Evelyn Reynolds

While the pace of growth slowed, spending stayed strong because of robust job growth and strong wage gains.Despite lingering inflation, Americans increased their spending this holiday season, early data shows. That comes as a big relief for retailers that had spent much of the year fearing the economy would soon weaken and consumer spending would fall.Retail sales increased 3.1 percent from Nov. 1 to Dec. 24 compared with the same period a year earlier, according to data Mastercard released on Tuesday. The credit card company’s numbers are not adjusted for inflation.Spending increased across many categories, with restaurants experiencing one of the largest jumps, 7.8 percent. Apparel increased 2.4 percent, and groceries also had gains.The holiday sales figures, driven by a healthy labor market and wage gains, suggests that the economy remains strong. The Federal Reserve’s campaign to rein in high inflation by raising interest rates over the last few years has slowed the economy, but many economists believe a so-called soft landing is within reach.“What we’re seeing during this holiday season is very consistent with how we’re thinking about the economy, which is that it’s an economy that is still very much expanding,” said Michelle Meyer, Mastercard’s chief economist.Solid job growth is allowing people to spend more. And even though consumer prices have risen a lot in the last two years, wages have grown faster on the whole.“We’re now entering the period, and we’re seeing it to some extent during the holiday season, where consumers have built up real purchasing power,” Ms. Meyer said.Still spending in categories like electronics and jewelry declined this season. And the rate of growth in spending has moderated from the last couple of years. In 2022, retail sales during the holiday season increased 5.4 percent, according to the National Retail Federation. In 2021, they rose 12.7 percent, the largest percentage increase in at least 20 years. Online sales growth has also slowed in 2023, increasing 6.3 percent compared with 10.6 percent from 2021 to 2022, according to Mastercard.While the economy is strong overall, Americans are being more mindful of how they’re spending, and that discretion shaped the shopping season.Some retailers had expressed concerns in recent months that shoppers appeared glum and fearful about the economy. Walmart and Target noted that shoppers seemed to be waiting for sales before buying, a change from recent years when they spent more freely.“The caution that they’ve taken on their spend and where they’re spending has been really noticeable in the second half of the year, where a lot of customers have been affected, especially lower-income and middle-income” people, said Jessica Ramírez, a retail research analyst at Jane Hali & Associates.In a return to some of the trends that prevailed before the pandemic, many retailers and brands offered promotions. Discounts were in the 30 to 50 percent range, Ms. Ramírez said. But the discounts were more targeted this year than last because fewer companies were saddled with gluts of inventory.Retail sales increased this holiday season compared with the same period a year earlier, though at a slower pace than last year.Maansi Srivastava/The New York TimesThe categories that have faced falling sales this year — like electronics, home furnishings and toys — saw some of the biggest discounts leading up to Christmas. Those goods had enjoyed booming sales during the pandemic.Alexan Weir, a 30-year-old mother in Orlando, Fla., said she was pleased to find deals on toys when she bought Christmas gifts for her daughters this month. Among the items she bought at Target were the Asha doll, based on the main character from the Disney movie “Wish”; an Elsa doll from “Frozen”; and a Minnie Mouse kitchen set. With discounts, the items together cost about half as much as their total list prices of $200.“As a parent you’re just trying to make your kids happy. You’re not trying to break the bank,” Ms. Weir said. “I spent a little bit more this year, but at least with the few sales that I received, I can say I was not heartbroken about how much I was spending.”Barbie — whose banner year was fueled by the blockbuster movie — sold particularly well in a year when there wasn’t a breakout toy. The doll and her many accouterments have been selling well at Mary Arnold Toys, a family-owned store on Manhattan’s Upper East Side. And overall sales at the shop have been steady, said Ezra Ishayik, who has run the store for 40 years.“It looks like it is about even with last year — not better, not worse,” Mr. Ishayik said. “The economy looks good to me. It’s decent, it’s OK, people are buying. We are on the high end of the industry so we don’t see any downtrend at all.”But the past few months have been more challenging for Modi Toys.Modi, an online retailer, sells plush toys and books based on Hindu culture and usually sees two sales bumps in the fourth quarter — one in the lead up to Diwali and another around Christmas.Normally the company brings in more than $100,000 in sales in the month before Diwali, which fell on Nov. 12, but this year sales dropped into the five-figure range. That was partly because the retailer launched a product too early and then had to offer hefty discounts to spur sales — something retailers try to avoid with new merchandise.“That’s when we knew that we really were going to have a challenging holiday season,” said Avani Modi Sarkar, a founder of the company.As she wraps up the year and looks toward 2024, Ms. Sarkar is testing new digital marketing strategies, including sending personalized email newsletters to customers and closely monitoring discounts.“We’re just trying to close the gap for us and not end the year with as big of a gap as we would have,” she said. “I know what we’re capable of, and I’m trying to not only get to that level again, but surpass it.”One clear sign that shoppers are being more careful about how much they spend comes from discount retailers. In November, Burlington, an off-price retailer, and the parent company of Marshalls and T.J. Maxx said they saw comparable store sales increase 6 percent.The online retailer ThriftBooks said its sales were also up this holiday season, by more than 20 percent in November and more than 24 percent this month compared with a year ago, according to Ken Goldstein, the company’s chief executive.“This was unprecedented,” Mr. Goldstein said. “This is beyond belief in terms of the volume that we’re doing. Because we’re a value product, I think a lot of people are putting their dollars to work.” More

Residual anger about high inflation in recent years appears to have soured consumers’ views of the economy.
That discontent comes even as a strong labor market, appreciating home values and a stock market rebound has made some positive about their financial situation.

