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    Key Fed inflation measure rose 0.6% in January, more than expected

    The core personal consumption expenditures price index increased 0.6% for the month, and was up 4.7% from a year ago.
    Headline inflation increased 0.6% and 5.4% respectively. All the numbers were higher than estimates.
    The numbers suggest inflation accelerated to start the new year, putting the Fed in a position where it likely will continue to raise interest rates.

    A measure the Federal Reserve watches closely to gauge inflation rose more than expected in January, indicating the central bank has more work to do to bring down prices.
    The personal consumption expenditures price index excluding food and energy increased 0.6% for the month, and was up 4.7% from a year ago, the Commerce Department reported Friday. Wall Street had been expecting respective readings of 0.5% and 4.4%. The core PCE gains were 0.4% and 4.6% in December.

    Including the volatile food and energy components, headline inflation increased 0.6% and 5.4% respectively, compared to 0.2% and 5.3% in December.
    Markets fell following the report, with the Dow Jones Industrial Average off around 500 points in morning trading.
    “This morning’s strong inflation data continued the recent spate of market-unfriendly news. This could keep the policy rate higher for longer than the market had hoped, which in turn will likely pressure earnings,” said Matt Peron, director of research at Janus Henderson Investors. “While we do see signs that inflation will eventually moderate, higher rates for longer will take a toll.”
    Consumer spending also rose more than expected as prices increased, jumping 1.8% for the month vs. the estimate for 1.4%. Adjusted for inflation, prices rose 1.1%.
    Personal income adjusted for inflation increased 1.4%, higher than the 1.2% estimate. The personal saving rate also was up, rising to 4.7%.

    All of the numbers suggest inflation accelerated to start the new year, putting the Fed in a position where it likely will continue to raise interest rates. The central bank has pushed benchmark rates up by 4.5 percentage points since March 2022 as inflation hit its highest level in some 41 years.
    “Clearly, tighter monetary policy has yet to fully impact consumers and shows that the Fed has more work to do in slowing down aggregate demand,” said Jeffrey Roach, chief economist at LPL Financial. “The Fed may still decide to hike by 0.25 [percentage points] at the next meeting, but this report means that the Fed will likely continue hiking into the summer. Markets will likely stay choppy during these months where higher rates have yet to materially cool consumer spending.”
    The Fed follows the PCE measures more closely than it does some of the other inflation metrics because the index adjusts for consumer spending habits, such as substituting lower-priced goods for more expensive ones. That provides a more accurate view of the cost of living.
    Policymakers tend to focus more on core inflation as they believe it provides a better long-run view of inflation, though the Fed officially tracks headline PCE.
    Much of January’s inflation surge came from a 2% rise in energy prices, according to Friday’s report. Food prices increased 0.4%. Goods and services both rose 0.6%.
    On an annual basis, food prices rose 11.1%, while energy was up 9.6%.
    Earlier Friday, Cleveland Fed President Loretta Mester noted in a CNBC interview that there has been some progress made but “the level of inflation is still too high.”
    A nonvoting member of the rate-setting Federal Open Market Committee, Mester has been pushing for more aggressive increases. She said she’s not sure if she’ll again advocate for a half percentage point boost at the March FOMC meeting.
    In the wake of Friday’s data, market pricing increased for the likelihood of a half-point, or 50 basis point, increase next month, to about 33%, according to CME Group data.

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    OECD says global economic outlook ‘slightly better’ for 2023 but inflation risks linger

    OECD Secretary-General Mathias Cormann said the global economic outlook is “slightly brighter” this year but inflation challenges remain.
    “The outlook for the world is slightly brighter at the beginning of 2023 than what we thought it would be just two or three months ago,” he told CNBC’s “Street Signs Asia” on Friday.
    The OECD chief highlighted that the U.S. Federal Reserve took “aggressive action last year,” in terms of hiking interest rates to rein in surging price pressures.

    People shop near prices displayed in a supermarket on February 13, 2023 in Los Angeles, California. 
    Mario Tama | Getty Images News | Getty Images

    OECD Secretary-General Mathias Cormann said the global economic outlook is “slightly brighter” this year but inflation challenges remain.
    “The outlook for the world is slightly brighter at the beginning of 2023 than what we thought it would be just two or three months ago,” he told CNBC’s “Street Signs Asia” on Friday.

