Commercial real estate (CRE) has tumbled into a downturn as property values are sliding. This situation worsens because small and regional banks are the biggest source of credit to CRE owners. Over the past three months, these banks have been the epicenter of financial turmoil, a concern we presented to readers when the regional bank domino began falling in early March in a note titled “Nowhere To Hide In CMBS”: CRE Nuke Goes Off With Small Banks Accounting For 70% Of Commercial Real Estate Loans.

Bloomberg cited the latest data from Moody’s Analytics that showed first-quarter CRE prices fell for the first time in over a decade. An ominous sign as the regional bank crisis developed late in the quarter and has since sparked credit tightening in the second quarter. 

Moody’s said courthouse records of transactions revealed CRE market dropped about 1% in the quarter, led by multi-family residences and office buildings. 

Moody’s Analytics chief Mark Zandi warned: “Lots more price declines are coming.” 

Just how deep will the CRE correction be? 

According to Lisa Shalett, chief investment officer for Morgan Stanley Wealth Management, she believes “peak-to-trough CRE price decline of as much as 40%, worse than in the Great Financial Crisis.” 

Shalett warned:

“More than 50% of the $2.9 trillion in commercial mortgages will need to be renegotiated in the next 24 months when new lending rates are likely to be up by 350 to 450 basis points.”

Although we do not discount the possibility of such a drastic plunge in CRE values, it’s important to note that the Federal Reserve will likely cut interest rates should such a decline happen.

Complicating the matter is a JPMorgan analysis showing small banks have accounted for the lion’s share of CRE lending relative to larger banks. As shown below, as of February 2023, small banks account for a staggering 70% of total CRE loans, excluding multi-family, farmland, and construction loans.

Last week, the Federal Reserve’s semi-annual Financial Stability Report said, “The magnitude of a correction in property values could be sizable and therefore could lead to credit losses.” 

On Tuesday, Fed Vice Chair for Supervision Michael Barr told lawmakers that he’s watching for “commercial real estate risks.” 

The price declines come as the regional bank fiasco has led to the sharp tightening of lending standards. This means a massive slowdown in bank credit extended, making it more difficult for CRE clients to refinance. And what’s worse is a multi-trillion-dollar CRE debt maturity wall over the next five years. 

A “doom loop” is developing, explained Paul Ashworth, chief North American economist for Capital Economics. He said the reduction in lending by banks would depress CRE prices, prompting even further credit cuts. 

“Delinquencies and defaults will rise, but I don’t think we’ll see a lot of forced sales,” Zandi said, adding his price forecast is for a 10% drop. 

Here are other notes we’ve highlighted about the CRE downturn:

• Hartnett: Commercial Real Estate Is The Next Shoe To Drop (subscribers only, really all you need to know…)
• Echoes Of New Century’s Collapse Amid Sudden Firesale Of Real Estate Loans As Morgan Stanley Sees 40% Downside (subscribers only)
• Commercial Real Estate Faces Perfect Storm: The Demise Of Downtown Office Buildings
• A Record 30% Of San Francisco Office Space Is Vacant

Blackstone, of course, is waiting with dry powder for the “largest ever” real estate drawdown.

Via OilPrice.com,

Iran and Russia are considering the joint development of as many as 10 oil and gas fields in Iran, media have reported following a meeting between Iranian officials and a Russian delegation led by Deputy Prime Minister Alexander Novak.

The proposal has come from the Iranian side amid talks about the development of other oil and gas resources in the country.

Novak told reporters that the sides had discussed specifically the development of six oil fields and two gas deposits. Gazprom was considering taking part in the development of the Kish and North Pars gas fields and building an LNG production facility, Novak also said, as quoted by TASS.

“Our oil companies are considering six oil fields, and Gazprom is considering two fields: Kish and North Pars, for joint development with the Iranian side, followed by the implementation of a natural gas liquefaction project and supplies to world markets,” he said, adding “Now, virtually all technical issues on this gas project have been settled. The evaluation of commercial conditions with Iran is currently underway.”

The Iranian government is in talks with Russia’s Gazprom about investments worth as much as $40 billion, Iran’s oil minister Javad Owiji said during the visit.

The amount is stipulated in a memorandum of understanding but, according to Owiji, “Some of these agreements are already turning into real contracts.”

