Aurelia Butler

Finance ministers from the Group of Seven leading economies pledged to deliver almost $20bn of budget aid to Ukraine as the country struggles to meet its spending needs in the face of Russia’s invasion.“Ukraine’s liquidity is secured for the foreseeable future,” German finance minister Christian Lindner told reporters after hosting his G7 counterparts at a meeting in the west German town of Königswinter.The meeting also focused on the danger posed to the global economy by rising inflation, which is driving up commodity, energy and food prices, and which Lindner said had played a “very significant” role in the ministers’ deliberations.He urged central banks to deal with the problem. “The central banks are very, very, very independent, but they have a very, very, very great responsibility in these times,” he said.Joachim Nagel, head of the Bundesbank, who took part in the meeting along with other G7 central bank chiefs, said there was an inflation risk from what he called “three Ds” — deglobalisation, where countries sever trading ties with each other decarbonisation, where economies adopt green policies to reduce their output of CO₂ and demography.The G7 also called for rapid development of the regulation of financial assets based on crypto technologies, immediately after sharp declines in the value of assets in the nascent class.The international Financial Stability Board and other international authorities should “advance the swift development and implementation of consistent and comprehensive regulation of cryptoasset issuers and service providers”, the G7 said. But the war in Ukraine, which has caused ripples throughout the global economy, dominated the discussions. The final communique noted that the war was causing “global economic disruptions, impacting the security of global energy supply, food production and exports of food and agricultural commodities, as well as the functioning of global supply chains in general”.

Germany’s Finance Minister Christian Lindner and Bundesbank President Joachim Nagel address a news conference after their country hosted the G7 summit © Benjamin Westhoff/Reuters

The figure of $19.8bn of aid agreed by the G7 includes $9.5bn pledged during the meeting. Of that, $8.5bn are grants and the rest guarantees or loans. It also includes $10.3bn that has already been paid out or promised by the IMF.Lindner said that in addition, the European Bank for Reconstruction and Development and the World Bank were providing $3.4bn to support Ukrainian state companies and the private sector.The G7 announcement came after the US Senate approved more than $40bn in assistance for Ukraine. From that, the US is contributing $7.5bn to the G7 plan.The money mobilised by the G7 is designed to cover Ukraine’s urgent short-term financing needs so it can deliver basic services and pay public sector workers and pensions during a war that has devastated its economy and placed massive strain on its finances. “We agreed that Ukraine’s financial situation must have no influence on Ukraine’s ability to defend itself successfully,” Lindner said. “We need to do our utmost to end this war.”He said the money was on top of humanitarian and military aid that the west is providing to Ukraine.The G7 said the group would “continue to stand by Ukraine throughout this war and beyond and are prepared to do more as needed”.“We are working closely with Ukraine to safeguard its macroeconomic stability in face of the challenges posed by Russia’s war of aggression, massive destruction of critical infrastructure and disruption of traditional shipping routes for Ukrainian exports,” the group said.On crypto, the meeting’s final statement urged the need for “stronger disclosure and regulatory reporting”, especially of the nature of reserve assets said to back so-called stablecoins, whose value is tied to that of the US dollar.The G7 said that no stablecoin project should begin operating until it adequately addressed “relevant legal, regulatory and oversight requirements through appropriate design and by adhering to applicable standards”.This month, Tether, the largest stablecoin provider, declined to provide the Financial Times with detailed information about the company’s reserves. More

Early in the pandemic, there was hope that humanity might draw a lesson or two from our renewed sense of fragility. Existential threats like global warming would be taken more seriously, supply chains rejigged, healthcare services strengthened and critical workers held in higher esteem. So far, however, the biggest change has been in what we buy. Data from US freight-forwarder Flexport show how US consumers are still spending far more on goods relative to services than they used to. Pre-pandemic, Americans spent roughly 36 per cent of their incomes on goods, says Chris Rogers, Flexport’s supply chain economist. In early 2021, with millions confined to their homes, that figure jumped to around 42 per cent. Cue pandemonium at many of the world’s biggest ports.