    “Indeed, energy and food prices are substantially lower than what they were at their peaks,” noted the OECD chief, ahead of a G-20 financial leaders meeting this week in Bengaluru, India.
    Energy prices have fallen significantly because Europe was able to “successfully” diversify its sources of energy, Cormann noted. In addition, a “benign winter” helped to reduce energy demand which kept gas prices low, he said.
    In November, the OECD said “Russia’s war of aggression against Ukraine has provoked a massive energy price shock not seen since the 1970s.”
    “The global economy is projected to grow well below the outcomes expected before the war – at a modest 3.1% this year [2022], before slowing to 2.2% in 2023 and recovering moderately to a still sub-par 2.7% pace in 2024,” it added.

    That report further highlighted Asian emerging-market economies are expected to account for close to three-quarters of global GDP growth in 2023, as Europe and the U.S. slow down sharply.

    Inflation risks

    Still, inflation risks continue to persist and need to be tackled well, said the OECD chief.
    “Inflation is starting to tick down, but we are not on top of the inflation challenge yet. There is more work to be done to tackle inflation and that comes with risks,” noted Cormann. “And these are risks that will need to continue to be managed well over the weeks and months.”
    The OECD chief highlighted the U.S. Federal Reserve took “aggressive action last year,” in terms of hiking interest rates to rein in surging price pressures.
    Now the Fed continues to fight inflation in “a more steady fashion allowing the data to come through and allowing… the measures that are in the pipeline to take effect,” Cormann noted. “That is what we expect central banks around the world to do, to continue to monitor the data and to continue to adjust the decisions.”

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    In early February, the U.S. central bank raised its benchmark interest rate by a quarter percentage point and gave little indication it is nearing the end of this hiking cycle.
    Last month, the OECD chief highlighted China’s reopening is “overwhelmingly positive” in the global fight to tackle surging inflation. In early December, Beijing suddenly shifted away from its zero-Covid policy.
    “Over the medium to longer term, this is a very much a positive in terms of making sure that the supply chains function more efficiently and more effectively, making sure that demand in China and indeed trade more generally resumes in a more positive pattern,” Cormann told CNBC at the World Economic Forum in Davos, Switzerland.

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    Judge Scales Back Ruling Against Starbucks in Union Fight

    After barring Starbucks from firing any U.S.-based worker over labor activity, a federal judge said he had erred and limited the action to one store.It was the most sweeping intervention by a court in the 18-month campaign to unionize Starbucks: Last week, a federal judge in Michigan issued an order blocking Starbucks from firing any U.S. worker because they engaged in collective action, like seeking to form a union.Union supporters cheered. Starbucks seemed taken aback, calling the order “extraordinary” and “unwarranted” and denying that the company had broken the law.But a few days later, the judge, Mark A. Goldsmith, announced that he had made certain unspecified “errors” and withdrew his earlier injunction. On Thursday, Judge Goldsmith issued a new injunction — only this time it was limited to a store in Michigan where a worker said she had been fired for her involvement in union organizing. The injunction’s national scope had vanished.In a revised opinion accompanying Thursday’s order, Judge Goldsmith said that the key criterion for determining whether to impose a nationwide injunction was whether the company had pursued a general policy of violating labor law. He said that while the National Labor Relations Board had filed about 24 complaints involving roughly 50 workers fired by Starbucks across the country, many of those cases were in their early stages.As a result, Judge Goldsmith concluded, the evidence supported an injunction only at a store in Ann Arbor, Mich., where a labor board judge found in October that a worker had illegally been fired.Legal experts said that the original injunction would have allowed the labor board to seek expedited reinstatement of workers who had been fired at any of the roughly 9,000 corporate-owned Starbucks stores in the country, and that it could have led to fines if the court found that Starbucks was continuing to fire workers for union organizing. Now those measures will apply only to a single store.The general counsel of the labor board, who oversees the office that had gone to federal court seeking the worker’s reinstatement, called the reversal disappointing but said in a statement that “the judge’s revised order still provides critical protection for the workers at Starbucks’ Ann Arbor store.” The statement said the agency would continue to seek nationwide remedies for labor law violations “as appropriate.”The union, Workers United, said it would “continue to fight for a national remedy to address Starbucks’ unprecedented union-busting campaign and hold the company accountable for their actions.”A Starbucks spokesman said, “We are pleased that the court rejected the National Labor Relations Board’s overreaching and inappropriate request for a nationwide cease-and-desist order as we pursue a full legal review of the merits of the case.”As to why the court initially issued the national injunction before abandoning it, Judge Goldsmith’s opinion did not elaborate.Legal experts said they couldn’t recall seeing a judge make a similar about-face. “I don’t think I can think of anything like this,” Wilma Liebman, a former chairwoman of the National Labor Relations Board, said in an email.Ms. Liebman said the most plausible explanation she could imagine was that the board had provided the judge with the order it was seeking, and that the judge had incorporated the order without sufficient modification — “careless but not intentionally mistaken,” Ms. Liebman said.A clerk reached at the court said the judge could not comment. More