Russia and Iran have been actively forging closer ties in the past few years, and that process got an additional push last year after Russia joined the small but growing club of Western-sanctioned countries following its invasion of Ukraine.

“The oil and gas industry is a backbone for the economies of our countries. Strengthening bilateral cooperation in this area will undoubtedly increase the economic sustainability of Russia and Iran,” the Russian government said in a statement during the visit, as quoted by Reuters.

NASA’s Jet Propulsion Laboratory in Southern California identified a “potential precursor” of El Niño conditions after one of its satellites spotted a massive wave of warm water moving across the equatorial Pacific. 

Described as “Kelvin waves,” JPL said the US-European satellite Sentinel-6 Michael Freilich shows raised ocean surface, approximately 2 to 4 inches, and hundreds of miles wide, moving from west to east along the equator. 

“A series of Kelvin waves starting in spring is a well-known precursor to an El Niño, a periodic climate phenomenon that can affect weather patterns around the world,” JPL said, adding these waves tend to be higher than cooler ocean water because warm water expands. 

“We’ll be watching this El Niño like a hawk. If it’s a big one, the globe will see record warming,” Josh Willis, a project scientist on Sentinel-6 Michael Freilich at JPL. 

Sentinel-6 Michael Freilich can detect Kelvin waves – low waves that can be hundreds of miles /km wide. When Kelvin waves form at the equator, they can bring warm water – and higher sea levels – from west to east across the Pacific, all characterizations of an El Niño. pic.twitter.com/0TrjhyWmxK

— NASA JPL (@NASAJPL) May 12, 2023

El Niño is also associated with weakening trade winds and can bring cooler, wetter conditions to the US Southwest and drought to countries in the Western Pacific, such as Australia and Indonesia. More specifically, here are the impacts on North America: 

As of May 11, NOAA’s Climate Prediction Center said the probability of El Niño forming is greater than 90% over the next few months. 

We have previously explained to readers that El Niño could affect global weather patterns and cause disruptions in the agriculture sector. Reports of heatwaves in Asia and Europe have already surfaced, with the possibility of rice crops being damaged in Thailand. 

And to get the facts straight, the UN Office for the Coordination of Humanitarian Affairs has stated, “El Niño and La Niña are naturally occurring climate patterns, and humans have no direct ability to influence their onset, intensity or duration.” 

Sorry Greta, but attributing every weather change to evil fossil fuels won’t work this time. 

Authored by Evgenia Filimianova via The Epoch Times,

Royal Mail has suffered a full-year loss of more than £1 billion, leaving it trading at a loss as it recovers from the impacts of industrial action.

A 94-page document (pdf) by Royal Mail’s owner International Distributions Services (IDS), reported that the group swung to an operating loss of £1.04 billion for the year to March 26, against earnings of £250 million in 2021–2022.

IDS also revealed Royal Mail’s adjusted operating loss was £419 million against £416 million profit a year before. The report cited industrial action as the reason for the loss, in addition to an inability to deliver the in-year benefits of planned productivity improvements, lower numbers of COVID-19 test kits being returned, and a weaker online retail market.

IDS booked a £539 million writedown on the value of Royal Mail, given the “current risk backdrop and ongoing industrial dispute.”

Thousands of staff members launched a series of strikes in December 2022, disrupting the services in the run-up to the busy Christmas season.

Disagreement over pay and work practices between the members of the Communications Workers Union (CWU) and Royal Mail executives are at the root of the long-running industrial dispute. The disagreement that began last year resulted in 18 days of strike action across the business.

CWU and Royal Mail negotiators struck a deal and announced the Business Recovery, Transformation, and Growth Agreement (pdf) at the end of April. The agreement set out provisions to “jointly rebuild and transform the business” and included a pay offer as well as improvements made during negotiations.

The non-executive chair of Royal Mail Group Keith Williams has welcomed the agreement that will be put to a vote by CWU members.

“I said before that we had reached a crossroads at Royal Mail. Now that we have a negotiators agreement with CWU that will shortly go out to ballot, and thanks to the good progress made on our five-point plan to stabilise Royal Mail, our destination is coming into sight,” Williams said.

“There is now a clear path towards a more competitive and profitable Royal Mail, delivering improved services for our customers whilst further reducing our environmental impact.

“Importantly, if ratified, the CWU agreement provides greater job security and increased rewards—through both pay and profit share—for our employees. Successful delivery of the agreement will be key,” Williams added.

