U.S. labor market healing despite unexpected rise in weekly jobless claims

By Lucia Mutikani

WASHINGTON (Reuters) – The number of Americans filing new claims for unemployment benefits increased last week for the first time in 1-1/2 months, but layoffs are easing amid a reopening economy and a shortage of people willing to work.

While other data on Thursday showed factory activity in the mid-Atlantic region continuing to grow at a steady pace in June, a measure of future production surged to its highest level in nearly 30 years. Factories in the region that covers eastern Pennsylvania, southern New Jersey and Delaware also reported stepping up hiring, which bodes well for job growth this month.

The scarcity of labor is a hurdle to faster employment growth. The Federal Reserve on Wednesday held its benchmark short-term interest rate near zero and said it would continue to inject money into the economy through monthly bond purchases. The U.S. central bank brought forward its projections for the first post-pandemic interest rate hikes into 2023 from 2024.

“We continue to see labor market progress, but as has been the case through the pandemic, the situation remains fluid,” said AnnElizabeth Konkel, an economist at Indeed Hiring Lab. “We are in a wildly different place than we were in June 2020, but we have not crossed the finish line just yet.”

Initial claims for state unemployment benefits rose 37,000 to a seasonally adjusted 412,000 for the week ended June 12, the Labor Department said. That was the first increase since late April. Economists polled by Reuters had forecast 359,000 applications for the latest week.

The increase in claims was led by California, Kentucky and Pennsylvania. The four-week moving average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, fell 8,000 to 395,000.

The economy, ironically, is facing a labor crunch despite employment remaining 7.6 million jobs below its peak in February 2020. A shortage of childcare facilities is keeping some parents, mostly women, at home.

Generous government-funded unemployment benefits, including a $300 weekly check, have also been blamed, as well as a reluctance by some to return to work out of fear of contracting COVID-19 even though vaccines are widely accessible.

Pandemic-related retirements and transitions into new careers are also factors.

Fed Chair Jerome Powell told reporters on Wednesday he was “confident that we are on a path to a very strong labor market, a labor market that shows low unemployment, high participation, rising wages for people across the spectrum.”

The White House also struck an optimistic note on the labor market, with senior economic adviser Jared Bernstein saying: “I saw a labor market that continues to improve, continues to grow as shots in arms and checks in pockets have helped pull this recovery forward.”

Iowa, Mississippi and Missouri terminated all federal government-funded emergency benefits last Saturday, while Alaska ended only the $300 supplement. Twenty-one other states also led by Republican governors, including Texas and Florida, will end these benefits for residents between June 19 and July 10.

Louisiana is ending the weekly supplementary check on July 31, the only state with a Democratic governor to terminate the federal benefits. For the rest of the country, they will lapse on Sept. 6.

Iowa reported an increase in claims for the regular state unemployment insurance program last week, while Alaska, Mississippi and Missouri saw declines. Only Alaska reported a decrease in claims for the government-funded Pandemic Unemployment Assistance.

Economists are watching the 26 states to see if their actions will boost employment or labor force participation over the summer, which could offer clues on labor market trends for the rest of the year when all government aid lapses.

There are a record 9.3 million job openings, while 9.3 million people are officially unemployed.

“We also could see added noise in the claims report if people end up trying to shuffle between programs or re-determine eligibility,” said Daniel Silver, an economist at JPMorgan in New York.

Stocks on Wall Street were mixed while the dollar rose against a basket of currencies. Longer-dated U.S. Treasury prices were trading higher.

STRONG FACTORY HIRING

In a separate report on Thursday, the Philadelphia Fed said its business conditions index dipped to a reading of 30.7 this month from 31.5 in May. But its measure of activity over the next six months surged to 69.2, the highest level since 1991, from 52.7 last month.

The survey’s gauge of factory employment in the mid-Atlantic region surged to 30.7 from a reading of 19.3 May. Factories also anticipated hiring more workers over the next six months, which offers further support to the labor market. Many, however, reported that labor shortages and supply chain bottlenecks were constraining their ability to fully use their resources.

