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    GDP Data Shows US Economic Growth Rate of 2% in Q1

    The NewsThe United States economy grew faster early this year than previously believed.Gross domestic product, adjusted for inflation, expanded at an annual rate of 2 percent in the first three months of the year, the Commerce Department said Thursday. That was a significant upward revision from the 1.1 percent growth rate in preliminary data released in April. (An earlier revision, released last month, showed a slightly stronger rate of 1.3 percent.)An alternative measure of growth, based on income rather than production, painted a different picture, showing that the economy contracted for the second quarter in a row. That measure was also revised upward from the prior estimate.The report underscored the surprising resilience of the country’s economic recovery, which has remained steady despite high inflation, rapidly rising interest rates and persistent predictions of a recession from many forecasters on Wall Street.The new data is cause for “genuine optimism,” wrote Gregory Daco, chief economist at EY, the consulting firm previously known as Ernst & Young, in a note to clients. “This is leading many to rightly question whether the long-forecast recession is truly inevitable.”Consumers are powering the recovery through their spending, which increased at a 4.2 percent rate in the first quarter, up from a 1 percent rate in late 2022 and faster than the 3.7 percent rate initially reported in April. That spending, fueled by a strong job market and rising wages, helped offset declines in other sectors of the economy like business investment and housing.Consumers are powering the recovery through their spending, which increased at 4.2 percent rate in the first quarter.Jim Wilson/The New York TimesWhat It Means: Complications for the Fed.The continued strength of the consumer economy poses a conundrum for policymakers at the Federal Reserve, who have been raising interest rates in an effort to curb inflation without causing a recession.On the one hand, data from the first quarter provides some signs of success: Economic growth has slowed but not stalled, even as inflation has cooled significantly since the middle of last year.But many forecasters, both inside and outside the central bank, are skeptical that inflation will continue to ease as long as consumers are willing to open their wallets — meaning policymakers are likely to take further steps to rein in growth. At their meeting this month, Fed officials left interest rates unchanged for the first time in more than a year, but they have signaled they are likely to resume rate increases in July.The Fed chair, Jerome H. Powell, at a conference in Madrid on Thursday, noted that inflation had repeatedly defied forecasts of a slowdown.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.What’s Next: Data on income and spending.Mr. Powell and his colleagues will get more up-to-date evidence on their progress on Friday, when the Commerce Department releases data on personal income, spending and inflation from May.Jeanna Smialek More

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    Opposition Grows to U.S. Imports of ‘Laundered’ Russian Oil

