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Tag: economy and economic indicators

  • Biden reshuffles economic team midway through first term | CNN Politics

    Biden reshuffles economic team midway through first term | CNN Politics



    CNN
     — 

    President Joe Biden’s economic team is taking new shape midway through his first term and as he gears up for an expected reelection bid, with the White House Tuesday officially naming Federal Reserve Vice Chair Lael Brainard as his top economic adviser and nominating Jared Bernstein to serve as his chair for the Council of Economic Advisers.

    “Over the past two years, my economic strategy has delivered historic results for the American people. This team will be committed to implementing that strategy, while managing the transition of our historic economic recovery to steady and stable growth. They will work tirelessly to ensure every American enjoys a fair return for their work and an equal chance to get ahead, and that our businesses can thrive and outcompete the rest of the world. Let’s finish the job,” Biden said in a written statement announcing the moves.

    The decision to tap the current second-in-command at the Fed is also significant since it will open up a spot at the Federal Reserve for the president to fill.

    A key and high-profile aide who was the first Black woman to chair the Council of Economic Advisers, Cecilia Rouse, has long planned to return to Princeton University next month.

    Biden confirmed earlier this month that Brian Deese, his National Economic Council director, would also be leaving his role.

    As head of Biden’s economic council, Deese has been the driving force behind the administration’s economic policy and legislative agenda for two years and has been one of the most powerful NEC directors in recent memory. Biden, when confirming Deese would step down, touted his “critical” role in the passage of key legislation, including the bipartisan infrastructure law, the Covid-19 relief bill, the CHIPS and Science Act and the health care and climate package – all pieces of legislation what will likely feature greatly in any future campaign.

    “Cecilia Rouse and Brian Deese are trusted advisors that I have relied on to help craft my economic agenda, and our country owes them a debt of gratitude for their service. As they transition out of the White House, I am pleased to announce new leaders who will continue to deliver on my economic vision and help finish the job,” Biden said.

    The president is also reshaping other elements of his economic team, picking Bharat Ramamurti to serve as an adviser for strategic economic communications, moving Heather Boushey to serve as the chief economist to the Invest in America Cabinet and selecting the top economist at the Department of Labor, Joelle Gamble, to be the new deputy director of the National Economic Council.

    Brainard was a Treasury official during the Obama administration and has been a Fed governor since 2014. Jared Bernstein, long expected to take over for Rouse, is a current member of the Council of Economic Advisors and longtime Biden economic adviser.

    The personnel shakeups are among a pattern of shifts across the White House and the administration, as staff and Cabinet officials mull a potential change midway through Biden’s first term and come at moment the US economy has shown a level of durability in job gains and growth that has surprised analysts.

    And yet the president faces many challenges ahead, including high inflation, a looming debt-ceiling crisis, and an economic agenda expected to stall in the face of a Republican-controlled House of Representatives.

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  • UK strikes hit a 30-year high as inflation erodes pay | CNN Business

    UK strikes hit a 30-year high as inflation erodes pay | CNN Business


    London
    CNN
     — 

    The United Kingdom lost more working days to strikes in 2022 than in any year since 1989, as employees walked out in large numbers over pay amid soaring living costs.

    Figures from the Office for National Statistics (ONS) showed Tuesday that nearly 2.5 million working days were lost to industrial action between June and December, the highest since 1989 when 4.1 million days were lost.

    The ONS said 843,000 working days were lost in December 2022 alone — the highest monthly number since November 2011.

    Workers in health care, communications and transportation were among those who walked out in the run-up to Christmas. The Royal College of Nursing, which represents nearly 500,000 nurses, midwives and health care assistants, staged its first ever strike in December.

    Strike action has dragged into the new year, disrupting schools and public transport. As many as half a million workers, including teachers, staged the biggest single day of walkouts in more than a decade on February 1.

    Workers are demanding higher wages as they grapple with a cost-of-living crisis, with inflation near its highest level in four decades. Many public sector workers have been offered raises of 4% or 5% for the current financial year, far lower than the 10.5% annual inflation rate in December. The ONS will publish inflation figures for January on Wednesday.

    The UK government has so far refused to grant public sector workers higher pay awards, arguing that doing so risks making the inflation problem worse. The government is instead introducing laws that will make it harder for key workers to strike.

    The ONS said Tuesday that after taking inflation into account, growth in average regular pay, which excludes bonuses, fell by 2.5% between October and December 2022 compared with the same period in 2021. That’s among the largest drops since records began in 2001.

    For public sector workers, the decline in real pay will have been worse as, without adjusting for inflation, their wages grew a lot less compared with private sector earnings. Average regular pay growth for the public sector was 4.2% in the final three months of last year compared with the same period in 2021, versus growth of 7.3% for the private sector.

    The ONS said private sector pay growth was at its strongest outside the height of the coronavirus pandemic.

    “Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period,” ONS director of economic statistics Darren Morgan said in a statement. “Overall, pay, though, continues to be outstripped by rising prices.”

    A separate survey published Monday by the Chartered Institute of Personnel Development (CIPD) found that UK employers expect to give employees a median pay rise of 5% this year, the highest increase in 11 years.

    “However, median anticipated public sector pay rise expectations of 2% lag those in the private sector at 5%, with the gap providing the context for ongoing discontent and strikes among key public sector workers,” the CIPD said.

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  • Microsoft and Google promised to invest in these communities. Now they’re backtracking | CNN Business

    Microsoft and Google promised to invest in these communities. Now they’re backtracking | CNN Business



    CNN Business
     — 

    When Microsoft President Brad Smith announced in February 2021 that the tech giant had purchased a 90-acre plot of land in Atlanta’s westside, he laid out a bold vision: The company, he said, would invest in the community and put it “on the path toward becoming one of Microsoft’s largest hubs” in the United States.

    The announcement, which was met with enthusiastic coverage in local media, promised the construction of affordable housing, programs to help public school children develop digital skills, support for historically Black colleges and universities, new funding for local nonprofits, and affordable broadband for more people in Atlanta.

    “Our biggest question today is not what Atlanta can do to support Microsoft,” Smith wrote. “It’s what Microsoft can do to support Atlanta.”

    Two years later, Microsoft announced a series of cost-cutting efforts, including eliminating 10,000 jobs, making changes to its hardware portfolio and consolidating leases. As part of those moves, Microsoft put development of its Atlanta campus on pause this month, a spokesperson confirmed to CNN.

    The decision to pause plans feels like a “broken promise” that caught many residents of the predominately Black neighborhood where Microsoft planned to build the campus off-guard, according to Jasmine Hope, a local resident and chair of her neighborhood planning unit.

    “All the promises of, ‘We’re going to put a grocery store here, we’re going to bring jobs to the area, we’re going to have a pipeline between the schools and Microsoft to create jobs,’ all that seems like it’s out the window,” she told CNN. “But the consequences are still being felt by the neighborhood.”

    A Microsoft spokesperson said the land is not for sale, “and we still aim to set aside a quarter of the 90 acres for community needs.” Microsoft will continue efforts “to create a positive impact in the region and be a contributing community partner,” the spokesperson added.

    As the tech industry boomed in the United States throughout the past decade, cities across the country vied to become tech hubs. State and city officials competed for Silicon Valley giants to bring offices, data centers and warehouses to their communities in hopes of creating jobs and bringing other benefits that cash-strapped local governments might struggle to fund on their own. In perhaps the biggest example of this, 238 communities submitted bids in 2017 to be home to Amazon’s second headquarters, with some offering major tax breaks or even to rename land “city of Amazon.”

    But now, a number of large tech companies are rethinking their costs, after years of seemingly limitless hiring and expansion. The reason: a perfect storm of shifting pandemic demand for online services, rising interest rates and fears of a looming recession. Much of the focus of this tech downturn so far has been on the long list of layoffs, but companies have also teased plans to dramatically reduce real estate expenses across the country.

    Facebook-parent Meta, Microsoft, Salesforce and Snap have each shuttered offices or announced plans to cut back on real estate, according to recent corporate announcements, filings and local news reports. Some tech companies have said they’ll let leases expire or go fully remote. Meta CEO Mark Zuckerberg said his company is “transitioning to desk-sharing for people who already spend most of their time outside the office.”

    The effect of those pullbacks can already be felt across the country, from New York City, where Meta reportedly scaled back its real estate footprint in the Hudson Yards neighborhood, to San Francisco, where some local businesses say they are facing the ripple effects of remote work and multiple tech office closures.

    “Tech had pretty much gained market share to become the top industry leasing office space across the US, and that started back in 2012, 2013,” said Colin Yasukochi, the executive director of the Tech Insights Center at CBRE, a commercial real estate firm. In 2022, however, finance and insurance companies overtook the tech industry for the highest share of US office leases, according to CBRE’s data.

    “Really, over the last couple of quarters, you’ve seen the tech industry decrease its leasing activity pretty significantly,” he added. “That’s really, I think, the biggest impact that you’ve seen regarding these layoffs and austerity measures: the leasing activity pullback by the tech industry.”

    But the impact of that pullback is perhaps most stark in the communities with less robust tech hubs.

    Quarry Yards, on Atlanta’s westside, has been a source of some promise and dashed hopes. In 2017, Georgia officials included the formerly industrial area on a list of sites where Amazon could build its second headquarters, as part of its pitch to the e-commerce giant. Amazon ultimately went with other cities, but four years later, another Seattle tech giant scooped up the land.

    After the purchase, Microsoft described Quarry Yards as a place with “wide, tree-lined streets” but “broken sidewalks.” The area, Microsoft said, is “food desert with no grocery store, pharmacy or bank.”

    The community, according to Hope, consists of “a lot of elderly, Black neighbors.” These residents, she said, have been worried about gentrification and displacement for years as housing prices and property taxes surge in the metro Atlanta region.

    Jasmine Hope, PhD, Department of Rehabilitation Medicine, Motions Analysis Laboratory, Emory University.

    “Just the announcement of Microsoft coming into town” brought new buyers and developers into the area, she said, exacerbating these longstanding concerns. Data from Zillow indicates average home values in the neighborhood surged more at a significantly faster pace between January 2020 and December 2022 than Atlanta as a whole.

    But residents also had cautious optimism about the benefits Microsoft promised to the community, according to Hope. Now, the community is left with higher prices but none of the promised improvements or economic opportunities. “We’re not going to see any benefits and only deal with the consequences,” she said.

    “It feels like the community is now going to be burdened by this,” she said.

    Hope’s community isn’t alone in confronting the whiplash of Silicon Valley’s real estate pullback. Late last month, the city of Kirkland, Washington, said in a press release that it had been notified by Google that the company will not be proceeding with its proposed redevelopment project that initially aimed to bring a massive new campus to the city.

    In a Kirkland City Council meeting held just last summer, representatives from Google teased a slew of community benefits from the build — including infrastructure improvements, such as the creation of bike lanes and pedestrian trails, as well as a more than $12 million investment in affordable housing. The planning process between Google and the city had been taking place since the fall of 2020.

    “As we continue to shape our future workplace experience, we’re working to ensure our real estate investments meet the current and future needs of our workforce,” Ryan Lamont, a Google spokesperson, told CNN in a statement. “Our campuses are at the heart of our Google community, and we remain committed to our long-term presence in Washington state.”

    Even San Francisco, whose fortunes are tied to Silicon Valley more than any other city, is showing signs of strain from the one-two punch of the shift to remote work and office closures.

    Office vacancy rates in the city hit a record high of 27.6% in the final three months of last year, according to CBRE, compared to the pre-pandemic figure of 3.7%.

