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Tag: economic conditions

  • Fed watch 2023: When will rate hikes slow down | CNN Business

    Fed watch 2023: When will rate hikes slow down | CNN Business

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    Minneapolis
    CNN
     — 

    America’s central bank found itself in a glaring spotlight for much of this past year, as Federal Reserve Chairman Jerome Powell wielded blunt tools of interest rate hikes and quantitative tightening to curb surging inflation.

    As 2022 draws to a close, inflation metrics show some of that may have worked: Consumer prices are cooling, home sales have ground to a halt, and some of America’s best-known companies have made plans to slow their roll and pull back on capital investment.

    The latest measure of inflation showed that the Consumer Price Index for November came in at 7.1%, down from the 40-year high of 9.1% hit in June; prices for used cars, lumber and gas — once poster children for the painfully steep price hikes — have come down; and housing prices and rents have also been on a downward trajectory.

    “This idea of peak inflation, which people have been talking about for most of the year, is starting to look like it’s valid,” said Thomas Martin, senior portfolio manager at Globalt Investments. “It’s just how quickly does that come down?”

    In a matter of weeks, the Fed’s Act II gets underway.

    The Fed’s recently revised script calls for the federal funds rate, the central bank’s benchmark borrowing rate, to move higher, but at a slower pace than in the past several months.

    While the Fed has — finally — eked out some small victories in slowing the economy, after seven bumper rate hikes, the robust and historically tight labor market has remained a thorn in the central bank’s side. When the number of available jobs far outpaces those looking for work, wages can rise, which in turn could keep prices higher for longer.

    That means the Fed, with its “laser focus on the job market,” could be “continually hawkish” at the start of 2023, said Ross Mayfield, investment strategy analyst at Baird.

    There are already signs that the labor market is softening: Quits and hires have edged downward, while layoffs have moved higher; continuing claims have grown to their highest level since February; and the number of jobs added each month has started to nudge slowly lower.

    However, a “structural labor shortage” remains a major headwind, Powell noted in December, attributing the lack of workers to early retirements, caregiving needs, Covid illnesses and deaths, and a plunge in net immigration.

    As such, employers are hesitant to lay people off, and other areas of the economy are showing such strength that those who are unemployed are able to get rehired quickly, Mayfield said.

    “This latent strength in the job market could be the reason that the Fed over-tightens,” he told CNN. “The rest of the economy, to us, is very clearly signaling slowdown, imminent recession. And when you see the Fed revising their unemployment projections up, revising their GDP growth number down, it seems that they agree.”

    He added: “So, I would hope that they would take their own advice and pause fairly soon.”

    The December projections showed a more aggressive monetary policy tightening path, with the median forecast rising to a new interest rate peak of 5%-5.25%, up from 4.5%-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the Fed’s economic predictions were last released.

    Jerome Powell, chairman of the US Federal Reserve, from right, Lael Brainard, vice chair of the board of governors for the Federal Reserve System, and John Williams, president and chief executive officer of the Federal Reserve Bank of New York, during a break at the Jackson Hole economic symposium in Moran, Wyoming, on Aug. 26, 2022.

    Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain far above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. That’s 0.2 percentage points higher than the 4.4% rate they were expecting in September and significantly higher than the current 3.7% rate.

    Based on projections from Fed officials and other economists, the pathway has narrowed for the desired “soft landing” of reining in inflation while avoiding recession or significant layoffs.

    “It’s been pretty impressive how well the consumer has held up over the past 18 months, and not pulling the rug out from under the consumer is pretty much how you get to the soft landing,” Mayfield said.

    “I think it’s a really, really narrow path, and the Fed’s tone [during its December meeting] doesn’t give me a lot of optimism that they can navigate that without hitting a recession. … If a soft landing is avoiding a recession altogether, then I think that’s a pretty tough task. If it’s a milder recession than recent history, I think that’s still in the cards.”

    The Federal Open Market Committee, the central bank’s policymaking arm, holds eight regularly scheduled meetings per year. Over the course of two days, the 12-member group looks through economic data, assesses financial conditions and evaluates monetary policy actions that are announced to the public following the conclusion of its meeting on the second day, along with a press conference led by Chair Powell.

    Below are the meetings tentatively scheduled for 2023. Those with asterisks indicate the meeting with a Summary of Economic Projections, which includes the chart colloquially known as the “dot plot” that shows where each Fed member expects interest rates to land in the future.

    • January 31-February 1
    • March 21-22*
    • May 2-3
    • June 13-14*
    • July 25-26
    • September 19-20*
    • October 31-November 1
    • December 12-13*

    — CNN’s Nicole Goodkind contributed to this report.

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  • Senior citizens will soon get that big hike in their Social Security benefits | CNN Politics

    Senior citizens will soon get that big hike in their Social Security benefits | CNN Politics

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    CNN
     — 

    Senior citizens and other Social Security recipients will start getting a heftier monthly benefit next month due to an 8.7% annual cost-of-living adjustment aimed at helping them cope with high inflation.

    The increase, the largest in more than 40 years, will boost retirees’ monthly payments by more than $140 to an estimated average of $1,827 for 2023.

    The adjustment is the highest that most current beneficiaries have ever seen because it is based on an inflation metric from August through October, which was also around 40-year highs. Inflation has cooled somewhat since then, though prices remain elevated.

    “I’m sure everyone is anxiously awaiting because prices are still high,” said Mary Johnson, a Social Security and Medicare policy analyst at The Senior Citizens League, an advocacy group. “Just shopping for food to feed people during the holidays is going to be a huge challenge.”

    Roughly 70 million people will receive the increase, which follows a 5.9% adjustment for 2022.

    Many senior citizens depend heavily on Social Security. Some 42% of elderly women and 37% of elderly men rely on the monthly payments for at least half their income, according to the Social Security Administration.

    Just when the beefed-up payment will arrive depends on recipients’ ages and birth dates. Those who received Social Security before May 1997 get their monthly benefit on the 3rd of each month. For more recent retirees, those whose birth dates are the 1st through the 10th of the month receive it on the second Wednesday, while those born on the 11th to 20th and the 21st to 31st of the month are paid the third and fourth Wednesdays, respectively.

    Even though recipients received a sizable adjustment for this year, inflation ate away at the boost.

    The increase fell short of actual inflation by an average of more than $42 – or 46% – every month or roughly $508 for the year, Johnson said.

    Many retirees have been forced to turn to their savings or public assistance. One-third of seniors reported signing up for food stamps or visiting a food pantry over the past 12 months, compared with 22% in 2020, according to recent surveys by The Senior Citizens League. Also, 17% have applied for assistance with heating costs, compared with 10% in 2020.

    This is not a new problem. Benefits have not kept up with the rising cost of living for years, even with the annual adjustments.

    As of March, inflation has caused Social Security payments to lose 40% of their buying power since 2000, according to a study released earlier this year by the league. Monthly benefits would have to increase by $540 to maintain the same level of buying power as in 2000.

    Senior citizens will also see their Medicare Part B premiums drop in 2023, the first time in more than a decade that the tab will be lower than the year before, the Centers for Medicare and Medicaid Services announced in the fall. It’s only the fourth time that premiums are declining since Medicare was created in 1965.

    The standard monthly premiums will be $164.90 in 2023, a decrease of $5.20 from 2022.

    The reduction comes after a large spike in 2022 premiums, which raised the standard monthly premium to $170.10, up from $148.50 in 2021. A key driver of the 2022 hike was a projected jump in spending due to a costly new drug for Alzheimer’s disease, Aduhelm. However, since then, Aduhelm’s manufacturer cut the price and the Centers for Medicare and Medicaid Services limited coverage of the drug.

    Also, spending was lower than projected on other Part B items and services, which resulted in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.

    The big annual adjustment could end up hurting some seniors, Johnson said.

    For instance, the resulting increase in income could push them above the thresholds for certain government benefits, such as Medicare Extra Help, Medicaid, food stamps and rental assistance, leaving them eligible for less or no aid. Or they could have to pay more for their Medicare Part B premiums, which are adjusted for income.

    Also, they could have to start paying taxes – or owe higher levies – on their Social Security benefits if their income rises above a certain level.

    Further, the increase could leave Social Security’s finances on even shakier ground. The combined trust funds that pay benefits to retirees, survivors and the disabled will be depleted by 2035 and only able to distribute roughly three-quarters of promised payments unless Congress addresses the program’s long-term funding shortfall, according to the most recent Social Security trustees’ report.

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  • How to Prepare Your Portfolio for a Market Downturn With Real Assets

    How to Prepare Your Portfolio for a Market Downturn With Real Assets

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    Opinions expressed by Entrepreneur contributors are their own.

    Forecasters are growing increasingly confident that a large-scale economic downturn is imminent. In a recent Bankrate survey, economists placed a 65% chance of a recession in 2023. Meanwhile, a mid-November American Association of Individual Investors survey showed nearly twice as many investors predict that the stock market will go down in the next six months than those who think it will rebound.

    One of the latest economic watchers to sound the alarm is Bloomberg, whose forecast models show a 100% chance of a recession. All this is to say that it’s nearly impossible to know exactly when a global recession will begin — or how long it will last.

    But while past performance does not guarantee future results, historical data can help investors predict how certain assets might hold up in times of turmoil. As we head into the New Year, here’s why you might want to consider real assets to help safeguard your portfolio from the uncertainty ahead.

    Related: 7 Investment Strategies to Follow During a Crisis

    Portfolio diversification

    Historically speaking, stocks and bonds tend to have a negative correlation with each other, meaning if stocks take a turn, bonds should still hold their value and vice versa. Typically, the two act as a hedge against one another. That’s not necessarily the case in today’s environment.

    Following the Fed’s decision to begin raising interest rates, coupled with growing fears of a potential recession, both stocks and bonds have experienced massive sell-offs this year. As a result, the values of both assets have dropped in tandem; year-to-date, the S&P 500 is down nearly 18% while the Bloomberg U.S. Aggregate Bond Index has surrendered about 13%.

