Electronics

Retail Sales Up 0.3% In August From July Amid Inflation

By Associated Press
September 15, 2022

Consumer spending accounts for nearly 70% of U.S. economic activity.

Americans picked up their spending a bit in August from July even as surging inflation on household necessities like rent and food took a toll on family budgets.

U.S. retail sales rose an unexpected 0.3% last month after falling 0.4% in July, the Commerce Department said Thursday. Excluding business at gas stations, sales rose 0.8%.

Sales at grocery stores rose 0.5% , helped by rising prices in food.

There was, however, weakening in some areas of discretionary spending with Americans fully aware of inflation’s bite. Business at restaurants ticked up 1.1%, but the pace has slowed. Sales at furniture stores fell 1.3%. Online sales fell 0.7% last month after Amazon’s Prime Day boosted e-commerce sales in July.

“Retailers would probably like to be growing more, especially relative to inflation, but I’m not sure they could realistically hope for much more,” said Ted Rossman, senior industry analyst at Bankrate.com. “Consumer spending habits are changing as the pandemic continues to recede and inflation remains high.”

Consumer spending accounts for nearly 70% of U.S. economic activity and Americans have remained mostly resilient even with inflation near four-decade highs. Yet surging prices for everything from mortgages to milk have upped the anxiety level. Overall spending has slowed and shifted increasingly toward necessities like food, while spending on electronics, furniture, new clothes and other non-necessities has faded.

On Thursday, it appeared that the U.S. dodged a national freight rail strike, which could have sent retail prices higher.

Still, inflation remains stubbornly high. Lower gas costs slowed U.S. inflation for a second straight month in August, but most other prices across the economy kept going up — evidence that inflation remains a heavy load for American households.

Consumer prices rose 8.3% from a year earlier and 0.1% from July. But the jump in “core” prices, which exclude volatile food and energy costs, was especially worrisome. It outpaced expectations and sparked fear that the Federal Reserve will increase interest rates more aggressively and raise the risk of a recession.

The government’s monthly report on retail sales covers about a third of all consumer purchases and doesn’t include spending on most services, ranging from plane fares and apartment rents to movie tickets and doctor visits. In recent months, Americans have been shifting their purchases away from physical goods and more toward travel, hotel stays and plane trips as the threat of the virus fades.

Additional reporting by The Associated Press.

: newsy.com

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Why Is Taiwan So Disputed?

By Patrick Fok
September 8, 2022

There are still tensions over diplomatic relations between Taiwan and the U.S.

How did Taiwan become one of the most contested places on the planet?

The story begins in 1949. A civil war pitted Chinese nationalists and communists fighting in a civil war.

The communists won on the mainland in 1949. The nationalists, led by Chiang Kai-Shek, fled to Taiwan, 100 miles off the southeast coast.

Its leaders saw themselves as the proper rulers of China. So on one side of the Taiwan Strait was the People’s Republic of China, or PRC, and on the other, the Republic of China, or ROC, which is still the official name of Taiwan today.

For decades nations maintained relations with both governments.

That was until 1979 when the U.S. established diplomatic relations with the PRC on the mainland and broke official ties with the ROC in Taiwan.

Beijing has said for decades that Taiwan is part of what it calls “One China.”

Since 1982, the U.S. has maintained a delicate balance on the issue. On one hand, American administrations have recognized China’s position but crucially, the U.S. hasn’t endorsed it.

Instead, while calling for a peaceful resolution of the conflict, the U.S. has been an unofficial military partner of Taiwan for decades. During the Trump and Biden administrations alone, the U.S. sold roughly $20 billion in arms to Taiwan, according to the Arms Control Association.

Historically, the U.S. hasn’t said it would defend Taiwan from a Chinese invasion.

Analysts have called this position “strategic ambiguity” meant to keep Beijing from attacking Taiwan without provoking war

But this tenuous balance is at risk of being upended.

President Joe Biden has repeatedly made assurances that the U.S. would in fact defend Taiwan.

REPORTER: Are you willing to get involved militarily to defend Taiwan if it comes to that?

PRESIDENT JOE BIDEN: Yes.

REPORTER: You are?

BIDEN: That’s the commitment we made.

White House officials backtracked, but House Speaker Nancy Pelosi further ratcheted the tension in August when she visited Taiwan, the highest profile American delegation on the island since 1997.

