Evelyn Reynolds

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    Global Economy Is Heading Toward ‘Soft Landing,’ I.M.F. Says

    The International Monetary Fund upgraded its growth forecasts and offered a more optimistic outlook for the world economy.The global economy has been battered by a pandemic, record levels of inflation, protracted wars and skyrocketing interest rates over the past four years, raising fears of a painful worldwide downturn. But fresh forecasts published on Tuesday suggest that the world has managed to defy the odds, averting the threat of a so-called hard landing.Projections from the International Monetary Fund painted a picture of economic durability — one that policymakers have been hoping to achieve while trying to manage a series of cascading crises.In its latest economic outlook, the I.M.F. projected global growth of 3.1 percent this year — the same pace as in 2023 and an upgrade from its previous forecast of 2.9 percent. Predictions of a global recession have receded, with inflation easing faster than economists anticipated. Central bankers, including the Federal Reserve, are expected to begin cutting interest rates in the coming months.“The global economy has shown remarkable resilience, and we are now in the final descent to a soft landing,” said Pierre-Olivier Gourinchas, the chief economist of the I.M.F.Policymakers who feared they would need to hit the brakes on economic growth to contain rising prices have managed to tame inflation without tipping the world into a recession. The I.M.F. expects global inflation to fall to 5.8 percent this year and 4.4 percent in 2025 from 6.8 percent in 2023. It estimates that 80 percent of the world’s economies will experience lower annual inflation this year.The brighter outlook is due largely to the strength of the U.S. economy, which grew 3.1 percent last year. That robust growth came despite the Fed’s aggressive series of rate increases, which raised borrowing costs to their highest levels in 22 years. Consumer spending in America has held strong while businesses have continued to invest. The I.M.F. now expects the U.S. economy to grow 2.1 percent this year, up from its previous prediction of 1.5 percent.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Euro zone economy narrowly skirts recession, stagnates in fourth quarter

    The euro zone economy stabilized in the fourth quarter of 2023, flash figures published by the European Union’s statistics agency showed on Tuesday.
    The bloc narrowly avoided the shallow recession that was forecast in a Reuters poll of economists, following a 0.1% fall in GDP in the third quarter.
    The euro zone’s seasonally-adjusted GDP was flat compared with the previous quarter and expanded by 0.1% versus the previous year.

    Cargo trains stand on the railway tracks at a transshipment station in Frankfurt am Main, western Germany, as in background can be seen the city’s skyline, on January 23, 2024.
    Kirill Kudryavtsev | Afp | Getty Images

    The euro zone economy stabilized in the fourth quarter of 2023, flash figures published by the European Union’s statistics agency showed on Tuesday.
    The bloc narrowly avoided the shallow recession that was forecast in a Reuters poll of economists, following a 0.1% fall in GDP in the third quarter.

    The euro zone’s seasonally-adjusted GDP was flat compared with the previous quarter and expanded by 0.1% versus the previous year. In a preliminary estimate, the euro area was seen posting 0.5% growth over the whole of 2023.
    Its biggest economy, Germany, posted a 0.3% contraction in the final quarter of the year, according to figures also out on Tuesday. The country narrowly skirted a technical recession due to an upwards revision to its reading for the third quarter, when the economy stagnated.
    The French economy was steady in the fourth quarter, while Spain outperformed forecasts to expand by 0.6%.
    The European Commission’s euro zone sentiment indicator meanwhile showed a decline in consumer confidence — though the outlook for businesses in services and industrials was slightly brighter.
    The euro zone economy is in a “phase of prolonged weakness” that is being driven by Germany, while southern European economies lead the way in growth, Bert Colijn, senior economist at ING, said in a note.