    Human rights groups and Ukrainian officials want the United States to stop buying Russian crude oil that has been refined into other products in third countries like IndiaUkrainian officials and human rights groups are asking the United States to close what they describe as a loophole that allows Russian crude oil that has been refined in other countries to be shipped to the United States.The Biden administration issued a ban in March last year on purchasing crude oil and other petroleum products directly from Russia, immediately after the Kremlin’s invasion of Ukraine. The European Union, which was heavily dependent on Russia for supplies of energy, banned Russian crude in December and then petroleum products in February.But both the United States and the European Union continue to buy Russian oil that has been refined in other countries into gasoline, fuel oil and other products. Countries like Turkey, the United Arab Emirates, Singapore, China and particularly India are snapping up Russian oil, which must now be sold at a reduced price under a cap imposed by the United States and Europe. These nations — which have been described as “laundromat” countries by environmental and human rights groups — then refine the oil and send it to other markets.This activity is legal: Once Russian crude oil has been “substantially transformed” by being refined in another country, it legally ceases to be Russian. The same standards have long applied to oil from other nations that are under sanctions, like Iran and Venezuela.Still, opposition to this sort of trade is growing.Oleg Ustenko, an economic adviser to the Ukrainian president, said such U.S. purchases meant “that we are indirectly supporting this insurrection, which is just not acceptable.”“I don’t know how it sounds in English, but in Ukrainian I’m calling this strategy as a cockroach strategy, meaning they are trying to find all possible loopholes, as a cockroach trying to crawl through these holes into your apartment,” he said of Russia’s oil trade. “And what you need to do, you need to close all these holes.”It’s difficult to estimate how much refined petroleum the United States is importing that originally came from Russia. But a report released Thursday by Global Witness, a London-based organization that advocates environmental and human rights, suggested that the volume was small but not insignificant.Take India, one of the biggest participants in this activity. The United States imported roughly 152 million barrels of refined petroleum products in the first five months of this year, with about 8 percent coming from India.More than 80 percent of refined oil that the United States imports from India came from a single port: Sikka, in Gujarat Province, which is home to the Jamnagar Refinery, the world’s largest refinery, according to calculations by Global Witness. And in the first five months of the year, the group estimated, 35 percent of the crude oil arriving at the port was of Russian origin.To block these flows, Global Witness proposes banning all imports from refineries that buy Russian crude oil. The group sent members to Washington last week to lobby members of Congress on the move, including in the committees overseeing energy and support for Ukraine.“Banning oil from refineries running on Russia crude is a common-sense decision for the U.S.,” said Lela Stanley, senior investigator at Global Witness.Mr. Ustenko and Ms. Stanley said such a ban was unlikely to have much impact on U.S. gas prices. But Tom Kloza, global head of energy analysis at the Oil Price Information Service, which tracks wholesale and retail prices of oil, said he believed it would have some effect.“If you remove a number of countries as potential sources for gasoline and diesel, there’s an impact in the U.S. and an impact in Europe,” he said.Mr. Kloza said that the Biden administration might be reluctant to take any step that would raise gas prices with an election approaching — and that such a ban could also prove difficult to police. He pointed to the example of Saudi Arabia, which last year had started importing Russian diesel, while also exporting more diesel from Saudi refineries to other countries.“There’s lots of ways to get around the Russian boycott,” he said.It also remains to be seen what such a ban would mean for the U.S. relationship with India, which the Biden administration regards as a key strategic partner. The Jamnagar Refinery is owned by Reliance Industry, which is in turn controlled by Mukesh Ambani, an Indian businessman. Mr. Ambani is a close partner to the Indian prime minister, Narendra Modi, and was a guest at the state dinner that the White House threw for Mr. Modi last week. More

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    First-quarter economic growth was actually 2%, up from 1.3% first reported in major GDP revision

    David Leal installs a tailpipe on a vehicle at Muffler Pros on April 12, 2023 in Hollywood, Florida.
    Joe Raedle | Getty Images

    The U.S. economy showed much stronger-than-expected growth in the first quarter than previously thought, according to a big upward revision Thursday from the Commerce Department.
    Gross domestic product increased at a 2% annualized pace for the January-through-March period, up from the previous estimate of 1.3% and ahead of the 1.4% Dow Jones consensus forecast. This was the third and final estimate for Q1 GDP. The growth rate was 2.6% in the fourth quarter.

    The upward revision helps undercut widespread expectations that the U.S. is heading toward a recession.
    According to a summary from the department’s Bureau of Economic Analysis, the change came in large part because both consumer expenditures and exports were stronger than previously thought.
    Consumer spending, as gauged by personal consumption expenditures, rose 4.2%, the highest quarterly pace since the second quarter of 2021. At the same time, exports rose 7.8% after falling 3.7% in the fourth quarter of 2022.
    There also was some good news on the inflation front.
    Core PCE prices, which exclude food and energy, rose 4.9% in the period, a downward revision of 0.1 percentage point. The all-times price index increased 3.8%, unchanged from the last estimate.

