But on another front – supply chain backlogs – there are welcome signs of relief.
What’s happening: A supply chain stress tracker compiled by UBS has improved significantly after peaking in October, the bank said this week. He found that a quarter of the bottleneck pressure was reversed.
Its economists point to a number of data points. More air cargo capacity opens up as passengers return to the skies, reducing costs. Spending in the United States is beginning to shift from goods to services. And outside of China, countries in Asia are moving away from “zero-Covid” policies, which have put in place tough restrictions that have affected trade in order to limit infections.
“We attribute the strong improvement in global delivery time indices largely to the shift away from ‘zero-Covid’ in Asia,” UBS said. “The jump in production as restrictions were lifted led to greater availability of goods and an immediate reduction in backlogs.”
Congestion at the ports of Los Angeles and Long Beach is also decreasing. The number of ships awaiting unloading has halved since early January, according to UBS.
That said: the bank’s economists admit that there is “a lot of work to be done”. Obtaining shipping containers remains extremely difficult and shipping costs are still high, according to data from Freightos.
Why it matters: If the supply chain picture improves significantly, it will have major ramifications for policymakers as they try to tame inflation.
One of the reasons the Federal Reserve spent much of the last year calling inflation “transitional” was because its members believed supply chains would begin to normalize quickly, helping to drive down the cost of goods.
That hasn’t happened and inflation has continued to climb, raising the odds that the Fed will need to take a more aggressive approach to interest rate hikes that are expected to begin next month.
“Participants generally expected inflation to moderate over the year as supply and demand imbalances ease and monetary policy easing is removed,” the Fed said.
But he noted that the risks to the inflation outlook were “weighted upside” and highlighted the role of supply chains in the puzzle. China’s zero-tolerance policy for Covid-19 could be particularly problematic, policymakers said.
Google’s privacy change could deal another blow to Facebook
Google plans to develop new privacy measures that remove the ability to track users across apps on Android devices — a move that could shake up digital advertising companies like Facebook that have already been unsettled by app tracking changes introduced by Apple.
These solutions will work without the individual identifiers that allow developers to track user activity across various mobile apps and create advertisements targeted to a user’s behavior and interests. Google said it was also exploring technology that would reduce the potential for a user’s data to be collected without their knowledge.
The announcement — which comes as Google and other Big Tech companies face increasing regulatory scrutiny over privacy concerns and other issues — was light on details. But that’s been enough to piss off some investors in companies that rely on targeted digital advertising.
The change – which gives users the ability to opt out of having apps track their behavior – contributed to Meta’s huge market wipeout earlier this month. The company said Apple’s tracking change is expected to impact its bottom line by $10 billion this year.
Wall Street is no fan of Paramount+
“An iconic global company deserves an iconic global name,” CEO Bob Bakish and Shari Redstone, non-executive chair of the company’s board, told employees in an internal memo on Tuesday. “One that reflects the power of our content; one that reflects our role as stewards of a rich legacy and as leaders of the future of entertainment.”
But Wall Street was unimpressed, noting that the company’s heightened streaming ambitions make a long-discussed sale of the company less likely. Shares of ViacomCBS plunged nearly 18% on Wednesday.
“Our earlier bullish thesis was largely based on [Viacom] be an attractive potential target amid a wave of industry consolidation,” said analysts at Bank of America, who downgraded the company’s stock. “Our view on this has not changed, but it does not appear that a potential sale is imminent.
Paramount wants to hit 100 million subscribers by 2024 and plans to spend big on content to get there. But according to Bank of America, “swinging for the fences increases risk” and will eat into short-term profits.
Also today: U.S. housing starts and building permits for January arrive at 8:30 a.m. ET, along with early jobless claims for the past week.