Grocery items are offered for sale at a supermarket on August 09, 2023 in Chicago, Illinois.
Scott Olson | Getty Images

When Kyle Connolly looks back at 2023, she sees it as a year defined by changes and challenges.
The newly single parent reentered the workforce, only to be laid off from her job at a custom home-building company in November. At the same time, Connolly has seen prices climb for everything from her Aldi’s grocery basket to her condo’s utility costs.

In turn, she’s cut back on everyday luxuries like eating out or going to the movies. Christmas will look pared down for her three kids compared to years prior.
“I’ve trimmed everything that I possibly can,” said the 41-year-old. “It sucks having to tell my kids no. It sucks when they ask for a little something extra when we’re checking out at the grocery store and having to tell them, ‘No, I’m sorry, we can’t.'”
Economic woes have seemed more apparent within her community in Florida’s panhandle. Connolly has noticed fewer 2022 Chevy Suburbans on the road, replaced by older Toyota Camry models. The waters typically filled with boats have been eerily quiet as owners either sold them or tried to cut back on gas costs. Fellow parents have taken to Facebook groups to discuss ways to better conserve money or rake in extra income.
The struggles among Connolly and her neighbors highlight a key conundrum puzzling economists: Why does the average American feel so bad about an economy that’s otherwise considered strong?

‘High prices really hurt’

By many accounts, it has been a good year on this front. The annualized rate of price growth is sliding closer to a level preferred by the Federal Reserve, while the labor market has remained strong. There’s rising hope that monetary policymakers have successfully cooled inflation without tipping the economy into a recession. 

Yet closely watched survey data from the University of Michigan shows consumer sentiment, while improving, is a far cry from pre-pandemic levels. December’s index reading showed sentiment improved by almost 17% from a year prior, but was still nearly 30% off from where it sat during the same month in 2019.
“The main issue is that high prices really hurt,” said Joanne Hsu, Michigan’s director of consumer surveys. “Americans are still trying to come to grips with the idea that we’re not going back to the extended period of low inflation, low interest rates that we had in the 2010s. And that reality is not the current reality.”

Still, Hsu sees reason for optimism when zooming in. Sentiment has largely improved from its all-time low seen in June 2022 — the same month the consumer price index rose 9.1% from a year earlier — as people started noticing inflationary pressures recede, she said.
One notable caveat was the drop in sentiment this past May, which she tied to the U.S. debt ceiling negotiations. The 2024 presidential election has added to feelings of economic uncertainty for some, Hsu said.

Inflation vs. the job market

Continued strength in the labor market is something economists expected to sweeten everyday Americans’ views of the economy. But because consumers independently decide how they feel, jobs may hold less importance in their mental calculations than inflation.
There are still more job openings than there are unemployed people, according to the latest data from the Bureau of Labor Statistics. Average hourly pay has continued rising — albeit at a slower rate than during the pandemic — and was about 20% higher in November than it was in the same month four years ago, seasonally adjusted Labor Department figures show.
That’s helped boost another widely followed indicator of vibes: the Conference Board’s consumer confidence index. Its preliminary December reading was around 14% lower than the same month in 2019, meaning it has rebounded far more than the Michigan index.

While the Michigan index compiles questions focused on financial conditions and purchasing power, the Conference Board’s more closely gauges one’s feelings about the job market. That puts the latter more in line with data painting a rosier picture of the economy, according to Camelia Kuhnen, a finance professor at the University of North Carolina.
“You think that they’re talking about different countries,” Kuhnen said of the two measures. “They look different because they focus on different aspects of what people would consider as part of their economic reality.”
A hot job market can be a double-edged sword for sentiment, Michigan’s Hsu noted. Yes, it allows workers to clinch better roles or higher pay, she said. But when those same workers put on their consumer hats, a tight market means shorter hours or limited availability at their repair company or veterinarian’s office.

Silver linings for some

Other reasons why consumers feel positively about the economy this year can only be true for certain — and often wealthier — groups, economists say.
UNC’s Kuhnen said Americans would be pleased if they are homeowners seeing price appreciation. Another reason for optimism: If they had investments during 2023’s stock market rebound.
Without those cushions, people on the lower end of the income spectrum may feel more of a pinch as higher costs bite into any leftover savings from pandemic stimulus, Kuhnen said. Elsewhere, the resumption of student loan payments this year likely also caused discontent for those with outstanding dues, according to Karen Dynan, a Harvard professor and former chief economist for the U.S. Treasury Department.

Marissa Lyda moved with her husband and two kids to Phoenix from Portland earlier this year, in part due to lower housing costs. With profits from the value gained on the property she bought in 2019, her family was able to get a nicer house in the Grand Canyon state.
Yet she’s had to contend with an interest rate that’s more than double what she was paying on her old home. Though Arizona’s lower income tax has fattened her family’s wallet, Lyda has found herself allocating a sizable chunk of that money to her rising grocery bill.
The stay-at-home mom has switched her go-to grocer from Kroger to Walmart as value became increasingly important. She’s also found herself searching harder in the aisles for store-brand food and hunting for recipes with fewer ingredients.
Her family’s financial situation certainly doesn’t feel like it reflects the economy she hears experts talking about, Lyda said. It’s more akin to the videos she sees on TikTok and chatter among friends about how inflation is still pinching pocketbooks.
“I look at the news and see how they’re like, ‘Oh, best earnings, there’s been great growth,'” the 29-year-old said. “And I’m like, ‘Where’s that been?'”

