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Tag: economic indicators

  • 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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  • Gas prices had a wild ride this year, making 2023 tough to predict | CNN Business

    Gas prices had a wild ride this year, making 2023 tough to predict | CNN Business

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    New York
    CNN
     — 

    US drivers have never seen a year quite like 2022.

    Wild price swings at the gas pump throughout the year make predicting prices for 2023 even more difficult.

    Russia’s invasion of Ukraine and the sanctions that it sparked on Russian oil sent the price of crude soaring in February at the beginning of the conflict. And even though relatively little Russian crude oil was ever exported to US refineries, the fact that oil prices are set on global commodity markets meant that US drivers were not spared a spike in gas prices.

    Prices were far more volatile throughout 2022 than they were in other recent years, both during and before the pandemic roiled oil markets.

    By June, the average US gas price crossed $5 a gallon for the first time ever, hitting a record $5.02 on June 14. But after that came a prolonged slide in gas prices, prompted by a number of factors, including the release of oil from the US Strategic Petroleum Reserve, concerns about the possibility of a recession in both the US and global economies, and a surge in Covid cases that caused renewed lockdowns in Asia. By the end of the year, the national average price of a gallon of regular gas had fallen to just over $3, well below the pre-invasion price, back to the average price of late summer of 2021.

    But there was not the same level of relief for the price of diesel. Diesel prices fell 20% from their peak in June, only about half the decline for gasoline during the same period. And while gasoline is cheaper than it was a year ago, diesel remains close to the pre-2022 record price set in 2008. Greater demand for North American diesel by Europe in the wake of the war in Ukraine kept diesel prices so high.

    While relatively few US drivers use diesel for their private cars, it is still the fuel used by most heavy trucks, so it had an impact on the average American’s wallet. Most trucking companies charge a fuel surcharge to their customers when diesel prices increase. Because virtually all goods purchased by Americans are on a truck at some point before those purchases, that was a factor driving inflation higher.

    The wild swings in oil and gasoline prices were a major factor in battered consumer confidence during the year. But those swings were not felt evenly across the nation and throughout the year. Many of the western states faced much higher gas prices because of more limited refining capacity. But there were a number of refinery accidents throughout the year that caused spikes in other regions as well. So, everyone saw wide swings in prices, though not always at the same time.

    There is also the wide variation in gas taxes, from 68 cents a gallon in California to only 15 cents a gallon in Alaska. Some states temporarily halted their state gas taxes during the year in the face of high prices.

    But the difference in average income in the different states meant that drivers in some of the states with relatively low prices had to work almost as many hours to buy 15 gallons of gas as those drivers in high-priced states.

    For example, in Mississippi, where the hourly average wage in November was $24.52, according to the Labor Department, it took 1 hour and 41 minutes of work to earn enough to pay for 15 gallons at $2.75 a gallon at year’s end. In California, where the average price of regular was $4.38 a gallon, or about 60% more than in Mississippi, the average hourly wage of $37.61 meant that they only had to work four more minutes to buy those 15 gallons.

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  • Why eggs have been so expensive this year | CNN Business

    Why eggs have been so expensive this year | CNN Business

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    New York
    CNN Business
     — 

    Several grocery items have gotten more expensive this year. But nothing comes close to the rise in egg prices.

    In the year through November, not adjusted for seasonal swings, egg prices jumped 49%, according to data from the Bureau of Labor Statistics.

    Since early this year, a deadly avian flu has been reducing poultry flocks — specifically turkeys and egg-laying hens. That’s one reason for the unrelenting increase in prices. But the situation has been exacerbated by elevated feed and energy costs for producers, in addition to high demand in the supermarket.

    Experts think that the peak has passed, but until these conditions improve, expect to pay more for eggs in the grocery store.

    Avian flu has been a problem in the US for several months now, but in recent weeks wholesale prices have been hitting records.

    As of last week, “prices have been escalating for nine consecutive weeks… setting new record highs on a daily basis since the week of Thanksgiving,” said Karyn Rispoli, editor of the Egg Price Current for Urner Barry, which offers food market data.

    On Friday, Midwest large eggs, the benchmark for eggs sold in their shells, hit $5.46 per dozen, Rispoli said, citing Urner Barry’s data. This time last year, Urner Berry’s data shows, that price was around $1.70.

    One reason for the increase? Not enough supply.

    “There’s simply not been enough production to support the incredibly strong retail demand we’ve seen this year,” Rispoli said. Supply has been constrained by the deadly bird flu.

    The current outbreak of Highly-Pathogenic Avian Influenza started in the US around February, and has persisted throughout the year. The last major bird flu outbreak in the United States was in 2015. But that one was contained by June of that year, noted Brian Earnest, lead economist for animal protein in CoBank.

    “This year, we’ve continued to see flock depopulations throughout the entire year, and there’s an expectation that we’ll continue to see it into 2023,” he said, noting that he expects “we’re going to see a tight supply situation and elevated pricing environment moving forward.”

    About 60 million birds are gone because of the disease so far, according to the USDA. Of those, about 43 million are egg-laying hens, according to USDA data provided by the American Egg Board, a farmer-funded group which markets eggs.

    Still, farmers have been able to moderate the losses. “Our producers learned a lot of hard lessons from 2015,” said Emily Metz, CEO of the American Egg Board. Some farmers have been able to repopulate their flocks, decreasing the net impact on flock sizes and egg supplies. As of early December, there were about 308 million hens laying eggs for consumption, down from about 328 million in December 2021, according to the USDA.

