Rate Cuts, Restaurants, and More!
Editor’s Note: TGIF, dear reader!
Let’s get to it!
FOMC: Rates Likely to Drop Another 50 Basis Points in 2024
This week, the Federal Open Market Committee (FOMC) — the Federal Reserve’s monetary policy-setting wing — highlighted that it has grown more confident about inflation trends, which are moving back toward its 2% target.
The Fed’s revised projections indicate a nuanced view of the economic landscape.
The central bank has adjusted its forecast for the unemployment rate. It’s now expected to reach 4.4% by the end of the year, up from the previous estimate of 4%.
This upward revision reflects potential labor market uncertainties or anticipated changes in economic conditions.
At the same time, the Fed has lowered its inflation outlook to 2.3%, down from the earlier forecast of 2.6%. For core inflation, the projection was reduced to 2.6%, a modest decrease from 2.8% in June.
The Fed’s infamous “dot plot” provides further insight into the future path of interest rates. According to the report, 19 FOMC members anticipate the benchmark federal funds rate to be 4.4% by year-end, aligning with a target range of 4.25% to 4.5%.
The FOMC has two more meetings scheduled for 2024: in November and December.
Looking beyond this year, the Fed’s projections suggest a continued easing of monetary policy. For 2025, interest rates are expected to land at 3.4%, implying another full percentage point cut.
By 2026, rates are forecasted to decrease further to 2.9%.
Fed Chair Jerome Powell emphasized that the central bank is not in a hurry to complete this adjustment process. “There’s nothing in the [Summary of Economic Projections] that suggests the committee is in a rush to get this done,” Powell stated during a post-meeting news conference. “This process evolves over time.”
Darden Restaurants Misses Expectations but Shares Still Rise
Darden Restaurants (NYSE: DRI) reported weaker-than-expected quarterly earnings and revenue for its fiscal first quarter.
The company, known for its diverse restaurant portfolio that includes Olive Garden, fell short of Wall Street’s projections, raising questions among investors about both the company’s short-term challenges and long-term outlook.
For the quarter, Darden reported earnings per share (EPS) of $1.75 on an adjusted basis, slightly below the $1.83 expected by analysts. Revenue came in at $2.76 billion, also falling short of the anticipated $2.8 billion.
Net income for the quarter was $207.2 million, or $1.74 per share, marking a year-over-year increase from $194.5 million, or $1.59 per share.
The company’s results were mixed, with net sales rising by 1% to $2.76 billion. However, same-store sales, a key performance metric, declined by 1.1%.
Olive Garden, Darden’s flagship casual dining chain, experienced a 2.9% decline in same-store sales. To combat this downturn, Olive Garden is reviving its popular “Never Ending Pasta Bowl” promotion later this month, aiming to attract back customers who may have stayed away due to rising menu prices.
The company’s fine-dining segment, which includes brands such as Eddie V’s and The Capital Grille, reported a significant 6% decline in same-store sales.
In contrast, LongHorn Steakhouse, another brand in Darden’s portfolio, was a standout performer with a 3.7% increase in same-store sales.
Despite the mixed performance in the first quarter, Darden has maintained its full-year outlook for fiscal 2025.
The company is forecasting earnings per share from continuing operations in the range of $9.40 to $9.60, with net sales projected between $11.8 billion and $11.9 billion.
In premarket trading, Darden’s shares rose approximately 10% despite the disappointing quarterly results. This suggests that investors remain optimistic about the company’s ability to overcome short-term obstacles and capitalize on its strategic initiatives.
However, the stock has fallen 3% year-to-date, indicating ongoing concerns about the broader consumer environment and its impact on the restaurant industry.
Which Small Businesses Are the Most Productive?
Micro, small, and medium-sized enterprises (MSMEs) demonstrate a unique productivity balance between scale and specialization.
Generally, larger firms enjoy economies of scale, leading to higher productivity levels.
But MSMEs in administrative services stand out as an exception, outperforming their larger competitors due to their nimble operations and strong customer relationships.
In the hospitality sector, MSMEs are notably productive, trailing only administrative services, and achieve about 75% of the productivity of larger businesses.
Take a look:
You will find more infographics at Statista
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