Business

Americans moved around a lot over the past two years, and those destinations also now happen to have the highest inflation rates in the U.S.
“We saw right away that inflation was highest in Phoenix and lowest in San Francisco,” Redfin deputy chief economist Taylor Marr told CNBC.

The relationship between migration and inflation has strengthened significantly as more people relocate from expensive coastal cities to more affordable metro areas, according to an analysis released by Redfin, the real estate broker.
Phoenix is one of the inflation hot spots that has seen an influx of new residents.
“Almost every component of the Phoenix CPI for whatever reason is up about 10%,” Lee McPheters, research professor of economics at Arizona State University, told CNBC. 
Atlanta and Tampa are also among the metro regions seeing both hot inflation and the pandemic-related surge in homebuying.
“People move to Atlanta because it’s more affordable,” Vivian Yue, economics professor at Emory University, told CNBC. “But now once people get here, [they say]: ‘Wow, this inflation is so high compared to where [we] moved from.'”

Prices are up across the country. The consumer price index rose by 8.3% in April 2022 from a year ago.
“For years and years, it’s always been a mixed bag of things going up, other things coming down, and that’s not the case lately. Essentially, everything is rising,” Steve Reed, economist with the U.S. Bureau of Labor Statistics, told CNBC.
Watch the video above to learn more about why migration impacts inflation, how the Bureau of Labor Statistics measures rising costs, the role of wages and what may be next for these hot spots.

WATCH LIVEWATCH IN THE APP More

The word “brainstorming” conjures up a vision of hell. It is someone saying, “Fire up the brainwaves barbecue.” It is trying desperately to work out where everyone else’s cursors have gone on a digital whiteboard. It is hearing the line “there are no bad ideas” and thinking “how did this get scheduled then?” Yet brainstorming persists, and for decent reasons. Normal routines afford employees precious little time to think. Getting a group of people together is an opportunity to harness disparate viewpoints. Producing, filtering and selecting new ideas in an efficient way is an appealing proposition. So why is brainstorming often so painful? The problem is that brainstorming must strike a balance between a series of competing imperatives. One tension is between creativity and feasibility. A brainstorm is meant to be freeing, a chance to ask out-of-the-box questions (like, “Wouldn’t it be great if people had prosthetic tails?”). But it is also meant to produce suggestions that can actually be translated into reality, which calls for a more pragmatic style of thinking (like, “What are you talking about? We work at a salad chain.”). Research carried out in 2017 found that different types of ideas emerge at different stages of a brainstorm. The most feasible suggestions were generated at the start of brainstorming sessions, presumably because they were also more obvious, and the most original ones came later. Both types risk producing a “what’s the point?” reaction from participants: incrementalism is unexciting, wild schemes are not going anywhere. A second tension is between managers and non-managers. By its nature brainstorming is insiderish. Someone has to arrange the session, and that person is often the manager of a team. If decision-makers are not in the room, then the suspicion will grow that time is being wasted. If they are, then hierarchies easily assert themselves: good ideas can wither with a frown from the boss, and bad ones can survive with a nod. A related issue concerns the presence of outsiders. There is a natural temptation to keep drawing on the same senior people within an organisation to generate ideas: these are the ones who get things done, who understand a company’s strategy. Yet reams of research suggest that outsiders bring a fresh perspective. That might be people from related industries: in an experiment carried out in 2013, carpenters, roofers and rollerbladers were asked how to improve safety gear in all of their fields and the most novel ideas came from people who were not in the area in question. But it might also be middle managers or front-line employees who have direct contact with customers. A third balance to strike is between different personalities and different styles of thinking. A new paper from researchers at Columbia Business School and Stanford Graduate School of Business finds that brainstorming on Zoom comes at a cost to creativity: as people’s visual focus narrows on the screen in front of them, their cognitive range also seems to become more limited. But if in-person gatherings are better, they also do not work equally well for everyone. Some personalities are immediately comfortable saying what they think; others need to be coaxed to share their opinions. These are known problems, and there are plenty of ideas out there to solve them. The trouble is that lots of them feel like they are themselves the product of a bad brainstorming session. “Figure-storming” is a way for people to combat groupthink by pretending to be a famous person (“how would the queen improve cloud computing?”). “Step-laddering” involves people joining a brainstorm one by one, for reasons that are not entirely clear. Breaking the ice by throwing a word-association ball at each other is a brilliant idea, if you are throwing a birthday party for ten-year-olds.Some simpler rules are much more likely to help. Define the parameters of a brainstorming session upfront. Try to make a specific thing work better rather than to shoot for the Moon. Involve people you don’t know, as well as those you do. Start by getting people to write their ideas down in silence, so extroverts and bosses have less chance to dominate. And be clear about the next steps after the session is over; the attraction of holding a “design sprint”, a week-long, clear-the-diary way for a team to develop and test product prototypes, is that the thread connecting ideas to outcomes is taut. All of which would make brainstorming a little more thought-provoking and a tad less heart-sinking.Read more from Bartleby, our columnist on management and work:The woolliest words in business (May 14th)Why working from anywhere isn’t realistic (May 7th)The case for Easter eggs and other treats (Apr 30th) More