    The supply squeeze isn’t the only thing contributing to higher egg prices, said Metz. Higher fuel, feed and other producer cost are also driving up wholesale prices, she said. And then there’s that high demand for eggs, which spikes this time of year.

    People buy more eggs around the holidays, when they’re baking and cooking more, and eating breakfast at home more often.

    Wholesale prices tend to go up in the winter because of those habits, noted Earnest. That has “brought about a very strong market condition.”

    Year-round demand for eggs has also also been strong.

    Even while prices have soared, sales of eggs have only ticked down about 2% by unit in retail in the year through December 4th, according to data from IRI, a market research firm.

    Shoppers have been accepting high prices at the grocery store as they pull back on restaurant visits. And even though eggs have gotten more expensive, they still cost less than other proteins.

    A deadly avian flu has led to the death of millions of poultry this year.

    As that peak holiday demand passes, wholesale prices are expected to fall.

    “Based on current trade values and market conditions, it appears that the market may have finally reached its peak,” said Rispoli. Friday’s wholesale prices were the same as Thursday’s, the first time pricing held steady since October, she said.

    “Several suppliers have reported to us… that they are seeing their orders slow,” in the week leading up to Christmas, she added. By then, “most grocers have pulled in whatever inventory they’ll need for the holidays.”

    It might take another three to six months for prices to moderate in retail, said KK Davey, president of thought leadership at IRI and NPD, and even longer for prices to come down to what they were last year.

    “It may take some more time,” he said.

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  • Oil and Turkish stocks were 2022 market winners. Russia funds and crypto tanked | CNN Business

    Oil and Turkish stocks were 2022 market winners. Russia funds and crypto tanked | CNN Business

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    New York
    CNN
     — 

    Oil stocks skyrocketed in 2022, so it’s no surprise funds that track the energy sector were Wall Street winners this year. But the top fund of the year is a surprising one: It invests in a variety of companies based in Turkey.

    The iShares MSCI Turkey exchange-traded fund had more than doubled as of December 19, according to data from Morningstar Direct. The fund has big stakes in Turkish financial giant Akbank, Istanbul-based retailer Bim and the parent company of Turkish Airlines.

    Turkey has been hit hard by inflation, like the rest of the world, and its currency, the lira, has plummeted against the US dollar and other leading global currencies.

    So why the big gains?

    Turkey’s stock market thrived because the country is doing something most others aren’t: Its central bank has been slashing interest rates to prop up consumer spending. Turkish President Recep Tayyip Erdogan wants to keep rates super low. He has even fired several central bankers in the past few years who refused to lower rates.

    The Turkish economy has slowed recently as unemployment has risen, but the instability has not hurt Turkish stocks. The iShares Turkey ETF has also had a lift from higher energy prices, as refinery Tüpraş is a top holding.

    Other US and international oil funds and ETFs were also at the top of Morningstar Direct’s list. (Morningstar Direct provided CNN Business with a ranking of the best and worst mutual funds and ETFs for 2022, excluding so-called leveraged funds that make outsized bets on stock market indexes.)

    The United States 12 Month Natural Gas

    (UNL)
    , Energy Select Sector SPDR

    (XLE)
    and several oil/energy funds run by top investing firms like Fidelity, Vanguard and BlackRock’s

    (BLK)
    iShares are all up between 50% and 80% for the year.

    In this rocky year for stocks, there were significantly more losers than winners in the mutual fund and ETF world in 2022. The SPDR S&P 500 ETF

    (SPY)
    and Invesco QQQ

    (QQQ)
    , which track the S&P 500 and Nasdaq 100, were down 19% and 31% respectively.

    But no funds were hit harder than ETFs with exposure to Russia.

    Most funds with investments in top Russian companies either liquidated or halted trading following Vladimir Putin’s decision to invade Ukraine in late February, an act that essentially forced the United States, Europe and rest of the Western world to cut ties with Moscow and Russian businesses.

    Investments in Russia ETFs from iShares, VanEck and Voya were pretty much wiped out.

    The carnage in cryptocurrencies also hit several funds hard. Bitcoin prices were plunging even before the collapse of former crypto unicorn FTX. But the stunning demise of Sam Bankman-Fried’s company sent further shock waves throughout the industry.

    Funds from Osprey, Grayscale, VanEck (again), Global X, Bitwise, First Trust, Invesco and many other institutional investment firms all tumbled more than 70% in 2022.

    Other once-trendy funds were also hit hard this year.

    Several of the Ark ETFs run by Cathie Wood, which had significant exposure to Tesla

    (TSLA)
    , Coinbase, Zoom

    (ZM)
    , Roku

    (ROKU)
    and other momentum tech stocks that have dropped precipitously in 2022, were among the biggest fund losers.

    Numerous funds focusing on cannabis stocks also, ahem, went to pot this year. Cannabis ETFs from AdvisorShares, Global X and Amplify all plunged more than 60%. Even though more states are legalizing recreational and medicinal weed, intense competition in the business is making it difficult for cannabis companies to generate profits.

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  • ‘Life or death.’ As Britons buckle under the cost of living crisis, many resort to ‘warm banks’ for heat this winter | CNN

    ‘Life or death.’ As Britons buckle under the cost of living crisis, many resort to ‘warm banks’ for heat this winter | CNN

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    London
    CNN
     — 

    In a community center in central London, a young child plays in a makeshift area as her caregiver rocks her stroller and chats to a friend.

    The Oasis Centre in Waterloo sits in a four-story building that has a warm, inviting feeling, with plush chairs and lots of potted plants.

