Daily Business Briefing
June 15, 2021, 9:00 a.m. ET
June 15, 2021, 9:00 a.m. ET
Retail sales fell slightly last month, the Commerce Department reported on Tuesday, as consumers spent less on goods and more on activities like travel, an industry that had been hobbled by the pandemic.
The 1.3 percent decline in May follows months of ups and downs in consumer spending, driven by the persistence of the coronavirus that had kept many people away from airports and restaurants. The data from April was revised to show an increase of 0.9 percent.
Monthly retail sales
But with a growing portion of the country’s population vaccinated and infection rates falling, Americans are venturing out and spending more on lodging and entertainment, rather than on the home improvement projects and grocery hoarding that characterized the earlier, more homebound months of the pandemic.
“Consumer spending growth is shifting from goods to services as the economy reopens,” said Gus Faucher, chief economist at PNC Financial Services Group.
Mr. Faucher had forecast that retail sales would rise less than 1 percent last month, with a large jump in restaurant spending being offset by a decline in auto sales brought on by a shortage of inventory. Vehicle production has been slowed by a lack of semiconductors, part of a global supply chain issue that is affecting a range of products like Starbucks coffee flavorings, furniture and lumber.
Retail sales have been a closely watched barometer of the economic recovery during the pandemic. While researchers developed vaccines and states tried to get the virus under control, the federal government has spent more than $1 trillion during the pandemic trying to ensure that Americans keep spending and to prevent stores and restaurants from closing.
The stimulus payments, by many measures, have paid off. Retail sales, which experienced a record drop at the start of the pandemic, have returned to prepandemic levels, though at times haltingly. Economists are now watching whether the end of the stimulus money — the last checks were sent out in mid March — will begin to test the recovery.
Michelle Meyer, U.S. economist at Bank of America, said last month’s retail sales, if anything, “understate consumer strength.” She tracked credit card spending during the Memorial Day holiday, which was the final weekend of May.
Consumers spent 24 percent more on restaurants and 16 percent more on lodging than they did during Memorial Day in 2019, according to Bank of America’s analysis.
Twenty-five states will halt some or all emergency unemployment benefits, with many Republican governors blaming the programs for a shortage of workers in many industries as businesses reopen.
The changes affect four programs:
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Federal Pandemic Unemployment Compensation, which provides eligible individuals with $300 a week on top of their regular benefits.
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Pandemic Emergency Unemployment Compensation, which extends benefits for workers who have exhausted their state allotment.
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Pandemic Unemployment Assistance, which covers freelancers, part-time hires, seasonal workers and others who do not normally qualify for state unemployment benefits.
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Mixed Earner Unemployment Compensation, which offers additional assistance for people who make their income by combining a salaried job with freelance gigs.
At a time when corporate leaders are increasingly expected to act as moral arbiters, the professional services giant PwC has spotted a business opportunity: teaching executives how to be more trustworthy.
On Tuesday, it unveiled a plan to focus the firm, which offers an array of accounting and consulting services, around the concept of trust. (It also announced a goal of investing $12 billion in recruiting, training and technology, with plans to add 100,000 new workers.)
It’s an offering aimed directly at corporate America’s need to account for more than just profits and shareholders.
Executives are now regularly under pressure to speak out on issues such as racial justice and the environment. And businesses are in the unusual position of being the most trusted institutions in society, more than governments, nonprofit groups and the media, according to the latest edition of a long-running survey by the public relations firm Edelman.
Those heightened expectations have created a new opportunity for PwC, said Tim Ryan, the firm’s U.S. chairman and senior partner. “The skill sets you need today to be a C-suite executive are fundamentally different from even five years ago,” he said in an interview. “No different than how technology defined the last 10 years, trust will define the next 10 years.”
As part of PwC’s overhaul, the firm will combine its accounting and tax services into a new division called, unsurprisingly, trust solutions.
PwC’s U.S. arm will also spend $300 million on new initiatives centered on the trust theme. The main one is the PwC Trust Leadership Institute, which will teach clients how to handle issues such as transparency, ethics, data security, corporate governance and politics and policy — without prescribing specific solutions.
Addressing broken trust is something that the Big Four accounting firms, including PwC, have experience with, given their legal run-ins over issues like international tax shelters and the improper mixing of auditing and consulting services.
To increase PwC’s commitment to investing in a more diverse work force and improving economic mobility, both topics that its leadership institute covers as essential to building trust, the company has committed $125 million to give 25,000 Black and Latino college students career coaching and mentoring. PwC aims to hire 10,000 of them over the next five years.
The seeds of the initiative were planted two years ago, Mr. Ryan said, when PwC began a strategic review, consulting with clients on new directions for the firm. By that point, Mr. Ryan had already been thinking about diversity and inclusion and reporting PwC’s progress on those issues.
Then the pandemic and social justice protests after the killing of George Floyd inspired the firm’s leadership to pursue what will become its new identity.
Mr. Ryan said corporate executives often learned softer skills on the job and needed help thinking through decisions in a way that maximized trust. That many executives are falling short is understandable, he added — but the onus is on them to make up for lost time.
“I don’t in any way view it as an indictment of current leadership,” Mr. Ryan said. “The world is changing.”
Britain and Australia have agreed “in principle”to a free-trade agreement, the British government announced on Tuesday, a deal that will eventually eliminate tariffs between the two countries.
It is Britain’s first major trade deal since it left the European Union and the agreement was reached in just under a year of negotiations.
