Evelyn Reynolds

More stories

  • 138 Shares119 Views

    in Economy

    What to Watch for as the Federal Reserve Meets This Week

    Central bankers are expected to leave interest rates steady at a 22-year high of 5.25 to 5.5 percent. Investors are looking for hints at what’s next.Federal Reserve officials are widely expected to leave interest rates steady at the conclusion of their two-day meeting on Wednesday. But investors and economists will watch for any hint about whether rates are likely to stay that way — or whether central bankers still think they might need to increase them again in the coming months.Officials will release a statement announcing their policy decision at 2 p.m., followed by a news conference with Jerome H. Powell, the Fed chair, at 2:30 p.m. Both will offer policymakers a chance to signal what they think might come next for interest rates and the economy.Central bankers have already raised interest rates to a range of 5.25 to 5.5 percent in a push to tame inflation. That rate setting is up from near-zero as recently as early 2022, and is the highest level in 22 years.Higher borrowing costs are meant to make it more expensive to buy a home, purchase a car or expand a business using a loan. By tapping the brakes on demand and hiring, that slows the broader economy, which can help to put a lid on price increases.Fed officials have widely signaled that they are close to the point where they no longer need to raise interest rates — simply leaving them around this level will cool the economy and help drive inflation back down to their 2 percent goal over time. The question now is twofold: Will policymakers feel it necessary to make one more quarter-point interest-rate move later this year or early next? And once they decide that rates are high enough, how long will they leave them elevated?Here’s what to watch for on Wednesday.Jerome Powell, the Federal Reserve chair, said in that “at the margin” the recent tightening in financial conditions could reduce the need for further tightening, “though that remains to be seen.”Michelle V. Agins/The New York TimesThe Fed’s language will be in focus.Central bankers will first release their standard monetary policy statement, and markets will carefully watch to see if officials make any changes that suggest they are done raising interest rates.Last time, officials said that “in determining the extent of additional policy firming that may be appropriate,” they would contemplate incoming economic data. If they softened that language to make further policy moves sound less likely, it would be notable.But investors may not find much else to parse in this release. Fed officials will not release fresh quarterly economic projections again until December. Given that, traders will have to watch Mr. Powell’s news conference for more details about what comes next.Recent market moves could be critical.As of the Fed’s latest economic forecasts in September, officials still thought that one more rate increase in 2023 might be appropriate.But something critical has changed in the intervening weeks.Long-term interest rates have climbed notably in markets since the Fed gathered on Sept. 19-20. While central bankers directly set short-term interest rates, longer-term borrowing costs often adjust only at a delay — and the recent jump is making everything from mortgages to business loans much more expensive.That could help slow the economy, doing some of the Fed’s work for it. And some economists think in light of that, central bankers will no longer see a need for another rate increase.Mr. Powell, during a question-and-answer session on Oct. 19, said that “at the margin” the recent tightening in financial conditions could reduce the need for further tightening, “though that remains to be seen.”“I took it to mean that perhaps there isn’t as much urgency to raise interest rates further,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. She said that she didn’t expect officials to rule out another move, but “they need to manage a broad range of risks right now.”If consumer spending remains so strong that companies feel they can raise prices without scaring away customers, it could make it tough to fully wrestle inflation back down to 2 percent.Amir Hamja/The New York TimesStrong consumer spending may keep officials alert.While the Fed is dealing with the possibility that higher market-based interest rates will weigh on the economy, they are also confronting another potential challenge: Economic data have remained surprisingly strong in recent months.On one level, this is good news. Consumers are shopping and companies are hiring at a rapid clip in spite of higher interest rates, and that resilience has come at a time when inflation has moderated substantially. The Fed’s favorite inflation gauge has slowed to 3.4 percent, down from 7.1 percent at its peak in summer 2022.But if consumer spending remains so strong that companies feel they can raise prices without scaring away customers, that could make it tough to fully wrestle inflation back down to 2 percent.That’s why policymakers at the Fed are watching the continued strength closely — and trying to decide whether it suggests that further interest rate increases are needed.Timing is a big question.Officials may decide that they simply need more time to watch economic trends play out.Holding off on further rate moves in November — and possibly beyond — could give officials a chance to see if growth and consumer spending slow in the way companies have been warning they could.Plus, keeping rates on pause will give officials more time to see how looming geopolitical risks shape up. The war between Israel and Hamas could affect the economy in hard-to-predict ways. If it escalates into a regional war, it could shake consumer confidence. But a wider conflict could also cause oil prices to pop, pushing up inflation.At the same time, officials won’t want to fully rule out a future move at a time when market rates could fall, risks could fade and growth could remain quick.“Maintaining optionality makes a lot of sense in the current context,” said Matthew Luzzetti, chief U.S. economist at Deutsche Bank.Wall Street is divided over what will come next. Investors see about a one-in-four chance of a rate move at the Fed’s final 2023 meeting, which takes place on Dec. 13. They see a slightly higher — but far from guaranteed — chance of a move in early 2024.“Nobody is feeling a high degree of confidence about the economic outlook right now,” Ms. Uruci said. More

