Where are we? (July 24-30)
Meta’s not so good day
Wednesday was not a good day for the company formerly known as Facebook. First came a lawsuit from the Federal Trade Commission, and then the company announced its first decline in revenue since going public. The FTC, led by Lina Khan, one of Big Tech’s biggest critics, is suing Meta to block it from buying Within, a virtual reality company that would help oust Meta CEO Mark Zuckerberg in metaverse. In the lawsuit, the FTC accused Meta of trying to buy a company it had to compete with. Meta responded that the agency had assembled a case “based on ideology and speculation.” Later, the company reported that its second-quarter revenue fell 1 percent from last year, results that Mr. Zuckerberg put them in the context of an “economic downturn that will have a far-reaching impact” on digital advertising. However, he appears relentless in advancing his vision for the next era of his business and has told employees that anyone not on board can leave.
A recession? Or not?
The economy contracted for the second quarter in a row, meeting the criteria for a common definition of recession. Adjusted for inflation, gross domestic product fell 0.2 percent in the second quarter, the Commerce Department said Thursday. But under closer scrutiny, GDP isn’t the only indicator of a serious downturn: Economists use a wide array of data to gauge the state of the economy, including measures of income, spending, and employment, and most contend that the U.S. are not in a recession. And through the eyes of Federal Reserve officials, the latest GDP numbers are a sign that their efforts to slow the economy are working. But the outlook is certainly dimming, especially with the housing market slowing and a slew of layoffs.
Fed’s Supersize Rate Increase
The Federal Reserve continued its lone pursuit of taming rising prices last week as it raised interest rates by three-quarters of a percentage point. Policymakers had unanimously agreed to the supersize hike, which followed one of the same size in June, the largest since 1994. The Biden administration has said it relies heavily on the Fed to keep inflation under control. But a day after the Fed meeting, President Biden announced that an agreement had been reached with Senator Joe Manchin III of West Virginia to advance a package known as the Inflation Reduction Act. Cecilia Rouse, who chairs Mr. Biden’s Council of Economic Advisers, said the plan would make “a significant contribution” to the government’s efforts to ease inflation.
What is expected next? (July 31 – August 6)
Booming oil profits
As every other sector struggles with factors like rising production costs, shortages, supply chain disruptions, changing consumer habits, the strength of the dollar against foreign currencies – the list goes on – global markets have a clear winner: energy. Shell last week reported $11.5 billion in second-quarter profit, another record for the company as high oil and gas prices fueled by the war in Ukraine boost profits. Exxon Mobil and Chevron followed suit, with record quarterly earnings, and BP is likely to post similarly buoyant results on Tuesday. The company wrote off $25.5 billion for the withdrawal from Russia in the first quarter, but celebrated an “outstanding” performance overall, more than doubling its earnings from a year ago. By the end of this week, the world’s major oil companies will collectively have reported adding tens of billions of dollars to their bottom lines as high energy prices rattle economies.
Another closely followed job report
June job growth was higher than expected, pointing to a still buoyant job market and growing economy. But that wasn’t necessarily a good result for the Fed, whose officials are scouring a range of economic data for signs that the economy is slowing from its torrid pace. On the other hand, a strong jobs report is a useful messaging tool for the Biden administration when it faces questions about whether the economy is in recession. The jobs report for July comes out on Friday, and economists will have a new number to analyze as they try to figure out where the economy stands.
Inflation is also high in Britain
At its last meeting in June, Bank of England officials suggested they may be less modest about raising rates in August, after a string of quarterly hikes. At the moment, its benchmark rate is 1.25, the highest since 2009. But as elsewhere, inflation in Britain is galloping at its fastest pace in decades, and some officials at the central bank are worried that it is not walk fast enough. to address it. In June, three of the nine people on the rate-setting committee voted for a half-point increase, but were shut out by the majority. Policymakers may now feel pressure from other central banks that are acting more aggressively.
JetBlue Airways and Spirit Airlines announced plans to merge a day after Spirit broke off merger talks with Frontier Airlines. A Trader Joe’s in Hadley, Mass., became the first of the company’s more than 500 stores to join the union. Instagram reversed some of its product changes after celebrities joined a user-driven backlash.