    “Germany is struggling with weak global demand for goods and heavy industry is suffering from higher energy prices,” he said.
    The euro zone’s divergence from the U.S. is growing, he added, partly explained by a larger decline in inflation-adjusted wages, energy prices hitting industrials, and lower levels of fiscal support.
    The euro continued to log narrow losses against the U.S. dollar following the fresh Tuesday data, also posting tight gains against the British pound. The U.S. economy smashed expectations for the end of the year, expanding by 3.3% in the fourth quarter. U.K. figures are due out in the middle of February.
    The European Central Bank has hauled interest rates to a record high over the last year and a half, creating tighter financial conditions across the region which have helped cool inflation from a peak of 10.6% in October 2022 to 2.9% in December. The latest euro zone inflation flash figures are due Thursday. More

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    Why Cut Rates in an Economy This Strong? A Big Question Confronts the Fed.

    The central bank is widely expected to lower interest rates this year. But with growth and consumer spending chugging along, explaining it may take some work.The Federal Reserve is widely expected to leave interest rates unchanged at the conclusion of its meeting on Wednesday, but investors will be watching closely for any hint at when and how much it might lower those rates this year.The expected rate cuts raise a big question: Why would central bankers lower borrowing costs when the economy is experiencing surprisingly strong growth?The United States’ economy grew 3.1 percent last year, up from less than 1 percent in 2022 and faster than the average for the five years leading up to the pandemic. Consumer spending in December came in faster than expected. And while hiring has slowed, America still boasts an unemployment rate of just 3.7 percent — a historically low level.The data suggest that even though the Fed has raised interest rates to a range of 5.25 to 5.5 percent, the highest level in more than two decades, the increase has not been enough to slam the brakes on the economy. In fact, growth remains faster than the pace that many forecasters think is sustainable in the longer run.Fed officials themselves projected in December that they would make three rate cuts this year as inflation steadily cooled. Yet lowering interest rates against such a robust backdrop could take some explaining. Typically, the Fed tries to keep the economy running at an even keel: lowering rates to stoke borrowing and spending and speed things up when growth is weak, and raising them to cool growth down to make sure that demand does not overheat and push inflation higher.The economic resilience has caused Wall Street investors to suspect that central bankers may wait longer to cut rates — they were previously betting heavily on a move down in March, but now see the odds as only 50-50. But, some economists said, there could be good reasons for the Fed to lower borrowing costs even if the economy continues chugging along.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Walmart Offers Store Managers Company Stock to Make Them Feel Like ‘Owners’

    The retailer has been raising wages for store workers. It’s now turning its attention to improving salaries and benefits for their bosses.Walmart, the nation’s largest private employer, is raising salaries and benefits for store managers as it looks for ways to retain them.Walmart said on Monday that managers of its U.S. stores would be eligible for grants of up to $20,000 in company stock every year. The stock will vest over a three-year period, with a percentage vested each quarter.Earlier this month, Walmart said it would increase the average salary for store managers to $128,000 from $117,000. The big-box retailer also said bonuses for store managers could reach up to 200 percent of base salary, with a store’s profitability becoming a bigger factor in the calculation.Store managers are crucial in driving sales and profitability within their stores and keeping morale high in a dynamic business. The managers are also seen as an important pipeline for leadership at the company.A store manager at a Walmart Supercenter oversees hundreds of employees who work across a variety of departments, including food, apparel, pharmacies and auto centers. These stores often attract scores of shoppers and bring in millions of dollars in sales each year. At the start of the Covid pandemic, store managers were given even more responsibilities as the company adapted to changing consumer behavior, including managing e-commerce abilities like in-store pickup for online orders and navigating goods that are out of stock as well as excess inventory.“It’s fair to say that we’re asking them to act like owners and to think like owners,” John Furner, the chief executive of Walmart U.S. and previously a manager at a company store, said in a briefing with reporters. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Hottest Job in Corporate America? The Executive in Charge of A.I.