The CWU said the agreement could “stand the test of time, that moves us forward and moves the company forward,” following the “most bitter, most intense, and high-risk dispute this union’s ever been involved in.”

Quality of Service

In the financial results report, IDS also attributed Royal Mail’s “disappointing” quality of service to strikes and absences, but said an improvement plan was underway.

“Quality of service has been significantly affected by industrial action and high levels of absence. I am sorry that we have not delivered the high standards of service our customers expect. Improving quality of service is our top priority,” Williams said.

The agreement with CWU provides for pay increases over the two years to March 2025 at a cumulative cost of around £600 million. According to IDS, this is expected to be broadly covered by cost efficiencies, with changes to working practices, network changes, and attendance policies introduced successively over the next two years.

“So as we enter 2023–24 we have grounds for optimism. The economic climate remains challenging, and Royal Mail faces the task of rebuilding business from the damage caused by industrial action,” Williams said.

CWU released its annual account results on May 18, reporting that Royal Mail workers had delivered an excellent public service.

CWU Deputy General Secretary Terry Pullinger said the results demonstrated that “postal workers have delivered in the face of grossly unfair and intense competition, overbearing naval gazing regulation, and perpetual technological change.”

Another sign of a possible consumer downturn is unfolding in India, recognized as the world’s top polishing gem hub. The country is bracing for a challenging year as diamond demand from key markets in North America and Asia is expected to soften. 

For the fiscal year ending in March, India reported a 10% drop in cut and polished diamond exports to $22 billion, driven primarily by inconsistent Russian rough-diamond supplies and waning demand in the US and China, according to Bloomberg, citing a new report from Gem & Jewellery Export Promotion Council.

On Wednesday, Vipul Shah, chairman of the state-backed industry group, spoke with Bloomberg TV about the souring diamond demand in top global markets:

“It is going to be a difficult year,” Shah said. Elevated inflationary pressures in the US, China’s slower-than-expected recovery after pandemic restrictions lifted, and volatile gold prices will make it “tough and challenging” for Indian diamond merchants, he noted.

“Supply is also one of the constraints,” while factories in the key hub of Surat, Gujarat state, have been slow in building inventories, with working shifts staggered in light of the weak demand, Shah said.

India, which considers Moscow a close political and trade partner, imports oil, weapons, and commodities from Russia despite the threat of sanctions due to the war in Ukraine. Shah’s group is in talks with the Indian government to resolve a payment issue with regard to procuring rough-gem supplies from Russia, he said. Still, the industry’s biggest challenge was waiting for “the US economy to pick up, consumer demand to pick up,” Shah said. –Bloomberg 

Another sign that consumers in the world’s largest economy might be under pressure is a report last month from French luxury group LVMH which pointed out a “bit of a slowdown” in luxury spending in the first quarter. 

The luxury spending slowdown comes as the seemingly invincible US consumer starts to break, first at the low end (as we explained two months ago in “First Signs Of A Notable Low-Income Slowdown“) and now at the top.

One month ago, we used the latest Bank of America card spending data to (correctly) predict that the first post-bank crisis retail sales data would be ugly, well uglier than consensus had expected. However, while spending was clearly slowing down, it was mainly impacting the low end of the middle class.

Now according to the most recent debit and credit card data published by the Bank of America Institute, the recent higher-income job market slowdown is also starting to impact spending. Yes: the upper-income cohort is finally starting to crack too.

And what are some of the first things consumers dial back spending as macroeconomic headwinds mount? Well, it’s jewelry and other forms of luxury spending. 

Authored by Naveen Athrappully via The Epoch Times (emphasis ours),

The European Union has approved a set of rules—the first such regulation in the world—to regulate crypto assets like cryptocurrencies and tokens in a bid to curb money laundering activities and protect investors.

The markets in crypto-assets (MiCA) legislation was approved on May 16 by EU ministers. The new rules will increase transparency and create a comprehensive framework for businesses operating in crypto markets, including compliance with anti-money laundering rules, according to a May 16 press release. “Recent events have confirmed the urgent need for imposing rules which will better protect Europeans who have invested in these assets, and prevent the misuse of crypto industry for the purposes of money laundering and financing of terrorism,” said Elisabeth Svantesson, Minister for Finance of Sweden.