American capitalism has a special reverence for large numbers. They can frighten as debt or reassure as backstops. The $260bn raised by special-purpose acquisition companies (spacs) since the start of 2020 lacks the multitrillion-dollar aura of federal debt or America’s pandemic stimulus. It is nevertheless big enough to have become a defining symbol of recent market mania. spacs used to be a curious capital-markets sideshow: complex, obscure, hardly novel. A conventional initial public offering underwritten by investment banks was the marker of corporate maturity; merging with a pile of cash and entering the stockmarket by the backdoor was not. This changed when stockmarkets rallied from their covid-induced lows: more than 800 spacs raised capital between May 2020 and December 2021. Underwriting fees were collected; questionable incentives and complexity remained. This year investors appear to have remembered why some disliked spacs in the first place. Few new blank-cheque vehicles are being listed. Rising interest rates are chipping away at the present value of speculative firms’ future profits and investment banks are pulling back from this kind of faddish financial engineering in expectation of tough new due-diligence rules. At the same time, many existing spacs are having trouble finding merger targets. The big-shots (or “sponsors”) who erect the empty shells are typically given 24 months to find a business to acquire (or to de-spac, in Wall Street lingo). They are struggling: 27 such transactions were announced in the first three months of 2022, compared with 77 during the same period in 2021. Of the 298 spacs listed in the go-go first quarter of 2021, raising $97bn, 196 have yet to announce a de-spacing. In all, more than 600 American-listed spacs are still searching for a target. That is a lot of clocks counting down, and a lot of unspent cash. Where is it all now? Ironically, much of this money, once chasing some of the riskiest tech bets out there, has been parked in finance’s dullest quarter. Approximately $160bn currently sits in trust accounts, invested in risk-free Treasuries. It could be ploughed into the next white-hot tech stocks in early 2023, when the countdowns end and investors’ cash is returned. Until then, being locked up in a spac without the prospect of a merger resembles investing in a money-market fund. Investors profit from the difference between its trading price and the money returned upon its liquidation. At present, the average yield-to-maturity on these blank cheques is above 3%.Astute investors know better than to hang around for the blank cheque to blossom into a real business. After a spac announces a merger, investors are given the chance to redeem their shares and have their investment returned. Average redemptions are running at more than 50%. Excluding additional funding and deals hanging in limbo between announcement and completion, The Economist calculates that less than $40bn of capital invested in spacs since 2020 has found its way onto the balance-sheet of an operating company. That is roughly the valuation at which Grab, a South-East Asian super-app, tied up with a spac in December 2021.Investors in de-spaced firms have fared far worse than those in spacs wanting for a target. One recent study finds that barely more than a third hit their revenue projections. Many are short of cash. Almost half of the companies included in the de-spac index are currently burning through cash fast enough to empty their coffers within two years. This month Canoo, an electric-vehicle maker whose investor presentation benchmarked its valuation to Netflix and Tesla, expressed “substantial doubt” about its future as a going concern. An index tracking 25 large companies which went public through de-spac transactions is down by 52% this year, compared with a 27% fall for the tech-heavy nasdaq (see chart 2). Grab is now worth $10bn. The dilution caused by free shares designed to compensate a spac’s sponsor magnifies the sector’s losses. Unsurprisingly, then, spacs are once again paraded as symbols of market excess, where moonshot assets were pursued at otherwordly valuations. In practice, a stockmarket correction and increased regulatory scrutiny means the majority of spac investors will never see their cash put to work. They are the lucky ones. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