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    How One Ukrainian Company Survived, and Thrived, Through a Year of War

    It was exactly a year ago, and the Ukrainian pet food maker Kormotech had concluded its annual meeting. The mood was buoyant. Business was booming, the factory was running 24/7, and sales were projected to grow by double digits. “We had a beautiful budget,” Rostyslav Vovk, the company’s chief executive and founder, recalled almost dreamily.The next morning, air sirens sounded.Russia had invaded. Mr. Vovk called his top managers to meet at a nearby hotel, avoiding the company’s windowed seventh-floor headquarters in Lviv. They had a plan for what had been considered a very unlikely risk — Russian aggression — but it soon proved wholly inadequate.“We were not ready,” Mr. Vovk said. He closed the plant. Raw materials couldn’t get into the country, and deliveries headed abroad couldn’t get out. Staff from the besieged eastern part of the country needed to be evacuated. Employees were joining the military. And the company’s biggest export market, Belarus, was a close ally of Vladimir V. Putin, the Russian president.“We would make decisions,” Mr. Vovk said of that first week after the invasion, “and then the next morning, we would change all the information.”Like leaders at tens of thousands of companies throughout Ukraine, Mr. Vovk and his team were suddenly confronted with a new and bewildering responsibility: keeping a business going through the chaos and danger of war.For many, the task has proved impossible. Before the war, Ukraine’s private sector, including its huge steel and agricultural industries, accounted for 70 percent of the country’s gross domestic product, said Elena Voloshina, head of the International Finance Corporation in Ukraine. Eighty-three percent of businesses experienced losses related to the war, she said. Forty percent suffered direct damage, like a factory or store decimated by a missile, while 25 percent were in what is now occupied territory.Kormotech employs 1,300 people, some of whom had to be evacuated from the eastern part of Ukraine.Maciek Nabrdalik for The New York TimesLast year, Ukraine’s overall output plunged by nearly a third, wrecking the country’s economy and hampering its ability to battle Russian forces.Kormotech, a family-owned business with 1,300 employees worldwide, does not produce weapons or drones. It isn’t involved in supplying critically needed electricity, transport or fresh water to ravaged cities. But it employs people, produces income, earns foreign currency from exports, and contributes tax revenue that the government in Kyiv desperately needs to pay soldiers, repair power lines and buy medical equipment.A year later, Mr. Vovk and his management team have found reason to again celebrate. Mr. Vovk was back in his offices getting ready for the latest annual meeting with his staff — and some of their dogs, which are fixtures around the office and often serve as product taste testers. Despite the odds, business grew more than expected.The State of the WarBiden’s Kyiv Visit: President Biden traveled covertly to the besieged Ukrainian capital, hoping to demonstrate American resolve and boost shellshocked Ukrainians. But the trip was also the first of several direct challenges to President Vladimir V. Putin of Russia.Contrasting Narratives: In sharply opposed speeches, Mr. Biden said Mr. Putin bore sole responsibility for the war, while Mr. Putin said Russia had invaded in self-defense. But they agreed the war would not end soon.Nuclear Treaty: Mr. Putin announced that Russia would suspend its participation in the New START nuclear arms control treaty — the last major such agreement remaining with the United States.In the North: A different sort of war game is playing out in northern Ukraine, where Russian shelling is tying up thousands of Ukrainian troops that might otherwise defend against attacks farther south.Kormotech had a few things going for it. The company’s plant was outside Lviv in the westernmost part of the country, near the Polish border, one of the safest parts of Ukraine. The two factories in Prylbychi were able to reopen less than two weeks after the war began.An earlier decision to start an additional factory in Lithuania, which opened in 2020 and was operating around the clock, turned out to be a boon. It could continue smoothly producing and delivering tons of Kormotech’s Club 4 Paws, Optimeal, Miau and Gav brands.After a helter-skelter start, Mr. Vovk and his top managers reorganized. The company, which sells its products in 35 countries including the United States and Europe, had a little wiggle room because they had avoided just-in-time practices that eliminated backup inventory — a cost-cutting approach that had stymied so many companies worldwide during the pandemic. Kormotech routinely kept stock in its warehouses — at least a month and a half’s worth in Ukraine, two months in other countries in Europe and two and a half in the United States.Kormotech was able to recover from supply chain turmoil in part because it had routinely stocked its warehouses with up to two months of ingredients for its pet food.Maciek Nabrdalik for The New York TimesStill, Kormotech’s supply chain was disrupted. Before the war, roughly half its raw materials, like meat and chicken meal, came from abroad. Now border crossing delays and rising import prices had prompted a search for domestic producers. It found two that had never produced pet meal before and taught them what to do.Kateryna Kovaliuk, Kormotech’s chief reputation officer, emphasized that pet food standards could often be more exacting than food produced for people. During a recent tour of the Lviv plant, she picked up a few kibble-size bits chopped up from long ropelike strands of cat food fresh off the production line.