Details of the agreement haven’t been published yet, but the government said it would include a cap on tariff-free imports for 15 years, a measure intended to appease British farmers concerned about a flood of beef and sheep imports from Australia. The deal will remove Australia’s 5 percent tariff on Scotch whisky exports. The agreement will also allow Britons under the age of 35 to travel and work in Australia more easily, the government said.
“It is a fundamentally liberalizing agreement,” Liz Truss, the secretary of state for international trade, said in a statement. “That removes tariffs on all British goods, opens new opportunities for our services providers and tech firms, and makes it easier for our people to travel and work together.”
The deal was finalized over dinner at Downing Street, the British prime minister’s residence, on Monday as Australia’s prime minister, Scott Morrison, is in Britain following the Group of 7 meetings.
The free-trade agreement has been entirely negotiated since Britain formally left the European Union in January 2020. Britain has signed scores of other trade agreements recently but these, such as the one with Japan, mostly replicated pre-Brexit market access.
The Australia deal is part of Britain’s broader trade ambitions, including joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the trade pact signed by 11 countries after President Donald J. Trump pulled the United States out of the Trans-Pacific Partnership. Australia is a founding member that agreement, and Britain’s process for joining began in early June.
Since Brexit, Britain has been eager to prove that it’s an outward-looking nation, actively embodying its “Global Britain” slogan. But the urgency with which it is looking to write new trade agreements has recently come under attack by food and agricultural groups, who fear that the government will allow in products with lower production standards.
Scott Walker, the chief executive of the National Farmers Union Scotland, said the industry had been told there would be safeguards in the deal but “there’s not been much detail on what they will mean in practice.”
One of the main concerns for farmers in Scotland is that Australians use a cattle farming system that allows for larger-scale production, with more cattle in a smaller space than is permissible in Britain, Mr. Walker said. This could undercut Scottish beef farmers. He said that the Australian trade deal alone was not the biggest problem, but the fear that trade negotiators in New Zealand and the United States would want to replicate this agreement next.
“We see this as just the start of what could be huge difficulties ahead for the industry in the United Kingdom,” Mr. Walker said.
In Australia, the deal has been welcomed by the meat and wine industries, two of the industries expected to gain the most from the agreement.
“It is just the tonic the Australian wine sector has needed as it moves quickly to reposition itself after the market into China was closed by the imposition of prohibitive tariffs,” Tony Battaglene, the chief executive of Australian Grape and Wine, the country’s national association for wine producers, said.
Patrick Hutchinson, the chief executive of the Australian Meat Industry Council, said, “This is a great opportunity for the Australian red meat industry.”
Chanel, the French fashion house known for its No. 5 perfumes and quilted leather handbags, spent record amounts maintaining its stores, supply chain, advertising and fashion shows in 2020, despite the strain of pandemic lockdowns and sales volatility in one of the most tumultuous years in retail history.
The company said Tuesday that revenue for 2020 was $10.1 billion, down 18 percent compared with the previous year. Operating profit fell 41.4 percent in the same period, to just over $2 billion. But unlike some industry rivals that were forced to slash costs last year, Chanel spent $1.36 billion on “brand support activities” like advertising and runway shows, and $1.12 billion on capital expenditure investments such as the acquisition and renovation of its boutiques network, new offices and the ecosystem of small artisanal workshops that produce its luxury wares.
“One of the luxuries of being a privately owned luxury company is that we could prioritize protecting our employees and vulnerable supply chain partners even if we knew it would have a detrimental effect on short-term profitability and cash flow,” said Chanel’s chief financial officer, Philippe Blondiaux. “It was the most challenging year ever for this company. But for us, the most important thing was to defend our values and way of doing business.”
At a time when the global fashion industry has come under more scrutiny than ever for its environmental practices, Chanel said it had issued 600 million euros, or $727 million, in sustainability linked bonds, which are an increasingly popular way for companies to raise money for environmental or social projects without spending restrictions, but with penalties paid to investors if they miss specific targets.
Mr. Blondiaux said the September issuance was the first of its kind by a luxury brand, and underscored the brand’s commitment to its climate goals. A week ago, Chanel committed $25 million to a new climate adaptation fund that aims to invest in sustainable agriculture practices, protect forests and support small-scale farmers in developing countries.
At a time of heightened competition in high-end retail and persistent rumors that Chanel could be a takeover target, the storied French fashion house — one of the last large privately owned brands — began publishing results in 2018 to fend off approaches.
“Despite the difficulties of 2020, we are in a great place to continue building the Chanel business and the long-term valued upheld by the brand,” Mr. Blondiaux said.
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There were 213 audience-less episodes of “The Late Show With Stephen Colbert,” broadcasts that came with off-camera chuckles from his executive producer, Chris Licht, and his wife, Evie, in place of big laughs from a packed hall. The usually buttoned-up host ditched his suit and grew out his hair. Mr. Colbert was back in his element on Monday, connecting with a capacity crowd 460 days after the coronavirus pandemic had emptied the theater where he has worked since 2015. The return to the stage of late night’s highest-rated host was one of the clearest signs yet, in television and in New York cultural life, that things were starting to get back to normal.
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Washington Prime Group, which oversees 102 shopping centers in the United States, said on Sunday that it had filed for Chapter 11 bankruptcy after its business took a hit during the pandemic. The company said foot traffic at its properties had been depressed and that it had been “forced to provide certain tenants with rent relief through a combination of rent deferrals and abatements” to stave off bankruptcies and lease abandonments last year. The company said in a statement that it expects business to continue as usual throughout the restructuring.
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