Economists Warn a ‘Summer of Fun' Could Lead to Autumn Pain

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'Fun-flation'

The uncomfortably-high inflation rate is likely to persist, forcing central banks to continue to increase borrowing costs for consumers and businesses.

But economists have noticed an unusual trend as we head into summer: Consumers continue to spend money on expensive, but fun experiences such as concerts and nights out, despite the rising prices.

Both sides of the Atlantic have raised the alarm. Bank of England increased interest rates by more than expected half a percentage point, after it failed to control the highest inflation of all Group of 7 countries. Andrew Bailey, the bank's governor whose credibility has been hammered, offered a warning: "If we don't increase rates now, things could get worse later."

Jay Powell, Fed chair, said to a Senate Committee a few hours later that he also saw a threat of this nature. He said that 'we are committed to getting the inflation under control' and warned of at least one additional increase.

Economists have noticed something strange in the inflation figures. The consumer is spending a lot on expensive meals, outrageous airfares and concert tickets. Some economists in Sweden blamed Beyonce's fans for driving prices up at hotels and restaurants last month when the star's fans converged to Sweden to watch her kick off her tour. Hotel prices have risen in U.S. cities that host Taylor Swift concerts.

Holger Schmieding is the chief economist of Berenberg and told DealBook that it's a fun-flation. The data shows that this type of inflation will not be subsiding. He said, 'We are looking at the summer fun'.

Consumers usually cut back when inflation is persistently high. When consumers do spend money, they tend to buy durable goods, such as a new car, washing machine or house. It's a good idea to make such purchases sooner if you think you will be spending more on them in the future. Economists are seeing this, as well as higher discretionary spending, like travel and nights out.

Many call this phenomenon " revenge spending" - the desire to enjoy experiences now that Covid's lockdowns have long passed. It helps that many have still got pandemic funds to use or their wages have risen in the last year. Grant Fitzner is the chief economist at the Office for National Statistics in Britain. He has identified airfares, concert tickets, and computer games as the main drivers of the stubbornly high inflation rate.

This autumn, a summer of fun may prompt a more aggressive policy. The Financial Times reported that 'the only way to bring inflation to 2% is to crush the demand and slow down economy in a substantial way'.

Here's What's Happening

Five people aboard the Titan submersible have been presumed to be dead. U.S. Coast Guard officers said the vessel seemed to have suffered from a "catastrophic collapse" near the Titanic wreck site. James Cameron and other deep-sea experts said that the Titanic's design had been criticized for years.

Microsoft has warned that it could abandon its bid to acquire Activision Blizzard. At a recent court hearing, lawyers for Microsoft said that the company would abandon the $70 billion acquisition if the F.T.C. In an attempt to delay the closing of the deal, Microsoft's team has also accused Sony of being a major rival in video games and as such is the'complainer in chief'about this deal. Microsoft's team accused Sony of being the "complainer in chief" about the deal.

TikTok has restructured its management. V. Pappas will be leaving the video app maker and Zenia Mucha has been named as the new communications chief. She is the former combative head of media relations for Disney. TikTok is under pressure from Washington regarding its parent company ByteDance of China, and its data and privacy policies.

Warren Buffett donates billions of dollars more to charity. The Oracle of Omaha gave $4.6 billion of Berkshire Hathaway to five organizations, including the Gates Foundation as well as those run by his own children. Buffett has now donated more than $50 billion to charity, which is more than his net worth was in 2006 when he began making his annual large donations.

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India benefits from Modi’s U.S. trip

In his visit to Washington, President Biden has praised Prime Minister Narendra modi for securing a number of agreements, including defense pacts that have been sought after and economic cooperation pledges.

Modi was able to benefit from Biden’s efforts to strengthen ties with India in an attempt to make India a counterweight against China and to erode Russia's alliance. All the pomp and deals of the trip -- including an address before Congress and a lavish dinner -- may have not achieved what the White House wanted.

Among the deals India received: a long delayed purchase of Predator drones worth $3 billion; a joint-venture with General Electric for production of next-generation engines in India; commitments from chipmakers such as Micron and Applied Materials, to invest in their plants in India; and other initiatives in telecommunications and artificial intelligence.

Modi agreed to lift the retaliatory duties on a wide range of American exports. This was a surprise.

U.S. Leaders gave Modi an enthusiastic welcome as Washington tries to push India into its sphere of influence. Biden told a press conference on Thursday that the partnership was one of the most important in the world.