    “The previous high was about 20%, after the Dotcom bust,” Yasukochi, of CBRE, told CNN. “We’re at the highest point that our records have shown.”

    The rise of remote and hybrid work had been a major driver in tech giants cutting back on their real estate investments, Yasukochi said. Then came the recent cost-cutting measures.

    Local business owners say they are now feeling the impacts.

    An office sits vacant on October 27, 2022 in San Francisco, California. According to a report by commercial real estate firm CBRE, the city of San Francisco has a record 27.1 million square feet of office space available as the city struggles to rebound from the Covid-19 pandemic. The US Census Bureau reports an estimated 35% of employees in San Francisco and San Jose continue to work from home.

    Mark Nagle, the owner of a 21-year-old Irish pub and restaurant in downtown San Francisco called The Chieftain, told CNN he has witnessed a “cascade of closures” of tech and corporate offices in his neighborhood recently — including the shuttering of a Snapchat office just down the street.

    “We’re in a great location normally, we’re downtown,” Nagle said. But now his business is surrounded by several vacant retail spaces and multiple lots that are under construction.

    The number of workers regularly coming into the area has not bounced back since the start of the pandemic, Nagle said, and neither has his business. Nagle said that in addition to workers stopping by for a drink at the end of their days, nearby companies would frequently hold events and meetings at The Chieftain, but that those have also largely dropped off.

    At least six bars and restaurants in a two-block radius of him have shuttered in recent years, he said.

    “You’re making do with less and it’s made the business so much more unpredictable,” he added. “And we’re one of the lucky ones that can keep their doors open.”

    – CNN’s Clare Duffy contributed to this report.

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  • Japan nominates new central bank leader in possible move away from ultra-easy policy | CNN Business

    Japan nominates new central bank leader in possible move away from ultra-easy policy | CNN Business


    Hong Kong
    CNN
     — 

    The Japanese government has nominated Kazuo Ueda to lead its central bank, in a surprise move that could pave the way for the country to wind down its ultra-loose monetary policy.

    If appointed, Ueda — a 71-year-old university professor and a former Bank of Japan (BOJ) board member — would succeed Haruhiko Kuroda, the country’s longest serving central bank chief and the architect of its current yield curve control policy (YCC). His term ends on April 8.

    Ueda’s nomination must be approved by both houses of parliament, each is currently controlled by the ruling coalition, before the government of Prime Minister Fumio Kishida can formally appoint him for a five-year term.

    Analysts believe Ueda’s appointment could increase the odds that the BOJ will exit its prolonged ultra-easy monetary policy, which is increasingly difficult to maintain at a time when inflationary pressure is rising and other central banks are hiking rates aggressively.

    “Investors reckoned that the pick of Ueda-san is a signal to pave the way [for BOJ] to exit the ultra-loose policy,” said Ken Cheung, chief Asian foreign exchange strategist at Mizuho Bank.

    “[The] chance for ending the yield curve control policy and negative interest rate[s] has been increasing,” he said, but adding that the BOJ’s monetary policy will likely stay “accommodative.”

    The yield curve control policy is a pillar of the central bank’s effort to keep interest rates low and stimulate the economy.

    Accommodative is a term used to describe monetary policy that adjusts to adverse market conditions and usually involves keeping interest rates low to spur growth and employment.

    The BOJ has implemented an ultra-easy policy since Kuroda took the reins in 2013. In 2016, after years of aggressive bond buying failed to push up prices, it introduced the yield curve control program, where it bought targeted amounts of bonds to push down yields, in order to stoke inflation and stimulate growth.

    As part of that program, the central bank targeted some short-term interest rates at an ultra-dovish minus 0.1% and aimed for 10-year government bond yields around 0%.

    But as prices rose and interest rates elsewhere went up, pressure has grown on the BOJ to wind down YCC.

    In December, the BOJ shocked global markets by allowing the 10-year government bond yield to move 50 basis points on either side of its 0% target, in a move that stoked speculation the central bank may follow the same direction as other major economies by allowing rates to rise further.

    The unexpectedly hawkish decision caused stocks to tumble, while sending the yen and bond yields soaring.

    But Kuroda later dismissed a near-term exit from his ultra-loose monetary policy.

    When local media first reported Friday that Ueda would be nominated as the next BOJ governor, the yen jumped against both the US dollar and the euro.

    “Investors interpreted the news as signaling a hawkish turn,” said Stefan Angrick, senior economist at Moody’s Analytics.

    “But it will take time for the implications to become clear,” he said. “With demand-driven price pressure still preciously scarce and stronger wage gains yet to materialize, it’s hard to see the BOJ rush towards tightening under a new governor.”

    On Friday, Ueda told reporters that he thinks “the current BOJ policy is appropriate” and “monetary easing must carry on given the current state.”

    In an opinion piece published last July in the Nikkei, Ueda warned against prematurely raising rates.

    However, in the same piece, he also noted the BOJ should prepare an exit strategy, saying that a “serious” examination is needed at some point on the unprecedented monetary easing framework, which has continued far longer than most would expect.

    “We don’t think he is expected to immediately change the BOJ’s policy stance based on his previous remarks,” said Min Joo Kang, senior economist at ING Group, in a recent research report.

    “He [Ueda] is likely to shift monetary policy only gradually and the BOJ’s data dependency – inflation and wage growth – will become more important.”

    Japan’s economy remains weak, highlighting the tough task ahead for Ueda.

    According to the latest data from Tuesday, Japan’s economy grew by an annualized 0.6% in the fourth quarter of 2022, reversing a 0.8% contraction in the third quarter. But it was much weaker than the consensus forecast of 2% expansion.

    “We believe that the modest recovery will continue this year, but today’s data support[s] the Bank of Japan’s argument that the recovery is still fragile and that easy monetary policy is needed,” said ING analysts. “The incoming new governor will find it difficult to start any normalization.”

    – CNN’s Junko Ogura contributed reporting

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  • This is the economic buzzword we should all be paying attention to | CNN Business

    This is the economic buzzword we should all be paying attention to | CNN Business


    New York
    CNN
     — 

    If “transitory” was the buzzword for inflation watchers in 2021, this year it’s “supercore.”

    Federal Reserve officials and economists were taken to task for dismissing inflation as temporary earlier in the pandemic, so now they’re slicing and dicing inflation data in different ways. The new favorite: supercore inflation.

    Supercore inflation refers to prices that rise when workers get paid more for their services. Think haircuts, electrical work and gardening. Those prices are typically less volatile than food and energy and can better indicate the direction of prices in the US economy.

    Core services that exclude housing “may be the most important category for understanding the future evolution of core inflation,” Fed Chair Jerome Powell said recently.

    That’s a problem: Supercore prices have remained stubbornly high in recent years.

    Over the past year, an alphabet soup of otherwise wonky economic statistics have become household names as American families suffered through the worst inflation in 40 years: CPI (Consumer Price Index), PPI (Producer Price Index), PCE (Personal Consumption Expenditures and ECI (Employment Cost Index).

    Each of these reports has shown how prices for food and fuel and housing have risen much faster than wages for most of the past year, driven by huge consumer demand coupled with supply chain snags and the war in Ukraine.

    The most mainstream of the monthly inflation gauges, CPI, is due out Tuesday. January CPI is expected to have moderated to 6.2%, down from the 6.5% rate in December and far below the summer peak of 9.1%. Core inflation is forecast to have slowed to 5.5% from 5.7% in December.

    Taken together, the raft of inflation data shows prices still uncomfortably high, but moving in the right direction.

    But White House economists last week highlighted a wage-growth statistic that suggests inflation may not be as strong as the Fed believes. The supercore wage reading has fallen from 8% to just over 5% in January, according to the White House Council of Economic Advisers.

    “Supercore inflation was a strong 6.4% on a year-over-year basis through December 2022, but it is moderating,” said Mark Zandi, Moody’s chief economist. For the three months through December, supercore inflation is up only 2.4% annualized, and just 0.9% annualized in the month of December.

    Wage growth is also moderating, Zandi said, a good sign for future supercore inflation.

    “The Fed focuses on supercore because it includes those prices that are more likely to be driven by the cost of labor, which the Fed can more directly impact through changes in interest rates,” he said.

    “Supercore inflation is still way too hot, but it has begun to cool off, and all signs point to it and overall inflation getting back to something more comfortable over the coming 12-18 months,” Zandi told CNN.

    While helpful for economists to drill down on inflation’s drivers, there is a practical drawback to stripping out volatile categories like housing, food and energy: These are non-negotiable expenses for most households.

    “Pervasive price pressures across categories of spending that are necessities — shelter, food, electricity, apparel, vehicle insurance, and household furnishings and operations — show that broad-based improvement on the inflation front is still lacking,” said Greg McBride, chief financial analyst at Bankrate.

    So there is a risk that January CPI could disappoint, McBride cautioned. Some of December’s rosy headlines came from falling gas prices, which have since reversed.

    “The CPI is likely to underscore the feeling that inflation pressures aren’t going to come down easily or in a straight line,” McBride said. “The progress is going to be tougher to come by than what the trend of the past several months would have us believe.”

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  • McCarthy leans on ‘five families’ as House GOP plots debt-limit tactics | CNN Politics

    McCarthy leans on ‘five families’ as House GOP plots debt-limit tactics | CNN Politics



    CNN
     — 

    The White House and Senate Democrats have calculated that Speaker Kevin McCarthy won’t have enough votes to raise the national borrowing limit and will end up caving to their demands to avoid a first-ever debt default – with no strings attached or any conditions whatsoever.

    House Republicans are trying to prove them wrong.

    Behind the scenes, McCarthy is beginning to chart out a new strategy to ensure the House GOP can muster 218 votes to raise the national debt ceiling and tie that to an array of cuts to federal spending, as the standoff with the White House shows no signs of easing.

    In the speaker’s office last week, leaders of the so-called “five families” of the House GOP – representing the various ideological wings of the conference – met for the first time to discuss the range of possibilities and to kick around ideas about raising the debt limit, according to multiple attendees. McCarthy didn’t attend the session but enlisted a close confidant, Louisiana Rep. Garret Graves, to lead the discussions, with top committee chairmen and other members of leadership also participating. Talks are expected to pick up when the House returns from a two-week recess after the Presidents Day holiday.

    The goal, according to multiple Republicans, is to begin to develop a consensus about a proposal that can pass the House with GOP votes and strengthen their conference’s negotiating position as Washington stares into a looming debt default this summer. The belief among Republicans is such a plan would force the White House and Senate Democrats to back off their insistence that they will only accept a “clean” debt ceiling increase without any spending cuts attached.

    The move gives a window into McCarthy’s management of his razor-thin majority, allowing his most conservative members to try to find consensus with more moderate lawmakers – replicating a dynamic that ultimately allowed him to win the speakership after a messy, 15-ballot fight. But it also is a break to how one of his predecessors, John Boehner, dealt with the debt limit the last-time the country nearly defaulted – in 2011 when many of the decisions were made by the leadership, prompting a revolt among the rank-and-file.

    The private GOP talks have been positive so far, attendees said, even as they acknowledged they are in the very early stages, weighing a range of potential budget cuts and not nearing any agreement yet.

    Rep. Patrick McHenry, the North Carolina Republican who chairs the House Financial Services Committee, said the meeting amounted to a “healthy discussion” that showed “goodwill” in an effort “to come up with an approach that unifies Republicans and enables us to unlock the rest of the legislative year.”

    “That’s the purpose of the conversation: How do you move the debt limit out of the House of Representatives?” McHenry told CNN.