    Federal Reserve policymakers most closely watch core PCE as an inflation indicator. Through a series of rate increases, the Fed is trying to get inflation back down to 2%.
    The rate hikes are targeted at slowing down an economy that in the summer of 2022 was generating inflation at the highest level since the early 1980s.
    One specific focus for the Fed has been the labor market. There currently are about 1.7 open positions for every available worker, and the tightness has resulted in a push higher for wages which generally have not kept pace with inflation.
    A separate report Thursday from the Labor Department pointed showed that initial jobless claims fell to 239,000 for the week ended June 24. That was a decline of 26,000 from the previous week and well below the estimate for 264,000. More

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    Fed Chair Powell Says He Expects Slower Interest Rate Increases to Continue

    After rapid interest rate increases, Federal Reserve officials could move to a steadily slower pace — though they are not ready to commit.Jerome H. Powell, the Federal Reserve chair, said on Thursday that he would expect to continue with a slower pace of interest rate increases after central bankers skipped raising interest rates in June for the first time in 11 policy meetings — but he did not rule out that officials could return to back-to-back rate moves.“It may be that we don’t move for a meeting, and then move at a meeting,” Mr. Powell said.Speaking at a conference in Madrid, he reiterated an assertion he made a day earlier that he would not take future rate increases at consecutive meetings “off the table.” But he added that he would expect a more patient approach to persist.“We did take one meeting where we didn’t move, so that’s in a way a moderation of the pace,” he explained. “So I would expect something like that to continue, assuming the economy evolves about as expected.”Mr. Powell noted, however, that the economy “has a tendency to do something different” than policymakers anticipate.Fed officials raised interest rates rapidly in 2022, making a string of three-quarter-point increases. They slowed to a half-point move late last year, and have been progressively moving toward smaller, and now more intermittent, adjustments.Raising interest rates is like hitting the brakes on economic growth: It slows consumer and business demand in order to bring down inflation. Lifting rates more gradually is akin to tapping the brake pedal less firmly. Fed officials are still slowing the economy, but they are trying to avoid an unnecessarily jarring halt. For now, central bankers expect to raise their policy rate two more times in 2023, from just above 5 percent to just above 5.5 percent. If those moves happen at an every-other-meeting pace, that could mean rate increases at the central bank’s meetings in July and November.But significant uncertainty clouds that forecast. Investors put a low — though rising — probability on two more rate increases by the end of the year. They are betting that it is more likely that the Fed will make only one more rate increase in 2023, as the economy slows and inflation cools.Mr. Powell noted that the Fed has repeatedly been wrong in the other direction, overestimating how quickly price increases moderate.“We’ve all seen inflation be — over and over again — shown to be more persistent and stronger than we expected,” he said.“It wouldn’t have been thinkable to have a 5 percent interest rate before the pandemic,” he later added. “And now the question is — is that tight enough policy?” More

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    Biden Administration Weighs Further Curbs on Sales of A.I. Chips to China

