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WASHINGTON — The United States saw its biggest surge in inflation in more than a decade last month, government data said on Tuesday, hitting consumers and challenging the White House and Federal Reserve (Fed) narrative that the price spike will fade in the coming months.

As widespread COVID-19 vaccinations allowed the world's largest economy to relax pandemic restrictions, Americans have resumed spending and traveling but have faced rising prices for used cars, gasoline, hotels and airline fares.

That trend could undermine already-tentative support for President Joe Biden's economic plan, including his massive jobs and infrastructure proposals.

The Consumer Price Index (CPI) spiked 5.4 percent, not seasonally adjusted, over the 12 months ended in June, the Labor Department said, its highest rate since August 2008.

While the reopening is a boon to businesses, they are facing supply bottlenecks such as a global shortage of semiconductors that has hampered auto production, and also surges in demand, including from rental car companies rushing to rebuild their fleets.

After sinking in the midst of the pandemic shutdowns, energy prices have rebounded, aided by the failure of OPEC+ oil producers to boost output. Gasoline surged an unadjusted 45.1 per cent over the past year and 2.5 per cent in the month of June, the report said.

Those eye-popping gains will intensify pressure on Fed chair Jerome Powell, who faces two days of questioning by lawmakers on Wednesday and Thursday.

Powell has repeatedly insisted that most of the factors driving the price spikes, among them the comparison to the sharp declines in 2020, will disappear and inflation will come down.

But economists are beginning to question that view.

"The surge in prices remained largely driven by COVID but surprised many at the Federal Reserve [Fed] who hope the surge will be transitory," said economist Diane Swonk of Grant Thornton. She warned, "That possibility is fading."

Continued stimulus 

Powell likely will find himself defending the Fed's pledge to continue providing stimulus to the American economy until there has been substantial progress on lowering unemployment and getting inflation to hold above 2 per cent.

US central bankers at their policy meeting in June expressed surprise at the extent of the inflation jump, and with the new data, inflation hawks will have the upper hand at the policy meeting later this month, where they are expected to discuss pulling back on the Fed's massive bond-buying programme.

Food prices rose a comparatively modest 2.4 per cent for the year ended in June, and 0.9 per cent in the month, according to the data.

But even excluding the more volatile food and energy prices, "core" CPI over the 12 months to June jumped 4.5 per cent, unadjusted, the biggest increase since November 1991, the Labour Department said.

Compared to May alone, CPI surged 0.9 per cent, seasonally adjusted, with over one-third of that rise driven by a 10.5 per cent gain in used car prices.

The White House Council of Economic Advisers pointed to temporary factors driving inflation, and cautioned that "the recovery from the pandemic will not be linear".

Ahead of the report, economists said they expected inflation to start trending down in coming months, but noted that price pressures persist.

The "price gains were widespread as unleashed pent-up demand outstrips diminished supply," said Kathy Bostjancic of Oxford Economics.

"We believe this will be the peak in the annual rate of inflation," she said in an analysis, but "price increases stemming from the reopening of the economy and ongoing supply chain bottlenecks will keep the rate of inflation elevated."

By Beiyi Seow with Lianchao Lan in Shanghai
Agence France-Presse

BEIJING — China's economic growth slowed in the second quarter as the country's army of consumers remained hesitant to splurge and exports were dented by disruptions, according to an AFP poll of analysts.

The world's second largest economy has staged a rapid recovery from last year's pandemic-induced slump, but the investment and manufacturing rebound fuelling it now seems to be fading — and other drivers are not picking up fast enough.

It is forecast to have grown 7.7 per cent on-year in April-June and 8.5 per cent for the full year, according to a poll of 12 analysts conducted by AFP.

While the quarterly figure would be much slower than the record 18.3 per cent seen at the start of the year, that jump was largely driven by the low base of comparison owing to large parts of the country being locked down to prevent the spread of the virus.

Official figures will be released on Thursday.

The virus first emerged in China in late 2019, but the strict containment measures meant the disease was brought under control fairly quickly, allowing the country to be the only major economy to expand last year.

But analysts note that the economy has been expanding more slowly since the start of 2021 as the pandemic drags on globally.

"The production side of the economy is... under pressure amid increasing supply challenges," Moody's Analytics Economist Christina Zhu told AFP.

"Input shortages, surging raw material costs, and shipping disruptions are weighing on the country's manufacturers, threatening to drag down the country's growth," she said.

China's factory activity has been bogged down in recent months by supply shortages of key commodities and semiconductors, which are used to make a range of goods from electronics to vehicles.