“Democrats and Republicans, House and Senate, both sides of the aisle united in our support for Taiwan,” said Pelosi.

China responded with condemnation and kicked off a series of aggressive military drills.

The stakes of the confrontation have risen as the prospect of a Chinese invasion could far worsen an ongoing global shortage of semiconductors.

The Taiwan semiconductor manufacturing company makes 92% of the world’s most sophisticated microchips according to the research firm Capital Economics.

Those chips are found in phones, laptops, cars and other electronics across the world.

U.S. lawmakers recently authorized $200 billion in federal spending to promote American semiconductor manufacturing. But new factories will take time to build.

So for now, one of the world’s most contested territories will remain, Taiwan.

: newsy.com

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How Robots Are Impacting U.S. Economy

Experts are pleased with how quickly robots are being added to the workplace. A mechanized future is well on its way.

North American companies are onboarding robot workers at a faster-than-ever pace.

According to the Association for Advancing Automation, companies ordered a record-setting 12,305 machines in the second quarter of 2022. That’s 25% more than the same period a year ago.

“The pandemic definitely highlighted some areas and shortages in resources needed to be automated, and customers had to automate just due to the fact that people weren’t coming back to the workplace,” FANUC North America Vice President Louis Finazzo said.

“For a long time, the automotive industry accounted for 60 to 70% of robot orders,” Association for Advancing Automation President Jeff Burnstein said. “And we knew that when other industries started adopting is when we would really see growth, which is finally happening now, in part due to the pandemic forcing companies to look at other options when they couldn’t bring people into work.”

Burnstein and Finazzo told Newsy that the industries helping fuel this increased demand for robotics ranged widely from food processing to pharmaceuticals.

E-commerce companies have been particularly interested in buying up these robots, as robots can help grab packages and get them ready for delivery.

However, if these robots are meant to close productivity gaps, the results aren’t apparent. During the second quarter of 2022, U.S. productivity fell at its highest rate since the government began collecting that data.

Robots can help do the tasks businesses need done, but it will take time to get those machines up and running. And they’ll need a human workforce with specialized training.

“The lack of people who are available to install and maintain, operate, program and take advantage of all the data — this is a barrier, actually, to further adoption of robotics,” Burnstein said. “We have to put more emphasis on teaching people the skills they need because we all have to benefit in an increasingly automated future.”

Experts are pleased with how quickly robots are being added to the workplace. A mechanized future is well on its way.

“The adoption curve used to be 50 weeks, now it’s been cut into the 21 week range,” Finazzo said. “So, you will see gains happening quicker because the customers and the manufacturers are picking applications that can get immediate impact.”

: newsy.com

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Taiwan Forces Fire At Chinese Drones Flying Off Coast

By Associated Press
August 31, 2022

Amid rising tensions, Taiwan’s forces said warning shots were fired after drones were spotted flying 9 miles off China’s coast.

Taiwan’s military fired warning shots at drones from China flying over its outposts just off the Chinese coastline, underscoring heightened tensions and the self-ruled island’s resolve to respond to new provocations.

Taiwan’s forces said in a statement that troops took the action on Tuesday after drones were found hovering over the Kinmen island group. Dadan, one of the islands where a drone was spotted, lies roughly 9 miles off the Chinese coast.

The statement Wednesday referred to the unmanned aerial vehicles as being of “civilian use,” but gave no other details. It said the drones returned to the nearby Chinese city of Xiamen after the shots were fired. Taiwan previously fired only flares as warnings.

The incident comes amid heightened tensions after China fired missiles into the sea and sent planes and ships across the dividing line in the Taiwan Strait earlier this month. It followed angry rhetoric from Beijing over a trip to Taiwan by House Speaker Nancy Pelosi, the highest-ranking U.S. dignitary to visit the island in 25 years.

China claims Taiwan as its own territory and its recent actions have been viewed as a rehearsal of a possible blockade or invasion. China’s drills brought strong condemnation from Taiwan’s chief ally, the U.S., along with fellow regional democracies such as Australia and Japan. Some of China’s missiles early in August fell into nearby Japan’s exclusive economic zone.

Taiwan maintains control over a range of islands in the Kinmen and Matsu groups in the Taiwan Strait, a relic of the effort by Chiang Kai-shek’s Nationalists to maintain a foothold on the mainland after being driven out by Mao Zedong’s Communists amid civil war in 1949.

