U.S. home sales tumble as prices race to record high

FILE PHOTO: A real estate sign advertising a home "Under Contract" is pictured in Vienna, Virginia, outside of Washington, October 20, 2014. REUTERS/Larry Downing

By Lucia Mutikani

WASHINGTON (Reuters) – U.S home sales fell more than expected in June as a persistent shortage of properties pushed prices to a record high, suggesting the housing market was struggling to regain speed since hitting a soft patch last year.

Weak housing and manufacturing are holding back the economy, offsetting strong consumer spending. The National Association of Realtors said on Tuesday existing home sales dropped 1.7% to a seasonally adjusted annual rate of 5.27 million units last month. May’s sales pace was revised higher to 5.36 million units from the previously reported 5.34 million units.

“Meager inventory levels, especially in the entry-level segment, and still-rising prices continue to limit the selection of homes available to more budget-conscious buyers,” said Matthew Speakman, an economist at Zillow.

Economists polled by Reuters had forecast existing home sales slipping 0.2% to a rate of 5.33 million units in June. Existing home sales, which make up about 90 percent of U.S. home sales, decreased 2.2% from a year ago. That was the 16th straight year-on-year decline in home sales.

The weakness in housing comes despite cheaper mortgage rates and the lowest unemployment rate in nearly 50 years.

Supply has continued to lag, especially in the lower-price segment of the housing market because of land and labor shortages, as well as expensive building materials. The government reported last week that permits for future home construction dropped to a two-year low in June.

According to the NAR, there was a 19% drop from a year earlier in sales of houses priced $100,000 and below.

The Realtors group said there was strong demand in this market segment, but not enough homes for sale. The NAR also said last year’s revamp of the U.S. tax code, which reduced the amount of mortgage interest payments homeowners could deduct, was weighing on demand for homes priced at $1 million and above.

The 30-year fixed mortgage rate has dropped to an average of 3.81% from a more than seven-year peak of 4.94% in November, according to data from mortgage finance agency Freddie Mac. Further declines are likely as the Federal Reserve is expected to cut interest rates next week for the first time in a decade.

Last month, existing-home sales rose in the Northeast and Midwest. They tumbled in the populous South and in the West.

June’s drop in existing homes sales likely means less in brokers’ commissions, which suggests that housing probably remained a drag on the gross domestic product in the second quarter. Spending on homebuilding contracted in the first quarter, the fifth straight quarterly decline.

The Atlanta Fed is forecasting GDP rising at a 1.6% annualized rate in the second quarter. The economy grew at a 3.1% rate in the January-March period. The government will publish it snapshot of second-quarter GDP on Friday.

The PHLX housing index <.HGX> was little changed, underperforming a broadly firmer U.S. stock market. The dollar held near a five-week high against a basket of currencies. U.S. Treasury prices fell.

HOUSE PRICES RE-ACCELERATE

There were 1.93 million previously owned homes on the market in June, up from 1.91 million in May and unchanged from a year ago. The median existing house price increased 4.3% from a year ago to $285,700 in June, an all-time high. House price inflation had been slowing after a jump in mortgage rates last year dampened demand.

Last month, houses for sale typically stayed on the market for 27 days, up from 26 days in May and a year ago. Fifty-six percent of homes sold in June were on the market for less than a month.

At June’s sales pace, it would take 4.4 months to exhaust the current inventory, up from 4.3 months in May. A six-to-seven-month supply is viewed as a healthy balance between supply and demand.

First-time buyers accounted for 35% of sales last month, up from 32% in May and 31% a year ago. Economists and realtors say a 40% share of first-time buyers is needed for a robust housing market.

(Reporting by Lucia Mutikani; editing by Andrea Ricci)

Strong U.S. retail sales boost economic outlook

FILE PHOTO: A stack of shipping containers are pictured in the Port of Miami in Miami, Florida, U.S., May 19, 2016. REUTERS/Carlo Allegri/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales increased more than expected in June, pointing to strong consumer spending, which could help to blunt some of the drag on the economy from weak business investment.

The report from the Commerce Department on Tuesday did not change market expectations that the Federal Reserve will cut interest rates this month for the first time in a decade.