‘Just trying to hold on’

Economists wonder if social media discourse and discussion about a potential recession have made Americans think they should feel worse about the economy than they actually do. That would help explain why consumer spending remains strong, despite the fact that people typically tighten their belts when they foresee financial turmoil.
There’s also a feeling of whiplash from the runaway inflation that snapped a long period of low-to-normal price growth, said Harvard’s Dynan. Now, even as the annual rate of inflation has cooled to more acceptable levels, consumers remain on edge as prices continue to creep higher.
“People are still angry about the inflation we saw in 2021 and, in particular, 2022,” Dynan said. “There’s something about the salience of … the bill for lunch that you see every single day that just maybe resonates in your brain, relative to the pay increase you get once a year.”

Federal Reserve Board Chairman Jerome Powell speaks during a press conference following a closed two-day meeting of the Federal Open Market Committee on interest rate policy at the Federal Reserve in Washington, U.S., December 13, 2023. 
Kevin Lamarque | Reuters

Another potential problem: The average person may not completely understand that some inflation is considered normal. In fact, the Federal Reserve, which sets U.S. monetary policy, aims for a 2% increase in prices each year. Deflation, which is when prices decrease, is actually seen as bad for the economy.
Despite these quandaries, economists are optimistic for the new year as it appears increasingly likely that a recession has been avoided and the Fed can lower the cost of borrowing money. For everyday Americans like Connolly and Lyda, inflation and their financial standing will remain top of mind.
Lyda has cut treats like weekly Starbucks lattes out of the budget to ensure her family can afford a memorable first holiday season in their new home. In 2024, she’ll be watching to see if the Fed cuts interest rates, potentially creating an opportunity to refinance the loan on that house.
“You just have to realize that every season of life may not be this huge financial season,” Lyda said. “Sometimes you’re in a season where you’re just trying to hold on. And I feel like that’s what it’s been like for most Americans.” More

Next year could see increasing volatility as persistent military conflicts and economic uncertainty influence voting in national elections across the globe.The attacks on crucial shipping traffic in the Red Sea straits by a determined band of militants in Yemen — a spillover from the Israeli-Hamas war in Gaza — is injecting a new dose of instability into a world economy already struggling with mounting geopolitical tensions.The risk of escalating conflict in the Middle East is the latest in a string of unpredictable crises, including the Covid-19 pandemic and the war in Ukraine, that have landed like swipes of a bear claw on the global economy, smacking it off course and leaving scars.As if that weren’t enough, more volatility lies ahead in the form of a wave of national elections whose repercussions could be deep and long. More than two billion people in roughly 50 countries, including India, Indonesia, Mexico, South Africa, the United States and the 27 nations of the European Parliament, will head to the polls. Altogether, participants in 2024’s elections olympiad account for 60 percent of the world’s economic output.In robust democracies, elections are taking place as mistrust in government is rising, electorates are bitterly divided and there is a profound and abiding anxiety over economic prospects.A ship crossing the Suez Canal toward the Red Sea. Attacks on the Red Sea have pushed up freight and insurance rates.Mohamed Hossam/EPA, via ShutterstockA billboard promoting presidential elections in Russia, which will take place in March.Dmitri Lovetsky/Associated PressEven in countries where elections are neither free nor fair, leaders are sensitive to the economy’s health. President Vladimir V. Putin’s decision this fall to require exporters to convert foreign currency into rubles was probably done with an eye on propping up the ruble and tamping down prices in the run-up to Russia’s presidential elections in March.The winners will determine crucial policy decisions affecting factory subsidies, tax breaks, technology transfers, the development of artificial intelligence, regulatory controls, trade barriers, investments, debt relief and the energy transition.A rash of electoral victories that carry angry populists into power could push governments toward tighter control of trade, foreign investment and immigration. Such policies, said Diane Coyle, a professor of public policy at the University of Cambridge, could tip the global economy into “a very different world than the one that we have been used to.”In many places, skepticism about globalization has been fueled by stagnant incomes, declining standards of living and growing inequality. Nonetheless, Ms. Coyle said, “a world of shrinking trade is a world of shrinking income.”And that raises the possibility of a “vicious cycle,” because the election of right-wing nationalists is likely to further weaken global growth and bruise economic fortunes, she warned.A campaign rally for former President Donald J. Trump in New Hampshire in December.Doug Mills/The New York TimesA line of migrants on their way to a Border Patrol processing center at the U.S.-Mexico border. Immigration will be a hot topic in upcoming elections.Rebecca Noble for The New York TimesMany economists have compared recent economic events to those of the 1970s, but the decade that Ms. Coyle said came to mind was the 1930s, when political upheavals and financial imbalances “played out into populism and declining trade and then extreme politics.”The biggest election next year is in India. Currently the world’s fastest-growing economy, it is jockeying to compete with China as the world’s manufacturing hub. Taiwan’s presidential election in January has the potential to ratchet up tensions between the United States and China. In Mexico, the vote will affect the government’s approach to energy and foreign investment. And a new president in Indonesia could shift policies on critical minerals like nickel.The U.S. presidential election, of course, will be the most significant by far for the world economy. The approaching contest is already affecting decision-making. Last week, Washington and Brussels agreed to suspend tariffs on European steel and aluminum and on American whiskey and motorcycles until after the election.The deal enables President Biden to appear to take a tough stance on trade deals as he battles for votes. Former President Donald J. Trump, the likely Republican candidate, has championed protectionist trade policies and proposed slapping a 10 percent tariff on all goods coming into the United States — a combative move that would inevitably lead other countries to retaliate.Mr. Trump, who has echoed authoritarian leaders, has also indicated that he would step back from America’s partnership with Europe, withdraw support for Ukraine and pursue a more confrontational stance toward China.Workers on a car assembly line in Hefei, China. Beijing has provided enormous incentives for electric vehicles.Qilai Shen for The New York TimesA shipyard in India, which is jockeying to compete with China as the world’s largest manufacturing hub.Atul Loke for The New York Times“The outcome of the elections could lead to far-reaching shifts in domestic and foreign policy issues, including on climate change, regulations and global alliances,” the consulting firm EY-Parthenon concluded in a recent report.Next year’s global economic outlook so far is mixed. Growth in most corners of the world remains slow, and dozens of developing countries are in danger of defaulting on their sovereign debts. On the positive side of the ledger, the rapid fall in inflation is nudging central bankers to reduce interest rates or at least halt their rise. Reduced borrowing costs are generally a spur to investment and home buying.As the world continues to fracture into uneasy alliances and rival blocs, security concerns are likely to loom even larger in economic decisions than they have so far.China, India and Turkey stepped up to buy Russian oil, gas and coal after Europe sharply reduced its purchases in the wake of Moscow’s invasion of Ukraine. At the same time, tensions between China and the United States spurred Washington to respond to years of strong-handed industrial support from Beijing by providing enormous incentives for electric vehicles, semiconductors and other items deemed essential for national security.A protest in Yemen on Friday against the operation to safeguard trade and protect ships in the Red Sea.Osamah Yahya/EPA, via ShutterstockThe drone and missile attacks in the Red Sea by Iranian-backed Houthi militia are a further sign of increasing fragmentation.In the last couple of months, there has been a rise in smaller players like Yemen, Hamas, Azerbaijan and Venezuela that are seeking to change the status quo, said Courtney Rickert McCaffrey, a geopolitical analyst at EY-Parthenon and an author of the recent report.“Even if these conflicts are smaller, they can still affect global supply chains in unexpected ways,” she said. “Geopolitical power is becoming more dispersed,” and that increases volatility.The Houthi assaults on vessels from around the world in the Bab-el-Mandeb strait — the aptly named Gate of Grief — on the southern end of the Red Sea have pushed up freight and insurance rates and oil prices while diverting marine traffic to a much longer and costlier route around Africa.Last week, the United States said it would expand a military coalition to ensure the safety of ships passing through this commercial pathway, through which 12 percent of global trade passes. It is the biggest rerouting of worldwide trade since Russia’s invasion of Ukraine in February 2022.Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said the impact of the attacks had so far been limited. “From an economic perspective, we’re not seeing huge increase in oil and gas prices,” Mr. Vistesen said, although he acknowledged that the Red Sea assaults were the “most obvious near-term flashpoint.”Uncertainty does have a dampening effect on the economy, though. Businesses tend to adopt a wait-and-see attitude when it comes to investment, expansions and hiring.“Continuing volatility in geopolitical and geoeconomic relations between major economies is the biggest concern for chief risk officers in both the public and private sectors,” a midyear survey by the World Economic Forum found.With persistent military conflicts, increasing bouts of extreme weather and a slew of major elections ahead, it’s likely that 2024 will bring more of the same. More

