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The World
The U.S. economy grew faster than expected in 4Q22 at a 2.9% annualized rate, but that likely exaggerates the nation's health as a measure of domestic demand rose at its slowest pace in 2-1/2 years, reflecting the impact of higher borrowing costs. Half of the boost to growth came from a sharp rise in inventory held by businesses, some of which is likely unwanted. While consumer spending maintained a solid pace of growth, a big chunk of the increase in consumption was early in 4Q22. Retail sales weakened sharply in November and December. Business spending on equipment contracted last quarter and is likely to remain on the backfoot as demand for goods softens. It could be the last quarter of solid GDP growth before the lagged effects of the Fed’s fastest monetary policy tightening cycle since the 1980s are fully felt. (Reuters)
“Looking at the headline [figure], it’s all looking good. But, looking under the hood, it’s just those troubling signs and a loss of momentum that we’ve been seeing really in broad swaths of the data,” said James Knightley, chief international economist at ING. (Financial Times)
“Outside of the labor market, we’re really seeing a broad-based slowing in economic activity,” said Kathy Bostjancic, chief economist at Nationwide. “It’s not going to be a soft landing.” (Wall Street Journal)
The US dollar has wilted against its peers in the opening month of 2023 as the Fed fades as the key driver in currency markets and investors focus on the policies of other major central banks. The dollar has fallen 1.4% in January against half a dozen major currencies, leaving it on track to record its fourth-straight monthly decline. It is now trading at levels last seen in May 2022. (Financial Times)
Small companies have been responsible for all of the net job growth in the U.S. since the onset of the Covid-19 pandemic and account for almost four out of five available job openings, according to a WSJ review of labor data and an analysis by Jefferies. (Wall Street Journal)
Japan and the Netherlands are poised to join the US in limiting China’s access to advanced semiconductor machinery, forging a powerful alliance that will undercut Beijing’s ambitions to build its own domestic chip capabilities, according to people familiar with the negotiations. US, Dutch and Japanese officials are set to conclude talks as soon as Friday US time on a new set of limits to what can be supplied to Chinese companies. There is no plan for a public announcement of restrictions that will likely be just implemented, the people said. (Bloomberg)
South Korea's economy has slowed as rate hikes aimed at controlling inflation and protecting the won have pushed up mortgage rates and weakened consumer spending. Real gross domestic product grew 2.6% in 2022, the Bank of Korea estimated Thursday -- a slowing from the 4.1% of 2021. The central bank projects growth of just 1.7% in 2023. (Nikkei Asia)
Core consumer prices in Japan's capital, a leading indicator of nationwide trends, rose 4.3% in January from a year earlier, marking the fastest annual gain in nearly 42 years and keeping the central bank under pressure to phase out economic stimulus. While the government's energy subsidies starting next month will likely moderate price gains from February, the data heightens the chance that inflation will stay well above the Bank of Japan's 2% target in coming months as companies continue to steadily pass on higher costs to households. (Reuters)
The U.S. is poised to make COVID-19 vaccinations more like a yearly flu shot, a major shift in strategy despite a long list of questions about how to best protect against a still rapidly mutating virus. The Food and Drug Administration asked its scientific advisers Thursday to help lay the groundwork for switching to once-a-year boosters for most Americans -- and how and when to periodically update the shots’ recipe. “This is a consequential meeting to determine if we’ve reached the point in the pandemic that allows for simplifying the use of current COVID-19 vaccines,” said FDA’s Dr. David Kaslow. The advisory panel mostly agreed with the FDA’s approach. (Associated Press)
High-Earning Men Are Cutting Back on Their Working Hours: The top-earning 10% of men in the U.S. labor market logged 77 fewer work hours in 2022, on average, than those in the same earnings group in 2019, according to a new study of federal data by the economics department at Washington University in St. Louis. That translates to 1.5 hours less time on the job each workweek, or a 3% reduction in hours. Over the same three-year period, the top-earning 10% of women cut back time at work by 29 hours, which translates to about half an hour less work each week, or a 1% reduction. (Wall Street Journal)
Young Americans Demand Businesses Have Solid Moral Compass: Americans aged 18 to 29 are more likely than those in all older age groups to say it is “extremely important” that businesses operate in an environmentally sustainable way (77%) and that they reduce their carbon footprint and/or emissions (73%). Young adults are also more likely than older Americans to say it is extremely important for businesses to focus on long-term social benefits; promote diversity, equity and inclusion; and create opportunities for low socioeconomic groups. All of these importance ratings are at least 10 percentage points higher among adults under age 30 than among those 60 and older, and in some cases, more than 20 points higher. (Gallup)