Taiwan’s Defense Ministry said China’s actions failed to intimidate the island’s 23 million people, saying they had only hardened support for the armed forces and the status quo of de-facto independence.

Officials said anti-drone defenses were being strengthened, part of a 12.9% increase in the Defense Ministry’s annual budget next year. The government is planning to spend an additional $1.6 billion, for a total of $13.8 billion for the year.

The U.S. is also reportedly preparing to approve a $1.1 billion defense package for Taiwan that would include anti-ship and air-to-air missiles to be used to repel potential Chinese invasion attempt.

Following the Chinese drills, the U.S. sailed two warships through the Taiwan Strait, which China has sought to designate as its sovereign waters. Foreign delegations from the U.S., Japan and European nations have continued to arrive to lend Taipei diplomatic and economic support.

Arizona Gov. Doug Ducey is currently visiting Taiwan to discuss production of semiconductors, the critical chips that are used in everyday electronics and have become a battleground in the technology competition between the U.S. and China.

Ducey is seeking to woo suppliers for the new $12 billion Taiwan Semiconductor Manufacturing Corp. (TSMC) plant being built in his state.

Taiwanese Air Force pilots have also trained at Luke Air Force Base outside Phoenix for more than 25 years, an indication of continuing U.S. support for Taiwan’s defense despite the lack of formal diplomatic ties.

Reacting to Ducey’s visit, China on Wednesday reaffirmed its opposition to any official contacts between the U.S. and Taiwan. That was a further reminder of the Communist Party’s refusal to acknowledge the separation of powers within the U.S. government and the right of American local officials to operate independently of the administration.

“We urge the relevant parties in the U.S. to … stop any forms of official contacts with Taiwan, and refrain from sending wrong signals to the Taiwan independence forces,” Foreign Ministry spokesperson Zhao Lijian said at a daily briefing.

“China will take strong measures to resolutely safeguard national sovereignty and territorial integrity,” Zhao said.

Additional reporting by The Associated Press.

: newsy.com

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Government Takes Steps To Improve Food Security For Military Families

In recent months, the U.S. government has taken some steps to improve food security for its service members — but there’s more to do.

Years after joining the Navy, Lisa Javenar still worries about having enough food for her family of five every month.

We first introduced you to Lisa in May. She’s the wife of Teddy Javenar, an electronics technician with the rank of petty officer third class. Some months, she doesn’t know how she’s going to feed her kids.

“We know what we signed up for,” Javenar said. “It doesn’t make it any easier. It’s still difficult. And so to have to deal with all of that and have to worry about how we’re going to feed our families. I mean, it’s just — it would be awesome to not have that extra stress.”

In tight months, Lisa, like thousands of other military families, helps feed her family by joining a line at the military equivalent of a food bank.

As Newsy reported, a bureaucratic oversight is costing thousands of military families critical benefits to keep them from going hungry, especially in high-rent cities like San Diego where the value of housing can easily put them over budget.

They get what’s called a basic allowance for housing to live off base. It covers the high rent, but also counts as income. It means they missed qualifying for SNAP benefits because on paper, they brought in too much money — by about $5 a month.

The U.S. Department of Defense issued a roadmap this summer for strengthening food security in the force.

It references a survey done in 2020 that showed 24% of active-duty service members were food insecure. That’s around 300,000 people, plus their families.

“People are shocked when they hear that military families struggle with hunger in the first place at all,” said Josh Protas, an executive at aid group MAZON: A Jewish Response to Hunger. “And they should be shocked because there’s no reason that those who serve in our armed forces should have to struggle to put food on the table.”

The Department of Defense plan aims to increase access to healthy food, help military spouses with employment, look at pay, and more.

“It’s the first time that i know that a Secretary of Defense has spoken openly about this problem, and not tried to deflect blame onto the service members who are impacted, but to look at the systemic issues that are causing the problem,” Protas said.

There are other fixes in the works. Families may soon get what is called a basic needs allowance, a sort of pay bonus for low-income military families. It was part of last year’s bill that appropriates money for the Department of Defense.

The Congressional Budget Office estimates it will mean about $400 extra each month on average.

But like SNAP eligibility, this too counts the basic allowance for housing as income, disqualifying many families.

It does give the Secretary of Defense power to exclude the basic allowance for housing in high-cost areas.