Javier Milei warned that things would get worse before they got better. Now Argentines are living it.Over the past two weeks, the owner of a hip wine bar in Buenos Aires saw the price of beef soar 73 percent, while the zucchini he puts in salads rose 140 percent. An Uber driver paid 60 percent more to fill her tank. And a father said he spent twice as much on diapers for his toddler than he did last month.In Argentina, a country synonymous with galloping inflation, people are used to paying more for just about everything. But under the country’s new president, life is quickly becoming even more painful.When Javier Milei was elected president on Nov. 19, the country was already suffering under the world’s third-highest rate of inflation, with prices up 160 percent from a year before.But since Mr. Milei took office on Dec. 10 and quickly devalued the Argentine currency, prices have soared at such a dizzying pace that many in this South American country of 46 million are running new calculations on how their businesses or households can survive the far deeper economic crunch the country is already enduring.“Since Milei won, we’ve been worried all the time,” said Fernando González Galli, 36, a high school philosophy teacher in Buenos Aires.Mr. Galli has been trying to cut back without making life worse for his two daughters, who are 6 years and 18 months old, including switching to a cheaper brand of diapers and racing to spend his Argentine pesos before their value disintegrates even further. “As soon as I get my paycheck, I go buy everything I can,” he said.Since Javier Milei took office on Dec. 10 and quickly devalued the Argentine currency, prices have risen at a dizzying pace.Emiliano Lasalvia/Agence France-Presse — Getty ImagesNahuel Carbajo, 37, an owner of Naranjo Bar, a trendy Buenos Aires wine bar, said that like most Argentines, he had become accustomed to regular price increases, but this past week went far beyond what even he was used to.Since Mr. Milei won, the price for the premium steak that Mr. Carbajo serves soared 73 percent, to 14,580 pesos, or roughly $18, per kilogram, about 2.2 pounds; a five-kilogram box of zucchinis rose to 15,600 pesos from 6,500; and avocados cost 51 percent more than the beginning of this month.“There’s no way for salaries or people’s incomes to adapt at that speed,” Mr. Carbajo said.Mr. Milei’s spokesman, Manuel Adorni, said accelerating inflation was the inevitable consequence of finally fixing Argentina’s distorted economy.“We’ve been left with a multitude of problems and unresolved issues that we have to start addressing,” he said. “Inevitably, we will go through months of high inflation.”Mr. Milei has warned Argentines that his plans to shrink the government and remake the economy would hurt at first. “I prefer to tell you the uncomfortable truth rather than a comfortable lie,” he said in his inaugural address, adding this past week that he wanted to end the country’s “model of decline.”Argentina’s economy has been mired in crisis for years, with chronic inflation, rising poverty and a currency that has plunged in value. The economic turmoil paved the way to the presidency for Mr. Milei, a political outsider who had spent years as an economist and television pundit railing against what he called corrupt politicians who had destroyed the economy, often for personal gain.During the campaign, he vowed to take a chain saw to public spending and regulations, even wielding an actual chain saw at rallies.After Mr. Milei’s victory, price increases began accelerating in expectation of his new policies.Buying fruit and vegetables in Buenos Aires. Argentines suffer under the world’s third highest rate of inflation.Tomas Cuesta/ReutersThe previous leftist government had used complicated currency controls, consumer subsidies and other measures to inflate the peso’s official value and keep several key prices artificially low, including gas, transportation and electricity.Mr. Milei vowed to undo all that, and he has wasted little time.Two days after taking office, Mr. Milei began cutting government spending, including consumer subsidies. He also devalued the peso by 54 percent, putting the government’s exchange rate much closer to the market’s valuation of the peso.Economists said such measures were necessary to fix Argentina’s long-term financial problems. But they also brought short-term pain in the form of even faster inflation. Some analysts questioned the lack of adequate safety nets for the poorest Argentines.In November, prices rose 13 percent from October, according to government data. Analysts predict prices will increase another 25 percent to 30 percent this month. And from now until February, some economists are forecasting an 80 percent jump, according to Santiago Manoukian, the chief economist at Ecolatina, an economics consulting firm.The forecasts are partly caused by soaring gas prices, which increased 60 percent from Dec. 7 to Dec. 13, and have a trickle-down effect on the economy.The currency devaluation made imported products like coffee, electronic devices and gas immediately more expensive because they are priced in U.S. dollars. A monthly Netflix subscription in Argentina jumped 60 percent to 6,676 pesos, or $8.30, the day after the devaluation, for example. It also prompted some domestic producers, including farmers and cattle ranchers, to increase prices to align them with their own rising costs.With the chronic high inflation, labor unions often negotiate large raises to try to keep up, yet those wage increases are quickly eaten up by sharp price hikes. Informal workers, a list that includes nannies and street vendors, and who make up nearly half of the economy, also do not get such raises.Outside a clothing store this month in Buenos Aires. In November, prices rose 13 percent from October, and analysts predict that prices will increase another 25 percent to 30 percent this month.Luis Robayo/Agence France-Presse — Getty ImagesOn Wednesday, Mr. Milei launched his next big steps to remake the government and economy with an emergency decree that significantly reduces the state’s role in the economy and eliminates a raft of regulations.The measure prohibits the state from regulating the rental real estate market and setting limits on fees that banks and health insurers can charge customers; changes labor laws to make it easier to fire workers while also placing limits on strikes; and turns state companies into corporations so they can be privatized.Many legal analysts immediately questioned the decree’s constitutionality, saying that Mr. Milei was trying to subvert Congress.After the speech, people across Buenos Aires, like Jesusa Orfelia Peralta, 73, a retiree, took to the streets banging on pots to show their displeasure.She worried that price increases would make proper health care too expensive for her and her husband. Despite severe spinal problems, she said she did not hesitate to head out, using a walker, and vent her anger in public. “Where else would I be?” she said.A protest on Wednesday in Buenos Aires against Mr. Milei’s austerity measures.Luis Robayo/Agence France-Presse — Getty ImagesMr. Milei has sought to discourage protests by threatening to cancel welfare plans and fine anyone involved in demonstrations that block roads. Human rights groups have widely criticized such policies as restricting the right to peacefully protest.For now, most Argentines are trying to figure out how to make ends meet in what often feels like both a complicated course in economics and a frenzied sprint to buy before prices rise again.“I always say that we are at university, and every day we sit for a difficult exam, every five minutes,” Roberto Nicolás Ormeño, an owner of El Gauchito, a small empanada shop in downtown Buenos Aires.Mr. Ormeño said he had been scouring the market for his ingredients and changing suppliers almost every week, either because they increase prices too much or provide poorer quality products.He is trying to avoid passing along too much of his price increases to customers, though he is unsure how long he can sustain that. “I see my frequent customers buying one dozen instead of two” dozen empanadas, he said.Marisol del Valle Cardozo, who has a 3-year-old daughter, has been cutting back in a bid to make ends meet, turning to cheaper brands and going out less. “We don’t turn the air-conditioning on as much,” she said. “We decreased our plans on weekends from four times a month to just once.”Ms. Cardozo, who works for a police department outside Buenos Aires, said that she got a raise this year, but that it is already not enough. She also drives an Uber, but said that fare increases had not kept up with the soaring gas prices.Despite the challenges, Ms. Cardozo said she remained a Milei supporter and was hoping his policies work.“We were living under a fantasy,” she said, referring to gas prices before the recent hike. “If these adjustments are necessary to thrive in the end, they’re worth it.”Protesters in front of the National Congress on Thursday in Buenos Aires.Luis Robayo/Agence France-Presse — Getty ImagesJack Nicas More