    As two of the most common asset classes gear up to finish the year with net losses — which would be the first time since 1969 — traditional portfolios may be in for a painful drawdown.

    Across the board, investors are increasingly looking for non-correlated assets to help cushion their portfolios in times of volatility.

    Real assets, such as real estate, infrastructure and farmland, have historically low or negative correlations to traditional stocks and bonds, as well as to each other, meaning they are not often exposed to speculative trading in public markets. In the last three decades, farmland, for example, has had a -0.06 correlation to stocks and -0.24 to bonds, according to research from my own firm, FarmTogether.

    As a result, these assets can offer welcome diversification for investors looking to create distance between their portfolios and the markets.

    Capital preservation

    For nearly 30 years, real assets have provided similar or higher average annual returns than stocks, and with much lower volatility, resulting in historically higher risk-adjusted returns. From 1991 to 2021, average annual real estate returns had a standard deviation of 7.73%, while S&P 500’s was over 16%. Meanwhile, farmland’s standard deviation was just 6.75%.

    This stability is largely driven by a host of factors, including real assets’ intrinsic value, comparatively lower level of uncertainty around future cash flows and long-term structural trends driving values upward. The demand for necessities, like shelter, food and energy, for example, is inelastic, meaning it tends to remain consistent throughout the year. In turn, the value of these assets is not likely to experience swings like those seen with the markets.

    During the 2008 Global Financial Crisis, the Dow Jones dropped 54%. By comparison, gold values actually increased in value by 4%. Today, despite stocks and bonds both showing negative returns this year, the NCREIF Real Estate and Farmland indices have returned around 9% and 6% year to date, respectively.

    In addition to their physical value, many real assets have the potential to deliver passive income through operating or rental income. Global real estate has historically generated an annual cash yield of 3.8%, while infrastructure investments have yielded 3.3%. Farmland cash receipts from the sale of agricultural commodities are forecast to be up $91.7 billion in 2022, to $525 billion, a 21.2% increase from last year.

    Related: How Entrepreneur Millionaires Prepare for a Recession

    Hedge against inflation

    While inflation cooled to 7.7% in October, the inflation rate is not projected to return to the Fed’s 2% target until the end of 2025, with some econometric models still showing 3%+ inflation through 2024. With many signs pointing to continued inflation, investors may find refuge in real assets.

    The value of real assets is ultimately derived from their physical characteristics, meaning they’re more likely to retain long-term value than other, more traditional investments.

    But this unique quality of real assets is even more attractive when you combine the limited supply of natural resources with the rising demand from a growing population, which just topped 8 billion people last month. With stable supply-demand dynamics, real assets are well-positioned to increase in value year after year.

    Also, because real asset returns are inherently tied to commodity prices, which tend to move in lockstep with inflation, these investments have had a historically positive relationship to inflation indices like the Consumer Price Index (CPI). Simply put, when the CPI rises, so too should the value of your investment; over the last 20 years, real assets have historically outperformed traditional investments in inflationary environments.

    Preparing for a potential recession

    In an increasingly uncertain market, real assets can present an attractive opportunity for investors in 2023 and beyond. By expanding into real assets, investors have the potential to help spread overall investment risk, generate historically attractive returns and help hedge against persistent inflation.

    And thanks to the rise of real asset investment managers in recent years, investors now have access to a wide variety of investment channels and diverse opportunities.

    Related: What to Expect from the Markets in a Recession

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    Artem Milinchuk

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  • Brexit has cracked Britain’s economic foundations | CNN Business

    Brexit has cracked Britain’s economic foundations | CNN Business

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    London
    CNN
     — 

    It’s been two years since former Prime Minister Boris Johnson signed his Brexit trade deal and triumphantly declared that Britain would be “prosperous, dynamic and contented” after completing its exit from the European Union.

    The Brexit deal would enable UK companies to “do even more business” with the European Union, according to Johnson, and would leave Britain free to strike trade deals around the world while continuing to export seamlessly to the EU market of 450 million consumers.

    In reality, Brexit has hobbled the UK economy, which remains the only member of the G7 — the group of advanced economies that also includes Canada, France, Germany, Italy, Japan and the United States — with an economy smaller than it was before the pandemic.

    Years of uncertainty over the future trading relationship with the European Union, Britain’s largest trading partner, have damaged business investment, which in the third quarter was 8% below pre-pandemic levels despite a UK-EU trade deal being in place for nearly two years.

    And the pound has taken a beating, making imports more expensive and stoking inflation while failing to boost exports, even as other parts of the world have enjoyed a post-pandemic trade boom.

    Brexit has erected trade barriers for UK businesses and foreign companies that used Britain as a European base. It’s weighing on imports and exports, sapping investment and contributing to labor shortages. All this has exacerbated Britain’s inflation problem, hurting workers and the business community.

    “The most plausible reason as to why Britain is doing comparatively worse than comparable countries is Brexit,” according to L. Alan Winters, co-director of the Centre for Inclusive Trade Policy at the University of Sussex.

    The sense of gloom hanging over the UK economy is captured by striking workers, who are walking out in ever larger numbers over pay and conditions as the worst inflation in decades eats into their wages. At the same time, the government is cutting spending and hiking taxes to fill the hole in its budget.

    While Brexit isn’t the cause of Britain’s cost-of-living crisis, it has made the problem more difficult to solve.

    “The UK chose Brexit in a referendum, but the government then chose a particularly hard form of Brexit, which maximized the economic cost,” said Michael Saunders, a senior adviser at Oxford Economics and former Bank of England official. “Any hope for economic upside from Brexit is pretty much gone.”

    Although Britain voted to leave the European Union in June 2016, its exit from the single market and customs union was finalized only on December 24, 2020, when the two sides finally agreed a free trade deal.

    The Brexit deal, known as the Trade and Cooperation Agreement, came into effect on January 1, 2021.

    It eliminated tariffs on most goods but introduced a raft of non-tariff barriers, such as border controls, customs checks, import duties and health inspections on plant and animal products.

    Before Brexit, a farmer in Kent could ship a truckload of potatoes to Paris just as easily as they might send it to London. Those days are no more.

    “We hear stories every single day from small businesses about the nightmare of forms, transportation, couriers, things getting stuck for weeks at a time… the epic length of the problems is just gobsmacking,” said Michelle Ovens, the founder of Small Business Britain, a campaign group.

    “The way things have panned out in the last two years has been really bad for small businesses,” Ovens told CNN.

    Researchers at the London School of Economics estimate that the variety of UK products exported to the European Union declined by 30% during the first year of Brexit. They said that this was likely because small exporters had exited small EU markets.

    Take the example of Little Star, a UK company that makes jewelry for children. Its business took off in the Netherlands and it had plans to expand to France and Germany next. But since Brexit, only two of more than 30 of its Dutch customers are prepared to handle the costs and paperwork to obtain stock from the company.

    Products that took two days to ship are now taking three weeks, while import duties and sales taxes have made it much harder to compete with European jewelers, according to Rob Walker, who co-founded the business with his wife, Vicky, in 2017. The company is now looking to the United States for growth opportunities.

    “Isn’t it mad that we have to look to the other side of the Atlantic to do business, because it’s so difficult to do business with people 30 miles away?” Walker said.

    A truck passes a Union Jack, at the Port of Dover on April 1, 2021. The UK government has delayed post-Brexit checks on EU food imports until the end of 2023.

    A British Chambers of Commerce survey of more than 1,168 businesses published this month reported that 77% said Brexit has not helped them increase sales or grow their businesses. More than half said they were finding it difficult to adapt to the new rules for trading goods.

    Siteright Construction Supplies, a manufacturer in Dorset, told the Chamber that importing parts from the European Union to fix broken machines has become a costly and “time-consuming nightmare.”

    “Brexit has been the biggest-ever imposition of bureaucracy on business,” according to Siteright.

    Nova Dog Chews, a producer of snacks for canines, said it would have lost all its EU trade had it not set up a base in the bloc. “This has cost our business a huge amount of money, which could have been invested in the UK had it not been for Brexit,” it added.

    A UK government spokesperson told CNN that the government’s export support service has provided exporters with “practical support” on the implementation of the Brexit deal. The deal is “the world’s largest zero tariff, zero quota free trade deal,” the spokesperson added. “It secures the UK market access across key service sectors and opens new opportunities for UK businesses across the globe.”

    Britain won’t easily replace what it has lost by forfeiting unfettered access to the world’s largest trading bloc.

    The only substantive new trade deals it has struck since exiting the European Union, which did not simply roll over the deals it had as an EU member, have been with Australia and New Zealand. By the government’s own estimate, these will have a negligible impact on the UK economy, increasing GDP in the long run by just 0.1% and 0.03% respectively.

    By contrast, the UK Office for Budget Responsibility, which produces economic forecasts for the government, expects Brexit to reduce Britain’s output by 4% over 15 years compared to remaining in the bloc. Exports and imports are projected to be around 15% lower in the long run.

    Initial data has borne this out. According to the OBR, in the fourth quarter of 2021, UK goods export volumes to the European Union were 9% below 2019 levels, with imports from the European Union 18% lower. Goods exports to non-EU countries were 18% weaker than in 2019.

    The United Kingdom “appears to have become a less trade-intensive economy, with trade as a share of GDP falling 12% since 2019, two and a half times more than in any other G7 country,” the OBR said in the March report.

    The decline in exports to non-EU countries could be a sign that UK businesses have become less competitive as they battle higher supply chain costs following Brexit, according to Jun Du, an economics professor at Aston University in Birmingham.

    “The UK’s trading ability has been damaged permanently [by Brexit],” Du told CNN. “It doesn’t mean it can’t recover, but it’s been set back for a number of years.”

