Latest Economy News & Stories

Savers facing ‘summertime of sadness’ can still build financial safety net

Savers have been warned that they face a “summertime of sadness”, with banks and building societies continuing to slash the interest rates they pay on accounts.

The financial information firm Moneyfacts said that since the Bank of England cut the base rate to only 0.1% in March, the average rate on an easy access account had halved to a record low of 0.3%. Meanwhile, returns on one-year fixed-rate savings bonds were on the verge of a new low, at an average of 0.92%.

However, it said the full fallout from the Bank cut may not have been felt and more cuts could be on the way.

Don’t look away: how to face your finances in lockdown – whether you are furloughed, unemployed or saving

The reductions come at a time when some households are finding they have spare money to put into savings and want to build up a financial safety net.

Research by Aviva found that while a quarter of adults felt they were unable to save, many households could have extra money to put aside as a result of a drop in spending during the coronavirus crisis. It said the typical UK household could have cut their outgoings by £171 a week.

Anna Bowes, a co-founder of the Savings Champion website, said although savers may feel things are “hopeless and there’s nothing they can do”, it could still be worth shopping around.

Some high street banks have cut rates to as little as 0.01% and there are better deals to be found. Among the deals savers could consider are:

• NS&I’s income bonds. This is an easy access account that pays out monthly interest – it is currently still paying 1.15% before tax. The minimum investment is £500 and you can hold up to £1m. Your money is backed by the Treasury. The rate is not fixed.

• Variable rates are still vulnerable to further cuts, so some may prefer to tie up at least some of their money in fixed-rate bonds, Bowes says. She says the best one-year account is with Ikano Bank, paying 1.21%. That needs a minimum deposit of £1,000. Up to £85,000 in savings is currently protected under the Swedish deposit protection scheme (from 1 January 2021 people’s money will be protected up to the same level by the official UK deposit protection scheme).

If you would prefer to tie your money up for longer, the rates are a little better. Ikano Bank is also paying the best rate over two years: 1.31%.

• Among the best-paying easy access accounts highlighted by the Savers Friend website is Family building society’s market tracker saver, which pays a rate that is the average of the top 20 no-notice accounts available. The variable rate is currently 1.13%, although the society warns that it will fall below 1% in July. The minimum deposit is £500.

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Simon Property Group sues Gap over $66M in unpaid rent

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Retailers face damage from riots while struggling to reopen amid coronavirus. FOX Business’ Lauren Simonetti with more.

One of the country's biggest mall operators, Simon Property Group, is suing Gap Inc. over nearly $66 million in unpaid rent and other charges, The Real Deal first reported.

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The Gap owes rent for April, May and June, the suit filed in Delaware state court says, according to The Real Deal.

GAP INC. REOPENING STORES WITH CORONAVIRUS SAFETY MEASURES

The Gap blamed the "profound effect" of the coronavirus pandemic for its decision to suspend rent payments in a statement to FOX Business.

Masked people walk past a boarded up Old Navy clothing store on Wednesday, May 27, 2020, in San Francisco. (AP Photo/Ben Margot)

"We remain committed to working directly with our landlords on mutually agreeable solutions and fair rent terms, just as our hundreds of industry and government partners have sat with us in good faith to shape the post COVID business landscape," The Gap's statement reads.

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The Gap began reopening stores in May. Its brands include Old Navy, Banana Republic, Athleta and, of course, Gap.

Ticker	Security	Last	Change	Change %
GPS	GAP	12.07	+0.12	+1.00%

FOX Business' inquiry to Simon Property Group was not returned at the time of publication.

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Sephora to allow customer donations to National Black Justice Coalition with store points

How is makeup industry staying afloat?

CEO of e.l.f. Beauty, Tarang Amin, discusses how his sales have dipped amid the coronavirus pandemic.

Sephora has updated its Beauty Insider Rewards Bazaar, so customers can redeem their points for a donation to the National Black Justice Coalition in place of a cosmetic sample.

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Redeeming 500 points will give the American civil rights organization $10 while 1,000 points will give $20 and 1,500 points will give $30.

