Morning Brew Daily
Inflation Cools More Than Expected & 'Pokémon GO' Heads to Saudi Arabia
Thu, 13 Mar 2025
Episode 538: Neal and Toby dive into the latest inflation report that shows it cooled a bit, which is a welcomed sign. But some can’t forget that the ongoing trade war could spoil the party. Then, RFK Jr. meets with CEOs of major food companies and urges them to remove artificial dyes from their products. Also, the popular mobile game Pokémon Go is being sold to a Saudi Arabian company that looks to expand its gaming aspirations. Meanwhile, Neal shares his favorite numbers on the workday clock-outs, car tech, and America’s longest conveyor belt. Subscribe to Morning Brew Daily for more of the news you need to start your day. Share the show with a friend, and leave us a review on your favorite podcast app. Listen to Morning Brew Daily Here: https://link.chtbl.com/MBD Watch Morning Brew Daily Here: https://www.youtube.com/@MorningBrewDailyShow There are risks involved with investing in ETFs, including possible loss of money. ETFs are subject to risks similar to those of stocks. Investments focus in a particular sector, such as technology, are subject to greater risks and are more greatly impacted by market volatility, than more diversified investments. The Nasdaq-100 Index® includes the 100 largest non-financial companies listed on the Nasdaq. An investment cannot be made directly into an index. Invesco Distributors, Inc. Learn more about your ad choices. Visit megaphone.fm/adchoices
Chapter 1: What are the latest updates on inflation?
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New inflation numbers dropped yesterday, and for the first time in months, lead-foot prices actually eased off the accelerator. Woo-hoo! Party in the streets! Well, not quite. The Consumer Price Index rose just 0.2% in February, the slowest pace since October.
That brought annual inflation down to 2.8%, better than expected, thanks to falling gas prices, cheaper housing, and airfare taking a 4% nosedive. Even egg prices, which have been on a rampage, climbed less than last month, though they're still up nearly 60% from a year ago. Before you break out the margaritas, economists are bracing for higher prices in the future.
President Trump's tariffs on steel, aluminum, and a fresh round of Chinese goods are expected to push up prices on everything from clothing to food to cars. So while the White House is holding this inflation report up as proof the economy is on track, Wall Street wasn't as convinced. Stocks rallied briefly on the news before wiping out those gains just hours later and finishing the day about flat.
Meanwhile, the Federal Reserve is likely still in wait-and-see mode, looking for more clarity on Trump's trade actions. And this report likely won't sway it away from its plan to hold interest rates steady when policymakers meet next week. Bottom line, Neil, inflation may have cooled for now, but with tariffs heating up, this could be the calm before the $20 egg storm.
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Chapter 2: How are tariffs affecting the economy?
I'm taking the W here. My portfolio. really needed this. Stocks stopped their three-day slide. A really nice change of pace after weeks of some pretty bleak economic data and surveys. We finally got some encouraging news here with inflation growing at its slowest pace in four months. That steady, bumpy decline that we've been seeing over the past few years is still continuing apace.
We'll see what tariffs and other measures have in store going forward. But But right for now, inflation is still coming down, and I think we should celebrate that.
Just diving into some of the specific categories, nearly half of the advance of the overall CPI was due to shelter costs. But those costs actually still decelerated from the prior month, so they did go up a little bit less quickly. Airfares falling 4% was actually a big reason why this inflation report came in a little less hot.
And that's because a lot of carriers, as we've spoken about, have faltered. forecasted weaker demand. Prices of new cars, gasoline also declined. Grocery prices were pretty unchanged, actually, after a big increase in January. So that's actually a good thing. Technically, they fell if you exclude eggs, which I think some people are probably doing at this point.
And yeah, so I do think that, as I said, the Federal Reserve probably is in wait-and-see mode. There's nothing much that this report can do that really will sway it one way or the other. They still need more data to come in, still need to see these inflation numbers milding out a little bit.
Yeah, Jerome Powell gave a speech last week. He said he wants proof that inflation is moving sustainably lower. One month of cooling inflation, such as we saw, lower than expected, is not necessarily any definition of sustainably. So the Fed is meeting next week. They are expected to hold interest rates steady. Bets did rise of an interest rate cut in June, but that is a long time from now.