The post-Covid Indicator compares the balance of spending in summer 2020 (PCI = 100) to that before the pandemic (PCI = zero) © Flexport, US Bureau of Economic Affairs

The jump in demand for “stuff” over “experiences” is neatly illustrated by the green line in the chart above, which tracks spending habits measured by the US Department for Commerce. The latest data from March indicate levels of personal consumption expenditure have stayed broadly stable so far this year.The red line, meanwhile, represents a “peek into the future” based on an amalgamation of that same national consumption behaviour and the latest data on which goods are leaving ports in Asia. Going off past correlations, Flexport estimates that consumers’ preferences for goods versus services today, in May — in aggregate and in dollar terms — remains pretty elevated, belying expectations that a “post-Covid” reopening of the economy would see spending patterns snap back to normal.The chart below distinguishes between the different types of goods being bought.

© Flexport, US Bureau of Economic Affairs

The solid lines show how consumers’ nominal preference for goods over services was more pronounced for durable goods (furniture, exercise equipment, consumer electricals) than for non-durable goods (food, clothes) in the first months of 2021. Preferences for both look set to remain above summer 2020 levels into the second quarter of this year. The inflation-adjusted dotted lines tell a different story. In real terms, Americans’ preferences for non-durable goods relative to services has plummeted since November, reflecting how prices for food and clothes (which are linked to global commodity prices), have so far risen quicker than prices for services. Does that suggest that supply chain bottlenecks may be about to ease? Not really, according to Rogers. Since T-shirts are easier to ship than fridges, “for long haul freight, the decline in non-durables isn’t as important as if durables were falling”. Lockdowns across China aren’t helping either. The fact that demand for goods has yet to fall back to the pre-pandemic trendline has implications for the trajectory of global inflation, Rogers adds. If inflation is driven by elevated demand facing up to at best fixed supply, unless and until demand comes down significantly, it’s going to put pressure on those supply chain networks . . . We’re nowhere near that yet. More

The central bank eventually decided to raise its Monetary Policy Rate (MPR) by 125 points to 8.25%, which was still more than expected by the market.The bank’s council weighed options that ranged from 100 to 150 basis points.”All the directors agreed that the option of 125 base points was the one that allowed the best way to communicate the change in the inflationary scenario, signaling a special concern for the persistence of inflation,” the meeting minutes revealed. More

The ministry said it channelled $71.25 million on coupon payout for dollar-denominated Eurobonds maturing in 2026 and 26.5 million euros ($28 million) on papers due in 2036.The national settlement depository has received the funds the ministry channelled, it said.($1 = 0.9461 euros) More

(Reuters) -Deere & Co raised its 2022 profit forecast on Friday as gaps in grain supplies triggered by Russia’s invasion of Ukraine drive global crop price higher, but the heavy equipment maker’s stock fell after its quarterly revenue missed analysts’ forecasts.The Moline, Illinois-based firm forecast fiscal 2022 net income, including special items, of $7.0 billion to $7.4 billion, from a prior estimate of $6.7 billion to $7.1 billion.Deere (NYSE:DE)’s net income was $2.09 billion or $6.81 per share for the quarter ended May 1, outpacing Wall Street estimates of $6.71 per share.Shares in the world’s largest farm equipment maker, which surged to record highs in March as investors bet on stronger demand, were down 6% in pre-market trading against the backdrop of a weaker market triggered by a lackluster earnings season and a hawkish stance from the U.S. Federal reserve.The S&P is down nearly 19% year-to-date.Deere’s performance has largely outpaced the general market as a tight supply of grains has lifted prices, supporting farm incomes and encouraging farmers to upgrade their fleet. The company said that total net sales and revenue rose about 11% to $13.37 billion from $12.06 billion in the quarter, while net sales for its production and precision agricultural solutions saw the biggest increase, up 13% from the year before. Grains giant Archer-Daniels-Midland Co said last month that it expects demand to likely outpace crop supplies until at least 2024. More