But signs of strong consumer spending and rising underlying inflation suggest the U.S. central bank is unlikely to cut rates by 50 basis points at its July 30-31 policy meeting as markets had initially anticipated.

Fed Chairman Jerome Powell last week told lawmakers the central bank would “act as appropriate” to protect the economy against risks stoked by a trade war between the United States and China, as well as slowing global growth.

“It certainly will counteract weak business spending to some degree,” said Robert Frick, corporate economist at Navy Federal Credit Union in Vienna, Virginia. “Given that the Fed is most worried about foreign economies and the threat of an escalating trade war, it is unlikely to dissuade them from cutting rates soon.”

Retail sales increased 0.4% last month as households stepped up purchases of motor vehicles and a variety of other goods. Data for May was revised slightly down to show retail sales gaining 0.4%, instead of rising 0.5% as previously reported.

Economists polled by Reuters had forecast retail sales edging up 0.1% in June. Compared to June last year, retail sales advanced 3.4%.

Excluding automobiles, gasoline, building materials and food services, retail sales jumped 0.7% last month after an upwardly revised 0.6% increase in May. These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have increased 0.4% in May.

    June’s strong gain in core retail sales, coming on the heels of solid increases in April and May, suggested an acceleration in consumer spending in the second quarter. Consumer spending grew at its slowest pace in a year in the first quarter.

The dollar rose against a basket of currencies, while U.S. Treasury prices fell.

BROAD GAINS

Consumer spending is being supported by a tight labor market, even as the broader economy is slowing as weaker business investment, an inventory overhang, a trade war between the United States and China, and softening global growth pressure manufacturing.

The Fed reported on Tuesday that manufacturing output rose 0.4% in June, boosted by increased production of motor vehicles and parts, after gaining 0.2% in May. Still, factory production dropped at an annual rate of 2.2% in the second quarter, the biggest drop in three years, after contracting at a 1.9% rate in the January-March period.

“Healthy consumption growth is especially important now amid the U.S. and global industrial slump that we expect to contribute to an outright decline in real business fixed investment in the second quarter and as manufacturers continue to work off the inventory overhang,” said Roiana Reid, an economist at Berenberg Capital Markets in New York.

The Atlanta Fed is forecasting GDP increased at a 1.4% annualized rate in the second quarter. The economy grew at a 3.1% pace in the January-March quarter. The government will publish its snapshot of second-quarter GDP next Friday. The economy is losing speed in part as last year’s stimulus from massive tax cuts and more government spending fades.

Auto sales increased 0.7% in June after a similar gain in May. Receipts at service stations fell 2.8%, reflecting cheaper gasoline. Sales at building material stores rebounded 0.5% after dropping 1.5% in May.

Receipts at clothing stores rose 0.5%. Online and mail-order retail sales climbed 1.7%, matching May’s increase. Receipts at furniture stores advanced 0.5%. Sales at restaurants and bars surged 0.9%. Spending at hobby, musical instrument and book stores was unchanged.

While core inflation perked up in June, gains are likely to remain moderate. A separate report on Tuesday from the Labor Department showed import prices dropped 0.9% last month, the biggest decrease in six months, after being unchanged in May.

Import prices, which exclude tariffs, were held down by a 6.2% drop in the cost of petroleum products. There were also decreases in the prices of imported food and capital goods.

The cost of goods imported from China slipped 0.1%, matching May’s drop. Prices of Chinese goods fell 1.5% in the 12 months through June, the largest decrease since February 2017.

(Reporting by Lucia Mutikani; Additional reporting by Pete Schroeder; Editing by Andrea Ricci)

U.S. job openings, hiring fall in May

FILE PHOTO: Job seekers line up at TechFair in Los Angeles, California, U.S. March 8, 2018. REUTERS/Monica Almeida

WASHINGTON (Reuters) – U.S. job openings fell in May, pulled down by declines in the construction and transportation industries, potentially flagging a slowdown in employment growth in the months ahead.

Job openings, a measure of labor demand, slipped by 49,000 to a seasonally adjusted 7.3 million in May, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS on Tuesday. The job openings rate dipped to 4.6% from 4.7% in April.

