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Global Growth Prospects Downgraded, Consumer Confidence Drops, Netflix Looks To Trim Costs

Global Growth Prospects Downgraded, Consumer Confidence Drops, Netflix Looks To Trim Costs

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Global Growth Prospects Downgraded

Inflation, jitters about regional banks and a showdown in Washington over how to tackle government debt are among numerous issues spurring analysts to ratchet down what were already relatively pessimistic predictions for global economic growth.

Global gross domestic product is now forecast to grow 2.3% in 2023, below the sluggish 3.3% rate of 2022, according to a May 11 report from the Conference Board, a prominent economic research organization. Asian economies are expected to drive most of this year’s growth, with most weakness concentrated in the U.S., Europe and Latin America.

“Despite rapid monetary tightening, inflation is proving persistent in many key economies, particularly on the back of strength in job markets and severe labor shortages,” Conference Board researchers said. “Therefore, monetary policy is likely to remain restrictive throughout most of 2023, despite financial stability concerns.”

In its own report last week, consulting firm Oxford Economics said its latest survey gauging business risk perceptions suggests banking system strains and tightened credit supply “now pose the greatest threats to the global economy.” Corporate leaders responding to the firm’s global survey, which queried 143 businesses, perceive there’s about a 33% chance in the next year of a “full-blown financial crisis” on par with the global crisis of 2009-2010.

Oxford Economics said most surveyed businesses have cut growth expectations for 2023 and 2024, with a rising proportion of businesses, now 60%, taking steps to bolster their supply chains against global risks. Referencing rising tensions generated by China and Russia, more than a third of those businesses are “friend-shoring” by rerouting supply chains to countries that are more in line with their own country’s political and economic priorities.

Another challenge is the standoff on Capitol Hill over raising the U.S. debt ceiling, with the potential for further economic turmoil including distress in credit markets and even higher borrowing rates. The nonpartisan Congressional Budget Office reported Friday that if the debt limit remains unchanged, there is a “significant risk” that at some point in the first two weeks of June the government will no longer be able to pay all its obligations.

Consumer Confidence Drops

Consumer confidence declined sharply in May from the prior month amid growing uncertainties about the economy, according to preliminary numbers released Friday in a closely watched University of Michigan survey.

Subject to revision later this month, the latest numbers showed the overall May index of consumer sentiment at 57.7, generally reflecting the percentage of nationwide respondents with a favorable view of the larger economy and their own household finances. The number is down from April’s 63.5 and the 58.4 for May 2022.

Researchers said this month’s drop has erased more than half the gains in sentiment seen since last June, when confidence hit an all-time low in the monthly survey. Joanne Hsu, the university’s director of consumer surveys, said respondents’ worries about the economy were heightened this month by negative news including the federal debt ceiling standoff.

“Throughout the current inflationary episode, consumers have shown resilience under strong labor markets, but their anticipation of a recession will lead them to pull back when signs of weakness emerge,” Hsu said in a statement. “If policymakers fail to resolve the debt ceiling crisis, these dismal views over the economy will exacerbate the dire economic consequences of default.”

Netflix Looks To Trim Costs

Netflix is reportedly looking to cut spending this year by $300 million in response to profit challenges and slowing subscriber growth, though it’s not certain how it could affect layoffs or real estate pullbacks.

Citing sources familiar with the matter, the Wall Street Journal reported Friday that the streaming entertainment giant is looking to reduce costs by $300 million, in part because of delays in its plans to crack down on password sharing, which has cut into revenue for several years. The crackdown is expected to move forward in the current quarter and boost revenue and profits, but Netflix is also reportedly looking to further reduce overhead costs in a competitive streaming landscape.

The Journal’s sources cited an internal meeting this month where company leaders urged staff members to be cautious about spending, including in relation to hiring. But the leaders said there would be no hiring freeze or additional layoffs, according to the sources.

Netflix in the past year has made real estate moves including closing its Salt Lake City office. The company also pulled back on office space in Los Angeles and in its headquarters city of Los Gatos, California, putting much of it up for subleasing.

A Netflix spokesman told CoStar News the company had no comment.

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