A key inflation measure has been slowing and overall prices actually declined slightly from October, good news for officials and consumers.A closely watched measure of inflation cooled notably in November, good news for the Federal Reserve as officials move toward the next phase in their fight against rapid price increases and a positive for the White House as voters see relief from rising costs.The Personal Consumption Expenditures inflation measure, which the Fed cites when it says it aims for 2 percent inflation on average over time, climbed 2.6 percent in the year through November. That was down from 2.9 percent the previous month, and was less than what economists had forecast. Compared with the previous month, prices overall even fell slightly for the first time in years.That decline — a 0.1 percent drop, and the first negative reading since April 2020 — came as gas prices dropped. After volatile food and fuel prices were stripped out for a clearer look at underlying price pressures, inflation climbed modestly on a monthly basis and 3.2 percent over the year. That was down from 3.4 percent previously.While that is still faster than the Fed’s goal, the report provided the latest evidence that price increases are swiftly slowing back toward the central bank’s target. After more than two years of rapid inflation that has burdened American shoppers and bedeviled policymakers, several months of solid progress have helped to convince policymakers that they may be turning a corner.Increasingly, officials and economists think that they may be within sight of a soft economic landing — one in which inflation moderates back to normal without a painful recession. Fed policymakers held interest rates steady at their meeting this month, signaled that they might well be done raising interest rates and suggested that they could even cut borrowing costs three times next year.“Inflation is slowing a lot faster than the Fed had anticipated — that could allow them to potentially cut soon, and more aggressively,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. “They’re really trying their best to deliver a soft landing here.”The inflation progress is welcome news for the Biden administration, which has struggled to capitalize on strong economic growth and low unemployment at a time when high prices are eroding household confidence.President Biden released a statement celebrating the report, and Lael Brainard, director of the National Economic Council, called the slowdown in inflation “a significant milestone” in a call with reporters.“Inflation has come down faster than even the more optimistic forecasts,” she said, noting that wage gains are outstripping price increases. While she didn’t comment on monetary policy directly, citing the central bank’s independence from the White House, she did note that households are already facing lower mortgage rates as investors come to expect a more lenient Fed.Based on market pricing, the Fed is expected to begin lowering interest rates as soon as March, though officials have argued that it is too early to talk about when rate cuts will commence.“Inflation has eased from its highs, and this has come without a significant increase in unemployment — that’s very good news,” Jerome H. Powell, the Fed chair, said at that meeting. Still, he emphasized that “the path forward is uncertain.”Central bankers are likely to watch closely for signs that inflation has continued to cool as they contemplate when to start cutting rates. Some officials have suggested that keeping borrowing costs steady when price increases are slowing would effectively squeeze the economy more. (Interest rates are not price-adjusted, so they get higher after stripping inflation out as inflation falls.)Still, Fed officials have been hesitant to declare victory after repeated head fakes in which price increases proved more stubborn than expected, and at a time when geopolitical issues could complicate supply chains or push up gas prices.“The more benign inflation data is certainly something to celebrate, but there is some turbulence ahead,” Omair Sharif, founder of Inflation Insights, wrote in a note reacting to Friday’s data. “Fed officials will want to get through before turning the focus squarely to rate cuts.”Policymakers are also likely to keep a close eye on consumer spending as they try to figure out how much momentum is left in the economy.The report released Friday showed that consumers are still spending at a moderate clip. A measure of personal consumption climbed 0.2 percent from October, and 0.3 percent after adjusting for inflation. Both readings were quicker than the previous month. That suggested that growth is still positive, though is no longer quite as hot as it was earlier this year.Officials still expect the economy to slow more notably in 2024, a demand cool-down that they think would pave the way to sustainably slower price increases.After a year in which inflation cooled rapidly in spite of surprisingly strong growth, economists are expressing humility. But policymakers remain wary of a situation in which growth remains too strong.“If you have growth that’s robust, what that will mean is probably we’ll keep the labor market very strong; it probably will place some upward pressure on inflation,” Mr. Powell said at his news conference. “That could mean that it takes longer to get to 2 percent inflation.”That, he said, “could mean we need to keep rates higher for longer.” More