Though layoffs are easing, initial claims remain well above the 200,000-250,000 range that is viewed as consistent with healthy labor market conditions. Claims have, however, dropped from a record 6.149 million in early April 2020.

Last week’s claims data included the period during which the government surveyed business establishments for the nonfarm payrolls component of June’s employment report. The economy created 559,000 jobs in May after adding 278,000 in April.

To get a better picture of how hiring fared in June, economists will await data next week on the number of people continuing to receive benefits after an initial week of aid.

The so-called continuing claims, which are reported with a one-week lag, edged up 1,000 to 3.518 million in the week ended June 5. There were 14.8 million people collecting unemployment checks under all programs at the end of May.

(Reporting by Lucia Mutikani; Additional reporting by Evan Sully and Trevor Hunnicutt; Editing by Chizu Nomiyama, Andrea Ricci and Paul Simao)

Stung by pandemic and JBS cyberattack, U.S. ranchers build new beef plants

By Tom Polansek

CHICAGO (Reuters) – U.S. cattle ranchers and investors are sinking hundreds of millions of dollars into new beef plants after temporary closures of massive slaughterhouses at the start of the COVID-19 pandemic left farmers with nowhere to send animals destined to be turned into meat.

A cyberattack against the U.S. unit of Brazilian meatpacking giant JBS SA that idled nearly a quarter of America’s beef production earlier this month again highlighted vulnerabilities in the country’s meat supply chain and caused more headaches for farmers.

Ranchers, as well as the U.S. Agriculture Department (USDA), say the sector is too consolidated and therefore reliant on a handful of large processors and their industrial meatpacking plants.

Four industry behemoths – JBS USA, Tyson Foods Inc, Cargill Inc and National Beef Packing Company – slaughter 85% of grain-fattened cattle carved into steaks, ribs and roasts for consumers.

Smaller startup meat plants are aiming to provide local ranchers with more places to slaughter cattle, particularly those raised to produce higher-quality beef. They say adding plants can ensure some meat production continues if large facilities close.

When large meat plants close, meat supplies tighten while ranchers get stuck with cattle that would otherwise have been slaughtered. That means the price of cattle generally falls, while the price of meat in supermarkets rises.

Extended shutdowns of some of the biggest U.S. slaughterhouses due to COVID-19 outbreaks hobbled meat production in spring 2020, leading to limits on consumers’ purchases at grocery stores and a decline in frozen inventories that processors have yet to replenish.

Rusty Kemp saw the need for more processing capacity after a 2019 fire at a Tyson Foods plant in Holcomb, Kansas, left meat buyers scrambling for supplies and cattle producers with nowhere to sell their cattle. Then, the pandemic and ransomware attack on JBS hit.

Kemp is now planning to break ground on a $300 million beef plant in Nebraska this fall.

“We thought the Holcomb fire was an absolute train wreck and then COVID came along and Holcomb didn’t seem that bad,” he said.

Kemp’s plant, named Sustainable Beef, will kill 1,500 cattle a day and use blockchain technology so consumers can track a piece of meat all the way back to the ranch, he said.

Sustainable Beef is co-owned by cattle producers who will provide animals for slaughter to the plant, instead of to major packers, Kemp said. He hired former executives of one of the biggest processors, Cargill, as consultants because of their expertise.

But Kemp said he is not trying to pick a fight with the four major processors and that bigger plants are still needed to produce large volumes of meat.

“We absolutely need more capacity and more players,” Kemp said.

MORE ROOM TO SLAUGHTER

Nationwide, at least five new processing facilities of varying sizes have opened or are planned following supply shocks early in the pandemic. Combined with expansions at existing plants, including one owned by JBS, daily U.S. slaughter capacity is set to increase by about 5%, according to a Reuters calculation and data from industry group the North American Meat Institute.

Market conditions are favorable for new entrants. Cattle supplies are ample, while beef prices and profit margins for packers have soared due to strong exports and demand from U.S. consumers.

In Butler, Missouri, Todd Hertzog and his family opened Hertzog Meat Company this month after considering the project for five years.

Though the $3.75 million plant is only slaughtering about 20 cattle a day, it serves nearby ranchers who want to produce higher-quality beef, said Hertzog, who manages the operation.

