Aurelia Butler

This week, as western governments pondered sending aircraft to Ukraine, the Kyiv government embarked on a novel financing step: it launched a website #buymeafighterjet to crowdsource donations for jets from the world’s mega-rich.Once that might have seemed a laughably bizarre thing to do. But today it no longer appears quite so odd. Never mind the fact that events in Ukraine show we live in a world where networks, not institutions, wield power; today the ultra wealthy increasingly wield riches and power, with some billionaires controlling budgets comparable to those of small countries. And while it is unclear whether #buymeafighterjet will deliver planes, the symbolism is worth noting. It highlights a trend that deserves far more attention from economists and political scientists alike — and in spheres that have nothing to do with war. Consider one radically different context: this week’s World Economic Outlook report from the IMF. The message in this tome that grabbed most attention this week was that the world faces rising inflation, high debt and stalling growth — stagflation, in other words, although the IMF tactfully downplays that term.But on page 62 of the report there was also an intriguing little sidebar about the “Saving Glut of the Rich”. A decade ago, the concept of a “savings glut” was something usually discussed in relation to China. When market interest rates plunged in the early 21st century, economists argued that rates were being suppressed because emerging market countries were recycling their vast export earnings into the financial system.Or, as Ben Bernanke, former Federal Reserve chair, wrote in 2015: “A global excess of desired saving over desired investment, emanating in large part from China and other Asian emerging market economies and oil producers like Saudi Arabia,” had created a “global savings glut”.But, this week, the IMF highlighted another, little-noticed contributing issue: the ultra-rich. It pointed out that a “substantial rise in saving at the very top of the income distribution in the United States over the past four decades . . . has coincided with rising household indebtedness concentrated among lower-income households and rising income inequality”.And while economists used to look at this through an American lens, “the phenomenon may not be limited to the United States”, the Fund notes. It seems to be global. And since the rich cannot possibly spend all their wealth — unlike the poor, who usually do — this savings glut has almost certainly “contributed to the secular decline of the natural rate of interest”.Moreover, while the IMF downplays this, the actions of western central banks have made the pattern worse. Years of quantitative easing have raised the value of assets held by the rich, thus expanding inequality — and with it the rich persons’ savings glut.How much has this affected rates? In truth, no one knows, not least because information about this shadowy world of ultra wealth is sparse. Or, as the World Inequality Laboratory notes in its 2022 report: “We live in a data-abundant world and yet we lack basic information about inequality.” Furthermore, western central bankers have limited incentive to study these issues too publicly, since many feel privately embarrassed that quantitative easing has made inequality worse. But one sign of the trend can be found in the 2022 Wealth Inequality Index report: not only have the richest 1 per cent across the world apparently taken 38 per cent of all wealth gains since the mid 1990s, but also the private share of national wealth has soared, while public wealth has shrunk. Another striking clue emanates from reports collated by Campden consultants, experts on the family office ecosystem. In 2019, they calculated that there were 7,300-odd family offices in the world, controlling $6tn in funds, a 38 per cent increase from 2017. Between 2020 and 2021, during the latest wave of QE, funds under management increased on average by 61 per cent. It is possible that this trend in inequality will slow if QE — and with it asset inflation — comes to an end in 2022 and beyond. Or maybe not — as the IMF report also points out, a world of stagflation risks and rising rates is one that will hurt the indebted poor far more than it will the rich.Either way, the pattern deserves far more debate among economists and political scientists. We need to know, for example, whether ultra-wealthy funds will step in to buy assets like Treasuries as central banks wind down QE. The way family offices are contributing to a secular shift from public capital markets to private ones should get more attention — particularly since economists such as Mohamed El-Erian predict that this will accelerate in the wake of Russia’s invasion of Ukraine.We also need to pay more attention to governance issues. The expanding private pots are generating innovative forms of philanthropy (which is good). But they can also subvert democracy via dark money donations (which is bad). Either way, #buymeafighterjet is one tiny symbol of an increasingly networked but unequal world. 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Households in the UK are investing less money for the future as they grapple with the rising cost of living, according to one of the country’s largest investment platforms.AJ Bell said on Thursday that rising inflation and the war in Ukraine had knocked investor confidence and put a squeeze on household budgets, resulting in less cash flowing into investments.Those forces resulted in lower net inflows during the first quarter of £1.6bn, compared with £1.8bn in the same three months last year, the company reported.