    But it’s not your regular high street hangout. This is a haven for families and local people to escape the bitter squeeze of Britain’s cost-of-living crisis – if only for the afternoon.

    Thousands of warm banks have opened their doors across the UK this winter, as household budgets are squeezed even further by spiking energy bills and inflation reaches a 40-year high, leaving many scrambling to pay for basic necessities. There are more than 3,000 registered organizations running warm banks in Britain, according to the Warm Welcome Campaign, an initiative that signposts community-led responses to the cost-of-living crisis.

    “A lot of people are struggling,” Charlotte, a community and families worker at the center, tells CNN. Her full name is not being disclosed for privacy reasons.

    “We haven’t even really got to the peak of the living crisis yet,” the 33-year-old mother-of-four adds. “No one should be choosing whether to put food on the table or to put the heating on.”

    The hub is funded by donations from individuals and local businesses, as well as grant incomes from charitable trusts.

    The cost of living has risen sharply since early 2021, according to data from the UK government. From October 2021 to October 2022, domestic gas and electricity prices increased by 129% and 66% respectively, the same research found.

    The average annual energy bill surged 96% from last autumn to £2,500 (roughly $3,000), with the UK government intervening to cap the unit cost of gas and electricity bills at that level until April 2023. However, the total amount consumers pay for their energy depends on their consumption habits, where they live, how they pay for energy and what type of meter they use, according to the UK’s regulator, Ofgem.

    A welcoming sign outside the Oasis Centre, an open to all communal area which acts as a 'warm bank', in London, on December 12.

    Charlotte, who works at and uses the warm space in Waterloo, says she limits her gas and electricity use in her flat. Instead of turning on the heating in the evening, she and her partner sit under quilts and use hot water bottles to stay warm, she says.

    She also anticipates her household energy costs increasing over Christmas, as her children, who are between 4 and 17 years old, spend more time at home during the school holidays. At the moment, Charlotte spends most days at the hub and said this habit will continue over the holidays to help alleviate her costs at home.

    Grace Richardson is an adult services manager at Future Projects in Norwich, in eastern England, an organization that offers health, housing and financial support to residents. She says her team started planning over the summer to provide a warm space in the organization’s Baseline Centre, located in an area with significant poverty.

    “This winter in particular, it’s extremely important that we’re offering a space that people can turn everything off at home and they can save money,” she tells CNN.

    “We’ve got people here working full time and they cannot make ends meet. That’s where the real difference is.”

    From young parents to pensioners to students in their 20s, Richardson says that people from all walks of life use the warm space, with about 25 attending each day. The warm bank, where staff serve meals, is subsidized by grant funding from the local council and private or corporate foundations, as well as donations from individuals.

    The café space at Future Projects' Baseline Centre in Norwich. The Centre, which serves as a community space, is currently undergoing renovation.

    Michael John Edward Easter, 57, says the service at the Baseline Centre has been a lifeline for him this winter.

    Easter, who has lymphedema in both legs and arthritis in one knee, is unable to work. Speaking to CNN earlier this month, he said he’d turned the heating on in his one-bedroom flat just twice so far this year to avoid spiking energy costs and compensate for a 50% increase in his weekly supermarket bill.

    He says he “was in a mess” when he first reached out to the Baseline Centre in January for welfare advice, as he was dealing with mobility challenges and craved a sense of community.

    “I was so ashamed and embarrassed, but I had to cry out for help,” he says. “I needed help and I just didn’t know where to turn to. If I’m totally honest, I’m very lonely.”

    Richardson suggests the need for warm banks is a result of government inaction.

    “I think that it highlights just how far removed our government is right now from the reality of real life. I think it screams … the divide between us and them, it’s only getting wider,” she says. “We keep referring to this as a cost of living crisis, as though it’s a period of time we’re going to go through and we will come out the other side. Will we? It’s life or death.”

    Energy prices have soared across Europe since fall 2021, driven in part by Russia’s war in Ukraine. But UK energy prices rose more sharply than in comparable economies such as France and Italy, analysts told CNN Business this summer.

    In November, UK Prime Minister Rishi Sunak and Finance Minister Jeremy Hunt announced higher taxes and reduced public spending in an effort to heave the country out of a recession forecast to last just over a year and shrink its economy by just over 2%, according to the Office for Budget Responsibility. The UK is the only G7 economy that remains smaller than it was before the coronavirus pandemic, according to the Office for National Statistics.

    Snow-covered roofs on terraced houses in Aldershot, UK, on December 12. UK power prices jumped to record levels just as a lengthy spell of freezing temperatures caused a surge in demand.

    The UK government also announced an Energy Bill Support Scheme worth £400 per eligible household, which will partially subsidize domestic energy bills from winter 2022 to 2023, as well as providing extra financial support to help pensioners pay their heating costs this winter under the Winter Fuel Payment scheme.

    In December more than one million households with prepayment meters did not redeem their monthly energy support vouchers – included in the government’s Energy Bill Support Scheme – the BBC reported.

    But Michael Marmot, a lead researcher in epidemiology and health inequalities, says years of austerity, paltry government support, cuts to spending on social welfare and infrastructure, and a lack of regulation in the UK’s energy market have plunged millions into fuel poverty.

    “Poverty has been building up over the last dozen years and getting worse,” says Marmot, director of University College London’s Institute of Health Equity.

    “We look the worst in G7 countries, we’re the only one in terms of recovery … that hasn’t gone back to where we were pre-pandemic. This is mismanagement on a colossal scale.”