For the first time since the start of the pandemic, global leisure and business flights have risen to levels not seen since 2019.
That’s according to the Mastercard Economics Institute’s third annual travel report, titled “Travel 2022: Trends & Transitions,” published yesterday.

After analyzing 37 global markets, the report found that cross-border travel reached pre-pandemic levels as of March — a significant milestone for a travel industry that has been dominated by domestic travel since 2020.

Flights are back

Global flight bookings for leisure travel soared 25% above pre-pandemic levels in April, according to the report. That was driven by the number of short-haul and medium-haul flights, which were higher in April than during the same time in 2019, according to the report.
Long-haul leisure flights weren’t far behind. After starting the year at -75% of pre-pandemic levels, an “unprecedented surge” in international flight bookings brought these flights “just shy” of 2019 levels in less than three months, according to the report.  

Like airlines, global spending for cruises, buses and passenger railways rose sharply earlier this year, with tourist car rentals in March surpassing 2019 levels, according to Mastercard Economics Institute’s 2022 travel report.
3Alexd | E+ | Getty Images

Business flyers, who have trailed leisure passengers for the entire pandemic, are returning to the skies as well.
At the end of March, business flight bookings exceeded 2019 levels for the first time since the start of the pandemic, according to the report, marking a key milestone for airlines that rely on corporate “frequent flyer” passengers.

The return of business travel has been swift, as business flight bookings were only about half of pre-pandemic levels earlier this year, according to the report.

A delay in Asia

The global upward trajectory comes despite a sluggish return to air travel in Asia. Flights to Singapore, Malaysia and Indonesia increased among Asia-Pacific flyers this year, though most of the top international travel destinations were outside of the region.
“Among the top destinations visited by Asia Pacific travelers in the first quarter of 2022, 50% were out of the region based on our data, with the United States being the number 1,” said David Mann, chief economist for Asia-Pacific, Middle East and Africa at the Mastercard Economics Institute.
“Despite a delayed recovery compared to the West,” said Mann, “travelers in Asia Pacific have demonstrated a strong desire to return to travel where there have been liberalizations.”
If flight bookings continue at their current pace, an estimated 1.5 billion more global passengers will fly this year than in 2021, according to the Mastercard Economics Institute, with more than one-third of those coming from Europe.

Will this continue?

Strong demand for air travel and an upswing in global hiring trends are just some of the reasons the global travel industry has “more reason to be optimistic than pessimistic,” according to the report.  
People have paid off debt at “a record pace” over the past two years, while wealthier consumers — who are “likelier to be traveling for leisure” — have benefited from pandemic-related savings and increases in asset prices, according to the report.  
Yet, rising inflation, market instability, geopolitical problems in Europe and Asia, and rising Covid-19 rates are threatening to derail a robust travel recovery in 2022.
Incomes are expected to grow in response to inflation, but this will happen faster in developing economies, according to the report.
“While we expect income growth to outpace consumer price growth in Germany and the United States by mid-2023, this likely won’t happen until 2024 and 2025 in Mexico and South Africa, respectively,” the report stated.

Among the numerous risks that could derail travel recovery … we would put Covid as the biggest swing factor.