SEPHORA REOPENING SOME STORES AFTER CORONAVIRUS CLOSURES WITH NEW LOOK

(Sephora)

Ticker	Security	Last	Change	Change %
LVMUY	LVMH MOËT HENNESSY LOUIS VUITTON SE	89.1	+2.71	+3.14%

FOX Business reached out to Sephora about its decision to implement a charitable rewards option but did not immediately hear back from the company at the time of publication.

On Tuesday, the multinational company shared with its social media followers that it had partnered with four organizations dedicated to helping African Americans and other black groups, one of which is the National Black Justice Coalition. The company has donated more than $1 million between the organizations.

SEPHORA WANTS TO BACK OUT OF JCPENNEY STORES

“We stand in solidarity with our Black employees, colleagues, friends, and communities, and we’re proud to support these organizations that are fighting for racial justice and equity: @CARES_Mentoring @CFUF_Baltimore @naacp @nbjconthemove @ncbcp_bwr #BlackoutTuesday,”

In light of last weekend’s protests against police brutality after the death of 46-year-old George Floyd, Sephora shared an open letter from its CEO Jean-André Rougeot on the company’s commitment to racial equality.

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“At Sephora, we believe unequivocally that #BlackLivesMatter. We are committed to using our platform and resources to stand against racism and injustice in this country,” the beauty retailer wrote in a tweet on Monday, which linked to Rougeot’s letter.

“First and foremost, I want to express my empathy for the range of emotions you may be feeling right now. When is enough enough? How can prejudice and violence continue to happen in a country whose values include equality and justice,” he wrote. “We have seen that the COVID-19 pandemic has disproportionately impacted communities of color and highlighted the existing inequalities in our country. George Floyd, Ahmaud Arbery and Breonna Taylor are sadly only a few examples of recent violence against the Black and African American communities, adding to the difficulties these communities are already facing.”

This isn’t the first time Sephora has stepped up to join the racial discourse in this country. In June, U.S. stores closed down nationwide for a one-hour diversity training after R&B singer SZA said she was racially profiled by Sephora security guards in Calabasas, California.

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U.S. Private Sector Job Losses Show Substantial Slowdown In May

After reporting a record drop in private sector employment in the previous month, payroll processor ADP released a report on Wednesday showing the pace of job losses slowed by much more than anticipated in the month of May.

ADP said private sector employment slumped by 2.76 million jobs in May after plummeting by a revised 19.557 million jobs in April.

Economists had expected employment to plunge by about 9.0 million jobs compared to 20.236 million job nosedive originally reported for the previous month.

“While the labor market is still reeling from the effects of the pandemic, job loss likely peaked in April, as many states have begun a phased reopening of businesses,” said Ahu Yildirmaz, co-head of the ADP Research Institute.

The report said employment in the service-providing sector tumbled by 1.967 million jobs, reflecting a particularly steep drop in jobs in the trade/transportation/utilities industry.

Employment in the goods-producing sector also sank by 794,000, as employment in the manufacturing industry slumped by 719,000 jobs.

ADP also said employment at large businesses plummeted by 1.604 million, while employment and midsized and small businesses decrease by 722,000 jobs and 435,000 jobs, respectively.

On Friday, the Labor Department is scheduled to release its more closely watched employment report for May, which includes both public and private sector jobs.

Employment is expected to tumble by about 8.0 million jobs in May after plunging by 20.5 million jobs in April. The unemployment rate is expected to jump to 19.7 percent from 14.7 percent.

Noting the ADP data has not provided an accurate guide to the Labor Department figures in the past, Michael Pearce, Senior U.S. Economist at Capital Economics, said he will wait for the official report before drawing any firm conclusions.

“But this report does add weight to the message from the recent decline in continuing jobless claims, indicating that rehiring could be beginning to outpace the continued flood of new layoffs,” Pearce said.

He added, “As more states move to reopen, we expect that trend to continue, with employment rebounding potentially quite sharply from June onwards.”

