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Mixed US consumer price revisions leave slowing inflation trend intact

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Mixed US consumer price revisions leave slowing inflation trend intact
© Reuters. FILE PHOTO: A woman shops for groceries at El Progreso Market in the Mount Pleasant neighborhood of Washington, D.C., U.S., August 19, 2022. REUTERS/Sarah Silbiger/File Photo

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. monthly consumer prices rose less than initially thought in December, but the overall inflation revisions were mixed, and did not shift expectations on the timing of an anticipated interest rate cut from the Federal Reserve this year.

The annual revisions published by the Labor Department on Friday also showed the consumer price index increasing slightly more than previously reported in October and November.

Prices excluding the volatile food and energy components were unrevised, after rounding, from October through December. All told, the revisions did not materially alter the path of inflation, which is moderating after surging in 2022.

The revised CPI data had been eagerly awaited by financial markets and economists after Federal Reserve Governor Christopher Waller last month flagged them as among the key data pieces he would be watching as policymakers try to gauge progress in their fight against inflation.

“The revisions were much ado about nothing,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “This is becoming a trend where a Fed official mentions a data release once and then everyone waits with bated breath only to find out that it’s a bunch of noise.”

The consumer price index rose 0.2% in December instead of 0.3% as reported last month, the revisions of the CPI data published by the Labor Department’s Bureau of Labor Statistics (BLS) showed. But data for November was revised up to show the CPI increasing 0.2% rather than 0.1% as previously estimated.

The CPI gained 0.1% in October. Prices were previously reported to have been unchanged in October. The 3-month annualized increase in the CPI was revised up to a 1.9% rate from a 1.8% pace.

The revisions emanated from the recalculation of seasonal adjustment factors, the model used by the government to strip out seasonal fluctuations from the data. This routine procedure, which the BLS undertakes every year, covered data from January 2019 through December 2023. The year-on-year data, which is not seasonally adjusted, was unrevised.

Excluding food and energy, the CPI advanced by 0.275% in December, which was rounded up to 0.3%. That was revised down from 0.309%, rounded to 0.3%. The so-called core CPI was revised up to 0.308% in November, rounded to 0.3%.

It was previously reported to have increased 0.285% in November, rounded up to 0.3%. The 3-month increase in the core CPI inflation rate was unchanged at 3.3%.

Core goods prices fell in the first half, but not as steeply as had been previously estimated, while the increase in the cost of services was revised down for November and December. The increase in services excluding rents was revised lower in November and December.

“This should give more support to the Fed that strong growth and jobs are not causing an acceleration in inflationary pressures,” said Ellen Zentner, chief economist at Morgan Stanley in New York.

Stocks on Wall Street were trading higher. The dollar was steady versus a basket of currencies. U.S. Treasury prices fell.

UPDATED WEIGHTS

Financial markets expect the U.S. central bank will start cutting interest rates sometime in the first half of the year. Since March 2022, the Fed has raised its policy rate by 525 basis points to the current 5.25% to 5.50% range.

The 2023 data was of interest after revisions last year showed inflation a bit warmer in the second half of 2022 than previously thought. Economists saw a minor impact from the CPI revisions on the personal consumption expenditures (PCE) price indexes data for the fourth quarter, the inflation measures tracked by the U.S. central bank for its 2% inflation target.

“On the whole for October-December, the period that will be subject to revision in the next related report, we look for basically no revision to the monthly changes to the core PCE data on net, with the December change revised down by 0.02 percentage point but offsetting upward revisions to the earlier months,” said Daniel Silver, an economist at JPMorgan.

The core PCE price index gained 0.2% on the month in December and rose 2.9% year-on-year.

The BLS also updated spending weights used to calculate the CPI, effective with January’s report due next Tuesday. Housing now has a higher weighting, while transportation’s share was lowered. It will also introduce changes to the methodology used to calculate used cars and trucks prices.

According to a Reuters survey of economists, the CPI likely increased 0.2% in January. That would lower the annual increase in prices to 3.0% from 3.4% in December. The core CPI was forecast advancing 0.3%, with the year-on-year increase slowing to 3.8% from 3.9%.

“Since some Fed officials were apparently worried about a repeat of last year, the lack of any meaningful change this year, at the margin at least, supports an earlier May rate cut,” said Paul Ashworth, chief North America economist at Capital Economics in Toronto.”

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Wendy’s, blasted over CEO’s pricing comment, vows no price hikes at busy times

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Wendy's, blasted over CEO's pricing comment, vows no price hikes at busy times
© Reuters. FILE PHOTO: A Wendy?s restaurant displays a “Now Hiring” sign in Tampa, Florida, U.S., June 1, 2021. REUTERS/Octavio Jones/File Photo

By Waylon Cunningham and Deborah Mary Sophia

DALLAS (Reuters) -Wendy’s said on Wednesday it has no plans to raise menu prices at times of peak demand, after the burger chain weathered heavy criticism on social media since its CEO said earlier this month it would start testing “dynamic pricing”.

CEO Kirk Tanner told investors on a call this month that starting as early as 2025, Wendy’s (NASDAQ:) would begin testing features including “dynamic pricing and daypart offerings”. Dynamic pricing refers to surge pricing based on demand, especially during peak hours of the day.

This practice often raises prices at busy times, similar to how Uber (NYSE:) adjusts ride fares.