“Customers invested slightly less via our platform than [last year] as they assess the impact of the rising cost of living,” said Andy Bell, chief executive.The warnings that cost of living pressures would slow the flow of cash into investments marks a sharp change of tone from last year, when investment businesses enjoyed bumper inflows as people invested money they had stashed during Covid-19 lockdowns. It is also the latest sign of the affordability crisis gripping UK households. A poll conducted by Interactive Investor, another UK platform, earlier this month found that one-quarter of its customers had cut back on paying into their investments or savings pots because of the cost of living.One in 20 respondents said they had stopped contributing to their pension, while 8.5 per cent had paused contributions to their stocks and shares Isa, a tax-protected UK investment account. The slowdown in investing has been exacerbated by turmoil in financial markets, which have been unsettled by the war in Ukraine and moves by central banks to tame inflation by reducing their support for the economy. The FTSE All-Share index fell half a per cent in the first quarter, while the MSCI World index tumbled 5.5 per cent. In contrast, stocks surged in 2021 in part thanks to central bank support, and many savers invested in the rising markets. By the end of March this year, AJ Bell’s assets under management stood at £74.1bn, up 14 per cent over 12 months, but down 2 per cent since January. AJ Bell said last year’s influx of new money into investments “was exceptionally strong . . . whereas this year [investors] have been faced with increased market uncertainty caused by factors including inflationary pressure on the cost of living and the war in Ukraine”.However, Bell warned that savers who pulled back from investing could also be hurt by rising inflation eroding their savings in real terms. The Financial Conduct Authority last autumn identified 8.6mn Britons with more than £10,000 in investable cash. AJ Bell on Wednesday launched a simplified stock brokerage app, with no trading fees, called Dodl, which it hopes will appeal to these potential customers. More

WASHINGTON (Reuters) -The number of Americans filing new claims for unemployment benefits fell moderately last week, still suggesting that April was another month of strong job growth.The report from the Labor Department on Thursday also showed unemployment rolls shrinking to the lowest level in 52 years in the first week of April, reinforcing the tightening labor market conditions. An acute shortage of workers is keeping layoffs low, helping to fuel inflation, and forcing the Federal Reserve to adopt a restrictive monetary policy stance.”Jobless claims at near-record lows mean worker wages will continue to go up and up, guaranteeing that inflation remains more persistent and at more worrisome levels for longer than Fed officials believe,” said Christopher Rupkey, chief economist at FWDBONDS in New York. Initial claims for state unemployment benefits declined 2,000 to a seasonally adjusted 184,000 for the week ended April 16. Data for the prior week was revised to show 1,000 more applications received than initially reported.Economists polled by Reuters had forecast 180,000 applications for the latest week. Claims plunged to a more than 53-year low of 166,000 during the week ending March 19. There is probably limited scope for further declines.Last week, applications tumbled by 7,656 in Missouri. There were also substantial declines in Ohio, Texas, New York and Michigan, which offset increases in Connecticut and California. The Fed in March raised its policy interest rate by 25 basis points, the first rate hike in more than three years. Economists expect a half-percentage-point rate increase next month, and for the U.S. central bank to soon start trimming its asset holdings.Claims, which have dropped from a record high of 6.137 million in early April 2020, will be closely watched for signs of whether rising borrowing costs are curbing demand.So far, demand for labor is holding strong. The Fed’s Beige Book, based on information collected on or before April 11 from the central bank’s business contacts, showed on Wednesday that “demand for workers continued to be strong across most districts and industry sectors,” but noted “hiring was held back by the overall lack of available workers.”There were a near record 11.3 million job openings at the end of February. The unemployment rate is at 3.6%, just one-tenth of a percentage point above its pre-pandemic level.But there are signs labor supply will soon improve. The claims report showed the number of people receiving benefits after an initial week of aid dropped 58,000 to 1.417 million during the week ending April 9. The was the lowest level for the so-called continuing claims since February 1970.Last week’s claims data covered the period during which the government surveyed business establishments for the nonfarm payrolls component of April’s employment report. Claims rose marginally between the March and April payrolls survey periods. Economists are expecting strong employment growth in April. Payrolls increased by 431,000 jobs in March, marking the 11th straight month of employment gains in excess of 400,000. More