Export challenges 

The government has also "put the brakes on lending in order to stop the rise in private corporate and household debt", said Hao Zhou, senior emerging markets economist at Commerzbank

"The industrial sector has so far remained relatively unimpressed by this," he added, pointing to expectations of slowing industrial output.

Unlike most other countries, the government has so far refused to embark on a big-spending stimulus drive as it looks to prevent overheating.

However, on Friday the central bank lowered the amount of cash lenders must keep in reserve, which it said would pump an extra $154 billion into the economy.

Another potential drag comes from exports as demand is weighed by the pandemic as well as supply and shipping bottlenecks.

A backlog caused by a coronavirus outbreak among port workers earlier this year severely hit shipping container movement and exacerbated existing challenges.

While export growth beat expectations in June, the government warned the pandemic continued to cause headwinds with customs spokesman Li Kuiwen saying there were "many uncertain and unstable factors facing foreign trade development".

Although China's growth drivers are widely expected to move from industrial production to services, Wu warned recently that "household consumption recovery remains fragile", with data showing holiday spending was 25 per cent below pre-pandemic levels in June.

Still, he believes consumers will eventually "become more comfortable with public health conditions and their own economic situation".

China has ramped up its vaccination drive in recent months, and has now given out around 1.38 billion doses — although it does not make publicly available what percentage of the population have had the jab.

The World Bank cautioned last month that full recovery would require continued progress towards widespread immunisation against COVID-19.

"The prospect of reaching herd immunity this year has increased, which could bolster consumption in the second half," said Oxford Economics lead economist Tommy Wu.

PARIS — France's competition regulator said on Friday that it would issue a ruling on Tuesday on whether Google was negotiating "in good faith" with news publishers over payments for using their content alongside search results.

The long-running legal battle centres on claims that the US Internet giant is showing articles, pictures and videos produced by media groups when displaying search results, without adequate compensation despite the seismic shift of advertising revenue online.

In April 2020, France's competition authority ordered Google to negotiate "in good faith" with media groups, after it refused to comply with a new EU law governing digital copyrights.

The so-called "neighbouring rights" aim to ensure that news publishers are compensated when their work is shown on websites, search engines and social media platforms.

But last September, news publishers including Agence France-Presse filed a complaint with regulators, saying Google was refusing to move forward on paying to display content in web searches.

The competition authority will rule on this point, before issuing a final ruling later this year on Google's alleged abuse of monopoly power in internet news searches.

News outlets struggling with dwindling print subscriptions have long seethed at Google's refusal to give them a cut of the millions of euros it makes from ads displayed alongside news search results.

The US giant counters that it encourages millions of people to click through to media sites, and it has also spent heavily to support media groups in other ways, including emergency funding during the COVID-19 crisis.

In the meantime, Google announced in November that it had signed "some individual agreements" on copyright payments with French newspapers and magazines, including top dailies Le Monde and Le Figaro.

AFP did not sign the accord, but its chief executive Fabrice Fries said he was "optimistic" about improved relations with Google and other internet giants such as Facebook and Apple.

AL BADHAN — Palestinian workers in the Israel-occupied West Bank are putting the final touches on a decommissioned Boeing 707 aircraft to ready it for a new kind of takeoff: As a restaurant.

Its enterprising owners, 60-year-old twin brothers Ata and Khamis Al Sairafi, expect to welcome their first customers within weeks at the site in an isolated mountain area near Nablus.

Inside the old jet's cabin, the seats have been stripped out and the window panes removed. Tables will soon be fitted in the fuselage, which has been painted white with laminate wooden floors.

The brothers plan to call their aviation-themed eatery — which is decorated with Palestinian and Jordanian flags — "the Palestinian-Jordanian Airline Restaurant and Coffee Shop Al Sairafi Nablus".

"We will start by providing hookahs," said Khamis, for people who enjoy smoking tobacco through water pipes, before later expanding the business into an event space.

"The cockpit will be a suitable place for any newlyweds who come to us for their wedding ceremony."

The Sairafi brothers — identical twins who were sporting matching yellow shirts, khaki shorts and red sneakers during AFP's visit — are known for their interest in unusual initiatives.

Ata said he and his brother were working as scrap metal traders two decades ago when he learned about a 1980s-era passenger plane sitting near Kiryat Shmona in northern Israel.

They purchased it in 1999, even though there was — and still is — no airport in the Palestinian Territories, usually forcing residents who want to fly abroad to travel via Jordan.

'Strange idea' 

The brothers negotiated with the Israeli owner, who sold it to them for $100,000, the engines removed.

