The Week in Business: Inflation Moderates

After months of prices that climbed higher and higher without any indication of letting up, last month brought some relief. New inflation data on Wednesday showed the Consumer Price Index rising 8.5 percent in the year through July, a notable slowdown from June, when prices increased 9.1 percent. Falling prices for airfares, used cars, hotel rooms and gas drove the decline, with the national average for a gallon of gasoline descending sharply since earlier in the summer. But the inflation report is not the unqualified good news it may seem at first. A measure that strips out volatile food and fuel costs rose 5.9 percent, suggesting that underlying inflationary pressures remain strong. Still, the overall moderating pace is likely to be reassuring for policymakers at the Federal Reserve, who will see July’s data as a step in the right direction. And it’s a win for President Biden, for whom high inflation is a political liability. What happens next, however, is uncertain: Last year, inflation sped up in the fall after cooling in the summer.

As analysts expected, the Walt Disney Company lowered its ambitious subscriber goal for Disney+, conceding that it would not be able to reach 230 million to 260 million subscribers by 2024 as it once said. But the company announced another noteworthy subscriber benchmark: surpassing Netflix. Disney+ added more than 14 million subscribers in the most recent quarter, far exceeding Wall Street’s forecast and bringing Disney’s portfolio of streaming services to 221 million subscribers. (Netflix, which has been losing subscribers, now has about 220.7 million.) The subscriber news was just one highlight in Disney’s blockbuster earnings report last week. Disney said its profit jumped 50 percent, fueled by strong demand for its theme parks — one indication that consumer confidence remains high despite economists’ worries that inflation is leading Americans to tighten their budgets.

Cryptocurrency companies keep falling to new lows. Coinbase, the United States’ largest crypto exchange, on Tuesday reported a 63 percent decline in revenue in the second quarter and swung to a $1.1 billion loss from a year ago. The outlook for the next three months is not much better, it said, predicting that its user numbers —  down from 9.2 million — would continue their descent in the third quarter. Coinbase blamed the industry’s “fast and furious” downturn for its bleak report. The company’s success is largely dependent on the broader crypto market, which has taken a steep fall over the last several months. Coinbase had a leg up on its competitors in crypto’s early days, but it has been losing its lead, and not solely because of the industry slump. The company has made a series of strategic missteps, including botching an effort to expand into India and going on a hiring spree that eventually led to mass layoffs.

Walmart and Target will release their second-quarter earnings reports this week, and it’s possible both will be hurting. Last month, Walmart lowered its profit outlook, pointing to inflation as the reason its customers were making fewer purchases of general merchandise. A larger portion of the retail giant’s sales were coming from its grocery business rather than from its more expensive stock of electronics and clothing as consumers felt the strain of higher prices, it said. The month before, Target said it was facing similar challenges and announced a plan to rid itself of the excess inventory it had accumulated as a result of shifting consumer habits. Target had already lowered its profit forecast in May, when it released a dismal first-quarter report that sent its shares plunging. Together, the retailers’ performances could help signal whether inflation continues dampen spending or whether the worst has passed.

Policymakers at the Federal Reserve will release the minutes from their July meeting on Wednesday, providing clues about how the central bank is thinking about its path to reining in inflation. After two months of supersize rate increases, some economists expect the Fed to begin taking a gentler approach, opting for a half-point increase rather than another three-quarter-point one next month. But even with the cooling of inflation in July, the Fed is probably inclined to see its work as far from over. Wages and rents continue to rise quickly across the country, and the central bank is still far above its goal of 2 percent inflation.

After a bleak first six months of the year — Wall Street’s worst start to a year in half a century — stocks are poised for their best stretch of 2022. The rebound may seem counterintuitive, given the talk of a potential recession. But investors have been buoyed by signs of cooling inflation, a still-booming job market and, in some cases, better-than-expected company earnings. They have also been increasingly unfazed by the Federal Reserve’s policy moves and now have reason to believe the central bank will begin to ease its campaign to cool off the economy, soothing fears about a serious downturn. Many experts say stocks will probably move higher still. Others are more cautious, warning that it is not unusual to see short-term gains in the market over a longer period of losses.

Chipotle agreed to pay $20 million to settle a suit with New York City over violations of worker protection laws. The digital media company Axios agreed to sell itself to Cox Enterprises for $525 million. Johnson & Johnson said it would stop selling talc-based baby powder globally by 2023 and use cornstarch in its product instead.

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