    Many feared that artificial intelligence would kill jobs. But hospitals, insurance companies and others are creating roles to navigate and harness the disruptive technology.In September, the Mayo Clinic in Arizona created a first-of-its-kind job at the hospital system: chief artificial intelligence officer.Doctors at the Arizona site, which has facilities in Phoenix and Scottsdale, had experimented with A.I. for years. But after ChatGPT’s release in 2022 and an ensuing frenzy over the technology, the hospital decided it needed to work more with A.I. and find someone to coordinate the efforts.So executives appointed Dr. Bhavik Patel, a radiologist who specializes in A.I., to the new job. Dr. Patel has since piloted a new A.I. model that could help speed up the diagnosis of a rare heart disease by looking for hidden data in ultrasounds.“We’re really trying to foster some of these data and A.I. capabilities throughout every department, every division, every work group,” said Dr. Richard Gray, the chief executive of the Mayo Clinic in Arizona. The chief A.I. officer role was hatched because “it helps to have a coordinating function with the depth of expertise.”Many people have long feared that A.I. would kill jobs. But a boom in the technology has instead spurred law firms, hospitals, insurance companies, government agencies and universities to create what has become the hottest new role in corporate America and beyond: the senior executive in charge of A.I.The Equifax credit bureau, the manufacturer Ashley Furniture and law firms such as Eversheds Sutherland have appointed A.I. executives over the past year. In December, The New York Times named an editorial director of A.I. initiatives. And more than 400 federal departments and agencies looked for chief A.I. officers last year to comply with an executive order by President Biden that created safeguards for the technology.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Private Equity Is Starting to Share With Workers, Without Taking a Financial Hit

    In 2018, Anna-Lisa Miller was working with agricultural cooperatives in Hawaii, helping them reinvest in their communities through shared ownership.Ms. Miller, who had gone to law school and had planned to do civil rights litigation, loved the principle of workers partaking in the financial success of their employers, and the next year joined Project Equity, a nonprofit that helps small businesses transition to worker ownership. But it was slow going, with each transaction requiring customized assistance.Then she came across an investor presentation from a different universe: KKR, one of the world’s largest private equity firms. In it, a KKR executive, Pete Stavros, discussed a model he had been developing to provide employees with an equity stake in companies it purchased, so the workers would reap some benefits if it was flipped for a profit. When all goes according to plan, KKR doesn’t give up a penny of profit, since newly motivated workers benefit the company’s bottom line, elevating the eventual sale price by more than what KKR gives up.In 2021, the two met up to talk about the idea. By that time, Mr. Stavros had decided to start an organization to promote his model more broadly, hoping to reach the 12 million people who work for companies that private equity firms own. Ms. Miller saw it as a way to move much faster.“Me, as Anna-Lisa working at Project Equity — zero ability to influence private equity in any way — I thought, ‘Oh, gosh, maybe this could be a really efficient scale lever,’” Ms. Miller said. “And here’s Pete, not only doing it but wanting to start this nonprofit.”A few months later, she was the founding executive director of the new group, Ownership Works. The organization now has 25 employees working in a sleek New York office space a couple of blocks from KKR’s soaring headquarters at Hudson Yards. A couple of dozen private equity firms have signed on to give the idea a try.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Economists Predicted a Recession. Instead, the Economy Grew.

    A widely predicted recession never showed up. Now, economists are assessing what the unexpected resilience tells us about the future.The recession America was expecting never showed up.Many economists spent early 2023 predicting a painful downturn, a view so widely held that some commentators started to treat it as a given. Inflation had spiked to the highest level in decades, and a range of forecasters thought that it would take a drop in demand and a prolonged jump in unemployment to wrestle it down.Instead, the economy grew 3.1 percent last year, up from less than 1 percent in 2022 and faster than the average for the five years leading up to the pandemic. Inflation has retreated substantially. Unemployment remains at historic lows, and consumers continue to spend even with Federal Reserve interest rates at a 22-year high.The divide between doomsday predictions and the heyday reality is forcing a reckoning on Wall Street and in academia. Why did economists get so much wrong, and what can policymakers learn from those mistakes as they try to anticipate what might come next?It’s early days to draw firm conclusions. The economy could still slow down as two years of Fed rate increases start to add up. But what is clear is that old models of how growth and inflation relate did not serve as accurate guides. Bad luck drove more of the initial burst of inflation than some economists appreciated. Good luck helped to lower it again, and other surprises have hit along the way.“It’s not like we understood the macro economy perfectly before, and this was a pretty unique time,” said Jason Furman, a Harvard economist and former Obama administration economic official who thought that lowering inflation would require higher unemployment. “Economists can learn a huge, healthy dose of humility.”Economists, of course, have a long history of getting their predictions wrong. Few saw the global financial crisis coming earlier this century, even once the mortgage meltdown that set it off was well underway. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber?  More