A few members of Congress are working hard to fix this in the next defense spending bill. One effort cleared the House of Representatives but now must make it through the Senate this fall.

The Senate’s version made it out of committee. It doesn’t tackle the housing allowance issue but it does raise the financial limit for who qualifies for the basic needs allowance.

There are also other standalone bills to stop the housing allowance from being counted as income for SNAP eligibility, including one introduced by Sen. Tammy Duckworth, who we spoke to earlier this year.

“We have a real issue here,” Duckworth said. “The same people who protect and defend us should not be worried about whether or not their children are getting food.”

There’s a similar bill in the House.

Now, after Newsy’s report, some familiar faces on the veterans advocacy front are joining the fight.

John Feal fought alongside comedian and TV host Jon Stewart to get funding and benefits to 9/11 first responders, and most recently advocated for passing the PACT Act, which expanded care for veterans exposed to toxic burn pits in Iraq and Afghanistan.

The day after President Biden signed the PACT Act, Feal shifted his focus. He sent a tweet saying “24% of our military and their families are food insecure… D.C., I am coming back with a vengeance!”

“We’re going to get in their face,” Feal said. “We’re going to make them do what’s morally right. We’re going to make them put aside their politics and their ideologies and think like human beings and show some humanity. If we have to shame them and scorch the earth to do so, then we’ll do so. We come in peace until we can’t come in peace anymore.”

It’s still unclear whether other agencies, like the USDA, the Department of Defense, or even the White House, could legally fix this quickly. But Protas says there’s one group of people in D.C. that could.

“Congress shouldn’t wait for administrative action, whether or not that is forthcoming, but should do right by military families and not leave them stranded,” he said.

: newsy.com

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CEOs Are Obsessed With ‘Elasticity’ as Inflation Soars. Here’s Why.

When companies raise prices, they make assumptions about the strength of their brands and how inflation affects their typical customers — earnings at the mass-market retailer Target have plunged because its shoppers have been buying less clothing and electronics, while the luxury house Hermès, maker of the pricey Birkin bag, recently reported its biggest profit margin ever.

Fittingly, the number of mentions of elasticity on the earnings calls mimics the inflation rate: bumping along at a relatively low level of about 2 percent for years before soaring to new heights in recent months, above 9 percent in June.

Several companies say they have already noticed higher prices hurting demand, at least for some of their products. That has been true for Kellogg, which saw cereal sales in Europe slow; Tyson Foods, the largest U.S. meat processor by sales, which said customers were shifting away from more expensive chicken and meat offerings in favor of cheaper cuts; and Ralph Lauren, which said it had seen some of its “value-oriented” customers pulling back.

Walmart

“The rising cost for essential items and customers’ reprioritization of spending led to significant mix shifts in our business.”
— John David Rainey, chief financial officer

Southwest Airlines

“Leisure travelers have a price elasticity effect where you can’t go much higher.”
— Andrew M. Watterson, chief commercial officer

Procter & Gamble

“As they are more exposed to inflation broadly in the marketplace, with the highest inflation in 40 years, it’d be naïve to assume the consumer is not looking at their cash outlay and their spending even in our categories.”
— Andre Schulten, chief financial officer

And a few companies have raised alarms about inflation already leading to broad-based weakness in demand.

HanesBrands

“I think you’re seeing a macro environment change in the second quarter, and particularly towards the middle to end of the quarter, with the inflation really hitting the consumer, and you saw an inflection point in the consumer behavior.”
— Stephen B. Bratspies, chief executive

Crocs

“We anticipate, as the drag of high interest rates, high inflation and uncertainty continues to impact the consumer, that they will soften as the year goes on.”
— Andrew Rees, chief executive

Sweetgreen

“In Sweetgreen’s 15-year history of sales patterns, we’ve never seen this before. Our historical seasonality always showed growth during this period.”
— Mitch Reback, chief financial officer

The growing chatter about elasticity suggests that the point at which higher prices could force broader consumer cutbacks is approaching.

“In the first half of the year, we saw minimal price elasticity across our portfolio,” Michele Buck, the chief executive of Hershey, told investors. “We continue to expect more elasticity in the second half of the year than what we have experienced year to date.”

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U.S. To Hold Trade Talks With Taiwan

The announcement of trade talks comes after Beijing fired missiles into the sea to intimidate Taiwan after U.S. House Speaker Nancy Pelosi visited.

