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Wall Street thinks inflation peaked. Main Street expects more pain

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Shoppers are seen in a Kroger supermarket on October 14, 2022, in Atlanta, Georgia.

Elijah Nouvelage | AFP | Getty Images

More players in the stock market and among the ranks of professional economists have come around to the view that inflation has peaked or already is in decline, but small business owners on Main Street don’t expect a reprieve from high prices any time soon, according to a new CNBC poll.

An overwhelming majority (78%) of America’s entrepreneurs say they expect inflation to continue to rise, according to the quarterly CNBC|SurveyMonkey Small Business Survey. That is effectively unchanged from last quarter when 77% said they expected inflation to continue to rise.

Main Street’s belief that inflation has yet to peak comes amid recent conflicting economic data points and consumer sentiment.

Wholesale prices reported on Friday rose more than expected in November as food prices continued to surge. However, the producer price index, a measure of what companies get for their products in the pipeline, was up 7.4% from a year ago, the slowest 12-month pace since May 2021. Meanwhile, the University of Michigan Consumer Sentiment Index rose more than expected amid declining inflation expectations, albeit still high relative to recent history.

Megan Greene, chief economist at Kroll Global, said on CNBC’s “Squawk Box” on Friday that she thinks “peak inflation is probably behind us.”

But inflation concerns are leading to the most cautious holiday season for shoppers since 2013, according to the CNBC All-America Economic Survey, with 41% of consumers saying they plan to spend less this year than last. Of that group, a third said they will spend less because of inflation.

Walmart CEO Doug McMillon said on Tuesday that the American shopper is still feeling “stressed” by inflation, even if that effect isn’t being felt evenly across categories.

Cheaper gas prices may help to lessen those concerns, as the price per gallon is now expected to fall below $3 for more Americans by the end of the year. According to AAA, the national average for a gallon of unleaded gas was $3.329 on Thursday, well below the record $5.01 price per gallon on June 14 and below the price seen ahead of Russia’s invasion of Ukraine.

Regardless of the economic tailwinds, inflation remains top of mind for small business owners.

More small business owners (45%) now say inflation is the biggest risk to their business than tracked in any of the previous recent quarterly survey. The CNBC|SurveyMonkey Small Business Survey for Q4 2022 was conducted Nov. 9-Nov. 16 among nearly 2,600 small business owners. 

Overall, nearly all small business owners (92%) are worried about inflation, according to the survey.

“I think a lot of what has driven sentiment among small business owners recently, but especially since Covid began, is pure risk management,” said Laura Wronski, senior manager of research science at Momentive, which conducts the survey for CNBC. “The safe bet over the past year has been that inflation would continue to get worse over time, because if small business owners are prepared for the worst, they would be better able to handle any business challenges.”

Wronski said that given the economic environment seen so far this year, “Main Street is probably a bit burned from their experience.”

Small business owners remain convinced that a recession will occur, though the survey’s latest data shows a pushing back of economic downturn expectations to next year. Previously, a large share of business owners told the survey they thought the economy was already in a recession.

Risk management, Wronski says, is “the reason why we see small business owners continuing to point to inflation as their top concern and expecting prices to keep rising, even as economic indicators start to shift.”

While small business owners in general are concerned about inflation, there is some partisanship when it comes to their concerns about the economy. Fifty-one percent of Republican small business owners say inflation is the biggest risk to their business, compared to 35% of small business owners who are Democrats.

That political divide is also present in the forecasts around inflation’s peak, with just 11% of Republican small business owners saying inflation has reached that point compared to 41% of small business owners who identify as Democrats. Those figures are largely unchanged from the previous quarter, with slightly more independents and Democrats saying inflation has reached a peak this quarter, falling in line with a slightly rosier outlook from small business owners who identify as Democrats.

The sentiment shift among Democrats taking the survey helped President Biden’s approval rating on Main Street go up for the first time during his presidency, albeit rising from an all-time low. After washing out at an approval rating among small business owners of 31% during the third quarter of 2022, when inflation hit its to-date peak level, President Biden’s approval rating increased to 34% in the fourth quarter, the first time across the eight quarters of his presidency there has been any rise in the quarterly poll, and breaking a streak of six consecutive quarterly declines.

But the key to Biden’s standing on Main Street, as well as the overall sentiment from small business owners, will be the continuing decline of inflation, or at least clearer signs of it heading in the right direction.

That’s something that Federal Reserve Chair Jerome Powell has indicated, saying on Nov. 30 during a speech at the Brookings Institution that “it will take substantially more evidence to give comfort that inflation is actually declining.”

“By any standard, inflation remains much too high,” Powell said. “Despite the tighter policy and slower growth over the past year, we have not seen clear progress on slowing inflation. … The truth is that the path ahead for inflation remains highly uncertain,” Powell said.

Peak inflation is likely behind us, says Kroll Global chief economist



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U.S. is behind on supply chain independence from China

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'We have to make sure we have a diversified supply chain': Biden presidential coordinator

The U.S. has some rapid catching up to do if it is to secure the reliability of its supply chain and its independence from competitors like China, a top White House advisor admitted this week.

“Look, this is a major concern for the U.S. and I think for the rest of the world. As we are going into a cleaner, greener, an entirely new energy system, we have to make sure we have a diversified supply chain,” Special Presidential Coordinator Amos Hochstein told CNBC’s Hadley Gamble on Monday.

“We can’t have a supply chain that is concentrated in any country, doesn’t matter which country that is,” he said. “We have to make sure from the mining and refining process to the building of the batteries and wind turbines that we have a diversified system that we can be well supplied for. That is the only way this will work from an economy perspective.”

Asked if the U.S. was behind in this endeavor, Hochstein, who also served in the Obama administration as chief energy envoy, replied: “Absolutely we’re behind.” But, he added, “It doesn’t mean that we’re out.”

