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  • Monday's Scoop: Anxious🌤️

Monday's Scoop: Anxious🌤️

Toyota's fraudulent safety tests & Moderna's cancer cure

 
Hey friend - hope you had a great weekend enjoying the start of summer!
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Here’s what you need to know today to inform your work, spending, and investments…

 

🌎 Big picture

  1. Americans have cut back spending as real incomes shrink.

  2. Inflation isn’t getting worse, but it’s not getting much better.

  3. The manufacturing sector continues to struggle.

How are you feeling about the economy?

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 💼 Work trends

Unemployment Rate: 3.9%
Still near the lowest rate in 50+ years

The manufacturing sector still hasn’t recovered from over a year of slumping business activity. After signaling a brief revival in March, the Institute for Supply Management reported the 2nd consecutive month of contracting business activity in the manufacturing sector. The sector has contracted for 18 of the last 19 months, the worst stretch in over two decades. New product orders fell in May by the most in two years. Manufacturing accounts for 10% of the US economy and has suffered as consumers cut back on spending on goods.

 

 👜 Cost of living trends

Inflation Rate: +3.4% (YoY), +0.3% (MoM)
Policymakers aim for 2% YoY inflation (April CPI)

Americans can’t save as much amid inflated living costs and weak income growth. The Commerce Department reported real disposable income, adjusted for inflation, declined in April. Despite above-average economic and investment growth, our real after-tax income has only grown 1% over the past twelve months. Everyday expenses continue to demand a more significant portion of that after-tax income. The personal savings rate, what we’re able to keep after tax and monthly expenses, fell again in April to the lowest level in 16 months. Americans can only save 3.6% of their disposable income, half of what they saved in January 2020.

People are spending less as the cost of living keeps rising. The Commerce Department reported personal consumption expenditures increased by only 0.2% in April. When considering inflation, spending declined by 0.1%. Higher prices on groceries and services have strained budgets, and wages aren’t keeping up.

Inflation is improving, but not by much. Policymakers’ preferred inflation gauge, the Personal Consumption Expenditures Price Index (PCE), rose 0.3% in April, or 0.2% when excluding volatile food and energy costs. The one-year change in the cost of living was only 2.7% over the past year, much closer to the normal levels policymakers have been trying to reach. Monthly inflation has held steady at around 0.3% for the past three months, far lower than the worst periods of the past few years but still well above pre-pandemic averages.

 

 🤓 Inside Scoop: What is the difference between the PCE and CPI?

Economists track inflation using both the PCE (Personal Consumption Expenditures) price index and the CPI (Consumer Price Index), but they differ in scope and method.

The PCE covers all goods and services consumed by households, adjusting for changes in consumer behavior, while CPI focuses on a fixed basket of goods and services. The PCE may often show lower inflation because it accounts for consumers switching to cheaper alternatives, like beef to chicken, as beef prices rise. The PCE also includes a broader scope of costs. For instance, while the CPI tracks only out-of-pocket medical expenses, the PCE tracks medical costs paid on consumers’ behalf. The weightings of the underlying categories also differ. The PCE has a smaller weight for shelter.

Investors pay the most attention to the CPI because it usually comes out a couple of weeks before the PCE. Policymakers at the Federal Reserve prefer the PCE, particularly the core PCE that strips out volatile food and energy prices.

 📈 Investment trends

The Market: ⬆️ +0.1%
S&P 500: 5,283.40
1Mo: +3% | 1Yr: +24% | 5Yr: +84%

The market kicked off the month without a clear direction as investors worried about more signs of a slowing economy. Consumers, the economy's engine, are increasingly struggling each day, and manufacturing isn't doing well either.

 

🏭 Companies worth watching

👍👎 APPROVAL RATINGS 

Act like a boardmember and judge how companies behave. Engaging helps build your financial confidence and hold corporations accountable. (+2pts)

Toyota

Testing Scandal

Toyota apologized for falsifying testing data on several vehicle models and suspended production on some models due to fraudulent collision certifications.

The automaker said the improper testing doesn't affect any vehicles on the road.

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Southwest

Anti-Abortion Activism

Southwest will challenge in federal court judge-mandated religious liberty training and an $800,000 award to a fired flight attendant with anti-abortion views.

The airline claims the employee breached workplace civility by harassing coworkers with hostile messages and graphic images.

Tell Southwest's CEO how you feel

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 💭 Broader perspectives… (+2pts)

Should employees have the right to criticize coworkers for their religious beliefs?

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Spotify

Price Hike

Spotify increased premium plan prices in the US by as much as 17% in an effort to boost profitability, saying it plans to use the extra funds to invest in product innovation.

The streaming giant launched a strategic overhaul last year to reduce staff and marketing costs, resulting in its first $1B gross profit.

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American Airlines

Union Standoff

American Airlines is preparing for a potential strike from its flight attendants after contract negotiations hit an impasse over critical economic terms and scheduling concessions.

Federal mediators may intervene, bringing the parties together for a final effort before the strike.

Tell American Airlines's CEO how you feel

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Moderna

Skin Cancer Success

Moderna and Merck's joint experimental skin cancer vaccine and therapy delivered a 96% patient survival rate after 2.5 years and moved closer to becoming a melanoma treatment.

The two drugmakers are working on applying the vaccine combination to other kinds of cancer.

Tell Moderna's CEO how you feel

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 🛠️ Recommended resources (+2 pts)


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