The U.S. government will hold trade talks with Taiwan in a sign of support for the island democracy that China claims as its own territory, prompting Beijing to warn Thursday it will take action if necessary to “safeguard its sovereignty.”

The announcement of trade talks comes after Beijing fired missiles into the sea to intimidate Taiwan after U.S. House Speaker Nancy Pelosi this month became the highest-ranking American official to visit the island in 25 years.

Chinese President Xi Jinping’s government criticized the planned talks as a violation of its stance that Taiwan has no right to foreign relations. It warned Washington not to encourage the island to try to make its de facto independence permanent, a step Beijing says would lead to war.

“China firmly opposes this,” Ministry of Commerce spokesperson Shu Jueting said. She called on Washington to “fully respect China’s core interests.”

Also Thursday, Taiwan’s military held a drill with missiles and cannons simulating a response to a Chinese missile attack.

Taiwan and China split in 1949 after a civil war and have no official relations but are bound by billions of dollars of trade and investment. The island never has been part of the People’s Republic of China, but the ruling Communist Party says it is obliged to unite with the mainland, by force if necessary.

President Joe Biden’s coordinator for the Indo-Pacific region, Kurt Campbell, said last week that trade talks would “deepen our ties with Taiwan” but stressed policy wasn’t changing. The United States has no diplomatic relations with Taiwan, its ninth-largest trading partner, but maintains extensive informal ties.

The U.S. Trade Representative’s announcement of the talks made no mention of tension with Beijing but said “formal negotiations” would develop trade and regulatory ties, a step that would entail closer official interaction.

Being allowed to export more to the United States might help Taiwan blunt China’s efforts to use its status as the island’s biggest trading partner as political leverage. The mainland blocked imports of Taiwanese citrus and other food in retaliation for Pelosi’s Aug. 2 visit.

Taiwan’s Foreign Ministry expressed “high welcome” for the trade talks, which it said will lead to a “new page” in relations with the United States.

“As the situation across the Taiwan Strait has recently escalated, the U.S. government will continue to take concrete actions to maintain security and stability across the Taiwan Strait,” it said in a statement.

U.S.-Chinese relations are at their lowest level in decades amid disputes over trade, security, technology, and Beijing’s treatment of Muslim minorities and Hong Kong.

The U.S. Trade Representative said negotiations would be conducted under the auspices of Washington’s unofficial embassy, the American Institute in Taiwan.

“China always opposes any form of official exchanges between any country and the Taiwan region of China,” said Shu, the Chinese spokesperson. “China will take all necessary measures to resolutely safeguard its sovereignty.”

Washington says it takes no position on the status of China and Taiwan but wants their dispute settled peacefully. The U.S. government is obligated by federal law to see that the island has the means to defend itself.

“We will continue to take calm and resolute steps to uphold peace and stability in the face of Beijing’s ongoing efforts to undermine it, and to support Taiwan,” Campbell said during a conference call last Friday.

China takes more than twice as much of Taiwan’s exports as the United States, its No. 2 foreign market. Taiwan’s government says its companies have invested almost $200 billion in the mainland. Beijing says a 2020 census found some 158,000 Taiwanese entrepreneurs, professionals and others live on the mainland.

China’s ban on imports of citrus, fish and hundreds of other Taiwanese food products hurt rural areas seen as supporters of President Tsai Ing-wen, but those goods account for less than 0.5% of Taiwan’s exports to the mainland.

Beijing did nothing that might affect the flow of processor chips from Taiwan that are needed by Chinese factories that assemble the world’s smartphones and consumer electronics. The island is the world’s biggest chip supplier.

A second group of U.S. lawmakers led by Sen. Ed Markey, a Democrat from Massachusetts, arrived on Taiwan on Sunday and met with Tsai. Beijing announced a second round of military drills after their arrival.

Taiwan, with 23.6 million people, has launched its own military drills in response.

On Thursday, drills at Hualien Air Base on the east coast simulated a response to a Chinese missile attack. Military personnel practiced with Taiwanese-made Sky Bow 3 anti-aircraft missiles and 35mm anti-aircraft cannon but didn’t fire them.

“We didn’t panic” when China launched military drills, said air force Maj. Chen Teh-huan.

