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Quest Means Business

US Economy Grows After Shrinking For Two Quarters; Shares Of Meta Plunging Today; Fighting Inflation; Ukrainian Power Station Damaged By Russia; IEA Says Energy Crisis Will Push Us Away From Fossil Fuels; Brazilian Candidates Try To Win Over The Poor; Vera Bradley Cofounders On Building A Brand. Aired 3-4p ET

Aired October 27, 2022 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

[15:00:23]

ALISON KOSIK, CNN BUSINESS HOST: It's another tough day for tech. The NASDAQ down more than one percent.

Those are the markets and these are the main events.

The US economy grows after shrinking for two quarters, but there are signs the mighty US consumer is starting to lag.

Shares of Facebook owner, Meta are down at 23 percent after it reports declining revenue and plans to cut costs.

And CNN gets an inside look at the damage Russia is causing to Ukraine's power network.

Live from New York, it's Thursday, October 27th. I'm Alison Kosik. I'm in for Richard Quest, and this is QUEST MEANS BUSINESS.

Good evening.

The US economy shifted into growth mode during the third quarter. Gross domestic product increased 2.6 percent on an annualized basis from July

through September. This is the first positive reading this year, and while it ends debate as to if the US is in a recession now, it does little to

quell fears of whether one is on the way.

The Dow Jones surging this morning on the stronger than expected growth. It was up by more than 500 points. The S&P 500 was briefly higher, the NASDAQ

is firmly in the red at the moment.

Here is what drove us economic growth: In the third quarter, exports rose despite a strong US dollar. Consumer spending advanced 1.4 percent. That's

a slight drop off from the second quarter; and Federal, State and local government spending, that increased.

Let's get more now. I want to bring in Rahel Solomon. She joins us from New York.

I know you've been pouring over this GDP report all day. I'm curious, how does the first quarter of contraction compared to what you're seeing in

this third quarter?

RAHEL SOLOMON, CNN BUSINESS CORRESPONDENT: Well, I think if you look at net exports, for example, you can see that net exports really solidly moved

higher, right? So you can see that there is still strong demand for US goods and services. Is that sustainable? Well, that's a different question.

The US consumer imported less. We didn't buy things from out of the country, out of the US and so that led to a positive net export, which

really helped on that top line number. But our government spending that moved positive as compared to the last few quarters.

Really at every level, Alison, at the Federal level, we saw increased spending for things like Defense spending, then we also saw increased spend

for things like State governments and local government.

Businesses continue to spend not on structures or on buildings, but on other things like equipment, for things like intellectual property and

consumer spending, also slowing certainly compared to the first quarter of this year and the second quarter of this year, but still positive.

And that was on things like services, things like restaurant spending, hotel spending, not physical goods, which sort of matches up right to what

we saw on the trade data, that we're not buying physical things, but we still are spending.

And how do you read all of this with the recession fears? Well, I spoke to one economist from Citi today, who told me this: "We would expect that

we're in a mild recession next year." These comments coming from Veronica Clark.

"So, this doesn't really tell you where we're headed. It does, however, tell you that right now, things are still okay, backed up by a labor market

that is very strong." And of course, the labor market right now at 3.5 percent unemployment, which is practically a 50-year low.

KOSIK: So how could we explain them the two consecutive negative quarters that we saw this year? By definition, that does define a recession. I mean,

is there a way to explain this beyond the fact that it's the labor market that has been very strong?

SOLOMON: Oh, absolutely. I mean, I think the way you think about it is if it was the trade data in the first sort of six months of this year in

inventories that sort of led to that negative GDP number, well, then you saw all of those same factors swing positive, right?

I mean, Mark Zandi, the Chief Economist of Moody's actually talked about this this morning to me, Alison. He said that, look, we're getting these

swings in trade and inventories, a lot of it related to the pandemic. But saying that we're not really seeing anything fundamental that shows

improving, we're basically just moving sideways.

And to be fair for those economists who honestly told me earlier this year, this is noise. This is data: It's trade data, it's inventory data. It

doesn't really say much about the strength of the economy. They're saying the same now that this is a lot of those same factors, but just moving in a

different direction.

But one thing that is still solidly good news, you can't slice it any other way. The US consumer is still holding on, still spending albeit at a slower

pace.

KOSIK: Yes, you've got it. All of these conflicting signals creates great discussion doesn't it?

[15:05:10]

Rahel Solomon, thanks so much.

The third quarter GDP figures did show a slight cooling as she said of consumer spending, but with inflation still running hot, the Federal

Reserve is expected to continue raising rates.

As we reported this week, economists fear the Fed's fight to stamp out inflation could cause a recession in the United States next year.

Olu Sonola is the head of US Regional Economics at Fitch Ratings, and he joins us now from New York. Great to have you with us.

