The Economist - USA (2022-06-11)

TheEconomistJune11th 2022 9
The world this week Business

TheWorldBankslashedits
forecast of global gdpgrowth
this year, to 2.9%. It warned
that the risk of stagflation was
considerable and that the
world should prepare for
“several years of above­average
inflation and below­average
growth”. Real income per
person in 2023 is expected to
remain below pre­pandemic
levels in 40% of developing
economies. The oecdalso cut
its forecast for growth, but
played down the risk of stag­
flation; it expects inflation to
start easing later this year. 

Appearing before a Senate
committee, Janet Yellen
acknowledged that America’s
high level of inflationwas
“unacceptable”, and asked
Congress to “mitigate” rising
household costs through a
variety of measures, such as
lowering prescription­drug
prices. The American treasury
secretary earlier denied claims
in a new book that she had told
Joe Biden to reduce the size of
his $1.9trn stimulus package
last year because it would
stoke inflation. 

Targetissued a profit warning
because of a build­up in its
inventory, which it will clear
by heavily discounting prices
on a range of goods. Like other
retailers, the department­store
chain is adapting to a change
in consumer spending towards
household essentials, such as
food and fuel, and away from
frivolous products.

In Britain retail salesfell at an
annual rate of 1.1% in May, the
biggest drop since January
2021, when the country was in
lockdown. The four­day Plati-
num Jubileeweekend provid­
ed a small fillip. Retail footfall

wasupby6.9%versusthe

averageforMay.Spendingin

pubsroseby74%,yearonyear.

Currencyfluctuations

TheTurkishlirafellsharply

again,afterRecepTayyipErdo­

gan,Turkey’spresident,reiter­

atedhispledgetocontinue

cuttinginterestrates,despite

annualinflationrunningat

73.5%.MrErdoganhaspressed

thenominallyindependent

central bank to reduce rates,

which he hopes will boost

growth. But the weak lira is

pushing up the cost of im­

ports, especially for food and

energy. Mr Erdogan has called

interest rates “the mother of

evils”. This week he said only

“those living a charmed exis­

tence” benefit from them. 

Australia’scentral bank made

a more assertive push to tame

inflation by raising its main

interest rate by half a percent­

age point, to 0.85%. That fol­

lows a smaller increase in May.

India’scentral bank also lifted

its benchmark rate by half a

point, to 4.9%, the biggest rise

in over a decade. 

Share prices in Chinese tech

companiescontinued their

winning streak, amid hopes

that the government’s crack­

down on the industry is near­

inganend.DidiGlobal’s

depressedstocksurgedbyas

muchas60%,afterreports

thatanalmostyear­longban

ondownloadingtheride­

hailinggiant’sappwouldsoon

belifted.

AntGroup, anaffiliateof

Alibabaandalsoa targetofthe

Chinesegovernment’sire,this

weekopeneda digitalwhole­

salebank,whichit hasbased

inSingapore.anextBankwill

provide financial services to

small­ and medium­sized

enterprises. 

Howard Schultz said he would

step down as chief executive of

Starbucksearly next year. Mr

Schultz took up the job on an

interim basis in April, his third

stint leading the coffee chain.

Like Amazon, Starbucks is

fighting a grassroots effort to

unionise its employees. It has

decided to close one of the

outlets that recently plumped

to join a union, apparently

over a faulty grease trap. 

Elon Musksent a formal com­

plaint to Twitterstating that it

was in “clear material breach”

of their $44bn buy­out agree­

ment by “actively resisting” his

request for the number of fake

and spam accounts on the

platform. Twitter said that if

necessary it would enforce the

transaction,thoughit has

reportedlyagreedtogiveMr

Muskaccesstodataonthe

swarmsoftweetsit hostseach

day.ItisthoughtMrMuskis

lookingfora wayout.Since

strikingthedealTwitterhas

lostabouta fifthofitsstock­

marketvalue.

Meanwhile,Tesla’sshareprice

plungedafterreportsthatMr

Muskwasthinkingofcutting

thecarmaker’sworkforceby

10% because he has a “super

bad feeling” about the econ­

omy. Mr Musk recently told

Tesla’s staff that they could no

longer work remotely and were

expected in the office at least

40 hours a week. 

ThursdayisthenewFriday

Tesla employees wanting to

spend less time in the office

could benefit from the results

of the world’s biggest experi­

ment of a four-day week,

which has just started in

Britain. The six­month

programme involves 70 firms

and 3,300 staff, who will

receive full pay but work 80%

of their time. The experiment

is being run by a think­tank

and academics to measure

whether and how a reduced

work week affects productiv­

ity, and if people can work

“shorter and smarter”. 

GDP forecasts*

2022, % change on a year earlier

Source: World Bank *Made in June 2

-30-40-50 -10-20 0 10

Ukraine

Russia

Belarus

Brazil

South Africa

World

China

India