Tanner’s comment this week sparked an online backlash. U.S. Senator Elizabeth Warren in a post on the social media platform X on Wednesday called it “price gouging plain and simple.”

Wendy’s, in a statement to Reuters, said on Wednesday it “would not raise prices when our customers are visiting us most.”

Its initiative to add digital menuboards to certain stores would instead allow Wendy’s to offer discounts to customers more easily, “particularly in the slower times of day,” it added.

“We said these menuboards would give us more flexibility to change the display of featured items. This was misconstrued in some media reports as an intent to raise prices when demand is highest … We have no plans to do that,” the company said.

Warren’s post on X, previously Twitter, said Wendy’s plan “means you could pay more for your lunch, even if the cost to Wendy’s stays exactly the same. It’s price gouging plain and simple, and American families have had enough.”

“I guess I won’t be eating at Wendy’s anymore,” one Reddit user said in a post, while others on X called for boycotts.

Analysts and consultants were skeptical of the idea of surge pricing at restaurants.

Wendy’s “dynamic pricing” was a hot topic at a restaurant conference in the Dallas area, with several executives saying customers – already skittish after recent price increases – would likely be scared off by unpredictable prices.

“I don’t see it taking off any time soon,” said Victor Fernandez, a senior analyst at restaurant analytics firm Black Box Intelligence.

Michael Lukianoff, CEO of SignalFlare.ai, who has consulted with restaurants about pricing for years, said that “dynamic pricing” is a great success in other industries such as airlines, but would not work in restaurants.

“Customers will shop elsewhere,” he said.

Wendy’s sales have already slowed. Placer.ai data showed visits to Wendy’s outlets declined in all three months of the fourth quarter of 2023.

Wendy’s shares, which dropped about 14% in 2023, were up 1% on Wednesday. The company also recently issued a profit forecast for this year below Wall Street estimates, hurt by higher commodity and labor costs.

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Apple shareholders reject AI disclosure proposal

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Apple to disclose AI plans later this year, CEO Tim Cook says
© Reuters. Apple logo is seen in this illustration taken, August 22, 2022. REUTERS/Dado Ruvic/Illustration

By Stephen Nellis

(Reuters) -Apple plans to disclose more about its plans to put generative artificial intelligence to use later this year, Chief Executive Officer Tim Cook said during the company’s annual shareholder meeting on Wednesday.

Cook said that the iPhone maker sees “incredible breakthrough potential for generative AI, which is why we’re currently investing significantly in this area. We believe that will unlock transformative opportunities for users when it comes to productivity, problem solving and more.”

Apple (NASDAQ:) has been slower in rolling out generative AI, which can generate human-like responses to written prompts, than rivals such as Microsoft (NASDAQ:) and Alphabet (NASDAQ:)’s Google, which are weaving them into products.

On Wednesday, Cook argued that AI is already at work behind the scenes in Apple’s products but said there would be more news on explicit AI features later this year. Bloomberg previously reported Apple plans to use AI to improve the ability to search through data stored on Apple devices.

“Every Mac that is powered by Apple silicon is an extraordinarily capable AI machine. In fact, there’s no better computer for AI on the market today,” Cook said.

Apple shareholders on Wednesday rejected a measure asking the company to disclose more information about how it uses artificial intelligence in its business and its ethical guidelines for the technology.

The proposal, which was defeated at the company’s annual shareholder meeting, was put forth by the pension trust of the AFL-CIO, the largest American labor union federation, which has also proposed AI measures at other technology companies.

A similar proposal will be heard at Walt Disney (NYSE:)’s annual meeting in April.

At Apple, the AFL-CIO asked for a report on the company’s use of AI “in its business operations and disclose any ethical guidelines that the company has adopted regarding the company’s use of AI technology.”

In its supporting statement in Apple’s proxy materials, the AFL-CIO wrote that “AI systems should not be trained on copyrighted works, or the voices, likenesses and performances of professional performers, without transparency, consent and compensation to creators and rights holders.”

Apple opposed the measure, saying that disclosures could tip its hand on strategy as it competes against rivals in the fast-moving AI field.

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UMG to generate 250 million euros in savings by 2026, flags job cuts

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UMG to generate 250 million euros in savings by 2026, flags job cuts
© Reuters. FILE PHOTO: Universal Music Group logo is seen displayed in this illustration taken, May 3, 2022. REUTERS/Dado Ruvic/Illustration/File Photo

(Reuters) – Universal Music Group (AS:) will cut jobs and streamline its operations with the aim of generating 250 million euros ($271.03 million) in run-rate savings by 2026.

In the first phase of the plan, which will be introduced immediately, the group plans to save 125 million euros in 2025, including 75 million euros in 2024, the company said.

“Our organizational redesign achieves efficiencies in targeted cost areas while providing our labels with unprecedented capabilities to deepen artist and fan connections via new experiential, commerce, and content offerings,” the group said in a statement.

UMG also posted a 9.2% year-on-year increase in adjusted core profit (EBITDA), to 677 million euros in the fourth quarter, as its revenue rose to 3.21 billion euros, up 9.0% from previous year.

It proposed a year-end dividend of 0.27 euros per share, bringing total dividend payout in 2023 to 0.51 per share.

($1 = 0.9224 euros)

(This story has been refiled to add ‘euros’ in the headline)

(Reportin by Dagmarah Mackos, editing by Tassilo Hummel)

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