    An estimated 3.69 million households in the UK were in fuel poverty as of December 2020 compared with 6.99 million households in December 2022, Simon Francis, who coordinates the End Fuel Poverty Coalition, told CNN.

    This figure is set to steadily increase, with more than three-quarters of UK households – 53 million people – forecast to be in fuel poverty by the new year, according to research by the University of York in northern England.

    The human rights organization Save the Children has distributed 2,344 direct grants to low-income families in the UK in the past year, the Guardian reported. The head of the charity also called on the government to provide more support for families, as it predicts acute financial hardship for millions in January.

    “What do you want a well-functioning society to do? At the minimum, people should be able to eat, to feed their families, have a safe dwelling … and a safe dwelling includes one that’s warm enough,” Marmot adds.

    Flyers advertising the warm spaces service alongside complimentary refreshments for visitors, at the Ashburton Hall community hub, operated by Greenwich Leisure Ltd., in Croydon, UK, on December 15.

    Susan Aitken, leader of Glasgow City Council in Scotland, says warm banks are “not a solution” to the cost of living crisis but rather “an emergency service.” The council has established more than 30 warm banks across the city in spaces including church halls, libraries, sports venues and cafes, and that number is expected to increase, according to Aitken. The service runs on council budgets and charitable donations.

    “The solution is for people to be able to stay in their own homes,” she says.

    “It’s bad enough that food banks have become a permanent fixture of communities across the UK now. To have places that people have to go to because they can’t afford to heat their own home is an absolute indictment (of government policy).”

    CNN has reached out to the UK government for comment, but it did not respond.

    Back at the Oasis Centre, locals show up for anything from knitting circles to after-school clubs offering free hot meals.

    Steve Chalke, the hub’s founder, says about 200 people use the facility daily for warmth. He says that he does not advertise the service as a warm bank because it is “dehumanizing.” Instead, he coordinates community-led events that are held in warm venues across the city.

    “The idea is to not inquire and to not ask,” he says. “It’s stigmatizing and it’s traumatizing, you know, so you end up feeling a non-person. So we want to take away that stigma in every way we can.”

    Steve Chalke, founder of the Oasis Centre, at the hub in Waterloo, London, on December 1.

    Francis, the End Fuel Poverty Coalition coordinator, says one of the most significant challenges to curbing fuel poverty is removing the taboo that people may feel when asking for support.

    “I think one of the problems with fuel poverty … is it is quite a hidden form of poverty. People kind of … try and cover it up and try and get by,” he says. “We’re not going to know the full extent of the pain that people are suffering this winter, because there will be ways that people will disguise what it is that they’re doing.”

    The mental health costs of fuel poverty are far-reaching, according to a 2020 report from the UCL Institute of Health Equity. The report said that young people living in cold homes are seven times more likely to have symptoms of poor mental health compared with those living in warm homes.

    “There’s surprisingly lots of people that do have work, but yet it’s not enough to keep afloat, at least without needing some help,” says Bintu Tijani, a mother-of-four who goes to the Oasis Centre at least three times a week to warm up. “It’s having a significant impact on people’s wellbeing, mental health and wellbeing.”

    Looking ahead to Christmas and the New Year, Francis says he is also concerned about the strain that treatment needed for medical conditions exacerbated or caused by cold weather will have on Britain’s National Health Service (NHS).

    “We’re still calling for the government to realize that if it doesn’t take action to support those who are the most vulnerable … it is going to see a huge increase in the number of people turning up at the NHS’ door to seek help because of the fact that they are now living in a cold, damp home and it is making them sick,” he says.

    Britain’s NHS is already under pressure amid staff shortages, historic nurses’ strikes over poor pay and working conditions, and a backlog of treatments resulting from the coronavirus pandemic.

    Aitken, the councilor in Glasgow, believes this Christmas will “be a pretty miserable time” for many.

    “A Christmas where you have to ration how long you can put your heating on in your home is not a good Christmas for anyone.”

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  • 5 people arrested after a 19-year-old was fatally shot at the largest shopping center in the US | CNN

    5 people arrested after a 19-year-old was fatally shot at the largest shopping center in the US | CNN

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    CNN
     — 

    Five people were arrested Saturday in connection with the fatal shooting of a 19-year-old the previous night at Minnesota’s Mall of America, the largest shopping center in the US, police said.

    The suspects – three 17-year-old males and two 18-year-old males – were arrested after police executed a search warrant on Saturday, Bloomington Police Chief Booker Hodges told reporters.

    Investigators believe the shooter is one of the adults who was arrested, Hodges said. They’re trying to determine if another shooter was involved. The suspects were expected to be charged with second-degree murder, according to Hodges.

    “We don’t know why this happened,” Hodges said. “And we don’t know the why, because people flat out are just not cooperating and people don’t want to talk.”

    Hodges had earlier said officers heard gunshots on the first floor of Nordstrom just before 8 p.m. local time on Friday and found a man shot multiple times in the store. ,

    On Saturday, Hodges said an officer working at the Watches of Switzerland store saw people come out of Nordstrom, ran into the store, and found the victim.

    Lifesaving measures were performed on the victim but were unsuccessful. A bystander who was grazed by a bullet is expected to survive, Hodges said.

    Minnesota Gov. Tim Walz said his office was working with local officials to provide support and resources, tweeting “the violence at MOA last night is absolutely unacceptable.”

    The 30-year-old mall, about 10 miles south of downtown Minneapolis, is a popular tourist destination in the Midwest, with tens of millions of visitors each year. The giant shopping complex boasts more than 500 stores, more than 50 dining options, dozens of attractions and two hotels, according to its owners.