"After we bought it, we had to move it from Israel... which is a complicated process," Ata said.

The twins paid an Israeli company $20,000 to move the jet to the West Bank, which Israel has occupied since it occupied the territory along with East Jerusalem from Jordan in 1967.

The brothers said the 13-hour transport was coordinated between the Israeli and Palestinian sides.

Key roads were closed so the plane could be rolled on a giant tow truck, its wings temporarily separated, to its current location.

"Loads of media outlets covered it, and the Israeli police intervened to organise the transfer," recalled Khamis.

"We received the plane, which dates back to the 1980s, without any equipment that would enable it to fly," Ata said.

The twins said they hoped to run a restaurant out of the plane since around 2000, but the launch faltered with the outbreak of the second Palestinian intifada, or uprising.

"The events in the Palestinian territories at that time hindered the completion of our project, and we thought of reviving it two years ago, but the spread of the coronavirus also prevented us from doing so," Khamis said.

As they returned to their long-delayed passion project, the twins purchased a rickety retired gangway from Ben Gurion Airport, its name still visible in Hebrew and English characters.

The project faces one more, environmental, challenge. The plane sits on property abutting a waste sorting station which the twins are trying to convince local authorities to move elsewhere.

Ultimately, they said they are hopeful their project will finally take wing after being grounded for nearly a quarter-century.

"Having an aircraft in the Palestinian territories," said Khamis, "is such a strange idea that I'm sure the project will be a success."

BEIRUT — Pharmacies in crisis-hit Lebanon began an indefinite strike on Friday over medicine shortages as the cash-strapped state struggles to afford subsidies on key imports.

The country is facing what the World Bank has called one of the world's worst economic crises since the 1850s, and its foreign currency reserves are fast depleting.

Drug importers warned on Sunday that they were running out of hundreds of drugs, and that the central bank had failed to pay suppliers abroad millions of dollars in accumulated dues under a subsidy scheme.

The association of pharmacy owners announced there would be a "general open-ended strike across Lebanon" from Friday morning.

Ali Safa, a member of the association, said 80 per cent of pharmacies had stayed closed in Beirut and other big cities, and around half had done so in other areas.

An AFP photographer said most pharmacies had closed along the densely populated coastline north of Beirut, while another said many remained shut in the capital's southern suburbs.

Some medicines have disappeared from the shelves in recent months, forcing many people to appeal on social media for help in finding them, including from friends and family abroad.

Beirut resident Elie, 48, said he had visited five pharmacies earlier in the week to find medicine to treat high uric acid.

"They kept telling me there was none left, or that the suppliers had not delivered" the medicine, he told AFP.

Medicine importers' syndicate head Karim Gebara told AFP on Sunday that some drugs to treat cardiac diseases, high blood pressure, diabetes, cancer and multiple sclerosis were already out of stock.

He said this was because the central bank was not releasing dollars and importers could no longer open lines of credit.

Pharmacy owner Safa said that over the past two months suppliers had gradually stopped deliveries.

He said he and others wanted the health ministry to approve a list of medicines that would continue being subsidised according to priority, and then be sold at a fixed rate.

Suppliers could then sell all the other drugs according to the black market exchange rate to the dollar, he said, in order not to make a loss.

The central bank on Monday said it would earmark $400 million to support key products including medicine and flour.

Gebara said the central bank had promised $50 million a month in subsidies for medicine, which would cover just half of importers' current bills.

By Daniel Aronssohn 
Agence France-Presse 

BRUSSELS — Europe's prestigious carmakers lead the world in perfecting the internal combustion engine -- but the days of the petrol motor are numbered, and the continent is changing gear.

On Wednesday next week, the European Commission will unveil its plan to reduce carbon emissions from new vehicles to zero within the next decade, to fight climate change.

The EU plans to be carbon neutral by 2050, but petrol and diesel cars remains the continent's main mode of transport and the pride of its globally admired marques.

Sources in Brussels expect the commission's plan, part of a climate climate strategy, to foresee an end to new registrations of gas guzzlers from 2035. Europe's existing emissions limit of less than 95 grams of CO2 per kilometre was to have been reduced by 37.5 per cent in 2030.

Exact figures are still under discussion, but Brussels is now expected to seek a 60 per cent reduction by 2030 and a 100 per cent reduction just five years later in 2035. 

The economic damage the coronavirus pandemic has damaged the road vehicle market as a whole, but electric cars have been an exception, with growth accelerating.

Battery-powered cars represented eight per cent of new registrations in western Europe in the first five months of this year, with 356,000 new vehicles.

