Economy

(Reuters) -Google-parent Alphabet (NASDAQ:GOOGL)’s cloud business crawled to its slowest in at least 11 quarters, sending the company’s stock down 5.7% after hours, even as sales at rival Microsoft (NASDAQ:MSFT)’s cloud unit boomed.The drop in Google’s share price despite beating Wall Street estimates for profit and sales, shows how much investors want the company to deliver gains in artificial intelligence, and show the cloud business remains competitive against a more powerful Azure from Microsoft and Amazon (NASDAQ:AMZN).com’s AWS. Fears of a slowing global economy have prompted companies to curb spending on cloud-related services, including expensive AI tools, which has slowed revenue growth at Google’s cloud unit to 22.5% in the third quarter, from 28% in the prior three-month period.Google Cloud third-quarter revenue rose 22.5% to $8.41 billion, the slowest growth since at least the first quarter of 2021. The cloud unit reported a operating income of $266 million, compared with an operating loss of $440 million a year ago. Wall Street expected cloud computing revenue of $8.62 billion.Finance chief Ruth Porat said in a conference call Tuesday that the third-quarter cloud growth is due to “customer optimization efforts,” without elaborating. By contrast, revenue from Microsoft’s Intelligent Cloud unit, which houses the Azure cloud computing platform, grew to $24.3 billion, compared with analysts’ estimate of $23.49 billion, LSEG data showed. Azure revenue rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha. Microsoft shares rose 5% after hours.”Despite Alphabet topping quarterly earnings and revenue estimates, investors were disappointed by the relatively weak performance at its Google cloud platform, which is at risk of falling further behind Azure and AWS,” Investing.com senior analyst Jesse Cohen.While advertising spending has been strong in some sectors such as retail and travel, industry executives and analysts have noted a pullback in budgets in some areas, affecting Alphabet’s major source of revenue.The company recorded ad revenue of $59.65 billion in the third quarter, compared with $54.48 billion a year earlier. Analysts on average had expected $59.12 billion in revenue from its advertising business. Within the company’s advertising segment, YouTube ads reported revenue of $7.95 billion compared with $7.07 billion last year.Alphabet reported a net profit of $19.69 billion for the July-Sept. period, compared with $13.91 billion a year earlier.Revenue for the quarter ended Sept. 30 stood at $76.69 billion, compared with estimates of $75.97 billion, according to LSEG data.Google said it spent $8.06 billion on capital expenses in the third quarter that was “overwhelmingly” the result of investments in its technical infrastructure. Servers were the largest component, followed by data centers due to a significant increase in AI computing investments, Porat said. Alphabet laid off roughly than 12,000 employees earlier this year, or about 6% of its global workforce, in an effort to cut staff amid a “different economic reality.” The company also laid off employees from its global recruiting team in September.The company disclosed that it recorded severance and related charges of $2.1 billion for the first nine months of the year. More

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Dimon also downplayed the potential effect of an additional 25 basis point hike by the Federal Reserve. This comes after a series of 11 rate hikes since 2022, with no further adjustments expected in November. Despite these increases, Dimon’s comments suggest that further hikes may have a limited impact on the economy.In his address, Dimon also voiced concerns over record peacetime fiscal spending and global overspending. He highlighted these aspects as potential destabilizers to economic stability. Furthermore, he pointed out the ongoing conflict in Ukraine as another factor that could potentially disrupt economic stability globally.The CEO’s remarks underscore a growing sentiment among financial leaders regarding the limits of monetary policy in addressing complex global economic issues. His call for readiness rather than definitive predictions indicates a shift towards a more cautious approach to economic planning and forecasting amidst an increasingly uncertain global economic landscape.This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