Hiring dropped by 266,000 to 5.7 million in May, with the biggest decrease in the professional and business services industry. The hiring rate fell to 3.8% from 4.0% in April.

Nonfarm payrolls surged by 224,000 jobs in June after increasing only by 72,000 in May, the government reported last Friday. The unemployment rate rose one-tenth of a percentage point to 3.7% as more people entered the labor market, a sign of confidence in their employment prospects.

(Reporting By Lucia Mutikani; Editing by Chizu Nomiyama)

Fed faces tougher task in deciding whether to cut U.S. rates

The Federal Reserve building is pictured in Washington, DC, U.S., August 22, 2018. REUTERS/Chris Wattie/

By Trevor Hunnicutt

NEW YORK (Reuters) – U.S. employers are hiring workers at a brisk pace, but that is only making the Federal Reserve’s job harder.

On Friday, the Labor Department said nonfarm employers added 224,000 jobs last month – the most in five months, and not the kind of labor market that would normally cause policymakers at the U.S. central bank to cut interest rates.

But the Fed opened up the possibility of cuts last month, citing muted inflation pressures and an economic outlook clouded by a U.S. trade war and slower global growth.

This complicates a debate Fed policymakers are having over whether the economy needs stimulus, setting up a possible standoff with markets at their July 30-31 meeting.

“They are in a bit of a bind,” said Karim Basta, chief economist at III Capital Management. “On the surface, the data, in my opinion, doesn’t really support an imminent cut, but markets are expecting it, and I do think there’s a risk at this stage that they disappoint.”

Markets are overwhelmingly betting the Fed’s next move will be its first rate cut since the financial crisis a decade ago, and President Donald Trump on Friday renewed demands for lower rates to strengthen the economy.

Fed Chairman Jerome Powell has repeatedly said the central bank makes decisions independently from both markets and the White House, but failing to deliver a cut could cause a stock and short-term bond selloff and reduce economic activity.

U.S. interest rates futures fell after the jobs report on Friday. Markets still see a rate cut this month as a near-certainty, though they largely priced out changes for an aggressive half-percentage-point cut.

“These are good numbers, but a rate cut in July is still all but inevitable,” said Luke Bartholomew, investment strategist for Aberdeen Standard Investments. “Employment growth remains a bright spot amid a fairly mixed bag of U.S. data and yet markets have come to expect a cut now so (they) will fall out of bed if they don’t get one.”

The U.S. has not resolved its trade dispute with China, but the two countries agreed last weekend to resume trade talks, putting off new tariffs.

There are still signs of a pullback in economic activity. Businesses’ spending on machines and other equipment is tepid, but employers keep hiring hotel maids, electricians, daycare providers and other workers. They are also paying them more. Average hourly earnings rose at a 3.1%-a-year pace. A May payroll gain of 72,000 now seems like a fluke rather than a sign of deterioration.

Those are not the prototypical conditions for a rate cut. Unemployment at 3.7% is near its lowest levels since 1969 and policymakers have traditionally seen job gains with low unemployment posing risks of inflation.

But economists have grown less confident in academic models that forecast an inverse relationship between unemployment and inflation. The core personal consumption expenditures index is running at 1.6% a year, short of the Fed’s 2% goal.

In its semi-annual report to Congress, the Fed on Friday repeated its pledge to “act as appropriate” to sustain the economic expansion, with possible interest rate cuts in the coming months, but notably said the jobs market had “continued to strengthen” so far this year, and described recent weak inflation as due to “transitory influences.”

Some policymakers think a rate cut could lift inflation expectations, reducing chances of more drastic rate cuts being needed later. With rates at 2.25%-2.50%, policymakers have less room to cut before they resort to unconventional measures.

A cut could also reduce the Fed’s firepower in the case of a more severe downturn and signal greater concern about the future and even that more stimulus is on the way.

