1. This statement reports on information that has become available since the staff report was issued. It does not alter the thrust of the staff appraisal.
2. An upward revision to first quarter GDP. Growth in the first quarter was revised up to -0.2 percent, suggesting that the temporary factors that hampered growth in the winter were a smaller drag than had been previously thought. Staff, however, has maintained its annual growth projection for 2015 at 2.5 percent, with recent data pointing to a modestly slower second quarter than had been assumed in the forecasts underpinning the staff report.
3. A generally upbeat picture from other indicators. Recent data releases have shown real personal consumption expenditures and consumer sentiment rebounded in May, personal income growth remains solid, manufacturing surveys are improving, and housing data shows a mild but steady recovery. Inflation continues to be subdued (core PCE inflation was 1.2 percent in May). Nonfarm payrolls in June added 223 thousand jobs—close to Consensus expectations—with the unemployment rate falling to 5.3 percent, mainly reflecting a decline in the participation rate. Average hourly earnings slowed to 2.0 percent year-over-year in June—0.3 percentage points below Consensus expectations—from 2.3 percent in May.
4. The Supreme Court ruled on the Affordable Care Act. In a 6–3 decision, the U.S. Supreme Court upheld a key provision of the Affordable Care Act. The Court ruled that health insurance subsidies should continue to be available for those states that have not set up their own health insurance exchanges and are, instead, using the federal exchange.
5. Trade Promotion Authority was approved by Congress and signed by President Obama. The Congress approved Trade Promotion Authority on June 24, allowing for an up-or-down vote (so-called “fast track”) on future trade deals. In addition, Trade Adjustment Assistance was signed into law, renewing funding for assistance and job training to workers displaced by the forces of globalization. This legislation opens the way for a congressional vote on the Trans-Pacific Partnership, potentially as early as this Fall.
6. The Export-Import Bank’s authority to extend new loans, guarantees or credit insurance expired on June 30. The bank will, however, continue to operate and manage transactions related to its existing portfolio.
7. Puerto Rico’s fiscal crisis. The fiscal situation in Puerto Rico continues to deteriorate, raising concerns that the commonwealth may be unable to service its $72 billion in public debt. On July 1 the Puerto Rico Electricity Power Authority reached an agreement with its creditors that allowed it to meet a debt service payment that was due that day and extended until September 15 a forbearance agreement between the utility and its creditors. The bondholders and the utility continue to work on a long-term plan to put the finances of the company on a sustainable footing. Puerto Rico’s Governor Padilla announced on June 30 that the commonwealth’s debts are “not payable” and has established a working group to analyze, by August 30, the options for a “complete restructuring and development plan” for Puerto Rico.
8. The impact on the U.S. of recent events in Greece has, so far, been modest. Following the Greek government’s call for a referendum, U.S. equity markets fell by around 2 percent, the 10-year U.S. Treasury rate fell by 10 basis points, and the U.S. dollar strengthened around 1 percent versus the Euro.