    Reports that the White House may clamp down on sales of semiconductors that power artificial intelligence capabilities sent tech stocks diving.The Biden administration is weighing additional curbs on China’s ability to access critical technology, including restricting the sale of high-end chips used to power artificial intelligence, according to five people familiar with the deliberations.The curbs would clamp down on the sales to China of advanced chips made by companies like Nvidia and Advanced Micro Devices and Intel, which are needed for the data centers that power artificial intelligence.Biden officials have said that China’s artificial intelligence capabilities could pose a national security threat to the United States by enhancing Beijing’s military and security apparatus. Among the concerns is the use of A.I. in guiding weapons, carrying out cyber warfare and powering facial recognition systems used to track dissidents and minorities.But such curbs would be a blow to semiconductor manufacturers, including those in the United States, who still generate much of their revenue in China.The deliberations were earlier reported by The Wall Street Journal. Nvidia’s shares closed down 1.8 percent on Wednesday after reports of the potential export crackdown. The company has been one of the primary beneficiaries of the enthusiasm over artificial intelligence, with its share price surging by roughly 180 percent this year.Such additional restrictions, if adopted, would not have an immediate impact on Nvidia’s financial results, Colette Kress, the chief financial officer of Nvidia, said Wednesday at an event hosted by an investment firm. But over the long term, they “will result in a permanent loss of opportunities for the U.S. industry to compete and lead in one of the world’s largest markets,” she said. She added that China typically generates 20 percent to 25 percent of the company’s data center revenue, which includes other products in addition to chips that enable A.I.The stock prices of chip companies Qualcomm and Intel fell less than 2 percent on Wednesday while AMD nudged 0.2 percent lower.Intel declined to comment, as did the Commerce Department, which oversees export controls. AMD did not respond to a request for comment.Curbing the sale of high-end chips would be the latest step in the Biden administration’s campaign to starve China of advanced technology that is needed to power everything from self-driving cars to robotics.Last October, the administration issued sweeping restrictions on the types of advanced semiconductors and chip making machinery that could be sent to China. The rules were applied across the industry, but they had particularly strong consequences for Nvidia. The company, an industry leader, was barred from selling China its top-line A100 and H100 chips — which are adept at running the many processes required to build artificial intelligence — unless it first obtained a special license.In response to those restrictions, Nvidia began offering the downgraded A800 and H800 chips in China last year.The additional restrictions under consideration, which would come as part of the process of finalizing those earlier rules, would also bar sales of Nvidia’s A800 and H800 chips, and similar advanced chips from competitors like AMD and Intel, unless those companies obtained a license from the Commerce Department to continue shipping to the country.The deliberations have touched off an intense lobbying battle, with Intel and Nvidia working to prevent further curbs on their business.Chip companies say cutting them off from a major market like China will substantially eat into their revenues and reduce their ability to spend on research and innovation of new chips. In an interview with The Financial Times last month, Nvidia’s chief executive, Jensen Huang, warned that the U.S. tech industry was at risk of “enormous damage” if it were to be cut off from trading with China.The Biden administration has also been internally debating where to draw the line on chip sales to China. Their goal is to limit technological capacity that could aid the Chinese military in guiding weapons, developing autonomous drones, carrying out cyber warfare and powering surveillance systems, while minimizing the impact such rules would have on private companies.The measure, which would come as the United States is also considering expanded curbs on U.S. investment in Chinese technology firms, is also likely to ruffle the Chinese government. Biden officials have been working in recent weeks to improve bilateral relations after a fallout with Beijing this year, after a Chinese surveillance balloon flew over the United States.Antony J. Blinken, the secretary of state, traveled to Beijing this month to meet with his counterparts, and Treasury Secretary Janet L. Yellen is also expected to travel to China soon.During a Wednesday appearance at the Council on Foreign Relations in New York, Mr. Blinken said that China’s concern that the U.S. sought to slow its economic growth was “a lengthy part of the conversation that we just had in Beijing.”Chinese officials, he said, believe the U.S. seeks “to hold them back, globally, and economically.” But he disputed that notion.“How is it in our interest to allow them to get technology that they may turn around and use against us?” he asked, citing China’s expanding nuclear weapons program, its development of hypersonic missiles and its use of artificial intelligence “potentially for repressive purposes.”“If they were in our shoes, they would do exactly the same thing,” he said, adding that the U.S. was imposing “very targeted, very narrowly defined controls.”Nvidia’s valuation had soared in light of the recent boom in generative artificial intelligence services, which can produce complex written answers to questions and images based on a single prompt. Microsoft has teamed up with OpenAI, which makes the chatbot ChatGPT, to generate results in its Bing search engine while Google has built a competing chatbot called Bard.As companies race to incorporate the technology into their products, it has increased demand for chips like Nvidia’s that can handle that the complex computing tasks. That momentum has helped to push Nvidia’s market capitalization past $1 trillion, making the company the world’s sixth largest by value.Nvidia said in an August filing that $400 million in revenue from “potential sales to China” could be subject to U.S. export restrictions, including sales of the A100, if “customers do not want to purchase the company’s alternative product offerings” or the government failed to grant licenses to allow the company to continue to sell the chip inside China.Since the restrictions were imposed, Chinese chip makers have been trying to overhaul their supply chains and develop domestic sources of advanced chips, but China’s capabilities to produce the most advanced chips remains many years behind that of the United States.Dan Wang, a visiting scholar at Yale Law School, said that the impact of advanced chip restrictions on Chinese tech companies was uncertain.“Most of their business needs are driven by less advanced chips, as fewer of them are playing on the fringes of the most advanced A.I.,” he said.Joe Rennison More

