U.S. corporate profits fell the most in nearly two years in the first quarter as some companies struggled to offset soaring costs, while the overall economy also contracted. Inflation-adjusted gross domestic product fell at an annualized rate of 1.5 percent in the first quarter, compared with a 1.4 percent decline in the previous release, according to the Commerce Department on Thursday. Consumer spending, which accounts for the largest share of the economy, was revised upward to 3.1 percent. The report also included corporate earnings figures for the first quarter. The data showed pre-tax corporate profits fell at a 2.3 percent annualized rate from a year earlier and rose 12.5 percent from a year earlier. Last year was the most profitable year for U.S. companies since 1950. In the face of rising raw material, transportation and labor costs, many companies are seeking to pass these costs on to customers by raising selling prices.

A report released Thursday by the Federal Reserve Bank of New York shows that U.S. consumers still largely believe the current inflation shock is only temporary and that price increases will stabilize at low levels in the long run. The survey confirms earlier findings by the New York Fed, showing that although short-term inflation expectations are rising, consumers expect prices to rise by an average of only about 3 percent over the next five years. This suggests that consumers expect the recent price spike to cool over time, according to the researchers. "While short-term inflation expectations continue to trend upward, medium-term inflation expectations appear to have plateaued over the past few months, while long-term inflation expectations remain fairly stable," the researchers wrote in a blog post. New York Fed President John Williams is a co-author. The Fed's inflation target is 2 percent. And the Fed's preferred inflation indicator - the Commerce Department's personal consumption expenditures price index - rose 6.6 percent year-over-year in March; the consumer price index was up 8.3 percent in April.

Federal Reserve Vice Chairman Leonard Brenner said the Fed is considering various means to soften the impact on commercial bank deposits if the U.S. government decides to issue digital dollars. Although deposits will inevitably fall, the Fed is looking for ways to avoid a significant decline, Brainard said Thursday. Industry lobbying groups, including the American Bankers Association and the Institute for Banking Policy, have called on the government to hold off on a central bank digital currency, fearing it would divert money from the banking system and reduce credit to businesses and households. "We've been doing a lot of thinking in terms of considering the potential impact on deposits," Brainard said at the Financial Services Commission. "Any future developments in the financial system in terms of digitization will lead to a reduction in cash use and a reduction in bank deposits."

As global concerns about food shortages and soaring prices intensify, Russian President Vladimir Putin has said he is willing to facilitate grain and fertilizer exports, but only if sanctions against Russia are lifted. Putin did not specify whether he was referring to Russian exports or Ukrainian exports stopped by the country's blockade of Ukrainian ports. He linked the sanctions to a worsening food crisis, while the United States and its allies are unlikely to agree to lift the broad sanctions imposed on Russia. Putin made the comments during a phone call with Italian Prime Minister Mario Draghi on Thursday, according to a Kremlin statement. Putin told Draghi that sanctions imposed by the U.S. and its allies have exacerbated disruptions in global food supplies and that Russia "is ready to make a significant contribution to solving the food crisis by exporting grain and fertilizer on the condition that the West lifts restrictions imposed for political reasons.

China's Ministry of Commerce, the People's Bank of China and the State Administration of Foreign Exchange issued a notice on supporting foreign trade and economic enterprises to improve their exchange rate risk management capabilities, saying that they will improve exchange rate hedging product services and further enhance the convenience of cross-border settlement in RMB. Support small and medium-sized banks to cooperate in RMB-to-foreign exchange derivatives services; encourage enterprises to hedge exchange rate risks through RMB cross-border valuation and settlement. The local authorities are required to seriously study the "urgent difficulties and worries" of enterprises in exchange rate hedging and RMB cross-border settlement, refine and introduce targeted measures, increase effective policy supply, and create a favorable policy environment for banks and enterprises to enjoy the benefits.

Hong Kong's exports unexpectedly rebounded in April, but trade with the mainland continued to take a hit due to tighter anti-epidemic restrictions. Hong Kong's overall exports rose 1.1 percent last month from a year earlier, according to data released Thursday by the Census and Statistics Department. Economists had expected a 6.9 percent drop. Imports rose 2.1 percent in the month, compared with economists' expectations for a 6.9 percent decline. The trade deficit was HK$36.6 billion ($4.7 billion), compared with HK$37.3 billion in March. Despite the unexpected improvement, Hong Kong's trade with the mainland has been hit by epidemic-related restrictions affecting logistics and supply chains. The Hong Kong Census and Statistics Department said exports to the mainland slipped 9.4 percent, but were better than in March, when they fell 12.8 percent. At one point, Hong Kong's exports fell the most since January 2020 in March, worse than economists had expected at the time, with the mainland's epidemic-related restrictions posing a bigger curb on trade than expected. The mainland closure controls also affected logistics and supply chains.

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