Economy
Corporate Layoffs Spread Beyond High-Growth Tech Giants: Dow, IBM and SAP say they will lay off thousands of workers as belt-tightening becomes the new business priority. The headline-grabbing expansion of layoffs beyond high-growth technology companies stands in contrast to historically low levels of jobless claims and news that companies such as Chipotle Mexican Grill Inc. and Airbus SE are adding jobs. This week, four companies trimmed more than 10,000 jobs, just a fraction of their total workforces. Still, the decisions mark a shift in sentiment inside executive suites, where many leaders have been holding on to workers after struggling to hire and retain them in recent years when the pandemic disrupted workplaces. (Wall Street Journal)
Morgan Stanley has hit bankers with financial penalties running up to more than $1mn per employee for conducting official business on WhatsApp and other messaging platforms. The forfeitures come as the bank tries to punish employees for a scandal that tarnished the group’s reputation and resulted in it paying $200mn of regulatory fines last year. Ranging from a few thousand dollars to more than $1mn per individual, the penalties are based on a points system that takes into account factors including the number of messages sent, the banker’s seniority, and whether they received prior warnings. (Financial Times)
The U.S. Chamber of Commerce plans to take the Federal Trade Commission (FTC) to court over its proposed rule to ban noncompete agreements that restrict employees from switching jobs. Chamber CEO Suzanne Clark said that the corporate lobbying group will “oppose the proposed regulation with all the tools at our disposal, including litigation” in a Wall Street Journal opinion piece.
Investors pour money into emerging markets at near-record rate. (Financial Times)
Bed Bath & Beyond doesn’t have enough cash to pay down its debts and it has defaulted on its credit line with JPMorgan, warning once again of a potential bankruptcy. Shares of Bed Bath plunged Thursday afternoon, prompting brief trading halts. The stock closed 22% down with a market cap of about $295 million. (CNBC)
Toymaker Hasbro is cutting about 1,000 jobs as part of moves announced last year to save up to $300 million annually by 2025. The nearly century-old Rhode Island-based company behind Monopoly, Play-Doh and My Little Pony toys said the layoffs amount to 15% of its global full-time workforce. (The Hill)
Technology
Fintech startup Stripe has set a 12-month deadline for itself to go public, either through a direct listing, or pursuing a transaction on the private market, such as a fundraising event and a tender offer, according to sources familiar with the matter. The news, as first reported by the Wall Street Journal, comes as a surprise considering the rather dry public market activity in the tech world. (TechCrunch)
Stripe’s revenue growth fell sharply last year and the firm was unprofitable, factors the payments giant will need to navigate while planning to either go public or raise money privately in the next year. The company’s gross revenue—the amount of sales it pulls in before paying out a significant chunk to credit card companies—was $14.4 billion last year, a person familiar with the matter said. For comparison, Forbes had reported that the company generated nearly $12 billion in gross revenue in 2021, up 60% from a year earlier. (The Information)
BuzzFeed said it will work with ChatGPT creator OpenAI to use artificial intelligence to help create content for its audience, making the stock jump 150% and marking a milestone in how media companies implement the new technology into their businesses. Jonah Peretti, the company’s co-founder and chief executive, told employees in a memo that they can expect “AI inspired content” to “move from an R&D stage to part of our core business.” (CNN)
Salesforce Inc. is discussing the potential appointment of new board members amid pressure from activist investors, people with knowledge of the matter said. The enterprise software company is in talks to bring on Arnold Donald, the former chief executive officer of Carnival Corp., and Mastercard Inc. Chief Financial Officer Sachin Mehra as independent directors, according to the people. It’s also discussing the possibility of giving a board seat to ValueAct Capital Management CEO Mason Morfit, the people said, asking not to be identified because the information is private. (Bloomberg)
Worldwide smartphone shipments fell 18.3% YoY to 300.3M units in Q4 2022, the largest ever drop in a quarter; Apple fell 14.9%, Samsung 15.6%, and Xiaomi 26.3%. (IDC)
Smart Links
Microsoft Plans Security Features, Wider Release for Its OpenAI-Powered Coding Tool. (The Information)
Southwest lost $800 million from cancellation meltdown. (Axios)
Vegas Visitors Sue the Strip's Biggest Hotels Over Room Prices. (Bloomberg)
Texas heat-related deaths reached a two-decade high in 2022 amid extreme temperatures. (Texas Tribune)