  • 125 Shares179 Views

    in Economy

    U.A.W. Strikes Near an End After G.M. Reaches Tentative Deal

    Tentative accords at Ford Motor, General Motors and Stellantis are the most generous in decades, raising costs as the industry shifts to electric vehicles.A six-week wave of strikes that hobbled the three largest U.S. automakers has resulted in tentative contract agreements that would give workers their biggest pay raises in decades while avoiding a protracted work stoppage that could have damaged the economy.On Monday, General Motors and the United Automobile Workers reached a deal that mirrored agreements the union had reached in recent days with Ford Motor and Stellantis, the parent company of Ram, Jeep and Chrysler. The terms will be costly for the automakers as they undertake a switch to electric vehicles, while setting the stage for labor strife and demands for higher pay at nonunion automakers like Tesla and Toyota.The tentative agreements, which still require ratification by union members, also appeared to be a win for President Biden, who had risked political capital by picketing with striking workers at a G.M. facility in Michigan last month.“They have reached a historic agreement,” Mr. Biden said Monday after speaking with Shawn Fain, the U.A.W. president. The deals, the president said, “reward autoworkers who gave up much to keep the industry working and going during the global financial crisis more than a decade ago.”The strike stretched longer than White House officials would have liked, but was resolved before causing significant shortages of new cars and trucks that might have frustrated voters already angry about inflation.“The near-term impact of this strike will be relatively minor,” said Karl Brauer, executive analyst at iSeeCars.com, an online auto sales site. We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.We are confirming your access to this article, this will take just a moment. However, if you are using Reader mode please log in, subscribe, or exit Reader mode since we are unable to verify access in that state.Confirming article access.If you are a subscriber, please  More

  • 163 Shares189 Views

    in Economy

    Treasury to borrow $776 billion in the final three months of the year

    In a closely watched announcement Monday afternoon, the Treasury Department said it will be looking to borrow $776 billion.
    The Treasury said it expects to borrow $816 billion between January and March.
    The announcement comes 10 days after the government said the fiscal 2023 budget deficit would be about $1.7 trillion.

    The U.S. government’s borrowing needs will decline slightly in the final three months of 2023 from the prior quarter, a potentially important development during a turbulent time for the global bond market.
    In a closely watched announcement Monday afternoon, the U.S. Department of the Treasury said it will be looking to borrow $776 billion, which is below the $1.01 trillion in privately held marketable debt the department borrowed in the July-through-September period, the highest ever for that particular quarter.

    The borrowing level appeared to be somewhat below Wall Street expectations — strategists at JPMorgan Chase said they expected the announcement to be around $800 billion.
    When the Treasury announced in July its heightened borrowing needs, it set off a frenzy in the bond market that saw yields hit their highest levels since 2007, the early days of what would become a global financial crisis.
    Stocks lost some of their gains but still remained strongly positive after the announcement. Treasury yields were mostly higher.
    Markets have been concerned about the effect of higher yields, and the government’s borrowing need, as well as restrictive Federal Reserve policy, have exacerbated those concerns.
    Officials attributed the lower borrowing needs to higher receipts, which were offset somewhat by greater expenses.