    Research by the Centre for European Reform, a think tank, estimates that over the 18 months to June 2022, UK goods trade is 7% lower than it would have been had Britain remained in the European Union.

    Investment is 11% weaker and GDP is 5.5% smaller than it would have been, costing the economy £40 billion ($48.4 billion) in tax revenues annually. That’s enough to pay for three quarters of the spending cuts and tax rises that UK finance minister Jeremy Hunt announced in November.

    The United Kingdom is projected to have one of the worst performing economies next year among developed nations.

    The Organization for Economic Cooperation and Development expects the UK economy to shrink by 0.4%, ahead only of sanctioned Russia. GDP in Germany is forecast to be 0.3% smaller.

    The International Monetary Fund forecasts growth of just 0.3% for UK GDP next year, ahead of only Germany, Italy and Russia, which are expected to contract.

    Both institutions say high inflation and rising interest rates will weigh on spending by consumers and businesses in Britain.

    According to the Confederation of British Industry, a leading business group, the fall in private sector activity picked up pace in December and has now declined for five consecutive quarters.

    The downward trend “looks set to deepen” in 2023, principal economist at the CBI Martin Sartorius said in a statement.

    “Businesses continue to face a number of headwinds, with rising costs, labor shortages, and weakening demand contributing to a gloomy outlook for next year. ”

    — Julia Horowitz contributed to this report.

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  • UK wages next year will be at their lowest level since 2006, report says | CNN Business

    UK wages next year will be at their lowest level since 2006, report says | CNN Business

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    London
    CNN
     — 

    Brits hoping for a new-year salary bump to offset soaring food and energy costs may be disappointed.

    The average British worker’s pay in 2023 is expected to fall back to 2006 levels once inflation is taken into account, according to PwC. Real wages, which factor in inflation, are expected to fall by as much as 3% in 2022 and another 2% in 2023, PwC has predicted in a report on the UK economy shared with CNN.

    The report confirms that wages have stagnated in Britain even as inflation hits double digits, sparking the worst cost-of-living crisis in decades. That’s led to widespread strikes across the UK economy, encompassing railways, schools, nurses, hospitals and the postal service.

    On Friday, passport officers began eight days of strikes that are expected to hit some of the United Kingdom’s busiest airports over Christmas and New Year, including Heathrow and Gatwick in London. The government said in a statement that the military would be supporting Border Force but warned travelers to expect delays and disruptions on arrival in Britain.

    “2022 has obviously been a highly challenging year for the UK economy, and it is not surprising that these chilly headwinds will continue throughout 2023,” Barret Kupelian, a senior economist at PwC said in a statement.

    The report offered some hope. Despite the hit to wages, more than 300,000 UK workers could rejoin the labor market in 2023, reducing economic inactivity and alleviating staff shortages in highly skilled sectors, according to PwC. At the same time, increased immigration to the UK could directly contribute £19 billion ($23 billion) to the economy, boosting GDP growth by 1% “even as the whole economy contracts,” PwC said.

    “Despite a contracting economy, the UK remains an attractive destination for workers,” PwC economist Jake Finney said in a statement. UK immigration levels reached a record 1.1 million in 2022, with resettlement programs aimed at Ukrainians, Afghans and Hong Kong residents adding around 140,000 to the total, according to PwC.

    Even with record immigration, the United Kingdom has lagged behind developed nations in its post-Covid employment recovery. Vacancies hit a record 1.3 million earlier in the year, dropping to just under 1.2 million in November. Worker shortages have been particularly acute in the hospitality, retail and agriculture industries.

    Research by the House of Lords Economic Affairs Committee published this week concluded that early retirement has been the biggest driver of the squeeze on the UK workforce. Increasing long-term sickness, lower EU migration following Brexit and an aging UK population have also played a role.

    “The rise in inactivity poses serious challenges to the UK economy. Shortage of labor exacerbates the current inflationary challenge; damages growth in the near term; and reduces the revenues available to finance public services, while demand for those services continues to grow,” the committee said.

    PwC’s Kupelian added that UK inflation likely peaked in October and “will gradually begin to return to target over the next two years.”

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  • White House cautiously optimistic over economy in 2023: ‘Absolutely no sign’ job growth will tumble or unemployment will spike | CNN Politics

    White House cautiously optimistic over economy in 2023: ‘Absolutely no sign’ job growth will tumble or unemployment will spike | CNN Politics

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    CNN
     — 

    As Wall Street and Main Street fret about a potential recession, White House officials are projecting confidence about the economy’s ability to weather the storm in 2023.

    “We’re feeling cautiously optimistic because we are starting to see some real concrete measurable signs of progress,” Aviva Aron-Dine, deputy director of the White House National Economic Council, told CNN in a Zoom interview.

    The Biden administration economist pointed to a range of metrics showing inflation has cooled off, real wages have heated up and the job market has defied doomsday predictions.

    The White House is hoping for a soft landing, in which the Federal Reserve tames inflation without crashing the economy.

    “We remain optimistic about a transition to stable, steady growth with lower inflation – without giving up labor market gains, without a recession,” Aron-Dine said.

    So far, so good – at least from the administration’s perspective.

    For the moment, metrics suggest the economy has remained resilient and consumers are more optimistic as inflation has eased. The Conference Board’s latest consumer confidence index this month, for example, showed a significant jump from November. And after spiking to record highs in June, gas prices have plunged to 17-month lows, delivering a major boost to consumers.

    And some broader trends appear to be working in the administration’s favor, like hiring, which has slowed but has not collapsed.

    There is “absolutely no sign” that job growth will fall on a “sustained basis” below a pace of roughly 150,000 jobs a month, Aron-Dine said.

    Last month, the US economy added a surprisingly strong 263,000 jobs. That’s down sharply from 647,000 in the same period last year – but still a very healthy pace.

    Despite a series of mass layoffs in the tech and media industries, Aron-Dine added that there is “no sign of a big increase in unemployment.”

    Indeed, initial jobless claims remain very low. The Labor Department said Thursday that first-time claims for unemployment benefits rose just slightly in the latest week and remain near two-month lows. However, some economists – including ones at the Fed – warn this trend could be about to change due in large part to continued pressure from higher borrowing costs.

    After raising interest rates for a seventh meeting in a row, the Fed last week projected the unemployment rate will rise from a historically low level of 3.7% today to 4.6% by the end of next year. That implies an increase of approximately 1.6 million unemployed people.

    Some, though certainly not all, business leaders and major banks expect the US economy will slip into a downturn next year. For instance, PNC is now projecting a “mild recession” that is similar to the downturns of 1990-1991 and 2001.

    “The risk of a recession is elevated right now – certainly higher than six months or a year ago,” Gus Faucher, chief economist at PNC, told CNN. “We need to be prepared for a recession sometime in the spring or summer of 2023.”

    Other economists including Mark Zandi, the chief economist at Moody’s Analytics, are growing more confident a recession may be avoided.

    Although Fed officials say a soft landing is still possible, some of the Fed’s own metrics are flashing red.

    A New York Fed model that uses shifts in the bond market to forecast recession risks finds there is a 38% chance of a recession in the next 12 months. That narrowly surpasses the peak in 2019 and is the highest level since just before the Great Recession.

    There are signs that cracks are forming in consumer spending – the main engine of the US economy – due to high inflation that has forced some Americans to dip into savings and turn to credit cards. Retail sales declined in November by the most in nearly a year as shoppers pulled back on everything from furniture and cars to even e-commerce.

    Asked about the surprise retail sales slump, Aron-Dine noted this metric can experience significant volatility.

    “If you look at the data over a more extended period, you’re just not seeing any signs that would make us think that is a significant concern,” she said.

    In that effort to transition away from high inflation, Aron-Dine said, the White House continues to evaluate ongoing risks, calling the war in Ukraine “one of the most significant risks that we monitor.”

    “I think all year, we’ve seen that there are signs of real strength and opportunities for a successful transition, and that there are significant risks. And so our work, our strategy has been about trying to take advantage of the strengths and mitigates the risk,” she said, later adding, “I think we have reason for optimism, reasons to believe the US economy is well positioned, but there are global challenges and high on that list is potential downstream consequences of the war in Ukraine for food and energy as we saw this year and more generally.”

    Another hurdle Biden’s economic team will face in the new year will be achieving consensus among a newly divided Congress.

    Biden’s first two years in office were marked by the passage the administration’s proposed major spending bills aimed at bolstering the country’s recovery from the coronavirus pandemic, rebuilding the nation’s infrastructure, overhauling major social safety net programs, enhancing domestic supply chains and making climate investments.

    But some major provisions the Biden White House has pushed for, including the revival of the enhanced child credit have failed to move forward in Congress. The previous expansion of the child tax credit lifted 2.1 million children out of poverty in 2021, according to the Census Bureau.

    A last-ditch effort this month to pass the credit into law as part of the $1.7 trillion government spending bill failed. And with Republicans taking over the House of Representatives next year, its passage is even less likely.

    “It is a disappointment that Republicans blocked inclusion of Child Tax Credit improvements during the lame duck,” Aron-Dine said, adding, “I won’t get ahead of agenda setting our strategy for next year, but of course, this will remain a priority for us.”

    Along with broader efforts to tackle inflation and avoid a recession, the implementation of the Inflation Reduction Act will also be top of mind for Biden economic officials in the coming year.

    A slate of provisions in the IRA are scheduled to roll out in January, including home energy efficiency tax credits and a $35 cap on the cost of insulin for seniors on Medicare.

    And CNN previously reported that along with deploying a messaging strategy aimed at highlighting existing accomplishments, as Biden heads into the new year, the White House is looking to highlight ways the Inflation Reduction Act will lower everyday costs.

    Aron-Dine told CNN that the enactment of the IRA “is just going to have a huge effect in shaping our work in the year ahead, with one of our biggest priorities really being just making sure that we fully realize the potential of that law.”

