The news at a glance
Autos: Ford scraps planned Mexican factory
“In a surprising turnaround,” Ford Motor Co. abandoned plans this week for a new small-car factory in Mexico th at Presidentelect Donald Trump had criticized, said John Stoll and Mike Colias in The Wall Street Journal. Ford will now produce its Focus model in an existing Mexican factory and invest $700 million in a Michigan facility that will build electric vehicles, creating 700 new U.S. jobs. Ford CEO Mark Fields characterized the company’s decision as “a vote of confidence” in Trump’s “pro-growth policies.” Ford’s announcement came hours after Trump slammed Ford rival GM on Twitter for selling Mexican-made Chevrolet Cruze hatchbacks in the U.S. GM responded thatthe vast majority of U.S.-sold Cruzes are built stateside.
Despite Trump’s criticism, U.S. automakers are unlikely to give up on building cars in Mexico anytime soon, said David Welch and Dave Merrill in Bloomberg.com. Automakers “have rushed to build factories” south of the border in recent years; Ford, GM, and Fiat Chrysler will produce nearly 1 million more cars in Mexico by 2022. Lower wages are only one factor. Another is that Mexico “has trade agreements with 44 countries, giving automakers access to half the global car market tariff-free.” By contrast, the U.S. has trade deals with just 20 countries, making up 9 percent of global car sales.
Retail: Holiday sales finish strong
“A jump in consumer spending in the final stretch of December significantly offset a slow start to the U.S. holiday shopping season,” said Nandita Bose in Reuters.com. Sales at brick-and-mortar stores in the week ending Dec. 24 rose 6.5 percent year-over-year, making up for a disappointing November, and the late surge is “likely to help many retailers beat sales forecasts.” Spending over Thanksgiving weekend fell 3.5 percent from a year ago despite strong online sales, according to the National Retail Federation. U.S. consumer confidence also rose in December to its highest point in more than 15 years.
Construction: Spending hits post-recession high
U.S. construction spending just reached its highest level “in more than a decade,” said Martin Crutsinger in the Associated Press. Builders increased spending 0.9 percent in November, following a 0.6 percent increase in October, driven by “solid gains in home construction, non residential building, and government construction activity.” Total construction spending rose to a seasonally adjusted annual rate of $1.18 trillion in November, “the highest point since April 2006, when a housing boom fueled building.” Economists believe more gains are in store in 2017, thanks to a strong job market and low unemployment.
Banking: Deutsche Bank, Credit Suisse settle suits
Deutsche Bank and Credit Suisse have agreed to pay the U.S. government a combined $12.5 billion in fines for selling toxic assets during the subprime mortgage crisis, said Jan-Henrik Foerster in Bloomberg.com. The settlement puts to rest a lingering investigation from the aftermath of the financial crisis “that undermined confidence in the banks and raised questions about their turnarounds.” However, the settlement costs will probably lead the banks “to second straight annual losses.” Deutsche Bank will pay $7.2 billion, and Credit Suisse $5.3 billion.
Labor: Minimum wage hikes kick in across U.S.
Minimum wage increases went into effect in 19 states on New Year’s Day, providing raises “for millions of the lowest-paid U.S. workers,” said David Klepper in the Associated Press. Massachusetts and Washington state have the highest new minimum wage in the country, $11 per hour. Voters in November passed higher-minimum-wage laws in Arizona, Maine, and Colorado, while seven other states—Alaska, Florida, Missouri, Montana, New Jersey, Ohio, and South Dakota— automatically increased their minimum wage based on indexing.