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    Overstock Buys Intellectual Property to Rename as Bed Bath & Beyond

    The online retailer is renaming its website and its mobile app after buying the intellectual property of the bankrupt home-goods store.Soon, Overstock.com will become Bed Bath & Beyond — at least in digital form.Overstock, which last week paid $21.5 million to acquire the bankrupt retailer’s intellectual property, said on Wednesday that it would start operating its website under the Bed Bath & Beyond name.The change will roll out in Canada in early July. Starting in August, about a month after the final Bed Bath & Beyond stores in the United States close, customers in the country who visit overstock.com will be redirected to bedbathandbeyond.com.Overstock’s mobile app and its rewards program will also be rebranded. Company executives plan to eventually bring back Bed Bath & Beyond’s popular wedding registry.As Overstock folds the bankrupt retailers’ assets into its own operations, it is considering renaming its business entirely, said Jonathan Johnson, the company’s chief executive. It might settle on Bed Bath & Beyond, he added, but other names are being considered, too.“I can’t tell you how many times I’ve been asked over the years when we’re going to change the name of Overstock,” said Mr. Johnson, who has been at the helm since 2019.For years, Overstock.com has been trying to find a way to update its image as a liquidator, which was how it started in 1999. The company has since moved away from selling only furniture at basement bargain prices, but ultimately, Mr. Johnson said, its name was holding it back in the eyes of consumers.It’s betting Bed Bath & Beyond’s name can help change that.“We will probably have both logos for a little bit, but the goal is to transition as quickly as possible to Bed Bath & Beyond,” Mr. Johnson said.When the home-goods retailer filed for Chapter 11 bankruptcy in April, Mr. Johnson saw an opportunity for his own company. In 2018, when Patrick Byrne, then Overstock’s chief executive, wanted to sell the retail business to focus on cryptocurrency technology, Bed Bath & Beyond was a potential buyer, Mr. Johnson said. That deal never happened.The tables turned when the pandemic hit and Overstock’s sales surged. Bankers approached the company, suggesting that it should purchase Bed Bath & Beyond.On the other hand, Bed Bath & Beyond was financially battered by the pandemic. Like many retailers, it had to temporarily close its stores, and its supply chain buckled as the company sought to keep up with the demand in online shopping. Sales fell drastically as company executives made several merchandising and marketing missteps.“We’ve been watching and watching, and last year when Bed Bath & Beyond fell on some troubles we started thinking, ‘Gee, if it goes bankrupt, we might have the opportunity to purchase what we like without purchasing what gave us pause before,’” Mr. Johnson said. (Overstock did not purchase Bed Bath & Beyond’s store locations or inventory.)As Overstock folds the bankrupt retailers’ assets into its own operations, it is considering renaming its business entirely, said Jonathan Johnson, Overstock’s chief executive.Alex Wong/Getty ImagesIn the week after its bid for Bed Bath & Beyond’s assets became public, Overstock added more than 100,000 bedding and bath items to its site as vendors raced to do business with the company. This was after months of Overstock’s courting them and making concessions like agreeing to hold inventory in warehouses, a rare move for the online retailer. Now, Mr. Johnson said, he does not think his company will have to do that to win vendors over.The acquisition also gives Overstock a trove of customer data. It has information on what Bed Bath & Beyond shoppers bought online and how frequently they visited the website — a helpful tool as Overstock contends with its own falling sales. On Wednesday, the company said it expected its second-quarter revenue to decline in the low 20 percent range from the year before.Overstock’s sales peaked in 2021, when more people bought furniture during the height of the pandemic. Its active customers have also been declining, and it said in April that it had 4.8 million users. Bed Bath & Beyond’s active customer list for its online shoppers is twice as large.Overstock expects that its customer count will increase in the coming months, while the average amount that shoppers spend may shrink because the small appliances and home goods that Bed Bath & Beyond was known for are less expensive than the couches and patio tables Overstock normally sells. The online retailer will also spend more on marketing to make consumers aware of its branding changes.This deal comes as U.S. consumers are spending less on furniture and more on eating out and traveling. Sales at furniture and home furnishing stores in the first five months of the year fell nearly 3 percent from a year earlier, according to Commerce Department data, which is not adjusted for inflation. “Opportunities like this come up once in a while, and they come up sometimes when times are tough,” Mr. Johnson said. “Will the category still be tough in the short to medium term? I think so, but I think getting all these new customers and rebranding helps us cut through some of that headwind.”During the integration process, Overstock plans to hire workers with marketing, merchandising and technology expertise. The company has been trying to recruit former Bed Bath & Beyond employees.As for the fate of Bed Bath & Beyond’s famed 20 percent coupon?“We’ll always be a couponer; we’ll always do the site sales,” Mr. Johnson said. “Whether we run at 20 percent as frequently as Bed Bath did — probably not. But it’ll be there for the beginning.” More

