The week in business: Liz Truss concedes the markets

Investors didn’t react strongly to Liz Truss’s announcement of her resignation as British Prime Minister on Thursday. Sterling appreciated only slightly and bond yields fell briefly but then reversed. It was perhaps a disappointing end to Ms Truss’ six weeks in office, which were marked by wide market volatility in response to her corporate tax cut proposals – plans she later scrapped in the face of overwhelming backlash. But her exit doesn’t necessarily mean the end of the tumult. Bank of England Governor Andrew Bailey has warned that despite the central bank’s brief intervention to calm markets, the central bank will continue to hike interest rates in a bid to tame inflation. At the end of the month, Jeremy Hunt, the incoming Treasury Secretary, will present the government’s financial report, which he says would include “difficult” spending cuts. And sometime before that, the Conservative Party will appoint a new prime minister who may have different ideas about taxes and government spending.

Two of the world’s largest consumer-centric companies are seeing signs that Americans may be tightening their wallets. Last week, Nestlé and Procter & Gamble reported higher third-quarter sales even as they increased the cost of their products by 9 percent or more to keep up with more expensive raw materials, labor and transportation. However, the two consumer giants said they have sold fewer goods as customers limit their purchases of cereal, yogurt, laundry detergent and other items. Other companies have observed a similar trend: This month, PepsiCo said third-quarter sales rose 9 percent year over year and earnings rose more than 20 percent as consumers offered the company “at higher prices.” have followed. But sales volumes also fell. The expected earnings reports from Coca-Cola and Chipotle will give a better idea of ​​how pervasive this bias is.

Americans who wanted to postpone vacations earlier in the pandemic are taking advantage of the flexibility of remote work and combining business and leisure travel. And that boosts airline profits even as high inflation and volatile markets threaten business. Customer appetites for post-Labor Day air travel have broadly kept pace with the summer’s boom, and executives from the country’s major airlines were upbeat as they discussed their third-quarter earnings reports last week. American Airlines CEO Robert Isom said the company is “very bullish on aggregate demand, even in an uncertain economic environment.” While the high demand is good for airlines’ bottom lines, it translates into higher airfares for travelers who may get sticker shock when booking leisure flights.

The country’s biggest tech companies are expected to tell a disheartening story about the direction of the economy with their third-quarter earnings reports this week. You may have already prepared for this: Last month, Mark Zuckerberg announced that Meta would freeze most hires and cut budgets. Shortly after, Amazon said it would freeze hiring at its retail business for the rest of the year, and last week Snap reported its slowest quarterly growth on record, citing the “volatile macroeconomic environment.” Once relatively resilient to economic fluctuations, technology companies are increasingly feeling the pinch of inflation and a slowdown in demand. (Apple might be a notable exception, with Wall Street analysts predicting higher earnings than the same period last year.) These factors compound other challenges, like the strong dollar hurting some companies’ overseas operations and privacy policy changes that have done so have affected advertising.

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