“The pandemic opened our eyes to the needs of local producers,” he said.

Production disruptions during the pandemic pushed Cliff Welch to begin construction on a meat processing plant near Central City, Kentucky, at a price tag of more than $1.2 million. The cyberattack on JBS then reinforced Welch’s decision to build the facility, slated to open in late 2021, he said.

Welch aims to slaughter 75 cattle a week to start, with the capability to eventually kill 300 head a week. He said he will produce custom cuts of meat using “old-style butchery” and plans to sell it locally.

“I’m starting from ground zero,” Welch said. “It’s a big undertaking.”

Welch said he received a $250,000 grant from Kentucky for the project.

The U.S. Agriculture Department has pledged to support increased processing as part of a $4 billion initiative to strengthen the country’s food system.

“The hope would be that by spreading out, by creating diversity in size and diversity of ownership and diversity of operations, we create greater resilience,” USDA Secretary Tom Vilsack told reporters after the JBS attack.

Missouri last year paid about $17 million in grants to meat processors with fewer than 200 employees that wanted to expand or build new facilities, state agriculture director Chris Chinn said. The payments doubled the amount of red meat inspected by the state in a program sparked by the pandemic, she said.

“It added stability to our local communities and our rural areas,” Chinn said. “They didn’t have to depend on one local source to get their food.”

SMALLER PLANTS, SAME PROBLEMS

Small facilities are finding they face some of the same challenges as larger outfits, notably a labor shortage, without the benefit of a big corporation behind them.

After opening in March, Missouri Prime Beef Packers struggled to find workers for a plant in Pleasant Hope, Missouri, that now kills about 200 cattle a day, despite putting ads in newspapers and on radio, said Dallen Davies, director of company culture.

The facility is slaughtering cattle raised under special guidelines, such as being grass-fed or certified for humane handling, as a way to add value for ranchers and provide a better product for consumers, Davies said.

Plants need to differentiate themselves because they cannot compete with industry titans on volume or on low prices achieved with mass production lines.

Former President Donald Trump last year said he urged the Justice Department to look into allegations the meatpacking industry broke antitrust law because the price that slaughterhouses pay farmers for animals dropped even as meat prices climbed. U.S. governors and lawmakers are pushing the department to keep probing.

Those involved in slaughterhouse expansion say they still need to do something to give ranchers more options in the meantime.

“We really don’t want to wait around and see if the government is going to solve this problem,” Kemp said. “We decided to take matters into our own hands and do this.”

(Reporting by Tom Polansek in Chicago; Editing by Caroline Stauffer and Matthew Lewis)

Meet Grace, the healthcare robot COVID-19 created

By Joyce Zhou

HONG KONG (Reuters) – The Hong Kong team behind celebrity humanoid robot Sophia is launching a new prototype, Grace, targeted at the healthcare market and designed to interact with the elderly and those isolated by the COVID-19 pandemic.

Dressed in a blue nurse’s uniform, Grace has Asian features, collar-length brown hair and a thermal camera in her chest to take your temperature and measure your responsiveness. She uses artificial intelligence to diagnose a patient and can speak English, Mandarin and Cantonese.

“I can visit with people and brighten their day with social stimulation … but can also do talk therapy, take bio readings and help healthcare providers,” Grace told Reuters as she stood next to her “sister,” Sophia, in creator Hanson Robotics’ Hong Kong workshop.

Grace’s resemblance to a healthcare professional and capacity for social interaction is aimed at relieving the burden of front-line hospital staff overwhelmed during the pandemic, said founder David Hanson.

“A human-like appearance facilitates trust and natural engagement because we are wired for human face-to-face interactions,” Hanson said, explaining how Grace can simulate the action of more than 48 major facial muscles, and has a comforting demeanor designed to look a little like anime characters, often a fusion of Asian and Western styles.

Awakening Health intends to mass-produce a beta version of Grace by August, said David Lake, chief executive of the joint venture between Hanson Robotics and Singularity Studio, and there are plans to fully deploy her next year in locations including Hong Kong, mainland China, Japan and Korea.