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    Facial Recognition Spreads as Tool to Fight Shoplifting

    Simon Mackenzie, a security officer at the discount retailer QD Stores outside London, was short of breath. He had just chased after three shoplifters who had taken off with several packages of laundry soap. Before the police arrived, he sat at a back-room desk to do something important: Capture the culprits’ faces.On an aging desktop computer, he pulled up security camera footage, pausing to zoom in and save a photo of each thief. He then logged in to a facial recognition program, Facewatch, which his store uses to identify shoplifters. The next time those people enter any shop within a few miles that uses Facewatch, store staff will receive an alert.“It’s like having somebody with you saying, ‘That person you bagged last week just came back in,’” Mr. Mackenzie said.Use of facial recognition technology by the police has been heavily scrutinized in recent years, but its application by private businesses has received less attention. Now, as the technology improves and its cost falls, the systems are reaching further into people’s lives. No longer just the purview of government agencies, facial recognition is increasingly being deployed to identify shoplifters, problematic customers and legal adversaries.Facewatch, a British company, is used by retailers across the country frustrated by petty crime. For as little as 250 pounds a month, or roughly $320, Facewatch offers access to a customized watchlist that stores near one another share. When Facewatch spots a flagged face, an alert is sent to a smartphone at the shop, where employees decide whether to keep a close eye on the person or ask the person to leave.Mr. Mackenzie adds one or two new faces every week, he said, mainly people who steal diapers, groceries, pet supplies and other low-cost goods. He said their economic hardship made him sympathetic, but that the number of thefts had gotten so out of hand that facial recognition was needed. Usually at least once a day, Facewatch alerts him that somebody on the watchlist has entered the store.Mr. Mackenzie adds one or two new faces a week to the Facewatch watch list that stores in the area share.Suzie Howell for The New York TimesA sign at a supermarket that uses Facewatch in Bristol, England. Suzie Howell for The New York TimesFacial recognition technology is proliferating as Western countries grapple with advances brought on by artificial intelligence. The European Union is drafting rules that would ban many of facial recognition’s uses, while Eric Adams, the mayor of New York City, has encouraged retailers to try the technology to fight crime. MSG Entertainment, the owner of Madison Square Garden and Radio City Music Hall, has used automated facial recognition to refuse entry to lawyers whose firms have sued the company.Among democratic nations, Britain is at the forefront of using live facial recognition, with courts and regulators signing off on its use. The police in London and Cardiff are experimenting with the technology to identify wanted criminals as they walk down the street. In May, it was used to scan the crowds at the coronation of King Charles III.But the use by retailers has drawn criticism as a disproportionate solution for minor crimes. Individuals have little way of knowing they are on the watchlist or how to appeal. In a legal complaint last year, Big Brother Watch, a civil society group, called it “Orwellian in the extreme.”Fraser Sampson, Britain’s biometrics and surveillance camera commissioner, who advises the government on policy, said there was “a nervousness and a hesitancy” around facial recognition technology because of privacy concerns and poorly performing algorithms in the past.“But I think in terms of speed, scale, accuracy and cost, facial recognition technology can in some areas, you know, literally be a game changer,” he said. “That means its arrival and deployment is probably inevitable. It’s just a case of when.”‘You can’t expect the police to come’Simon Gordon, the owner of Gordon’s Wine Bar in London, founded Facewatch in 2010. As a business owner, “you’ve got to help yourself,” he said. Suzie Howell for The New York TimesFacewatch was founded in 2010 by Simon Gordon, the owner of a popular 19th-century wine bar in central London known for its cellarlike interior and popularity among pickpockets.At the time, Mr. Gordon hired software developers to create an online tool to share security camera footage with the authorities, hoping it would save the police time filing incident reports and result in more arrests.There was limited interest, but Mr. Gordon’s fascination with security technology was piqued. He followed facial recognition developments and had the idea for a watchlist that retailers could share and contribute to. It was like the photos of shoplifters that stores keep next to the register, but supercharged into a collective database to identify bad guys in real time.By 2018, Mr. Gordon felt the technology was ready for commercial use.