Davos: No breakthrough on the financial crisis
“The best and brightest in government and business” converged on Davos, Switzerland, last week, aiming to craft a plan to rescue the world economy, said Edith Lederer in the Associated Press. But they broke up without a comprehensive solution. “No one seems to have a clear understanding of how big the crisis is,” or how to get out of it, said Davos attendee Kishore Mahbubani, a Singapore academic. Attendees did agree to meet again in April in London.
By the time that meeting convenes, the world could be in a trade war, said Chris Giles in the Financial Times. Trade ministers from around the world fear an outbreak of protectionism as countries rush to safeguard jobs. They’re especially unhappy with the “Buy American” provisions of the Obama administration’s stimulus bill. Export-dependent countries worry that they’ll be shut out of the U.S., a key market. Pascal Lamy, head of the World Trade Organization, promised at Davos to punish countries “using illegal trade restrictions in their stimulus packages.”
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The economy: Spending shrivels
Consumer spending plunged in December, “capping off the worst year for consumer spending since 1961,” said David Goldman in CNNmoney.com. Personal spending fell 1 percent in December, the Commerce Department said this week, continuing a decline “that accelerated dramatically in the last three months” of the year. Spending in the fourth quarter of 2008 fell 8.9 percent, for the worst quarter since Commerce first compiled spending data,
in 1947. “Consumers are in a mood to rebuild their savings but not to go out and spend,” said Wachovia economist Mark Vitner.
Banking: Citi flies into trouble
Former Citigroup Chairman Sandy Weill “borrowed” a Citi jet
to fly his family to Mexico in January, “at the same time as the bank announced plans to cut 75,000 jobs,” said David Teather in the London Guardian. The news follows reports last week that Citi canceled an order for a $50 million corporate jet after an Obama administration official assailed the purchase as “an outrageous use of funds.” Weill said he would stop using jets owned by Citi, which has received $345 billion in government aid and loan guarantees.
Coffee: Starbucks announces more closings
Starbucks’ woes deepened last week as the chain announced it would close 300 stores and lay off 6,700 employees, said David Kiley and Burt Helm in BusinessWeek. The retrenchment comes “on top of a cut of 600 stores announced in 2008.” Starbucks executives are also feeling the pinch. CEO Howard Schultz has cut his own annual salary to $100,000 from $1.2 million, and senior executives will see their 2009 pay frozen at 2008 levels.
Retailing: Amazon’s profit surprise
Amazon brightened an otherwise bleak earnings season last week, reporting a surprising jump in sales and profits, said Michael Copeland in CNNmoney.com. “In a week when company after company announced horrible earnings and pulled the plug on tens of thousands of jobs,” Amazon said that strong international sales had fueled a 9 percent fourth-quarter profit jump to $225 million. Profit margins suffered, however, as “Amazon lowered prices to keep shoppers coming.” The company declined to offer a profit forecast for 2009.
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