The United Automobile Workers on Tuesday expanded its strike to General Motors’ largest U.S. plant a day after striking at a Ram truck plant.The United Automobile Workers union shut down production at General Motors’ largest U.S. factory on Tuesday, significantly stepping up pressure on the large U.S. automakers as signs multiplied that the six-week strike is taking a toll on profits.The union told 5,000 workers at G.M.’s plant in Arlington, Texas, to stop working on the same day that the automaker announced a drop in its third-quarter profit and said U.A.W. work stoppages, which have also hit Ford Motor and Stellantis, had cost it $800 million so far.The strike in Arlington continued the union’s strategy of targeting some of the carmaker’s most profitable vehicles. The Texas factory makes large sport utility vehicles including the Chevrolet Tahoe, GMC Yukon and Cadillac Escalade.Before the Tuesday expansion, there had been signs that the union and G.M. were close to an agreement. Some analysts said the union’s decision to raise the stakes was part of an endgame strategy to squeeze the last dollar from the company.The U.A.W. president, Shawn Fain, “has been saying he still had some levers to pull to push the companies, and now he’s pulling them,” said Arthur Wheaton, director of labor studies at Cornell’s School of Industrial and Labor Relations. “So I think this is the union’s final push to the companies, saying, ‘Let’s get this deal done.’”But it is also possible the companies and the union are still far from striking deals and the U.A.W. is demonstrating that it still has plenty of cards to play.“My gut feeling is that they’re not close and this is trying to impose more cost and say, ‘Look, you guys have to get closer to what we want or we’ll keeping doing this,’” said Patricia Anderson, a professor of economics at Dartmouth College.On Monday, the union struck a Ram pickup truck plant, the largest U.S. factory operated by Stellantis, which also owns Jeep and Chrysler. The U.A.W. has also struck Ford Motor’s largest plant, in Louisville, Ky., which produces large pickup trucks and the Lincoln Navigator S.U.V.“Another record quarter, another record year; as we’ve said for months: record profits equal record contracts,” Mr. Fain said in a statement. “It’s time G.M. workers, and the whole working class, get their fair share.”G.M. executives had said earlier on Tuesday that they hoped to reach a tentative agreement with the union soon. The Texas walkout dimmed those hopes.The longer the strike lasts, the greater the risk it will become a drag on the U.S. economy, or make it harder for consumers to find the vehicles they want.The automakers have been keen to point out the ripple effects that the strikes are having on other workers. Stellantis, the maker of Chrysler and Jeep, said on Tuesday that it laid off 525 workers at two Michigan factories, in Sterling and Warren, that make parts for Ram pickup trucks that are not needed while the assembly line is shut down by the strike.All told, Stellantis has temporarily laid off more than 2,000 workers because of the strikes. Ford has laid off more than 3,000 workers because of the strike, according to the company. G.M. has laid off about 2,500, including about 140 at a factory in Ohio who made parts for the factory in Arlington and were let go on Tuesday. Another 3,000 workers at G.M. suppliers are temporarily out of work because of the strike, according to the company.“We are disappointed by the escalation of this unnecessary and irresponsible strike,” G.M. said in a statement. “It is harming our team members who are sacrificing their livelihoods and having negative ripple effects on our dealers, suppliers and the communities that rely on us.”Where Autoworkers Are Walking Out More

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Macklem acknowledged that higher interest rates pose challenges, but emphasized their crucial role in combating inflation. As of September, inflation stood at 3.8% and disproportionately affects society’s most vulnerable. Amid a weakening economy and easing inflation, the Bank is expected to maintain its key rate.The debate over interest rates comes amid heightened political scrutiny of the Bank following Canada’s highest inflation levels in 40 years post-pandemic. Conservative Leader Pierre Poilievre had pledged to fire Macklem over these inflation concerns, while the NDP suggested the federal government could ask the Bank to stop raising rates. Finance Minister Chrystia Freeland faced backlash for her comments describing the bank’s decision to hold its key rate steady as “welcome relief.”This article was generated with the support of AI and reviewed by an editor. For more information see our T&C. More

WASHINGTON (Reuters) – U.S. banking regulators are set to adopt new rules to modernize fair lending standards for banks, requiring them to take into account more than their physical presence to ensure they are adequately servicing communities.The Federal Reserve unveiled the final rules, which update rules enforcing the 1977 Community Reinvestment Act. Under the new standard, banks will be graded on how well they service areas with significant lending, and also provide greater clarity on the grading process. More