(Reporting by Trevor Hunnicutt in New York; Additional reporting by April Joyner in New York and Howard Schneider in Washington; Editing by Jennifer Ablan and James Dalgleish)

U.S. aims to restart China trade talks, will not accept conditions on tariff use

By Jeff Mason

WASHINGTON (Reuters) – The United States hopes to re-launch trade talks with China after President Donald Trump and President Xi Jinping meet in Japan on Saturday, but Washington will not accept any conditions around the U.S. use of tariffs in the dispute, a senior administration official said on Tuesday.

Trump has threatened to impose tariffs on another $325 billion of goods, covering nearly all the remaining Chinese imports into the United States – including consumer products such as cellphones, computers and clothing – if the meeting with Xi produces no progress in resolving a host of U.S. complaints around the way China does business.

The two sides could agree not to impose new tariffs as a goodwill gesture to get negotiations going, the official said, but he said it was unclear if that would happen.

The United States was not willing to come to the Xi meeting with concessions, said the official, who spoke on the condition of anonymity. Washington wants Beijing to come back the table with the promises it withdrew before talks broke down, he said.

China has shown no softening in its position and said on Monday that both sides should make compromises in the trade talks and that a trade deal has to be beneficial for both countries.

The back-and-forth set up what could prove to be a tricky meeting between Trump and Xi at the Group of 20 summit meeting in Osaka. The session will be the first time they have met since trade talks between the world’s two largest economies broke down in May, when the United States accused China of reneging on reform pledges it made.

Chinese Vice Premier Liu He, who has led trade talks for Beijing, held a phone conversation with his counterparts, U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin, on Monday, according to China’s Ministry of Commerce. The three men are helping to pave the way for talks between the leaders later this week.

Expectations for that meeting so far appear to be low. The best-case scenario would be a resumption of official talks, which could ease fears in financial markets that the already long trade dispute might continue indefinitely. The fears have pummeled global markets and hurt the world economy.

Trump advisers have said no trade deal is expected at the meeting but they hope to create a path forward for talks. Once negotiations resume, they could take months or even years to complete, the senior Trump administration official said, with some parts agreed early and others needing more time.

A resumption of negotiations could put that threat of further tariffs on hold, at least for now.

But if Trump sees no progress and decides to raise tariffs, the relationship between the world’s two largest economies would deteriorate further.

“I think if they go with the tariffs, the trade talks are dead. Period,” said one person familiar with the talks.

The United States has made clear it wants China to go back to the position it held in a draft trade agreement that was nearly completed before Beijing balked at some of its terms, particularly requirements to change its laws on key issues.

Beijing wants the United States to lift tariffs, while Washington wants China to change a series of practices including on intellectual property and requirements that U.S. companies share their technology with Chinese companies in order to do business there.

As part of the trade war, Washington has already imposed 25% tariffs on $250 billion of Chinese goods, ranging from semi-conductors to furniture, that are imported to the United States.

PRESSURE BUILDING

The president has spoken optimistically about the chances of a deal.

The administration official said rounds of meetings between top trade officials from both countries likely would begin again after the G20 summit. He noted that although the vice premier still led China’s trade delegation, new names had been added to the list who could be hard-liners.

The official said Trump and Xi were unlikely to get into the fine details of the draft trade pact, although the case of Chinese tech giant Huawei Technologies Co may come up during talks.

Pressure on Huawei, which the U.S. government has labeled a security threat, has increased in recent days.

About a dozen rural U.S. telecom carriers that depend on Huawei for network gear are in discussions with its biggest rivals, Ericsson and Nokia, to replace their Chinese equipment, sources familiar with the matter said.

And the U.S.-based research arm of Huawei, Futurewei Technologies Inc, has moved to separate its operations from its corporate parent since the U.S government in May put Huawei on a trade blacklist, according to two people familiar with the matter.

Trump has indicated a willingness to include the Huawei issue in a trade deal, despite the national security implications cited by his advisers about the company. Meanwhile, U.S. parcel delivery firm FedEx Corp on Monday sued the U.S. government, saying it should not be held liable if it inadvertently shipped products that violated a Trump administration ban on exports to some Chinese companies.

The move came after FedEx reignited Chinese ire over its business practices when a package containing a Huawei phone sent to the United States was returned last week to its sender in Britain, in what FedEx said was an “operational error.”

