US economy contracts for 2nd consecutive quarter
The US economy contracted at an annual rate of 0.9pc in the second quarter, marking a second consecutive quarter of contraction and signaling the economy may be in a recession by a commonly viewed measure.
The contraction in the second quarter, according to the "advance estimate" from the Bureau of Economic Analysis (BEA), followed a 1.6pc annual contraction in the first quarter. A second estimate, with more complete data, will be released on 25 August.
The decrease in GDP reflected decreases in private inventories, home construction and federal, state and local government spending. These decreases were partly offset by increases in exports as well as slowing, but still positive, personal consumption. Imports, which subtract from GDP, increased.
Today's report comes as the Federal Reserve has embarked on its steepest course of rate hikes in decades to curb inflation that spiked at 9.1pc in June. The Fed yesterday hiked its target rate by 75 basis points, its second such consecutive increase, and Fed chairman Jerome Powell reiterated that the Fed could achieve its goal of slowing the economy without inducing a recession.
Two consecutive quarters of economic contraction are frequently viewed as technically signaling a recession, even as the official arbiter of recessions, the National Bureau of Economic Research, adheres to a definition of recessions that is broader. Its definition reflects a significant decline in activity over more than several months encompassing measures of personal income, nonfarm payroll employment, personal consumption, wholesale-retail sales and industrial production.
Residential investment fell at a 14pc pace in the quarter, reflecting the downturn in home building on the heels of the Fed's recent rate increases. Federal government spending fell by 3.2pc, with nondefense spending off by 10.5pc, reflecting the end of Covid-19 stimulus to individuals and companies.
Offsetting the declines, exports rose by 18pc and imports climbed by 3.1pc. Personal consumption rose by 1pc after a 1.8pc annual gain in the first quarter.
The resilience of the labor market is the main stalwart against arguments for recession as the unemployment rate holds at 3.6pc, near the pre-pandemic low, and job growth averaged about 455,000/month in the first half of the year.
"I don't think it's likely that the US economy is in a recession because we do see a very strong labor market," Fed chair Powell said yesterday in a press conference.
Related news posts
Australia's WesCEF to pursue Li plans despite hurdles
Australia's WesCEF to pursue Li plans despite hurdles
Singapore, 3 May (Argus) — Australian conglomerate Wesfarmers will still pursue the strategy for its chemicals, energy and fertilisers arm (WesCEF) to be an integrated lithium producer, despite the recent lithium market downturn. Wesfarmers earlier this year warned of unprofitable lithium sales from its Mount Holland project , owing to high production costs as it goes through a ramp-up. But WesCEF plans to weather through the downturn and plow ahead with its lithium downstream developments, given strong long-term fundamentals and despite the market's immaturity and cyclical demand, according to the group's executives on 2 May. Spodumene prices in China — which dominates global consumption of lithium raw materials — were assessed at $1,080-1,180/t on 30 April, down sharply from $5,750-5,900/t at the start of 2023. "It's also worth remembering that when we invested in Covalent and took the final investment decision , lithium hydroxide prices were lower than they are today," said WesCEF's managing director Ian Hansen. Wesfarmers and Chilean lithium firm SQM jointly own Australian firm Covalent Lithium, which looks after the Mount Holland project that includes a mine, concentrator and its 50,000 t/yr Kwinana lithium hydroxide refinery. Completing the refinery's construction and commissioning remains WesCEF's priority, with the mine and concentrator going through a ramp-up, according to WesCEF. The firm is also progressing its potential expansion project for the mine and concentrator, which it submitted an application for environmental approvals. The first lithium hydroxide output out of the Kwinana refinery is still expected in the first half of 2025, with a delay in timeline. Covalent completed its first spodumene concentrate shipment earlier in March, said WesCEF. Wesfarmers expected its share of spodumene concentrate output from Mount Holland to be 50,000t in the current July 2023-June 2024 fiscal year. The share will rise to 150,000-190,000t in the upcoming July 2024-June 2025 fiscal year. Lithium downturn The lithium downturn has led to multiple firms, including major particpants across the lithium and battery supply chain, reporting poor January-March results. Australian lithium and nickel producer IGO, affected by slumps in the lithium and nickel markets, reported its first quarterly loss in years while posting lower output . Major US lithium producer Albemarle's executives have also called the market "unsustainable" in the long run, as it posts a whopping $1.1bn year-on-year fall in sales from its energy storage division. Major Chinese lithium producer Tianqi Lithium also suffered heavy losses, while global lithium firm Arcadium Lithium earlier this year cut its planned sales numbers this year and warned that current market prices will weigh on future supply. South Korea's top battery manufacturer LG Energy Solution (LGES) reported W157bn of operating profit in January-March , but would have reported an operating loss of W32bn if it did not receive almost W189bn in US Inflation Reduction Act tax credits. By Joseph Ho Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Nippon Steel delays timeline to acquire US Steel
Nippon Steel delays timeline to acquire US Steel