    And as the administration prepares to frame Biden’s agenda ahead of the State of the Union address next year, National Economic Council Director Brian Deese told the Wall Street Journal this week that officials are considering a push for policies aimed at getting Americans back to work, including childcare and eldercare benefits.

    It’s not clear whether the White House is considering using executive authority or proposals to Congress to move forward on the initiative. Aron-Dine declined to offer specifics.

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  • Japan’s consumer inflation hits fresh 40-year high | CNN Business

    Japan’s consumer inflation hits fresh 40-year high | CNN Business

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    Japan’s core consumer inflation hit a fresh four-decade high as companies continued to pass on rising costs to households, data showed, a sign price hikes were broadening and could keep the central bank under pressure to whittle down massive stimulus.

    Months before Tuesday’s surprise tweak to its yield control policy, Bank of Japan (BOJ) policymakers had discussed the potential market impact of a future exit from ultra-low interest rates, minutes of their October meeting showed Friday.

    While many retailers plan further hikes for food products next year, the outlook for inflation and the timing of any further BOJ policy tweaks are muddled by the risk of global recession and uncertainty over the pace of wage hikes, analysts say.

    “The hurdle for policy normalization isn’t low. The global economy may worsen in the first half of next year, making it hard for the BOJ to take steps that can be interpreted as monetary tightening,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

    Japan’s core consumer price index (CPI), which excludes volatile fresh food but includes energy costs, rose 3.7% in November from a year earlier, data showed Friday, matching market forecasts and perking up from a 3.6% gain in October.

    It was the biggest rise since a 4.0% jump seen in December 1981, when inflation was still high from the impact of the 1979 oil shock and a booming economy.

    Aside from utility bills, prices rose for a broad range of goods from fried chicken, smartphones to air conditioners, in a sign of mounting inflationary pressure, the data showed.

    Many analysts expect core consumer inflation to slow back near the BOJ’s 2% target next year, as the base effect of past fuel price spikes dissipates and the impact of government subsidies to curb electricity prices take effect from February.

    But an index stripping away such one-off factors may remain elevated and keep pressure on the BOJ to remain vigilant to the chance of a demand-driven rise in inflation.

    The so-called “core-core” index, which excludes both fresh food and energy prices, rose 2.8% in November from a year earlier, accelerating from a 2.5% increase in October.

    The rise in the core-core index, which the BOJ closely watches as a gauge of demand-driven inflation, highlights how inflationary pressure is building in once deflation-prone Japan and could persist well into next year.

    Already, companies expect to hike prices for 7,152 food products in the first four months of 2023, more than double the number of the same period this year, research firm Teikoku Data Bank said in a report.

    “We’ll likely see a rush in price hikes next year that could be more intense than this year,” as companies face rising labor and distribution costs, Teikoku Data Bank said.

    The BOJ stunned markets on Tuesday by tweaking its yield control and allowing long-term interest rates to rise more, a move market players see as a prelude to a further withdrawal of its massive stimulus program.

    BOJ Governor Haruhiko Kuroda, who will see his term end in April, has said the bank had no intention to roll back stimulus as inflation was set to slow below 2% next year.

    But the October minutes showed how many of his fellow board members are shifting their attention to the risk of an inflation overshoot and prospects of a stimulus withdrawal.

    “Given structural changes such as a shift away from globalization, past experiences in Japan may not necessarily apply. We can’t rule out the chance of a big overshoot in inflation,” one member was quoted as saying in the October minutes.

    The CPI data will likely be among key factors the BOJ will scrutinize when it produces fresh quarterly inflation forecasts at a two-day policy meeting ending on January 18.

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  • The US economy grew much faster than previously thought in the third quarter | CNN Business

    The US economy grew much faster than previously thought in the third quarter | CNN Business

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    New York
    CNN
     — 

    America’s economy grew much faster than previously thought in the third quarter, a sign that the Federal Reserve’s battle to cool the economy to fight inflation t is having only limited impact.

    The Commerce Department’s final reading Thursday morning showed gross domestic product, the broadest measure of the US economy, grew at an annual pace of 3.2% between July and September. That was above the 2.9% estimate from a month ago. Economists surveyed by Refinitiv had expected GDP to stay unchanged from its previous reading.

    The report said the stronger-than-expected reading was due to increases in exports and consumer spending that were partly offset by a decrease in spending on new housing. Consumer spending is responsible for more than two-thirds of the nation’s economic activity.

    The Fed has been raising interest rates throughout the year to cool demand for goods and services and reduce inflation. Economists have been worried for quite some time that the Fed’s actions could tip the US economy into recession next year.

    Inflation has cooled in recent readings, but the US economy has stayed strong. Some surveys released this week suggest the Fed’s higher rates are not slowing spending by businesses or consumers.

    A recent survey of chief financial officers found the current level of interest rates have not impacted their spending plans. And consumer confidence improved in December according to a survey by the Conference Board, reaching the highest level since April.

    In addition, employers have continued to hire at a historically strong pace, although layoffs have increased in some industries, especially technology.

    A separate Labor Department report Thursday showed that unemployment claims remained relatively unchanged.

    Initial weekly claims for unemployment insurance benefits ticked up to 216,000 for the week ended, December 17. The previous week’s total was upwardly revised by 3,000 to 214,000.

    Economists were expecting initial claims to land at 222,000, according to Refinitiv.

    The weekly initial claims totals are hovering around pre-pandemic levels. In 2019, weekly claims averaged 218,000.

    Continuing claims, which include people who are collecting benefits on an ongoing basis, dropped slightly to 1.672 million for the week ended December 10. The prior week’s number of continuing claims were revised up to 1.678 million.

    The final GDP report is one of most backward-looking readings the government releases, looking at the state of the economy nearly three months ago. The current forecast from economists is that growth in the current period will be only 2.4%, significantly slower than Thursday’s reading.

    Still, Wall Street was concerned that the GDP report could give the Fed more runway to raise rates. Stocks fell modestly Thursday. Dow futures were 200 points, or 0.6% lower. S&P 500 futures fell 0.8%.

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  • Why recession fears are back: Americans are losing faith | CNN Business

    Why recession fears are back: Americans are losing faith | CNN Business

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    New York
    CNN
     — 

    From the executive suite to the grocery aisles to the halls of the Federal Reserve, the big question is: Can red-hot inflation be vanquished without tipping the economy into a recession?

    Ironically, all this talking about a recession can actually help cause one. How people feel is a huge driver of consumer behavior and business planning. The famous British economist John Maynard Keynes coined the phrase “animal spirits” to describe what drives investors, consumers and business leaders. Fear, hope, uncertainty, and confidence are all hard to measure — and hugely important to how the economy fares.

    Essentially, worrying about a recession and planning for one can be a self-fulfilling prophecy.

    “At the end of the day, a recession is a loss of faith,” said Mark Zandi, chief economist at Moody’s Analytics. Consumers worry about losing a job and so pull back on spending, and business leaders worry their sales will decline and start laying off workers.

    “You get into this kind of self-reinforcing negative cycle,” he told CNN’s Early Start. “So when sentiment is this bad and starting to feed on itself, we run the risk of talking ourselves into one.”

    The US economy grew at a 2.9% annual rate in the third quarter, and the unemployment rate is near a 50-year low. That’s not going to last. The Federal Reserve this week lowered its forecast for growth in the United States next year to just 0.5% and a jobless rate rising to 4.6% by the end of 2023.

    “Look, we’re planning as if there’s going to be a mild recession next year,” United Airlines CEO Scott Kirby told CNN This Morning. “And a lot of people in the business world are trying to talk ourselves into one is what it sometimes feels like to me.”

    But he added, “If I didn’t watch business shows or read the Wall Street Journal, the word recession wouldn’t be in my vocabulary because we just don’t see it in our data.”

    Federal Reserve Chairman Jerome Powell and plenty of economists — including Treasury Secretary Janet Yellen — still see a path to a so-called soft landing, where the economy slows enough to lower inflation but not cause a recession. Yellen explained this week that recession risks permanently exist.

    “There are always risks of a recession,” Yellen told CBS’s “60 Minutes” in an interview that aired on Sunday. “The economy remains prone to shocks.”

    But Zandi said there can be a bright side to the dark worries.

    “It may just, in an odd kind of way, help things out because if everyone’s so nervous about recession, they are cautious,” he said. “They don’t take big risks. They don’t take on a lot of debt. They don’t go out and make big expansion moves (and) that may cool things off sufficiently to bring inflation down so that (the Fed) doesn’t have to raise rates as much and we actually — weirdly enough — avoid a recession.”

    JPMorgan Chase CEO Jamie Dimon has expressed concern for months about an impending recession, citing higher interest rates and consumers spending down their excess pandemic savings.

    “When you’re looking out forward, those things may very well derail the economy and cause this milder or hard recession that people are worried about,” he said earlier this month.

    With inflation still at the highest level in a generation and central banks around the world continuing to raise interest rates, the risks for 2023 are undoubtedly high.

    “I think it’s reasonable to be nervous and cautious about the economy next year,” Zandi acknowledged.

    “But you know, having said that, I think we have a fighting chance of getting through the next year without an economic downturn.” He cites inflation “coming in here pretty quickly, consumers still have cash and middle- and high-income consumers are spending and businesses are reluctant to lay off workers because their number one problem is finding and retaining workers.”

    He forecasts “just a moderate, steady slowing (in the job market) and economic activity as we move into next year. Hopefully we don’t lose faith and run for the bunker and go into recession.”

    — CNN’s Elizabeth Yang contributed to this report.

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  • The Grinch comes for retailers | CNN Business

    The Grinch comes for retailers | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN
     — 

    Weaker-than-expected retail sales in November pummeled market sentiment on Thursday and raised the odds that the Federal Reserve’s inflation-fighting interest rate hikes would push the economy into recession.

