Mar 7, 2022
The Weekly Scan March 7, 2022
Find out what’s happening in the world of business this week
Welcome to the Weekly Scan. Here’s what we’re following for the week of March 7, 2022.
SOTU economics. President Biden’s annual State of the Union speech last week focused on key issues facing the U.S. and the world, including:
- The war in Ukraine. Biden emphasized the importance of democracy against autocracy, while also emphasizing that the U.S. will not send troops in to defend Ukraine. The president also said that the U.S. would continue to work with the North Atlantic Treaty Organization (NATO) to support Ukraine.
- Inflation at home. In an attempt to relate to viewers experiencing the effects of inflation, Biden cited the effects of inflation on his own family growing up. Biden also called upon American companies to manufacture more products at home, while hiring more U.S. workers. He also stressed the need to confirm his nominees for the Federal Reserve Board, which sets monetary policy, and spoke out against oil price gouging.
- Covid-19 protocols. In contrast to last year’s speech, members of Congress didn’t wear masks, and neither did Vice President Kamala Harris or Speaker of the House Nancy Pelosi. Biden said he expects the country to move, “safely back to a normal routine,” including the return to work, and easing of mask mandates.
- The takeaway: The president touched on these three points, as well as others, that could affect the economy. While Biden reportedly can’t do much to move inflation, he emphasized that recovery from the pandemic could ease inflation. Biden also discussed how the war between Russia and Ukraine could put further pressure on the economy. One such effect could be higher gas prices, which are already on the rise. Currently, the inflation rate is 7.5% for the year ending January 2022, as measured by the Consumer Price Index.
A sinking feeling. A cargo ship carrying vehicles from Germany to the U.S. sank in the mid-Atlantic last week, after being on fire for almost two weeks. The 200-meter long ship, called the Felicity Ace, sank 400 kilometers off the coast of Portugal’s Azores Islands while it was being towed. When the fire started the ship’s 22 crew members were airlifted to safety. While the origin of the fire has not yet been confirmed, there has been speculation that lithium batteries in electric vehicles are to blame. The Felicity Ace was carrying both regular cars and electric ones. The total number of vehicles on board the ship is unknown, but the craft can carry up to 4,000 cars.
- The takeaway: The car brands onboard the Felicity Ace are also currently unknown. However, Porsche dealers in the U.S. were reportedly contacting customers regarding their orders. Another concern is how the sinking might pollute the ocean. The Felicity Ace was carrying 2,000 metric tons of oil and 2,000 metric tons of fuel. Portuguese authorities have said they will monitor the scene for pollution. The sinking comes almost a year after a cargo ship known as the Ever Given blocked traffic through the Suez Canal for roughly a week. It also comes amid record shortages of automobiles in the U.S., caused by supply chain interruptions and a scarcity of semiconductors.
Keeping score. Credit reporting bureau Equifax will now record “pay-in-four” installment loans from Buy Now Pay Later (BNPL) services in credit reports. Equifax’s decision to include BNPL loans in consumer credit files is part of a move by the three big credit bureaus in the U.S.—Equifax, TransUnion, and Experian—to give lenders more transparency into a borrower’s debt history. Including BNPL payments may also help borrowers build credit history through new lending products. BNPL loans allow people to spread out purchases over a period of time, such as four bi-weekly payments, rather than all at once. Shoppers are reportedly drawn to using BNPL because of convenience, low or no-interest payments plans, and the uncertain credit implications.
- The takeaway: The decision to record BNPL transactions on credit reports could be a reaction to the increasing popularity of that payment option. BNPL transactions were reportedly on track to reach a total of $55 billion in 2021, and big retailers like Amazon, Sephora, and Priceline have started partnering with BNPL providers to offer payment plans at checkout. Credit reporting on BNPL can help or hurt your credit score. Failing to make your payments on time might not lead to fees and interest charges, but it could make your credit score fall.
On Target. For the fourth quarter ending January 29, 2022, Target reported 9% sales growth, and said that it expects growth to continue. Adjusted earnings per share for the quarter were $3.19, versus the $2.86 per share that was expected. Revenue came slightly under the projected $31.39 billion at $31 billion. Net income grew 12% to $1.54 billion. Shares of Target increased 10% following the earnings report.
- The Takeaway: Target, like many other big retailers, has benefited from the Covid-19 pandemic, as more people have spent money on consumer staples. The company’s annual revenue has surged 36% to $106 billion since the pandemic began in March, 2020. Consumers have less spending money coming in from stimulus, but Target said that they expect spending to continue. Target’s in-store and online traffic increased 8.1%, while the average transaction amount ticked up 1%. Target’s CEO Brian Cornell said that purchases are starting to reflect a changing attitude, with more customers spending on items like swimsuits and suitcases.
Here’s what we covered last week in the Scan:
- Markets tumbled as Russia invaded Ukraine, and Western and Asian nations enacted economic sanctions against Russia for its unprovoked attack.
- Sanofi is seeking approval for a new Covid-19 vaccine that it says is 100% effective against severe Covid-19.
- Starbucks employees may be one step closer to unionizing, after the National Labor RelatIons Board (NLRB) ruled that workers at single stores may organize.
- The number of people who socked away $1 million or more in IRA and 401(k) retirement saving plans reached a record high in the fourth quarter of 2021.