The cost of making the robots, now akin to luxury car pricing, will decrease once the company is manufacturing tens or hundreds of thousands of units, Hanson added.

Grace’s launch comes as the global impact of the coronavirus has made the need for humanoid robots urgent, said Kim Min-Sun, a communicology professor at the University of Hawaii.

Stuck at home during COVID-19 lockdowns, many people have had their mental states affected with negative thoughts.

“If they can get help through the deployment of these social robots in intimate settings, certainly it will have a positive impact on society,” she said.

(Writing by Farah Master; Editing by Karishma Singh)

Illegal drugs trade goes digital for pandemic

By Catarina Demony

LISBON (Reuters) -Like supermarkets, restaurants and purveyors of sourdough bread, the illegal drugs trade went digital to serve its customers during lockdown, and could stay that way when the COVID-19 pandemic is over, Europe’s drugs agency said on Wednesday.

“The pandemic is pushing drug criminals online, reinforcing a trend,” said the European Commissioner for Home Affairs Ylva Johansson during the online launch of the 2021 drugs report put together by the Lisbon-based agency EMCDDA.

“Drug dealers are moving from the streets onto social media, taking orders via encrypted messaging services, sending drugs to customers via home delivering services.”

The pandemic has forced changes to every level of the drugs trade, from wholesale traffickers and smugglers to neighborhood dealers.

With international travel disrupted and borders shut, smugglers have been relying more on shipping containers and less on human couriers, the report said. The trade proved resilient, with data showing no decline in the amount of cocaine available, while more people were growing cannabis at home.

“The drug market continues to adjust to COVID-19 disruption, as drug traffickers adapt to travel restrictions and border closures,” it said.

“Although street-based retail drug markets were disrupted during the early lockdowns, and some localized shortages reported, drug sellers and buyers adapted by increasing their use of encrypted messaging services, social media apps, online sources and mail and home delivery services.”

Alexis Goosdeel, EMCDDA’s director, said there would be new risks from what the report called “the further digitalization of drug markets”. The shift to online transactions made it easier for drug dealers to recruit young people, and to make the push out of big cities into rural areas.

Mental health problems caused by the coronavirus pandemic could push more people to misuse drugs, and the financial impact of the crisis could push them to use “more toxic, more dangerous and potentially more lethal substances,” Goosdeel said.

“We are just in front of a perfect storm,” Goosdeel said. “The drug market is more resilient than ever and is digitally-enabled.”

(Reporting by Catarina DemonyEditing by Victoria Waldersee and Peter Graff)

Pfizer to test COVID-19 vaccine in larger group of children below 12

By Michael Erman and Ankur Banerjee

(Reuters) – Pfizer Inc said on Tuesday it will begin testing its COVID-19 vaccine in a larger group of children under age 12 after selecting a lower dose of the shot in an earlier stage of the trial.

The study will enroll up to 4,500 children at more than 90 clinical sites in the United States, Finland, Poland and Spain, the company said.

Based on safety, tolerability and the immune response generated by 144 children in a phase I study of the two-dose shot, Pfizer said it will test a dose of 10 micrograms in children between 5 and 11 years of age, and 3 micrograms for the age group of 6 months to 5.

A Pfizer spokesperson said the company expects data from 5- to 11-year-olds in September and would likely ask regulators for emergency use authorization later that month. Data for children 2 to 5 years old could arrive soon after that, he said.

Pfizer expects to have data from the 6-month to 2-year-old age group sometime in October or November.

The vaccine – made by Pfizer and German partner BioNTech SA – has been authorized for use in children as young as 12 in Europe, the United States and Canada. They receive the same dose as adults: 30 micrograms.

Nearly 7 million teens have received at least one dose of the vaccine in the United States, according to the U.S. Centers for Disease Control and Prevention.

Inoculating children and young people is considered a critical step toward reaching “herd immunity” and taming the COVID-19 pandemic.

Still, scientists in the United States and elsewhere are studying the possibility of a link between heart inflammation and mRNA vaccines, particularly in young men. Both Pfizer and Moderna Inc’s vaccines are mRNA shots.