    The Treasury said it expects to borrow $816 billion during the January-through-March period, which is the government’s fiscal second quarter. That number appeared above Wall Street estimates, as JPMorgan said it was looking for $698 billion. The record for quarterly borrowing happened in the April-through-June stretch in 2020, when borrowing hit nearly $2.8 trillion during the early Covid-19 pandemic days.
    The department said it expects to maintain a $750 billion cash balance for both quarters.
    Markets will be watching a Wednesday refunding announcement from the Treasury, which will detail the size of auctions, the duration being issued and their timing. Later that day, the Federal Reserve will conclude its two-day policy meeting, with markets overwhelmingly expecting the central bank to hold interest rates steady.
    The Monday announcement comes 10 days after the government said the fiscal 2023 budget deficit would be about $1.7 trillion. That was an increase of some $320 billion from the prior year.
    An accompanying economic summary indicated that growth has remained strong while inflation has cooled, even though it is well above the Federal Reserve’s target. However, the statement indicated that growth is likely to decelerate sharply, falling to 0.7% in the fourth quarter and just 1% for all of 2024.Don’t miss these CNBC PRO stories: More

  • 150 Shares169 Views

    in Economy

    The escalating Israel-Hamas conflict raises risks of global market contagion, economist says

    As the Israel-Hamas conflict further intensifies, the risks to the global economy are growing, economist Mohamed el-Erian said Monday.
    The impact on global markets was initially limited, as investors viewed the conflict as contained. However, the prospect of a regional spillover has added to a sense of unease.
    “The longer this conflict goes on, the more likely it will escalate. The higher the risk of escalation, the higher the risk of contagion to the rest of the world in terms of economics and finance,” el-Erian told CNBC.

    Mohamed Aly El-Erian, chief economic advisor for Allianz SE, during a Bloomberg Television interview in London, UK, on Monday, Sept. 25, 2023. El-Erian spoke alongside former UK Prime Minister Gordon Brown and economist Michael Spence, his co-authors for their book Permacrisis: A Plan to Fix a Fractured World. Photographer: Chris Ratcliffe/Bloomberg via Getty Images
    Bloomberg | Bloomberg | Getty Images

    As the Israel-Hamas war draws into into its fourth week, the risks to the global economy are rising, economist Mohamed el-Erian said Monday.
    The conflict ramped up on Monday, after Israeli military said it had widened its ground offensive in Gaza as it continues its assault in response to the Oct.7 terror attacks by the Hamas militant group.

    El-Erian, who is chief economic advisor at Allianz, said that the longer the fighting continues, the greater the chance that it will escalate into a regional conflict with implications for global financial markets.
    “The longer this conflict goes on, the more likely it will escalate,” el-Erian told CNBC’s Dan Murphy during a panel session at the AIM Summit in Dubai.
    “The higher the risk of escalation, the higher the risk of contagion to the rest of the world in terms of economics and finance,” he continued.
    El-Erian said that such contagion would compound the already pervasive issues facing the global economy, including stagnating growth, stubbornly high inflation and the broader fragmentation of markets.
    “This conflict, in a way, amplifies all of the challenges that existed and that were already significant,” he said.

    The impact on global markets in response to the onset of the war was initially limited, as investors first assessed that the conflict was contained. However, the prospect of a regional spill-over pulling in other players, such as Iran and Lebanon, has added to a sense of unease in markets.
    Oil has been particularly volatile, amid concerns that an escalation could restrict supply from the energy-rich region. Oil prices surged on Friday, after Israel said its troops were expanding their ground operation, but dipped on Monday, as investors looked ahead to the Federal Reserve’s monetary policy meeting of Wednesday.
    Kristalina Georgieva, head of the International Monetary Fund, on Wednesday dubbed the worsening Israel-Hamas conflict as another cloud on the horizon of an already gloomy economic outlook.
    “It is terrible in terms of economic prospects for the epicenter for the war,” she said. “[There will be] negative impact on the neighbors: on trade channels, on tourism channels, cost of insurance.”

    Middle East peace talks stall

    The Oct. 7 terror attacks perpetrated by Hamas came as Israel had been making moves to normalize diplomatic ties with its Arab neighbors, including Saudi Arabia.
    Asked what the ongoing conflict means for those ambitions, el-Erian said that the prospect had grown both more bleak and more pressing.
    “People are watching this and are feeling a sense of despair that I have not seen before,” he said.
    “The longer it [the conflict] continues, the more your question is going to become relevant, and it should really be asked to the policymakers.”
    El-Erian’s comments mirror those made last week by the president of the World Bank, Ajay Banga, who told CNBC that the conflict had made the goal of regional cooperation in the Middle East much more difficult.
    “We were working towards a more peaceful Middle East and many countries in this region have begun to speak to each other about the opportunity of moving forward with a new platform of being together,” Banga said Tuesday. “I think it’s clearly going to be a little while until this sort of works out one way or the other.” More

  • 138 Shares169 Views

    in Economy

    Shipping Contributes Heavily to Climate Change. Are Green Ships the Solution?