    Friday’s shooting comes about five months after suspects fired gunshots into a crowded store at the mall. No injuries were reported in the August incident.

    Hodges said the fatal shooting was the first firearms-related homicide at the mall. There was a domestic-related fatal stabbing at the mall in 1999, he said.

    A preliminary investigation into Friday’s incident indicated there was an altercation between about five to nine people inside Nordstrom. Store surveillance video showed a male pulling out a gun and shooting the victim, Hodges said.

    “We have an incident where if someone decides that they want to pull out a gun and shoot somebody with complete lack of disrespect for human life, I still don’t know what we can do to stop that,” Hodges said.

    A motive for the shooting has not yet been determined.

    Jovonta Patton, a Billboard gospel singer, was filming an Instagram reel at a Gucci location inside Nordstrom when gunshots went off in the background.

    Patton quickly ran to the back room of the store to hide for about 15 minutes, where about six or seven others had also taken cover, he told CNN.

    Several New York Giants players were also inside the mall at the time of the shooting, according to NFL Network insider Tom Pelissero.

    The team was staying at a hotel nearby ahead of a game against the Minnesota Vikings in Minneapolis on Saturday. Giants spokesperson Pat Hanlon told The Associated Press on Friday the players who were at the mall during the shooting had made it back to the hotel, and everyone had been accounted for.

    CNN has reached out to the New York Giants for comment.

    Team announcer, Bob Papa, was also inside the mall during the incident.

    “Scary here @mallofamerica,” he tweeted Friday. “Shooting in mall. On lockdown at #TwinCitiesGrill. Two gunmen at least one victim.” An hour later, Papa said, “Safely out of mall and back at hotel. Prayers to victim.”

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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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  • An inflation measure watched by the Fed eases to 5.5%

    An inflation measure watched by the Fed eases to 5.5%

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    WASHINGTON — A measure of inflation closely watched by the Federal Reserve slowed last month, another sign that a long surge in consumer prices seems to be easing.

    Friday’s report from the Commerce Department showed that prices rose 5.5% in November from a year earlier, down from a revised 6.1% increase in October and the smallest gain since October 2021. Excluding volatile food and energy prices, so-called core inflation was up 4.7% over the previous year. That was also the smallest increase since October 2021.

    On a month-to-month basis, prices rose 0.1% from October to November after rising 0.4% the previous month. Core prices rose 0.2%.

    Inflation, which began surging a year and a half ago as the economy bounced back from 2020’s coronavirus recession, still remains well above the 2% year-over-year growth the Fed wants to see.

    The central bank has raised its benchmark interest rate seven times since March in an attempt to bring consumer prices under control.

    Higher prices and borrowing costs may be taking a toll on American consumers. Their spending rose just 0.1% from October to November and didn’t rise at all after adjusting for higher prices.

    “We expect a deceleration in household spending as the Fed hikes rates further in 2023,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

    Americans’ after-tax income, however, rose 0.3% in November even after accounting for inflation.

    The Fed is believed to monitor the Commerce Department’s inflation gauge that was issued Friday, called the personal consumption expenditures price index, even more closely than it does the Labor Department’s better-known consumer price index. CPI rose 7.1% in November from 12 months earlier, down from June’s 9.1% year-over-year increase, which had been the biggest such jump in four decades.

    The PCE index tends to show a lower inflation rate than CPI. In part, that is because rents, which have soared, carry double the weight in the CPI that they do in the PCE.

    The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture, for example, when consumers switch from pricey national brands to cheaper store brands.

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  • An inflation measure watched by the Fed eases to 5.5%

    An inflation measure watched by the Fed eases to 5.5%

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    WASHINGTON — A measure of inflation closely watched by the Federal Reserve slowed last month, another sign that a long surge in consumer prices seems to be easing.

    Friday’s report from the Commerce Department showed that prices rose 5.5% in November from a year earlier, down from a revised 6.1% increase in October and the smallest gain since October 2021. Excluding volatile food and energy prices, so-called core inflation was up 4.7% over the previous year. That was also the smallest increase since October 2021.

    On a month-to-month basis, prices rose 0.1% from October to November after rising 0.4% the previous month. Core prices rose 0.2%.

    Inflation, which began surging a year and a half ago as the economy bounced back from 2020’s coronavirus recession, still remains well above the 2% year-over-year growth the Fed wants to see.

    The central bank has raised its benchmark interest rate seven times since March in an attempt to bring consumer prices under control.

    Higher prices and borrowing costs may be taking a toll on American consumers. Their spending rose just 0.1% from October to November and didn’t rise at all after adjusting for higher prices.

    “We expect a deceleration in household spending as the Fed hikes rates further in 2023,” Rubeela Farooqi, chief U.S. economist at High Frequency Economics, wrote in a research note.

    Americans’ after-tax income, however, rose 0.3% in November even after accounting for inflation.

    The Fed is believed to monitor the Commerce Department’s inflation gauge that was issued Friday, called the personal consumption expenditures price index, even more closely than it does the Labor Department’s better-known consumer price index. CPI rose 7.1% in November from 12 months earlier, down from June’s 9.1% year-over-year increase, which had been the biggest such jump in four decades.

    The PCE index tends to show a lower inflation rate than CPI. In part, that is because rents, which have soared, carry double the weight in the CPI that they do in the PCE.

    The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture, for example, when consumers switch from pricey national brands to cheaper store brands.