Tokyo, 3 May (Argus) — Japan's Nippon Steel has extended the scheduled timing of its US Steel acquisition completion until the end of the year, following a request by US authorities to submit more documentation, postponing an original plan of closing the deal by September at the latest. Nippon Steel will take more time to complete its $15bn deal to buy US Steel , as the Japanese firm received from the US Department of Justice a "second request" on submitting further documents necessary for the approval procedure. The deal was initially scheduled to close during April-September but is postponed to sometime during July-December, the Japanese firm announced on 3 May. Nippon Steel received the additional request in April, according to a company representative who spoke to Argus, without disclosing the specific date. The company anticipated the possibility of additional requirements, he added. The acquisition procedure may not finish before the US presidential election in November. Both the Democratic and the Republican party candidates repeatedly and vocally have opposed the deal , with incumbent US President Joe Biden pledging that a fellow American steel producer will be "American owned, American operated by American union steel workers". Nippon Steel is confident that its acquisition plan will eventually clear regulatory hurdles with "fair and objective judgement" from the US authorities, the representative added. By Yusuke Maekawa Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Canadian rail workers vote to launch strike: Correction
Canadian rail workers vote to launch strike: Correction
Corrects movement of grain loadings from a year earlier in final paragraph. Washington, 2 May (Argus) — Workers at the two major Canadian railroads could go on strike as soon as 22 May now that members of the Teamsters Canada Rail Conference (TCRC) have authorized a strike, potentially causing widespread disruption to shipments of commodities such as crude, coal and grain. A strike could disrupt rail traffic not only in Canada but also in the US and Mexico because trains would not be able to leave, nor could shipments enter into Canada. This labor action could be far more impactful than recent strikes because it would affect Canadian National (CN) and Canadian Pacific Kansas City (CPKC) at the same time. Union members at Canadian railroads have gone on strike individually in the past, which has left one of the two carriers to continue operating and handle some of their competitor's freight. But TCRC members completed a vote yesterday about whether to initiate a strike action at each carrier. The union represents about 9,300 workers employed at the two railroads. Roughly 98pc of union members that participated voted in favor of a strike beginning as early as 22 May, the union said. The union said talks are at an impasse. "After six months of negotiations with both companies, we are no closer to reaching a settlement than when we first began, TCRC president Paul Boucher said. Boucher warned that "a simultaneous work stoppage at both CN and CPKC would disrupt supply chains on a scale Canada has likely never experienced." He added that the union does not want to provoke a rail crisis and wants to avoid a work stoppage. The union has argued that the railroads' proposals would harm safety practices. It has also sought an improved work-life balance. But CN and CPKC said the union continues to reject their proposals. CPKC "is committed to negotiating in good faith and responding to our employees' desire for higher pay and improved work-life balance, while respecting the best interests of all our railroaders, their families, our customers, and the North American economy." CN said it wants a contract that addresses the work life balance and productivity, benefiting the company and employees. But even when CN "proposed a solution that would not touch duty-rest rules, the union has rejected it," the railroad said. Canadian commodity volume has fallen this year with only rail shipments of chemicals, petroleum and petroleum products, and non-metallic minerals rising, Association of American Railroads (AAR) data show. Volume data includes cars loaded in the US by Canadian carriers. Coal traffic dropped by 11pc during the 17 weeks ended on 27 April compared with a year earlier, AAR data show. Loadings of motor vehicles and parts have fallen by 5.2pc. CN and CPKC grain loadings fell by 4.3pc from a year earlier, while shipment of farm products and food fell by 9.3pc. By Abby Caplan Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
FTC clears Exxon-Pioneer deal but bars Sheffield
FTC clears Exxon-Pioneer deal but bars Sheffield
New York, 2 May (Argus) — US antitrust regulators signaled they will clear ExxonMobil's proposed $59.5bn takeover of Pioneer Natural Resources but banned the shale giant's former chief executive officer from gaining a seat on the board. A proposed consent order from the Federal Trade Commission seeks to stop Scott Sheffield, Pioneer's former chief executive, from taking part in "collusive activity" that would potentially raise crude prices and cause US consumers to pay more at the pump. The order paves the way for ExxonMobil to close its blockbuster deal for Pioneer, which will make it the leading producer in the prolific Permian shale basin of west Texas and southeastern New Mexico. It is also the top US oil producer's biggest transaction since Exxon's 1999 merger with Mobil. ExxonMobil's Permian output will more than double to 1.3mn b/d of oil equivalent (boe/d) when the acquisition closes, before increasing to about 2mn boe/d in 2027. The FTC, which has taken a tougher line on mergers under the administration of President Joe Biden, has paid close attention to oil deals announced during the latest phase of shale consolidation. Only this week, Diamondback Energy said it had received a second request for information from the regulator over its $26bn proposed takeover of Endeavor Energy Resources. And Chevron's planned $53bn acquisition of US independent Hess has also been held up. The FTC alleged in a complaint that Sheffield exchanged hundreds of text messages with Opec officials discussing crude pricing and output, and that he sought to align production across the Permian with the cartel. His past conduct "makes it crystal clear that he should be nowhere near Exxon's boardroom," said Kyle Mach, deputy director of the FTC's Bureau of Competition. ExxonMobil said it learnt about the allegations against Sheffield from the FTC. "They are entirely inconsistent with how we do business," the company said. While Pioneer said it disagreed with the FTC's complaint, which reflects a "fundamental misunderstanding" of US and global oil markets and "misreads the nature and intent" of Sheffield's actions, the company said it would not be taking any steps to stop the merger from closing. By Stephen Cunningham Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.
Business intelligence reports
Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.
Learn more