JERUSALEM (Reuters) – A depleted workforce. Constant rocket sirens. The lingering shock of an unexpected attack. The cost to Israel’s economy of its war with Hamas militants will be unlike anything it has experienced in decades.The cranes that dot Tel Aviv’s ever-growing skyline stood still for days after the city closed construction sites. They reopened this week under stricter safety guidelines but inactivity in this sector alone costs the economy an estimated 150 million shekels ($37 million) a day, an industry report said.”This is not a hit for contractors or industrialists alone,” said Raul Sarugo, president of the Israel Builders’ Association. “This is a hit for every household in Israel.”Israel was blindsided on Oct. 7 by Hamas gunmen from Gaza who rampaged through border towns in the deadliest attack on civilians in its history. In the two weeks since, its military has carried out a devastating bombardment in Gaza.Israel’s almost $500 billion economy, the most developed in the Middle East with strengths in technology and tourism, was healthy for most of 2023. Growth was on track to reach 3% this year with low unemployment.But with a ground invasion of Gaza likely imminent and the war threatening to spiral into a regional conflict, Israelis are hunkering down and spending much less on everything except food. Ratings agencies have already warned they could downgrade their assessment of the country’s creditworthiness.Hundreds of thousands of army reservists have been called up, leaving a gaping hole in manpower and disrupting supply chains from seaports to supermarkets, while retailers are furloughing employees. The shekel has slumped.The conflict has also halted the movement of thousands of Palestinian labourers from Gaza to Israel and curtailed the flow from the occupied West Bank.The escalators and walkways of Jerusalem’s main shopping mall were empty for the first two weeks of the war, though slowly patrons are venturing back.”There has been a drastic decline in traffic,” said Netanel Shraga, manager of the Columbia sportswear shop.HIGH-TECHSome of Shraga’s staff have been called up to army service, he said. Others are too afraid to come to work.Hotels are half-filled with Israeli evacuees from border areas, the rest of the rooms are mostly empty. Factories continue to operate, even those near Gaza, but there are not always enough truck drivers to make regular deliveries.Credit card purchases were down 12% in the last week from the same period a year ago, with sharp drops in nearly all categories except for a spike in shopping at supermarkets.The high-tech industry, which flourished during the COVID pandemic, is struggling. Usually it accounts for 18% of Israel’s GDP and half of all exports.”Productivity goes down significantly, because it’s hard to focus on day-to-day work when you have existential concerns,” said Barak Klein, chief financial officer at fintech firm ThetaRay.Twelve of their 80 Israel-based employees were drafted into the reserves. Others have children home from school. And there is still the constant fear of rocket fire.ThetaRay set up a day care center for employees who need to bring in children and has been relying on their offices abroad to take some of the workload.Erel Margalit, whose JVP venture capital fund is one of the country’s most active, said he has been jumping between board meetings, hearing about different business continuity plans.”Investors need to be assured,” he said.An estimated 10-15% of the high-tech work force has been called up for reserve duty, said Dror Bin, CEO of the state-funded Israel Innovation Authority.”We’ve been in touch with hundreds of tech companies, especially early stage ventures,” Bin said, adding that many were in the middle of a funding round and are running out of money.To help, his authority set up a 100 million shekel ($25 million) fund to help 100 tech startups weather the storm.The Economy Ministry created a war room and put out a call for help. Its database has so far matched at least 8,550 people with struggling businesses. When a logistics center of a major supermarket chain was strained, 38 people were sent to fill an overnight shift.”EMOTIONAL CRISIS”The government has promised “no limit” in spending to finance the war and to compensate households and businesses affected, meaning a bigger budget deficit and more debt.Past conflicts may not be a good guide to the economy’s path. Gross domestic product fell as much as 0.5% in a 34-day war with Iran-backed Lebanese group Hezbollah in 2006 as exports dropped and manufacturing slowed, but a recovery followed quickly.What’s happening today is different, officials say.There is an “emotional crisis” among the Israeli public and it is already taking a toll, said Leo Leiderman, chief economic adviser to Bank Hapoalim, one of the country’s biggest banks.”People will minimize their consumption spending, because of the uncertainty and the mood,” he said.With consumer spending accounting for more than half of economic activity, the damage to the economy may be significant.”Israel was able to recover remarkably well from all the recent events of fighting,” a senior Israeli Finance Ministry official told Reuters. “This seems to be a more dramatic event, even if it is really very early to know.”The Bank of Israel on Monday trimmed its economic growth estimate for 2023 to 2.3% from 3% and to 2.8% from 3.0% for 2024 assuming the war is contained to Gaza. Governor Amir Yaron – who is opposed to rate cuts for now – expects a rebound. “We have known how to recover from difficult periods in the past and to return rapidly to prosperity,” Yaron said. “I have no doubt that it will do so this time as well.”($1 = 4.0586 shekels) More