    What’s happening: US retail sales, which measure the total amount of money that stores make from selling goods to customers, fell 0.6% in November, the weakest performance in nearly a year. The drop concerned economists who had expected monthly sales to shrink by just 0.1%. It’s also a sharp reversal from October’s sales increase of 1.3%.

    That’s a bad sign for the economy. Just last month Bank of America CEO Brian Moynihan told CNN that the continued strength of the US consumer is nearly single-handedly staving off recession. Consumer spending is a major driver of the economy, and the last two months of the year can account for about 20% of total retail sales — even more for some retailers, according to National Retail Federation data.

    Market mania: The weak report means that spending faltered just as the holiday season started, a critical time for retailers to ramp up profits and get rid of excess inventory. Investors weren’t too happy about that.

    Shares of Costco

    (COST)     closed Thursday 4.1% lower, Target

    (CBDY)     fell by 3.2%, Macy’s

    (M)     dropped 3.5% and Abercrombie & Fitch

    (ANF)     was down 6.2%.

    The entire sector took a blow — the VanEck Retail ETF, with Amazon

    (AMZN)    , Home Depot

    (HD)     and Walmart

    (WMT)    as its top three holdings, fell by 2.2%. The SPDR S&P Retail ETF, which follows all S&P retail stocks, was down 2.9%.

    Weak sales are likely to continue, say analysts, and if they do, then retailers’ bottom lines and fourth-quarter earnings will suffer.

    “The headwinds of the past year are catching up to consumers and forcing them to be more conservative in their holiday shopping this winter,” warned Morgan Stanley economist Ellen Zentner in a note.

    The Fed factor: November’s report could indicate that consumers are feeling the double-punch of sky-high inflation and painful interest rate hikes from the central bank. This retail sales data adds to recessionary concerns, as it suggests that consumers may be becoming more cautious with their spending.

    “Households are increasingly relying on their savings to sustain their spending, and many families are resorting to credit to offset the burden of high prices. These trends are unsustainable, and the current credit splurge is a true risk, especially for families at the lower end of the income spectrum,” said Gregory Daco and Lydia Boussour, economists at EY Parthenon.

    While American bank accounts are still fairly robust, they’re beginning to dwindle. In the third quarter of 2022, credit card balances jumped 15% year over year. That’s the largest annual jump since the New York Fed began keeping track of the data in 2004.

    “Against this backdrop, we expect consumers will rein in their spending further in coming months,” said Daco and Boussour. “Real consumer spending should see modest growth in the final quarter of the year, but we expect it will barely grow in 2023.”

    Bottom line: If Bank of America’s Moynihan was right, the US economy is in trouble.

    US mortgage rates came in lower once again this week, marking the fifth consecutive drop in a row.

    The 30-year fixed-rate mortgage averaged 6.31% in the week ending December 15, down from 6.33% the week before, according to Freddie Mac. A year ago, the 30-year fixed rate was 3.12%, reports my colleague Anna Bahney.

    That’s a sharp reversal from the upward trend in rates we’ve seen for most of 2022. Those increases were spurred by the Federal Reserve’s unprecedented campaign of harsh interest rate hikes to tame soaring inflation. But mortgage rates have tumbled in the last several weeks, following data that showed inflation may have finally reached its peak.

    The Fed announced on Wednesday that it will continue to raise interest rates — albeit by a smaller amount than it has been.

    “Mortgage rates continued their downward trajectory this week, as softer inflation data and a modest shift in the Federal Reserve’s monetary policy reverberated through the economy,” said Sam Khater, Freddie Mac’s chief economist.

    “The good news for the housing market is that recent declines in rates have led to a stabilization in purchase demand,” he added. “The bad news is that demand remains very weak in the face of affordability hurdles that are still quite high.”

    American regulators have been granted unprecedented access to the full audits of Chinese companies like Alibaba

    (BABA)     and JD.com

    (JD)     after threatening to kick the tech giants off US stock exchanges if they did not receive the data.

    The announcement marks a major breakthrough in a yearslong standoff over how Chinese companies listed on Wall Street should be regulated. It will come as a huge relief for these firms and investors who have invested billions of dollars in them, reports my colleague Laura He.

    “For the first time in history, we are able to perform full and thorough inspections and investigations to root out potential problems and hold firms accountable to fix them,” Erica Williams, chair of the Public Company Accounting Oversight Board, said in a statement Thursday, adding that such access was “historic and unprecedented.”

    More than 100 Chinese companies had been identified by the US securities regulator as facing delisting in 2024 if they did not hand over the audits of their financial statements.

    On Friday, China’s securities regulator said it’s looking forward to working with US officials to continue promoting future audit supervision of companies listed in the United States.

    There are more than 260 Chinese companies listed on US stock exchanges, with a combined market capitalization of more than $770 billion, according to recent calculations posted by the US-China Economic and Security Review Commission.

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  • China’s economy faltered before major Covid policy shift | CNN Business

    China’s economy faltered before major Covid policy shift | CNN Business

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    Hong Kong
    CNN
     — 

    China’s Covid-battered economy slumped in November before its leaders abruptly eased pandemic restrictions, paving the way for a reopening that economists say will be bumpy and painful.

    On Thursday, a series of indicators pointed to a slowdown in economic activity last month. Retail sales declined 5.9% in November from a year ago, according to the National Bureau of Statistics. It was the worst contraction in retail spending since May, when widespread Covid lockdowns, including in the country’s richest city Shanghai, pummeled the economy.

    Industrial production only increased 2.2% in November, less than half of October’s growth.

    Investment in the property sector, which accounts for as much as 30% of China’s GDP, plunged by 9.8% in the first 11 months of the year. Property sales by value plummeted by more than 26%.

    Unemployment worsened, rising to 5.7% last month, the highest level in six months.

    “In November, Covid outbreaks spread to most parts of the country, forcing residents to cut travel and stay at home, which hit consumption heavily,” Fu Jiaqi, a statistician at the NBS, said in a statement on Thursday accompanying the data release.

    He noted that consumption activities involving personal interaction, for example travel or dining, were greatly affected. Catering sector revenues declined 8.4% last month.

    Sales of big-ticket items — such as cars, furniture, and high-end consumer electronics — also contracted sharply, as consumers were wary of spending amid worries about a weak economy. Spending on household appliances and telecoms devices plunged more than 17%. Car sales dropped over 4%.

    External trade was also weak. Last week, customs data showed the country’s exports contracted 8.7% in November from a year ago, the worst performance since February 2020. That figure was much lower than most economists had expected.

    November’s economic slump happened before Beijing abruptly eased its repressive pandemic restrictions earlier this month. Top leaders signaled at an important political meeting last week that they will shift focus back to growth and seek a turnaround of the economy next year.

    China’s economy has been battered by its stringent zero-Covid policy and persistent property woes this year. Growth is forecast to hit around 3% in 2022, one of the lowest levels since 1976, the year when former leader Mao Zedong’s death ended a decade of social and economic tumult.

    On Wednesday, two of the country’s top ruling bodies, the Central Committee of the Communist Party and the State Council, issued a strategic plan to expand domestic demand and stimulate consumption and investment until 2035. It cited rising external risks, including global economic and geopolitical uncertainties.

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  • The Fed lifts rates by half a point, acknowledging that inflation is easing | CNN Business

    The Fed lifts rates by half a point, acknowledging that inflation is easing | CNN Business

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    Washington, DC
    CNN
     — 

    The Federal Reserve approved a half-point interest rate hike on Wednesday, a smaller increase than in recent months and an acknowledgment that inflation is finally easing.

    The increase marks a shift for the central bank after an unprecedented year that includes seven-straight rate hikes as part of an aggressive campaign to try and bring down the highest inflation since the early 1980s.

    While lower than the four consecutive three-quarter-point hikes approved at the Fed’s previous meetings, Wednesday’s rate hike is still twice the size of the central bank’s customary quarter-point increase and will likely deepen the economic pain for millions of American businesses and households by pushing up the cost of borrowing even further.

    Fed officials will increase the rate that banks charge each other for overnight borrowing to a range of 4.25-4.5%, the highest since 2007.

    The Fed also released its highly anticipated Summary of Economic Projections, which includes what is colloquially known as the dot plot. Investors pay close attention to these forecasts, which show where each of its 19 leaders expect interest rates to go in the future, for clues about the path of rate hikes in the new year and beyond.

    The December projections showed a more aggressive monetary policy tightening path, with the median “dot” rising to a new peak in federal fund rates of 5-5.25% up from 4.5-4.75% in September. That would mean Fed officials expect to raise rates by half a percent more than they did three months ago, when the plot was last released.

    Policymakers also projected that PCE inflation, the Fed’s favored price gauge, would remain above its 2% target until at least 2025. Further projections showed souring expectations for the health of the US economy, with Fed officials now predicting that unemployment will rise to 4.6% by the end of 2023 and remain at that level through 2024. That’s 0.2 percentage points higher than the 4.4% rate they were expecting in September and significantly higher than the current 3.7% rate.

    GDP, a measure of economic output, is also projected to drop to 0.5% next year, down from 1.2% in September.

    The forecast will likely stoke investors’ and economists’ fear that the US economy will endure a recession next year. Federal Reserve Chair Jerome Powell said last month that there is still a chance the economy can avoid recession but said the odds are slim.

    “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing,” he said at an economic forum last month.

    Still, the economy has so far withstood the hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    Fed Chair Powell is schedule to hold a post-meeting press conference at 2:30 p.m. Wednesday.

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  • Is Inflation Finally Slowing Down?

    Is Inflation Finally Slowing Down?

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    Following the November inflation report, U.S. stocks surged amid lower-than-expected levels of inflation.