(Reporting by Jeff Mason; additional reporting by Alexandra Alper, Jane Lanhee Lee, Tarmo Vikri, Andrew Galbraith and Angela Moon; editing by Simon Webb and Cynthia Osterman)

S&P 500 hits all-time high on trade optimism

FILE PHOTO: Traders work on the main trading floor after the opening bell at New York Stock Exchange (NYSE) in New York, U.S. June 20, 2019. REUTERS/Brendan McDermid/File Photo

By Amy Caren Daniel and Shreyashi Sanyal

(Reuters) – The S&P 500 touched a record high for the second straight session on Friday as hopes of trade talks between Washington and Beijing were lifted by U.S. Vice President Mike Pence’s decision to defer a planned speech on China policy.

The decision was taken amid “positive signs” that trade talks with China could be back on track, the Wall Street Journal reported, citing a senior administration official.

The benchmark S&P 500 index hit an intraday high of 2,964.15 on Friday, but retreated into a tight range as rising tensions between the United States and Iran kept investors on edge.

The United States and China have said they would restart their trade talks after a lull at the Group of 20 summit in Japan next week.

“Investors are cautiously optimistic about the G20 summit. If they make progress then markets will celebrate that,” said Michael Antonelli, market strategist at Robert W. Baird in Milwaukee.

Stocks are now set to log their third straight week of gains, after posting their worst monthly performance this year in May on fears the prolonged trade war would hit global economic growth.

U.S. President Donald Trump said on Friday he aborted a military strike on Iran in response to Teheran downing a U.S. drone, but the possibility of a U.S. retaliation pushed crude prices higher and helped lift the energy sector by 0.49%. [O/R]

Traders also pointed to higher volatility during Friday’s session on account of “quadruple witching,” as investors unwind interests in futures and options contracts prior to expiration.

At 13:09 p.m. ET, the Dow Jones Industrial Average was up 45.72 points, or 0.17%, at 26,798.89 and the S&P 500 was down 0.53 points, or 0.02%, at 2,953.65.

The Nasdaq Composite was down 7.13 points, or 0.09%, at 8,044.21.

The tech-heavy index was weighed down by a 2.02% fall in PayPal Holdings Inc after the digital payments company said its chief operating officer Bill Ready would step down.

CarMax Inc rose as much as 6% to a record high after the used-vehicles retailer posted quarterly results above analysts’ expectations.

Carnival Corp fell for the second day, down 4.53%, and among the biggest decliners. Several brokerages trimmed their price targets after the cruise operator cut its 2019 profit forecast.

Declining issues outnumbered advancers for a 1.47-to-1 ratio on the NYSE and for a 1.71-to-1 ratio on the Nasdaq.

The S&P index recorded 33 new 52-week highs and two new lows, while the Nasdaq recorded 42 new highs and 49 new lows.

(Reporting by Amy Caren Daniel and Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila)

Fed holds rates steady, signals cuts possible later this year

Federal Reserve Chairman Jerome Powell holds a news conference following a two-day Federal Open Market Committee meeting in Washington, U.S., June 19, 2019. REUTERS/Kevin Lamarque

By Howard Schneider and Jason Lange

WASHINGTON (Reuters) – The U.S. Federal Reserve held interest rates steady on Wednesday but signaled possible rate cuts of as much as half a percentage point over the remainder of this year, as it responded to increased economic uncertainty and a drop in expected inflation.

The U.S. central bank said it “will act as appropriate to sustain” the economic expansion as it approaches the 10-year mark and dropped a promise to be “patient” in adjusting rates. Nearly half its policymakers now show a willingness to lower borrowing costs over the next six months.

While new economic projections showed policymakers’ views of growth and unemployment largely unchanged, they saw headline inflation at just 1.5 percent for the year, down from the 1.8 percent projected in March.

They also expect to miss their 2 percent inflation target next year as well.

Seven of 17 policymakers said they expected it would be appropriate to cut rates by half of a percentage point by the end of 2019, and an eighth saw a rate cut of a quarter point as appropriate.