The core personal consumption expenditures price index rose just 0.1% in November and was up 3.2% from a year ago, both close to expectations.
On a six-month basis, core PCE was up 1.9%, below the Fed’s 12-month target.
Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago.

A gauge the Federal Reserve uses for inflation rose slightly in November and edged closer to the central bank’s goal.
The core personal consumption expenditures price index, which excludes volatile food and energy prices, increased 0.1% for the month, and was up 3.2% from a year ago, the Commerce Department reported Friday.

Economists surveyed by Dow Jones had been expecting respective rises of 0.1% and 3.3%.
On a six-month basis, core PCE increased 1.9%, indicating that if current trends continue the Fed essentially has reached its goal.
“Adding in the further sharp slowdown in rent inflation still in the pipeline, it’s hard to see any credible reason why the annual inflation rate won’t also return to the 2% target over the coming months,” wrote Andrew Hunter, deputy chief U.S. economist at Capital Economics.
Markets reacted little to the report, with Wall Street set for a mixed open Friday in its last session before the Christmas holiday.
Elsewhere in the report, consumer expenditures in November climbed 0.3% while income rose 0.4%, numbers that were in line with expectations and indicative that spending was continuing apace despite ongoing inflation pressures.

Including food and energy costs, so-called headline PCE actually fell 0.1% on the month and was up just 2.6% from a year ago, after peaking above 7% in mid-2022. That was the first monthly decline since April 2020, according to Fed data.
The 12-month numbers are significant in that both show inflation making continued progress toward the Fed’s 2% target.
“The Federal Open Market Committee is not yet ready to declare victory on inflation, but the outlook is much better than it was just a few months ago,” wrote Gus Faucher, chief economist at PNC Financial Services. “The slowing in core inflation opens the door for fed funds rate cuts in 2024; the timing will depend on core PCE numbers over the next few months.”
The Fed prefers PCE as an inflation measure over the more widely followed CPI as the former focuses more on what consumers actually spend rather than the latter’s measure of what goods and services cost. Though policymakers watch both measures, they are more concerned with core prices as a longer-run inflation gauge.
November’s report reflected a shift in consumer appetite, as prices for services increased 0.2% while goods slumped 0.7%. A 2.7% slide in energy prices and a 0.1% decrease in food helped hold back inflation for the month.
Much of the market’s focus lately has been on the Fed’s inflation view and what that will mean for interest rates.
For each of its last three meetings, the Federal Open Market Committee has held the line, keeping its benchmark overnight borrowing rate targeted between 5.25%-5.5%. At its meeting last week, the committee indicated it is done raising rates and expects to implement cuts totaling 0.75 percentage point in 2024. Markets expect the first rate reduction to happen in March.
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The U.K. is edging closer to a technical recession, after revised figures showed the economy shrank in the previous quarter.
U.K. gross domestic product (GDP) fell by 0.1% between July and September, in a downward revision from the earlier estimate of flat growth, according to the Office for National Statistics.
The data could put further pressure on the Bank of England to cut interest rates sooner than planned in a bid to shore up a weaker economy.

