Fast food giant reports an annual increase of 13.8%
Fast-food giant McDonald’s on Thursday reported its largest annual increase in US sales since 1993. Sales at its American restaurants open for at least 13 months soared 13.8%.
The fourth quarter alone saw US sales jump 7.5%, partly due to price increases on some items on its menu.
In October last year, the company’s CEO, Chris Kempczinski, said menu prices were about 6% higher in 2021 compared to 2020, which didn’t turn off customers and “has been pretty well received” by them.
The fast-food chain was forced to raise prices to tackle wage inflation and cover the increased costs of food and paper, CFO Kevin Ozan said during an analyst call this week, as cited by CNN. He noted that costs may keep growing in 2022, as Covid-19-induced supply chain issues are expected to persist. McDonald’s also saw a significant boost in its digital sales and the growing popularity of certain menu items like the Crispy Chicken Sandwich and McRib.
Overall, the company said its 2021 sales “benefited from fewer restaurant closures and reduced Covid-related government restrictions compared with the prior year.”
The company reported a total of $6 billion in revenue for the past year. However, this fell short of analyst expectations, as did international sales. The chain’s shares shed some 2% following the sales report.
Supply shortages and the Ukraine-Russia crisis raise concerns over energy supplies
Global coal prices jumped by over a third in January, edging toward record highs reached in October 2021, due to supply shortages and tensions between Russia and Ukraine. The benchmark Newcastle coal index rose to $262 a ton.
The coal market reacted to a month-long export ban by major supplier Indonesia, which halted deliveries following new domestic market sales regulations at the peak of the European heating season. The ban is due to be lifted on January 31, but experts are uncertain about the volume of coal the markets may expect, with Indonesian authorities saying only miners that have complied with the new laws will be allowed to resume exports.
There are also worries over the outcome of the Russia-Ukraine crisis. The reported increase of Russian troops near Ukraine’s border has been met with outrage in the West, which threatened Moscow with sanctions in the event of a military conflict.
Some experts speculate that Russia may cut off gas supplies to Europe in response to sanctions. If that happens, Europe, which is already short on gas, with the commodity prices nearly doubling in the past months, may start loading up on coal, analysts say. According to data from UK oil and gas giant BP, European utilities have already stepped up imports of coal since mid-2021, after reducing their share of global coal use to 6.2% in 2020 amid a push towards greener energy.
Projections from commodity flows tracking firm Kpler show that Europe is due to import some 5.58 million tons of thermal coal this month, the highest monthly figure since 2019 and over 1 million tons more than the monthly average for 2021 coal imports. If this buying spree continues, coal prices will keep rising, squeezing the market already tight from high demand in two major coal consumers – China and India. Last year’s coal price records were reached because of shortages in these two states amid cold weather and booming post-Covid-19 pandemic industrial demand.
Analysts expect coal prices to retreat in February, as the heating season in the Northern Hemisphere draws to an end, but they claim this could change if Russia halts gas deliveries to Europe or stops coal exports.
Ukraine was once a major producer of coal, with some 50% of the commodity mined in its eastern regions, which broke away in 2014. The two self-proclaimed republics of Donetsk (DNR) and Lugansk (LNR), both on the Russian border, declared independence from Ukraine and remain at a standoff with Kiev. Amid the conflict, many mines had been shut down and coal production dropped. The breakaway republics halted coal shipments to the rest of Ukraine, which forced Kiev to import the commodity for power generation from the US. This is much more expensive due to freight costs, which resulted in a spike in power prices. However, coal exports from the regions have been gaining momentum recently, up 26.8% last year after Russia allowed quota-free imports from the breakaway republics.
Considering all the constraints weighing on the global coal market, analysts say the pricing situation remains unclear.
“[Buyers have] very few options, there are supply issues everywhere,” Vasudev Pamnani from Indian consultancy Lavi Coal Info OPC told Reuters.
Washington apparently believes attempts to shatter Russian economy will have no effect on ordinary Russians
The Biden administration says sanctions that it plans to introduce against Russia in the event of a hypothetical war with Ukraine would target Russian industry and key public figures, but not ordinary people.
“We can’t preview every action, but the intent there really is to have measures that we think will degrade Russia’s industrial capabilities and industrial production capacity over time, not to go after individual, everyday Russian consumers,” White House national security official Peter Harrell said in a speech to the Massachusetts Export Center on Thursday, as cited by Reuters.