'Go to the wall' 

This, noted analyst Matthias Schmidt, represents more than in the whole of 2019.

The impending new regulations will increase this trend, as they will not only spell doom for classic petrol and diesel motors but effectively force out hybrid and hybrid-rechargeable models.

These had once been seen as a transitional technology, a key product for an industry that boasts of employing 14.6 million workers in Europe.

The car lobby is resigned to going along with the changeover, but wants help from Europe, in particular in terms of developing a network of recharging points for battery cars.

"Under the right conditions, we are open to even higher CO2 reduction targets in 2030," said Oliver Zipse, president of the carmakers' association ACEA and chief executive of BMW. 

The industry is divided about the best way forward, with some executives warning too quick a transition will drive up prices and favour Chinese competitors, which have an advance in battery technology. 

But Europe's giant, Volkswagen, which represents one sale in four on the continent, has followed US champion Tesla in backing an all-electric future.

In 2015, the firm was at the heart of a scandal over faked emissions tests on diesel motors, and is keen to restore its image with the public and regulators.

"There is a huge conflict going on at ACEA level," market analyst Schmidt explained. 

"Volkswagen was forced to go early into electric vehicles because of Dieselgate, to improve their image. they have made huge investments and now they have got the products ready to meet CO2 legislation.

"They are in a perfect position to gain market share, and they will be happy to see others go to the wall."

Volkswagen already plans to stop selling vehicle with internal combustion engines between 2033 and 2035.

"In general a car remains on the road for 15 years. If we want transport to be carbon free by 2050, we need the last combustion-driven car to be sold by 2035 at the latest," said Diane Strauss, of pressure group Transport and Environment.

The NGO's latest report, published in June, gives Volkswagen and Volvo good marks for their preparations, with Renault and Hyundai a little behind them.

But BMW, Daimler (which owns the Mercedes brand), Stellantis (Peugeot, Citrion and Fiat) and Toyota are seen as lacking ambition and remaining too wed to hybrids. 

MEP Pascal Canfin, chair of the environment committee in the European Parliament, said the 2035 target date is a good compromise.

He said 2030 would be too soon for industry and workers to adapt, while 2040 would be too late for Europe's climate goals.

But Canfin is holding out for a fund of "several billion" euros to help fund the transition.

WASHINGTON — The world's richest nations must do more to help the poorest countries withstand the "devastating double-blow" of the pandemic and the resulting economic damage, International Monetary Fund (IMF) Chief Kristalina Georgieva said on Wednesday.

Warning of a "deepening divergence" between rich and poor, she called on the G-20 to take urgent steps to keep developing nations from falling further behind in vaccine access and funding to repair their fortunes.

In a blog post ahead of this week's meeting of G-20 finance ministers and central bankers, the head of the IMF said "speed is of the essence" but the price tag is relatively small.

"Poorer nations are facing a devastating double-blow" losing the race against the virus and missing out on key investments that will help lay the groundwork for economic growth, Georgieva said.

"It is a critical moment that calls for urgent action by the G-20 and policymakers across the globe," she said.

While the United States is poised to grow by its fastest pace since 1984 and countries like China and the euro area are gaining momentum, the developing world is being left behind by a "worsening two-track recovery, driven by dramatic differences in vaccine availability, infection rates, and the ability to provide policy support".

She again pressed the G-20 to do more to help get vaccines to the poor countries, including sharing doses, accelerating debt forgiveness, and endorsing the goal of vaccinating at least 40 per cent of the population in every country by the end of 2021, and at least 60 per cent by the first half of 2022.

With less than one adult in 100 fully vaccinated in Sub-Saharan Africa, compared to 30 per cent in advanced economies, those countries are at higher risk for emerging COVID-19 variants.

The IMF estimated that low-income countries will need to deploy about $200 billion over five years just to fight the pandemic, and another $250 billion for economic reforms to allow them to catch up to the richer nations.

But Georgieva said they cannot do that on their own and wealthy nations must "redouble their efforts, especially on concessional financing and dealing with debt".

The Washington-based crisis lender has proposed a $50 billion joint effort with the World Health Organisation, World Bank and World Trade Organisation to expand vaccine access, "a global game-changer" she said would save hundreds of thousands of lives and accelerate the recovery.

In areas where infections continue to rise, she said it is "critical" that businesses and families continue to receive financial support, but once the virus is under control funds can shift to things like worker training programs to "help heal the scars of the crisis", which hit women especially hard.

Georgieva also said the IMF is keeping an eye on rising prices, particularly in the United States, but as the recovery gains traction "it will be essential to avoid overreacting to transitory increases in inflation".