David Mann
chief economist, Mastercard Economics Institute

Airfares are also up, with average ticket prices increasing about 18% from January to April of this year, according to the report.
Air travel cost increases varied considerably by region, with fares up 27% in Singapore from April 2019 to April 2022. However, the report said flight prices in the United States have remained roughly unchanged during the same time frame.
Though many countries have reopened to international travelers, the pandemic still looms over the industry.  
“Among the numerous risks that could derail travel recovery … we would put Covid as the biggest swing factor,” said Mann.
“Whilst treatments are better, and many markets have seen successful vaccine rollouts, a severe or contagious variant necessitating border closures could lead to a return of the non-linear, stop-start recovery patterns of the last two years,” he said.

A last summer hurrah?

Whether travel demand will remain robust throughout the year — or whether travelers will take a last summer hurrah before tightening their purse strings — is yet to be seen.
The report noted that people have traditionally spent less on travel following rises in energy and food costs.
“However, given massive levels of pent-up demand in a post-pandemic world, this time could be different,” stated the report. More

Gautam adani is a man of few words but, as Asia’s richest tycoon, plenty of means. On May 15th he agreed to pay $10.5bn for Ambuja Cement, India’s second-biggest cement-maker, controlled by Holcim, a Swiss building-materials behemoth. Mr Adani’s terse statement accompanying the deal belies its significance. It will be the largest outright acquisition of an Indian company since Walmart, an American supermarket titan, purchased Flipkart, an Indian e-merchant, in 2018.Ambuja was founded by Narotam Sekhsaria, a Bombay cotton trader with a degree in chemical engineering but no background in cement. He managed to turn a commodity into a consumer product through a clever slogan (“giant strength”) and an eye-catching logo (a giant clutching a building). After courting Ambuja for years, Holcim succeeded only in 2005-07, as Mr Sekhsaria’s health began to fail. Since then the business has flailed. In the past decade, according to Kotak Securities, a broker, capacity at Holcim’s Indian holdings expanded by less than 2% a year, compared with a rate of 10% for UltraTech, India’s biggest cement-maker, and 13% for Shree Cement, an upstart. Holcim has not disclosed how much it paid for its Indian venture. One analyst puts the figure at around $2bn. Given that it will receive $6.4bn for its 63% stake, this would amount to an adequate but unexciting annual return of perhaps 8%. (The other $4bn or so Mr Adani is paying will go to Ambuja’s minority shareholders.)The deal is more favourable for Holcim in other ways. It fits in with the firm’s broader shift towards a greener, less cement-centric business. In recent years it has sold cement units in Brazil, Indonesia, Malaysia, Russia, Sri Lanka and Vietnam. Critically, it shouldn’t attract antitrust scrutiny, whereas success by one of the two other bidders might well have raised trustbusters’ concerns. UltraTech, controlled by the Birla family, is India’s biggest cement-maker. The Jindals’ jsw Group, a big steel producer, has a growing cement business. The Competition Commission of India has been looking into a possible cement cartel since at least 2010. A case involving Holcim is before the Supreme Court. Another investigation was reportedly launched in 2020. As part of the sale, Holcim will be spared from any judgment, its chief executive, Jan Jenisch, told analysts. But it was not solely because Mr Adani has no existing cement operations that he prevailed in the fight for Ambuja. What he brought also mattered. The Adani Group owns power utilities, useful in running energy-hungry kilns, and India’s biggest network of ports to ship the stuff. Its coal-fired plants provide a by-product, fly-ash, required for cement-making. Most important, the tycoon displays an uncanny ability to raise capital. Paired with vaulting ambition, it is a hard mix to beat. ■For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