Harrell also stated that in the event of military escalation, Washington is ready to immediately impose “crippling financial costs on major Russian financial institutions as well as to impose a range of quite sweeping export controls that will degrade Russian industrial capacity over the mid- and long term.” He went on to specify that the US strategy includes sanctions against major Russian financial institutions aiming “to trigger capital flight, to trigger inflation, to make the Russian Central Bank provide bailouts to its banks… so [Russian President Vladimir] Putin feels costs on day one.” Harrell’s remarks narrow the scope of measures that may be introduced, however, it appears unlikely that the ordinary consumer in Russia would not be affected by the collapse of the country’s economy, as Washington proposes.
Harrell did say he hoped measures would never have to be implemented, but stressed that Washington is fully prepared to introduce them if need be. According to the official, the measures aim to “degrade Russia’s ability to have industrial production in a couple of key sectors.” He did not specify the sectors, but other White House officials did mention the aviation, maritime, robotics, artificial intelligence, quantum computing, and defense industries. According to various sources, the US has the means to stop firms worldwide from shipping items like semiconductor chips made with US technology to Russia, as it did with China’s Huawei. Talks regarding the matter have reportedly been held with Taiwan and South Korea, major manufacturers of chips.
On Friday, Commerce Department official Thea Kendler noted that sanctions would also target Russia’s “key people,” while US President Joe Biden earlier this week vowed to consider personal sanctions against the Russian leader himself.
All measures are to come “in waves,” with US officials “quite confident we will have a very high degree of alignment with Europe if Russia does invade Ukraine.”
The talk of potential sanctions against Russia comes amid the global hype over Moscow’s recent amassing of troops in its regions bordering with neighboring Ukraine. Western states, largely at the behest of Washington, view it as a preface to Russia’s invasion of Ukraine. The Kremlin, however, repeatedly stressed that no such intentions exist and the movement of a country’s troops within its borders should not concern outsiders.
America’s trade deficit continues to widen as exports shrink
The US trade deficit has soared past $1 trillion in 2021 for the first time on record, government estimates from the Census Bureau show. For the past year, the figure rose to an unprecedented $1.08 trillion from $893.5 billion in 2020, a record high of its own.
The goods-trade gap jumped 3% in December alone to $101 billion, posting the biggest monthly increase to date. Analysts explain the situation with the shift of consumer focus to imports of a variety of non-US-made products, like toys, smartphones, and appliances.
“Strong demand and shifting consumer preferences during the pandemic led to a surge in imports that continues to outstrip exports and is contributing to all-time highs in the deficit,” Rubeela Farooqi, chief US economist at New York-based High Frequency Economics, told Reuters.
Analysts add that while the US showed a speedy recovery after the Covid-19 pandemic-induced crisis, enabling citizens to boost their spending on goods, many other countries lagged behind in their economic rebound, which made the demand for US exports slower to recover. More simply put, Americans could afford to purchase more non-US-made goods, and that’s what they did.
Experts say the deficit may narrow when the global recovery catches up, but with the Omicron variant still at large, this may take a while.
“The Omicron variant threatens to fuel an even wider deficit as virus concerns weigh on global growth and tourism, putting downward pressure on US exports, while domestic goods demand stays robust,” Mahir Rasheed of Oxford Economics told Market Watch.
More specific numbers on the trade deficit are expected next week when the full December report on the US trade balance is due to be published.
Shares rallied after firm posted blockbuster profits and hinted at metaverse expansion
The iPhone maker’s shares soared some 7% to $170.33 per share on Friday, marking the biggest one-day jump in a year and a half. Already the globe’s largest company by market value, Apple posted a Wall Street-beating record $123.9 billion in sales for the last three months of 2021, despite pressing supply-chain constraints, the company announced this week. Total revenue increased 11% in the quarter ended December 25, 2021, Apple said, while profits jumped 20%, reaching a record $34.6 billion.
“Apple is known for its supply-chain prowess and many wonder about the actions Apple has taken and will take to better position itself for this calendar year,” Scott Kessler of analytics firm Third Bridge told Reuters.
The figures helped Apple shares make up for the losses it has seen in recent weeks during a sell-off in growth and technology stocks.
The positive market reaction also stemmed from Apple’s announcement of its planned metaverse push. The company’s CEO Tim Cook on Thursday said Apple is mulling expanding its library of 14,000 augmented reality (AR) apps.
“We see a lot of potential in this space and are investing accordingly,” Cook said, responding to a question on Apple’s plans for the metaverse, the increasingly popular virtual world environment that can be accessed via internet.
