Aurelia Butler

UK house prices have registered the strongest start to the year since 2005 with faster growth than expected despite higher interest rates and surging inflation.The Nationwide house price index rose at an annual rate of 11.2 per cent last month from 10.4 per cent in December, the fastest January rate in 17 years. Economists polled by Reuters had predicted an annual rate of 10.8 per cent.“Housing demand has remained robust,” said Robert Gardner, chief economist at Nationwide, but that bumped against an “extremely low stock” of homes on estate agents’ books, which contributed to the pace of growth. Housing demand has also been supported by a strong labour market, while more people looked for bigger properties as they continued to work from home. Rhys Schofield, managing director at Peak Mortgages and Protection, said that January “was by far and away our busiest month ever, with demand for property and mortgages through the roof”.The rise pushed the average nominal house price to a record £256,000 since comparable data first began in 1952 and up £40,000 from two years ago, before Covid-19 restrictions were introduced. The data showed that UK house prices rose 18 per cent in the past two years, compared with an increase of just 1.9 per cent in the two years to January 2020.“The tsunami-like house price growth of the past two years shows no sign of slowing,” said Guy Harrington, chief executive of residential lender Glenhawk, noting this was “bad news for the millions of people who remain priced out of owning their own home”.House prices have grown across most advanced economies during the pandemic as a result of accommodative monetary policies and changes in lifestyles. However, the UK housing market is expected to slow in 2022. A 10 per cent house deposit for a typical first-time buyer is equivalent to a record 56 per cent of total gross annual earnings, said Gardner, which suggests fewer people may be able to afford to buy property if the trend continues.The Bank of England last month raised its key interest rate for the first time in nearly three years as inflation took its toll. A further rise is expected on Thursday.“A further increase in interest rates, widely expected this Thursday, will make borrowing more expensive and give buyers pause for thought when stretching their budget,” said Jonathan Hopper, chief executive of the buying agent Garrington Property Finders.

Hopper added that since lockdown restrictions had been eased across the UK more sellers were likely to come to market, improving supply and taking “some of the heat out of price rises”. Surging inflation, meanwhile, is eroding purchasing power and consumer confidence. Some households have accumulated large reserves of savings during the crisis, as spending was restricted, contributing to stronger housing demand. However, as the country faces the highest inflation rate in 30 years, with energy costs and taxes set to climb in April, people are likely to reach into these savings. “The cost of living pressures faced by households from rising inflation and taxes mean fewer people will be able to afford to borrow the necessary amount they need to buy at higher mortgage rates,” said Martin Beck, chief economic adviser to the EY Item Club. More

We’re no longer “team transitory”. Not because we think we’re about to see the sort of wage-price spiral we saw in the 1970s and 1980s. We still don’t. And not because we’ve changed our minds and think the chinks in global supply chains that have pushed up the prices of consumer durables are here to stay. We think they will, at some point, abate. We’re no longer “team transitory” because, regardless of your views on the labour market and semiconductor chips, we’ve come to realise how callous the phrase sounds. A few weeks ago, Jack Monroe, a food blogger based in the UK who has spent years chronicling how difficult it is to eat well when you are living in poverty, wrote the following thread in response to news that the official measure for consumer price inflation had hit 5.4 per cent:

Reading it, we felt full of sorrow. And quite ashamed, to be honest.We’re ashamed that it took the thread for us to realise how insulting framing inflation as only “transitory” must’ve felt for people who are struggling to make ends meet. Transitory sounds blasé, like it’s only a blip. It implies it’s something that officials and journalists ought to “look through”, focusing more on the “medium term” and less on how higher prices in the here-and-now are impacting society’s most vulnerable. Language helps shape public policy. Yet there’s an awful lot of weasel wordery in economics that ends up leading to the interests of certain groups of society being neglected. That’s not because those participating in the debates are evil. Many policymakers we’ve met are far from uncaring. Most see themselves as public servants, acting for the good of society. However, these debates take place almost exclusively among people who are comfortable. Many of us are guilty in communicating in ways that dismiss the hardships of those worst off because we have little idea of how economic policy truly impacts people living in poverty.This is why Monroe’s thread matters. It matters too that Joe Biden has nominated two people to the Federal Reserve board who have spent their working life researching poverty and inequality. The Fed has now stopped using the word transitory. Primarily because inflation lingered longer than policymakers expected. We’d like to think that, if Biden’s nominees — Lisa Cook and Philip Jefferson — had been there a year earlier, the bank might have stopped using the term sooner, realising that it can leave a sour taste in the mouths of those struggling to eat. More