    On a bright September day on the harbor in Copenhagen, several hundred people gathered to welcome the official arrival of Laura Maersk.Laura was not a visiting European dignitary like many of those in attendance. She was a hulking containership, towering a hundred feet above the crowd, and the most visible evidence to date of an effort by the global shipping industry to mitigate its role in the planet’s warming.The ship, commissioned by the Danish shipping giant Maersk, was designed with a special engine that can burn two types of fuel — either the black, sticky oil that has powered ships for more than a century, or a greener type made from methanol. By switching to green methanol, this single ship will produce 100 fewer tons of greenhouse gas per day, an amount equivalent to the emissions of 8,000 cars.The effect of global shipping on the climate is hard to overstate. Cargo shipping is responsible for nearly 3 percent of global greenhouse gas emissions — producing roughly as much carbon each year as the aviation industry does.Figuring out how to limit those emissions has been tricky. Some ships are turning to an age-old strategy: harnessing the wind to move them. But ships still need a more constant source of energy that is powerful enough to propel them halfway around the world in a single go.Unlike cars and trucks, ships can’t plug in frequently enough to be powered by batteries and the electrical grid: They need a clean fuel that is portable.Ursula von der Leyen, center, the president of the E.U. Commission, stands with the captains of the Laura Maersk as well as company and government officials in Copenhagen in September.Betina Garcia for The New York TimesThe Laura Maersk is the first of its kind to set sail with a green methanol engine and represents a significant step in the industry’s efforts to address its contribution to climate change. The vessel is also a vivid illustration of just how far the global shipping sector has to go. While roughly 125 methanol-burning ships are now on order at global shipyards from Maersk and other companies, that is just a tiny portion of the more than 50,000 cargo ships that ply the oceans today, which deliver 90 percent of the world’s traded goods.The market for green methanol is also in its infancy, and there is no guarantee that the new fuel will be made in sufficient quantities — or at the right price — to power the vast fleet of cargo ships operating worldwide.Shipping is surprisingly efficient: Transporting a good by container ship halfway around the world produces far less climate-warming gas than trucking it across the United States.That’s true in part because of the scale of modern cargo vessels. The biggest container ships today are larger than aircraft carriers. Each one is able to carry more than 20,000 metal containers, which would stretch for 75 miles if placed in a row.That incredible efficiency has lowered the cost of transport and enabled the modern consumer lifestyle, allowing retailers like Amazon, Walmart, Ikea and Home Depot to offer a vast suite of products at a fraction of their historical cost.Yet that easy consumption has come at the price of a warmer and dirtier planet. In addition to affecting the atmosphere, ships burning fossil fuel also spew out pollutants that reduce the life expectancy of the large percentage of the world’s people who live near ports, said Teresa Bui, policy director for climate at Pacific Environment, an environmental organization.Cargo ships at the Port of Los Angeles in 2021 sometimes had to wait days to dock because of congestion, producing huge amounts of pollution.Coley Brown for The New York TimesThat pollution was particularly bad during the Covid-19 pandemic, when supply chain bottlenecks caused ships to pile up outside of the Port of Los Angeles, producing pollution equivalent to nearly 100,000 big rigs per day, she said.“They have been under regulated for decades,” Ms. Bui said of the shipping industry.Some shipping companies have tried to cut emissions in recent years and comply with new global pollution standards by fueling their vessels with liquefied natural gas. Yet environmental groups, and some shipping executives, say that adopting another fossil fuel that contributes to climate change has been a move in the wrong direction.Maersk and other shipping companies now see greener fuels such as methanol, ammonia and hydrogen as the most promising path for the industry. Maersk is trying to cut its carbon emissions to zero by 2040, and is pouring billion of dollars into cleaner fuels, along with other investors. But making the switch — even to methanol, the most commercially viable of those fuels today — is no easy feat.Switching to methanol requires building new ships, or retrofitting old ones, with different engines and fuel storage systems. Global ports must install new infrastructure to fuel the vessels when they dock.Perhaps most crucially, an entire industry still needs to spring up to produce green methanol, which is in demand from airlines and factory owners as well as from shipping carriers.Methanol, which is used to make chemicals and plastics as well as fuel, is typically produced using coal, oil or natural gas. Green methanol can be made in far more environmentally friendly ways by using renewable energy and carbon captured from the atmosphere or siphoned from landfills, cow and pig manure, or other bio waste.By using green methanol, the Laura