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    Fed’s favorite inflation gauge rose 0.2% in December and was up 2.9% from a year ago

    The core personal consumption expenditures price index for December, an important gauge for the Federal Reserve, increased 0.2% on the month and was up 2.9% on a yearly basis.
    Including volatile food and energy costs, headline inflation also rose 0.2% for the month and held steady at 2.6% annually.
    Consumer spending increased 0.7%, stronger than the 0.5% estimate. Personal income growth edged lower to 0.3%, in line with the forecast.

    An important inflation gauge released Friday showed that the rate of price increases cooled as 2023 came to a close.
    The Commerce Department’s personal consumption expenditures price index for December, an important gauge for the Federal Reserve, increased 0.2% on the month and was up 2.9% on a yearly basis, excluding food and energy. Economists surveyed by Dow Jones had been looking for respective increases of 0.2% and 3%.

    On a monthly basis, core inflation increased from 0.1% in November. However, the annual rate declined from 3.2%. The 12-month rate is the lowest since March 2021.
    Including volatile food and energy costs, headline inflation also rose 0.2% for the month and held steady at 2.6% annually.
    The release adds to evidence that inflation, while still elevated, is continuing to make progress lower, possibly giving the Fed a green light to start cutting interest rates later this year. The central bank targets 2% as a healthy annual inflation rate.
    Markets took little notice of the data, with stock futures indicating only a slight change at the open and Treasury yields mostly lower.
    “Inflation dynamics inside the metric that the Fed uses to formulate policy strongly imply that the central bank will hit its inflation target in the near term,” said Joseph Brusuelas, chief economist at RSM. “This will create the conditions in which it makes [its] policy pivot and begins a multiyear campaign in which it reduces the policy rate towards a range between 2.5% and 3%.”

    The Fed’s benchmark overnight interest rate is currently targeted between 5.25%-5.5%.
    As inflation drifted closer to the Fed’s target, consumer spending increased 0.7%, stronger than the 0.5% estimate. Personal income growth edged lower to 0.3%, in line with the forecast.
    The data indicated that consumers are dipping into savings to pay for their expenditures. The personal savings rate fell to 3.7% for the month, down from 4.1% in November.
    Within the inflation numbers, prices for goods declined by 0.2% while services prices rose by 0.3%, reversing a trend when inflation began to spike. As the pandemic forced people to stay home more, demand for goods spiked, adding to supply chain problems and exacerbating price increases.
    Food prices increased 0.1% on the month while energy goods and services rose 0.3%. Prices for longer-lasting durable goods such as appliances, computers and vehicles decreased 0.4%.
    Looked at in conjunction with a separate report Thursday showing that gross domestic product grew at a much faster-than-expected 3.3% pace in the fourth quarter, the most recent round of data shows an expanding economy and inflation at least moving back to the Fed’s 2% annual target.
    “It is hard to say which is more remarkable: that GDP growth accelerated last year following the Fed’s most aggressive tightening campaign in decades, or that core inflation nevertheless fell back to the 2% target in annualized terms over the second half of the year,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.
    “Either way, it is time for Fed officials to take the win and start dialing back the level of policy restrictiveness soon,” he added.
    While the public more closely follows the Labor Department’s consumer price index, Fed policymakers prefer the PCE because it adjusts for shifts in what consumers actually buy, while the CPI measures prices in the marketplace.
    Inflation has been a nettlesome problem since the early days of the Covid pandemic, when price increases surged to their highest levels since the early 1980s. The Fed initially expected the acceleration to be temporary, then responded with a series of interest rate hikes that took its benchmark rate to its highest in more than 22 years.
    Now, with the inflation rate cooling markets largely expect the Fed to start unwinding its policy tightening. As of Friday morning, futures traders were assigning about a 53% chance the Fed will enact its first rate cut this cycle in March, according to CME Group data. Pricing points to six quarter-percentage point decreases this year.
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