Crypto markets have suffered in recent months due to the collapse of multiple firms. FTX, Alameda, Core Scientific, Voyager Digital, Celsius Network, BlockFi, and Three Arrows Capital are some of the major crypto companies that have filed for Chapter 11 bankruptcy and decided to liquidate their assets to pay back customers. Each of these firms is estimated to have liabilities worth billions of dollars that they owe to thousands of creditors.

MiCA was approved unanimously by members of the EU’s Economic and Financial Affairs Council (EcoFin). EcoFin represents the economic and finance ministers of all 27 EU nations.

In May last year, European Central Bank (ECB) president Christine Lagarde raised concerns about cryptocurrencies during an interview on Dutch television.

“I have said all along the crypto assets are highly speculative, very risky assets,” Lagarde told the program. “My very humble assessment is that it is worth nothing. It is based on nothing, there is no underlying assets to act as an anchor of safety.”

Earlier, the ECB President had called Bitcoin a “highly speculative asset” that contributes to money laundering activity.

The Legislation

MiCA covers issuers of utility tokens, asset-referenced tokens, as well as stablecoins. Service providers like trading venues and crypto wallets also come under its purview. The legislation is on track to become law in the EU region this summer, and is expected to be rolled out from 2024.

Firms looking to issue, trade, or safeguard crypto assets in the EU bloc will have to secure a license to do so. MiCA aims to combat tax evasion and money laundering via cryptocurrencies by making transactions involving these instruments easier to trace.

Beginning January 2026, service providers in the crypto industry will have to obtain the names of senders and beneficiaries of digital assets irrespective of the amount involved in the transaction.

Entities doing business in the crypto sector will be obliged to ensure their security protocols are up to the required standard. They have to comply with stringent rules to protect consumer funds and can become liable in case the funds of investors are lost.

MiCA establishes liquidity and disclosure requirements for crypto companies. The management of a crypto firm may be fined in case they fail to make sure the reserve funds are properly managed.

US Situation

Efforts to establish comprehensive regulation in the crypto industry are also underway in the United States. In March 2022, President Joe Biden issued an executive order seeking to ensure the responsible development of digital assets.

Since then, multiple government agencies have been framing policies aimed at pushing six areas of focus outlined in the order, including protecting investors and customers, ensuring financial stability, and countering illicit finance.

In September, the Biden administration released its first-ever comprehensive framework aimed at regulating digital assets like cryptocurrencies.

In January 2023, a White House blog post highlighted some of the dangers posed by cryptocurrencies while calling on Congress to pass new laws to limit criminal activity in the sector.

Officials characterized digital assets as a promising nascent industry that needs to be reined in to protect consumers. It also asked that laws incentivizing more investment into crypto be avoided.

“Legislation should not greenlight mainstream institutions, like pension funds, to dive headlong into cryptocurrency markets,” the blog said. “It would be a grave mistake to enact legislation that reverses course and deepens the ties between cryptocurrencies and the broader financial system.”

Authored by Joseph Solis-Mullen via The Libertarian Institute, 

Writing pseudonymously in a series of articles for Faith and Freedom in the 1950s, Murray Rothbard took on the question of whether or not the United States should defend Formosa (Taiwan) from attack by mainland China. While his conclusions will surprise no one familiar with his work (that war is the health of the state, that individuals concerned with the fate of Taiwan should do as they will privately, but that their lives and property are not for the government to command), a review of the articles’ contents are worthwhile, nonetheless.

For apart from such typically memorably Rothbardian lines as “only those who want to socialize America really look forward to the third and perhaps last World War,” we find many of the same ludicrous rationales for war with China used today excoriated with great wit by Rothbard.

For example, Rothbard begins the first of these, “Along Pennsylvania Avenue,” by rhetorically posing the question of how it happened that a smattering of islands eighty miles off the coast of mainland China became “necessary to our defense,” and as an answer he replies:

…[the government] were forced to portray the Reds as “island hopping” their way to the United States. […For] if the Reds take Formosa, they will be one island nearer to the United States. It is an age-old story: a peaceful Pacific “moat” is needed for our defense. In order to protect his moat, we must secure friendly countries or bases all around it. To protect Japan and the Philippines, we must defend Formosa, to protect Formosa we must defend the Pescadores. To protect the Pescadores, we must defend Quemoy, an island three miles off the Chinese mainland. To protect Quemoy we must equip Chiang’s troops for an invasion of the mainland. Where does this process end? Logically, never (18).