    The discussions are expected to run parallel to talks between McCarthy and President Joe Biden, with the speaker making clear he believes the next step will be to continue discussions with Biden. The group could potentially help McCarthy present a GOP proposal to the president in future conversations and help vet any White House offer.

    But despite both Biden and McCarthy sounding positive after their first face-to-face encounter earlier this month, there’s been little tangible progress toward finding a deal as Democrats continue to hold firm to their demands to raise the borrowing limit with no horse-trading with Republicans.

    Republicans believe that the White House is slow-rolling Biden’s discussions with the speaker in order to ratchet up pressure to pass a clean debt ceiling increase, something McCarthy has publicly and privately rejected.

    “They say they don’t want to put the economy in jeopardy,” McCarthy told CNN when asked about the lack of progress with Biden since the last White House meeting. “I think that would be the wrong approach.”

    Behind the scenes, McCarthy has been proactive in ensuring regular communication between the five families, a nickname from the “The Godfather” of warring New York mob families who tried to maintain the peace.

    “There’s a level of trust and engagement within the five families that I have not seen in the previous four years,” said South Dakota Rep. Dusty Johnson, chairman of the Main Street Caucus, a center-right group. “We’re working really well together.”

    Rep. Dave Joyce of Ohio, who leads the pragmatic-minded Republican Governance Group, said the group meeting with Graves was “very productive, and we will continue to have those until we come up with something.”

    Another reason Republicans are eager to outline their vision: Democrats have hammered them for not having a plan – and have tried to speak for them. Indeed, perhaps the most memorable moment of Biden’s State of the Union address was when the president suggested Republicans want to cut Social Security and Medicare, eliciting jeers and boos from GOP lawmakers in the audience.

    “It’s intellectually dishonest,” Joyce said, noting that McCarthy has said repeatedly that Medicare and Social Security cuts are off the table.

    Some Democrats have speculated that they could peel off at least six House Republicans to back a so-called discharge petition – a lengthy process that forces a bill to the floor if 218 lawmakers sign on – once they get closer to a debt default and still don’t have a resolution.

    But moderate Republicans are ruling out using the discharge petition for a clean debt ceiling hike and are insisting on extracting spending cuts in exchange for raising the nation’s borrowing limit – a sign that the conference is in lockstep with McCarthy’s negotiating strategy.

    “If it’s tied to a clean debt ceiling, I wouldn’t do that,” said Rep. Don Bacon, who represents a Biden-won district in Nebraska. “The President’s got to give us some compromise.”

    The hardline House Freedom Caucus, which ended up forcing McCarthy to make key concessions to win the speakership, is one of the five groups taking part in the debt ceiling talks.

    Rep. Scott Perry, a Pennsylvania Republican who chairs the group and attended the five families meeting, said there’s a consensus on this point: “We’re not going to accept ‘no negotiation,’” a reference to the White House’s position. “And there’s not going to be a clean debt ceiling, alright?”

    South Carolina Rep. Ralph Norman, also a member of the hardline group, agreed.

    “We got to get 218,” he said of the early talks. “We’re trying to get the framework. We want all buy in.”

    Norman argued that it didn’t make sense for the groups to publicly float competing proposals, even though one of the so-called families, the Republican Study Committee, has outlined its preferred approach, although the group did not lay out specific cuts or spending proposals.

    “There’s no sense in us, one group putting something out, another group puts something out,” Norman said.

    Norman, who initially opposed McCarthy’s speakership bid but ultimately backed him, said the California Republican’s effort to build consensus has helped his standing within the conference.

    “To his credit, Kevin has done a good job of getting us all together and getting us on the same page,” Norman said.

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  • In a market that’s gone mad, investors can embrace these dependable stocks | CNN Business

    In a market that’s gone mad, investors can embrace these dependable stocks | CNN Business

    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
     — 

    Many people don’t have the time or inclination to do deep research on stocks.

    It’s often easier to buy an exchange-traded fund that owns a basket of the top blue chips, like Apple

    (AAPL)    , Microsoft

    (MSFT)     and Amazon

    (AMZN)    . Other investors like to bet on themes and memes instead of poring over a company’s financial statements and regulatory filings. Hence the recent craze for momentum stocks like GameStop

    (GME)     and AMC

    (AMC)    .

    But for old-fashioned investors with a little gray in their hair (and veteran business journalists like yours truly) there are other ways to find winning stocks for the long haul.

    I’ve been running stock screens using market data software, first from FactSet and now from Refinitiv, on and off during the more than 20 years I’ve worked at CNN Business. (It was CNNMoney when I first started.)

    I’ve typically done this stock picking feature in early to mid February as a Stocks We Love type of story, pegging it to Valentine’s Day. (Here’s the first one I did in 2002!) So they’ve often been littered with cheesy references to how romantic it is to find a reliable company you can count on for a long-term relationship.

    Well, investing trends have changed a bit in the past two decades. Some would argue that active investing (actually choosing individual companies) is no longer in vogue thanks to the rise of passively run index funds.

    And to be fair, the experts are right, mostly. Investors usually are better off owning an index ETF. If the goal is saving for retirement in particular, a diversified mix of companies is safer than trying the riskier strategy of identifying individual winners and losers.

    But you know what they say about not being able to teach an old dog new tricks? I still believe there’s value in looking for quality stocks at bargain prices. Legendary investors like Warren Buffett and Peter Lynch of Fidelity fame would likely agree.

    With that in mind, I ran one final stock screen for this Valentine’s Day. Like my past screens, I tried to find companies with strong fundamentals (solid sales and earnings growth), low levels of debt and high returns on equity. And perhaps most importantly, I screened for companies trading at a reasonable price based on their estimated earnings.

    This screen wound up identifying 33 companies that could make sense as a buy-and-hold investment. All of them generated double-digit sales growth annually over the past five years and they are all expected to report profit growth of at least 10% a year for the next few years.

    Some of the more prominent companies on the list? IT services/consulting giant Accenture

    (ACN)     made the cut. So did software leader Adobe

    (ADBE)    , semiconductor manufacturer Analog Devices

    (ADI)    , chip equipment juggernaut Applied Materials

    (AMAT)     and Venmo owner PayPal

    (PYPL)    .

    That’s a fair amount of exposure to the tech sector. But several other non-techs made my list too.

    Auto insurer Progressive

    (PGR)     (hi Flo!), health insurer Humana

    (HUM)    , cosmetics retailer Ulta Beauty

    (ULTA)    , UGG boots and Hoka sneakers maker Deckers Outdoor

    (DECK)     and trucker JB Hunt

    (JBHT)     met my criteria.

    As did financial services firm Raymond James

    (RJF)    , perhaps most famous for having its name on the Tampa Bay Buccaneers stadium Tom Brady briefly called home.

    None of these stocks are likely to be moonshots that will surge because of comments that someone makes on Reddit. But they might offer a little more in the way of security and dependability. And after all, isn’t that what we all want from a long-term partner on Valentine’s Day?

    The broader market has continued to rally, in large part due to hopes that inflation pressures (and more Federal Reserve rate hikes) will soon be things of the past. But consumers are still skittish when it comes to buying more costly items.

    Meat processing giant Tyson Foods

    (TSN)     reported disappointing results last week, largely due to a pullback in consumer demand for pricier beef. Luxury apparel retailer Capri Holdings

    (CPRI)    , which owns the Versace, Jimmy Choo and Michael Kors brands, also posted lousy numbers.

    But shoppers still seem to be spending on more affordable goods. Pepsi

    (PEP)     reported sales and earnings last week that topped Wall Street’s targets. Fast food giant Yum! Brands

    (YUM)    , the owner of Taco Bell, KFC and Pizza Hut, issued solid results too.

    That could bode well for several leading consumer companies that are on tap to report earnings this week, including Pepsi competitor Coca-Cola

    (KO)     as well as Restaurant Brands

    (QSR)    , the parent company of Burger King, Popeyes, Tim Horton and Firehouse Subs.

    Kraft Heinz

    (KHC)    , restaurant owner Bloomin’ Brands

    (BLMN)    , Sam Adams brewer Boston Beer

    (SAM)     and food delivery service DoorDash are also scheduled to release their latest results this week.

    The restaurant stocks in particular could do well.

    “Consumers continue to trade goods for services,” said Jharonne Martis, director of consumer research for Refinitiv, in a report. Martis noted that the restaurant and broader leisure sector has continued to outperform other consumer-related industries this year.

    Inflation is obviously still a concern for big consumer brands. Companies have to deal with the challenge of trying to pass on higher costs to customers without driving them away.

    That could become less of a problem though.

    The US government will report both its Consumer Price Index and Producer Price Index for January this week and economists are hoping for a further slowdown in year-over-year prices. Consumer prices rose 6.5% over the past 12 months through December, down from a 7.1% pace in November.

    “There are positive signs. Inflation has passed the peak so there is a little bit of a respite,” said Kathryn Kaminski. chief research strategist with AlphaSimplex.

    Higher prices were a problem for retailers during the holidays. Retail sales fell 1.1% in December from November, according to figures from the US government, following a 0.6% drop in November.

    But retail sales are expected to bounce back as inflation becomes less of an issue. Economists are forecasting a 0.9% increase in retail sales for January when those numbers come out later this week.

    Monday: Earnings from TreeHouse Foods

    (THS)    , Avis Budget

    (CAR)    , FirstEnergy

    (FE)    , IAC

    (IAC)     and Palantir

    Tuesday: US CPI; Japan GDP; UK employment report; earnings from Coca-Cola, Asahi Group, Marriott

    (MAR)    . Cleveland-Cliffs

    (CLF)    , Restaurant Brands, Suncor Energy

    (SU)    , Airbnb, Herbalife

    (HLF)    , GoDaddy

    (GDDY)     and TripAdvisor

    (TRIP)

    Wednesday: US retail sales; UK inflation; weekly crude oil inventories; annual meeting of Charlie Munger’s Daily Journal Co

    (DJCO)    ; earnings from Kraft Heinz, Lithia Motors

    (LAD)    , Sunoco

    (SUN)    , Sonic Automotive

    (SAH)    , Ryder

    (R)    , Barrick Gold

    (GOLD)    , Biogen

    (BIIB)    , Owens Corning

    (OC)    , Krispy Kreme, Cisco

    (CSCO)    , AIG

    (AIG)    , Shopify

    (SHOP)     and Boston Beer

    Thursday: US PPI; US weekly jobless claims: US housing starts and building permits; China housing prices; earnings from US Foods

    (USFD)    , Lenovo

    (LNVGF)    , Nestle

    (NSRGF)    , Paramount Global, Southern

    (SO)    , Hasbro

    (HAS)    , Hyatt

    (H)    , Bloomin’ Brands, WeWork, Applied Materials

    (AMAT)    , DoorDash, DraftKings and Redfin

    (RDFN)

    Friday: Earnings from Deere

    (DE)    , AutoNation

    (AN)    , Sands China

    (SCHYF)     and AMC Networks

    (AMCX)

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  • New cars are crazy expensive but, if you’re careful, they don’t have to be | CNN Business

    New cars are crazy expensive but, if you’re careful, they don’t have to be | CNN Business


    New York
    CNN
     — 

    After years of parts shortages, the average price people paid for a new car in America only recently dropped back below sticker. But this ignores a larger issue: Even pre-pandemic, sticker prices were steadily ticking higher as buyers load up on options.

    Two decades of historic data from auto website Edmunds.com indicates that options are the biggest driver in rising vehicle prices — and that it’s been happening over many years.

    “Overall, the average price gap between base models and vehicles as optioned up by customers has soared, rising from 24.6% in 2002 to 38.1% in 2022.”