America’s clean-energy bosses thought they would by now have more to celebrate. In the presidential campaign of 2020 Democrats tried to outbid one another on climate plans—Joe Biden offered $2trn, Bernie Sanders’s Green New Deal was $16trn—as if the nomination would go to the highest bidder. In the three months after Mr Biden defeated Donald Trump, an index of clean-energy firms jumped by about 60%. Goldman Sachs, a bank, forecast “a new era for green infrastructure” in America and beyond. Though Mr Biden’s infrastructure bill offered some help for clean energy, a giant climate bill now seems fantastical. Worse, green power is not just failing to boom. It is going bust. An array of American solar projects have been delayed or cancelled amid a federal probe into tariff evasion by manufacturers of solar panels and modules. The countries in question—Cambodia, Malaysia, Thailand and Vietnam—together produce about 80% of America’s solar-panel imports. Politics is stymying makers of wind turbines, builders of wind farms and the utilities that buy power from them. The results are stark. So far this year the clean-energy sector has lost about 25% of its market value, compared with an 18% drop for the benchmark s&p 500 index of big American firms. Rystad Energy, a research firm, estimates that two-thirds of its forecast solar installations for this year are in doubt. According to Bloombergnef, a data provider, the capacity of new renewables projects in 2022 looks set to be a tenth lower than in 2020, under the windmill-hating Mr Trump. Two years ago clean-energy enthusiasts were right to feel bullish. In the decade to 2020 the levelised cost of electricity—which takes into account investment in equipment, construction, financing and maintenance—had fallen by 69% for onshore wind and 85% for solar projects, according to Lazard, an advisory firm. With renewables technologically mature and economically competitive, utilities and developers planned to pour money into solar and wind. NextEra Energy, a giant utility that in 2020 briefly overtook ExxonMobil to become America’s most valuable energy firm, said it would spend up to $14bn a year on capital projects in 2021 and 2022, calling it “the best renewables development environment in our history”. In the arduous effort to decarbonise America’s economy, building clean power would be the easy part. Turns out it isn’t. Some problems stem from the pandemic and gummed-up global supply chains. Pricey commodities helped push up the levelised cost of wind and solar in the second half of 2021 (though more slowly than for coal and gas). But many of the current woes are political in nature. Take restrictions on products from Xinjiang. Last year Mr Biden, seeking to limit imports made with forced labour, announced a ban on polysilicon coming from big companies producing in the Chinese region. American importers scrambled to present proof that they weren’t violating the ban. As customs officials pored over suppliers’ lengthy attestations, in Chinese, solar modules languished in ports. A lack of equipment forced developers to delay construction. That problem has now been dwarfed by a bigger one. In March the Commerce Department humoured a request by Auxin Solar, an American manufacturer, to check if Chinese companies were circumventing anti-dumping tariffs. Duties had originally been imposed by Barack Obama, then extended by Mr Trump; Auxin claims that firms are dodging tariffs by making parts in China but assembling modules in their South-East Asian factories.The effect is that a small American firm is obstructing more than 300 projects, according to a tally by the Solar Energy Industries Association, a lobby group. Some developers cannot get their hands on kit. Others find that costlier gear has put their construction deals in the red. NextEra told investors in April that up to 2.8 giga-watts of solar and battery projects planned for this year, equivalent to around a tenth of its intended renewables investments in 2021-24, would be delayed. American assemblers of solar panels, it said, were sold out for the next three years. America’s largest solar project, spanning 13,000 acres of Indiana, has been postponed. NiSource, the utility behind it, will instead delay the retirement of two coal-fired power stations to 2025. The challenges facing the wind industry look less severe only in comparison. Like many capital-intensive industries, the wind sector is grappling with rising costs of steel, copper, resin and other materials needed to craft turbines. Global manufacturers such as Vestas and Siemens Gamesa have seen their margins shrink. In America, rising input costs have unfortunately coincided with declining tax credits. It is possible that Congress could extend those for wind—but improbable given partisan deadlock. In the meantime developers and utilities are delaying new contracts, unwilling to make commitments before knowing the true costs. Politicians may create problems where things have been going well, as with auctions for seabed leases for offshore wind farms. These have attracted ample bids from oil firms and utilities. The House passed a bill in March with bipartisan support that would require the giant boats used to install turbines off America’s coast to replace some foreign crews with Americans. Wind executives note the country lacks enough people with the requisite skills. A high-voltage situationRepublicans, who look poised to control Congress after the mid-term elections in November, remain more hostile to greenery than Democrats. But the renewables industry’s current troubles highlight the contradictions within Mr Biden’s coalition. It wants to build green projects quickly. At the same time, it wants Americans to build them with American inputs. The trouble is that you cannot have both. In a letter to Mr Biden on May 17th, 85 members of Congress argued that the tariff inquiry could cost America’s solar sector more than 100,000 jobs. That is bad for workers, bad for the renewables industry—and terrible for the climate. ■Read more from Schumpeter, our columnist on global business:Activist investors are becoming tamer (May 14th 2022)Facebook’s retirement plan (May 7th)The weird ways companies are coping with inflation (Apr 30th)For more expert analysis of the biggest stories in economics, business and markets, sign up to Money Talks, our weekly newsletter. More

