Daily Business Briefing
Aug. 17, 2021, 7:17 a.m. ET
Aug. 17, 2021, 7:17 a.m. ET
The Commerce Department is set to report retail sales on Tuesday, and economists expect that spending dipped in July. Many cities and states in the U.S. were forced to rethink reopening plans last month as coronavirus cases rose, driven by the Delta variant, while the rate of vaccinations slowed.
“We’re seeing caution around the board where people are trying to minimize any potential exposure to the Delta variant,” said Joseph Song, a senior U.S. economist at Bank of America.
The unsteady reopening of the economy has been causing sales to shift month to month. After a drop in May, spending increased by 0.6 percent in June. However, spending on cars, car parts, building materials, furniture and sporting goods declined despite the rise in overall sales.
A global shortage of computer chips has slowed down car and truck production in recent months, with companies like Ford, Daimler and BMW feeling the effects on their financial performance.
The shortage continues to weigh down the automotive industry despite the rise in consumer prices, which increased by 5.4 percent last month compared with a year earlier, the Labor Department’s Consumer Price Index showed on Wednesday.
The report could also show a drop in e-commerce sales.
“One of the main reasons for July’s weakness was due to a slowdown in online retail sales (card not present), which we believe owes in large part to the timing of Prime Day promotions this year,” Michelle Meyer, an economist at Bank of America, wrote in a note on Friday. Prime Day, usually held on July, took place in mid-June.
A decline in sales could signal a slowdown in the broader economic recovery in August. Consumer sentiment tumbled more than 13 percent in early August from July, according to preliminary results from the University of Michigan’s consumer sentiment index.
A string of financial reports from retail giants will be announced this week. Walmart and Home Depot report on Tuesday, with Macy’s, Kohl’s and Target following later in the week. The results could give more perspective on the Delta variant’s effect on consumer spending.
As Gov. Andrew M. Cuomo’s political career teetered, his brother, the TV host Chris Cuomo, kept silent, declining to address the matter on his CNN show and then leaving for what he described as a planned vacation.
On Monday, Chris Cuomo returned to prime time and spoke publicly for the first time about his brother’s stunning resignation — and the ethical headaches it created for him and his network.
“It was a unique situation, being a brother to a politician in a scandal and being part of the media,” Mr. Cuomo said in brief remarks toward the end of his 9 p.m. show. “I tried to do the right thing, and I just want you all to know that.”
He also said he had advised his brother to step down as New York’s governor. “While it was something I never imagined ever having to do,” he told viewers, “I did urge my brother to resign, when the time came.”
For CNN, the conundrum of the Cuomo brothers was painful on several levels.
Chris Cuomo apologized in May after it emerged that he had offered advice to Andrew Cuomo’s aides as the governor faced sexual harassment accusations. The host pledged not to discuss his brother’s travails, but CNN kept him on the air, roiling some colleagues who considered his role a glaring conflict of interest.
It did not help that CNN had openly encouraged the brothers’ on-air rapport at the start of the pandemic, when viewers tuned in to see Chris Cuomo interview Andrew Cuomo on a near-nightly basis.
On his Monday show, Chris Cuomo said the situation involving the governor’s scandal was “unlike anything I could have imagined.”
“I’m not an adviser; I’m a brother,” he told viewers. “I wasn’t in control of anything. I was there to listen and to offer my take. And my advice to my brother was simple and consistent: own what you did, tell people what you’ll do to be better, be contrite, and, finally, accept that it doesn’t matter what you intended. What matters is how your actions and words were perceived.”
Chris Cuomo has also faced scrutiny over his involvement in the efforts by Andrew Cuomo’s aides to stave off the growing scandal. On Monday, the CNN host said: “I never attacked nor encouraged anyone to attack any woman who came forward. I never made calls to the press about my brother’s situation. I never influenced or attempted to control CNN’s coverage of my family.”
He said he had no plans to comment further. “This will be my final word on it,” the host said, before cutting to a commercial. “Let’s take a break. We’ll be right back.”
Job vacancies in Britain climbed to a record high at the start of the summer as businesses competed with each other to fill positions after the government lifted pandemic restrictions.
From May to July, businesses sought to fill 953,000 vacancies, up 44 percent from three months earlier and well above prepandemic levels, according to data from the Office for National Statistics published on Tuesday.
Vacancies were highest for health care workers, followed by positions in the wholesale and retail industry and the accommodation and food services industry, such as hotels and restaurants, the statistics office said. In recent months, many businesses in these industries have reported staff shortages and in the case of hospitality, some are restricting their opening hours to ease the burden on existing staff members even as consumer demand is high. Some businesses are raising pay to lure new employees as the pool of people out of work shrinks.
Pay excluding bonuses jumped 7.4 percent in the second quarter from the year before. But even once certain quirks from the pandemic are stripped away — such as the effect of fewer low-paid employees in the work force a year ago, when much of the economy was in lockdown — the increase in pay was 3.5 percent to 4.9 percent, the statistics office estimated. It’s much higher than the average annual increase of the previous decade, which was about 2 percent.
“Rising wage pressures fit with the broader story of rising inflation across the economy,” Kallum Pickering, an economist at Berenberg, wrote in a note. This strengthens the case for the Bank of England to raise interest rates next year, he added.
Overall, the British labor market is recovering strongly from the pandemic. The number of people on payrolls rose by 182,000 in July, up 0.6 percent from June. Compared with February 2020, the number of payrolled employees is down by 201,000. At its worst, in November, there were nearly 969,000 fewer employees than before the pandemic.
In the second quarter, the unemployment rate slipped to 4.7 percent from 4.9 percent in the previous quarter. There was a record flow of about 300,000 people from unemployment into employment. There was also a decrease in the economic inactivity rate, as more people were classified as unemployed because they have resumed hunting for a job.