    The average sticker price of a new vehicle, as purchased, was about $30,000 in 2009 and reached almost $40,000 in 2019, before Covid hampered parts supply and vehicle production, according to Edmunds. Last year that figure reached almost $46,000, according to data from Edmunds.com.

    Yet the average sticker for base models, adjusted for inflation, has actually gone down a little — even as consumers have shifted from sedans to more expensive SUVs. The difference is the cost of options buyers added on.

    Steve Reed, an economist with Bureau of Labor Statistics, a government agency that measures inflation, concurred with what Edmunds’ historic pricing data indicated.

    “According to our measures, the real cost of cars relative to other things has declined,” he said.

    That’s good news for drivers willing to go no-frills: If you don’t want to pay lots of a new car, you don’t have to. Don’t dip heavily into the options list, and cars are actually relatively cheap.

    Consider the Nissan Versa, the cheapest car available for the 2023 model year.

    It has a base price of $15,730. Adjusted for inflation, that’s barely different from the base price of a Hyundai Accent in 2002, the cheapest new car available that year. This is despite the fact the 2023 Versa is loaded with standard features — including push-button start, blind spot monitoring and a touchscreen — of which many weren’t even available two decades ago.

    For lots of different types of vehicles, gaps between the lowest base price and the average sticker price as sold to customers have grown over the past two decades, according to Edmunds.com data.

    For the Mercedes E-class, for example, the difference between the base sticker price and the average sticker with options was just 11.5% in 2002 compared to 30% in 2022; for the Chevrolet Tahoe, it jumped from 14% to 41% over that same period; and for the Acura MDX it increased from 7% to 21%.

    Overall, the average price gap between base models and vehicles as optioned up by customers rose from 24.6% in 2002 to 38.1% in 2022.

    (Of course, it’s not entirely surprising that base prices of vehicles haven’t gone up in the past couple of decades, adjusted for inflation, since that is what “adjusted for inflation” is supposed to mean. New cars are part of the overall inflation picture for economists who calculate it, accounting for a certain amount of improved quality.

    Competition is a factor, too. Car companies have found ways to keep prices down even while adding more safety technology and comfort features like standard automatic transmissions.

    These base price models may not make much money, if any, for automakers. But they can attract shoppers who can then be up-sold to more expensive versions in what’s known as a “loss leader” pricing strategy, said Michael Brisson, director of economic strategy at Moodys.

    And customers are more than willing to play along, said Matt Jones, a spokesperson for the auto pricing site TrueCar who spent 12 years working at auto dealerships.

    “The idea that people buy the most cost-effective thing? I have almost never seen that be the case,” he said.

    So, even though vehicle shoppers are getting more for their money to start with, Americans keep piling on options.

    This year, GMC started offering its most luxurious trim level, Denal Ultimate, on its heavy duty trucks.

    For General Motors’ GMC brand, for example, the gap between base models and the average vehicle with options (as sold to customers) has been growing steadily among trucks and SUVs for the last 20 years.

    Surprisingly, the gap has been growing fastest in GMC’s heavy-duty trucks, usually thought of as serious work vehicles. The average price of a GMC Sierra 2500 HD, as sold, is now double the base price.

    These customers see their big trucks as a reward for years of hard work, said Patrick Finnegan, head of marketing for GMC.

    “You may think a heavy-duty truck customer might not be in the market for that sort of thing, might not be willing to pay for it,” said Finnegan. “But it’s some of those features that they’re actually most excited about, like Bose Premium Series speakers.”

    Offering increasingly luxurious option packages is a way for automakers to take advantage of greater income disparity in the United States, said University of Michigan economist Justin Wolfers. Wealthy buyers can pay more while automakers maintain purchase opportunities for those without as much to spend.

    A different kind of competitive pressure has resulted in this rise in options, said Edmunds.com’s Drury: the competition with friends and neighbors who have the latest features on their cars. Plus, when buying a new vehicle, people seldom want less than they had before.

    Industry strategy also plays into it. Car shoppers can rarely pick and choose options individually. Instead, they usually have to buy packages of features together or even pay more for more luxurious “trim levels” to get features they want, said Tyson Jominy, an industry analyst with J.D. Power.

    “A classic example is a ‘Wheels and Tunes’ package,” Jominy wrote in an email. “There’s no inherent link between music and wheels, but if you’re an audiophile you have to get the upgraded wheels to get the branded radio, and vice versa.”

    Car shoppers can avoid getting caught in the vortex pulling them toward ever more expensive new vehicles, said Jeff Bartlett, managing editor at Consumer Reports. He worries that car shoppers seeing these rising prices for the “average new car” will use that as a guide to what their next car should cost.

    “It gives me shivers to think of people in this economic climate, thinking, ‘Oh, well, I was just going buy a $30,000 car but, hey, I guess $50,000 is average, so why not?” he said.

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  • Is the iPhone’s ‘Made in India’ era about to begin? | CNN Business

    Is the iPhone’s ‘Made in India’ era about to begin? | CNN Business


    New Delhi
    CNN
     — 

    As Apple looks beyond China to secure crucial supply chains strained by Covid lockdowns and threatened by rising geopolitical tension, India has emerged as an attractive potential alternative to the world’s second largest economy.

    And Beijing’s big regional rival isn’t missing a beat in talking up the opportunity. One of India’s top ministers said last month the California-based company wants to ramp up its production in the South Asian country to a quarter of its overall total.

    Minister of Commerce and Industry Piyush Goyal said Apple was already making between 5% and 7% of its products in India. “If I am not mistaken, they are targeting to go up to 25% of their manufacturing,” he said at an event in January.

    His comments come at a time when Foxconn

    (HNHPF)    , a top Apple supplier, is looking to expand its operations in India after suffering severe supply disruptions in China.

    For years, Apple had relied on a vast manufacturing network in China to mass produce iPhones, iPads and other popular products. But its dependence on the country was tested last year by Beijing’s strict zero-Covid strategy, which was rapidly dismantled last December.

    Since the middle of last year, Apple has redoubled its efforts to invest in India. But can Asia’s third largest economy deliver?

    “Theoretically, it can be done, but it won’t be happening overnight,” said Tarun Pathak, a research director at market research firm Counterpoint.

    “[Apple’s] dependency on China is a result of almost two and a half decades of what China put in to develop their entire electronics manufacturing ecosystem,” Pathak said, adding that the company makes nearly 95% of its phones in China.

    Apple did not respond to requests for comment from CNN.

    But the world’s most valuable company posted shockingly weak earnings this month, partly because of its recent problems in China. The troubles started in October, when workers began fleeing the world’s biggest iPhone factory, run by Foxconn, over a Covid outbreak.

    Short on staff, Foxconn offered bonuses to workers to return. But violent protests broke out in November, when newly-hired staff said management had reneged on their promises. Workers clashed with security officers, before the company eventually offered them cash to quit and leave the site.

    While operations at the sprawling campus in Zhengzhou, central China, have now returned to normal, the supply problems hit the supply of iPhone 14 Pro and iPhone 14 Pro Max models during the key holiday shopping season.

    Foxconn did not respond to a request for comment.

    On top of that, US-China relations are looking increasingly tense. Last year, the Biden administration banned Chinese companies from buying advanced chips and chipmaking equipment without a license.

    “I think they will continue to depend on China for a significant proportion of their production,” said Willy Shih, a professor at Harvard Business School, referring to Apple.

    “But what they are trying to do, and I think it makes sense, is to add diversity to their supply base so that if something goes wrong in China, they will have some alternatives.”

    Shih referred to this strategy as “China +1 or China+ more than one.”

    “India is a hugely exciting market for us and a major focus,” Apple CEO Tim Cook said on a recent earnings call.

    “Looking at the business in India, we set a quarterly revenue record and grew very strong double digits year over year and so we feel very good about how we performed,” he said.

    India is set to overtake China this year to become the world’s most populous country. The country’s massive and cheap labor force, which includes workers with key technical skills, is a big draw for manufacturers.

    Asia’s third largest economy also offers a growing domestic market. In 2023, as global recession fears persist, India is expected to remain the fastest growing major economy in the world.

    If it can sustain that momentum, India could become only the third country with GDP worth $10 trillion by 2035, according to the Centre for Economics and Business Research.

    Analysts say India’s growing consumer base might give it an edge over Vietnam, which has also been attracting greater investment in electronics manufacturing.

    The Indian government has rolled out policies to attract investments in mobile phone manufacturing. According to Counterpoint’s Pathak, India accounts for 16% of the global smartphone production, while China constitutes 70%.

    There are some success stories: Samsung, the world’s top selling smartphone brand, is one step ahead of Apple and already makes a lot of its phones in India.

    An employee tests the camera quality of mobile phones on an assembly line at a unit of Foxconn Technology Co., in Sri City, Andhra pradesh, India.

    The South Korean giant has been diversifying away from China because of rising labor costs and also stiff local competition from homegrown players such as Huawei, Oppo, Vivo and Xiaomi.

    It now makes the bulk of its phones in Vietnam and India, with the latter accounting for 20% of Samsung’s global production.

    In 2018, Samsung opened what it called “the world’s largest mobile factory” in Noida, a city near New Delhi, and analysts say the the company may have paved the way for other manufacturers.

    Apple devices are manufactured in India by Taiwan’s Foxconn, Wistron and Pegatron. Until recently, the company would typically start assembling models in the country only seven to eight months after launch. That changed last year, when Apple started making new iPhone 14 devices in India weeks after they went on sale.

    Some of Apple’s biggest contractors are already pumping more money into India. Last year, Foxconn announced it had invested half a billion dollars in its Indian subsidiary.

    Earlier this week, the government of the southern Indian state of Karnataka said it is “in serious discussion of investment plans” with the Taiwanese giant. Foxconn already has factories in the Andhra Pradesh and Tamil Nadu.

    Manufacturing in India, however, comes with myriad challenges. It constitute only 14% of India’s GDP, according to the World Bank, and the government has struggled to grow that figure.

    “One of the things that China did is they built infrastructure when they could. And I would argue that India did not build infrastructure when they could,” said Shih, referring to highways, ports and transport links that allow easy movement of goods.

    An aerial view of Mumbai Metro Line 7 between Andheri East station and Aarey Metro station on its Andheri (East)-Dahisar (E) route on Western Express Highway, on July 26, 2022 in Mumbai, India.

    Apple will also face a lot more red tape in India if it wants to create sprawling Chinese-style campuses.

    “Will India be able to replicate a Shenzhen version?” asked Pathak, referring to China’s manufacturing hub. Building such “hotspots” won’t be easy and would require India to think about issues ranging from logistics and infrastructure to the availability of workers, he added.

    Experts told CNN that accessing land in a chaotic democracy like India could be a challenge, while the Chinese Communist Party faces fewer barriers to expropriating real estate quickly for causes it deems important.

    India would also have to think about moving beyond simply assembling iPhones through favorable government policies.

    “You need to source components locally, which means you need to attract many more companies in the supply chain to set up shop in India,” Pathak said.

    Some of the biggest businesses in India may be stepping up. According to Bloomberg, autos-to-airline conglomerate Tata Group is in talks with Wistron to take over the Taiwanese company’s factory in southern India.

    Tata and Wistron did not respond to request for comment.

    “I am not directly involved in that, but it should be really good for India because this is going to create an opportunity in India to manufacture electronics and microelectronics,” N. Ganapathy Subramaniam, COO of Tata Consultancy Services, the group’s software services arm, told Bloomberg.

    While there are significant obstacles in India’s ambition to deepen its relationship with Apple, doing so would be a huge boost for the country and Prime Minister Narendra Modi.