OLU SONOLA, HEAD OF US REGIONAL ECONOMICS, FITCH RATINGS: Thanks for having me.

KOSIK: So Fitch was all the talk about a week ago when, you know, Fitch predicted that the US would enter a 1990s kind of recession. So, we get

this latest GDP report, economic growth rebounding over the summer and I would imagine Fitch is staying on course with its predictions still have a

looming recession or has that prediction changed any with this report?

SONOLA: No, that prediction has not changed. Our forecast has not changed at all. I think as you mentioned earlier, once you strip out the very

volatile components of trade and inventory, the core economic activities are relatively weak, and I think we expect the weakness to persist into the

coming quarters, and we still expect a recession starting during the second quarter of 2023.

KOSIK: What are the core -- what's the core data that sticks out to you as the weakest?

SONOLA No, without question, residential investment is the weakest and that's not a surprise given the Fed tightening and what is happening on the

mortgage side of things and also, in the housing market.

The residential component subtracted a significant amount of points from GDP in the last printout that we just saw, and that weakness is expected to

persist.

Consumer spending was still relatively okay. We also expect that to slow, it should slow, not necessarily contract. And ultimately, once you put it

all together, we expect the recession to take hold on the second quarter.

KOSIK: I'm going to try to get you to explain this contraction that we saw in the first part of the year, the first half of the year. You know, many

are just writing it off, saying, oh, because the labor market shows strength, it is not a recession, even though in the past before the

pandemic, if we had two consecutive quarters of contraction, that is, by definition, a recession, so it leaves us scratching our head. Are we just

waiting for the labor market to crack, the unemployment rate to rise, so we can go ahead and say we're in a recession?

SONOLA Now, I think, a genuine recession territory, you will need the labor markets to crack. When you go back to the first two quarters that we saw,

again, it was -- it had a lot to do with the noise from trade, and also the noise from inventory. But we expect the unemployment rate to increase from

here on out. We are at three-and-a-half percent now. We expect that number to creep up to the four percent range in 2023 and ultimately, top out in

the five percent range in 2024.

And as you start to see the weakness in the labor market, we think that would ultimately affect income as a whole, and ultimately affect consumer

spending.

KOSIK: And so also with the latest report from Fitch about the 1990-style recession, Fitch did say consumers will cushion the blow, meaning we'll

have a mild recession here in the US. But as you said, we're already seeing consumer spending slow. So, with that continuation of slow spending, how

would that cushion actually remain then?

SONOLA: Well, the cushion is actually quite significant. So, you have to look at the balance -- the cushion really comes from the balance sheet

strength of the consumer.

On the asset side, net worth is at all-time highs, and when you also think about the savings that were accumulated during the pandemic, we asked -- we

still have decent savings there that will cushion the spending.

When you also look at the liability side of it, household leverage is relatively low and household debt service is relatively low. So, to a large

extent, the consumer can also lean on borrowing to support spending.

So we think the US economy is coming into this recession from a place of strength. It will take some body blows during the recession, but it should

be able to come out of it relatively in good faith.

We're definitely not talking about a great recession style recession, if I can put it that way. Where we are today, we are fundamentally a different

place compared to the great recession that we saw a couple of -- many years ago.

KOSIK: So then how do you see the United States' financial status holding up? Meaning US debt and the need to pay a higher premium for borrowing?

[15:10:00]

SONOLA: No, I think with interest rates, in general, debt service levels for the US government is still relatively low. Yes, you know when you think

about the 10-year yield, two-year yields and borrowing rates, they are creeping up, but overall I will say that they are still quite manageable

over the near term.

KOSIK: Okay, Olu Sonola, the head of US Regional Economics at Fitch Ratings, pleasure talking with you today.

SONOLA: Thank you for having me.

KOSIK: Shares of Meta, the parent company of Facebook plunging today, down more than 20 percent after the company revealed a second straight quarter

of decline.

Meta reporting third quarter revenue of $27.7 billion. That's down four percent year-over-year. Third quarter profit less than half of what it made

a year earlier.

A slump and ad revenue and big spending on the Metaverse, those are some of the contributing factors here. CEO Mark Zuckerberg has committed to keep

developing the Metaverse.

I want to bring in Clare Duffy to talk more about this.

Clare, great to have you with us.

So you look at these earnings and you know, investors clearly having a hard time with this, right? I mean, Meta, its core business is kind of focusing

on many challenges here, but at the same time you're hearing about Mark Zuckerberg looking to kind of spend the piggy bank on this Metaverse that,

you know, investors still kind of can't wrap their heads around. A lot of people really just don't know what it is.

CLARE DUFFY, CNN BUSINESS WRITER: Yes, I mean, I think the stock movement today is a huge signal to the company, down more than 20 percent. It was

already down 60 percent on the year. It has fallen below $100.00 per share, which it hasn't seen in years. Like this is a big deal for the company.