“Try it,” she urged, before popping a couple of pieces in her mouth and smiling. “It’s good. It tastes like meat without salt.”As it turned out, the local producers, less than 40 miles from the plant, were not only cheaper but also didn’t have to be paid in precious foreign currency. Instead of buying 500 tons of meal from abroad, the company now buys 100 tons.Kormotech stepped up its purchase of Ukrainian grains and corn as well. The war and Russian blockade caused a drastic drop in grain exports, spiraling food prices and a global hunger crisis. But it also meant that domestic businesses like Kormotech could buy at a discount.Manufacturing the product was one hurdle; getting it delivered abroad was another. At a time when Ukraine has barred men under 60 from leaving the country, the trade ministry provided exemptions for delivery drivers.“We would make decisions, and then the next morning, we would change all the information,” Rostyslav Vovk, the chief executive of Kormotech, said of the first week after the invasion.Maciek Nabrdalik for The New York TimesBut the wait at the borders could extend from a few days to a few weeks. And with seaports mostly blocked, exporting remained an expensive and tricky problem.“No one knew where to go or how,” Mr. Vovk said. The first truck sent to Azerbaijan, he said, cost more than $8,000 — before the war, it was roughly $2,000.Domestic demand for its products stayed steady, but finding new export markets was another challenge. Belarus, which has allowed Russia to stage attacks from inside its border, represented 25 percent of Kormotech’s export market. The management team decided to pull out but needed to replace those customers.Supermarket chains, particularly in the Baltic countries and Poland, were eager to step in and replace Russian-made goods with Ukrainian ones.“For the first time in my life, ‘Made in Ukraine’ was a premium,” Mr. Vovk said. Previously, when the company appeared at international pet supply exhibitions, he said with a laugh, people were so unfamiliar with the country’s products, they would ask if the letters “u” and “k” referred to “the U.K.,” for the United Kingdom.Even so, good will extended only so far. Buyers wanted assurances that Kormotech’s products would keep flowing. So the company provided guarantees, setting up a warehouse in Poland with backup stocks of its 650 different products, outsourcing some production to facilities in Germany and Poland, and drawing up last-resort plans to move production out of Ukraine.The enormous growth in both the European and American markets means that the company’s sales are expected to increase to $155 million this year from $124 million. The main obstacle to expanding even more is capacity.Its growth in Europe and the United States is expected to propel Kormotech to a big revenue increase in 2023, an unlikely development after a year of war.Maciek Nabrdalik for The New York TimesKormotech scrapped plans for a new 92 million-euro factory because of uncertainty and the difficulty in getting financing. But it invested €5 million ($5.34 million) in the Prylbychi plant and €7 million ($7.5 million) in Lithuania.Of course, many businesses have not been as successful as Kormotech, either because their facilities were damaged or demand for their products was eviscerated when people fled the country, as well as by ravenous inflation and shrunken incomes. Mr. Vovk said the exodus of millions of mothers and children had left a friend’s diaper manufacturing business in tatters.A new report from the American Chamber of Commerce in Ukraine and McKinsey & Company found that only 15 percent of companies grew last year, while nearly half saw a decline in sales.Others have adapted by relocating to places like Lviv, or changing their output to fill new wartime demands, like the lingerie seamstresses who have switched to sewing cloth vests to fit body armor plates. Ukraine’s large and mobile information technology sector has also remained strong.Businesses are still struggling to adapt. Russian attacks on Ukraine’s power grids compelled Kormotech to buy two generators at €150,000 apiece, supersize versions of the small colorful units that noisily hum outside nearly every shop and cafe on Lviv’s streets.Now, the Russians are stepping up missile strikes. On a recent weekday, air raid alerts caused 200 plant workers to spend more than half of their 12-hour shift in a tunnel-like storage area about three paces wide that doubles as a bomb shelter.Vira Protsyk, who normally would be packing boxes, sat on one of the wooden benches that lined the 100-foot-long wall. “It’s a bit boring,” she said of the forced breaks. This was the second alert of the day. “I didn’t want to go to the shelter. I’d rather work.”Russia has stepped up its missile strikes, and on a recent weekday, plant workers had to seek safety in a storage area.Maciek Nabrdalik for The New York TimesYurii Shyvala contributed reporting. More