    ‘I think it’ll be [a] big, big win,” said Pathak, noting that growing manufacturing ties with a US giant like Apple will in turn attract other global players in the electronics manufacturing ecosystem to India. “You focus on the big one, the others will follow.”

    — Catherine Thorbecke and Juliana Liu contributed reporting.

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  • A twisted tale of celebrity promotion, opaque transactions and allegations of racist tropes | CNN Business

    A twisted tale of celebrity promotion, opaque transactions and allegations of racist tropes | CNN Business



    CNN
     — 

    Sitting across from Jimmy Fallon on “The Tonight Show,” Paris Hilton, wearing a sparkling neon green turtleneck dress and a high ponytail, looked at a picture of a glum cartoon ape and said it “reminds me of me.” The audience laughed. It did not look like her at all.

    Hilton and Fallon were chatting about their NFTs – non-fungible tokens, typically digital art bought with cryptocurrency – from the Bored Ape Yacht Club. The camera zoomed in on framed printouts of the ape cartoons. “We’re both apes,” Fallon said. Hilton, with her signature vocal fry, replied, “Love it.”

    “The Tonight Show” episode from January 2022 is a YouTube time capsule showing the temporary alliance between celebrity marketing and the crypto industry. Bored Ape Yacht Club was not the biggest crypto phenomenon, but it was one of the top beneficiaries of celebrity hype. That celebrity hype, in turn, helped draw new consumers to crypto — an industry rife with manipulation and fraud, and one that US regulators are now giving more scrutiny in the wake of the collapse of crypto exchange FTX. But for a time, when crypto’s prices seemed to have no limit, the money appeared too good for some to ask questions — questions like: Why are some of those apes wearing prison clothes?

    “That was a very significant moment, because the audience for that show is very different from the typical crypto person,” explained Molly White, a software engineer and a fellow at the Harvard Library Innovation Lab. The Bored Apes — a computer-generated collection of 10,000 cartoons — were being presented as a status symbol, membership in an exclusive club. Hilton, Fallon, and other celebrities had joined — and viewers could join, too, if they bought an NFT.

    A class action lawsuit, filed in December, alleges Hilton, Fallon, and other celebrities conspired in a “vast scheme” to artificially inflate the price of Bored Ape NFTs and enrich themselves, the crypto payments company they used to get the apes, MoonPay, and the company that made the Bored Apes, Yuga Labs.

    Hilton and Fallon did not respond to requests for comment.

    In April 2021, Yuga Labs released the Bored Ape Yacht Club collection of cartoon apes with a computer-generated combination of features and accessories, such as gold fur, a sailor hat, laser eyes, 3-D glasses, a cigarette, as well as “hip hop” clothes, a “pimp coat,” a prison jumpsuit, a pith helmet, and a “sushi chef” headband. The founders were anonymous, known only by their online screen names.

    That fall, Hollywood agent Guy Oseary reached out to Yuga Labs, eventually investing in the company and joining its board. Soon celebrities started posting their Bored Apes on social media — including Oseary’s client Madonna, along with Steph Curry, Lil Baby, DJ Khaled, Snoop Dogg, Gwyneth Paltrow, and more. Bored Apes started selling for hundreds of thousands of dollars. Justin Bieber bought an ape for $1.3 million. By March 2022, Yuga got a $450 million venture capital investment, and was valued at $4 billion.

    Guy Oseary and Madonna at a 2016 Billboard Women In Music event. Oseary said both bought NFTs from Bored Ape Yacht Club.

    The class action lawsuit claims, “this purported interest in” Bored Apes “by high-profile taste makers was entirely manufactured by Oseary at the behest of” Yuga Labs. “In order to make the promotion of, and subsequent interest in, the BAYC NFTs appear to be organic (as opposed to being solely the result of a paid promotion), the Company needed a way to discreetly pay their celebrity cohorts.” The suit alleges they did this through MoonPay.

    When Jimmy Fallon introduced his audience to crypto, he also presented a frictionless way to buy in: MoonPay, a payments company that allows customers to buy crypto through most major payment systems like with a credit card. In November 2021, Fallon said on “The Tonight Show” that he’d bought his first NFT through MoonPay. “MoonPay? MoonPay! I did my homework — Moonpay, which is like PayPal but for crypto,” Fallon said. The following January, when Hilton showed her ape on the show, she said, “You said you got it on MoonPay, so I went and I copied you.”

    A few months later, in April 2022, MoonPay announced more than 60 celebrities and influencers had invested in the firm. MoonPay spokesman Justin Hamilton told CNN that Hilton became an investor, but not until after she spoke with Fallon on “The Tonight Show.” The FTC generally requires an endorser to disclose when they have a financial interest in promoting a company.

    The celebrity hype and unbelievable prices generated enormous media interest. “Rolling Stone” minted NFTs of the magazine with Bored Apes on the cover. Guy Oseary was on the cover of “Variety” under the headline “NFT King.”

    Independent journalists, under the names of Coffeezilla and Dirty Bubble Media, noticed blockchain ledger records suggesting not everything was as it appeared. Cryptocurrency is traded on the blockchain, a permanent and public ledger of every transaction. That means it can reveal financial relationships, if you figure out the right questions to ask.

    Hours before Justin Bieber bought an ape for the equivalent of $1.3 million on January 29, 2022, Bieber received Ethereum worth about $2.5 million in his crypto wallet, the blockchain shows. A couple weeks before Post Malone released a music video in November 2021 in which he bought a Bored Ape through MoonPay, MoonPay transferred cryptocurrency then worth about $760,000 into the artist’s wallet, and sent two more payments, worth about $640,000, a couple weeks after. MoonPay admits it paid for the placement in Post Malone’s video but says other celebrities paid full price for their service in US dollars.

    Many celebrities who got apes thanked MoonPay on social media. Gwyneth Paltrow tweeted, “Joined @BoredApeYC ready for the reveal? Thanks @moonpay concierge.” The rapper Gunna posted on Instagram, “I Bought A @boredapeyachtclub NFT worth 300K No Cap ! His Name is BUTTA Thanks @moonpay !” Lil Baby mentioned MoonPay in his song “Top Priority.”

    The blockchain shows MoonPay paying high prices for the apes, and then transferring them to purported celebrity wallets for free. MoonPay explains this as a service that helps wealthy people buy NFTs without setting up their own crypto wallet.

    The company says the “white-glove” service was created because MoonPay’s CEO, Ivan Soto-Wright, had a lot of celebrity friends, and many of them asked how they could get an NFT. Jimmy Fallon, Lil Baby — they were Soto-Wright’s friends, Hamilton said.

    CNN spoke to several former MoonPay employees who said they were skeptical the celebrities paid for their NFTs, because there was no evidence on the blockchain.

    The company’s ape purchases have been significant. Since 2021, one of its wallets, “MoonPayHQ,” has spent at least $25 million on NFTs — 60% or about $15 million of that was spent on Bored Apes. The company told CNN they had 14 apes in a cold storage wallet, which offers more safety. It said that five of those NFTs were “purchased by concierge clients that are in the process of being transferred.” The last ape was purchased in April 2022, 10 months ago, according to blockchain records.

    One influencer has said he was approached about an ape. In a Twitter Spaces audio chat last year, celebrity jeweler Ben Baller said, “Real talk: not once, not twice, three times, I’ve been offered a Bored Ape through MoonPay. … The fact that some of these super top-tier all-star NBA players have them? And I was like, ‘Yo this is all cap [lies.]’ They didn’t buy this sh*t.” Baller did not respond to CNN’s request for comment. MoonPay’s spokesman said this didn’t happen.

    Oseary, the Hollywood agent and MoonPay/Yuga investor, texted CNN in response to a question: “NO ONE is paid to join the club and Yuga do NOT and have NOT given away any apes.” He said he paid full price for his Bored Ape, and so did Madonna.

    Yuga Labs declined an on-the-record interview with CNN. In a statement, the company said, “In our view, these claims are opportunistic and parasitic. We strongly believe that they are without merit, and look forward to proving as much.” Hamilton, MoonPay’s spokesman, said of the lawsuit, “We look forward to it being dismissed.”

    “The fine art market is a scam – that’s OK, at least there’s art going on,” said Max Gail, who’s been a blockchain developer since 2010, and founded Omakasea and Eth Gobblers.com. (Gail hosted the Twitter Space in which Baller discussed Bored Apes.) The NFT market, he said, “is like a parody of the fine art market. They took the same strategies that had been employed in the fine art market, but then distorted it with some strange crypto economics.”

    Anonymous buyers and sellers dealing in items whose values are difficult to calculate has made the fine art market susceptible to money laundering, a Senate investigation found in 2020. In 2022, an average of more than half of NFT trading volume on the Ethereum blockchain was “wash” trading, according to an analysis at Dune Analytics. (Most NFTs are on Ethereum.) Essentially, wash trades are a transaction in which the buyer and seller are the same person, or they’re working together. Wash trading has been illegal in traditional finance since the Great Depression, because it can distort the market by making people believe there is a high volume of interest in the investment. The ability to open many anonymous cryptocurrency wallets makes wash trading NFTs easier. A Chainalysis report found one “prolific NFT wash trader” made 830 sales to self-financed wallets in 2021.

    Though NFTs have been celebrated as the future of digital art, and a way for artists to earn royalties, many NFT collections operate more like securities — a financial instrument, like stocks or bonds, that hold some monetary value. “People will say that the technology itself has provided this whole new way of creating digital art,” Harvard’s Molly White said. “It’s not that unique. The unique part of it is the speculative bubble.”

    Mad Dog Jones' SHIFT// goes on view as part of 'Natively Digital: A Curated NFT Sale' at Sotheby's in June 2021. NFTs have been celebrated as the future of digital art.

    The NFT marketplace does not always make sense even to those who benefit from it. “Bored Apes have gone from $100 to $100,000 in a year. Nothing appreciates that fast,” a successful NFT artist said. The artist’s own works had gone from a couple hundred dollars to tens of thousands. One of the artist’s major collectors “treats me as a commodity and my art is a commodity and he’s always pumping and dumping it. … It’s being treated as a financial vehicle.”

    But there is pressure not to raise questions about the system. The NFT artist did not want to go on the record, saying it would be career suicide. “The big collectors watch for artists that FUD. And as soon as an artist FUDs, they get cancelled,” the artist said. FUD is “fear, uncertainty, and doubt,” or criticism of crypto.

    Beyond how the Bored Ape NFTs are traded, what they depict is at issue in yet another Yuga Labs legal battle.

    In the fall of 2021, accusations began swirling on social media that the Bored Ape Yacht Club contained visual references to racist memes from the troll site, 4chan. The artist Ryder Ripps — who’s worked with stars like Kanye West and Tame Impala — started tweeting about the claims of racist imagery. Ripps claims Guy Oseary, the Hollywood agent on Yuga’s board, called to pressure him to stop talking about the claims. (Oseary told CNN, “I can’t speak on active litigation.”)

    Ripps doubled down and made a website cataloging the claims. Then, in an act he says was meant to protest the alleged racism and comment on the idea you can’t copy an NFT, Ripps made copycat NFTs he sold as RR/BAYC. Yuga sued Ripps for trademark infringement, and argues that his maligning of the Yuga apes is nothing more than a profiteering tactic. Ripps says Yuga is trying to silence its critics, and has doubled down on his claims as part of his defense in the trademark suit.

    Yuga Labs called the accusations “the incoherent ramblings of a small group of for-profit conspiracy theorists.” However, the Yuga lawsuit against Ripps could affect the class action lawsuit against Yuga. Ripps’s lawyers have issued subpoenas to Paris Hilton and Jimmy Fallon.