People shopping on Oxford Street in London. Picture date: Thursday December 29, 2022. (Photo by James Manning/PA Images via Getty Images)
James Manning – Pa Images | Pa Images | Getty Images

LONDON — The U.K. is edging closer to recession after revised figures showed the economy shrank in the previous quarter.
U.K. gross domestic product (GDP) fell by 0.1% between July and September, a downward revision from the earlier estimate of flat growth, according to new data released Friday by the Office for National Statistics.

There was also zero growth in the prior three months, the new figures showed, down from the 0.2% growth previously calculated.
Data due out in February will show whether the U.K. has entered a technical recession — defined as when the economy shrinks for two consecutive quarters.
Responding to the revisions Friday, Finance Minister Jeremy Hunt insisted that the “medium-term outlook for the U.K. is far more optimistic than these numbers suggest.”

However, analysts said it shows that the U.K. has so far just “scraped by” without a recession.
“Growth is weakening and interest rates are really beginning to bite and while a recession has just been avoided to date, there is no guarantee one will be avoided in 2024,” Richard Carter, head of fixed interest research at Quilter Cheviot, said in a note.

“Inflation has eased more than anticipated and interest rate predictions are suggesting more easing than originally thought in 2024, but the damage may already have been done. Certainly, Rishi Sunak’s pledge to grow the economy is now severely in doubt,” he said.
That could put further pressure on the Bank of England to cut interest rates sooner than planned in a bid to shore up a weaker economy.
Better-than-expected data released Wednesday showed that inflation hit 3.9% in November, raising speculation that the central bank could cut rates in the spring.
Prime Minister Rishi Sunak has made growing the economy one of his key pledges this year. Downing Street said it will be met if GDP increases in the three months to December versus the previous quarter.
A near-term drop in interest rates would be a win for Sunak’s government, as the U.K. enters an election year.
Still, the BOE’s governor Andrew Bailey has insisted that rates may need to remain “higher for longer” after holding them steady at 5.25% at the final policy meeting of the year. More