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    Chip Makers Turn Cutthroat in Fight for Share of Federal Money

    Semiconductor companies, which united to get the CHIPS Act approved, have set off a lobbying frenzy as they argue for more cash than their competitors.WASHINGTON — In early January, a New York public relations firm sent an email warning about what it characterized as a threat to the federal government’s program to revitalize the U.S. semiconductor industry.The message, received by The New York Times, accused Intel, the Silicon Valley chip titan, of angling to win subsidies under the CHIPS and Science Act for new factories in Ohio and Arizona that would sit empty. Intel had said in a recent earnings call that it would build out its facilities with the expensive machinery needed to make semiconductors when demand for its chips increased.The question, the email said, was whether officials would give funding to companies that outfitted their factories from the jump “or if they will give the majority of CHIPS funding to companies like Intel.”The firm declined to name its client. But it has done work in the past for Advanced Micro Devices, Intel’s longtime rival, which has raised similar concerns about whether federal funding should go to companies that plan to build empty shells. A spokesman for AMD said it had not reviewed the email or approved the public relations firm’s efforts to lobby for or against any specific company receiving funding.“We fully support the CHIPS and Science Act and the efforts of the Biden administration to boost domestic semiconductor research and manufacturing,” the spokesman said.Rival semiconductor suppliers and their customers pulled together last year as they lobbied Congress to help shore up U.S. chip manufacturing and reduce vulnerabilities in the crucial supply chain. The push led lawmakers to approve the CHIPS Act, including $52 billion in subsidies to companies and research institutions as well as $24 billion or more in tax credits — one of the biggest infusions into a single industry in decades.President Biden with Intel’s chief executive, Patrick Gelsinger, at an Intel semiconductor facility under construction in New Albany, Ohio, in September.Pete Marovich for The New York TimesBut that unity is beginning to crack. As the Biden administration prepares to begin handing out the money, chief executives, lobbyists and lawmakers have begun jostling to make their case for funding, in public and behind closed doors.In meetings with government officials and in a public filing, Intel has called into question how much taxpayer money should go to its competitors that have offshore headquarters, arguing that American innovations and other intellectual property could be funneled out of the country.“Our I.P. is here, and that’s not insignificant,” said Allen Thompson, Intel’s vice president of U.S. government relations. “We are the U.S. champion.”The Global Race for Computer ChipsA Ramp-Up in Spending: Amid a tech cold war with China, U.S. companies have pledged nearly $200 billion for chip manufacturing projects since early 2020. But the investments have limits.Crackdown on China: The United States has been aiming to prevent China from becoming an advanced power in chips, issuing sweeping restrictions on the country’s access to advanced technology.Arizona Factory: Internal doubts are mounting at Taiwan Semiconductor Manufacturing Company, the world’s biggest maker of advanced chips, over its investment in a new factory in Phoenix.CHIPS Act: The sprawling $280 billion bill passed by U.S. lawmakers last year gives the federal government new sway over the chips industry.States, cities and universities have also gotten into the act, hoping to lure subsidies and jobs expected to be generated by manufacturing sites and new research and development.Purveyors of chips, their suppliers and the trade associations that represent them together spent $59 million on lobbying last year, according to tracking from OpenSecrets, up from $46 million in 2021 and $36 million in 2020, as they tried to ensure that Congress approved their funding.Some of those activities have now shifted to making sure companies snag the biggest portion.“Everybody wants their piece of the pie,” said Willy Shih, a management professor at Harvard Business School who follows semiconductor issues. He said it wasn’t surprising that companies would be raising tough questions about competitors, which could be helpful for the Commerce Department in setting policies.“We haven’t done something of this scale in the U.S. in a long time,” he said. “There is a lot at stake.”How the Biden administration distributes the funding in coming months could shape the future of an industry that is increasingly seen as a driver of both economic prosperity and national security. It may also influence how vulnerable the United States remains to foreign threats — particularly the possibility of a Chinese invasion of Taiwan, where more than 90 percent of the world’s advanced chips are made.Since American researchers invented the integrated circuit in the late 1950s, the U.S. manufacturing share has dwindled to around 12 percent. Most American chip companies, including AMD, focus on designing cutting-edge products while outsourcing the costly manufacturing to overseas foundries, most of which are in Asia.AMD’s chief executive, Lisa Su, at a technology trade show last month. AMD and Intel have been fierce competitors.David Becker/Getty ImagesTaiwan Semiconductor Manufacturing Company developed the foundry concept in the 1980s and dominates that market, followed by Samsung Electronics. Intel, which both designs and makes its own chips, fell behind TSMC and Samsung in manufacturing technology but has vowed to catch up and build its own foundry business to make chips for customers.The industry’s concentration has left it particularly vulnerable to supply chain disruptions. During the pandemic, shortages of lower-end “legacy” chips that are used in cars