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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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  • Housing slump likely to continue but some see hopeful signs ahead | CNN Business

    Housing slump likely to continue but some see hopeful signs ahead | 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
     — 

    Mortgage rates have ticked down recently, but are still up dramatically from a year ago thanks to the surge in long-term bond yields as the Federal Reserve hiked interest rates.

    While that’s already had a negative impact on the housing market, we’ll get more details this week about how much worse the damage has become.

    A long list of housing data is on tap. On Tuesday the US Census Bureau will report housing starts and building permits figures for November, followed by Friday’s release of new home sales data for the same month. In between that will be the November existing home sales numbers from the National Association of Realtors on Wednesday, as well as weekly data on mortgage rates and applications on Thursday.

    For the past few months, existing and new home sales have been steadily declining because of the spike in rates and the fact that home prices remain stubbornly high for first-time buyers. Housing starts and building permits have been choppier on a month-to-month basis, but those figures are both down from a year ago.

    Still, there are some promising signs that the worst could soon be over. Shares of Lennar

    (LEN)
    , one of the largest homebuilders in the US, rallied after reporting earnings last week. Revenue topped forecasts and the company’s guidance for the number of homes it expected to deliver next year was a little higher than analysts’ estimates as well.

    Lennar investors “may be looking ahead to 2023, perhaps crossing the valley from recession to potential recovery,” according to CFRA Research analyst Kenneth Leon.

    Others in the industry are cautiously optimistic as well.

    According to data from Amherst Group, an investment firm that buys single-family homes to rent out, it’s important to put the recent slide in prices in context.

    Amherst said home prices are still up about 40% from pre-pandemic levels. So even a further drop of about 15% would merely bring them to mid-2021 levels. In other words, this isn’t like the mid-2000s real estate bubble bursting.

    It’s also worth noting that the job market is still strong and wages are growing. What’s more, many consumers still have decent levels of excess savings thanks to pandemic era government stimulus.

    That all amounts to a few good reasons why the housing market could avoid a severe and prolonged slump.

    “The U.S. housing market is still supported by a tight labor market, the lock-in effect of low fixed mortgage rates for existing homeowners, tight mortgage underwriting, low leverage in the mortgage sector, and low housing supply,” said Brandywine fixed-income analyst Tracy Chen in a report this month.

    “We believe we can avoid a severe housing downturn like the one in the Global Financial Crisis,” Chen added.

    Others point out that even though housing sales may remain weak due to high home prices and still elevated mortgage rates, the good news is that most existing homeowners are still paying their monthly mortgage on time.

    Again, that’s a stark contrast from 2008 when many people with subprime loans or borrowers with poor credit histories were unable to keep up with their mortgage payments.

    “Housing is not bringing down the economy. Yes, the housing market has been impacted. But mortgage delinquencies are still low,” said Gene Goldman, chief investment officer at Cetera Investment Management.

    There aren’t a ton of companies reporting their latest earnings this week. But the few that are could give more clues about the financial health of consumers and the state of corporate spending.

    Cereal giant General Mills

    (GIS)
    will release earnings on Tuesday. Analysts are expecting a slight increase in both sales and profit. Consumers may be growing increasingly wary about inflation and the broader economy, but they’re still eating their Wheaties. Shares of General Mills

    (GIS)
    have soared nearly 30% this year.

    Analysts are less optimistic about the outlooks for sneaker king and Dow component Nike

    (NKE)
    , used car retailer CarMax

    (KMX)
    and memory chip maker Micron

    (MU)
    , whose semiconductors are used in devices ranging from cell phones and computers to cars.

    Earnings are expected to decline for these three companies. They won’t be the only leaders of Corporate America to report weak results.

    According to data from FactSet, fourth-quarter earnings for S&P 500 companies are expected to decline 2.8% from a year ago. Analysts have been busy cutting their forecasts too. John Butters, senior earnings analyst at FactSet, noted in a report that fourth-quarter profits were expected to rise 3.7% as recently as September 30.

    Investors are also going to be paying very close attention to what companies say in their earnings reports about their outlooks for 2023. Analysts currently are anticipating earnings growth of 5.3% for 2023. That could be too optimistic… especially if companies start cutting their own forecasts due to worries about the broader economy.

    “Odds of a recession are pretty high,” said Vincent Reinhart, chief economist and macro strategist at Dreyfus & Mellon. “That will have a knock-on effect for corporate earnings. Higher rates and weaker earnings suggest more pain for stocks.”

    Monday: Germany Ifo business climate index

    Tuesday: US housing starts and building permits; China sets loan prime rate; Bank of Japan interest rate decision; earnings from General Mills, Nike, FedEx

    (FDX)
    and Blackberry

    (BB)

    Wednesday: US existing home sales; Germany consumer confidence; earnings from Rite Aid

    (RAD)
    , Carnival

    (CCL)
    , Cintas

    (CTAS)
    , Toro

    (TTC)
    and Micron

    Thursday: US weekly jobless claims; US Q3 GDP (third estimate); earnings from CarMax

    (KMX)
    and Paychex

    Friday: US personal income and spending; US PCE inflation; US new home sales; US durable goods orders; US U. of Michigan consumer sentiment; Japan inflation; UK markets close early

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  • How much should you tip your barista? | CNN Business

    How much should you tip your barista? | CNN Business

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    New York
    CNN
     — 

    A new checkout trend is sweeping across America, making for an increasingly awkward experience: digital tip jars.