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Need new stimulus of ₹10 lakh crore: Economists Collective

Economists urge cash transfers to 80% of households to revive economy.

The Centre needs to announce a ₹10 lakh crore fiscal stimulus package providing universal food ration and cash transfers for 80% of households in order to revive the economy at this time, the Heterodox Economists Collective has urged. Employment guarantees must be expanded for both rural and urban workers at a time of soaring joblessness, the group of economists added during a webinar on Wednesday.

Funding such a package would require suspension of fiscal deficit targets, which could impact the country’s credit rating. “It does not help if you have a wonderful credit rating if your economy is going down the drain,” warned JNU professor and economist Jayati Ghosh. “If fear of credit rating agencies are what drives the government’s policies, they are doomed to failure,” she added.

Presenting an analysis of the government’s ₹20 lakh crore Atmanirbhar package on Wednesday, the Heterodox Economists Collective observed that the fiscal component amounted to only ₹3 lakh crore, which includes already announced budgetary measures. The measures announced for MSMEs would only benefit larger players within that segment, they said, adding that provisions for higher liquidity may not increase actual credit offtake. Minimum support prices for farmers had not kept pace with inflation, while real wages were being suppressed.

In order to mitigate the crisis, the public distribution system must be universalised, with free cereals, pulses and cooking oil provided to all for the next six months, said the economists’ group. It proposed cash payments of ₹15,000 to the bottom 80% of households as compensation for lost incomes during the 75 days lockdown. Employment guarantees needed to be expanded to urban areas, while agricultural work needed to be included under the existing rural scheme, with 200 days of guaranteed work, said the economists.

To fund the package, they suggested the issue of special bonds for low-interest public borrowing, increased central transfers to States and, if required, a monetisation of the central fiscal deficit.

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SoftBank to invest $100M in companies led by people of color

SoftBank Group is launching a $100 million fund to invest in “companies led by founders and entrepreneurs of color,” in the latest corporate action as protests roil the US.

Described as SoftBank’s bid to improve diversity, “we have to put money behind it, set plans, and hold ourselves accountable,” SoftBank chief operating officer Marcelo Claure, who will head the fund, wrote in a letter to employees Wednesday.

Named the “Opportunity Growth Fund” and focused on African Americans and Latinos in the US, it is, SoftBank says, the largest fund of its kind.

It will invest in entrepreneurs “from communities that face systemic disadvantages in building and scaling their businesses,” Claure wrote.

SoftBank also runs the $100 billion Vision Fund, which is headed by Rajeev Misra and invests amounts larger than the entire new fund in startups around the world.

In addition to leading restructuring at floundering office-space startup WeWork, Claure runs a fund investing in Latin America. He and Misra are seen as potential successors to chief executive Masayoshi Son.

“Racism is a lamentable thing,” Son wrote on Twitter, ending his post with the hashtag #blacklivesmatter.

Claure wrote in his letter that Tokyo-headquartered SoftBank was also establishing a “dedicated diversity and inclusion program.”

SoftBank’s management is overwhelmingly male, with the company planning to nominate its first female board director at a shareholder meeting later this month.

While the company includes a wide range of nationalities, only four of 30 investors listed on Vision Fund’s website are female.

Companies including foreign firms like SoftBank have made public statements following the worst US civil unrest in decades as the death of an unarmed black man reignites the issue of police brutality against African Americans.

Sony this week pushed back an event for its upcoming PlayStation 5 console, saying “we want to stand back and allow more important voices to be heard.”

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Feds expect coronavirus to drain trillions from US economy

The feds expect the coronavirus crisis to drain trillions of dollars from the US economy over the next decade, in the latest sign of the pandemic’s economic devastation.

The crisis will lead to a $15.7 trillion reduction in the nation’s gross domestic product — the value of all goods and services produced here — from this year to 2030 without adjusting for inflation, the Congressional Budget Office said Monday.

The nonpartisan agency expects a plunge of $7.9 trillion when adjusting for inflation, or 3 percent of the cumulative real GDP the office projected for that 10-year period in January.