forced automakers to repeatedly close factories, sending prices soaring.The CHIPS Act aims to rectify some of these shortcomings by allocating $39 billion in grants for new or expanded U.S. factories. The Commerce Department has indicated that about two-thirds of the money will be steered toward makers of leading-edge semiconductors, a category that includes TSMC, Samsung and Intel. All three companies have already broken ground on major expansions of their U.S. facilities.The remaining third is expected to go toward legacy chips, which are heavily used in cars, appliances and military equipment.Another $11 billion of funding is expected to go toward building a handful of chip research centers around the country. Government and academic institutions in Texas, Arizona, Georgia, Indiana, Florida and Ohio have filed documents describing why they should be considered for funding. Even tiny Guam has raised its hand.One challenge for the Commerce Department will be to distribute the money widely enough across the nation to create several thriving “ecosystems” that can bring together raw materials, research and manufacturing capacity, but not undermine the effort by spreading it too thinly. With dozens of companies, universities and other players interested in snagging a share, the funding could go fast.Commerce Secretary Gina Raimondo told reporters on Wednesday that the goal was to create “at least two” new clusters of manufacturing capacity for leading-edge chips, in addition to facilities producing other kinds of semiconductors. Each cluster would employ thousands of workers and support a web of businesses supplying the raw materials and services they need.“We have very clear national security goals, which we must achieve,” Ms. Raimondo said, noting that not every chip maker will get what it wants. “I suspect there will be many disappointed companies who feel that they should have a certain amount of money, and the reality is the return on our investment here is the achievement of our national security goal. Period.”The competition has intensified as the Biden administration prepares to release the ground rules for applications next week. The grants, which can range up to $3 billion or more per project, could start going out this spring.Executives say huge spending by governments in South Korea, Taiwan, China and elsewhere has helped shape the chip industry globally. And the current U.S. policy push could again alter the market, by giving some companies advantages that allow them to edge out competitors.Most chip companies, in publicly discussing the subsidies, have stressed the common goal of bolstering U.S. production. But clear differences among them have emerged. Many are outlined in the more than 200 filings that companies, organizations, universities and others submitted to the Commerce Department last March.Beyond extolling the merits of their own manufacturing plans, some applicants made the case that rival projects deserved less funding or should face strict limits on how they operated, though few companies mentioned their competitors by name.Intel, along with other U.S.-based firms like GlobalFoundries and SkyWater Technology, expressed concerns about foreign-owned companies, including whether their U.S. factories could continue operating in the event of a crisis in their home country.Taiwan Semiconductor Manufacturing Company, which is building a factory site in Phoenix, has objected to “preferential treatment based on the location of a company’s headquarters.”Adriana Zehbrauskas for The New York TimesIntel has argued that foreign investment is welcome, but that its longtime concentration of chip design, research and manufacturing in the United States meant that it should get special consideration.But competitors argue that investing heavily in Intel could be a risky bet for the U.S. government, and some Biden administration officials have questioned whether Intel can follow through on its plans to catch up to its competitors technologically. The company has suffered from a severe drop in sales and announced on Wednesday that it would cut its stock dividend.U.S. officials have also stressed the need to support a U.S. expansion by TSMC, in part because it produces leading-edge chips crucial to the military.TSMC, which has broken ground on a $40 billion investment in two advanced factories in Arizona, countered in its filing that “preferential treatment based on the location of a company’s headquarters” would not be an effective or efficient use of U.S. money. AMD, one of TSMC’s largest customers, has advocated its U.S. expansion.AMD and Intel, both based in Santa Clara, Calif., have competed fiercely for the market for microprocessor chips.In its filing in March, AMD expressed concerns about whether certain unnamed competitors had proved that they could operate effectively as a foundry and make leading-edge chips. Intel has struggled on both counts. And AMD highlighted the risk that grant recipients would not immediately spend that money to outfit their factories with equipment.“Any facility receiving federal assistance must be operational upon completion of construction,” AMD wrote. “A facility that sits idle or is held in reserve for demand increases should immediately forfeit any federal funds.”Mr. Thompson of Intel declined to comment on the email. But he defended the “smart capital” strategy articulated by Patrick Gelsinger, Intel’s chief executive, which has stressed building factory shells and then investing to equip them in accordance with market demand.Intel is continuing to follow that strategy with construction projects in Arizona, New Mexico and Ohio, to ensure that its new facilities are built out “in alignment with the market,” Mr. Thompson said. But Intel has no intention of using the government money for “basically just building shells,” he said. “The goal is to ensure that we have the capacity to support our customers.”Ana Swanson reported from Washington, and Don Clark from San Francisco. More

