin Lewis, founder of the MoneySavingExpert website, and former prime minister Gordon Brown that urgent support is needed.Energy consultancy Cornwall Insight has estimated that the energy price cap on customer bills could increase from its current rate of £1,971 a year to £4,427 by next April.Chancellor Nadhim Zahawi on Friday said the government was “looking at all the options” to help people through the winter. “We’re making sure we’re doing the work so on September 5 the new prime minister can hit the ground running and get those things into place,” he told Sky News.Johnson’s comments came after Truss on Thursday reiterated her opposition to imposing windfall taxes on oil companies, arguing that it amounted to “bashing business” and sent “the wrong message to international investors”. The foreign secretary’s economic pledges include tax cuts worth about £30bn, the reversal of the national insurance rise and a temporary moratorium on the green energy levy. “One thing I absolutely don’t support is a windfall tax,” she told Conservative party members during hustings in Cheltenham in the west of England. “I don’t think profit is a dirty word, and the fact it’s become a dirty word in our society is a massive problem,” Truss added.

In May, the UK introduced an energy profits levy on oil and gas companies, however, record profits reported by the sector have promoted renewed calls for further invention.Shell, Europe’s largest oil company, reported adjusted earnings of $11.5bn in the second quarter of this year, while the operating profits at Centrica, UK’s biggest energy retailer, rose to £1.3bn between January to June.Meanwhile, former chancellor Rishi Sunak has attacked his rival’s plans, arguing that tax cuts would do little to help the most vulnerable in society.“There are two groups of other people who will need more help: people on very low incomes and pensioners. Now, Liz Truss’s tax plans do virtually nothing for those people,” he said in an interview with Times Radio on Friday. More

According to Refinitiv Lipper, global equity funds lured $2.75 billion in their first weekly net purchase since June 22. GRAPHIC: Fund flows: Global equities, bonds and money market (https://fingfx.thomsonreuters.com/gfx/mkt/dwpkrwkykvm/Fund%20flows-%20Global%20equities%20bonds%20and%20money%20market.jpg) The data released on Wednesday showed U.S. consumer prices were unchanged in July, which has raised expectations of a 50 bps hike by the Federal Reserve in its September meeting, rather than a 75 bps which was widely anticipated earlier. A report showing a pick-up in the U.S. services industry also bolstered sentiment. U.S. and Asian equity funds received $4.21 billion and $0.69 billion respectively, although European funds had outflows of $2.52 billion.Among sector funds, consumer staples and healthcare gained $535 million and $389 million respectively, but tech and financials lost $412 million and $386 million respectively. GRAPHIC: Fund flows: Global equity sector funds (https://fingfx.thomsonreuters.com/gfx/mkt/zjvqkbnmavx/Fund%20flows-%20Global%20equity%20sector%20funds.jpg) Investors purchased about $5 billion of global bond funds, marking a second weekly inflow in a row.Government bond funds attracted a net $2.25 billion in a second weekly inflow, however, investors sold short- & medium-term, and high yield funds of $1.66 billion and $47 million respectively. GRAPHIC: Global bond fund flows in the week ended Aug 10 (https://fingfx.thomsonreuters.com/gfx/mkt/gkvlgobkkpb/Global%20bond%20fund%20flows%20in%20the%20week%20ended%20Aug%2010.jpg) Money market funds recorded outflows of $12.51 billion, the biggest in six weeks.Data for commodities funds showed energy funds attracted $101 million in net buying, the first weekly inflow in seven weeks, but precious metal funds lost $394 million.An analysis of 24,438 emerging market funds showed bond funds attracted purchases worth $766 million while equities notched up a fourth weekly capital outflow of $488 million. GRAPHIC: Fund flows: EM equities and bonds (https://fingfx.thomsonreuters.com/gfx/mkt/xmvjombyepr/Fund%20flows-%20EM%20equities%20and%20bonds.jpg) More

NEW DELHI (Reuters) -India’s consumer inflation dipped to 6.71% in July, easing for the third month in a row, helped by a slower increase in food and fuel prices and adding to expectations that the central bank may rein in the pace of its policy rate hikes next month.The year-on-year figure, published on Friday by the National Statistics Office, was marginally lower than the 6.78% forecast by economists in a Reuters poll. But it remained above the central bank’s 2-6% tolerance band for a seventh month in a row.After months of eye-watering inflation readings across much of the world, policymakers are wondering if they may have seen the peak of price pressures given recent evidence of moderation in Japan, China and the United States.However, few are willing to make definitive calls with the Ukraine war and pandemic continuing to tie up supply lines.”Inflationary pressures have eased,” a government source said on Thursday, adding that the government and central bank would continue to take steps to bring retail inflation below 6%. Economists said they expect the Reserve Bank of India (RBI) to raise policy rate by at least 25 basis points next month as real interest rates are still negative. The RBI’s Monetary Policy Committee has lifted the key repo rate by 140 basis points since May, including by 50 bps this month, while the government imposed restrictions on export of crops including wheat and sugar while cutting fuel taxes.Food inflation, which accounts for nearly half the CPI basket, was 6.75% in July, also easing for the third month in a row. Prices of edible oil and some metals fell.Core inflation, excluding volatile food and energy prices, was estimated at 5.79-5.80% in July, lower than 5.96- 6.2% estimates in June, said two economists, after the data release.India does not release core inflation data. More

Import prices fell by a more-than-expected 1.4% last month after rising 0.3% in June, the data showed. It was the largest monthly drop since April 2020. In the 12 months through July, import prices increased 8.8% after rising 10.7% in June.Economists polled by Reuters had forecast import prices, which exclude tariffs, would decline 1.0% from June.The report follows other tentative signs earlier this week that inflation has peaked, with U.S. consumer prices unchanged in July due to a sharp drop in the cost of gasoline, after advancing 1.3% in June, although underlying price pressures remained elevated. Producer prices also declined last month on the back of lower energy costs.The Federal Reserve is mulling whether to raise its benchmark overnight lending rate by another 50 or 75 basis points at its next policy meeting on Sept. 20-21, as the U.S. central bank battles to cool demand across the economy and bring inflation back down to its 2% goal. The Fed has raised its policy rate by 225 basis points since March.Imported fuel prices dropped 7.5% last month after surging 6.2% in June. Petroleum prices declined 6.8%, while the cost of imported food fell 0.9%, the largest one-month drop since November 2020.Excluding fuel and food, import prices dropped 0.5%. These so-called core import prices decreased 0.6% in June. They rose 3.8% on a year-on-year basis in July. The strength of the U.S. dollar is helping keep a lid on core import prices.The dollar has gained around 10% against the currencies of the United States’ main trade partners since the beginning of the year.The report also showed export prices fell 3.3% in July after accelerating 0.7% in June. Prices for agricultural exports declined 3.0%, with the fall led by lower prices for soybeans, wheat and cotton. Nonagricultural export prices fell 3.3%. Export prices rose 13.1% on a year-on-year basis in July after increasing 18.1% in June. More