    To assert its trademark rights, Yuga must show that consumers associate its logos with its products, and it did so in a legal filing, in part, by pointing to celebrity owners “including TV host Jimmy Fallon…”

    Ripps’s lawyer, Louis Tompros, asserts Yuga compensated celebrities for promoting its NFTs, and they did not disclose it. “And by doing that, in our view, they have gotten this public notoriety for their brand improperly,” Tompros told CNN. “And so having gotten it improperly, they now can’t go and assert that they have these rights.”

    This week Yuga co-founder Wylie Aronow published a 24-page letter explaining that he was stepping back from the company and addressing widespread rumors that the company and its products were connected to the alt-right.

    “I will soon call out this utter bullsh*t under oath,” he wrote.

    So what are the racist references alleged by Ripps and others? To start, there’s what’s right on the surface: some of the NFTs are pictures of apes in “hip hop” clothes, a “pimp coat,” a prison uniform, a bone necklace, gold and diamond grills. Record executive Dame Dash, a crypto enthusiast, pointed out on a podcast last year that monkeys and apes are old racist tropes.

    “Think if you were a racist, like ‘Guess what I’m gonna do? I’mma get Black people to love monkeys so much that they gonna buy them, wear them on their neck… go to something called ApeFest and they’re gonna like it!’ Wouldn’t that sound funny?” Dash said on the podcast. “That’s what’s happening.”

    Dash told CNN he hadn’t intended to target Yuga directly. But he’d started to wonder if he was being trolled, given the ubiquity of apes in crypto. “Racism is different these days — you can’t be so overt about it. You have to kind of troll,” Dash said.

    This week Yuga agreed to settle a lawsuit with a developer who worked with Ripps, with the developer agreeing to pay them $25,000 and saying he would reject all disparaging statements against Yuga Labs.

    Ryan Hickman, a software engineer who also worked with Ripps on RR/BAYC, is also being sued separately by Yuga. Hickman, who is Black, thought the Bored Apes looked like stereotypical portrayals of Black people as stupid or lazy. He said he thought this would be obvious to most people the second they saw an image of a Bored Ape. But, he said, “then somebody says, ‘Well, it’s worth $100,000.’ They say, ‘Okay well, tell me more.’”

    In a statement, Yuga said, “Our company and founders strongly condemn the spread of hate, in any form, against any group.” Hollywood agent Oseary said he’d never been on the troll site 4chan.

    The crypto community has adopted a lot of terms — rekt, frens, wagmi — that were popularized on 4chan, and it’s not always clear if the person using them understands where they came from. “I doubt that they were a massive alt-right troll campaign,” Harvard’s Molly White said. “I do think it’s likely that the creators of the project basically included some nods to 4chan.”

    “It’s not one thing that makes it racist. It’s everything together as a package,” programmer and 8chan founder Fredrick Brennan said, looking at comparisons between Pepe the Frog memes and Bored Apes. Brennan took an interest in the claims that Yuga referenced 4chan memes, because he’d seen them so often when he was running 8chan, a similar troll site. He quit 8chan in 2016, and in 2019 pushed for it to be taken down because it had become a hub for extremist violence. He began to suspect the Yuga founders were like the people he used to know.

    Take one of the apes’ characteristics, which Yuga calls a “sushi chef headband.” Brennan reads and speaks Japanese, and saw the headband actually said “kamikaze,” which has been used as a slur against Japanese people. A similar headband appeared on a Pepe meme. “That one was the most shocking,” he told CNN.

    In a legal filing connected to the Ripps case, Yuga said the apes reflected a combination of many traits, “not any person’s purported racism.”

    “I was hoping, in my eternal optimism,” Brennan said, “that people would become a lot more skeptical of tech bros. … And that liberal — so-called — celebrities in Hollywood would view these people with suspicion. Apparently not.”

    – CORRECTION: This story has been updated to clarify when Paris Hilton invested in MoonPay. Jimmy Fallon is not an investor, a company spokesman said.

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  • Bad news: Consumer prices actually climbed in December | CNN Business

    Bad news: Consumer prices actually climbed in December | CNN Business


    Minneapolis
    CNN
     — 

    December consumer prices rose from the month before and did not fall as previously thought, according to revised data from the Bureau of Labor Statistics released Friday.

    The newly calibrated Consumer Price Index shows that prices rose 0.1% on a seasonally adjusted basis in December from November versus a previously estimated decline of 0.1%.

    Every year, the BLS recalculates seasonal adjustment factors for CPI going back five years. (However, the year-over-year data, which is not seasonally adjusted, is not revised.)

    The latest annual adjustments show slight shifts in the month-on-month inflation trend for 2022 — with November and October revised up by 0.1 percentage points.

    Core CPI, which excludes the more volatile categories of food and energy, saw upward revisions of 0.1 percentage points in December and November to 0.4% and 0.3%, respectively.

    “Whether you’re talking about inflation, labor markets, GDP, these things all go through seasonal adjustment procedures and do get revised over time,” said Andrew Patterson, senior economist in Vanguard’s investment strategy group.

    “There’s not usually a whole lot of focus on it, but given the magnitude of inflation and the volatility of macro fundamentals these days, it’s probably gotten a little bit more attention than typical,” he added.

    The latest BLS tweaks show the importance of not reading into any one data point but instead reviewing a variety of different metrics over a longer-term period, he said, a point that has been repeatedly stressed by officials such as Federal Reserve Chairman Jerome Powell and Treasury Secretary Janet Yellen as they measure the path of inflation.

    But the revisions don’t change the overall storyline, Patterson noted.

    “We continue to believe that inflation is going to grind down over the course of the year,” he said.

    The annual revisions also come just days before the release of the January CPI report, which will debut some modifications of its own: changing its weighting methodology from consumption patterns collected every two years to a single year of spending data.

    “This means that this 2023 CPI report will be based on consumer spending patterns that took place in 2021, as opposed to 2022’s CPI data, which was based on spending data over 2019-2020,” William Blair analyst Richard de Chazal wrote in a note Friday. “From the BLS’s perspective, this makes the data more timely and relevant, and a better reflection of actual spending patterns.”

    The adjustments could help better gauge economic activity during what’s been a very unpredictable time, noted Diane Swonk, KPMG chief economist, in a Twitter thread this week.

    “The U.S. statistical agencies work extremely hard to measure and seasonally adjust the data accurately to reflect what where once considered normal season variations — everything from the surge in extreme weather events we are enduring to the unusual dynamics of an economy that is still emerging from a pandemic have distorted normal seasonal patterns,” she wrote.

    “Those shifts, coupled with the rapid pace at which the economy is currently shifting has made measuring current economic conditions more difficult. It is hard to tell where we are, let alone where the economy is headed,” she said.

    Here’s how the adjusted data looks for 2022:

    Month: Original data vs. Revised

    January: 0.6% vs. 0.6%

    February: 0.8% vs. 0.7%

    March: 1.2% vs. 1%

    April: 0.3% vs. 0.4%

    May: 1% vs. 0.9%

    June: 1.3% vs. 1.2%

    July: 0.1% vs. 0%

    August: 0.1% vs. 0.2%

    September: 0.4% vs. 0.4%

    October: 0.4% vs. 0.5%

    November: 0.1% vs. 0.2%

    December: -0.1% vs. 0.1%

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  • Russia to cut oil output by 5% as sanctions bite | CNN Business

    Russia to cut oil output by 5% as sanctions bite | CNN Business


    London
    CNN
     — 

    Russia will cut crude oil production by half a million barrels per day starting in March, a little over two months after the world’s major economies imposed a price cap on the country’s seaborne exports.

    “We will not sell oil to those who directly or indirectly adhere to the principles of the price ceiling,” Russian Deputy Prime Minister Alexander Novak said in a statement. “In relation to this, Russia will voluntarily reduce production by 500,000 barrels per day in March. This will contribute to the restoration of market relations.”

    The cut is equivalent to about 5% of Russian oil output.

    Futures prices for Brent crude, the global benchmark, jumped 2.7% Friday to $86 a barrel as traders anticipated a tightening in global supply. US oil gained 1% to trade at $79 a barrel.

    In June last year, the European Union agreed to phase out all seaborne imports of Russian crude oil within the following six months as part of unprecedented Western sanctions aimed at reducing Moscow’s ability to fund its war in Ukraine.

    In a move aimed at further tightening the screws, G7 countries and the European Union agreed in December to cap the price at which Western brokers, insurers and shippers can trade Russia’s seaborne oil for markets elsewhere at $60 a barrel. Earlier this month, EU countries also banned imports of Russia’s diesel and refined oil imports.

    Novak warned that the crude oil price cap could lead to “a decrease in investment in the oil sector and, accordingly, an oil shortage.”

    Neil Crosby, a senior analyst at oil data firm OilX, told CNN that a 500,000 barrel-a-day cut is not the “worst-case scenario” and is still a smaller hit to Russian production than most analysts were expecting last year.

    “But it sets a precedent for further cuts ahead if necessary or desired by Russian authorities,” Crosby said, adding that Moscow could be anticipating difficulty in finding enough demand for its crude.

    Russian Urals crude traded at a discount to Brent crude of $28 a barrel on Friday. Over the past few months, India and China have snapped up cheap oil from Moscow, just as the EU — once Russia’s biggest customer for crude — has ended all imports.

    “Russia currently has a limited pool of buyers for its crudes and has likely found a ceiling to its export sales in the near term, primarily to China and India,” said Alan Gelder, vice president of refining, chemicals and oil markets at Wood Mackenzie.

    According to Reuters, Russia took the decision to reduce its output without consulting the OPEC+ group of producers, which includes Saudi Arabia. OPEC+ decided in October to cut output by 2 million barrels per day and has not adjusted that stance since.

    A potential drop in global oil supply could come at a tricky time. China’s swift reopening of its economy in December after almost three years of strict coronavirus restrictions has pushed up estimates for global oil demand.

    Last month, the International Energy Agency said it expected global demand to surge by 1.9 million barrels per day to reach an all-time high of 101.7 million barrels per day, with China accounting for nearly half of the increase.

    Western sanctions — added to the grinding cost of war — are weighing on Russia’s economy. The country’s budget deficit ballooned to $45 billion last year, or 2.3% of its gross domestic product.

    But Russia’s central bank held its main interest rate at 7.5% Friday, saying that economic activity was better than expected and that inflation was likely to come down this year.

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  • Here’s what keeps Jerome Powell up at night and interest rates high | CNN Business

    Here’s what keeps Jerome Powell up at night and interest rates high | CNN Business

    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
     — 

    Federal Reserve Chairman Jerome Powell threw markets into a tizzy on Tuesday as he spoke about the economy alongside his former boss, Carlyle Group co-founder David Rubenstein, at the Economic Club of Washington.

    Stocks struggled for direction as investors tried to get a read on Powell’s economic outlook, attitude towards inflation and on future interest rate hikes. Wall Street cheered as the Fed chair said the disinflationary process has begun, then soured when he said the road to reaching 2% inflation will be “bumpy” and “long” with more rate hikes ahead.

    Markets soared to new highs, before quickly falling to session lows and then recovering to close the day in the green.

    “Powell doesn’t want to play games with financial markets,” said EY Parthenon chief economist Gregory Daco after the conversation. But at the same time, he said Powell wanted to communicate that the Fed’s “base case was not for inflation to come down as quickly and painlessly as some market participants appear to expect.”

    Here’s why Powell thinks bringing down prices will be more difficult than investors anticipate.