Israel’s Health Ministry said last week it had found the small number of myocarditis cases observed mainly in young men who received the Pfizer vaccine there were probably linked to their vaccination. The cases were generally mild and did not last long.

Pfizer has said it is aware of the Israeli observations of myocarditis and that no causal link to its vaccine has been established.

(Reporting by Ankur Banerjee in Bengaluru and Michael Erman in New York; Editing by Arun Koyyur, Will Dunham and Mark Heinrich)

From lapsing job benefits to full stadiums, June could be U.S. recovery’s pivot

By Howard Schneider and Ann Saphir

WASHINGTON (Reuters) – Fourteen months after the pandemic triggered a national emergency, the final chapter of the U.S. economic recovery may begin this month, with rapid changes starting with the end of enhanced unemployment benefits in half the states and ending in the fall’s expected reopening of schools and universities.

Along the way, Major League Baseball stadiums are slated to return to full capacity, and the largest state economy, California, on June 15 will shed its final COVID-era restrictions and give bars, restaurants and other businesses a green light on the road to normal.

That same day in Washington, the U.S. Federal Reserve is expected to open debate about when and how to cut the economy loose from its crisis-fighting monetary policy and shift to managing what is hoped to be a long economic expansion.

The questions about just what the post-pandemic economy will look like are myriad: How many people will return to jobs? How many businesses will have survived or failed? How resilient will the country be when pandemic supports are withdrawn? The answers should start to come soon.

“The timing really is awesome,” Porchlight Brewing Co. general manager Tyson Herzog said of the just-in-time-for-summer end of California’s restrictions, which closed many restaurants for parts of last year and kept them under strict limits during the fight against the virus.

An $800 billion small business assistance program helped many firms survive, including Herzog’s. After a year of home-delivering beer in his 1999 Dodge Caravan he plans to hire more onsite staff and expand production amid already record sales.

Since coronavirus vaccines rolled out in December, forecasts have pointed to record-breaking numbers this year, including the fastest annual gross domestic product growth in nearly 40 years.

More than 60% of people 12 years and older are at least partially vaccinated. The rate of new infections and deaths has plummeted, while confidence, travel, and human socializing – and the commerce that accompanies all that – have risen steadily.

Still, the pieces have not yet clicked in unison.

Companies in May added 559,000 jobs, but the total number remains 7.6 million short of early 2020. About 3.6 million more people are unemployed, and the labor force is 3.5 million smaller.

Shortages of supplies, workers and raw materials have crimped the recovery with businesses curtailing hours, turning away customers, or delaying filling orders. The Fed’s most recent national economic snapshot referenced shortages 44 times, compared with 17 in January and three a year ago.

Economists expect that to ease. The pandemic put the economy into what some likened to an induced coma. Shaking off the stupor takes time, and is complicated by some of the programs used to cushion the economy’s sharp drop last spring.

Stimulus payments and low interest rates, for example, fueled a boom in home sales that spilled into home construction and lumber prices. Yet the costs for wood and some other commodities already have begun easing: lumber futures are down 24% from their peak, with copper and aluminum falling around 5%. Likewise, the splurge on automobiles, appliances and other goods will likely prove a one-time affair; even if demand remains strong, supply will likely catch up.

Workers sidelined by a variety of issues, from health concerns to lack of childcare, have been given latitude on when to return to work through expanded unemployment benefits that pay some more than their former jobs. That starts to wind down on June 12 when the first four states end the extra benefits launched last spring as one plank in a financial “bridge” to the other side of the pandemic.

In all, $5.2 trillion deployed across an array of programs helped make the coronavirus recession unique: Personal incomes actually rose even as unemployment hit 14.8% in April 2020.

With the money now largely spent, the programs one-by-one are being shuttered.

By July 10 half the states will have ended the extra unemployment benefits, and the program lapses nationwide on Sept. 4. The Payroll Protection Program of small business loans closed May 31.

There’s dispute over what role those and other programs play in decisions to work or not. But to the degree prices, wages and other factors have been distorted by the pandemic, the next few weeks should wring those distortions out.