    Yuichiro Chino | Getty Images

    The Bureau of Labor Statistics reported on Tuesday that the consumer price index (CPI) rose by only 0.1% in November and 7.1% since last year. The report came as a welcome surprise as analysts previously estimated a 0.3% monthly increase and a 7.3% 12-month increase. Additionally, the November rates mark a much slower pace of inflation from October, when the CPI rose by 0.4% and 7.7% from the previous year.

    Given the unexpected numbers, U.S. stocks soared following the report. The Dow Jones Industrial Average gained 521 points or 1.5%; the S&P 500 added 2.3%; and the Nasdaq Composite rose 3.2%, CNBC reported. Tuesday stock gains were widespread, with 2,630 New York Stock Exchange-listed stocks rising and only 190 declining.

    Related: Here’s Why the CPI Report will Dictate the Market Bottom

    “That was a big surprise and markets are reacting accordingly,” Steve Sosnick, chief strategist at Interactive Brokers, told CNBC. “Today is a day where the entire bullish scenario is working. Yields are lower on the inflationary story. Stocks love the story of a less restrictive Fed and the dollar is weaker which also helps stocks.”

    The November inflation numbers could also affect the Fed’s decision on the next interest rate hike during its two-day policy meeting starting Wednesday. With inflation showing signs of slowing down, the report could persuade the Fed to raise rates slightly less aggressively.

    Related: Treasure Secretary Janet Yellen Predicts ‘Much Lower Inflation’ By End of 2023

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  • What to expect from this week’s Fed meeting | CNN Business

    What to expect from this week’s Fed meeting | CNN Business

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    New York
    CNN
     — 

    The Federal Reserve is expected to raise interest rates by half a point at the conclusion of its two-day policy meeting on Wednesday, an indication that the central bank is pulling back on its aggressive stance as signs begin to emerge that inflation may be easing.

    Although that increase would be smaller than the three-quarter-point hikes announced at the past four Fed meetings, it’s nothing to scoff at.

    It’s still double the Fed’s customary quarter-point hike, and a sizable increase that will likely cause economic pain for millions of American businesses and households by pushing up the cost of borrowing for homes, cars and other loans.

    The Fed’s anticipated action would increase the rate that banks charge each other for overnight borrowing to a range of between 4.25% and 4.5%, the highest since 2007.

    Federal Reserve Chairman Jerome Powell confirmed last month that smaller rate hikes could be expected, saying: “The time for moderating the pace of rate increases may come as soon as the December meeting.”

    But while inflation is unlikely to slow dramatically any time soon, partly due to continued pressure on wages amid a shortage of workers, Wall Street appears to believe the Fed will eventually be forced to pivot away from, or even reverse its regimen of rate hikes. Traders are largely pricing in rate cuts in the second half of 2023.

    The Fed will conclude its rate hike regimen by the second quarter of next year, predicted JPMorgan analysts in a recent note. “With inflation continuing to fade and fiscal policy likely on hold, the Fed is likely to end its tightening cycle early in the new year and inflation could begin to ease before the end of 2023,” they wrote. The analysts expect two quarter-point hikes in the first half of 2023.

    But the average period between peak interest rates and the first reductions by the Fed is 11 months, which could mean that even if the central bank stops actively hiking rates, they could remain elevated into 2024.

    Investors will closely read the Fed’s economic outlook, the Summary of Economic Projections, which is also due out Wednesday. And they will watch Powell’s press conferences for clues about what’s to come — though they may end up sorely disappointed.

    ​”We expect Fed Chair Powell will insist on the need to hold policy at a restrictive level for some time to bring inflation down toward the 2% target,” wrote Gregory Daco, chief economist at EY-Parthenon, in a note to clients Monday. “This will serve to push back against current market pricing … Powell will stress that history cautions strongly against prematurely loosening policy.”

    The Fed has increased its benchmark lending rate six times this year in an attempt to discourage borrowing, cool the economy and bring down historically high inflation that peaked at 9.1% over the summer.

    Even if interest rate hikes do ease off, they will remain high, and economists are largely expecting that the US economy will endure a recession next year. Powell said in November that there is still a chance the economy avoids recession but the odds are slim, noting: “To the extent we need to keep rates higher longer, that’s going to narrow the path to a soft landing.”

    In an interview that aired on CBS on Sunday, Treasury Secretary Janet Yellen — Powell’s predecessor at the Fed — said there is “a risk of a recession. But it certainly isn’t, in my view, something that is necessary to bring inflation down.”

    And the economy has so far withstood the Fed’s aggressive rate hikes. The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Fed isn’t acting alone, it’s just one of nine central banks expected to make a rate announcement this week. Landing softly on the ever-narrowing path between high inflation and recession is a global concern as central banks across the world contend with similar economic problems.

    The European Central Bank, the Bank of England and the Swiss National Bank are expected to follow the United States with half-point moves of their own on Thursday. Norway, Mexico, Taiwan, Colombia and the Philippines will also likely increase their borrowing costs this week.

    The Federal Reserve announces its rate hike decision Wednesday at 2 p.m., followed by a press conference with Chair Powell at 2:30 p.m.

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  • The Fed will raise rates again. But it’s playing with fire | CNN Business

    The Fed will raise rates again. But it’s playing with fire | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here.


    New York
    CNN
     — 

    The Federal Reserve is all but guaranteed to announce Wednesday that it will once again raise interest rates. But investors are hopeful it will be a smaller increase than the last four hikes.

    Traders are betting on just a half-point increase. Federal funds futures on the Chicago Mercantile Exchange show an 80% probability of a half-point hike.

    The Fed bumped up rates by three-quarters of a percentage point in the past four meetings (June, July, September and November). That followed two smaller rate hikes earlier this year. The central bank’s key short-term interest rate, which sat at zero at the beginning of the year, is now at a range of 3.75% to 4%.

    The hope is that inflation pressures are finally starting to abate enough that the Fed can pivot — Fed-speak for a series of smaller rate hikes -— to avoid crashing the economy into a recession.

    But it may not be that simple. The government reported Friday that a key measure of wholesale prices, the Producer Price Index, rose 7.4% over the past 12 months through November. That was a bit higher than the expected rate of 7.2% but a marked slowdown from the 8% increase through October.

    The more widely watched Consumer Price Index data for November comes out Tuesday, just a day before the Fed announcement. CPI rose 7.7% year-over-year through October.

    As long as inflation remains a problem, the Fed is going to have to tread cautiously.

    “Inflation has probably peaked but it may not come down as quickly as people want it to,” said Kathy Jones, chief fixed income strategist for the Schwab Center for Financial Research.

    Jones still thinks the Fed will raise rates by only half a point this week and may look to hike them just a quarter point in early 2023. But she conceded that the Fed is now sort of “making it up as they go along.”

    The other problem: The Fed’s rate hikes this year have had limited impact on the economy so far. Yes, mortgage rates have spiked and that has severely hurt demand for housing, but the job market remains strong. Wages are growing, and consumers are still spending. That can’t last indefinitely.

    “The cumulative impact of higher rates are just beginning. Hence, the Fed has to step down its pace a bit,” Jones said.

    So investors are going to need to pay attention not to just what the Fed says in its policy statement about rates and what Powell talks about in his press conference. The Fed also will release its latest projections for gross domestic product growth, the job market and consumer prices Wednesday.

    In September, the Fed’s consensus forecasts called for GDP growth of 1.2% in 2023, an unemployment rate of 4.4% and an increase in personal consumption expenditures, the Fed’s preferred measure or inflation, of 2.8%. It seems likely that the Fed will cut its GDP target and raise its expectations for the jobless rate and consumer prices.

    The likelihood of an economic downturn is increasing, and the Fed’s projections may reflect that. But the Fed is not expected to start cutting interest rates until 2024 at the earliest, so it may be too late for the central bank to prevent a recession.

    “A pivot or pause is not a cure-all for this market,” said Keith Lerner, co-chief investment officer at Truist Advisory Services. “Rate cuts may be too late. Recession risks are still relatively high.”

    The US economy isn’t in a recession yet. But are American shoppers tapped out? We’ll get a better sense of that Thursday after the government reports retail sales figures for November.

    Economists are actually forecasting a small dip of 0.1% in retail sales from October. But it’s important to put that number in context. Retail sales surged 1.3% from September and 8.3% over the past 12 months.

    So it’s possible consumers were simply getting a head start on holiday shopping. Inflation has an effect on the numbers too, since retail sales have been impacted (positively) by the fact that people have to spend more money for stuff.

    One market strategist also pointed out that as long as price increases continue to slow, consumers will feel more confident as well.

    “Everybody has been talking about inflation this year. Going forward, it will be more about disinflation in 2023 or 2024,” said Arnaud Cosserat, CEO of Comgest Global Investors.

    What does that mean for investors? Cosserat said people should be looking for quality consumer companies that still have pricing power and can maintain their profit margins. Two stocks that his firm owns that he said fit that bill: Luxury goods maker Hermes

    (HESAF)     and cosmetics giant L’Oreal

    (LRLCF)    .

    Monday: UK monthly GDP; earnings from Oracle

    (ORCL)

    Tuesday: US Consumer Price Index; Germany economic sentiment

    Wednesday: Fed meeting; EU industrial production; UK inflation; earnings from Lennar

    (LEN)     and Trip.com

    (TCOM)

    Thursday: US retail sales; US weekly jobless claims; ECB and Bank of England rate decisions; earnings from Jabil

    (JBL)

    Friday: Eurozone PMI; UK retail sales; earnings from Accenture

    (ACN)    , Darden Restaurants

    (DRI)     and Winnebago

    (WGO)

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  • What goes up… is starting to come down | CNN Business

    What goes up… is starting to come down | CNN Business

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    CNN
     — 

    It’s too soon to declare victory over inflation, but from gas to chicken to big-screen TVs, there are, increasingly, signs that inflation’s grip on American pocketbooks may be loosening.

    Gas prices are back to last year’s levels, after spiking to a record high of just over $5 a gallon this summer. For perspective, a gallon of regular has fallen by almost 50 cents in just a month, making it about $10 cheaper to fill up an average SUV today than a month ago.