The CBO said social-distancing measures aimed at controlling the deadly virus and the resulting business closures will likely reduce consumer spending, while a drop in energy prices is expected to curtail US investment in the industry.

Legislation aimed at blunting the economic impact of the virus will “partially mitigate the deterioration in economic conditions,” CBO director Phillip L. Swagel said. He added that the projections are uncertain because it’s unclear how the pandemic will develop going into next year and how it will affect the economy.

“Additionally, if future federal policies differ from those underlying CBO’s economic projections — for example, if lawmakers enact additional pandemic-related legislation — then economic outcomes will necessarily differ from those presented here,” Swagel wrote in a letter to Democratic Senate Minority Leader Charles Schumer, who requested the analysis.

The nation’s GDP already suffered its worst contraction since the Great Recession in the first quarter of 2020 as the pandemic roiled the global economy. The CBO’s analysis also came ahead of the feds’ monthly employment report on Friday, which is expected to show unemployment at or near 20 percent in May.

Schumer and Sen. Bernie Sanders (I-Vt.) said the gloomy numbers underscore the need for Congress to pass another coronavirus stimulus bill. Lawmakers have already approved nearly $3 trillion in stimulus spending since late March, and they’ll be talking about another package “in the next month or so,” Senate Majority Leader Mitch McConnell said last week.

“In order to avoid the risk of another Great Depression, the Senate must act with a fierce sense of urgency to make sure that everyone in America has the income they need to feed their families and put a roof over their heads,” Schumer and Sanders said in a joint statement. “The American people cannot afford to wait another month for the Senate to pass legislation.”

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8 Retail Stocks Face Rising Risk As Trade War Escalates

Retail stocks that had been surging this year with the bull rally have pulled back and now are at risk of falling even further as the renewed U.S.-China trade conflict threatens to sharply boost their costs. On Friday, the U.S. hiked tariffs on Chinese goods worth $200 billion from 10% to 25%. The Chinese government has vowed to take countermeasures, and President Trump has threatened to tax nearly all Chinese exports "shortly." Trump also tweeted that there is "no need to rush" negotiations with China on a trade deal, pushing U.S. stock futures lower.

Companies at risk include Target Corp. (TGT), Lowe's Companies Inc. (LOW), Best Buy Inc. (BBY), Costco Wholesale Corp. (COST), Dollar Tree Inc. (DLTR), Kroger Co. (KR), Walmart Inc. (WMT), and Home Depot Inc. (HD), per a report by Bernstein as outlined in a detailed Barron’s story. While retailers have been attempting to diversify their supply chain in light of the threat of heavy levies on Chinese imports, these measures take time to implement.

“A sudden tariff increase with less than a week’s notice would severely disrupt U.S. businesses," said David French, a senior vice president at the National Retail Federation, as cited by the Wall Street Journal.

8 Companies at Risk as Trade War Heats Up

Target Corp.
Lowe’s Companies Inc.
Best Buy Inc.
Costco Wholesale Corp.
Dollar Tree Inc.
Kroger Co.
Walmart Inc.
Home Depot Inc.

Source: Barron’s

Risks of Lower Consumer Purchasing Power

Before President Trump escalated trade tensions with China last weekend, the SPDR S&P Retail ETF (XRT) was up 11.1% year-to-date as of Friday close. That return has fallen to 7.7% as of Thursday afternoon, compared to the broader S&P 500’s 13.5% gain this year.

When higher costs are passed on to consumers through higher prices, consumer purchasing power decreases, leaving shoppers with the option to buy the higher cost goods or save their money. A study by Trade Partnership Worldwide, an organization against China tariffs, estimates that a 25% levy on Chinese goods would result in a $767 loss per four-person family in the U.S. annually, per the WSJ. A major problem facing retailers is that that even with consumer confidence and employment near the highest level in several years, U.S. consumers remain very budget-conscious. With shoppers more cognizant of price changes, any increase could hurt retail sales.