June will inaugurate a “summer-boom with demand still strong and supply issues – on labor and capital – being resolved,” said Gregory Daco, chief U.S. economist for Oxford Economics. “There is evidence of supply bottlenecks slowly easing…On the labor front, reduced virus fear, reduced benefits, better childcare, will draw people back.”

And people seem primed to respond.

After a year of lockdown, public parks are again hosting crowds, sports stadiums are filling, and restaurants are booked to the limit.

California had among the first cases of COVID-19, imposed some of the stiffest restrictions, and will be among the last states to let it all go.

Damian Fagan, owner of the Almanac Taproom in Alameda, is getting ready. While he is adding up to six new employees to his current 12-person staff ahead of the June 15 reopening, he expects such a rush of business he plans to limit his hours for another few weeks “so we don’t have this tsunami of changes.”

“I don’t know how long this party will last,” he said. Eventually, “this massive excitement period dies down,” and business can get back to normal.

(Reporting by Howard Schneider and Ann Saphir; Editing by Dan Burns and Andrea Ricci)

Pent-up demand, shortages fuel U.S. inflation

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices surged in April, with a measure of underlying inflation blowing past the Federal Reserve’s 2% target and posting its largest annual gain since 1992, because of pent-up demand and supply constraints as the economy reopens.

The strong inflation readings reported by the Commerce Department on Friday had been widely anticipated as the pandemic’s grip eases, thanks to vaccinations, and will have no impact on monetary policy. Fed Chair Jerome Powell has repeatedly stated that higher inflation will be transitory.

The U.S. central bank slashed its benchmark overnight interest rate to near zero last year and is pumping money into the economy through monthly bond purchases. It has signaled it could tolerate higher inflation for some time to offset years in which inflation was lodged below its target, a flexible average.

The supply constraints largely reflect a shift in demand towards goods and away from services during the pandemic. A reversal is underway, with Americans flying to vacation destinations and staying at hotels among other activities. Year-on-year inflation is also accelerating as last spring’s weak readings drop from the calculation.

“Many goods are in short supply amid very strong demand and supply chain disruptions, and some services prices are up sharply as consumers start to go out again,” said Gus Faucher, chief economist at PNC Financial in Pittsburgh, Pennsylvania. “Shortages of labor in some industries are also contributing to higher prices. But many of these factors will prove transitory, and inflation will slow in the second half of 2021.”

Consumer prices as measured by the personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased 0.7% last month amid strong gains in both goods and services. That was the biggest rise in the so-called core PCE price index since October 2001 and followed a 0.4% gain in March.

In the 12 months through April, the core PCE price index vaulted 3.1%, the most since July 1992, after rising 1.9% in March. Economists polled by Reuters had forecast the core PCE price index rising 0.6% in April and surging 2.9% year-on-year.

The core PCE price index is the Fed’s preferred inflation gauge.

Stocks on Wall Street were trading higher, though gains were capped by the rising price pressures. The dollar rose against a basket of currencies. U.S. Treasury prices were higher.

“Inflation is up, but real yields are still low,” said Jamie Cox, managing partner at Harris Financial Group in Richmond, Virginia. “This is basically the transitory sweet spot.”

INCOME PLUNGES

Some economists are not convinced that higher inflation will be temporary.

A survey from the University of Michigan on Friday showed consumers’ one-year inflation expectations shot up to 4.6% in May from 3.4% in April, hurting household sentiment. Their five-year inflation expectations rose to 3.0% from 2.7% last month.

“Concerns about the future can cause households to become more conservative in their spending,” said Joel Naroff, chief economist at Naroff Economics in Holland, Pennsylvania. “The Fed is guessing that the rise in inflation will be temporary, and it better be correct.”

Though consumer spending moderated last month as the boost to incomes from stimulus checks faded, households have accumulated at least $2.3 trillion in excess savings during the pandemic, which should underpin demand. Wages are also rising as companies seek to attract labor to increase production.

Generous unemployment benefits funded by the government, problems with child care and fears of contracting the virus, even with vaccines widely accessible, as well as pandemic-related retirements have left companies scrambling for labor.

That is despite nearly 10 million Americans being officially unemployed. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.5% last month. Data for March was revised higher to show spending surging 4.7% instead of 4.2% as previously reported.