Maersk could produce 100 fewer tons of greenhouse gas per day, equivalent to the emissions of 8,000 cars.Betina Garcia for The New York TimesCargo ships require fuel sources that are powerful enough to propel them halfway around the world in a single go.Betina Garcia for The New York TimesFlemming Sogaard Christensen, the chief engineer of the Laura Maersk, inside the engineering room. The ship’s engine can burn oil or a greener type of fuel made from methanol.Betina Garcia for The New York TimesBut the world today does not yet produce much green methanol. Maersk has committed to using only sustainably produced methanol, but if other shipping companies end up using methanol fuel made with coal or oil, that will be no better for the environment.Ahmed El-Hoshy, the chief executive of OCI Global, which makes methane from natural gas and greener sources like landfill gas, said companies today were producing “infinitesimally small volumes” of green methanol using renewable energy.“Companies haven’t done much in our industry yet quite frankly,” he said. “It’s all hype.”Fuel producers still need to master the technology to build these projects, he said. And in order to finance them they need buyers who are willing to commit to long-term contracts for green fuel, which can be three to five times as expensive as conventional fuel.Maersk has signed contracts with fuel providers including OCI and European Energy, which is building in Denmark what will be the world’s largest plant producing methanol with renewable electricity. The shipping company already has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.But many other companies are not yet willing to pay the necessary cost for greener technologies, Mr. El-Hoshy said.The missing piece, said Mr. El-Hoshy and others in the shipping and methanol industries, is regulation that would help level the playing field between companies trying to clean up their emissions and those still burning dirtier fuels.The European Union is ushering in rules that encourage ships to decarbonize, including new subsidies for green fuels and penalties for fossil fuel use. The United States is also spurring new investments in green fuel production and more modern ports through generous domestic spending programs.Maersk has clients like Amazon and Volvo that are willing to pay more to have their goods transported with green fuels, in order to reduce their own carbon footprints.Betina Garcia for The New York TimesBut proponents say the key to a green transition in the shipping sector are global rules that are pending through the International Maritime Organization, the United Nations body that regulates global shipping.The organization has long received heavy criticism for its lagging efforts on climate. This summer, it adopted a more ambitious target: eliminating the global shipping industry’s greenhouse gas emissions “by or around” 2050.To get there, nations have promised to agree on a legally binding way to regulate emissions by the end of 2025, which they would put into effect in 2027.Yet countries have yet to agree on what kind of regulation to use. They are debating whether to adopt a new standard for cleaner fuels, new taxes per ton of greenhouse gas emitted or some kind of mix of tools.Some developing countries, and nations that export low-value goods like farm products, say that strict regulation would raise shipping costs and be economically harmful.Proponents of the regulation — including Maersk — say it’s necessary to avoid penalizing those who are trying to clean up the business, and provide certainty about the industry’s direction.“There has to be an economic mechanism by which you level the playing field so that people are incentivized and not punished for using low-carbon fuels,” said John Butler, the chief executive of the World Shipping Council, which represents container carriers including Maersk.“Then you can invest with some confidence,” he added.A container ship traveling halfway around the world produce less climate-warming gas than a truck traveling across the United States.Betina Garcia for The New York TimesVincent Clerc, the chief executive of Maersk, said the company would continue to adopt new green technologies as they became available.Betina Garcia for The New York TimesStill, Maersk acknowledges that green methanol is unlikely to be the final solution. Experts say that the fuel’s reliance on finite sources of waste, like corn husks and cow manure, mean there will not be enough to power the entire global shipping fleet.In an interview, Vincent Clerc, the chief executive of Maersk, said that the entire maritime sector was unlikely to ever be powered predominantly by methanol. But Maersk had no regrets about moving some of its fleet from fossil fuels to methanol now, then adopting new technologies as they become available, he said.“This marks a real systemic change for this sector,” Mr. Clerc said, gesturing toward the vessel piled high with 20-foot containers in front of him.Eric Leveridge, the climate campaign manager for Pacific Environment, said his group was glad that Maersk and other shipping companies were moving toward more sustainable fuels. But the organization is still concerned that “it is more for optics and that the impact is potentially being exaggerated,” he said.“When it comes down to it, even if there is this investment, there’s still a lot of heavy fuel oil ships on the water,” he said. More