The Worst Off

Brandon Fletcher at Bernstein notes that stores with bigger grocery departments such as Walmart, Costco and Dollar Tree have “more robust sourcing teams” and will “likely see lower impacts” of tariffs. But the story is different for other companies, including electronics retailer Best Buy. "Those with high exposure to China and limited sourcing capabilities are likely to face a bigger impact despite efforts to mitigate tariff risk in advance over the past year,” says Fletcher. He says other vulnerable retailers include Target and Lowe’s, which have boosted their China exposure as they've moved to sell a larger volume of private label brands.

Looking Ahead

On a broader scale, any economic downturn sparked by trade wars could shake retailers further. With Trump indicating that he’s preparing to expand a 25% tax to a larger group of Chinese goods, the pain could be quickly transferred to middle class American consumers, and as a result, the retailers that sell to them.

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Facebook workers stage ‘virtual walkout’ to protest policy on Trump posts

Working from home didn’t stop dozens of Facebook employees from conducting a virtual walkout in protest of Mark Zuckerberg.

Facebookers went on rival social network Twitter to announce that they were protesting the company’s policy of leaving Trump’s posts alone, arguing that they violate Facebook’s rule against “language that incites or facilitates serious violence.”

The workers “walked out” by requesting paid time off in Facebook’s systems and changing their out-of-office email response to say they were unavailable, according to reports.

The protest came after dozens of Facebook employees over the weekend blasted their employer on Twitter, with many specifically singling out founder and CEO Zuckerberg.

“Mark is wrong, and I will endeavor in the loudest possible way,” Ryan Frietas, director of product design for Facebook’s News Feed, wrote on Twitter about Zuckerberg’s decision to leave Trump’s posts up untouched.

Twitter on Friday hid a tweet from Trump that included the phrase “when the looting starts, the shooting starts” behind a warning label. It explained the tweet violated Twitter’s rules against “glorifying violence” but was being left up as a “public service exception.”

Facebook declined to take action on the same message, with Zuckerberg saying in a Facebook post on Friday that while he found the remarks “deeply offensive,” the company decided they did not violate its policy against “incitements to violence.”

“Respect to @Twitter’s integrity team for making the enforcement call,” David Gillis, a Facebook director of product design, wrote. Despite saying that he understood Zuckerberg’s thinking in Facebook holding firm, he added that “It would have been right for us to make a ‘spirit of the policy’ exception that took more context into account.

Jason Toff, identified as a Facebook director of product management, tweeted that he was “not proud” of how his company was dealing with the matter, while another Facebook manager, Andrew Crow, said that he disagrees “with Mark’s position and will work to make change happen.”

Facebook officials on Monday said they are listening to the criticisms. “We recognize the pain many of our people are feeling right now, especially our black community,” the company said in a statement to The Post. “We encourage employees to speak openly when they disagree with leadership. As we face additional difficult decisions around content ahead, we’ll continue seeking their honest feedback.”

Despite the uproar, investors sent Facebook’s shares up 3 percent, or more than $6 a share, to $231.91.

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What is racketeering?

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Racketeering is a broad term used to describe the act or threat of a crime, and is often associated with organized crime or gang activity.

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The term is defined by Cornell Law School's Legal Information Institute as "any act or threat involving murder, kidnapping, gambling, arson, robbery, bribery, extortion, dealing in obscene matter, or dealing in a controlled substance or listed chemical."

WHAT IS EXTORTION?

It also describes any act that is indictable under the Racketeer Influenced and Corrupt Organizations, or "RICO," statute. The FBI outlines the kinds of state and federal crimes included under RICO on its website.

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According to the Justice Department, someone can only be found guilty of racketeering, or any other activity that violates the RICO statute, if the government can prove "beyond a reasonable doubt":

“that an enterprise existed”
“that the enterprise affected interstate commerce”
“that the defendant was associated with or employed by the enterprise”
“that the defendant engaged in a pattern of racketeering activity”
“that the defendant conducted or participated in the conduct of the enterprise through that pattern of racketeering activity through the commission of at least two acts of racketeering activity as set forth in the indictment.”

WHAT IS TAX EVASION?

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