That was not enough to change the median outlook for the Fed’s targeted overnight lending rate, which officials projected to remain in a range of between 2.25% and 2.50% for the rest of this year.

But it still represented a significant shifting of views on the Fed. It appeared many, and perhaps most, policymakers trimmed a full half percentage point from their outlook for rates. Only one policymaker continues to see a rate hike as likely in 2019.

The long-run federal funds rate, a barometer for the state of the economy over the long term, was cut to 2.50% from 2.80%.

U.S. stocks turned higher after the Fed’s statement was released, with the benchmark S&P 500 up about 0.25% from the previous day’s close. Ahead of the statement, stocks had been fractionally lower on the day.

Yields on U.S. Treasury securities, which had been modestly higher before the rate decision was released, slipped. The 10-year Treasury note yield was down 1 basis point at just shy of 2.05%. The dollar weakened against the euro.

Along with the change in the policy statement, Wednesday’s projections open the door for the central bank to lower rates in short order if the economy weakens, or U.S. trade disputes with China and other nations escalate.

The Fed continued to regard the labor market as “strong” and said “sustained expansion of economic activity” and eventually rising inflation were still “the most likely outcomes.” The drop in inflation, however, was a blow for a central bank hoping to reach its target sometime next year.

Fed Chairman Jerome Powell will hold a press conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the results of the policy meeting, which was the first since President Donald Trump raised tariffs on $200 billion of Chinese imports and threatened, though ultimately decided against, imposing new tariffs on Mexican goods.

Those actions caused Fed officials to change their tone from largely dismissing the macroeconomic fallout of Trump’s trade policies to worrying that a new world order of persistent high tariffs and reordered global supply chains could be emerging.

St. Louis Fed President James Bullard, who had argued that rates should be cut, dissented in Wednesday’s policy decision.

(Reporting by Howard Schneider and Jason Lange; Editing by Paul Simao)

U.S. housing starts fall, but prior months revised up

FILE PHOTO: Single family homes being built by KB Homes are shown under construction in San Diego, California, U.S., April 17, 2017. REUTERS/Mike Blake/File Photo

WASHINGTON (Reuters) – U.S. homebuilding unexpectedly fell in May, but data for the prior two months was revised higher and building permits increased, suggesting that the housing market was drawing some support from a sharp decline in mortgage rates.

Housing starts dropped 0.9% to a seasonally adjusted annual rate of 1.269 million units last month amid a drop in the construction of single-family housing units, the Commerce Department said on Tuesday.

Data for April was revised up to show homebuilding rising to a pace of 1.281 million units, instead of increasing to a rate of 1.235 million units as previously reported. Housing starts in March were also stronger than initially estimated.

Economists polled by Reuters had forecast housing starts edging up to a pace of 1.239 million units in May. Single-family housing starts fell in the Northeast, the Midwest and West, but rose in the South, where the bulk of homebuilding occurs.

Building permits rose 0.3% to a rate of 1.294 million units in May. It was the second straight monthly increase in permits. Building permits have been weak this year, with much of the decline concentrated in the single-family housing segment. The housing market hit a soft patch last year and has been a drag on economic growth for five straight quarters.

The sector is being constrained by land and labor shortages, which are making it difficult for builders to fully take advantage of lower borrowing costs. As a result, the housing market continues to struggle with tight inventory, leading to sluggish sales growth.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci) ((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters Messaging: lucia.mutikani.thomsonreuters.com@reuters.net)

U.S. weekly unemployment claims rise; imported inflation weak

FILE PHOTO: People wait in line to attend TechFair LA, a technology job fair, in Los Angeles, California, U.S., January 26, 2017. REUTERS/Lucy Nicholson/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing applications for unemployment benefits unexpectedly rose last week, which could add to concerns that the labor market was losing steam after job growth slowed sharply in May.

Other data on Thursday showed import prices fell by the most in five months in May amid a broad decline in the cost of goods, the latest indication of muted inflation pressures. Signs of a slowing labor market and tepid inflation strengthen the case for the Federal Reserve to cut interest rates this year.

U.S. central bank policymakers are scheduled to meet on June 18-19 against the backdrop of rising trade tensions. Financial markets have priced in at least two rate cuts by the end of 2019. A rate cut is not expected next Wednesday.