  • 138 Shares99 Views

    in Economy

    Middle East War Could Cause Oil Price Shock, World Bank Warns

    A major escalation of the war between Israel and Hamas — one that spilled over into a broader Middle East conflict — could send oil prices surging as much as 75 percent, the World Bank warned on Monday.The potential for a global energy shock in the wake of Hamas’s brutal attack on Israel has been a pressing question for economists and policymakers, who have spent the past year trying to combat inflation.Energy prices have remained largely contained since Hamas invaded Israel on Oct. 7. But economists and policymakers have been closely monitoring the trajectory of the war and studying previous conflicts in the region as they try to determine the potential scale of economic repercussions if the current conflict intensifies and broadens across the Middle East.The World Bank’s new study suggests that such a crisis could overlap with energy market disruptions already caused by Russia’s war in Ukraine, exacerbating the economic consequences.“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” Indermit Gill, the World Bank’s chief economist and senior vice president for development economics, said in a statement that accompanied the report. “If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades — not just from the war in Ukraine but also from the Middle East.”The World Bank projects that global oil prices, which are currently hovering around $85 per barrel, will average $90 per barrel this quarter. The organization had been projecting them to decline next year, but disruptions to oil supplies could drastically change those forecasts.The bank’s worst-case scenario is pegged to the 1973 Arab oil embargo that took place during the Arab-Israeli war. A disruption of that severity could remove as much as eight millions barrels of oil per day off the market and send prices as high as $157 per barrel.A less severe, but still disruptive, outcome would be if the war plays out as the 2003 war in Iraq, with oil supply being reduced by five million barrels per day and prices rising as much as 35 percent, to $121 a barrel.A more modest outcome would be if the conflict parallels the 2011 civil war in Libya, with two million barrels per day of oil lost from global markets and prices rising as much as 13 percent, to $102 per barrel.World Bank officials cautioned that the effects on inflation and the global economy would depend on the duration of the conflict and how long oil prices remained elevated. They said that if higher oil prices are sustained, however, that would lead to higher prices for food, industrial metals and gold.The United States and Europe have been trying to keep global oil prices from spiking in the wake of Russia’s invasion of Ukraine. Western nations introduced a price cap on Russia’s energy exports, a move aimed at limiting Moscow’s oil revenues while ensuring oil supply continued to flow.The Biden administration also tapped its Strategic Petroleum Reserve to ease oil price pressures. A senior administration official told The New York Times last week that President Biden could authorize a new round of releases from the nation’s Strategic Petroleum Reserve, an emergency stockpile of crude oil that is stored in underground salt caverns near the Gulf of Mexico.Biden administration officials have publicly downplayed their concerns about the economic impact of the conflict, saying it was too soon to predict the fallout. Treasury Secretary Janet L. Yellen noted at a Bloomberg News event last week that oil prices had so far been generally flat and that she had not yet seen signs that the war was having global economic consequences.“What could happen if the war expands?” Ms. Yellen said. “Of course there could be more meaningful consequences.” More