Readers unfamiliar with the history of the region may be interested in some additional context regarding Rothbard’s mention of equipping Chiang Kai-shek, the dictator of Taiwan and exiled leader of China’s failed Republic, for an invasion of the mainland. Despite having been driven from the off by force of arms, and only secured in their island fortress by virtue of the United States Navy repeatedly intervening to prevent a cross-strait invasion by the PLA, it was the official policy of Taipei to retake the mainland by force. Though such plains never got far off the ground—and were mostly abandoned by the 1970s—it was not until the constitutional revisions of the 1990s that Taiwan officially gave up such a policy of armed reconquest in favor of focusing strictly on its own defense.

Writing in the 1950s, near the height of the first Taiwan Strait Crisis and when talk of an invasion of the mainland by Taipei was still openly planned and called for by Chiang, Rothbard heroically pushed back against those who equated isolation with appeasement.

In a scene all too familiar, he complained that Congress’ answer to heightened tensions over Formosa was to write what “amounted to a blank check for war in China whenever the President shall deem it necessary,” noting sadly that only two congressmen had opposed the resolution on the grounds that the United States should not actively seek to “engage their boys in a war on foreign soil,” the rest merely arguing over the scope or scale of the commitment to be made.

Rothbard was predictably red-baited for his efforts, even attacked by a fellow “libertarian” in Faith and Freedom. He defended himself in a series of further articles, “Fight for Formosa?” Parts I & II, and reflecting on the experience some years later in The Betrayal of the American Right he had this to say:

I could never—and still cannot—detect one iota of devotion to ‘freedom’ in the worldview of those whose zeal for crusading abroad makes them blind to the real enemy: the invasion of our liberty by the State…to give up our freedom in order to “preserve” it is only succumbing to the Orwellian dialectic that “freedom is slavery.”

Indeed.

The distance between Payson, UT, USA and Qigu District, Tainan City, Taiwan 724 is 11176km #Maps #GIS #Earth pic.twitter.com/C3FLyAQWFY

— Random Distance (@RandomDistance) February 14, 2018

Those who today reasonably say that the defense of an island eighty miles off the coast of mainland China and five thousand miles from Hawaii (let alone the mainland United States) cannot possibly be a core national interest can take comfort in following the footsteps of such brave and principled forebearers as Rothbard.

Americans can and must say NO! to the new Cold War and refuse efforts by Washington to provoke Beijing with regards to Taiwan, virtually its only declared “red line.”

That is, unless another disaster like Ukraine is the goal—which it may well be.

Authored by Mattias Desmet via Substack (emphasis ours),

The Belgian politician Connor Rousseau and his social-democratic Vooruit party want to require parents to send their children to day care and kindergarten. There are still politicians who think of the children. And the logic is conclusive: the first six years of life are decisive for the future life of the child. That cannot be left to the parents. The state must take its responsibility and release money. A few billion is enough to get the job done.

No one knows where that money will come from. But if necessary, some additional printing can be done. That is actually a way to make the population pay more taxes without them realizing it. Citizens nowadays pay barely 53 percent taxes. A little more loyalty to the state is welcome. Moreover, it is for their own good, and that of their descendants. Citizens do not realize enough how important it is that their children are brought up well. Just as they do not realize that they cannot actually do that themselves and that the state must do it for them.

And if inflation leads to the collapse of the financial system, then a solution is already at hand: the introduction of the CBDC—the digital currency of the central banks. This will be linked to the digital passport and a social credit system. In this way, the state will educate not only the child, but the parents as well, according to a system of punishment and reward that Pavlov tested on dogs.

Granted, Pavlov concluded that his system of rewards and punishment really only works if you know the character of the individual dog. Every dog ultimately reacts in its own way to rewards and punishment. We can ask ourselves whether the state will also take the individual character of the child-puppies in daycare into account in its state education. That chance is small. Connor Rousseau believes that every child should receive equal opportunities and thus an equal education. Whether the child actually benefits from it or not is beside the point.