“You’ve got to help yourself,” he said in an interview. “You can’t expect the police to come.”Facewatch, which licenses facial recognition software made by Real Networks and Amazon, is now inside nearly 400 stores across Britain. Trained on millions of pictures and videos, the systems read the biometric information of a face as the person walks into a shop and check it against a database of flagged people.Facewatch’s watchlist is constantly growing as stores upload photos of shoplifters and problematic customers. Once added, a person remains there for a year before being deleted.‘Mistakes are rare but do happen’Every time Facewatch’s system identifies a shoplifter, a notification goes to a person who passed a test to be a “super recognizer” — someone with a special talent for remembering faces. Within seconds, the super recognizer must confirm the match against the Facewatch database before an alert is sent.Facewatch is used in about 400 British stores.Suzie Howell for The New York TimesBut while the company has created policies to prevent misidentification and other errors, mistakes happen.In October, a woman buying milk in a supermarket in Bristol, England, was confronted by an employee and ordered to leave. She was told that Facewatch had flagged her as a barred shoplifter.The woman, who asked that her name be withheld because of privacy concerns and whose story was corroborated by materials provided by her lawyer and Facewatch, said there must have been a mistake. When she contacted Facewatch a few days later, the company apologized, saying it was a case of mistaken identity.After the woman threatened legal action, Facewatch dug into its records. It found that the woman had been added to the watchlist because of an incident 10 months earlier involving £20 of merchandise, about $25. The system “worked perfectly,” Facewatch said.But while the technology had correctly identified the woman, it did not leave much room for human discretion. Neither Facewatch nor the store where the incident occurred contacted her to let her know that she was on the watchlist and to ask what had happened.The woman said she did not recall the incident and had never shoplifted. She said she may have walked out after not realizing that her debit card payment failed to go through at a self-checkout kiosk.Madeleine Stone, the legal and policy officer for Big Brother Watch, said Facewatch was “normalizing airport-style security checks for everyday activities like buying a pint of milk.”Mr. Gordon declined to comment on the incident in Bristol.In general, he said, “mistakes are rare but do happen.” He added, “If this occurs, we acknowledge our mistake, apologize, delete any relevant data to prevent reoccurrence and offer proportionate compensation.”Approved by the privacy officeA woman said Facewatch had misidentified her at the Bristol market. Facewatch said the system had ”worked perfectly.”Suzie Howell for The New York TimesCivil liberties groups have raised concerns about Facewatch and suggested that its deployment to prevent petty crime might be illegal under British privacy law, which requires that biometric technologies have a “substantial public interest.”The U.K. Information Commissioner’s Office, the privacy regulator, conducted a yearlong investigation into Facewatch. The office concluded in March that Facewatch’s system was permissible under the law, but only after the company made changes to how it operated.Stephen Bonner, the office’s deputy commissioner for regulatory supervision, said in an interview that an investigation had led Facewatch to change its policies: It would put more signage in stores, share among stores only information about serious and violent offenders and send out alerts only about repeat offenders. That means people will not be put on the watchlist after a single minor offense, as happened to the woman in Bristol.“That reduces the amount of personal data that’s held, reduces the chances of individuals being unfairly added to this kind of list and makes it more likely to be accurate,” Mr. Bonner said. The technology, he said, is “not dissimilar to having just very good security guards.”Liam Ardern, the operations manager for Lawrence Hunt, which owns 23 Spar convenience stores that use Facewatch, estimates the technology has saved the company more than £50,000 since 2020.He called the privacy risks of facial recognition overblown. The only example of misidentification that he recalled was when a man was confused for his identical twin, who had shoplifted. Critics overlook that stores like his operate on thin profit margins, he said.“It’s easy for them to say, ‘No, it’s against human rights,’” Mr. Ardern said. If shoplifting isn’t reduced, he said, his shops will have to raise prices or cut staff. More

