Bloomberg - Evening Briefing - The Teflon economy

This week provided more proof that the US economy is steaming ahead in the face of more than a year of gloomily incorrect predictions. Economic growth in the fourth quarter trounced forecasts and gross domestic product increased 2.5% for the year. You may recall that 2023 opened with economic experts jostling for air time to warn the public of a guaranteed American recession. But the year ended with a US expansion rate that added about a South Korea’s worth of GDP to the world. On Friday, there was even more good news for the US on the inflation front. The Federal Reserve’s preferred gauge of underlying price pressures, the so-called core personal consumption expenditures price index, cooled to an almost three-year low in December, even with robust holiday spending. That report capped a year in which inflation retreated at a much faster rate than the Fed (and certainly Wall Street economists) anticipated, all while a sturdy job market kept powering consumer spending. You could call it the Teflon economy.

Even stubborn consumer sentiment is turning sunnier, which is good news for US President Joe Biden as he seeks a second term. And though some on Team Recession are saying their promised downturn is just delayed, others have conceded defeat. Some of those who argued that—as had historically been the case—inflation could not be tamed without a sharp increase in joblessness are shifting their stance. And while investors and average Americans are eager for the Fed to unwind some of its interest-rate hikes, the central bank is expected to keep rates at a two-decade high when they meet next week. While hailing last year’s economic performance as “remarkable,” economists including Mohamed El-Erian predict growth this year could moderate as Americans’ savings dwindle and new supply chain disruptions—such as those vexing Red Sea transport—bubble up.

The economic picture has been quite different in the world’s second-largest economy. China’s $6 trillion stock market rout reveals a painful truth for Xi Jinping’s government: People are sinking under the weight of a years-long real estate bust and the country’s worst streak of deflation in some 25 years. Exports declined in 2023, joblessness among young people has soared and local governments are saddled with too much debt. This month’s heavy selloff in China’s benchmark CSI 300 Index brings its plunge to a brutal 40% over the past three years. A potential government rescue package backed by about 2 trillion yuan ($278 billion), may indicate authorities are growing anxious to stem the rout. As the US puts more space between the size of its economy and that of China, Beijing may be looking over its own shoulder: India’s stock market capitalization overtook Hong Kong’s for the first time. 

Israel has undergone a profound transformation since the Oct. 7 attacks, temporarily putting aside its focus on startups and wealth (and domestic politics) in favor of fostering a wartime culture built on patriotism and unity. But the war in Gaza is starting to hurt its economy. In the Hague, the United Nations’ top court told Benjamin Netanyahu’s government it must act to prevent the killing and harm to innocent Palestinians, but stopped short of demanding an immediate cease-fire in Gaza. And as the related conflict in the Red Sea and Yemen intensifies, piracy off Somalia’s coast is increasing as well. The US hopes a fresh hostage deal between Israel and Hamas will create the space for talks to achieve a more lasting regional peace agreement.

Palestinians process animal fodder to make bread due to a lack of wheat flour in Gaza City on Jan. 24. Photographer: Anadolu

Former South Carolina Governor Nikki Haley is staying in the race for the Republican nomination with a little help from Wall Street. That’s not making Donald Trump happy, as the twice-impeached former president threatens to cut off any donor who gives to his rival, at whom he has leveled thinly-veiled racist and misogynist insults. Haley meanwhile has been calling Trump’s mental health into question, given some very public fumbles on his part. While Trump’s campaign organization seems more professional than last time, it’s him the Biden campaign and its backers seem to want to face. Still, the US president shook up his election staff this week as the season begins in earnest. The candidates are now focused on the primary in South Carolina, where Haley hopes to pick up enough hometown support to close the gap with her opponent. Trump however faces some distractions, namely the $83.3 million a jury ordered him to pay in a defamation case on Friday and four felony prosecutions for everything from accounting fraud to attempted subversion of the 2020 election.

Tesla narrowly missed earnings estimates and warned expansion will be be lower this year, sending the electric vehicle-maker’s shares plunging. The company spent last year cutting prices to boost sales, which ate into profits. And after previously envisioning a truly driverless car, Apple is now working on an EV with more limited features. The company has pushed back its launch from 2026 to 2028 at the earliest. 

The $1,000-a-night hotel room is no longer a rare extravagance even if it doesn’t guarantee more space. At the Raffles London at the OWO, the room is just big enough for a king-sized bed. For those without concierge service who need a repair, our reviewer recommends Skil’s Twist 2.0, a rechargeable screwdriver with an adjustable, angling head ($40 for a 28-bit set). And here are 11 booze-free drinks to keep dry January going all year long if you really feel it’s necessary.

The 11 nonalcoholic drinks we’re loving right now. Photographer: Joanna McClure for Bloomberg Businessweek.

• Fed policy meeting: BOE rate decision, EU inflation, growth.
• European Union leaders discuss new aid package for Ukraine. 
• Tech earnings continue, with Microsoft, Alphabet and Apple.
• China’s Evergrande faces court hearings, including “regulating order.”
• India’s interim budget as Modi prepares for the general election.

Eli Lilly could have been first to the projected $80 billion weight-loss drug market, and now it wants to make up for lost time. Its newest version of GLP-1 drugs, Zepbound, could take a big bite out of a market currently dominated by the success of Novo Nordisk’s Ozempic. Amid rising obesity rates and increasing demand for weight-loss solutions, valuations for both pharmaceutical giants are soaring, and there’s a lot of money to be made. On the Bloomberg Originals mini-documentary Pharma’s Growing Weight-Loss Bonanza, we explore how these new drugs are remaking the industry and society.

Watch Pharma’s Growing Weight-Loss Bonanza by Bloomberg Originals

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