Investors, I think really are skittish about this investment in the Metaverse. It is this future version of the internet that still feels many

years away and it's not even clear if consumers when it is fully realized if consumers will really want that.

You know, Meta so far this year has spent $9.4 billion on its Metaverse efforts, and it says it's going to spend even more next year. And in the

meantime, as you say, its core business is facing a host of challenges.

You know, all the tech companies are seeing ad revenues decline, ad companies are spending less money because of the fears of a recession, high

inflation. Meta is also losing younger users to rivals like TikTok. You know, the company is facing all of these challenges to its core business.

And I think investors are saying is this really the right time to be changing the company's whole strategy to focus on the Metaverse?

KOSIK: All right, let's talk about Twitter and Elon Musk specifically. He is of course tweeting again. He said in a tweet that he didn't buy the firm

to make more money. He said, "I did it to try to help humanity, whom I love." And then of course, the pictures of him walking into Twitter

yesterday holding a sink.

But you know, the reality is, it hasn't been confirmed yet that the deal has actually been sealed.

DUFFY: Right, I think that we are all expecting for the deal to close by tomorrow morning, that's the best estimate at this point. He has been

ordered by a judge to close the deal by 5:00 PM tomorrow, otherwise, he will have to go and face trial, again, over whether to take over the

company.

But I mean, all of these things seem like signals that he really is going to close the deal tomorrow, showing up talking to Twitter employees,

telling advertisers, you know, he is still committed to running their ads on Twitter, making it a safe enough place to be an advertiser.

And this will be really significant. Musk could make big changes to Twitter, and Twitter is such an important platform for public discussions.

You know, the timing ahead of the midterms is really significant here, we could see Trump returning to the platform, and so I think, tomorrow the

questions will shift from is he going to take the company over to what he is going to do with the company?

KOSIK: And will he take that company which is private now, public again, which could happen in the next few years?

Clare Duffy, thanks so much.

DUFFY: Thank you.

KOSIK: The European Central Bank raises rates to fight record inflation, there could be long term consequences across the Eurozone.

(COMMERCIAL BREAK)

[15:16:36]

KOSIK: Welcome back. I'm Alison Kosik.

The European Central Bank has lifted its interest rates for a third straight meeting in response to record inflation. The 75-basis point move

brings its benchmark rate to 1.5 percent. That's the highest it's been since 2009.

It is also tightening conditions on cheap bank loans.

Anna Stewart is here to explain what all of this means.

Okay, walk us through what the ECB decision was.

ANNA STEWART, CNN REPORTER: Well, the decision, the basic one was, as you say, that rate rise, which was completely expected. So really no surprise

there. It is trying to tackle inflation, which is nearly five times what it should be, the two percent medium target for the ECB nearly at 10 percent.

So, here is what they've done and here is what they can do. First of all, that rate hike, we're going to get more of them. The quote from the ECB

today was they're expecting to raise interest rates further.

Now, 1.5 percent where it is now is considered kind of to have a neutral effect on the economy. Any higher than that, though, is considered

restrictive.

It will be tricky, perhaps to get a full consensus on board for further rate hikes, particularly of this sort of magnitude. It was a big one this

month, likely because of the fear of recession and what that could do. In the past, the ECB in 2008, for example, did raise rates and then had to

slash them just two months later, so that is definitely the risk.

Then we get to quantitative tightening, and this was perhaps the most surprising element from the ECB today, there isn't any.

Here in the UK, the Bank of England has already started on this path; but the ECB, not even passive QT at this stage. They are still going to

reinvest maturing bonds.

And then Alison, perhaps the most interesting part of today was the real economy, ensuring that the rate hikes that they produce at the top actually

filter down to the real economy of -- let's remember 19 economies -- and that is no mean feat. There has been a lot of criticism on how banks,

commercial banks have been using the so-called TLTRO III. This was a loan mechanism. It was after the pandemic, trying to get banks to loan out to

people.

So essentially, banks were able to obtain loans at zero or negative rates, and now that rates have risen. They can park that money at the ECB, make a

tidy profit, nice little carry trade. They are cracking down on that.

So that could see some opposition from commercial banks, but this is the plan.

So they are trying to take some money off the balance sheet, maybe there, but the QT, I think we have to wait a few more meetings, I reckon before we

hear much more on that. So for now, it's really a focus on the interest rates.

KOSIK: Any criticism about that lack of quantitative tightening? I mean, you know, since there since the ECB is unwilling to go into restrictive

territory, doesn't something have to give if you want to make a dent in record high inflation?

STEWART: The ECB is always under criticism, partly because it's the Central Bank for 19 different nations. Is there ever going to have a policy

that fits all 19? Probably not. It's pretty tricky.