Initial claims for state unemployment benefits rose 3,000 to a seasonally adjusted 222,000 for the week ended June 8, the Labor Department said on Thursday. Economists polled by Reuters had forecast claims decreasing to 216,000 in the latest week.

While layoffs remain relatively low, the third straight weekly increase in claims suggests some softening in labor market conditions. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,500 to 217,750 last week.

The economy created only 75,000 jobs in May, with annual wages increasing at their slowest pace in eight months, the government reported last week. U.S. financial markets were little moved by the claims data.

The slowdown in hiring, which occurred before a recent escalation in trade tensions between the United States and China, raised fears of a sharp deceleration in economic growth. The claims data is being closely monitored for signs of any fallout from the trade war.

President Donald Trump in early May imposed additional tariffs of up to 25% on $200 billion of Chinese goods, prompting retaliation by Beijing. Trump on Monday threatened more duties on Chinese imports if no deal was reached when he meets Chinese President Xi Jinping at a G20 summit later this month in Japan.

A tariff on all goods from Mexico to force authorities in that country to stop immigrants from Central America from crossing the border into the United States was narrowly averted after the two nations struck an agreement late on Friday.

ECONOMY SLOWING

Data so far have suggested a sharp slowdown in U.S. economic growth in the second quarter after a temporary boost from exports and an accumulation of inventory early in the year. In addition to the sharp moderation in hiring last month, manufacturing production, exports and home sales dropped in April, while consumer spending cooled.

The Atlanta Fed is forecasting gross domestic product increasing at a 1.4% annualized rate in the April-June quarter. The economy grew at a 3.1% pace in the first quarter.

In another report on Thursday, the Labor Department said import prices dropped 0.3% last month, the biggest decline since last December, after edging up 0.1% in April.

Economists had forecast import prices slipping 0.2% in May. In the 12 months through May, import prices fell 1.5% after decreasing 0.3% in April. The report came on the heels of data on Wednesday showing consumer prices remained tame in May.

Import prices exclude duties. In May, prices for imported fuels and lubricants declined 1.0% after rising 1.7% percent in the prior month. Imported food prices dropped 0.8% last month after surging 2.7% in April.

Excluding fuels and food, import prices slipped 0.2% in May after falling 0.3% in the prior month. So-called core import prices decreased 1.5% in the 12 months through May. Though the dollar has weakened a bit this year, its gains last year against the currencies of the United States’ main trading partners continue to depress core import prices.

The cost of imported capital goods declined 0.1% last month. Prices for imported consumer goods excluding automobiles was unchanged. The cost of goods imported from China edged down 0.1% last month after falling 0.2% in April. Prices fell 1.4% in the 12 months through May, the largest drop since February 2017.

The report also showed export prices fell 0.2% in May, with prices for both agricultural and nonagricultural products dropping. Export prices nudged up 0.1% in April. They fell 0.7% on a year-on-year basis in May after gaining 0.2% in April. Soybean prices tumbled 20.6% year-on-year.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)

U.S. job openings dip as hiring hits record high

FILE PHOTO: Job seekers speak with potential employers at a City of Boston Neighborhood Career Fair on May Day in Boston, Massachusetts, U.S., May 1, 2017. REUTERS/Brian Snyder

WASHINGTON (Reuters) – U.S. job openings fell slightly in April as hiring surged to a record high, government data showed on Monday.

Job openings, a measure of labor demand, slipped to a seasonally adjusted 7.4 million from 7.5 million in March, the Labor Department said in its monthly Job Openings and Labor Turnover Survey, or JOLTS. The job openings rate was unchanged at 4.7%.

Hiring jumped by 240,000 jobs in April to 5.9 million, the highest level since the government started tracking the series in 2000. The hiring rate increased to 3.9% from 3.8% in March.

The economy created 75,000 jobs in May after adding 224,000 positions in April, the government reported last Friday.

The unemployment rate was unchanged near a 50-year low of 3.6%.

(Reporting by Lucia Mutikani; Editing by Susan Thomas)