Welcome to the Weekly Scan. Here’s what we’re following for the week of May 17, 2021.
A new media giant. AT&T announced Monday it will merge its WarnerMedia unit with Discovery Inc. in a cash and debt deal reportedly worth $43 billion.The combined companies will create a new streaming service giant, reportedly bigger than either Netflix and NBCUniversal. The new company has yet to be named.
- The takeaway. The decision to spin off WarnerMedia marks a big turnaround for AT&T, which purchased TimeWarner in 2018 for $85 billion, later renaming the company. For 2020, WarnerMedia and Discovery earned a combined $41 billion in revenue, and $10 billion in profit, which would make it the second-largest media company after Disney. WarnerMedia owns HBO, Warner Brothers studios, CNN and other cable networks. Discovery owns Oprah Winfrey’s OWN, HGTV, The Food Network and Animal Planet, and other properties. The deal must be approved by Discovery shareholders and regulators.
Price surge. The Consumer Price Index surged 4.2% in April, 2021 compared to a year earlier, reportedly the biggest increase for any 12-month stretch since 2008. The consumer price index demonstrates the changes in what consumers pay for goods and services, such as clothing, groceries, recreation, and more. The index stood at 2.6% for the year ending in March, 2020. On a seasonally adjusted basis, consumer prices increased 0.8% in April, 2021. Food prices increased 2.4% from the previous year, while car and truck rental prices rose 82% and flight prices ticked up 9.2%.
- The takeaway: The price increases are one indication that inflation is beginning to affect the economy. Some experts have said that causes include increased consumer spending fueled by pandemic-related government spending such as bigger unemployment payments and stimulus checks included in the most recent $1.9 trillion economic rescue package. Low interest rates, set by the nation’s central bank—the Federal Reserve—are also a factor. In response to the latest data, the Fed said that it would not immediately make any changes, keeping interest rates near 0%.
No score, no problem. A group of major banks including JPMorgan Chase, Wells Fargo, and U.S. Bancorp are reportedly exploring offering credit cards to consumers who don’t have a credit score. The program will use other factors to determine creditworthiness, such as rent payments, utility payments, bank deposits, and other recurring financial obligations. If the program is successful, the banks will have access to a market of the estimated 53 million Americans who don’t have credit scores. The initiative is apparently a response to a dip in new credit card issuances and balances over the last year.
- The takeaway: Having a credit card could give people access to financial opportunities that they otherwise wouldn’t have. Having a good credit score can give people access to mortgages, student loans, and small business loans to help them advance themselves financially. Using a credit card is also often a better alternative to more predatory lending practices, such as payday loans. Keep in mind, however, that it’s important not to let credit card spending get out of hand. You should try not to use more than 30% of your credit limit in a given month. And you should try to pay off your credit card bill in full every month.
Find out what we covered in last week’s Scan.