    You order a coffee, an ice cream, a salad or a slice of pizza and pay with your credit card or phone. Then, an employee standing behind the counter spins around a touch screen and slides it in front of you. The screen has a few suggested tip amounts – usually 10%, 15% or 20%. There’s also often an option to leave a custom tip or no tip at all.

    The worker is directly across from you. Other customers are standing behind, waiting impatiently and looking over your shoulder to see how much you tip. And you must make a decision in seconds. Oh lord, the stress.

    Customers and workers today are confronted with a radically different tipping culture compared to just a few years ago — without any clear norms. Although consumers are accustomed to tipping waiters, bartenders and other service workers, tipping a barista or cashier may be a new phenomenon for many shoppers. It’s being driven in large part by changes in technology that have enabled business owners to more easily shift the costs of compensating workers directly to customers.

    “I don’t know how much you’re supposed to tip and I study this,” said Michael Lynn, a professor of consumer behavior and marketing at Cornell University and one of the leading researchers on US tipping habits.

    Adding to the changing dynamics, customers were encouraged to tip generously during the pandemic to help keep restaurants and stores afloat, raising expectations. Total tips for full-service restaurants were up 25% during the latest quarter compared to a year ago, while tips at quick-service restaurants were up 17%, according to data from Square.

    The shift to digital payments also accelerated during the pandemic, leading stores to replace old-fashioned cash tip jars with tablet touch screens. But these screens and the procedures for digital tipping have proven more intrusive than a low-pressure cash tip jar with a few bucks in it.

    Customers are overwhelmed by the number of places where they now have the option to tip and feel pressure about whether to add a gratuity and for how much. Some people deliberately walk away from the screen without doing anything to avoid making a decision, say etiquette experts who study tipping culture and consumer behavior.

    Tipping can be an emotionally charged decision. Attitudes towards tipping in these new settings vary widely.

    Some customers tip no matter what. Others feel guilty if they don’t tip or embarrassed if their tip is stingy. And others eschew tipping for a $5 iced coffee, saying the price is already high enough.

    “The American public feels like tipping is out of control because they’re experiencing it in places they’re not used to,” said Lizzie Post, co-president of the Emily Post Institute and its namesake’s great-great-granddaughter. “Moments where tipping isn’t expected makes people less generous and uncomfortable.”

    Starbucks has rolled out tipping this year as an option for customers paying with credit and debit cards. Some Starbucks baristas told CNN that the tips are adding extra money to their paychecks, but customers shouldn’t feel obligated to tip every time.

    One barista in Washington State said that he understands if a customer doesn’t tip for a drip coffee order. But if he makes a customized drink after spending time talking to the customer about exactly how it should be made, “it does make me a little bit disappointed if I don’t receive a tip.”

    “If someone can afford Starbucks every day, they can afford to tip on at least a few of those trips,” added the employee, who spoke under the condition of anonymity.

    The option to tip is seemingly everywhere today, but the practice has a troubled history in the United States.

    Tipping spread after the Civil War as an exploitative measure to keep down wages of newly-freed slaves in service occupations. Pullman was the most notable for its tipping policies. The railroad company hired thousands of Black porters, but paid them low wages and forced them to rely on tips to make a living.

    Critics of tipping argued that it created an imbalance between customers and workers, and several states passed laws in the early 1900s to ban the practice.

    In “The Itching Palm,” a 1916 diatribe on tipping in America, writer William Scott said that tipping was “un-American” and argued that “the relation of a man giving a tip and a man accepting it is as undemocratic as the relation of master and slave.”

    But tipping service workers was essentially built into law by the 1938 Fair Labor Standards Act, which created the federal minimum wage that excluded restaurant and hospitality workers. This allowed the tipping system to proliferate in these industries.

    In 1966, Congress created a “subminimum” wage for tipped workers. The federal minimum wage for tipped employees has stood at $2.13 per hour — lower than the $7.25 federal minimum — since 1991, although many states require higher base wages for tipped employees. If a server’s tips don’t add up to the federal minimum, the law says that the employer must make up the difference. But this doesn’t always happen. Wage theft and other wage violations are common in the service industry.

    The Department of Labor considers any employee working in a job that “customarily and regularly” receives more than $30 a month in tips as eligible to be classified a tipped worker. Experts estimate there are more than five million tipped workers in the United States.

    Just how much to tip is entirely subjective and varies across industries, and the link between the quality of service and the tip amount is surprisingly weak, Lynn from Cornell said.

    He theorized that a 15% to 20% tip at restaurants became standard because of a cycle of competition among customers. Many people tip to gain social approval or with the expectation of better service. As tip levels increase, other customers start tipping more to avoid any losses in status or risk poorer service.

    The gig economy has also changed tipping norms. An MIT study released in 2019 found that customers are less likely to tip when workers have autonomy over whether and when to work. Nearly 60% of Uber customers never tip, while only about 1% always tip, a 2019 University of Chicago study found.

    What makes it confusing, Lynn said, is that “there’s no central authority that establishes tipping norms. They come from the bottom up. Ultimately, it’s what people do that helps establish what other people should do.”

    You should almost always tip workers earning the subminimum wage such as restaurant servers and bartenders, say advocates and tipping experts.

    The option to tip at coffee shops has become ubiquitous.

    When given the option to tip in places where workers make an hourly wage, such as Starbucks baristas, customers should use their discretion and remove any guilt from their decision, etiquette experts say. Tips help these workers supplement their income and are always encouraged, but it’s okay to say no.

    Etiquette experts recommend that customers approach the touch screen option the same way they would a tip jar. If they would leave change or a small cash tip in the jar, do so when prompted on the screen.