  • 113 Shares119 Views

    in Economy

    Halloween Shoppers Not Spooked as Economic Slowdown Remains Elusive

    Economists spent much of 2023 warning that a recession could be imminent as the Federal Reserve raised interest rates to the highest level in more than two decades. But for companies like Soergel Orchards in western Pennsylvania, a slowdown is nowhere in sight.“People are buying the decorative things,” said Amy Soergel, manager at the company who explained that gourds and cornstalks were in high demand and that customers were coming out to select pumpkins and apples. “People love to pick — people will pick anything.”Sales are up even though a string of rainy weekends have held back attendance at the farm’s annual fall festival. Demand at the hard cider shop has been solid. And the owners are bracing for a strong season in their store selling Christmas decorations.Soergel’s bustling business is a microcosm of a trend playing out nationwide. Consumer demand has unexpectedly boomed in 2023, defying widespread expectations for a slowdown and helping to fuel strong overall growth. The economy expanded at an eye-popping 4.9 percent annual rate in the third quarter, far faster than the roughly 2 percent pace officials at the Fed think of as its standard growth pace.That is great news for American companies. But it is a also a source of confusion. Why is the economy still growing so quickly more than a year and a half into the Fed’s campaign to slow it down, and how long will the upswing last?Fed officials have lifted interest rates above 5.25 percent, making it more expensive to take out a mortgage, borrow to expand a business or carry a credit card balance. Those moves were meant to trickle out through markets to cool the real economy. Some parts of the economy have felt the squeeze — existing home sales have slowed, for instance. Yet employers continue to hire and families keep spending.Customers were coming to Soergel Orchards to select pumpkins and apples.Ross Mantle for The New York Times“People love to pick — people will pick anything,” a manager said.Ross Mantle for The New York TimesCornstalks and gourds are in high demand at Soergel’s.Ross Mantle for The New York TimesIt is difficult to predict what comes next as the all-important holiday shopping season approaches. A solid job market and cooling inflation could combine to give consumers the wherewithal to keep powering the economy forward. But many companies are being careful not to build up too much inventory or predict too strong a sales outlook, worried that higher borrowing costs could collide with smaller savings piles and the accumulated effects of more than two years of rapid inflation to make Americans thriftier.“Sentiment definitely feels down,” Thomas Barkin, president of the Federal Reserve Bank of Richmond, said during an interview on Oct. 19. “The folks I talk to are still clamping down in preparation for 2024.”What happens with holiday shopping could help shape what the Fed does next.The central bank has been trying to slow growth for a reason: Inflation has been above 2 percent for 30 months now. To get prices under control, policymakers think they need to tamp down demand.The logic is fairly simple. If rapid hiring continues and wage gains prove quick, people who are earning more money are likely to feel confident and keep spending. And if shoppers are eager to buy restaurant dinners, new gadgets and updated wardrobes, it will be easier for companies to protect their profits by raising prices.That is why Fed officials are keeping an eye on how strong consumers and the job market remain as they contemplate what to do next with interest rates. Policymakers are almost sure to leave rates unchanged at their meeting on Nov. 1, and a number of them have suggested that they may be done raising borrowing costs altogether.Soergel’s owners are bracing for a strong season in their store selling Christmas decorations.Ross Mantle for The New York TimesBut top officials have kept alive the possibility of one final quarter-point increase, if economic data were to remain buoyant.“We are attentive to recent data showing the resilience of economic growth and demand for labor,” Jerome H. Powell, the Fed chair, said in a recent speech, adding that continued surprises “could put further progress on inflation at risk and could warrant further tightening of monetary policy.”So far, companies offer a mixed picture on the outlook. Many are suggesting that seasonal shopping is off to a strong start. Halloween spending is expected to climb to a record $12.2 billion, up 15 percent from last year’s record of $10.6 billion, according to the National Retail Federation’s annual survey. The group is expected to release its holiday forecast this week.Walmart reported strong sales during its back-to-school season, which its chief executive noted was a good indicator for how spending would look during Halloween and Christmas.“Typically when back-to-school is strong, it bodes well for what happens with Halloween and Christmas,” Doug McMillon, the Walmart chief, said on an earnings call in August.But some companies are uncertain. The Tractor Supply chief executive, Hal Lawton, said during an earnings call last week that the retailer was stocking up on fall and winter décor — selling, for instance, a skeleton cow that was a “TikTok viral sensation.”But “we acknowledge there is a broader range of estimates for holiday, consumer spending than we’ve seen over the last couple of years,” he added.And some analysts think winter shopping could prove weak. Craig Johnson, founder of the retail consultancy Customer Growth Partners, expects holiday sales to grow at 2.1 percent, the slowest since 2012, he said in a report released Oct. 17.“The fact that people had a good Halloween doesn’t necessarily mean that they’re going to have a good holiday,” Mr. Johnson said. “It’s a different buying mentality and there’s not a carryover — you’re not going to see apparel lines from Halloween extend over into Christmas.”Retailers report that they are carefully watching how much inventory they have headed into the holidays, and a Fed survey of business experiences from around the Fed’s 12 districts referenced the word “slow,” “slower” or “slowing” 69 times.Demand at the on-site hard cider shop has been solid.Ross Mantle for The New York TimesPart of the challenge in forecasting is that consumers seem to be splitting into two groups: Wealthier consumers keep spending even as the bottom tier of shoppers either pull back or look for deals.The department store chain Kohl’s says it is seeing this type of bifurcation play out in its customer base and is adjusting its stores accordingly.Shoppers at the Kohl’s in Ramsey, N.J., were greeted with a range of already-discounted Christmas items like miniature snowmen and ornaments at the front of the store. That design was done on purpose — Kohl’s executives want the section to appeal to deal-hungry shoppers.But in a sign that higher earners could fuel growth, it has also started to stock new category items like decanters, wine glasses and electric corkscrews.“We want to make sure we’ve got the right broad breadth of assortment for the breadth of customer base that we’ve got,” said Nick Jones, Kohl’s chief merchandising and digital officer. “And that’s an element of making sure everything’s got to be great value. But great value doesn’t always mean low price.” More