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    Fed Minutes Showed Policymakers Were Still Intent on Easing Inflation

    Federal Reserve officials thought they needed to do more to cool the economy even before a series of strong data releases in recent weeks.Federal Reserve officials believed that they needed to do more to slow the economy and wrestle painfully rapid inflation back under control as of their meeting early this month, minutes from the gathering showed.The notes, released on Wednesday, showed that “all participants” continued to believe that rates needed to rise by more, and that “a number” of them thought that monetary policy might need to be even more restrictive in light of easing conditions in financial markets in the months prior.“Participants generally noted that upside risks to the inflation outlook remained a key factor shaping the policy outlook,” the minutes said. “A number of participants observed that a policy stance that proved to be insufficiently restrictive could halt recent progress in moderating inflationary pressures.”The takeaway is that policymakers were still intently focused on wrestling inflation back under control even before a spate of recent data releases showed that the economy has maintained a surprising amount of momentum at the start of 2023. In the weeks since the Fed last met, inflation data have exhibited unexpected staying power, and a range of data points have suggested that both the job market and consumer spending remain robust. A release on Friday is expected to show that the Fed’s preferred inflation indicator climbed rapidly on a monthly basis in January, and that consumption grew at a solid pace.That creates a challenge for Fed officials, who had been hoping that their policy changes last year would slowly but steadily weigh on the economy, cooling demand and forcing companies to stop raising prices so quickly. If demand holds up, businesses are more likely to find that they can continue to charge more without driving away their customers.Inflation F.A.Q.Card 1 of 5What is inflation? More

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    Labor Board Curbs Gag Rules in Severance Agreements