“Our usual training is to be on call 24 hours a day to prepare for missile launches,” Chen said. “We were ready.”

The U.S.-Taiwanese talks also will cover agriculture, labor, the environment, digital technology, the status of state-owned enterprises and “non-market policies,” the U.S. Trade Representative said.

Washington and Beijing are locked in a 3-year-old tariff war over many of the same issues.

They include China’s support for government companies that dominate many of its industries and complaints that Beijing steals foreign technology and limits access to an array of fields in violation of its market-opening commitments.

Then-President Donald Trump raised tariffs on Chinese goods in 2019 in response to complaints that its technology development tactics violate its free-trade commitments and threaten U.S. industrial leadership. President Biden has left most of those tariff hikes in place.

Additional reporting by The Associated Press.

: newsy.com

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U.S. Retail Sales Were Flat In July As Inflation Takes A Toll

By Associated Press
August 17, 2022

Overall spending has weakened, and it has shifted increasingly toward necessities like groceries and away from discretionary items.

The pace of sales at U.S. retailers was unchanged last month as persistently high inflation and rising interest rates forced many households to spend more cautiously.

Retail purchases were flat in July after having risen 0.8% in June, the Commerce Department reported Wednesday.

America’s consumers, whose spending accounts for nearly 70% of economic activity, have remained mostly resilient even with inflation near a four-decade high, economic uncertainties rising and mortgage and other borrowing rates surging. Still, their overall spending has weakened, and it has shifted increasingly toward necessities like groceries and away from discretionary items like home goods, casual clothes and electronics.

The government’s monthly report on retail sales covers about a third of all consumer purchases and doesn’t include spending on most services ranging from plane fares and apartment rents to movie tickets and doctor visits.

Though overall inflation remains painfully high, consumer prices were unchanged from June to July — the smallest such figure in more than two years.

Still, inflation is posing a serious threat to families. Gasoline prices have fallen from their heights, but food, rent, used cars and other necessities have become far more expensive, beyond whatever wage increases most workers have received.

Despite a still-robust job market, the U.S. economy shrank in the first half of 2022, raising fears of a potential recession. Growth has been weakening largely as a consequence of the Federal Reserve’s aggressive interest rate hikes, which are intended to cool the economy and tame high inflation.

The impact of the Fed’s hikes has been felt especially in the housing market. Sales of previously occupied homes have slowed for five straight months as higher mortgage rates and high sales prices have kept many would-be buyers on the sidelines.

But the most important pillar of the economy — the job market — has proved durable. America’s employers added a hefty 528,000 jobs in July, and the unemployment rate reached 3.5%, matching a near-half-century low reached just before the pandemic erupted in the spring of 2020.

As consumers have shifted their purchases more toward necessities, Walmart, the nation’s largest retailer, on Tuesday reported sales and profit results that topped expectations. Walmart said more of its customers were favoring lower-priced grocery items.

But the company is benefiting from higher-income shoppers who have been trading down to Walmart to try to reduce their grocery bills. The company, long associated with price-conscious and lower-income consumers, disclosed that roughly 75% of its grocery sales last quarter were to households with incomes of at least $100,000.

At the same time, in recent weeks, Walmart and its rival Target have issued profit warnings, noting that their shoppers were reducing their discretionary purchases.

And last month, Best Buy, the nation’s largest consumer electronics chain, cut its annual sales and profit forecast, saying inflation had dampened consumer spending on gadgets.

Still, as a whole, America’s consumers have been showing the steady willingness to spend, though at a more modest pace. Home Depot on Tuesday reported sustained demand among its customers for goods related to home improvement projects despite surging prices and mortgage rates for homes.

Additional reporting by The Associated Press.

: newsy.com

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Inflation Weighs On Back-To-School Buying For Many Families

This back-to-school season, parents — particularly in the low to middle income bracket — are focusing on the basics while shopping at cheaper stores.

To understand the impact of surging inflation on this year’s back-to-school spending, look no further than children’s rain boots with motifs like frogs and ladybugs made by Washington Shoe Co.

Spending held steady for these evergreen items even after the Kent, Washington-based business was forced to pass along 15% price increases in January to its retail clients because of soaring transportation costs. But by May, as gas and food prices also surged, shoppers abruptly shifted away from the $35 higher-end rain boots to the no-frills versions that run $5 to $10 cheaper, its CEO Karl Moehring said.

