November 29, 2022
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The Week in Business: Prices Keep Climbing

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New inflation data on Thursday dashed any remaining hopes that the Federal Reserve might soon ease off its plans to continue aggressively raising interest rates. The Consumer Price Index showed overall inflation climbing 8.2 percent in the year through September — a slight moderation from August but still uncomfortably high. Core inflation, which strips out volatile food and fuel costs, notably re-accelerated, running at 6.6 percent. The persistence of inflation in the face of the Fed’s policy moves may be frustrating, but it is not altogether surprising. Most economists expected the process of wrestling down rising prices and cooling off the economy to be slow — though it is starting to seem that even small signs of progress are not cropping up where they should. And now some worry that as inflation becomes more entrenched it could lead to a wage-price spiral, a no-win feedback loop in which rising prices lead to wage increases that then reinforce inflation.

Rising prices can be particularly painful for retirees, who are often on fixed incomes and can’t seek new work as inflation eats into their earnings. Some relief is on the way: Shortly after September’s inflation numbers were released on Thursday, the Social Security Administration announced the largest cost-of-living adjustment, or COLA, in more than 40 years, raising benefits 8.7 percent beginning next year. The bump will affect roughly 52.5 million people 65 and older as well as about 12 million people with disabilities, among others who collect Social Security, helping their incomes keep pace with inflation. Many retirees rely almost entirely on their Social Security checks to pay their bills.

The word “recession” may be on many people’s minds, but the leaders of the biggest U.S. banks say they aren’t panicking yet. Reporting on JPMorgan Chase’s third-quarter earnings, the bank’s chief executive, Jamie Dimon, said consumers were still “healthy,” pointing to a strong jobs market and the household savings cushions that he said were keeping credit card spending up. Wells Fargo’s chief executive, Charles Scharf, said his bank’s customers remained in “strong financial condition.” But these banks are still taking steps to prepare for what Mr. Dimon warned were “significant headwinds immediately in front of us.” Citigroup, JPMorgan Chase and Wells Fargo all reported smaller profits compared with the third quarter of last year, and they said they had made provisions to protect against future loan losses.

Throughout the year, higher borrowing rates have been taking a toll on the housing market, another area where Fed policymakers look for evidence of a slowing economy. New data to be released this Thursday will probably show a continued downturn. Analysts expect existing-home sales to fall for the eighth consecutive month, mirroring the string of declines during the housing market crash that helped set off the 2008 financial crisis. Also on Thursday, Freddie Mac, the mortgage finance giant, is expected to report that rates on 30-year mortgages have surpassed 7 percent — another data point not seen since 2008. Rising mortgage rates are one reason for the cooling market, but broader uncertainty about the economy is also a big contributor. Many would-be home buyers may be spooked by factors like recent hiring freezes at major companies and stubbornly high inflation numbers — not to mention the sticker shock of house prices.

The path ahead for a deal that would merge the country’s two largest grocery store chains is likely to be a bumpy one, inviting intense scrutiny from regulators and strong objections from consumer advocates. On Friday, Kroger announced plans to acquire Albertsons, valuing the company at $24.6 billion including debt, in a bet that one super-supermarket chain could better compete with Walmart and Amazon. The companies said they intended to sell some of their 5,000 stores to competitors and would consider turning as many as 375 stores into a separate stand-alone company. But those plans may do little to convince the Federal Trade Commission, which, under the leadership of Lina Khan, has made it a top priority to tamp down corporate consolidation. Investors seemed to anticipate difficulties for the deal, selling shares of both Kroger and Albertsons on Friday.

In July, Netflix reassured shareholders that it would add one million subscribers in the third quarter, hoping to make up for painful losses this year. In the first quarter, the streaming giant lost 200,000 subscribers; in the next quarter, some 970,000. On Tuesday, in its latest earnings report, Netflix will share whether it met its goal. If it hasn’t, the company may point to its plans to roll out a cheaper ad-supported option next month. The new tier will cost $6.99 a month — compared with $9.99 for the most basic tier and $19.99 for the most expensive — and will show viewers four or five minutes of ads per hour of streaming they watch. The hope is to bring in new customers, especially younger viewers, and to persuade people who may be using the passwords of friends or family members to buy their own subscriptions.

In an effort to calm markets, Liz Truss, the British prime minister, said she would reinstate a scheduled increase in corporate taxes and ousted her finance minister. Google will allow former President Donald J. Trump’s social media app, Truth Social, to appear in the Google Play Store. Gannett, the country’s largest newspaper publisher, announced sweeping cost-cutting measures for its newsrooms, citing a troubling economic outlook.



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