    Shoppers scored major deals over the Thanksgiving shopping period amid widespread price-cutting. Online inflation fell 1.9% in November, the largest year-over-year drop in 31 months, according to Adobe Analytics.

    “Falling prices in categories such as toys and electronics accelerated demand in November,” Adobe reported, noting that computers and electronics saw the biggest year-over-year price cuts since 2014. Toy prices fell 7.7% year over year and sporting goods prices dropped 5.7%.

    Retailers awash with excess inventory are expected to keep marking down goods into the end of the year, as consumers shift from buying couches and clothes to spending on travel and experiences — where prices are not coming down for now.

    In other areas, price increases are moderating, as global supply chains work themselves out and commodity and shipping costs decline. Skyrocketing rent and automobile prices are still rising, but more slowly. After hitting a record high this summer, chicken prices have dropped sharply. And according to real estate site RealPage, apartment rents have fallen for three consecutive months.

    Major inflation gauges, while stubbornly high, have shown signs of peaking. The Federal Reserve’s preferred inflation gauge, the PCE Price Index, rose 6% in October versus a year ago and notched the smallest monthly gain in more than a year. The final Consumer Price Index report of the year comes out on Tuesday, and the Producer Price Index also showed signs of cooling, at 7.4%, down from an 8.1% annual rate in October.

    Still, considering the Federal Reserve has raised interest rates six times this year, there is a long way to go and inflation is still issue number one for Americans. In CNN’s most recent poll, the current cost of living represents a near-universal worry, with 93% saying they’re at least somewhat concerned by this, including 63% who say they are very concerned.

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  • Worried About Raising Capital in a Recession? Give Your Company The Edge.

    Worried About Raising Capital in a Recession? Give Your Company The Edge.

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    Opinions expressed by Entrepreneur contributors are their own.

    Entrepreneurs and founders need to generate capital investment to grow and succeed, yet attracting such investment is daunting in this market. Amidst heavy competition and negative market forces, one frequently underutilized resource provides many companies an edge: effective PR or public relations.

    By generating positive media coverage, PR can create interest in a startup and make it more attractive to potential investors. Emphasize the R in PR to build relationships with key influencers and industry experts who can promote a startup to a broader audience. By using PR effectively, startups can overcome the challenge of declining investment and improve their odds in the current market.

    Start using PR as a strategy to attract investment

    One of the most important — and often overlooked — aspects of PR for startups is its role in attracting investment. A well-executed PR strategy can help raise awareness of your company and generate interest among potential investors. Here are some of the most effective ways to use PR to attract investment:

    1. Highlight your company’s unique selling points

    Beyond the problem you are solving and the solutions you offer, you need to promote what makes your company unique. Star by answering these questions: Why should investors put their money into your business? Why are you succeeding when perhaps others are failing? Make sure these points are clear in your PR.

    Any company, large or small, must clearly understand its unique selling points (USPs). These aspects of your business make you stand out from the competition and attract customers and investors. PR is essential for promoting your USPs and ensuring they are communicated effectively to your target audience. Without PR, your USPs may be lost in the marketplace noise, and you could miss out on vital growth opportunities.

    PR can help you clarify your USPs, identify the most effective channels for reaching your target audience, and craft messages that resonate with them. By promoting your unique selling points, PR can help you to win new customers, partners, and investors.

    Related: How PR Can Attract Investors and Add Value to Your Startup

    2. Use social media wisely

    Social media is an excellent way for startups to connect with potential investors and get their companies noticed. However, it’s essential to be strategic in your use of social media, ensuring that the content is received by different audiences continuously. Use social media to share news about your company’s progress, announcements about new products or services, or articles that showcase your company’s thought leadership. By sharing interesting and valuable content, you can attract the attention of potential investors and get your startup noticed. Always mix things up and keep new audiences engaged by consistently sharing various types of content.

    3. Stay focused and consistent

    Throughout this process, it’s crucial to maintain a high level of consistency and relevancy. Keep your communications clear and concise, and stay focused on continuously putting your startup’s message out. This can be a challenge, especially in the early stages when you’re still trying to figure out what your brand is all about. But it’s crucial to maintain a high level of consistency and relevancy. PR is all about building relationships with the media and the public, so they can become familiar with your startup and what it has to offer. If you’re not consistent, you will have difficulty building those relationships.

    Stay consistent, clearly grasp your brand’s story, and consistently push that story out. To start, narrow the focus to existing relationships and lean on your team, existing investors, and others involved in the startup. Go for faster wins, even if it means blogs and freelance writers first. Reinforce your message with social media content. From there, go for media coverage.

    4. Get media coverage

    Good press can be a powerful tool for attracting investment. High-quality media coverage can help to build trust and credibility with potential investors. This goes beyond just a few press releases, as quality media coverage includes getting articles, videos, and other extended content on your business. PR can be time-consuming and costly, but it is often worth the investment. High-quality media coverage can help to build trust and credibility with potential investors, making them more likely to invest in your business.

    High quality does not always mean an article is published in the largest media outlet. For example, a great story or article can run in a local television affiliate and spread from there. Many founders assume that PR means getting the brand’s story published in an internationally known publication. Sometimes the best way to start using PR is to get noticed locally and build a PR campaign.

    Related: Why You Need A PR Agency and How to Choose One Wisely

    5. Find a dedicated expert PR team to ensure your message is heard

    An experienced PR team can be invaluable in helping you to craft a story that will resonate with investors. They can also use their connections to help get your story in front of the right people. But most importantly, a good PR team can provide honest feedback and constructive criticism. They can help you identify potential weaknesses in your investment pitch and suggest ways to address them.

    Not all PR agencies are created equal. When choosing a PR agency to help with your investment round, look for these essential qualities:

    1. When choosing a PR agency, it’s crucial to find one with significant experience working with startups, preferably with a record of success with investment rounds for other startups. You’ll also want to look for an agency that is calm under pressure and able to adapt quickly to changes. And, of course, it’s essential to find an agency with which you can build a good rapport — after all, you’ll be working closely together.
    2. Second, they should deeply understand the investment process and what matters to investors. Ask for case studies of other startups they ran PR for during an investment round. A PR firm with a deep understanding of the investment process can help you craft a winning message highlighting your company’s strengths and ability to return investment quickly.
    3. Third, they should have a creative and unique approach to generating attention for your company. Yes, press releases are essential and often underutilized. However, a resourceful PR team will find ways to get articles published detailing and validating the purpose of your startup, why it matters, and why it is the right investment opportunity.

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    Adam Horlock

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  • Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

    Key inflation measure shows price pressures cooled off in November, but remain high | CNN Business

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    New York
    CNN
     — 

    Another key inflation measure shows price pressures cooled off but remained stubbornly high in November, despite the Federal Reserve’s monthslong efforts to fight inflation through higher interest rates.

    The Producer Price Index, which measures prices paid for goods and services by businesses before they reach consumers, rose 7.4% in November compared to a year earlier, the Bureau of Labor Statistics reported Friday. That’s down from the revised 8.1% gain reported for October.

    US stocks fell immediately after the report, as economists surveyed by Refinitiv had expected wholesales prices to have risen just 7.2%, annually. The higher-than-expected inflation readings raised concerns about whether the Fed will be able to slow the pace of rate hikes.

    But futures for the Fed funds rate still show a strong likelihood of a half-point increase at the central bank’s policymaking meeting next week, rather than the three-quarter point hike instituted at the last four meetings.

    “Overall inflation is moving in the right direction, though at a slow pace,” said Kurt Rankin, senior economist at PNC. “The Federal Reserve’s tightening plans will remain aggressive until clear, consistent signs of inflation’s demise have been demonstrated.”

    The PPI report generally gets less attention that the corresponding Consumer Price Index, which measures prices paid by US consumers for goods and services. But this is a rare month in which the PPI report came out before the CPI report, which is due out Tuesday.

    That and the Fed meeting scheduled for Tuesday and Wednesday next week is making this inflation report of particular importance to investors.

    “Next Tuesday’s CPI release will be more important than today’s data, but with traders on edge, any indication that prices remain elevated and that inflation is more sticky than currently believed is a negative for markets,” said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

    Overall prices rose a seasonally adjusted 0.3% compared to October — the same monthly increase as was reported in both September and October — but were slightly higher than the 0.2% rise forecast by economists.

    Stripping out volatile food and energy prices, core PPI rose 6.2% for the year ending in November, down from the revised 6.8% increase the previous month. Economists had forecast only a 5.9% increase.

    Core PPI posted a 0.4% increase from October, a far bigger rise than the revised 0.1% month-over-month rise in that previous month, and twice as big as the 0.2% rise forecast by economists.

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  • 5 Things to Do Now to Propel Your Business in 2023

    5 Things to Do Now to Propel Your Business in 2023

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    Opinions expressed by Entrepreneur contributors are their own.

    Entrepreneurship is a daily leap of faith. In times of economic uncertainty, that leap may feel like a dive off a cliff. We are in one of those times. It likely will take months to fully re-adjust to the forces that have pummeled the world’s economy, and to entrepreneurs, months can feel like years.

    With the right playbook, entrepreneurs can survive and thrive in whatever economic scenario. Here are five things you can do to propel your business ahead now and through the difficulties of business cycles for years to come.

    1. Learn the lessons of more challenging times

    A rocky economy presents a unique opportunity to make tough decisions about the business plan. Everything is open to reexamination. How has the market changed? Are your customers facing challenges that create new opportunities for your solutions? How do new conditions change your assumptions, and what actions do you need to take in response?

    Critically evaluate your product roadmap. Is this the time to pivot or become more aggressive with your current plans? Prioritize the highest margin features that are achievable in the next twelve months. Push out projects that don’t make that list, and re-assign resources accordingly. Re-assess pricing. Even as inflation tiptoes back from the highest levels in forty years, raw material and transportation costs remain way up. What will impact your customers if you adjust the pricing or add surcharges to offset these costs, at least temporarily?