“We are seeing consumers shift down,” said Moehring, noting dramatic 20% sales swings in opposite directions for both types of products. “Wages are not keeping up with inflation.”

This back-to-school shopping season, parents — particularly in the low to middle income bracket — are focusing on the basics while also trading down to cheaper stores amid surging inflation, which hit a new 40-year high in June.

Last week, Walmart noted higher prices on gas and food are forcing shoppers to make fewer purchases of discretionary items, particularly clothing. Best Buy, the nation’s largest consumer electronics chain, cited that inflation has dampened consumer spending on gadgets. Both companies cut their profit forecasts as a result.

Such financial struggles amid the industry’s second-most important shopping season behind the winter holidays mark a big difference from a year ago when many low-income shoppers, flush with government stimulus and buoyed by wage increases, spent freely.

Matt Priest, CEO of trade group Footwear Distributors & Retailers of America, noted that last year, the group’s retail members saw a noticeable uptick in online sales mid-month when shoppers received their monthly child tax credit checks that amounted to a couple of hundred dollars. This season, without that bump, he expects shoppers will buy fewer shoes for their children and rely on private label brands.

Inflation has squeezed household finances for Jessica Reyes, 34, who took her daughters Jalysa, 7, and Jenesis, 5, to a “Back to School Bash” event last month in Chicago’s northside that offered free backpacks filled with supplies for students.

“I feel like everything is going up these days,” she said at the event. “We’re a one-income household right now … so I think it’s greatly affected us in all areas, in bills and in house necessities and school necessities.”

Out shopping, her girls were drawn to the school supplies featuring TV characters and animals they love, but she’ll focus on the plain versions.

“They want the cute ones, you know, the kitty ones. And those are always more expensive than the simple ones. And same thing with folders, or notebooks, or pencils,” Reyes said.

Earlier, Manny Colon and his daughters Jubilee, 8, and Audrey, 5, stopped by the back-to-school event to pick out backpacks.

Colon, 38, works at his daughters’ elementary school. He said his spouse has had to pick up extra work because of high prices for school supplies, groceries and gas.

“I think it’s definitely impacted us,” he said.

Multiple forecasts point to a solid back-to-school shopping season.

Mastercard SpendingPulse, which tracks spending across all payment forms including cash, forecasts back-to-school spending will be up 7.5% from July 14 through Sept. 5 compared with the year-ago period when sales rose 11%. For the 2020 back-to-school period, sales fell 0.8% as the pandemic wreaked havoc on schools’ reopening plans and back-to-school shopping.

Still, higher prices are propping up much of the numbers.

A basket of roughly a dozen supply items showed a price increase of nearly 15% on average for this back-to-school season compared with a year ago, according to retail analytics firm DataWeave. The price of backpacks are up nearly 12% to an average of $70, for example.

Back 2 School America, an Illinois-based nonprofit that distributes back-to-school kits to kids from low-income families, has seen “a significant increase in costs of supplies,” including a 10% increase from their vendor with another possible markup on the way, said the organization’s CEO Matthew Kurtzman. And shipping costs have also gone up.

Thanks to increased support this year, Back 2 School America will be able to cover the new costs and is on track to distribute more kits than ever before — 12,000 so far, and more than 30,000 by the end of August, Kurtzman said. But the funding isn’t guaranteed in the future as worries about a recession increase.

Retailers face big challenges to get shoppers to spend, particularly on clothing.

Walmart said last week it was taking extra discounts on clothing to clear out inventory. Analysts believe those sales will exert more pressure on other rivals to discount more to stay competitive. However, Walmart said it’s encouraged by the early signs for sales of school supplies.

Meanwhile, Gap’s low-price Old Navy division is guaranteeing a price freeze on its denim from July 29 through the end of September.

As for Washington Shoe, Moehring said he’s shifting production away from higher-priced children’s boots to more value-priced products in the months ahead. The company still sees annual sales ahead of last year, but he’s being cautious.

“I believe it is a muddy outlook, ” he said.

Additional reporting by The Associated Press.

: newsy.com

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China Blocks Some Taiwan Imports But Avoids Chip Disruptions

China blocked imports of hundreds of food items from Taiwan but has not disrupted the flow of processor chips and other industrial components.