    Structural changes in the labor market: The US economy added an astonishing 517,000 jobs in January, blowing economists’ expectations out of the water. The unemployment rate fell to 3.4% from 3.5%, hitting a level not seen since May 1969.

    The current labor market imbalance is a reflection of the pandemic’s lasting effect on the US economy and on labor supply, said Powell on Tuesday in answer to a question about the report. “The labor market is extraordinarily strong,” he said. Demand exceeds supply by 5 million people, and the labor force participation rate has declined. “It feels almost more structural than cyclical.”

    “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more,” he said.

    Core services inflation: Powell noted that he’s seeing disinflation in the goods sector and expects to soon see declining inflation in housing. But prices remain stubborn for services. Service-sector inflation, which is more sensitive to a strong labor market, is up 7.5% from the year prior through the end of 2022, and has not abated, he said.

    “That sector is not showing any disinflation yet,” Powell said. “There has been an expectation that [higher prices] will go away quickly and painlessly and I don’t think that’s at all guaranteed.”

    Geopolitical uncertainties: Powell also cited concerns that the reopening of China’s economy after the sudden end of Covid-Zero restrictions, plus uncertainty about Russia’s war on Ukraine could also affect the inflation path in ways that remain unclear.

    ▸ The labor market is strong, but tech layoffs keep coming. There were around  50,000 tech jobs cut in January, and the trend has continued into February.

    Video conferencing service Zoom is one of the latest to announce layoffs. The company said Tuesday that it’s cutting 1,300 jobs or 15% of its workforce. 

    Zoom CEO Eric Yuan said in a blog post on Tuesday that Zoom ramped up employment  quickly due to increased demand during the pandemic. The company grew three times in size within 24 months, he said and now it must  adapt to changing demand for its services.

    “The uncertainty of the global economy, and its effect on our customers, means we need to take a hard — yet important — look inward to reset ourselves so we can weather the economic environment, deliver for our customers and achieve Zoom’s long-term vision,” he wrote.

    Yuan added that he plans to lower his own salary by 98% and forgo his 2023 bonus. Shares of Zoom closed nearly 10% higher on Tuesday. 

    The announcement comes just one day after Dell said it would lay off more than 6,500 employees.

    Amazon

    (AMZN)    , Microsoft

    (MSFT)    , Google and other tech giants have also recently announced plans to cut thousands of workers as the companies adapt to shifting pandemic demand and fears of a looming recession.

    ▸ Neel Kashkari, president of the Federal Reserve Bank of Minneapolis told CNN that he is starting to think that the US economy could avoid a recession and achieve a so-called soft landing.

    It’s hard to have a recession when the job market is still so robust, he told CNN’s Poppy Harlow on Tuesday on CNN This Morning.

    Still, “we have more work to do,” Kashkari told Harlow, adding that the labor market is “too hot” and that is a key reason why it is “harder to bring inflation back down.”

    Although many investors are starting to think the Fed may pause after just two more similarly small hikes, to a level of around 5%, Kashkari said he believes the Fed may have to raise rates further. Kashkari has a vote this year on the Federal Open Market Committee, the Fed’s interest-rate setting group.

    ▸ It’s a good time to be in the oil business. BP’s annual profit more than doubled last year to an all-time high of nearly $28 billion.

    The British energy company said in a statement that underlying replacement cost profit rose to $27.7 billion in 2022 from $12.8 billion the previous year. The metric is a key indicator of oil companies’ profitability.

    BP

    (BP)     also unveiled a further $2.75 billion in share buybacks and hiked its dividend for the fourth quarter by around 10% to 6.61 cents per share.

    BP’s shares rose 6% in Tuesday trading following the news. Over the past 12 months, its shares have soared 24%.

    The earnings are the latest in a string of record-setting results by the world’s biggest energy companies, which have enjoyed bumper profits off the back of skyrocketing oil and gas prices.

    Last week, another energy major Shell reported a record profit of almost $40 billion for 2022, more than double what it raked in the previous year after oil and gas prices jumped following Russia’s invasion of Ukraine.

    On Wednesday it was TotalEnergie

    (TTFNF)    s turn. The French company posted annual profit of $36.2 billion for 2022, double the previous year’s earnings.

    Disney has found itself in the middle of a culture war battle that could end up transferring Disney World’s governance to a board appointed by Florida Gov. Ron DeSantis. And that may be the least of Disney’s problems, writes my colleague Chris Isidore.

    The company faces a media industry in turmoil, plunging cable subscriptions, a still-recovering box office, massive streaming losses, activist shareholders, possible reorganization and layoffs and growing labor disputes with employees. That’s a lot for CEO Bob Iger to handle.

    Iger, who retired as CEO in 2020 only to be brought back in November, has been mostly quiet about his plans for the company since his return. That ends at 4:30 p.m. ET Wednesday when he is set to begin an earnings call with Wall Street investors.

    Click here to read more about what to look for on what is certain to be a closely-followed call.

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  • Chinese savers stashed away $2.6 trillion last year but property crash will cool ‘revenge spending’ | CNN Business

    Chinese savers stashed away $2.6 trillion last year but property crash will cool ‘revenge spending’ | CNN Business


    Hong Kong
    CNN
     — 

    Even for a famously frugal nation, Chinese people saved a lot last year. Stuck at home due to Covid restrictions, they socked away a record $2.6 trillion.

    Now that life is returning to normal, hopes are high that consumers will spend with a vengeance, providing a much-needed boost to the world’s second largest economy, the impact of which would be felt around the world.

    Household savings at banks surged by a record high of 17.84 trillion yuan ($2.6 trillion) in 2022, up 80% from 2021, according to the People’s Bank of China. That’s more than one third of households’ total income. Before the pandemic, people saved about a fifth of their income.

    With pandemic controls lifted, Chinese shoppers appeared to be enjoying their freedom to spend. Hotel bookings, movie tickets and restaurant sales all boomed during the recent holiday season.

    The reawakening of the Chinese consumer will be an “exciting story” for global investors in 2023, said Swetha Ramachandran and Jian Shi Cortesi, investment directors at GAM Investments, a global asset management firm based in Zurich.

    “Chinese consumers are now going into reopening with strong household balance sheets,” they said, adding that Chinese companies exposed to discretionary spending and global luxury brands stand to gain significantly from the trend.

    More than 300 million travelers spent a total of $56 billion over the seven-day Lunar New Year holiday through January 27, up 30% from a year ago, according to the cultural and tourism ministry. According to the State Tax Administration, sales from consumer-facing businesses were 12% higher than pre-pandemic 2019 levels.

    Bookings for hotels soared more than 10 fold at some of the hottest tourist attractions, such as the cities of Xi’an and Luoyang, according to online travel agency Tongcheng Travel. Xi’an’s Terracotta Army museum was so crowded that visitors complained on social media they could only see other people’s heads rather than the statues.

    Restaurants reported higher sales than before the pandemic and were unprepared for the increased demand, according to a national survey published by the China Cuisine Association last week. More than a third of respondents said they were “extremely” short-staffed during the holiday.

    China’s box office receipts climbed to more than $1.5 billion last month, the best January on record, according to the China Film Administration. That’s mainly thanks to an extraordinary holiday week, when moviegoers paid 129 million visits to cinemas.

    Passengers prepare to check in at Daxing International airport in Beijing on January 19, 2023.

    The recovery in consumption has already lifted the Chinese economy.

    Last week, the Caixin/S&P Global services purchasing managers’ index (PMI), which tracks activity in the services sector, expanded in January for the first time in five months. That’s mainly because travel and consumer spending bounced back.

    The index, which mainly covers smaller, private businesses, mirrored the results of an earlier government PMI survey. The data added to evidence of a rapid rebound in economic activity, analysts said.

    The boom has fueled business confidence. After seeing record sales in many stores, Xiabuxiabu, one of China’s largest hot pot chains, opened 34 new stores last month in the country, the company said.

    Global luxury giants are also hopeful Chinese shoppers will come back. LVMH said in January that it was “confident” and “optimistic” that China’s luxury market would bounce back this year. LVMH CEO Bernard Arnault said its stores in France are ready to welcome Chinese shoppers as more travel restrictions are eased.

    Burberry

    (BBRYF)     said last month that it’s seeing “very promising” signs in China, according to Reuters.

    There’s one conspicuous laggard in consumption, however.

    Property sales by China’s 100 largest developers dropped 32% in January, according to data compiled by China Real Estate Information, a property research firm. In the nation’s 30 largest cities, property sales were only 60% of the 2022 level.

    Chinese households have been reluctant to buy homes for more than a year, as Covid curbs, falling home prices and rising unemployment discouraged prospective buyers. Mortgage protests that erupted in dozens of cities last year further dented buyers’ confidence.

    Despite a flurry of stimulus measures, the slump has shown no sign of improvement. By December, new home prices had fallen by 16 straight months, according to the most recent government statistics.

    Since real estate accounts for 70% of household wealth in China, “revenge spending” will be limited, analysts said.

    “The property industry remains the biggest drag on China’s economy,” said Raymond Yeung, chief economist for Greater China at ANZ Research, adding that the high youth jobless rate and asset price deflation will constrain China’s consumption recovery.

    BNP Paribas says “revenge spending” in China is set to happen, although it will be on a smaller scale than in Western economies such as in the United States.

    “The removal of Covid restrictions should unleash pent-up demand, and we expect the biggest driver of the recovery in 2023 to be consumption,” its analysts said.

    They expect household consumption growth to rebound to 9.5% in 2023 from about 3% in 2022, fueling annual GDP growth of more than 5%.

    Morgan Stanley analysts expect to see some “revenge spending” mostly from household with stable incomes.

    Those households include employees from the export sector, a rare bright spot in the Chinese economy during the pandemic years, business owners with steady earnings or those living off payouts from asset holdings.

    “We see a mini-rebound as early as in the first quarter of 2023,” they said, adding that the recovery in consumption could pick up in the second half of this year, but would still be lower than the pre-Covid level.

    They’re expecting household consumption growth to rebound to 8.5% in 2023, contributing to full-year economic growth of 5.7%.

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  • Zoom will lay off 1,300 employees and CEO is taking a massive pay cut | CNN Business

    Zoom will lay off 1,300 employees and CEO is taking a massive pay cut | CNN Business



    CNN
     — 

    Zoom on Tuesday said it will lay off about 1,300 employees, or approximately 15% of its staff, becoming the latest tech company to announce significant job cuts as a pandemic-fueled surge in demand for digital services wanes.

    In a memo to employees, Zoom’s CEO Eric Yuan said the layoffs would impact every part of the organization. Yuan also said he and other executives would take a significant pay cut, after acknowledging he made “mistakes” in how quickly the company grew during the pandemic.

    “As the CEO and founder of Zoom, I am accountable for these mistakes and the actions we take today– and I want to show accountability not just in words but in my own actions,” he wrote. “To that end, I am reducing my salary for the coming fiscal year by 98% and foregoing my FY23 corporate bonus.”

    Yuan said members of the executive leadership team will reduce their base salaries by 20% for the coming fiscal year and forfeit their fiscal year 2023 bonuses.

    Shares of Zoom rose nearly 9% in midday trading Tuesday following the announcement.

    Zoom, more than most companies, came to define the early days of the pandemic, as many turned to its platform to video chat with friends and colleagues during lockdowns. By mid-2020, Zoom reported skyrocketing revenue fueled by a spike in business customers from the many companies forced to turn to remote work.

    Yuan said the company staffed up “rapidly” during the early days of the pandemic to support the boom in demand as many turned to its platform to video chat with friends and colleagues. “Within 24 months, Zoom grew 3x in size to manage this demand while enabling continued innovation,” Yuan wrote.

