1. This statement summarizes economic developments since the issuance of the staff report (SM/09/196, 7/20/09). These developments do not alter the thrust of the staff appraisal.
2. In June 2009, annual CPI inflation declined to 6.9 percent from 8 percent in May. As anticipated in the staff report, the decline largely reflects base effects resulting from the peak in food and fuel prices in the middle of last year as well as weak activity. Inflation excluding food and energy declined to 7.5 percent from 8.3 percent in May.
3. The unemployment rate edged up slightly to 23.6 percent in the second quarter of 2009. However, the rate reflected a sharp decline in labor force participation as job losses reached 267,000 in the second quarter, bringing net job losses to about 475,000 in the first half of the year.
4. Notwithstanding the weakening labor market, there has been a marked increase in strikes and other labor action. Municipal workers agreed to a 13 percent pay increase after a strike in July. Following threats of labor action, mining sector workers settled for wage increases of between 9 and 10.5 percent. Other sectors that have been affected by labor action in July include communications and construction. Thus far, wage settlements have averaged above 9 percent in July.