May 2, 2022
The Weekly Scan May 2, 2022
By Stash Team
Welcome to the Weekly Scan. Here’s what we’re following for the week of May 2, 2022.
Honey, I shrunk the GDP. U.S. gross domestic product (GDP) decreased 0.4%—or 1.4% annualized—in the first quarter of 2022, the sharpest drop since the beginning of the pandemic. The GDP has increased since the third quarter of 2020. Slowing inventory growth could be one contributor to the GDP slump. To prepare for supply chain snags during the holiday season, companies bulked up their inventories in the fourth quarter of 2021. So now those companies are still relying on that inventory, making restocking less pressing. A trade deficit is another reason for the falling GDP. Imports into the U.S. remain high, but exports to other countries are falling as many importing economies struggle to grow.
- The takeaway: Despite the shrinking GDP, consumer spending reportedly remains strong, increasing 0.7% in the first quarter of 2022, even as prices for food and gas increased. The GDP data includes inflation, which is at its highest level in decades. Stripping out inflation, the economy actually grew 1.6% in the first quarter. Still, inflation is a pressing issue for consumers, with a record number saying that it’s the most significant household financial problem they face, according to a Gallup poll.
Biden’s graduation present? President Biden is reportedly considering large-scale forgiveness of federal student loan debt. While the president has yet to outline a plan, he reportedly signaled to House Democrats that he might use an executive action to wipe out $10,000 in student loan debt per borrower. Biden is also looking into yet again extending the date that federal student loan payments are set to resume, which is currently scheduled for August 31, 2022. Student loan repayments have been on hold since the beginning of the pandemic.
- The takeaway: Widespread student loan forgiveness would likely reach an impasse in Congress, but President Biden could use his executive authority to sign forgiveness into action. Biden has reportedly said that he’s wary of timing so as not to contribute to already high inflation. Canceling all student loan debt could reportedly add up to 0.5% to inflation in the year following canceled repayments, according to a recent federal report. The Biden administration has already canceled $17 billion in student debt, more than any other president. His administration recently made it easier for low-income borrowers to apply for student debt forgiveness through income-based repayment plans. In 2021, the administration also ushered in several student forgiveness plans, including $500 million in student loan forgiveness for former students of ITT Technical Institute, a private chain of colleges that was shut down in 2016 for misrepresentation.
Minty fresh regulation. The Food and Drug Administration (FDA) released a long-expected plan to ban the sale of menthol cigarettes and flavored cigars. The agency reportedly hopes the order will prevent up to 650,000 smoking deaths over 40 years, primarily among Black and younger smokers. Smoking contributes to illnesses like heart disease, lung cancer, and stroke. More than a third of the cigarettes sold in the U.S. are menthol. Approximately 85% of Black smokers smoke menthols. Flavored cigarettes reportedly make it easier to get hooked on smoking. The proposal is expected to be finalized next year, and cigarette makers will have a year to phase out the banned products
- The takeaway: Altria, one of the largest tobacco companies in the world, said it opposed the proposed regulation, suggesting the ban could create an illegal market for menthols. Altria has also come under fire for its 35% stake in e-cigarette company Juul, which makes e-cigarettes and popularized flavored nicotine cartridges. In 2018, Altria invested $12.8 billion in Juul. Criticism of the company ramped up in 2019, following a series of deaths and illnesses reportedly related to e-cigarettes. And in 2020, the FDA sent Juul a warning letter, saying it may have violated the law by advertising its products as a safer alternative to cigarettes, without approval from the FDA.
Keep on truckin’. Ford has started to roll out its electric F-150 Lightning pick-up truck. The carmaker says it has had strong demand with 200,000 pre-orders for the electric truck. Ford’s non-electric F-150 has been the best-selling car in the U.S. for nearly 50 years. Ford faces some pressure to get the current electric truck release right . In 2019 Ford’s best-selling Explorer SUV faced multiple recalls that cost the company billions of dollars and led to the removal of two Ford executives.
- The takeaway: With the release of the F-150 Lightning, Ford has beaten competitors Rivian and Tesla to the market with an electric truck. “This vehicle will bring electric vehicles, particularly electric trucks, to everybody,” said Ford’s executive chairman Bill Ford in a press statement. The release of the electric truck could also help car companies gauge broader interest and willingness to switch to electric-powered vehicles from gas-powered ones.
Other stories we’re following:
Ruble trouble. Russia has halted gas supplies to Bulgaria and Poland, reportedly because the countries haven’t been paying in rubles. Payments for gas are typically made in euros or dollars. By demanding payment in rubles, Russia is reportedly attempting to soften the blow of economic sanctions imposed by Western nations for its ongoing war in Ukraine.
Here’s what we covered last week in the Scan:
- Netflix experienced its biggest loss of subscribers in more than a decade.
- A federal judge in Florida struck down the national mandate that has made it a requirement for passengers to wear masks on airplanes, trains, taxis and ride-share vehicles, and in transit hubs.
- Lululemon is rolling out free and paid subscription services that give customers access to product drops, in-person events, and workout content.
- Just Eat Takeaway, parent company of Grubhub, is considering selling the food delivery service due to slumping sales.