    Zoom stock declined significantly last year, however, as more workers returned to office life.

    Zoom is far from the only pandemic darling to experience a sharp comedown. Peloton, for example, has gone through several rounds of layoffs. Much of Big Tech, which also grew fast during the pandemic, has since announced layoffs, too.

    And late Tuesday, eBay

    (EBAY)     said in a regulatory filing that it would cut about 500 jobs globally — about 4% of its employee base — during the next 24 hours.

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  • Americans are becoming ‘reluctant’ to make larger purchases, new Fed report shows | CNN Business

    Americans are becoming ‘reluctant’ to make larger purchases, new Fed report shows | CNN Business


    Minneapolis
    CNN
     — 

    As retail sales took a bit of a breather in December, so did the credit cards.

    US consumers’ outstanding credit grew by $11.56 billion to end the year, according to Federal Reserve data released Tuesday. It’s the lowest monthly gain since January 2021 and well below economists’ expectations of $25 billion.

    For much of 2022, consumer debt levels grew at record rates as pandemic-induced pent-up demand ran up against a period of rampant inflation.

    However, as the year drew to a close — and the Federal Reserve jacked up interest rates to combat inflation — that bullish spending activity was curtailed.

    “Long story short, we’re seeing a more cautious consumer,” Ted Rossman, senior industry analyst with Bankrate, told CNN.

    “Consumer spending certainly isn’t falling off a cliff, but we are seeing ample evidence that Americans are becoming more reluctant to make certain purchases, especially larger expenses and acquiring physical goods,” he said. “Services spending has been more robust, perhaps still owing to pent-up demand that stacked up during the pandemic for things like traveling and dining out.”

    Revolving credit balances, which is mostly credit cards, grew by 7.3% in December, according to Tuesday’s report. That’s the lowest month-on-month increase since the summer of 2021, Rossman noted.

    Still, those balances growing in a month when spending was down likely shows the toll taken by higher interest rates, Rossman said.

    The average credit card charges a record-high 19.95%, Rossman said, citing Bankrate data that also showed that 46% of card holders are carrying a balance from month to month. That’s up from 39% a year before.

    “Even if spending may be tailing off a bit, high inflation and higher interest rates are making balances harder to pay off,” he said. “More people are putting necessities on credit cards and financing these expenses over time.”

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  • Fed Chair Powell: Inflation fight will take ‘a significant period of time’ | CNN Business

    Fed Chair Powell: Inflation fight will take ‘a significant period of time’ | CNN Business


    Minneapolis
    CNN
     — 

    The US labor market remains “extraordinarily strong” and Friday’s monster jobs report underscored that the central bank has more work to do to bring down inflation, Federal Reserve Chairman Jerome Powell said Tuesday.

    “We didn’t expect it to be this strong,” Powell said of the January jobs report, which showed the US economy added 517,000 jobs. “It kind of shows you why we think that this will be a process that takes a significant period of time.”

    Powell was speaking during a question-and-answer session with David Rubenstein of the Economic Club of Washington.

    “The disinflationary process has begun,” Powell said, noting progress especially in goods prices. However, price gains within the services sector remain high, he added.

    The Fed expects “significant” declines in inflation to occur this year. It will take “not just this year but next year to get down to 2%,” the central bank’s inflation target, Powell said. And rates will have to remain at a restrictive level “for a period of time” before that happens, he noted.

    Powell expects housing inflation to come down by the middle of this year but is keeping the closest watch on a metric within the Personal Consumption Expenditures report: Core services excluding housing.

    “There has been an expectation that [inflation] will go away quickly and painlessly; I don’t think it’s guaranteed that’s the base case,” Powell said. “It will take some time.”

    The major US stock indexes rallied during Powell’s discussion but then fell in early afternoon trading, with the Dow down by around 200 points or 0.6%, the S&P lower by 0.3% and the tech-heavy Nasdaq down by 0.2%.

    While economists said the January job total was heavily influenced by seasonal factors and will probably be adjusted downward, it was probably too hot for the Fed’s liking. The robustness of the labor market has stood somewhat at odds with the Fed’s efforts to lower inflation.

    “The labor market is strong because the economy is strong,” Powell said.

    The current labor market is also a reflection of the pandemic’s lasting effect on the US economy and labor supply, he noted. The demand exceeds the supply by 5 million people, and the labor force participation rate has declined, he said.

    “It feels almost more structural than cyclical,” he said.

    A key reason Chair Powell wants more slack in the labor market is out of concern that a tight employment situation will continue to push up wages, which could then keep inflation elevated. As the unemployment rate rises, workers lose bargaining power for higher wages and households pull back on spending.

    Fed officials also want to keep inflation expectations anchored.

    “We had a labor market with 3.5% unemployment in 2018 and ’19, and we had inflation just barely getting to 2%, and wages moving up for most of the people at the lower end of the spectrum,” he said. “We all want to get back to that place.”

    And the Fed will react accordingly with the data to ensure it does, he said.

    “If we continue to get, for example, strong labor market reports or higher inflation reports, it may well be the case that we have to do more and raise rates more,” he said.

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  • BP’s annual profit more than doubles to $28 billion | CNN Business

    BP’s annual profit more than doubles to $28 billion | CNN Business


    Hong Kong
    CNN
     — 

    BP’s annual profit more than doubled last year to nearly $28 billion, extending a record run of earnings for the world’s oil majors that is adding to calls for higher taxes on the windfall gains.

    The British energy giant said in a statement that underlying replacement cost profit rose to $27.7 billion for 2022, compared with $12.8 billion the previous year. The metric is a key indicator of oil companies’ profitability.

    BP

    (BP)     also announced on Tuesday a further $2.75 billion in share buybacks and hiked its dividend for the fourth quarter by around 10% to 6.61 cents per share.

    The earnings are the latest in a series of record-setting results by the world’s biggest energy companies, which have enjoyed bumper profits off the back of soaring oil and gas prices.

    Last week, Shell

    (RDSA)     reported a record profit of almost $40 billion for 2022, more than double what it raked in the previous year after oil and gas prices soared following Russia’s invasion of Ukraine.

    — This is a developing story and will be updated.

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  • Australia’s central bank signals more tightening ahead after hiking rates to decade high | CNN Business

    Australia’s central bank signals more tightening ahead after hiking rates to decade high | CNN Business


    Sydney
    Reuters
     — 

    Australia’s central bank raised its cash rate by 25 basis points to a decade-high of 3.35% on Tuesday and reiterated that further increases would be needed, in a more hawkish policy tilt than many had expected.

    Wrapping up its February policy meeting, the Reserve Bank of Australia (RBA) also dropped previous guidance that it was not on a pre-set path and forecast inflation would only return to the top of its target range of 2-3% by mid-2025.

    “The Board expects that further increases in interest rates will be needed over the months ahead to ensure that inflation returns to target and that this period of high inflation is only temporary,” governor Philip Lowe said in a statement.

    Markets were surprised by the hawkish tone of the RBA which shattered any expectations of an imminent pause to the tightening campaign. The futures market has priced in a peak rate of 3.9%, implying at least two more rate hikes in March and April, compared with 3.75% before the decision.

    The local dollar shot up to $0.6940, extending earlier gains. Three-year government bond yields jumped 15 bps to 3.254% while ten-year yields also surged 15 bps to 3.615%.

    “The surprise was not in the decision, but rather the shift in tone and forward guidance in the Governor’s Statement,” said Gareth Aird, head of Australian economics at CBA, as he updated his call for rates to peak at 3.85% after the decision, compared with 3.35% previously.

    “This change implies that the RBA Board has essentially made up their mind and intend to raise the cash rate further over coming months, if the economic data prints in line with their updated forecasts.”

    Markets had expected a quarter-point move, with some risk of a bigger rise given recent inflation data had surprised on the high side. This was the ninth hike since last May, lifting rates by a total of 325 basis points.

    Lowe said that core inflation had been higher than expected, with the trimmed mean gauge accelerating to 6.9% last quarter from a year ago, above the central bank’s previous forecast of 6.5%.

    Inflation is expected to decline to 4.75% this year and only slow to around 3% by mid-2025, according to the RBA’s latest forecasts.

    The RBA also expects economic growth to average around 1.5% over 2023 and 2024.

    The interest rate increases so far, including Tuesday’s move, will add over A$900 a month in repayments to the average A$500,000 mortgage, according to RateCity, a deadweight for a population that holds A$2 trillion ($1.3 trillion) in home loans.

    Housing prices fell for the ninth straight month in January, with prices in Sydney and Melbourne down about 10% from a year ago.

    There are signs that consumers are finally pulling back on spending as the cost of living surges and rate increases bite. Australian retail sales recorded the biggest drop in more than two years in December.

    The next big test is the December quarter wage growth report later this month, which analysts expect to be robust given the labor market is at its strongest in nearly 50 years.

    “High inflation makes life difficult for people and damages the functioning of the economy. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later,” warned Lowe as he signaled the bank’s intention to extend the tightening cycle.

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  • Inflation may be falling — but not the cost of your car insurance | CNN Business

    Inflation may be falling — but not the cost of your car insurance | CNN Business



    CNN
     — 

    If you think news that inflation is easing means you’re not going to get hit with any more higher prices, think again.

    At least, that is, if you’re paying for car insurance. There’s a very good chance your premiums this year will go up … by a lot.

    The average cost of full coverage auto insurance has hit $2,014 a year nationally, up nearly 14% from last year, according to Bankrate’s annual True Cost of Auto Insurance Report, released Monday.

    Why? It’s a lagging effect of high inflation from the last two years that resulted from labor and parts shortages, which in turn drove up the cost of paying insurance claims on car repairs and related insured expenses.

    “Car insurance rates are reactionary,” said Cate Deventer, Bankrate’s insurance analyst.

    But the good news, she added, is this: “If inflation keeps cooling we could see insurers file for rate decreases in future years.”

    Plenty of other factors may increase your individual premium.

    For instance, putting your teen child as a driver on your policy will jack up the rate.

    Ditto if you got into an accident, had speeding tickets or were convicted of a DUI.

    Expect to pay more, too, if your credit score fell or you let your auto coverage temporarily lapse.

    Another big factor in how much your premiums will cost is where you live.

    “Each geographic area has different risks and costs of living, [so] the cost for car insurance varies across the nation,” Deventer said.

    Among major metro areas, Bankrate found that average 2023 premiums rose the most in Orlando, Florida (up nearly 23% to $3,078), followed by Phoenix (up nearly 17% to $2,164). They fell the most in Philadelphia (down nearly 22% to $1,872) and New York City (down 14% to $2,649).

    Meanwhile, as a percentage of average household income, drivers living in Miami now pay the most — 5.51%, or $3,447. Drivers in Boston, meanwhile, pay the least -— just 1.32% of average income, or $1,328.

    While you can’t control the effects of inflation or location on your premium, there are other things you can do to keep your costs to a minimum, Deventer said.

    Look for discounts: Every auto insurer provides them and there are many kinds.

    For instance, you may score a discount if you take a defensive driving course.

    Or if the teenager on your policy goes away to boarding school or college and can’t drive your car, your insurer may offer a “student away” discount. And if they aren’t away, but attend school full-time and get good grades through age 24, that may save you a few bucks, too, Deventer said.

    In any case, if your insurer doesn’t provide you a full list of options, ask to see what’s available to you.

    Shop around: If you’re unhappy with your premium, see if another insurer will give you a better deal, especially if you have a great driving record. “Every company uses a different algorithm to determine rates,” Deventer said.

    (The full Bankrate study can be found here.)

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