Workers transport soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China October 31, 2010.

Stringer | Reuters

China controls roughly 60% of the world’s production of rare earth minerals and materials, according to a recent report by Rice University’s Baker Institute for Public Policy. Those resources include lithium, cobalt, nickel, graphite, manganese and other rare earth elements crucial for making things like electric vehicles, batteries, computers and household goods.

They’re also essential for renewable technology like solar panels and wind turbines, which are central in the U.S.’s attempt at an energy transition away from fossil fuels. As just one example, China refines 95% of the world’s manganese — a chemical element used in batteries and steel manufacturing — despite mining less than 10% of its global supply.

For the U.S., whose relations with China can currently be described as tense at best, this poses several security risks, were China to decide to weaponize that market dominance at any point. The Covid-19 pandemic and the Russia-Ukraine war have also highlighted the fragility of the global supply chain.

‘We have not invested’

The White House, in a Feb. 2022 fact sheet, wrote that “The U.S. is increasingly dependent on foreign sources for many of the processed versions of these minerals. Globally, China controls most of the market for processing and refining for cobalt, lithium, rare earths and other critical minerals.”

“We have to recognize that we have not invested, and that’s what the United States is trying to do now, is not only say the same old talk of we want to have partnerships,” Hochstein said. “We’re going to come to this table together with our G7 allies, we’re going to pool our resources, we’re going to make sure that the money is there.”

This includes dedicated financial and business incentives, Hochstein said. The Biden administration’s mammoth 2022 Inflation Reduction Act aims to invest heavily in the supply of and access to critical minerals in allied countries, and offers approximately $369 billion in funding and tax credits to boost renewable energy technology and critical mineral production.

“We’re giving the incentives, through the IRA, to tell companies ‘look, if you make sure you’re mining in the U.S. or in other countries and bring it to the U.S. for refining, processing and battery manufacturing, there’s going to be the kind of financial incentives there’,” he said.

U.S. is 'absolutely behind' on supply chain independence for crucial minerals: presidential adviser

Despite his warnings about supply chain risk, Hochstein rejected the idea that the U.S. was being held hostage to China.

“I don’t want to talk about being held hostage, at the end of the day China is doing what they think is right for them,” he said. “They’re trying to build an economic energy in the clean energy space and we all need to do the same.”

“We have to learn from what we went through in the oil and gas energy space, as we transition to a new energy market that relies still on natural resources,” he added.

“They may not be oil and gas, but they’re still natural resources — they’re not abundant everywhere in the world — so we have to make sure from the U.S. perspective that we have a supply chain for the United States, and that’s what the legislation that we passed in the United States is trying to do.”



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Boeing to slash about 2,000 white-collar jobs in finance and HR, report says

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Boeing expects to slash about 2,000 white-collar jobs this year in finance and human resources through a combination of attrition and layoffs, the planemaker confirmed to Seattle Times newspaper on Monday.

Last month, the Virginia-based company announced it would hire 10,000 workers in 2023, but some support positions would be cut.

Back then Boeing acknowledged it will “lower staffing within some support functions” – a move meant to enable it to better align resources to support current products and technology development.

“Over time, some of our corporate functions have grown quite large. And with that growth tends to come bureaucracy or disparate systems that are inefficient,” the newspaper quoted Mike Friedman, a senior director of communications at Boeing as saying. “So we’re streamlining.”

Boeing did not immediately respond to Reuters’ request for comment. 

Last year, Boeing said it plans to cut about 150 finance jobs in the United States to simplify its corporate structure and focus more resources into manufacturing and product development.

Watch CNBC's full interview with Boeing's Dave Calhoun



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Trump appeals sanctions for ‘frivolous’ suit against Hillary Clinton

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presidential candidates Donald Trump and Hillary Clinton attend campaign rallies in Ambridge, Pennsylvania, October 10, 2016 and Manchester, New Hampshire U.S., October 24, 2016 in a combination of file photos.

Mike Segar | Carlos Barria | Reuters

Former President Donald Trump and one of his lawyers said Monday they are appealing nearly $1 million in sanctions imposed on them for what a federal judge called their “frivolous” lawsuit against Hillary Clinton and more than two dozen other defendants.

The court filing about the appeal came days after a lawyer for Trump and his attorney Alina Habba told the judge in the case they were willing to put up a bond of $1,031,788 to cover the costs of the sanctions while the federal Court of Appeals for the 11th Circuit considered the matter.

In imposing those sanctions Jan. 19, Judge John Middlebrooks said in an order, “We are confronted with a lawsuit that should never have been filed, which was completely frivolous, both factually and legally, and which was brought in bad faith for an improper purpose.”

Trump’s suit, which sought $70 million in damages, accused Clinton, former FBI officials, the Democratic National Committee and others of conspiring to create a “false narrative” that Trump and his 2016 presidential campaign against Clinton were colluding with Russia to try to win the election that year.

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Middlebrooks in September dismissed the lawsuit, which was filed in U.S. District Court for the Southern District of Florida, and barred Trump from refiling the complaint.

He later ordered Trump and Habba to pay more than $937,000 in sanctions.

Middlebrooks in his sanctions order called Trump “a mastermind of strategic abuse of the judicial process,” and a “prolific and sophisticated litigant who is repeatedly using the courts to seek revenge on political adversaries.”

A day after Middlebrooks issued that order, Trump voluntarily dropped another lawsuit he had pending before the same judge against New York Attorney General Letitia James. That suit was related to James’ pending $250 million fraud lawsuit against Trump and his company in Manhattan state court.

Jared Roberts, the lawyer for Trump and Habba, did not immediately respond to a request for comment from CNBC about the appeal.



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