The state has to guarantee the quality of education and will therefore also have to monitor and evaluate it. Just as the state cannot trust the weighty job of parenting to parents, it cannot trust the job of childcare to childcare providers. They will therefore have to be subjected to strict protocols, as befits a good bureaucracy. And those protocols will be designed by experts who have scientifically determined which conditioning techniques lead to the best adapted little New Citizen.

During the coronavirus crisis, those experts—not the same, of course, because there are experts for every part of your private life—also took control of your health and that of your children. Just as you don’t know how to raise your child now, you didn’t know then how to take care of your own health and that of your offspring.

We were all urged to get ourselves and our children vaccinated, especially so that grandma and grandpa would not get infected. Here and there, rare critical scientists suggested that a vaccine could not prevent infections, partly because coronaviruses mutate quickly. People didn’t listen to such nonsense–these scientists were thrown off Twitter and robbed of their jobs.

And those who refused to get vaccinated were treated as second-class citizens. They were no longer allowed to go to a restaurant or a theater. In some countries they were banned from taking public transport. French President Macron believed that their lives should be made into a living hell. Totalitarian leaders are so convinced that their logic is the only correct one—one that will ultimately lead to Paradise—that all basic tenets of humanity get thrown overboard in pursuit of that logic.

Unfortunately, the totalitarian logic, as it has throughout history, failed. The Great Guardian of American public health, Anthony Fauci, now says pretty much the same thing as those critical voices—that the virus is mutating too quickly to develop a vaccine that protects against infection on a long-term basis. Experts refer to this as the progressive nature of science. Apparently science progresses very quickly these days. Almost as fast as Pfizer’s share price during that same year.

Chances are, childrearing expertise is a work in progress, as well. When parents notice that their little New Citizen, through his state upbringing, is not as happy and perfect as protocol had promised, their only consolation will be that by willingly giving their child to the state they have contributed to the advancement of Science.

The problem with this kind of “science” is that it fails to recognize that education and health are both phenomena that deal primarily with individuality—a person’s unique characteristics as a subject. The literature on placebo and nocebo effects should in itself be enough to dispel any doubt: the subjective appreciation of a treatment determines its therapeutic effects. In the same way, the core of a good upbringing focuses on the individuality of the child. The educator must see the child in his singularity—he must love the child for his uniqueness. Without that love, education becomes indoctrination.

A protocol-based education inevitably fails. Although the Great Parenting Experts will probably explain their failure in a different way. It will still be the parents’ fault, after all. And the Great State Education should actually start even earlier, preferably in Huxley’s bottling room.

And if your love for your child should give you the courage to call the state to account, you will find that you actually have nowhere to go. Hannah Arendt noted about bureaucracies 50 years ago: “In a fully developed bureaucracy there is nobody left with whom one can argue, to whom one can present grievances, on whom the pressures of power can be exerted. Bureaucracy is the form of government in which everybody is deprived of political freedom, of the power to act; for the rule by Nobody is not no-rule, and where all are equally powerless, we have a tyranny without a tyrant.” (Hannah Arendt, “On Violence”)

Just to say: I would be careful with the idea of an Ideal State Education. If the state has to protect children from their parents, parents have to protect their children from the state.

A large swath of American consumers are facing financial hardship as they grapple with elevated living costs, record-high credit card use, and two years of negative real wage growth. This perfect storm could decimate financially fragile households in the next downturn. 

As many as 89.1 million American adults (or about 38.5%) were found to experience some form of difficulty in covering expenses between April 26 and May 8, according to Bloomberg, citing new data from the Household Pulse Survey. This is up from 34.4% in 2022 and 26.7% during the same period in 2021. 

The rising trend is alarming but not surprising. Consumers have been battered by two years of negative real wage growth.

As wages fail to outpace the cost of living, many consumers have burned through savings and resorted to credit cards. The latest revolving credit data shows consumers appear to be ‘strong,’ but that’s only because they use their plastic cards more than ever to survive. 

The Household Pulse Survey found struggling households were primarily based across West Coast and the South. 

Compared with the same period last year, the survey found 2.7 million more households were relying on credit cards to cover expenses. 

Consumers have record card debt and ultra-low savings rates and are paying some of the highest borrowing costs in a generation (the average interest rate on cards now exceeds 20%). This debt is becoming insurmountable for some as delinquencies rise. 

And what we have now is new debit and credit card data published by the Bank of America Institute that shows not just spending slowdown for lower-income consumers, but also the upper-income cohort is finally starting to crack.