    It’s been a rough year for hiring. Many companies took the talent they could get. If there are employees or gig workers who would fare better in a different job, now is the time to let them go. Make tough-minded corrections that will pay off overall — corrections that might be avoidable in less challenging times.

    Related: How to Turn Inflation and Recession into Your Largest Business Opportunity

    2. Tighten your grip on cash

    Venture capitalists are pulling back. In the third quarter, Crunchbase reported that funding for startups in U.S. and Canada fell 50% year-over-year. Valuations are down across the board. If you are fortunate enough to be a later-stage startup that benefited from VC largess in 2021, make your last raise last longer than intended.

    Keep your dry powder dry, and put off going for another round until the markets even out. Reemphasize the basics for early-stage companies with less market validation and greater distance between now and a potential exit. Delay all capital expenditures. Leverage the hybrid work model if possible, to reduce rent and other office expenses. Continue with Zoom or Google Meet. Now is not the time to rack up travel costs. Re-negotiate fees and terms with service providers. Seek credit terms with key suppliers, in a word, bootstrap.

    3. Talk to customers, in person. Now.

    How have the business needs of your customers — whether paying or beta — changed over the last 18 months? Are there benefits to your solution that have more recognized value now? Nearly every business, for example, from corporates to startups, has been forced to re-learn the lessons of supply chain management. Startups that can help their customers make better business decisions based on artificial intelligence (AI), reduce costs by improving inventory management or protect against out-of-stock scenarios by identifying and building relationships with new, more local sources of supply will have an edge.

    Related: Finding Validation in Serving Customers

    4. Non-dilutive capital

    According to PitchBook, venture capitalists are showing greater interest in portfolio companies “whose satellite, robotics and software tools can do double duty” in military and commercial markets. International conflicts are one reason, of course.

    Another is that the defense and military security industries are generally viewed as recession-proof. Our firm routinely encourages portfolio companies to consider non-dilutive funding from the Small Business Administration — grants to support cutting-edge technologies range from $150,000 to more than $1 million.

    Navigating the application process isn’t for the faint of heart. A startup must be realistic about the work involved, but in many states, there are resources to help. Besides the funding, severe responses to agency requests for proposals are reviewed and evaluated by technologists. At a minimum, this can be terrific feedback and a great source of industry contacts.

    5. Blue-chip cultures attract blue-chip talent

    Company culture can be an asset or a liability. An inclusive, rich culture helps key hires say yes. Finding stakeholders that believe what you believe and are aligned with your team’s values significantly improves the odds that they will stick with you in good times or bad.

    After months of “great resignation” fever, the over-heated demand for talent may be cooling off. Maybe offers aren’t as fast or grand as they were a year ago. Maybe Twitter won’t be the only advanced technology business to let people go. Regardless, the search for great talent isn’t a faucet that a young company turns off and on. A startup might modulate the timing or the number of hires but stand at the ready to recruit and filter for culture fit.

    Related: 3 Ways to Stay Competitive in the War for Talent

    With the right mindset and intentional approach, an entrepreneur can make 2023 a year to strive and thrive. As Yogi Berra, my favorite baseball player of all time, said, “Swing at the strikes.” In business, like baseball, the right swing can turn even the most challenging pitch into a hit.

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    Tom Walker

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  • Why we think we’re in a recession when the data says otherwise | CNN Business

    Why we think we’re in a recession when the data says otherwise | CNN Business

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    A version of this story first appeared in CNN Business’ Before the Bell newsletter. Not a subscriber? You can sign up right here. You can listen to an audio version of the newsletter by clicking the same link.


    New York
    CNN Business
     — 

    It seems like you can’t go anywhere these days without colliding headfirst into another ominous prediction of imminent recession. CEOs, portfolio managers, politicians, news pundits, second cousins and even Cardi B are sounding the alarm: Hear ye! Hear ye! Economic downturn awaits all who dare enter 2023!

    But those predictions contradict the slew of positive economic data we’ve seen: The job market is healthy, wages are growing, Americans are spending and GDP is strong. Business is also good: Companies are largely beating revenue expectations and reporting positive earnings results.

    The Federal Reserve’s regimen of painful interest rate hikes meant to tame persistent inflation could certainly cool the economy — as could events in Eastern Europe and China — but the economy has been able to successfully endure nearly a year of hikes and war in Ukraine with barely a dent.

    It’s possible that recession chatter is just that. Chatter.

    What’s happening: No one would ever accuse investors of shying away from their emotions: Passions run high on trading floors where feelings are often as valid as facts and fear and greed can sometimes run the show. Economists, on the other hand, are a data-dependent, stoic bunch. The US economy is not Wall Street, and market downturns are not recessions — but sometimes they get jumbled together in the public eye and their borders become hazy.

    That appears to be the case: The Fed’s attempts to tamp down sky-high inflation are having an outsized impact on markets — the S&P 500 is down about 18% so far this year — but there has so far been little impact on the US economy as a whole.

    This week, a number of top executives warned of an economic slowdown in 2023. CEOs from Goldman Sachs, JPMorgan, General Motors, Walmart, United and Union Pacific all said they were making plans for less-profitable times ahead. But hidden behind those “CEO PREDICTS RECESSION” headlines lies a lot of uncertainty.

    Rising interest rates and geopolitical chaos are pointing towards storm clouds on the horizon, JPMorgan CEO Jamie Dimon told CNBC on Tuesday: “When you look out forward, those things may well derail the economy and cause this mild-to-hard recession that people are worried about.” When pressed to predict what was coming, he deflected. “It could be a hurricane. We simply don’t know,” he said. What was left unsaid was that sunny days are also a possibility.

    Feedback loop: United Airlines CEO Scott Kirby also told CNBC on Tuesday that “we’re probably going to have a mild recession induced by the Fed.” He then went on to say that demand in his industry is higher than ever and United entered the fourth quarter with profit margins near all-time highs. He doesn’t see any indication of a slowdown on the horizon, either.

    So why does he think a recession is coming? “If I didn’t watch CNBC in the morning, the word ‘recession’ wouldn’t be in my vocabulary,” he said. “You just can’t see it in our data.”

    It’s almost as though Kirby predicted recession was imminent because other prominent voices predicted that recession was imminent. And it’s possible that we’re all stuck in a feedback loop that amplifies unjustified fear.

    Prophecies are often self-fulfilling. If CEOs believe recession is coming, they preemptively batten down the hatches — and that means less spending and more layoffs, which in turn can trigger an economic downturn.

    Goldman CEO David Solomon said Tuesday that the bank may soon terminate staff and exercise caution with its financial resources due to the mounting economic uncertainty. Morgan Stanley will reportedly slash its workforce by about 1,600 people, roughly 2% of the total.

    The upside: Some parts of Wall Street seem to be avoiding the recession fervor. ​​A recent study by Goldman Sachs found that smart money is betting on a soft landing. Money managers have been favoring industrial and commodity stocks that are sensitive to economic downturns. Stocks that act as a buffer during economic downturns like consumer staples and utilities have fallen out of favor at investment funds with assets totaling almost $5 trillion, Goldman strategists found.

    “Current sector tilts are consistent with positioning for a soft landing,” they wrote.

    Oil prices have tumbled to their lowest level since Christmas as worries about the health of the economy weigh on crude, overshadowing concerns about new restrictions imposed on Russian energy, reports my colleague Matt Egan.

    Brent crude, the world benchmark, lost nearly 3% on Thursday to around $77.45 a barrel.

    The oil selloff comes after the West hit Russia with new restrictions that, so far at least, do not appear to be derailing global energy markets.

    The European Union on Monday imposed a ban on seaborne oil imports from Russia, while the West placed a $60 cap on Russian oil. Both moves are designed to hurt Russia’s ability to finance its war in Ukraine, without hurting consumers by causing Moscow to slash oil production.

    “Russia oil is still on the market. As of now, it appears Russia is willing to play ball,” said Robert Yawger, vice president of oil futures at Mizuho Securities.

    The tame reaction from energy markets is a welcome gift for Americans heading on long drives this holiday season, as prices at the gas pump are expected to continue their recent plunge.

    US oil this week hit its lowest level since December 23, 2021, before recovering a little on Thursday to trade up 2% at $73.60 a barrel. That leaves oil down by 43% since briefly topping $130 a barrel in March amid fears about Russia’s invasion of Ukraine.

    The national average price for regular gasoline dipped by three cents to $3.33 a gallon on Thursday, according to AAA. Gas prices have dropped 14 cents in the past week and 47 cents in a month. The national average is a cent lower than a year ago when they averaged $3.34 a gallon.

    Britain is bracing for further disruption from strikes heading into the Christmas period, as ambulance drivers and nurses join rail operators and postal workers in the worst wave of walkouts the country has endured for at least a decade, reports my colleague Hanna Ziady.

    More than 20,000 ambulance workers, including paramedics and call handlers, are expected to strike on December 21 in a dispute over pay, according to statements from labor unions GMB, Unison and Unite.

    The strike will involve just under half of all ambulance drivers in England, Wales and Northern Ireland, although unions have said they will cover life-threatening emergencies during the walkouts. More than 10,000 ambulance workers represented by the GMB Union will strike again on December 28.

    Strikes have swept the United Kingdom this year, as workers grapple with a cost-of-living crisis and stagnating wages. Consumer prices rose by 11.1% in the year to October, a 41-year high. Once inflation is taken into account, average wages fell by the biggest drop on record earlier this year, and were still declining in the June-September period.

    According to The Times newspaper, one million UK workers are set to strike in December and January. Data from the Office for National Statistics shows Britain has already lost at least 741,000 days to strike action this year, putting it on track for its worst year of labor disputes in at least a decade.

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