They're very late in terms of raising rates. They are one of the last big Central Banks to do so. They've only had three so far. And yes, I think

there is criticism that they are still not tightening on the QE program, or at least not passively. I think there was an expectation today, they would

at least stop reinvesting the proceeds from maturing assets. So, I think there is some possibly due criticism there.

KOSIK: Anna Stewart, you always make dry things like the ECB decision making fun to talk about, hopefully fun for our viewers, too.

STEWART: That's right.

KOSIK: Thanks very much.

Let's take a look at this decisions wider implications.

Silvia Ardagna is the Chief European Economist at Barclays and she joins us from London.

Welcome to the show.

[15:20:00]

SILVIA ARDAGNA, CHIEF EUROPEAN ECONOMIST, BARCLAYS : Thank you very much for having me.

KOSIK: So I want to get your reaction to the ECB. You know, as the Federal Reserve comes under fire and criticism for trying to make up for lost time

by going on this aggressive path of, you know, raising rates, as inflation soars, possibly causing a recession, but in the ECB's case, does it does it

have to tread carefully here in a different fashion than the US' Federal Reserve given all the scars left by the Eurozone sovereign debt crisis a

decade ago?

ARDAGNA: Yes, definitely. I think the ECB has also to be very careful, first and foremost, because economic activity is weakening. So, we have

actually, even a worse outlook than in the US.

The energy crisis, there is a big supply side shock and the demand has never been as strong as in the US. So, we forecast a recession in the Euro

area, where the peak to trough decline in GDP is quite deep.

Second reason, as you mentioned, the ECB has to be cautious because of the risk of financial fragmentations, and the possibility that obviously, the

tighter the monetary policy, the higher the risk that investors become concerned about the debt sustainability in high debt countries.

And also higher policy rate reduces the potential fiscal space left that these countries have, which is still, in part needed to mitigate the cost

of this energy crisis.

KOSIK: You know, the ECB, it is already seen as kind of being late to the party, the party being the rate hiking party. So, is the cautious approach

too risky, though, because it means inflation will persist even longer? You know, what about just pulling the Band-Aid off? I mean, you know, you're

looking at 9.9 percent inflation here.

ARDAGNA: Look, we disagree. I don't think the ECB is late to the party. If anything, you know, they have done quite an aggressive shift. They have

started using QE from the beginning of the year and inflation in the euro area is very elevated, but it's of a different nature.

It has really been driven by this energy shock, by the supply side shock. It is the terms of trade, negative for the Euro area as a whole and we have

not seen in the Euro area any significant wage increase that basically lead us to think that there are second round effects.

Just to give you a sense, average nominal wage growth in the Euro area is tracking at 2.7 percent year-on-year. So in the near term, there is a very

big squeeze.

So in our take -- we have a different take, so we actually think that today, more dovish outcome that the market expected was, you know, what was

an inappropriate shift, if you say so. I mean, we expected 75 basis point of hike at this meeting, we expect 50 at the next one, and then two hikes

by 25 basis points. So we were forecasting less hikes than the market was pricing.

And I think the ECB sent the message that an aggressive shift has been done, and that we know that monetary policy actually lags. So, let's see

what the tightening and financing condition will bring about.

Probably, we think in December when the ECB will release the new forecast, they will set up inflation for 2025 going back to two percent target. And

again, I think it's very feasible, given the fact that the domestic economy is weakening and that there is no wage price spiral.

KOSIK: Do you think the ECB made a mistake by not engaging in any quantitative tightening?

ARDAGNA: No, again, I think the economic conditions in the Euro area are different and engaging in quantitative tightening has its own risks in

terms of financial fragmentation.

They announced that they will make -- that they will make a decision at the December meeting. We expect that starting from next year, probably in

March, when they finish hiking rates, they will begin to reinvest only partially the material securities.

KOSIK: You know, the ECB does have a difficult task of setting monetary policies for 19 different countries. Some of those countries have fiscal

wiggle room, others don't. Is there anything else the ECB should be doing to try to get a handle on record inflation?

ARDAGNA: Again, I think the ECB again, is doing -- you know, it is a very uncertain economic outlook. Inflation is driven by a war, by an energy

shock, and there is very little that the ECB can do. The ECB can control interest rates to try to avoid that, inflation expectations become dis-

anchored to try to avoid the wage price piles, but it's very difficult with an economy that is weakening, that wage growth will become so entrenched

that that that would lead to dis-anchoring of inflation expectations in our view.

So overall, I think that the ECB has now brought trade into restrictive territory or you know, neutral to restrictive. It will continue to look

obviously at the evolution of the data, both on the activity and inflation front.