By the end of the second quarter, about two million people were still on furlough in Britain, but that program will end next month. Even as vacancies remain high, policymakers and economists are watching closely to see if there will be a notable rise in the unemployment rate after the furlough program ends or if those workers are able to find jobs.
The Bank of England is not forecasting another increase in the unemployment rate this year and but expects it to be about 4.25 percent in 2023. It was at 3.8 percent before the pandemic.
“The challenge of avoiding a steep rise in unemployment has been replaced by that of ensuring a flow of labor into jobs,” Andrew Bailey, the governor of the central bank, said earlier this month. “This is a crucial challenge.”
The billionaire founder of Evergrande, China’s most indebted property developer, has stepped down from his position as chairman of the company’s main real estate arm, Hengda Real Estate Group, according to a notice filed to a government website on Tuesday.
The news that Xu Jiayin, the chairman, would be replaced by Zhao Changlong, a previous company director who will take over as general manager of the real estate arm, sent the developer’s shares falling by more than 4 percent.
Details of the management change at Hengda Real Estate Group were published on the National Enterprise Credit Information System, a government corporate information site. A spokesperson for Evergrande said Mr. Xu would remain chairman of Evergrande.
Evergrande is the latest Chinese corporate giant to fall under the microscope of regulators looking to rein in unruly corporate debt. One of the country’s most debt-saddled companies, it has as much as $300 billion in unpaid bills, loan and bond payments.
Evergrande cranes dot China’s urban landscape. During the country’s boom years, it helped to create the kind of economic activity that officials came to depend on to fuel the nation’s miraculous growth. It sold apartments before they were built, using a model that allowed it to grow quickly as the country urbanized. Then it borrowed money to dabble in new business ventures, like an unprofitable soccer club and an electric vehicle company.
Fearing a housing bubble could lead to a crisis that would reverberate through China’s financial system, regulators last year began to crack down on the borrowing habits of the property sector. The central bank created new rules called the “three red lines” that have forced property companies to begin paying off their bills. Evergrande was the primary target.
Evergrande has been selling off parts of its empire to comply. Earlier this month it sold stakes in its internet business. Mr. Xu has told investors that the company is working hard to pay off some of its loans and has reduced the debt that incurs interest to $88 billion from $130 billion last year.
The management changes on Tuesday could foreshadow more turmoil ahead.
Evergrande last week confirmed reports that it was in talks with prospective buyers to sell its electric vehicle business and its property management unit without offering any further details.
Hindenburg Research is having a moment. The five-person firm, founded in 2017, is making its name with searing reports about potential wrongdoing at public companies.
Some of those reports have prompted government investigations. Hindenburg’s founder, Nate Anderson, told The New York Times’s Matthew Goldstein and Kate Kelly that he’s not in the business just to move share prices, but the short-selling firm profits when the stocks it targets fall after it issues its research.
The firm, which has the backing of about 10 investors (which Mr. Anderson declined to identify), is named after the German airship that exploded in 1937. Mr. Anderson said his passion is to “find scams,” something he did as a hobby alongside previous jobs in due diligence for hedge funds and family offices. The Hindenburg team, comprising analysts and former journalists, can take six months or more to produce its reports.
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In early August, the S.E.C. subpoenaed the sports betting firm DraftKings after Hindenburg reported in June that it had potentially enabled black-market betting.
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Federal authorities began investigating the electric truck maker Lordstown Motors after Hindenburg reported in March that the company was hyping commercial interest. The company’s stock has fallen nearly 70 percent since the research was published.
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Last month, the founder of Nikola, an electric vehicle manufacturer, was charged with defrauding investors. A Hindenburg report on the firm, published last September, accused the company of making exaggerated statements about its business. (Mr. Anderson said his bet against Nikola was his biggest win to date and remained the firm’s largest short position.)
“He’s become a real giant killer,” said Frank Partnoy, a former derivatives trader who is now a professor of securities law at the University of California, Berkeley, School of Law. He “seems fearless, even when going after some of the biggest corporate targets.”
“Nate’s killing it right now,” said Carson Block, who popularized activist short-selling as the head of the firm Muddy Waters.
Blank-check companies, like the ones that took the three firms mentioned above public through a merger, have given Hindenburg a lot of fodder. Critics say the incentives between sponsors of these takeover vehicles and later investors are misaligned. The S.E.C. is looking more closely at these deals with so-called special purpose acquisition companies, which take other companies public with less scrutiny than traditional initial public offerings.
“There are just so many outrageous companies,” Mr. Anderson said. “Some of these companies we have looked at, they don’t have any revenues at all.”
Jerome H. Powell’s term as chair of the Federal Reserve ends in February. Slots for the vice chair and the Fed’s top bank regulator will also be up for grabs soon, and a position on the Fed’s Board of Governors is already vacant.
Assuming officials leave once their leadership terms end, the Biden administration may, in quick succession, be able to appoint four of the Fed’s seven board members, powerful policymakers who have constant votes on monetary decisions and exclusive regulatory authorities, Jeanna Smialek and Alan Rappeport report for The New York Times.
Many who would like to see Mr. Powell replaced play down the role Treasury Secretary Janet Yellen will have in shaping President Biden’s decision wether to oust Mr. Powell. But Treasury secretaries have traditionally been central to the Fed selection process. Ms. Yellen’s views will carry significant weight in the deliberations, coloring both who is considered and the ultimate outcome.
It’s unclear where Ms. Yellen’s preferences lie, but it’s common knowledge that she was unhappy when Mr. Trump broke a tradition of reappointment in her case.
Regulation and climate are key reasons some Democrats are lining up to replace Mr. Powell. READ THE FULL ARTICLE →
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