China blocked imports of citrus, fish and other foods from Taiwan in retaliation for a visit by a top American lawmaker, Nancy Pelosi, but has avoided disrupting one of the world’s most important technology and manufacturing relationships.

The two sides, which split in 1949 after a civil war, have no official relations but multibillion-dollar business ties, especially in the flow of Taiwanese-made processor chips needed by Chinese factories that assemble the world’s smartphones and other electronics.

They built that business while Beijing threatened for decades to enforce the ruling Communist Party’s claim to the island by attacking.

Two-way trade soared 26% last year to $328.3 billion. Taiwan, which produces half the world’s processor chips and has technology the mainland can’t match, said sales to Chinese factories rose 24.4% to $104.3 billion.

“The global economy cannot function without chips that are made in either Taiwan or China,” Carl B. Weinberg of High-Frequency Economics said in a report.

On Wednesday, Beijing blocked imports of citrus and frozen hairtail and mackerel from Taiwan after Pelosi, speaker of the House of Representatives, arrived on the island. China has not disrupted the flow of chips and other industrial components, a step that would send shock waves through the shaky global economy.

Also this week, China blocked imports of hundreds of other food items from Taiwan including cookies and seafood, though the timing was unclear. The customs website showed their import status was switched to “suspended.”

Fruit, fish and other foods are a small part of Taiwan’s exports to China, but the ban hurts areas that are seen as supporters of President Tsai Ing-wen.

Beijing has used import bans on bananas, wine, coal and other goods as leverage in disputes with Australia, the Philippines and other governments.

Beijing also announced four days of military exercises with artillery fire in waters around Taiwan. That might delay or disrupt shipping to and from the island, one of the biggest global traders.

The potential disruption adds to concerns over weakening global economic growth, but Asian stock markets rose Wednesday after there was no immediate sign of Chinese military action.

The Communist Party says Pelosi’s visit might embolden Taiwan to make its decades-old de facto independence permanent. Beijing says that would lead to war.

The administration of U.S. President Joe Biden has tried to mollify Beijing, saying there is no change in Washington’s “one China policy.” That says the United States takes no position on the status of the two sides but wants their dispute settled peacefully.

Washington has no formal relations with Taiwan but maintains unofficial ties and is obligated by federal law to see the island has the means to defend itself.

Meeting leaders in Taiwan, Pelosi said she and members of Congress traveling with her were showing they will not abandon their commitment to the island democracy.

“America’s determination to preserve democracy, here in Taiwan and around the world, remains ironclad,” Pelosi said in a short speech during a meeting with the president, Tsai. She departed later in the day for South Korea.

“Facing deliberately heightened military threats, Taiwan will not back down,” Tsai said.

Taiwanese companies have invested nearly $200 billion in the mainland over the past three decades, according to the island’s government. Entrepreneurs, engineers and others have migrated to the mainland to work, some recruited by Chinese chipmakers and other companies that want to catch up with Taiwan.

A 2020 census found 158,000 Taiwanese living on the mainland, according to the police ministry.

Taiwan plays an outsized role in the chip industry for an island of 24.5 million people, accounting for more than half the global supply.

Its producers including Taiwan Semiconductor Manufacturing Corp. make the most advanced processors for smartphones, tablet computers, medical devices and other products.

Beijing has invested billions of dollars in developing its own industry, which supplies low-end chips for autos and appliances but cannot support the latest smartphones, tablet computers, medical devices and other products.

Chips are China’s biggest import at more than $400 billion a year, ahead of crude oil.

That concentration has fueled concern in the United States and Europe about relying too heavily on supplies from East Asia. The U.S. government is trying to expand America’s production capacity.

Overall, China is Taiwan’s biggest trading partner, taking more than twice as much of its exports as the United States, the island’s No. 2 foreign market.

Beijing has tried to use access to its markets to undermine Tsai and other Taiwanese leaders it accuses of pursuing independence.

The Communist Party also has used military action in the past to try to hurt Taiwanese leaders by disrupting the island’s economy.

The mainland tried to drive voters away from then-President Lee Teng-hui ahead of the island’s first direct presidential elections in 1996 by firing missiles into shipping lanes.

That forced shippers to cancel voyages and raised insurance costs but backfired by allowing Lee to brag about standing up to Beijing in front of cheering supporters. Lee won the four-way election with 54% of the vote.

Additional reporting by The Associated Press.

: newsy.com

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