[15:25:17]

But so far, I would say, so good. I mean there has been an aggressive increase in interest rates, and there has not been much of a widening in

spreads between core and peripheral markets nor disorderly movements in financial markets in general.

KOSIK: Silvia, you mentioned energy shocks. Do you think that countries will have the fiscal space to deal with this issue?

ARDAGNA: Well, this year, they've had quite a lot of fiscal space, they've taken larger fiscal measures of the order of two and a half percent of GDP

at the Euro area level. But again, this has to be contrasted with the five percent of trade shock.

Next year, I think the fiscal space will be less so and this is because of a variety of reasons. One, as I said, the economies are weakening, and so

tax revenue is likely to be lower, but also the automatic stabilizers imply higher spending, but the cost of funding has gone up quite significantly.

So they will still be able, I think, to retake some of these measures that will expire, so extend some of the measures that will expire at the end of

the year, but certainly, the high debt countries will have to be much more careful in accommodating the energy shock.

KOSIK: Okay, Silvia Ardagna with Barclays, thanks so much for your perspective today.

Russia's war on Ukraine created a worldwide energy crisis with prices soaring and supply plummeting, but ultimately, it could make for a greener

future around the globe. The reasons why and just how much things could change ahead on QUEST MEANS BUSINESS.

(COMMERCIAL BREAK)

[15:30:00]

(MUSIC PLAYING)

KOSIK: Hello, I'm Alison Kosik. There is more QUEST MEANS BUSINESS in a moment.

When CNN has exclusive access to a Ukrainian power station, targeted by Russian attacks. We will show you the damage.

We will hear from the founders of Vera Bradley on the fashion brand's 40th anniversary. Before that, this is CNN. On this network, the facts always

come first.

(MUSIC PLAYING)

KOSIK (voice-over): Iranian military commanders accuse anti-government protesters of being complicit in a terror attack. ISIS has claimed

responsibility for the shooting Wednesday at a Shia shrine that killed at least 15 people. The Iranian military says the protests were designed to

create instability and chaos. They are threatening further crackdowns.

Pakistani journalist Arshad Sharif has been laid to rest in his hometown of Islamabad, Pakistan. He was killed by local police Sunday in Kenya, in what

officials said was a case of mistaken identity. Sharif fled Pakistan in August after a sedition charge for allegedly criticizing state

institutions.

Penguin Random House says Prince Harry's memoir, titled "Spare," will be released on January 10th. Harry and his wife, Meghan Markle, stepped back

from the monarchy in January 2020 due to the couple's fraught relationship with the royal family.

(MUSIC PLAYING)

KOSIK: Vladimir Putin is rejecting claims that Russia is considering taking nuclear action against Ukraine. In an appearance Thursday, the Russian

president says Moscow never intentionally said anything about the potential use of nuclear weapons.

He accused the West of using that suggestion to influence neutral countries against Moscow. Putin says Russian military doctrine allows for the use of

nuclear weapons only for defense purposes but added that as long as nuclear weapons exist, there is always the danger of their use.

Ukraine's capital is facing massive unprecedented power cuts after Russian airstrikes devastated one of the country's main power plants. Ukrainians

are being urged to use electricity sparingly, as energy officials try to prevent a complete blackout. Our Nic Robertson visited the power plant and

brought an exclusive look at the damage brought by Russia.

(BEGIN VIDEOTAPE)

NIC ROBERTSON, CNN INTERNATIONAL DIPLOMATIC EDITOR: This is where power plant officials say one of two drones slammed into the ground. It was the

same day the plant was hit by a cruise missile as well.

The drone, they say, got tangled up in the high voltage cables up here, ripping equipment apart, all on the ground here, all around; burnt out

cables and over here, burnt out equipment.

And the problem, officials say, is that this part of the site was the most sensitive part, the place that's the easiest to take the whole system down.

The plant, now completely offline.

The other problem is that some of this equipment here it's very hard to replace. It's scarce. Some of this not even made anymore. What they are

saying they're doing is turning to other power plants across the country to scavenge useful items.

Repair work is going on all the time. But for many of the engineers here, part of their days are spent underground in bunkers, because you still get

a lot of air raid siren alerts. This is still a target, and they are worried about it.

Already, some of the easier to repair parts of the plant have been put back together new concrete columns here. The cruise missile landed right here,

taking them out. But it raises the big question for the government now.

3can they repair at a faster rate than Russia is destroying?

Thirty percent to 40 percent of the country's electricity generating capacity is down. The public have been told to expect blackouts. They've

been told to keep their phones and power banks charged, not to use high energy appliances in their homes, particularly during peak hours of the

evening.

It is a real problem facing the government, a real pressure point that President Putin is putting on them right now -- Nic Robertson, CNN, at a

power generating plant in Ukraine.