There is a lot of policy shifts and new economic data that will come out in the interim, so again, wait and see. Moving on, this week CEOs of major food companies met with Health and Human Services Secretary Robert F. Kennedy Jr. and were given an ultimatum. Either you get rid of artificial dyes by the end of Donald Trump's term, or I'll do it for you.
The ultimatum was delivered during a Monday meeting that included the chief executives of General Mills, Pepsi, Kraft Heinz and more. They were told it is a top priority of this White House to make the American diet healthier by removing potentially harmful ingredients. Food dyes that make your Cheetos, neon orange and Kool-Aid strikingly red have been a target of health advocates for years.
But the movement has gotten a huge boost from RFK, who originally ran for president under an agenda to make America healthy again. RFK has called out food companies for, quote, poisoning Americans. And according to the Consumer Brands Association, during Monday's meeting, he made clear his intention to take action unless the industry is willing to be proactive with solutions.
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Chapter 3: Why is RFK Jr. targeting artificial dyes in food?
And it does look like Kennedy isn't just stopping at artificial dyes. He wants to expand beyond that. He said that the agency is going to look at generally recognized as safe rules. Those are the rules that allow companies to basically self-affirm which food ingredients make it into their products. He says he wants to look at those and just –
basically take a step back and say, what is going into our food supply? California has long been a leader in this movement. They banned six food dyes from food served to children in public schools back in September. West Virginia has also been leading the charge. They advanced this big ban that targets a range of common food dyes that have been linked to health problems.
And that got overwhelming support from both Republicans and Democrats. It passed both legislative chambers and expected to make it to the governor's desk for signing soon. So there is a groundswell of support. for it.
So how important is artificial dye, that neon cheeto color, to sales? Are we humans so obsessed with these very bright colors that it's so important for food companies to include them in their products? Well, if you go back through history, there are maybe some mixed messages. General Mills took artificial food dye out of their cereal in 2016. That includes Trix.
What they found was that people will not buy Trix that has muted colors. A year later, they put the artificial dye back in their cereals, back in Trix. So that was a warning sign to the industry. Then again, for every Trix debacle, there is a Kraft Heinz product. success story.
Kraft Heinz also that year took out artificial dye from their mac and cheese, and that didn't seem to affect sales at all. So we really don't know exactly how obsessed consumers are with these artificial dyes. Maybe some mixed messages throughout history.
One way to get around it, though, is there is this healthy food movement that we're going through right now. And one thing that signals healthier foods is muted colors. So you're seeing brands like PepsiCo has been working to create a different type of spicy ruffles. They have this Simply brand where it's just a healthier brand in general.
And so they are releasing this spicy chip, but it's a very muted color. So one that screams healthy colors. Two, you're getting around the artificial dye issue. So I think you may see some of these companies try to innovate their way out of it. Of course, the Flaming Hot... Change expectations. Right, change expectations. Like, this is a healthier snack.
You're going to get some spice, but you're going to get a healthier snack. It might be tough, though, to... Like, Flaming Hot Cheetos... How are you? Skittles. Yeah, they have to be those bright colors. Like we were talking, can you imagine like a muted Skittle? It would just look like a breath mint at that point.
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Chapter 4: What changes are happening with Pokémon GO?
It laid off 310 employees between 2022 and 2023 employees. And so you're right. Scopely was like, hey, we'll definitely take this. Scopely also has another huge moneymaker in the name of Monopoly Go. It sounds like all you have to do is take a nice IP and add Go to the end of it, and you'll make a billion dollars. That looks to be the strategy right now.
So right now, Scopely is like, hey, we do want to get bigger in games. Let's take this limping title that still makes a lot of money, and let's try to take over the games world.
And Saudi Arabia is absolutely taking over the games world. They've earmarked nearly $40 billion to build an industry there. Last summer, they hosted the Esports World Cup, handed out $60 million in prizes. And then in 2027, they're working with the International Olympic Committee to host the first ever Olympic Esports Games. So the center of the gaming universe is shifting to the Gulf.
Got to warm those thumbs up, Neil. I'm going to make it to the Olympic Games in esports. All right, what a first half of the show. Let's wait for the second half where we get Neil's numbers.
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