  • 100 Shares99 Views

    in Economy

    U.A.W. Reaches Tentative Deal With Stellantis, Following Ford

    The United Automobile Workers union announced the deal with Stellantis, the parent of Chrysler, Jeep and Ram. It also expanded its strike against G.M.The United Automobile Workers union announced on Saturday that it had reached a tentative agreement on a new labor contract with Stellantis, the parent company of Chrysler, Jeep and Ram.The agreement came three days after the union and Ford Motor announced a tentative agreement on a new contract. The two deals contain many of the same or similar terms, including a 25 percent general wage increase for U.A.W. members as well as the possibility for cost-of-living wage adjustments if inflation flares.“We have won a record-breaking contract,” the U.A.W. president, Shawn Fain, said in a video posted on Facebook. “We truly believe we got every penny possible out of the company.”Shortly after announcing the tentative agreement with Stellantis, the union expanded its strike against General Motors, calling on workers to walk off the job at the company’s plant in Spring Hill, Tenn. The plant makes sport utility vehicles for G.M.’s Cadillac and GMC divisions.Under the tentative new contract with Stellantis, Mr. Fain said, the company has agreed to reopen a plant in Belvidere, Ill., to produce a midsize pickup truck and to rehire enough workers to staff two shifts of production.The union also won commitments to keep an engine plant in Trenton Mich., open, and to keep and expand a machining plant in Toledo, Ohio. According to the union, these moves will create up to 5,000 new U.A.W. jobs.The union also won the right to strike if the company closes any plant and if it fails to follow through on its promised investment plans, Mr. Fain said.“If the company goes back on their words on any plant, we can strike the hell out of them,” he said.Mr. Fain said Stellantis workers would now return to their jobs.In a statement, Stellantis said, “We look forward to welcoming our 43,000 employees back to work and resuming operations to serve our customers.”The tentative agreement with Stellantis will require approval by a union council that oversees negotiations with the company, and then ratification by U.A.W. members. The council will meet on Thursday, Mr. Fain said.The deal with Stellantis means that only General Motors has not yet reached an agreement with the U.A.W.Erik Gordon, a business professor at the University of Michigan who follows the auto industry, said the new contracts impose higher labor costs on the Detroit manufacturers as they are ramping up production of electric vehicles and are competing with rivals who operate nonunion plants.“The Detroit Three enter a new, dangerous era,” he said. “They have to figure out how to transition to EVs and do it with a cost structure that puts them at a disadvantage with global competitors.”The union’s contracts with the three automakers expired on Sept. 15. Since then, the union has called on more than 45,000 autoworkers at the three companies to walk off the job at factories and at 38 spare-parts warehouses across the country.The most recent escalation of the strike at Stellantis came on Monday when the U.A.W. told workers to go on strike at a Ram plant in Sterling Heights, Mich., that makes the popular 1500 pickup truck. The strike has halted the production of Jeep Wranglers and Jeep Gladiators at a plant in Toledo, Ohio, and 20 Stellantis parts warehouses.For decades, the union has negotiated similar contracts with all three automakers, a method known as pattern bargaining. Like the contract it hammered out with Ford, the tentative Stellantis deal would lift the top U.A.W. wage from $32 an hour to more than $40 over four and a half years. That would allow employees working 40 hours a week to earn about $84,000 a year.Stellantis, G.M. and Ford began negotiating with the U.A.W. in July. The companies have sought to limit increases in labor costs because they already have higher labor costs than automakers like Tesla, Toyota and Honda that operate nonunion plants in the United States.The three large U.S. automakers are also trying to control costs while investing tens of billions of dollars to develop new electric vehicles, build battery plants and retool factories.Stellantis, which is based in Amsterdam, was created in 2021 by the merger of Fiat Chrysler and Peugeot, the French automaker. The company’s North American business, based near Detroit, is its most profitable.Stellantis surprised analysts recently by posting much stronger profits than G.M., which is the largest U.S. automaker by sales. Stellantis earned 11 billion euros ($11.6 billion) in the first half of the year while G.M. made nearly $5 billion.Noam Scheiber More