Despite legal reservations, policymakers are weighing the consequences of using $300 billion in Russian assets to help Kyiv’s war effort.The Biden administration is quietly signaling new support for seizing more than $300 billion in Russian central bank assets stashed in Western nations, and has begun urgent discussions with allies about using the funds to aid Ukraine’s war effort at a moment when financial support is waning, according to senior American and European officials.Until recently, Treasury Secretary Janet L. Yellen had argued that without action by Congress, seizing the funds was “not something that is legally permissible in the United States.” There has also been concern among some top American officials that nations around the world would hesitate to keep their funds at the New York Federal Reserve, or in dollars, if the United States established a precedent for seizing the money.But the administration, in coordination with the Group of 7 industrial nations, has begun taking another look at whether it can use its existing authorities or if it should seek congressional action to use the funds. Support for such legislation has been building in Congress, giving the Biden administration optimism that it could be granted the necessary authority.The talks among finance ministers, central bankers, diplomats and lawyers have intensified in recent weeks, officials said, with the Biden administration pressing Britain, France, Germany, Italy, Canada and Japan to come up with a strategy by Feb. 24, the second anniversary of the invasion.The more than $300 billion of Russian assets under discussion have already been out of Moscow’s control for more than a year. After the invasion of Ukraine, the United States, along with Europe and Japan, used sanctions to freeze the assets, denying Russia access to its international reserves.But seizing the assets would take matters a significant step further and require careful legal consideration.President Biden has not yet signed off on the strategy, and many of the details remain under heated discussion. Policymakers must determine if the money will be channeled directly to Ukraine or used to its benefit in other ways.They are also discussing what kinds of guardrails might be associated with the funds, such as whether the money could be used only for reconstruction and budgetary purposes to support Ukraine’s economy, or whether — like the funds Congress is debating — it could be spent directly on the military effort.The discussions have taken on greater urgency since Congress failed to reach a deal to provide military aid before the end of the year. On Tuesday, lawmakers abandoned a last-ditch effort amid a stalemate over Republican demands that any aid be tied to a crackdown on migration across the U.S. border with Mexico.The Financial Times reported earlier that the Biden administration had come around to the view that seizing Russia’s assets was viable under international law.A senior administration official said this week that even if Congress ultimately reached a deal to pay for more arms for Ukraine and aid to its government, eroding support for the war effort among Republicans and Ukraine’s increasingly precarious military position made it clear that an alternative source of funding was desperately needed.American officials have said that current funding for the Ukrainians is nearly exhausted, and they are scrambling to find ways to provide artillery rounds and air defenses for the country. With Europe’s own promise of fresh funds also stuck, a variety of new ideas are being debated about how to use the Russian assets, either dipping into them directly, using them to guarantee loans or using the interest income they earn to help Ukraine.“This amount of money that we’re talking about here is simply game-changing,” said Philip Zelikow, a State Department official in both Bush administrations and a senior fellow at Stanford University’s Hoover Institution. “The fight over this money which is occurring is actually in some ways the essential campaign of the war.”Seizing such a large sum of money from another sovereign nation would be without precedent, and such an action could have unpredictable legal ramifications and economic consequences. It would almost certainly lead to lawsuits and retaliation from Russia.Ukraine’s president, Volodymyr Zelensky, referred to the discussions in a video address to his country last week, saying that “the issue of frozen assets was one of the very important decisions addressed” during his recent talks in Washington. He seemed to suggest that the funds should be directed to arms purchases, adding, “The assets of the terrorist state and its affiliates should be used to support Ukraine, to protect lives and people from Russian terror.”In a sign that some European countries are ready to move forward with confiscating Russian assets, German prosecutors this week seized about $790 million from the Frankfurt bank account of a Russian financial firm that was under E.U. sanctions.The Biden administration has said little in public about the negotiations. At the State Department on Tuesday, Matthew Miller, a spokesman, said: “It’s something that we have looked at. There remains sort of operational questions about that, and legal questions.” He said he did not have more information.Very little of the Russian assets, perhaps $5 billion or so by some estimates, are in the hands of U.S. institutions. But a significant chunk of Russia’s foreign reserves are held in U.S. dollars, both in the United States and in Europe. The United States has the power to police transactions involving its currency and use its sanctions to immobilize dollar-denominated assets.President Volodymyr Zelensky of Ukraine at the Capitol this month. A Biden administration official said that even if Congress ultimately reached a deal to send more aid to Ukraine, an alternative source of funding was still desperately needed.Kent Nishimura for The New York TimesThe bulk of the Russian deposits are believed to be in Europe, including in Switzerland and Belgium, which are not part of the Group of 7. As a result, diplomatic negotiations are underway over how to gain access to those funds, some of which are held in euros and other currencies.American officials were surprised that President Vladimir V. Putin did not repatriate the funds before the Ukraine invasion. But in interviews over the past year, they have speculated that Mr. Putin did not believe the funds would be seized, because they were left untouched after his invasion and annexation of Crimea in 2014. And bringing the funds home to Russia would have been another tipoff that an invasion was imminent, at a time Mr. Putin was vigorously denying American and British charges that he was preparing for military action.One Group of 7 official said the coalition had been considering a variety of options for how to use Russia’s assets, with the goal of putting forward a unified proposal around the second anniversary of the war, when many top officials will be gathering in Germany for the Munich Security Conference. The first debates have focused on what would be permissible under international law and under each nation’s domestic laws, as they consider Russia’s likely legal responses and retaliatory measures.Earlier in the year, American officials said they thought the frozen assets could be used as leverage to help force Russia to the negotiating table for a cease-fire; presumably, in return, Moscow would be given access to some of its assets. But Russia has shown no interest in such negotiations, and now officials argue that beginning to use the funds may push Moscow to move to the negotiating table.Among the options that Western countries have discussed are seizing the assets directly and transferring them to Ukraine, using interest earned and other profits from the assets that are held in European financial institutions to Ukraine’s benefit or using the assets as collateral for loans to Ukraine.Daleep Singh, a former top Biden administration official, suggested in an interview this year that the immobilized reserves should be placed into an escrow account that Ukraine’s Ministry of Finance could have access to and be used as collateral for new bonds that Ukraine would issue.If Ukraine can successfully repay the debt — over a period of 10 to 30 years — then Russia could potentially have its frozen assets back.“If they can’t repay, my hunch is that Russia probably has something to do with that,” said Mr. Singh, who is now the chief global economist at PGIM Fixed Income. “And so in that way, Russia has a stake in Ukraine’s emergence as a sovereign independent economy and country.”Settling on a solid legal rationale has been one of the biggest challenges for policymakers as they decide how to proceed.Proponents of seizing Russia’s assets, such as Mr. Zelikow and former Treasury Secretary Lawrence Summers, have argued that nations that hold Russian assets are entitled to cancel their obligations to Russia and apply those assets to what Russia owes for its breach of international law under the so-called international law of state countermeasures. They note that after Iraq’s invasion of Kuwait in 1990, $50 billion of Iraqi funds were seized and transferred through the United Nations to compensate victims in Iraq and other countries.Robert B. Zoellick, the former World Bank president, has been making the case to Group of 7 finance ministers that as long as they act in unison, seizing Russian assets would not have an impact on their currencies or the status of the dollar. He suggested that other countries were unlikely to rush to put their money into another currency, such as China’s renminbi.“With reserve currencies, it’s always a question of what your alternatives are,” said Mr. Zoellick, who was also a Treasury and State Department official.One of the obstacles in the United States for seizing Russian assets has been the view within the Biden administration that being able to lawfully do so would require an act of Congress. At a news conference in Germany last year, Ms. Yellen highlighted that concern.“While we’re beginning to look at this, it would not be legal now, in the United States, for the government to seize those statutes,” Ms. Yellen said. “It’s not something that is legally permissible in the United States.”Since then, however, Ms. Yellen has become more open to the idea of seizing Russia’s assets to aid Ukraine.Factions of Congress have previously tried to attach provisions to the annual defense bill to allow the Justice Department to seize Russian assets belonging to officials under sanction and funnel the proceeds from the sale of those assets to Ukraine to help pay for weapons. But the efforts have faltered amid concerns that the proposals were not thoroughly vetted.With Ukraine running low on funds and ammunition, the debate about how to provide more aid could shift from a legal question to a moral question.“One can understand the precedential point made by those who do not believe the assets should be seized,” said Mark Sobel, a former longtime Treasury Department official who is now the U.S. chairman of the Official Monetary and Financial Institutions Forum. “Given skirmishes and wars in many spots, one could easily argue such a precedent could get out of hand.”However, Mr. Sobel argued that the barbarity of Russia’s actions justified using its assets to compensate Ukraine.“In my mind, humanity dictates that those factors outweigh the argument that seizing the assets would be unprecedented simply because Russia’s heinous and unfathomable behavior must be strongly punished,” he said.Eric Schmitt More