    The National Labor Relations Board said severance pacts requiring confidentiality and nondisparagement violated a law on collective worker activity.The National Labor Relations Board has ruled that it is generally illegal for companies to offer severance agreements that prohibit workers from making potentially disparaging statements about the employer or from disclosing details of the agreement.The ruling by the board, which has a Democratic majority, overturns a pair of 2020 decisions, when the board was controlled by Republicans and found that such severance agreements were not illegal on their face. It continues the labor board’s worker- and union-friendly trajectory under appointees of President Biden.The earlier decisions held that the severance agreements were illegal only if accompanied by other circumstances making them suspect, such as the possibility that they were being used to cover up the illegal firing of employees who tried to form a union.Still, Anne Lofaso, a professor of labor law at West Virginia University, said the latest decision was limited to rights under the National Labor Relations Act, such as employees’ rights to draw attention to unsafe working conditions, or to engage in other activities that protect or benefit workers as a group.She said an employer could still offer workers a severance agreement requiring them to give up their right to sue over, say, race discrimination under the Civil Rights Act of 1964.In the ruling, issued Tuesday, the board said it was returning to longstanding precedent. The 2020 standard, it said, ignored the fact that a severance package with confidentiality or nondisparagement provisions could on its own “unlawfully restrain and coerce” workers’ labor rights.“It’s long been understood by the board and the courts that employers cannot ask individual employees to choose between receiving benefits and exercising their rights,” the board’s chairman, Lauren McFerran, said in a statement.Charlotte Garden, a professor of labor law at the University of Minnesota, said the 2020 approach had effectively tried to “narrow the rule to situations where an employer was trying to cover up their own previous unlawful activity and prohibit employees from talking about it.” The current ruling, she added, takes a broader view of when employees have the right to speak out.The case involved a Michigan hospital that permanently furloughed 11 union members during the pandemic. To receive severance benefits, they were required to sign an agreement that barred them from making statements that could disparage the hospital and from sharing the terms of the agreement.In furloughing the workers and offering them the agreement, the hospital also bypassed the union, depriving it of a chance to negotiate the terms, according to Tuesday’s ruling.In his dissent, Marvin Kaplan, the board’s lone Republican, argued that offering the severance agreement was illegal because the hospital circumvented the union, but not specifically because of its nondisclosure and nondisparagement provisions.Under Mr. Biden’s appointees, the labor board has moved relatively quickly to reinstate workers who it determines have been fired illegally. It has also issued rulings effectively expanding the financial remedies available to such workers and making it easier for a subset of employees within a workplace to unionize. More

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    in Economy

    U.S. Could Default on Debt as Early as Summer, New Estimate Says

    The Bipartisan Policy Center said the nation could run out of cash this summer or early fall if Congress did not raise the debt limit.WASHINGTON — The United States faces a default sometime this summer or early fall if Congress does not raise or suspend the debt ceiling, a Washington think tank warned on Wednesday.The projection from the Bipartisan Policy Center is the latest estimate of when the government could run out of cash to pay its bills. The nation, which borrows huge sums to help pay for everything from military salaries to Social Security benefits, hit its $31.4 trillion borrowing cap on Jan. 19. Since then, the Treasury Department has been employing what are known as extraordinary measures to ensure that the government has enough to pay what it owes, including payments to bondholders.“We anticipate that those emergency measures, as well as the cash that Treasury has on hand, will most likely be exhausted at some point during the summer or early fall,” Shai Akabas, the center’s director of economic policy, said during a briefing on Wednesday morning.Last week, the nonpartisan Congressional Budget Office projected that the department’s ability to prevent the United States from defaulting on its debt could be exhausted between July and September. That estimate was slightly more favorable than what Treasury Secretary Janet L. Yellen suggested when she told Congress last month that her department’s ability to keep financing the country’s obligations could be exhausted in June.The day when the United States runs out of cash — known as the X date — depends largely on how much the Treasury Department collects in 2022 tax revenue, the Bipartisan Policy Center said. The group warned that moment could be “too close for comfort” given the vagaries around tax receipts.“There is a possibility that the cash balance in early to mid-June will be so low that it will necessitate action,” Mr. Akabas said. He added that given “the considerable uncertainty in our nation’s current economic outlook,” it was impossible to know for certain when the X date might happen.“Policymakers have an opportunity now to inject certainty into the U.S. and global economy by beginning, in earnest, bipartisan negotiations around our nation’s fiscal health and taking action to uphold the full faith and credit of the United States well before the X date,” he said.Ms. Yellen’s extraordinary measures to keep the government running have included redeeming some existing investments and suspending new investments in the Civil Service Retirement and Disability Fund and the Postal Service Retiree Health Benefits Fund. Once those measures are exhausted, the United States will need to borrow more money or face default. She has urged Congress to raise or suspend the debt limit.It remains unclear how quick or easy it would be to do that. Republican lawmakers have insisted that President Biden agree to undefined spending cuts to win their votes to raise the cap, arguing that the borrowing binge is putting the United States on a path to fiscal disaster. Mr. Biden has insisted that he will not negotiate spending cuts as part of any debt limit legislation, saying that the cap has to be raised to fund obligations that Congress — including Republicans — have already approved. More