Perhaps concerned that rival technology giants were enjoying the bruising Meta has endured as critics pile on about its products’ pernicious effects on minors, Zuck & Co. fired back. (Okay, parents were caught in the crossfire, but that’s 2023 for you.)
Meta argued in a blog post on Wednesday that the legal onus for keeping children off apps like its own platforms should fall to two parties other than itself: parents, and the tech companies that operate app stores, i.e. Google and Apple. Its timing could not be coincidental — Google (and Apple by extension) is having its app store policies torn apart by the Department of Justice. There’s never a bad time for salt in old wounds.
Morning Brief
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American consumers can’t stop shopping.
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Ukraine gets insured for war.
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Is F1 already spinning its tires?
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Indicators
US Retail Sales Dip in October, But It Could’ve Been Worse
The mighty American shopper barely stumbled, let alone dropped.
According to new data from the US Commerce Department released Wednesday, retail sales dipped slightly month-over-month in October, falling just 0.1%. While that marked the first decline since March — after a carefree summer of splurging on beach vacations and Taylor Swift tickets — it still beat most analyst expectations.
Cleared For a Soft Landing
The relatively rosy results from October (most analysts were expecting a sales decline of 0.3%) followed an upward revision of data in September to a 0.9% increase from 0.7%, which had already counted as a big beat over consensus estimates. All of which is to say: American consumers are proving far more resilient (or far more in love with a little retail therapy) than most doom-and-gloom projections expected. If nothing else, it’s confirmation that the resumption of student loan payments has yet to dent spending.
A few key forces did drag down October sales: a decrease in gas prices of about 5% — according to Tuesday’s similarly sunny inflation report — played a major role, as did a slowdown in spending on big-ticket items like furniture and cars. The so-called retail control group, which counts all sales excluding gas station sales, cars, and building materials, rose 0.2%.
That coincides with relative optimism in the consumer goods and retail sectors:
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On Wednesday, Target posted a third-quarter profit that beat analyst expectations. And while comparable-store sales slipped roughly 5%, the dip stemmed from big-ticket discretionary goods, and was nearly offset by strong sales of so-called frequency goods, such as beauty products.
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Overall, The National Retail Federation projects holiday season spending, or sales from the start of November through New Years, to grow as much as 4% year-over-year – a slowdown compared to the past two holiday seasons but better-than-expected growth.
The Grateful Fed: Economists closely watch the behavior of the American consumer, which drives the broader economy. The slight downtick in spending in October is almost exactly what the Federal Reserve has been looking for — essentially showing that spending can remain strong while inflation cools, all without totally undercutting the still-strong labor market. “The summer spending surge is fading,” Kieran Clancy, senior US economist at Pantheon Economics, told the Financial Times. “But households’ balance sheets remain in decent shape, so we see no reason to expect a sudden collapse in spending anytime soon.” Did Jerome Powell read American consumers better than Wall Street?
– Brian Boyle
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Geopolitics
Ukrainian Grain Shipments Are Insurable Again
Bad news for Russia, good news for your weekly pasta shop.
The Ukrainian government struck a deal with major insurers on Wednesday to provide affordable insurance to ships carrying grain out of the country. Up until this summer, Russia had agreed to allow shipments to sail out of Ukraine unmolested, but it severed that agreement, making insurers sweat bullets at the idea of covering shipping routes that were being actively targeted.
Grain Drain
Ukraine is a major global exporter of crops including sunflower oil, wheat, and corn. According to Bloomberg, Ukraine was the world’s third-largest corn exporter last year behind Brazil and the US — and that’s despite the logistical nuisances that come with fighting off a Russian invasion. In July 2022, after five months of food prices spiking globally, Turkey and the UN brokered an agreement between Ukraine and Russia to let cargo ships sail down a specific path in the Black Sea without fear of Russian attack.
This past July, however, Russia declared that agreement over and launched a series of strikes against key Ukrainian ports. This meant Ukraine’s maximum export capacity dipped by up to 50%, and insurance became more expensive. Insurance rates reportedly rose sharply again just this month, after Russia hit a civilian vessel near Odessa with a missile. With the new deal, Ukraine hopes to bring those prices down:
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Ukraine’s Deputy Prime Minister Yulia Svyridenko told theFinancial Times the new alliance between Ukraine’s government and insurers should bring the cost of grain insurance down by 2.5%.
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The insurers aren’t assuming all the risk in the way they normally would — Ukraine’s government is going to cover an undisclosed amount.
We Will Fight Them on the Premiums: Ukraine is also reaching out to allied countries for help in bringing down its insurance costs — or even just to get any insurance at all. Ukraine announced Tuesday it had struck a deal with the UK to get insurance discounts for Black Sea exports. It takes a real buddy to go to bat for you against the forces of insurance black-box premium calculations.
– Isobel Asher Hamilton
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A Bad Financial Advisor’s Worst Nightmare
Your financial advisor wants to put your money in a position to grow, but how effective are they at actually building your nest egg?
There aren’t a lot of people willing to drive or fly to Las Vegas to watch Formula 1 racers drive to survive.
The international racing circuit is holding a big three-day event in Sin City starting Thursday, but so far measly ticket sales, low hotel room occupancy, and an overall lack of buzz has insiders worried that the once-ascendent sport is suddenly running out of gas.
Days of Blunder
F1 got a major boost in 2019, when Netflix debuted the docu-series “Drive to Survive,” giving new fans an inside look at the sport’s behind-the-scenes (and behind-the-wheel) high drama. F1 execs quickly seized on the sudden popularity, turning US events into bona fide sports spectacles. Last year’s Miami Grand Prix, for example, saw ticket prices soar as high as $32,000 on the secondary market, and provided an estimated economic boost of $400 million to the metropolitan area. Not bad, considering Super Bowl LIV generated around $572 million when Miami hosted the game nearly four years ago.
F1 quickly filled its 2023 schedule with three more events in the US, more than any other host nation, with races held in Miami in May and in Austin last month. But the Vegas double-down may just end up going bust:
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Face-value tickets were still available on Wednesday for all three days of the event, despite vows from Las Vegas Grand Prix CEO Renee Wilm that it would sell out. Resale tickets are going for as low as $119 for a single-day pass, less than half of where they stood a month ago, according to TickPick.
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Meanwhile, hotels on the Strip, where the race is taking place, have returned to selling rooms at average weekend rates, after blocking off rooms to upsell in anticipation of the event, Bloomberg reports.
Tailspin: “When this event was first announced it had Super Bowl-level expectations in terms of demand,” TickPick co-CEO Brett Goldberg told Bloomberg. “But it seems as though the concept of a race on the Strip was more appealing than the actual event.” In other words, F1’s US expansion may have been too much, too soon, too fast and too furious.
– Brian Boyle
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Extra Upside
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Postage due: The US Post Office didn’t quite make its breakeven goal.
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