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    Markets are pricing in rate cuts too soon, IMF’s Gopinath says

    Gita Gopinath, first deputy managing director of the International Monetary Fund, told CNBC that central bankers “should continue tightening and importantly [interest rates] should stay at a high level for a while.”
    Both the U.S. Federal Reserve and European Central Bank have raised rates significantly over many months.
    “It is taking too long for inflation to come back to target that means that central banks will have to remain committed to fighting inflation, even if that means risking weaker growth or much more cooling in the labor market,” Gopinath added.

    Major central banks will have to keep interest rates high for much longer than some investors expect, Gita Gopinath, first deputy managing director of the International Monetary Fund, told CNBC Tuesday.
    “We also have to recognize that central banks have done quite a bit … But that said, we do think they should continue tightening and importantly they should stay at a high level for a while,” Gopinath told CNBC’s Annette Weisbach at the European Central Bank Forum in Sintra, Portugal.

    “Now this is unlike, for instance, what several markets expect, which is that things are going to come down very quickly in terms of rates. I think they have to be on hold for much longer,” she said.
    The ECB began raising rates in July 2022 and has increased its main rate from -0.5% to 3.5% since then. The U.S. Federal Reserve, meanwhile, embarked on a hiking cycle in March 2022 but opted to pause this month, diverging from Europe. Nonetheless, Fed Chairman Jerome Powell has suggested there could be at least two more rate hikes this year.
    A survey of U.S. economists in late May showed they had pushed back their expectations for the Fed to cut rates from the final quarter of this year to the first quarter of 2024. In a note to clients on Friday, Nomura said it expects both the ECB and the Bank of England to announce rate cuts in about a year’s time.
    However, for the IMF it is clear that reducing inflation needs to be the absolute priority.

    Gita Gopinath, first deputy managing director of International Monetary Fund (IMF), spoke to CNBC at the ECB Forum in Portugal.
    Bloomberg | Bloomberg | Getty Images

    “It is taking too long for inflation to come back to target that means that central banks will have to remain committed to fighting Inflation even if that means risking weaker growth or much more cooling in the labor market,” Gopinath said.

    In the case of the ECB, the central bank raised its expectations for inflation in the euro zone at its last meeting in June. It now expects headline inflation at 5.4% this year, at 3% in 2024 and at 2.2% in 2025.
    Gopinath described the current macroeconomic picture as “very uncertain.”
    Goldman analysts said in a note on Friday they expect the Fed to make the first rate cuts in the second quarter of next year and the ECB in the final quarter of 2024.
    Speaking to CNBC’s “Street Signs Europe” Tuesday, Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said it simply comes down to the fact that we don’t know “when enough will be enough” when it comes to rate increases.
    Meanwhile, ECB Governing Council member Mārtiņš Kazāks also told CNBC he believed markets were pricing in cuts too early.
    “Currently I think the markets are making the mistake of thinking the rates will come down much, much quicker, which in my view is inconsistent with the baseline we currently have,” Kazāks said at the Sintra Forum.
    “First off, next year is way too early. I would see personally for rates to start coming down, for rate cuts to be necessary, is only when we see that inflation does significantly and persistently fall below our target of 2%.” More