The rise in spending was in line with expectations. Spending was held back by a 0.6% drop in outlays on goods. Though purchases of long-lasting goods such as motor vehicles rose 0.5%, spending on nondurable goods tumbled 1.3%. Outlays on services increased 1.1%, led by spending on recreation, hotel accommodation and at restaurants.

When adjusted for inflation, consumer spending slipped 0.1% after jumping 4.1% in March. Despite last month’s dip in the so-called real consumer spending, March’s solid increase put consumption on a higher growth trajectory in the second quarter.

Personal income plunged 13.1% after surging 20.9% in March. With spending exceeding income, the saving rate dropped to a still-high 14.9% from 27.7% in March. Wages increased 1.0% for a second straight month.

Consumer spending powered ahead at a 11.3% annualized rate in the first quarter, contributing to the economy’s 6.4% growth pace. Most economists expect double-digit growth this quarter, which would position the economy to achieve growth of at least 7% this year, which would be the fastest since 1984. The economy contracted 3.5% in 2020, its worst performance in 74 years.

Growth prospects for the second quarter were bolstered by another report from the Commerce Department showing the goods trade deficit narrowed 7.3% to $85.2 billion in April, with exports rising and imports declining.

But inventory at retailers fell 1.6%, pulled down by a 7.0% plunge in automobile stocks as the sector struggles with a global semiconductor shortage.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci and Chizu Nomiyama)

Soaring international prices aggravate Cuban food crisis

By Marc Frank

HAVANA (Reuters) – Soaring international food and shipping prices and low domestic production are further squeezing import-dependent Cuba’s ability to feed its people.

Cuba traditionally imports by sea around 70% of the food it consumes, but tough U.S. sanctions and the pandemic, which has gutted tourism, have cut deeply into foreign exchange earnings.

For more than a year Cubans have endured long waiting lines and steep price rises in their search for everything from milk, butter, chicken and beans to rice, pasta and cooking oil. They have scavenged for scant produce at the market and collected dwindling World War II-style food rations.

This month the Communist-run government announced flour availability would be cut by 30% through July.

Diorgys Hernandez, general director of the food processing ministry, said when he announced the wheat shortage that “the financial costs involved in wheat shipments to the country” were partly to blame.

That was bad news for consumers who had been buying more bread to make up for having less rice, pasta and root vegetables at the dinner table.

“People eat a lot of bread and there is concern there is going to be a shortage of bread because that is what people eat the most,” Havana pensioner and cancer survivor Clara Diaz Delgado said as she waited in a food line.

Cuba does not grow wheat due to its subtropical climate. The price of the commodity was $280 per tonne in April, compared with $220 a year earlier.

The government has also said the sugar harvest was short of the planned 1.2 million tonnes by more than 30%, coming in at less than a million tonnes for the first time in more than a century.

Cuba will have trouble making up for a shortage of domestically produced sugar as international prices are around 70% higher than a year ago.

COST OF SHIPPING

Adding to the pain, the cost of international container shipping is up as much as 50% over the last year and bulk freight more.

The U.N. Food and Agriculture Organization reported its international food price index was up 30.8% through April compared with the same month last year, and the highest since May 2014.

The Cuban state has a monopoly on foreign trade and purchases around 15% of the food it imports from the United States for cash under a 2000 exception to the trade embargo.

John Kavulich, president of the U.S.-Cuba Trade and Economic Council, which follows the trade, said sales fell 36.6% last year to $163.4 million, compared with 2019. They recovered in the first quarter, reaching $69.6 million, though that represented less food due to higher prices.

Chicken, Cuba’s most important U.S. import, is badly affected. A U.S. businessman who sells chicken to Cuba said he shipped drumsticks at 24 cents a pound in January and 48 cents in April. He did not wish to be named.

“Resuming global demand, increased prices for product inputs and labor shortages suggest that commodity prices will not decrease soon,” Kavulich said.

The economy declined 11% last year and according to local economists contracted further during the first trimester of 2021 as a surge in the new coronavirus kept tourism shuttered and much of the country partially locked-down.

