Inflation, Fast-Food, and More!
Editor’s Note: Happy Friday, dear reader! I hope you have a great weekend after this busy week.
Now let’s get to it!
CPI: August Inflation at 3.5-Year Low
Yesterday, the Bureau of Labor Statistics (BLS) reported that the annual rate of inflation — as measured by the Consumer Price Index (CPI) — dropped to its lowest level since February 2021.
According to the BLS, the CPI rose just 0.2% for the month in August — in line with analyst expectations, according to Dow Jones.
But on a year-over-year basis, the CPI increased by just 2.5%. That’s 0.4 percentage points lower than the July reading. According to Dow Jones, the analyst consensus had expected a reading of 2.6%.
However, stripping out volatile food and energy prices, the core CPI rose slightly higher than expected — 0.3% for the month versus 0.2%. But year over year, core inflation rose by 3.2%, in line with estimates.
Breaking down the CPI, inflation in housing costs remains sticky. The CPI’s shelter component — which accounts for roughly one-third of the index’s weighting — rose by 0.5% in August. Year over year, the shelter index showed 5.2% gains.
“Shelter” costs include both rates for both rent and owner’s equivalent rent, which is what homeowners would pay if they were renting their houses.
Considering those “volatile” food and energy prices, food costs increased by only 0.1%, while energy costs fell by 0.8%.
Currently, the fed funds futures market is pricing in an 85% chance that the Federal Open Market Committee (FOMC) — the Federal Reserve’s policy-setting unit — will initiate a 25-basis-point cut to its benchmark interest rate.
Although there had been plenty of predictions that the FOMC would enact an “emergency” cut of 50 basis points, yesterday’s data points to a less extreme rate cut in the wings.
Well, we won’t have to wait much longer to find out: The FOMC meets next week.
McDonald’s Extends $5 Meal Offer
Yesterday, McDonald’s (NYSE: MCD) announced that it will continue to offer its $5 value meal in most U.S. markets into December.
Just as consumers have been opting for less expensive name-brand packaged food items at grocery stores, they have also been pulling back on their fast-food spending.
Menu prices at fast-food restaurants have soared in recent years. What was at first “necessitated” by supply-chain issued during the COVID pandemic has come close to looking like a case of corporate greed. Consumers have responded by dialing back their burger-and-fries habits.
In reaction, this summer, fast-food chains started offering special deals and discounts in an effort to woo back diners.
For McDonald’s, this has included offering a $5 value meal that combines a McDouble or McChicken sandwich with a small fries, a four-piece order of McNuggets, and a small soft drink.
The deal was originally offered for four weeks in June and July. However, 93% of McDonald’s franchises opted to extend the offer through the end of August.
Now apparently about 80% of local McDonald’s markets have opted to continue the discounted deal into December.
“Together with our franchisees, we’re committed to keeping our prices as affordable as possible, which is why we’re doubling down with even more ways to save,” the company’s president of U.S. operations, Joe Erlinger, said in a statement this week.
According to a memo from Erlinger sent to U.S. franchisees in July, the company has been able to bring back low-income diners with the deal.
“Reversing the narrative and re-establishing our position as the leader on value and affordability is possible, but it cannot be done overnight,” he wrote. “It will happen through sustained and coordinated actions that show the customer we’re on their side.”
McDonad’s isn’t the only fast-food company offering special value meals and discounts to bring back consumers. Starbucks (NSDQ: SBUX) and Burger King, which is owned by Restaurant Brands Intl. (NYSE: QSR) have taken similar steps in recent months.
General Mills to Sell Yogurt Brands for $2.1B
General Mills (NYSE: GIS) has announced that it is planning to sell its North American yogurt unit in an all-cash deal worth $2.1 billion.
According to the packaged food company, French firm Groupe Lactalis will acquire its U.S. yogurt business, while Sodiaal (a French dairy cooperative) will buy its Canadian operations.
General Mill’s yogurt business includes such popular brands as Yoplait and Liberté. The company has been working with JPMorgan Chase (NYSE: JPM) since the spring to find a buyer for this segment.
The makers of name-brand food products — including General Mills — have been struggling as cash-strapped consumers switch to cheaper store brands.
That’s leading them to spin off or sell peripheral segments of their businesses to allow them to focus on a tighter range of “core” brands and growth segments.
For example, Unilever (NYSE: UL) announced earlier this year that it is spinning off its ice-cream business.
Here in the U.S., General Mills’ Yoplait brand is also facing tough competition not only from store-brand generics but also from rival brands such as Chobani and Dannon.
It makes sense for Yoplait to return to its French “roots.” The yogurt brand was created in France back in the 1960s. General Mills began marketing the brand in the U.S. through a franchise agreement signed in 1977.
In 2011, General Mills purchased 51% of Yoplait. Sodiaal held the remaining stake.
General Mills already sold off its European yogurt unit to Sodiaal in 2021.
“By efficiently managing our portfolio and sharpening our focus on our global platforms and local gem brands that have stronger growth prospects and more attractive margins, we will be in a better position to drive top-tier shareholder returns over the long term,” General Mills CEO and Chairman Jeff Harmening said in a statement Thursday.
Google Has an Iron Grip on the Search Engine Market
Alphabet (NSDQ: GOOGL) subsidiary Google’s dominance of the search market realm has fallen under regulatory scrutiny lately.
Last month, a federal court found Google guilty of breaking anti-trust laws, ruling that the company has developed an illegal monopoly on internet searches.
According to data from Statcounter, Google’s domination is no secret. Between September 2023 and August 2024, Google dominated the search engine market for mobile and desktop searches with market shares of 95% and 76%, respectively.
Take a look:
You will find more infographics at Statista
It’s no wonder that Merriam-Webster has added “google” as a generic term for searching the internet to its dictionary.
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