The crunch in global supply chains will continue longer than originally thought and may persistently marginalise developing countries, said the head of the World Trade Organization.Ngozi Okonjo-Iweala, the former World Bank second-in-command who took over as WTO director-general last March, told an audience in Paris that higher transaction costs risked squeezing poorer countries even after some supply chain problems were resolved.“We thought the supply chain disruptions would be temporary,” Okonjo-Iweala told a meeting organised by the Jeune Afrique Media Group. “We still think that, but they are taking longer to resolve than we expected — maybe by the end of this year or maybe into next year.”Amid concerns that smaller companies are being pushed out of trading networks because of supply chain friction, the WTO will convene a meeting of business executives, ministers and trade experts in March to discuss how to ease the persistent blockages, Okonjo-Iweala said.In October last year Okonjo-Iweala told the FT that supply chain pressures would persist for “several months”, and in November said the problems should be “transitory” and resolved before the end of 2022. But the Omicron variant of Covid, which has closed down some production and transport in China and restricted global travel — forcing the postponement of the WTO’s own ministerial meeting in December — has pushed back expectations of a return to normality.Cargo delays at the US’s west coast ports have remained at record levels, despite efforts by Joe Biden’s administration to ease congestion, and container freight rates are still very high.Okonjo-Iweala said the demand-side pressures that had caused freight delays should ease this year, and that more supply capacity would come on stream.“Demand for goods should come down, especially with the inflationary pressures and the winding down of support from pandemic-related fiscal measures,” she said. “Shipping companies are making unprecedented profits and some are investing in capacity.”

Video: WTO director-general says supply chain problems could last months

But she added: “It may also be that there are structural problems that persist. It could be that the problems at US west coast ports, for example, are also due to structural and bureaucratic challenges. “In addition, there are issues with many developing countries being at the long end of maritime transport,” she said, reflecting concerns that poorer countries with smaller volumes of trade are at risk of being cut out of long supply chains if transport costs remain high.The March summit aims to bring together shipping, logistics and trading companies with ministers and experts from international organisations to see what improvements can be made in the logistics chain. The gathering is modelled on the WTO’s summit last year, which convened pharmaceutical companies, epidemiologists, health experts and campaigners to speed up vaccine production and delivery.The WTO ministerial conference, which was due to discuss reductions in fishing subsidies and reforming intellectual property rules on Covid-related medical products, has been postponed until later this year. More

The US and European allies are preparing what is being described on both sides of the Atlantic as the most aggressive package of economic and financial sanctions ever assembled to punish Russian president Vladimir Putin if he approves an invasion of Ukraine.The hope in western capitals is that the mere threat of these measures will be enough to deter Putin from attacking Ukraine in the first place — and if that fails, to pound Moscow with so many economic weapons that it will weaken the Kremlin’s resolve.So what measures specifically are the US and the EU prepared to impose?OligarchsIn recent days, the US and the UK have escalated plans to punish Putin’s inner circle by taking aim at Russia’s economic elite and the money it has parked in the west.Senior Biden administration officials said they have now drawn up “specific sanctions packages” focused on Russian oligarchs and their family members. They would not say who would be on the list, because of concerns about “flight risk”, but the scope could be broad. US officials said some names would be drawn from a classified list of potential targets sent by Treasury to Congress in 2018.Given how many Russian oligarchs have assets and other financial interests in the UK, support from Britain has been crucial to US efforts, and senior Biden administration officials have touted their co-ordination with London on the individual sanctions packages.On Monday, the UK vowed to introduce new legislation strengthening London’s ability to target Kremlin-linked businesses and their owners in the country.The EU is also drawing up a list of individuals to be hit with personal sanctions such as asset freezes and travel bans, but has in the past demanded a higher burden of proof for inclusion in such lists than the US, given the ability for those affected to mount legal challenges in European courts.BanksThe US and the EU also want to strike at the heart of the Russian banking system and cut Moscow significantly out of the international financial system, having failed to do so following the 2014 annexation of Crimea.

