New York (CNN) The strength of the US economy rests on the shoulders of consumers. If people are spending money, businesses keep hiring employees…and those employees keep spending money. Anyway, in theory.
Consumer spending accounts for about 70% of the gross domestic product of America, the broadest measure of the economy, so it’s nearly impossible to get into a recession when spending is on the rise.
That’s why Wall Street is already worried over Friday’s retail sales report.
Economists expect March retail sales to fall 0.4% from the previous month. But Goldman Sachs and Bank of America analysts say. core Sales excluding motor vehicles, petrol and building materials slowed by about 1%. Retail sales in February also fell 0.4% from January.
The March data came days after Federal Reserve Board minutes revealed that central bank economists believe the recent banking crisis will push the U.S. into recession this year. rice field. This is the first time Fed economists have predicted a recession in his current year-long rate hike cycle.
Bank of America credit card data shows spending has cooled. After a solid start to the year, the bank’s credit and debit card spending slowed to 0.1% year-on-year growth in March, analysts said. This is the slowest pace since February 2021.
A thorn in the side: Still, American consumers are still doing relatively well, according to BofA analysts.
Analysts said there was some concern that stress in the banking sector would lead to lower lending and slower spending, but the possible shortcomings had little to do with the regional banking crisis.
Instead, they attribute some of March’s weak data to missing tax returns.
“The slowdown in federal tax refunds in March contributed to the weakness in spending, as reported by the Internal Revenue Service (IRS),” they wrote. issued, which is about $25 billion less than in March 2022. That’s about 1.5% of monthly disposable income, according to BofA analysts.
Look at the numbers: US bank accounts are still fairly stable, but are starting to decline. It bothers me quite a bit.
Consumers added a total of $398 billion in new debt in the fourth quarter of 2022, according to WalletHub research. This is his fourth highest cumulative amount for that period in the last 20 years and nearly 4.5 times higher than he was a year ago.
Bankruptcies followed. In the first two months of 2023, US corporate bankruptcy filings hit his 12-year high, with 183 companies filing for Chapter 11, according to data from S&P Global Market Intelligence. .
Party City, Avaya, mattress maker Serta Simmons, and pet store retailer Independent Pet Partners have filed in recent months.
Chains such as Bed Bath & Beyond, Rite Aid and Joann Fabric are also on the brink of bankruptcy, according to credit rating agencies. These companies have struggled for years and are the most vulnerable to difficult economic times.
What’s next: March retail sales are scheduled for Friday at 8:30 AM ET.
The AI war continues
Big tech companies are investing quickly and heavily in artificial intelligence to stay ahead of their competitors.
Amazon, in particular, wants investors to know that it is not left behind in the latest AI arms race reported by CNN’s Catherine Thorbecke.
In a letter to shareholders on Thursday, Amazon CEO Andy Jassy said the company is “investing heavily” in the technology behind chatbots like ChatGPT.
“We have been working on ourselves [large language models] We believe they will transform and improve virtually every customer experience for the foreseeable future, and we will continue to invest heavily in these models across the consumer, merchant, brand and creator experience,” said Jassy, a shareholder. I am writing in a letter to
Since ChatGPT opened to the public in late November, Google, Facebook’s parent company Meta, and Microsoft have all turned to generative AI technology that can create compelling essays, stories, and visuals in response to user prompts. Talk about growing interest.
Jassy said Amazon’s goal is to provide cheaper machine learning chips so that smaller companies can train and run their own AI.
“Most companies want to use these large language models, but the really good ones spend billions of dollars and take years to train, so most companies want to do it. No,” Jassy said in an interview with CNBC Thursday morning.
“What they want to do is start with a base model that is already big and good and they want to be able to customize it for their own purposes,” Jassy told CNBC.
Manhattan rents are incredibly expensive
Rents across the country are starting to fall, but not in New York City.
CNN’s Anna Bahney reports that renting a Manhattan apartment was more expensive than ever in March.
The median cost of renting an apartment in Manhattan was $4,175 in March. That’s up 12.8% from a year ago and up 2% from February, according to reports from brokerage firm Douglas Elliman and appraisal and consultancy firm Miller Samuel.
The median rent for a one-bedroom apartment was $4,150, up 9.6% from last year, and the median rent for a two-bedroom apartment was $5,680, up 18.3% from a year ago. The median rent for a studio apartment is $3,190, up 16% from last year.
So the average two-bedroom rental in Manhattan costs $68,160 a year. And that’s before basic utility bills like internet, heat, and electricity. In 2022, the national average salary was about $60,575.
The main reason Manhattan’s March rents remained strong was that mortgage rates doubled from a year ago, making it harder for many buyers to buy a home. Additionally, the collapse of some banks in March may have created uncertainty, causing some people to consider buying rental properties instead, pushing prices higher, Miller said. .
New leases in March increased 15.4% from last year, and leasing activity increased 20.5% from February, according to the report.