(Reuters) -A surge in Tesla (NASDAQ:TSLA) shares was set to lift U.S. equity indexes at the open on Thursday, with airline stocks providing added boost after United Airlines and American Airlines (NASDAQ:AAL) forecast a return to profitability in the current quarter.The world’s most valuable automaker jumped 9.4% in premarket trading after its results beat Wall Street expectations as higher prices helped it overcome supply-chain chaos and rising costs.Meanwhile, United Airlines Holdings (NASDAQ:UAL) Inc and American Airlines Group Inc rose 8.7% and 11.3%, respectively, after their upbeat outlook on bookings due to booming travel demand.Shares of peers Southwest Airlines (NYSE:LUV) Co, JetBlue Airways (NASDAQ:JBLU) Corp and Delta Air Lines Inc (NYSE:DAL) gained between 3.1% and 4.8%.U.S. stocks fell sharply on Wednesday after dismal results from Netflix Inc (NASDAQ:NFLX) triggered a selloff in technology and growth stocks. “Earnings have been a mixed big so far, obviously you saw the disappointment with Netflix. We’re probably going to go back and forth on a day-to-day basis,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.”People are still looking at the bond market and the Fed policy over the longer term, it’s not just earnings.”Investors will focus on Federal Reserve Chair Jerome Powell’s speech later in the day for clues on monetary policy tightening plans, with many expecting a 50 basis points rate hike next month to contain soaring inflation.Markets have been jittery about the prospect of rising interest rates this year and their impact on rate-sensitive growth stocks. [US/] Manufacturing activity in the Mid-Atlantic region fell short of estimates, while input costs shot to their highest since 1979, a regional Federal Reserve survey showed on Thursday.Another set showed, the number of Americans filing new claims for unemployment benefits fell moderately last week, suggesting that April was another month of strong job growth.At 09:01 a.m. ET, Dow e-minis were up 248 points, or 0.71%, S&P 500 e-minis were up 42 points, or 0.94%, and Nasdaq 100 e-minis were up 183 points, or 1.31%.AT&T Inc (NYSE:T) rose 1.4% after posting a rise in core wireless revenue for the first quarter, as the telecom giant benefited from the aggressive expansion of its fiber internet and 5G services.Overall, analysts expect S&P 500 earnings growth of 6.5% in the first quarter as of Wednesday, compared with the 32.1% rise in the previous quarter, according to Refinitiv data. More

ZURICH (Reuters) -Makers of chocolate bars and coffee to lawn mowers and industrial robots were succeeding in passing on soaring costs to consumers, first-quarter earnings showed on Thursday, allaying fears higher prices could dent demand for their products.Some of Europe’s biggest companies reported first quarter sales increases, with KitKat maker Nestle, Evian water owner Danone and Dulux paint maker Akzo Nobel (OTC:AKZOY) saying they were able to accomplish the gains while raising their prices.Engineering company ABB and gardening equipment maker Husqvarna also reported strong demand despite both increasing prices.Outside Europe, Tesla (NASDAQ:TSLA) surged past Wall Street expectations on Wednesday, as higher prices helped insulate the electric vehicle maker from supply chain chaos and rising costs. [nL3N2WI3AV]But while cheering investors, with Nestle, ABB and Akzo Nobel enjoying share price gains, the strategy is stirring worries about households’ ability to cope and the outlook for the rest of the year.Rising interest rates and lagging pay deals are squeezing consumers, who are seeing their disposable incomes shrink and shopping bills rise.”Food and price and cost inflation pressure are going to be higher and more persistent,” said Berenberg in a recent note.”The sector outlook has become more challenging,” the bank added. “Nevertheless, grocery demand will be resilient, but inflation will reveal outperformers.”Nescafe owner Nestle was one of the winners on Thursday, reporting a 7.6% rise in organic sales during the first three months of the year as pet food and coffee sales performed strongly despite big price increases.The measure, which strips out currency swings and M&A deals, beat a 5.0% average forecast in a company-compiled consensus thanks to price increases of 5.2%.”We stepped up pricing in a responsible manner and saw sustained consumer demand,” said the Swiss company whose products include Purina pet food and Nespresso.MORE HIKES LIKELYThe world’s biggest food group said the current price rises were also unlikely to be the last.”Cost inflation continues to increase sharply, which will require further pricing and mitigating actions over the course of the year,” Nestle added.French peer Danone, whose product line up includes Activia yoghurt and Evian water, said it was also ready for further rounds of price increases “if needed” after reporting a 7.1% sales increase late on Wednesday.The world’s biggest yoghurt maker benefited from price increases at the start of the year as well as easier comparisons and stronger demand for baby formula in China.Higher prices could be a sensitive topic in its French home market where the cost of living crisis sets the tone for the presidential runoff between incumbent Emmanuel Macron and his right-wing challenger Marine Le Pen.Price rises have also not hurt demand for Dutch paint and coatings maker Akzo Nobel, which beat quarterly core earnings estimates on Thursday while reporting a 17% increase in prices compared with a year earlier.Chief Executive Thierry Vanlancker said that the group’s “vigorous pricing initiatives” had helped it manage “the unprecedented variable cost inflation that impacted our industry during the quarter”.Beyond the consumer area, factory robots and industrial drive maker ABB also reported a 21% jump in orders during its first quarter despite increasing prices.Chief Executive Bjorn Rosengren said there were was no end in sight to price increases for components and metals, as well as rising transport costs.This meant ABB would have to continue to lift prices to deal with it, he said, although there was no sign of customers holding back from equipping their factories with new products. “They are still placing orders, I guess they are accepting it,” Rosengren told reporters. “We are not the only one lifting prices, everyone is doing that in the market. That is the new reality.”Also on Thursday, Husqvarna, the world’s biggest maker of gardening power equipment, said it was raising prices further this month in response to rising supply and energy costs and said it had no indication retailers were holding back. “They accept the price increases,” Henric Andersson, chief executive of the Swedish group told Reuters after the earnings report. More