Policy Watch

• The Senate extended the debate on Fast Track legislation yesterday in a 65-33 vote with bipartisan support. Eleven Democrats joined all Republicans to support further consideration of the bill that would allow President Obama to pass his 12-nation Pacific trade agreement through Congress with only an up or down vote without the potential for amendments with the power of so-called trade promotion authority. The President expressed his opposition for new customs legislation that also passed the Senate earlier in the day. That customs bill is aimed at preventing unfair trade practices, but the President claims that its language regarding currency manipulation could damage relations with American trading partners, both those included in the Trans-Pacific Partnership and those that are not, like China. The Fast Track legislation still faces considerable resistance by Democratic lawmakers in Congress, and the House of Representatives must now consider both the customs and trade bills. [NYT]
• The House of Representatives passed the Senate-approved Iran Nuclear Review Act on Thursday in an overwhelming 400-25 vote that would grant legislators a window of 30 days to review a final nuclear deal with Tehran after international negotiators reach such an agreement. The measure would also forbid the White House from temporarily waiving any U.S. sanctions on Iran that were passed by Congress until after the review takes place. At the same time, the House passed new sanctions against the Iran-supported Shi’ite Muslim group Hezbollah, which lawmakers claim to be fighting alongside Syrian President Bahsar al-Assad in his country’s ongoing civil war. President Obama dropped his veto threat against the sanctions bill and is expected to sign it into law next week. [Reuters]

Economic Indicators & News

• Industrial production and capacity utilization in April declined 0.3% and 0.4%, respectively, which is consistent with the weakening of the current account balance in recent months due to a strong dollar in international markets. April’s reading for industrial production, which measures the output of U.S. manufacturers, utilities, and mines, is consistent with the weak global demand and soft consumer sentiment encountered in the first quarter. Manufacturing output, the largest component of industrial production, was unchanged, while a small gain in durable goods that was offset by a decline in nondurable goods Mining was down 14.5% during the month and 46.5% on the year. [Fed]
• Consumer sentiment plummeted 7.6% in May’s preliminary reading of 88.6 in the index’s largest month-to-month drop in over two years. The current conditions component fell 6.7% as a result of higher fuel costs and a slowdown in employment growth. The expectations component plunged 8.2% due to pessimism on the future of the American labor market, though consumers still remain hopeful for higher wages. The one-year inflation expectation rose 0.3% to 2.9% while the five-year outlook rose 0.2% to 2.8%. [UMich]