(END VIDEOTAPE)

KOSIK: The global energy crisis caused by the war is having a surprisingly positive impact on the shift toward green energy. That is according to the

International Energy Agency's annual outlook. Despite fears of a coming rush back to coal and oil, the world is seeing record growth in the use of

solar and wind power.

[15:35:00]

And IEA predicts emissions from fossil fuels will rise by less than 1 percent this year. Our Julia Chatterley talked with the head of the IEA

about what is driving the changes.

(BEGIN VIDEOTAPE)

FATIH BIROL, IEA, EXECUTIVE DIRECTOR: People were expecting that, this year, global emissions would grow substantially. If you look at the number,

which we do at IEA, we see that there is a major expansion of renewables around the world, in the western part of the world, but also in China, in

India, in Southeast Asia.

As a result, we see that the global emissions increase only a fraction of what they did last year. And the coal, there was expectation of the major

growth of coal use. And there was only muted increase, less than 1 percent increase in coal use, mainly coming from China.

But all in all, the news of the emissions this year is not extremely good but much better than many expected.

JULIA CHATTERLEY, CNN ANCHOR: Yes, and, to your point, if we stripped China out of that, then the news would be even better in terms of emissions.

I think the other striking point about this report is that you're talking about peak emissions, actually in the dateline for what we're seeing there.

And again, this is positive, too.

We're seeing one of the side effects, the catalysts of the invasion of Ukraine being this acceleration of the transition to renewable energies.

BIROL: Exactly. I think at IAE, we are all focused, rightly so, the negative impact of this crisis, which I call the first truly global energy

crisis.

We have, of course, negative impact on the economy, energy market, our lives, businesses and people.

But at the same time, but I think many of us can be missing that the government responses to this energy crisis in terms of huge amount of money

putting on the table to accelerate clean energy technologies is huge.

Inflation Reduction Act from the United States, $US 400 billion in terms of tax incentives, in terms of subsidies for solar, wind, nuclear power,

hydrogen, electric cars.

In Europe, there is also a similar plan, which we call the REPowerEU.

In Japan, in China, India, governments are putting real money on the table to accelerate the clean energy, not necessarily for environmental climate

reasons but mainly for energy security reasons.

(END VIDEOTAPE)

KOSIK: Voters in Brazil are bracing for this weekend's high stakes presidential runoff. Far-right incumbent Jair Bolsonaro is fighting to hang

onto leadership against leftist former President Lula da Silva following what was a violent campaign season.

Some fear how Sunday's elections will play out. For Brazil's poorest, this is a consequential vote. As CNN's Paula Newton explains, poverty is on the

ballot.

(BEGIN VIDEOTAPE)

PAULA NEWTON, CNN ANCHOR AND CORRESPONDENT (voice-over): Nova Vittoria Speranca (ph), this pandemic-era village on the outskirts of Sao Paulo, is

fertile ground for votes but not food. The irony, not lost on anyone here.

Food is the issue this mother of four will be voting on. Evanilda's (ph) partner works 16 hours a day and still she tells us, there isn't much in

her refrigerator.

"I just don't want my kids to go hungry," she says.

She feels they may if President Jair Bolsonaro is reelected, even though he raised welfare payments ahead of the election.

"In my view," she says, "Bolsonaro didn't fulfill his promises and has only given us a subsidy to see if he can get more votes."

People here know better than to expect too much from either candidate. But from former President Lula da Silva, they expect something.

"I intend to vote for Lula," she tells us, "because Bolsonaro has been there for four years and, in four years, he's not been able to do much."

From Brazil's impoverished suburbs, to the streets of its commercial capital, inflation is biting here. Access to food has become a central

election issue and a convenient campaign promise as tens of millions continue to live in poverty.

[15:40:00]

At a Bolsonaro rally, supporters ridicule Lula, calling him a thief who belongs in jail, hardly a savior of the poor. Evanilda (ph) sees past

corruption scandals differently.

"Every single one that is in there steal something," she says, "even just a little. They are talking about Lula and saying he stole. Maybe he did. But

at least he takes care of us, takes care of the poor."

Bolsonaro has spent billions on welfare subsidies in the leadup to this election, trying to prove he can save Brazilians from hunger.

Robson Mendonca has been feeding the hungry for decades. He says hundreds more have been lining up at his soup kitchen in recent months. And he's

troubled that the desperate plight of so many is being exploited for votes.

ROBSON MENDONCA, SAO PAULO COMMUNITY LEADER (through translator): Bolsonaro was even capable of lying on national radios saying there is no hunger in

Brazil. They don't see anyone asking for bread at the bakery. He doesn't know reality. There are millions asking for a plate of food, because they

can't feed themselves.

NEWTON (voice-over): To win, both presidential candidates need to count on votes from those can't count on their next meal. A stark snapshot of what

is at stake of Brazil's hungry -- Paula Newton, CNN, Sao Paulo, Brazil.