    “A 10% tip for takeaway food is a really common amount. We also see change or a single dollar per order,” said Lizzie Post. If you aren’t sure what to do, ask the worker if the store has a suggested tip amount.

    Saru Jayaraman, president of One Fair Wage, which advocates to end subminimum wage policies, encourages customers to tip. But tips should never count against service workers’ wages, and customers must demand that businesses pay workers a full wage, she said.

    “We’ve got to tip, but it’s got to be combined with telling employers that tips have to be on top, not instead of, a full minimum wage,” she said.

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  • Canadian firm blames Panama for closure of copper mine

    Canadian firm blames Panama for closure of copper mine

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    PANAMA CITY — A Canadian company claimed Friday the government of Panama has cut off talks with it, resulting in the closure of a huge copper mine.

    Canada’s First Quantum Minerals Ltd. said in a statement that it had been negotiating with the government of Panama, which wants vastly increased royalty payments of $375 million per year from the company.

    Analysts say the dispute threatens to have a huge economic impact in Panama, where the Cobre Panamá mine accounts for 3% of Panama’s gross domestic product, and poses a big challenge for the government, which will still have to administer the open-pit mine.

    First Quantum said in a statement Friday it had agreed to those payments, and “came very close to an agreement to secure the long-term future of the Cobre Panamá mine before the Government halted discussions.”

    The company said it wanted a protection clause in case metals prices or profitability at the mine drop, presumably to reduce royalty payments in that case.

    Panama’s president announced Thursday that the government ordered Frist Quantum’s local subsidiary to cease operations at the mine, the largest private investment in the history of Panama. The company says it has invested about $10 billion in the project since 1997.

    But it will not be easy to simply close such a huge operation, with a workforce of 40,000 and mine pits that need to be monitored and serviced.

    Environmental law expert Rodrigo Noriega said the government might have to take several moves.

    There are “different options, they could authorize the mine to continue operating while the talks go on, which would be a benevolent plan, or you could seek out a third company to administer it while the case with the mining company is resolved,” Noriega said.

    President Laurentino Cortizo’s Cabinet voted Thursday to order the mine to halt operations and instructed the Labor Ministry to take steps that would guarantee employment and labor protections for the mine’s workers.

    The government blamed the subsidiary, Minera Panama, saying it failed to meet commitments agreed to in January for a new contract that was “reasonable and satisfactory” for the Panamanian people.

    The government has said that on Jan. 17, Minera Panama agreed in a letter to a deal with the government that included the minimum annual payment of $375 million. Despite negotiations, the company did not sign the new contract by the Dec. 14 deadline set by the government.

    First Quantum has said the agreed-on figure “would make Cobre Panama one of the highest payers of royalties and taxes amongst the large copper producing mines in the Americas.”

    The company said “necessary legal protections on termination, stability and transition arrangements could not be agreed upon.”

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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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  • Why stocks keep tumbling: Good news and bad news are bad | CNN Business

    Why stocks keep tumbling: Good news and bad news are bad | CNN Business

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    New York
    CNN
     — 

    The good vibes on Wall Street are fading fast: US stocks tumbled yet again Friday as investors come to grips with a souring economy.

    Dow futures were down 400 points, or 1.3%. S&P 500 futures fell 1.4%, and Nasdaq Composite futures were 1.1% lower.

    CNN Business’ Fear and Greed Index, a measure of market sentiment, dipped perilously close to “Fear” Friday. The market had been in “Greed” mode for weeks.

    Stocks had been riding high this month on weaker-than-expected inflation and a number of stronger-than-expected reports on the broad economy and the job market. Investors were hopeful that the Federal Reserve could slow its historic pace of rate hikes and inflation could right itself sometime next year without tipping the economy into a recession.

    That excitement continued right up until Fed Chair Jerome Powell crashed Wall Street’s party Wednesday with some tough news: Economists at the Fed believe US gross domestic product, the broadest measure of America’s economy will barely grow next year. And they predict the US unemployment rate will rise to 4.6% by the end of 2023, which means roughly 1.6 million more Americans will be out of work.

    Compounding fears from those dour Fed forecasts was a worse-than-expected retail sales report Thursday that sent stocks plunging. The Dow lost 765 points Thursday, or 2.3%, the index’s worst day in three months. The S&P 500 lost 2.5% and the Nasdaq tumbled 3.2%, their worst days in a month.

    Now, economists at Moody’s Analytics predict America’s economy will grow at an annualized rate of just 1.9% in the fourth quarter, down from its previous estimate of 2.7%. Weak manufacturing and retail reports spooked Moody’s analysts, who also lowered their 2023 GDP forecast to just 0.9%, much lower than 2022’s 1.9% estimate.

    “This leaves little room for anything to go wrong,” Moody’s economist Matt Colyar wrote in an analysis.

    Sentiment on Wall Street can change on a dime, and this week is clear evidence of that: The Dow has tumbled about 1,100 points, or 3.4%, since the Fed’s policy update at 2 p.m. ET Wednesday, and the market hasn’t even opened yet Friday. Not helping stocks: It’s December. Many traders are on vacation, volume is low and tiny moves can get exacerbated.

    But, as my colleague Matt Egan notes, the market may be in a lose-lose situation. Good economic news has been bad news for investors, because the Fed is trying to cool down the economy as part of its inflation-fighting campaign. But bad economic news is also bad for investors – and everyone – because it raises the risk of a recession.

    – CNN’s Matt Egan 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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