The government reported that foreign exchange earnings were just 55% of planned levels last year, while imports fell between 30% and 40%.

Incoming container traffic was down 20% through April, compared with last year, according to a source with access to the data, who requested anonymity.

The government has not published statistics for the notoriously inefficient and rustic agricultural sector since 2019 but scattered provincial and other reports on specific crops and livestock indicate substantial declines for rice, beans, pork, dairy and other Cuban fare.

This was confirmed by a local expert who requested anonymity and said output was down by double digits due to a lack of fuel and imported fertilizer and pesticides.

(Reporting by Marc Frank; additional reporting by Reuters TV and Nelson Acosta; editing by Estelle Shirbon)

Biden to send 20 million doses of U.S.-authorized vaccines abroad for first time

By Steve Holland

WASHINGTON (Reuters) -President Joe Biden will send at least 20 million more COVID-19 vaccine doses abroad by the end of June, marking the first time the United States is sharing vaccines authorized for domestic use.

The move marks a notable pivot from the White House as the administration seeks to use the country’s vaccine supply as a diplomatic tool with the pandemic outlook brightening at home.

Biden announced on Monday that his administration will send doses of the Pfizer Inc/BioNTech SE, Moderna Inc and Johnson & Johnson vaccines, on top of 60 million AstraZeneca Plc doses he had already planned to give to other countries.

Unlike the others, AstraZeneca’s shot is not yet authorized for use in the United States.

“Just as in World War Two America was the arsenal of democracy, in the battle against COVID-19 pandemic our nation is going to be the arsenal of vaccines,” Biden said.

The president has been under pressure to share vaccines to help contain worsening epidemics from India to Brazil, where health experts fear new, more contagious coronavirus variants could undermine the effectiveness of available shots.

Biden noted that no other country will send more vaccines abroad than the United States. So far, the United Stages has sent a few million AstraZeneca doses to Canada and Mexico.

“We want to lead the world with our values with this demonstration of our innovation, ingenuity, and the fundamental decency of American people,” Biden said.

The White House has not provided any details about what countries will receive the shots. Biden said that Jeff Zients, who heads the U.S. vaccine efforts, will now also lead the global vaccine push.

The United States has administered more than 272 million COVID-19 vaccine doses and distributed more than 340 million, according to federal data updated on Monday morning.

With more and more Americans vaccinated, U.S. deaths from COVID-19 last week fell to their lowest in nearly 14 months, while the number of new cases declined for a fifth consecutive week, according to a Reuters analysis of state and county data.

Biden warned that those who do not get vaccinated “will end up paying the price” as he lamented that “we’re still losing too many Americans” despite the significant progress.

(Reporting By Steve Holland, Carl O’Donnell and Jarrett Renshaw; Writing by Jarrett Renshaw; Editing by Trevor Hunnicutt and Bill Berkrot)

Brazil’s Christ the Redeemer statue lights up for vaccine equality

(Reuters) – The world’s most famous statue of Jesus Christ was lit up in Rio de Janeiro to promote vaccine equality as Brazil and developing countries struggle to protect residents from COVID-19.

The message “Vaccine saves, United for vaccines” was projected on Saturday onto the 98-foot (30-meter) statue by Unidos Pela Vacina (United by the Vaccine), in partnership with the Cristo Redentor Sanctuary and the Ogilvy Brazil advertising agency.

In January, two healthcare workers received the first shots of coronavirus vaccines at the foot of the statue as Brazil kicked off its vaccination campaign.

Since then, 17% of residents have received at least one dose of vaccine and 8% have been fully vaccinated.

The country ranks 30th in the world based on first doses given and far behind the 59% in Israel and 47% in the United States, according to a Reuters analysis.

New cases of COVID-19 are once again rising in Brazil and infections are at 82% of the peak the country hit in March, according to a Reuters analysis.

In May 2020, the statue was lit up to call for wearing masks to slow the progress of the pandemic. Brazil has reported the third-highest number of cases in the world and the second-highest number of deaths, with over 435,000 lives lost.

(Writing by Lisa Shumaker; Editing by Rosalba O’Brien)