Russia’s largest financial institutions, including Sberbank, VTB, Gazprombank, The Russian Direct Investment Fund and Alfa Bank, are all in the line of fire.Meanwhile, the US and its allies have also been debating excluding Russia from Swift, the international payments network, which would further complicate the ability of Russian banks to interact with the west. But the EU is less supportive of this step, given the potential fallout on the service’s reputation, and how any disconnection might be perceived by third countries. One EU official said disconnecting Russia was seen “as a last resort”, and that it may be more effective to use targeted financial sanctions that, for instance, prevent lenders from converting roubles into dollars.US officials said last week there was growing “convergence” with EU allies on both the severity and the immediacy of the financial sanctions, noting that they would aim to hit both existing and new financing. Some EU states have also called for Russia’s access to the IMF’s Special Drawing Rights — which act as reserve currency — to be frozen, according to documents seen by the FT.TechnologyThe US and the EU have discussed imposing very stringent export controls on western technology in order to inflict as much damage as possible to Russia’s industrial base and its capacity to innovate.

Traditionally, export controls have been used as a means to prevent sophisticated weaponry from getting into the hands of geopolitical adversaries. However, the US and many European countries have expanded the measures to include emerging technologies such as quantum computing and artificial intelligence.According to people familiar with the Biden admin’s thinking, one of the most potent tools the US could deploy in this realm is the so-called “foreign direct product rule”, which was used to rein in Chinese technology company Huawei. The rule would prevent third countries from exporting certain sensitive technologies containing US components to Russia.“Export controls deny something to Russia that it needs and can’t easily replace from anywhere else,” a senior Biden administration official said last week, adding: “What we’re talking about are sophisticated technologies that we design and produce that are essential inputs to Russia’s strategic ambitions.”EnergyArguably the most politically and economically sensitive arena in which the US and the EU are preparing sanctions is the energy sector. Moscow is heavily reliant on energy exports as a source of foreign reserves, and the EU relies on Russian gas for 40 per cent of its consumption. Meanwhile, America is concerned about high energy costs stoking inflation ahead of the midterm elections.Yet the US and its allies have been debating using unprecedented measures to impose sanctions on oil and gas producers as well as Russian companies in the mining sector.Despite some uncertainty over the position of the new German government, the US and the EU have determined that if Russia decides to invade Ukraine, they would stop the controversial Nord Stream 2 gas pipeline linking Russia and Germany from becoming fully active. This would be a major blow to Moscow and could also lead to significant economic pain in Germany.However, the EU’s reliance on Moscow means there is also significant scope for potential countermeasures. Brussels is particularly concerned about a possible collapse in gas supplies in the event of a war, either because of damage to Ukrainian pipelines supplying Europe or Russia moving to restrict gas supplies. More

WASHINGTON (Reuters) -The largest U.S. labor organization said Monday it strongly supported a U.S. House of Representatives bill designed to improve competition with China, boost U.S. semiconductor production and reform key trade provisions.The AFL-CIO trade federation representing 12.5 million workers said in a letter to lawmakers the bill’s $52 billion for chips is critical to “addressing the current chip shortage that continues to adversely impact production in the automotive sector and elsewhere.” The U.S. House plans to take up the bill later this week. On Tuesday, the House Rules Committee is set to consider more than 500 proposed amendments to the bill including one from Representatives Alexandria Ocasio-Cortez and Cori Bush that would bar semiconductor firms receiving government subsidies from paying dividends or repurchasing company stock.On Wednesday, Commerce Secretary Gina Raimondo will speak to House Democrats about the importance of the legislation, according to an invitation seen by Reuters.The union said the bill “will provide critical and overdue enhancements to America’s global competitive capabilities, support workers whose jobs are lost to trade, and protect and expand the tools to fight foreign unfair trade.”The U.S Chamber of Commerce said it was pleased the House “is now starting the process of considering its version of this legislation. House action is an essential step in producing a bill that can be signed into law.”Majority Leader Steny Hoyer said on Friday that the House would vote on the 2,900-page bill, called the “America Competes” act. The bill authorizes $45 billion to support supply-chain resilience and manufacturing of critical goods and industrial equipment.President Joe Biden’s administration is pushing Congress to approve funding to subsidize chip production in the United States, as shortages of the component used in vehicles and computers have exacerbated supply-chain bottlenecks.The Senate passed the U.S. Innovation and Competition Act last year, which includes $52 billion for chips and authorizes $190 billion to strengthen U.S. technology and research to compete with China.The House bill has some differences with the Senate version. If approved, leaders of both chambers will negotiate to resolve differences.The AFL-CIO backed a new review process to protect supply chains “by screening outbound investment and guarding against offshoring of critical capabilities to adversaries like China and Russia.”The group added “from semiconductors to pharmaceutical ingredients, it will provide a needed review mechanism to advance U.S. production and employment.” More