(END VIDEOTAPE)

KOSIK: Later on in the program, why fit in when you can stand out?

It's the ethos that helped turn luggage company Vera Bradley into a multimillion dollar brand. We will hear from its cofounders.

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KOSIK: Every year millions of travelers from around the world go on safari in Africa, bringing in billions of dollars to developing nations. All of

those visitors bring in environmental costs. Today on Call to Earth, a game lodge in one of the continent's premier wildlife U.N. destinations is going

green through programs --

[15:45:00]

-- which benefit both tourists and the surrounding communities.

(BEGIN VIDEOTAPE)

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UNIDENTIFIED MALE (voice-over): Tourism is big business in Botswana, a landlocked country in southern Africa, where wilderness and game reserves

are the main attractions.

Of its approximately 2.3 million people, nearly 9 percent work in the industry with the majority of visitors coming to bask in the jewel of the

Kalahari, the Okavango Delta, and its neighbor, Chobe National Park.

UNIDENTIFIED FEMALE (voice-over): Tourists, they travel in from very far places from their countries to come and see our beautiful country.

UNIDENTIFIED MALE (voice-over): While all that traffic may be good for the economy, it can come at a huge environmental cost as waste, pollution and

an increasing number of vehicles damage the health of the region's ecosystem.

UNIDENTIFIED FEMALE (voice-over): This is a lion track. It's heading to the west side. So it could be the lions that we saw down by the riverside

yesterday.

UNIDENTIFIED MALE (voice-over): Here in Chobe National Park, home to Africa's largest elephant population, Bela Mayome (ph) works as a guide for

Chobe Game Lodge, the only permanent property inside its borders and the first in Africa to use an electric safari vehicle and an electric powered

boat.

UNIDENTIFIED FEMALE (voice-over): All of this electricity that used to power the boats and the vehicles are generated in-house from the solar

panels. Even when we are driving the boats, the solar charges from the sun.

It is such a magical (ph) experience on electric boats because they are much more quiet. Then you can hear birds call, you can hear the animal

call, like lion calls, those who are bird (ph) watching. It is a great moment.

And you can easily approach most the potentially dangerous animal like elephants and hippos without even disturbing them.

UNIDENTIFIED MALE (voice-over): According to the lodge, the electric vehicles have helped them save over 2,500 gallons of diesel, reduce their

carbon emissions by nearly 28 tons and drastically cut back on an invisible but highly important issue in the natural world: noise pollution.

UNIDENTIFIED FEMALE (voice-over): You can hear the noise from the other boats, you know, obviously they are diesel powered or petrol powered. They

make a lot of noise. And the -- ours are so silent. Of course, being -- given the water, they produce zero emissions.

So it's so nice, too, when you go around, especially when there elephants resting across, going to the other side. You can literally be close, you

know, a few meters away, just to watch them.

UNIDENTIFIED MALE (voice-over): Earlier this year, the fully ecotourism certified lodge took another step to ensure their credentials by appointing

Sepiso (ph) as their first environmentalist. And she says their sustainable practices extend across the entire property and beyond, from guest laundry

services to upcycling waste products.

UNIDENTIFIED FEMALE (voice-over): Compaction there. We have another initiative of manufacturing of (INAUDIBLE). So it all comes from those

fiberglass bottles here. And then we mix that with cement. We identify the right (INAUDIBLE) people, maybe a family that we can build a house for. And

we use these things which to help build them houses.

UNIDENTIFIED MALE (voice-over): The population is so reliant on the income that tourism brings, ecolodges like Chobe are vital in forging a path that

can maintain and even boost visitor numbers without damaging the very ecosystem that makes Botswana such an attractive destination.

UNIDENTIFIED FEMALE (voice-over): It is all about preserving and preserving what we have. We are taking care of our environment, make sure we take good

care of our flora and fauna. That is what matters most.

(END VIDEOTAPE)

KOSIK: Let us know what you are doing to answer the call with the hashtag, #CallToEarth. We will be right back.

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[15:50:00]

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KOSIK: Steady consumer spending has been one of the big reasons for the U.S. economy's rebound in the past quarter. Something two savvy

entrepreneurs have been taking advantage of for four decades. They are the cofounders of luxury luggage company, Vera Bradley.

They spoke to Chloe Melas about how to turn an idea into a $90 million brand.

(BEGIN VIDEOTAPE)

CHLOE MELAS, CNN CORRESPONDENT (voice-over): Pink paisley duffel bags, bright floral luggage, quilted handbags that beg to be seen. Vera Bradley's

signature styles are instantly recognizable.

The company had a humble start, when founders Barbara Bradley Baekgaard and Patricia R. Miller went on a trip together in 1982.