The visit was heavily influenced by corporate America, which is looking to expand its presence in India as it becomes a major manufacturing hub and market. Think about who ate stuffed portobello mushroom and saffron infused risotto at Modi's last night state dinner.

Dave Calhoun, Larry Culp and James Taiclet of Lockheed Martin are all industrial leaders. James Taiclet, Lockheed Martin and G.E.

Sam Altman, CEO of OpenAI; Tim Cook, Apple; Sanjay Mehrotra, Micron; Sundar Pichai, Alphabet, and Lisa Su, A.M.D. ;

Financial leaders such as Ken Chenault, Jane Fraser from Citigroup, Adena Friedman from Nasdaq and Deven Parekh, Insight Venture Partners, and Hemant Taney of General Catalyst.

'The U.S. and India need each other in technology,' Taneja told DealBook in an email. 'The U.S. has to recognize the strength and needs of India's economy and build a feedback cycle that avoids the digital cold war we currently find ourselves in with China. This is all the more pressing in the midst of the global debate over A.I. and the need to adopt basic guardrails worldwide so the future of the technology is not dictated by nefarious actors.'

Biden and Modi mostly ignored criticisms of India's government crackdown on religious freedom and human rights. Modi did not pledge to support U.S. efforts against China or to cut off ties with Russia. This investigation by The Times on how India benefits from buying and refining Russian oil is worth reading.

It could be that the White House and other business leaders are focused on India’s 1.4 billion population, its increasing appetite for consumer products and its explosive growth as a manufacturing center. Biden stated that he has long believed the United States-India relationship will be one the most important relationships in the 21st Century.

"The Church will follow not only the science but also our faith, both of which call on us to work towards climate justice."

Justin Welby (archbishop of Canterbury and former oil industry executive) on the Church of England's decision to sell its stakes in major oil firms, including Shell, BP, and Exxon. The Church of England was frustrated that these companies were not doing enough against climate change.

Qatar is a serious contender for the N.B.A.

On Thursday, basketball fans were captivated by the San Antonio Spurs' selection of Victor Wembanyama to be the No. The French seven-footer has long been hailed as the game changer by analysts. He is perhaps the most anticipated draft pick in recent memory, after LeBron James.

Sportico reported that Qatar's sovereign fund was in talks to purchase a portion of Washington Wizards parent company for $4.05 billion.

Qatar wants to buy a 5 percent share in Monumental Sports and Entertainment which owns both the Washington Capitals and the Wizards of the N.H.L. This would be Qatar's first major investment in an American sports league. Oil-and-gas rich country would not have any say on how the Wizards were run but its money could be used to finance further expansion of Monumental.

The N.B.A. is now moving to the next stage in its ownership reform efforts. The N.B.A.'s efforts are aimed at opening up ownership of the league to institutional investors, including family offices, sovereign wealth funds, and private equity firms. (Also, on Thursday, Omers, an Ontario public pension fund that is large, was reported to be in talks with the Toronto Raptors' parent company, the N.B.A.).

Middle Eastern funds are investing in sports to increase their soft power. They have petrodollars in abundance and want to expand by purchasing global brands.

Qatar, through a separate entity, owns the Paris Saint-Germain football club. A member of Qatar's royal family bid on Manchester United in England. Saudi Arabia also helped broker a deal this month between the PGA Tour and LIV Golf.

Some critics have suggested that the flood in Middle Eastern money into sports is an attempt by Persian Gulf countries to cover up accusations of human right abuses. Sports leagues have so far shown no inclination towards refusing the money.

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Deals

Fortress Investment Group led a group of lenders that agreed to purchase Vice, the struggling digital media publisher out of bankruptcy. (NYT)

Virgin Galactic, Richard Branson’s space tourism company, raised $300 million through the sale of new shares. (CNBC)

What is the I.P.O. for a painting? This $55 million Masterpiece is Going Public' (WSJ).

Policy

Ford and SK On will receive a $9.2 billion government loan to help build three battery-manufacturing plants in Kentucky and Tennessee. (NYT)

Meta announced that it would block news for Canadian Facebook and Instagram users after Canada passed legislation that forces tech giants to compensate domestic news publishers. (AP, NYT)

The Best of the Rest

Two lawyers sanctioned by a federal judge for citing fake legal citations generated from ChatGPT. (NYT)

The bond guarantors of Representative George Santos are revealed: they're his dad and an aunt. (NYT)

Citigroup has warned that it will be enforcing its in-office attendance policy soon. (Bloomberg)

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