Walmart went from strength to strength during the covid-19 pandemic. Its years-long investments in online fulfilment finally began to pay off as virus-wary shoppers swapped aisles for apps. As inflation picked up initially, its “everyday low prices” looked even more appealing than usual. And investors appeared to believe that it had the power to make those prices a bit less low, passing its own rising costs without putting off shoppers or sacrificing margins. On May 17th economic reality finally caught up with America’s supermarket titan. The company reported quarterly earnings that fell short of even the most conservative analysts’ estimates, blaming chiefly supply-chain snags and the rising cost of labour and transport. Its share price fell by 11%, a daily drop second only to the one the firm experienced in the trading session before the Black Monday stockmarket crash in 1987. A day later it slid by another 7%. The same day Target, another pandemic retail star, reported similarly disappointing results, wiping out 25% of its market value. The two companies shed a combined $65bn in market capitalisation in the space of two days.Historically, inflation has often benefited big supermarkets. Elevated prices boost the nominal value of sales. As for higher unit costs, these could often be passed on to shoppers, who are likelier to keep needing supermarkets staples and less likely to gripe about higher bills if everything else they buy is also dearer. This time, though, the retailers are finding it harder to offset the steep increase in operating expenses. Target’s chief executive, Brian Cornell, anticipates an extra $1bn in transport costs this year as soaring energy prices dent profits. It is already raising prices in response—evidently not fast enough. Walmart, far bigger of the two, is better placed to absorb some of the higher costs. But even the Beast of Bentonville now expects earnings to decline by 1% this year. In addition to costlier transport, Walmart also reported higher wage costs, not least as a result of a hiring spree to ensure enough workers amid the Omicron wave of covid-19. It stocked too many clothes and home furnishings in order to avert a supply crunch, just as appetite for these products waned. And margins suffered as penny-pinching customers switched away from pricier premium brands to the supermarkets’ less lucrative own labels.Neither firm is about to collapse. Target’s revenues rose year on year, in nominal terms at least. So did traffic in its stores—something that is “rare to find in retail these days”, according to Morgan Stanley, an investment bank. Walmart’s sales were up by 2.6%, to $142bn. Founded by a man who prized frugality, the bigger retailer has an established reputation for good value—a particular virtue in shoppers’ eyes during a recession, which can no longer be ruled out. Its large grocery business offers a hedge against a downturn. And wealthier shoppers with bigger savings may migrate to Walmart from higher-end retailers, which could help pad margins.The question now is who will be the next to face a reckoning. The share prices of smaller retailers like Kroger and Dollar General, which have yet to report their first-quarter results, have been dragged down by association. Consumer-goods giants may be the next in line. Firms like Procter & Gamble (p&g) have been raising the prices of their premium brands to counter their own margin squeeze. Now they may think twice before doing so again, lest they lose sales. Such calculations diminish their pricing power, which markets have tended to reward handsomely. Investors may have taken note. On May 18th p&g’s share price fell by 6%, even more than the wobbly stockmarket as a whole. ■ More

Walmart went from strength to strength during the covid-19 pandemic. Its years-long investments in online fulfilment finally began to pay off as virus-wary shoppers swapped aisles for apps. As inflation picked up initially, its “everyday low prices” looked even more appealing than usual. And investors appeared to believe that it had the power to make those prices a bit less low, passing its own rising costs without putting off shoppers or sacrificing margins. Listen to this story. Enjoy more audio and podcasts on More