BARBARA BRADLEY BAEKGAARD, COFOUNDER, VERA BRADLEY: I was used to a lot of color. We had a lot of color.

But there was nothing in the airport, right?

PATRICIA R. MILLER, COFOUNDER, VERA BRADLEY: Nothing we saw.

BAEKGAARD: All the bags were canvas or black. It just kind of, I don't know. You could call it a light bulb went on or a God wink. I don't know

what it was. But we went back and started the company the next day.

MELAS (voice-over): Using a basement ping-pong table as their workstation, the women turned to Barb's college-age daughters for help.

BAEKGAARD: We sent the bags to them and heard back that their friends all liked them. And the girls, the Kappa House at Michigan State, they kind of

brag like they think they started the company because they were our first - - it was our test market, actually. And it just grew from there. It was just a crazy thing.

MELAS (voice-over): Pat and Barb flew to New York. In those days, a major center for garment business.

BAEKGAARD: I went into the receptionist. I said I didn't have an appointment or anything. And I said, I would like to see someone in sales.

And they said, who are you with?

And I said, Vera Bradley. Well, they -- Vera was a large company back them.

(CROSSTALK)

MILLER: They made scarves and all that.

BAEKGAARD: And they ushered me into the office of the vice president of sales.

(CROSSTALK)

MILLER: Are you sure you didn't say Vera Bradley?

BAEKGAARD: Yes, I might have.

And he sold us the fabric. We ended up being their largest customer at the end of, say, 10 years, 20 years, whatever it was. And they actually had in

their sales course, remember Vera Bradley was one of their little things. Because he could've thrown me out of the office.

MELAS (voice-over): Their operation soon grew too big for the basement.

MILLER: We had to get reps to sell our products. We would send a sample to someone we knew in D.C.

Like, Mary, said, do you like this bag?

And if she said yes, we said, well, we will give you 15 percent of everything you sell.

MELAS (voice-over): From celebrities to school kids, Vera Bradley became ubiquitous. It is now valued at more than $90 million. After four decades,

the founders still believe their brand has authenticity.

BAEKGAARD: I think Vera Bradley is real. I think we are real. We are not phony. We are not making something up. And I find with people, too, it's

almost like called bragging rights. I have seen people that I'll say, oh I like your bag. They don't know who I am.

And they'll, ooh, it's a Vera Bradley.

MILLER: It's interesting because I --

[15:55:00]

If you could capsulize (ph) those 40 years on one word, I don't know what yours would be. But it has been joyful.

BAEKGAARD: It's been fun.

MILLER: It's been fun.

(END VIDEOTAPE)

MELAS: They were so much fun to speak to. This brand has been around for 40 years. And it is ubiquitous, it is iconic. And to celebrate their 40 years,

they have launched the World of Vera Bradley to teach their female consumers about the world of Web Three, the metaverse.

They have two NFTs out. And all of it, Alison, goes to raise money for their Vera Bradley Breast Cancer Foundation, which they say has raised a

lot of money for research. But it was really, really, cool to talk to them and listen about how they went from the basement to the boardroom, all with

just --

(CROSSTALK)

KOSIK: They seem so --

MELAS: -- dollars.

KOSIK: -- they seem so down to Earth. And, yes, Vera Bradley is a household name. But then their products, you just know them when you see them, right?

MELAS: Oh, yes. And they talked about, like you heard, that they were doing everything on a ping-pong table. There they were; they had a sewing

machine. They're down there, cutting fabrics and doing all these things.

They were sending the bags off to Barbara's daughters in college, using them to get the word out at their universities. Next thing you know, it

exploded. They did partnerships with Disney and then it was everywhere.

KOSIK: All right Chloe Melas, thank you so much for bringing that story to us.

MELAS: Thank you.

KOSIK: We will have a final look at the markets in the closing bell right after the break.

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KOSIK: Welcome back, I'm Alison Kosik. It has been a mixed day on Wall Street. U.S. economic growth helped to lift the Dow into positive

territory. Third quarter GDP was stronger than expected putting a stop to two straight quarters of decline.

The S&P 500 is down on the day, though. Tech stocks, they are dragging the Nasdaq lower. Facebook owner, Meta, is down over 20 percent on its big

earnings miss. Now for a look at some of the Dow components. Checking out Caterpillar. It is up almost 8 percent. The heavy equipment maker beat on

profits and revenue.

McDonald's shares are up over 3 percent. It says sales are up and demand remains strong, despite higher prices. We are looking at tech stocks, they

are near the bottom. Shares of Microsoft are at 1.6 percent. They are down 1.6 percent after Tuesday's earnings miss.

Apple is off 3 percent. Apple is going to be reporting after the closing bell today.

That is QUEST MEANS BUSINESS. I am Alison Kosik, follow me on Instagram and Twitter.

END