Evelyn Reynolds

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    Germany’s inflation steady at 2.8% in January ahead of February election

    Customers waiting at the checkout in a supermarket.
    Markus Scholz | Picture Alliance | Getty Images

    German inflation was unchanged year-on-year at 2.8% in January, preliminary data from the country’s statistics office Destatis showed Friday in the last reading before Germans head to the polls next month.
    The reading was also in line with a forecast from economists polled by Reuters. The print is harmonized across the euro area for comparability. 

    On a monthly basis, the harmonized consumer price index fell by 0.2%
    Germany’s inflation rate has now stayed above the European Central Bank’s 2% target for the fourth month in a row, after falling below that threshold in September last year.
    This roughly mirrors the development of re-accelerating inflation in the wider euro area. The European Central Bank on Thursday said that disinflation in the bloc “is well on track” and has broadly developed in line with staff projections.
    Euro area inflation came in at 2.4% in December. The January figures are slated for release next week.
    The January inflation print is among the final key economic data released before Germany’s election on Feb. 23, which is taking place earlier than originally scheduled after the collapse of the ruling coalition in November 2024.

    Germany’s economy has been one of big topics during campaigning next to immigration, as the country has been grappling with lackluster economic growth and the renewed rise of inflation.
    The government earlier this week slashed gross domestic product expectations to 0.3% for full-year 2025, after annual GDP contracted in the last two years. Quarterly growth has also been sluggish, even as the economy has so far avoided a technical recession characterized by two consecutive quarter of contraction.
    Non-harmonized inflation is expected to average 2.2% this year, the government added in its annual economic report.
    This is a breaking news story. Please check back for updates. More

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    High Inflation and New Tariffs Will Make the Fed’s Job Tougher

    Fresh tariffs amid high inflation are making the Fed’s job uniquely difficult and feeding uncertainty about what to expect for interest rates this year.High inflation is stoking fresh debate about how the Federal Reserve should respond to President Trump’s sweeping plans to reorder the world economy through tariffs, leading to questions about whether old playbooks still apply.On Saturday, Mr. Trump is poised to impose 25 percent tariffs on imports from Mexico and Canada as well as an additional 10 percent tariff on Chinese goods. That move comes on the heels of threats to impose hefty tariffs on Colombia, which were rescinded after its government complied with Mr. Trump’s demands to accept deported migrants.Howard Lutnick, Mr. Trump’s nominee to oversee the Commerce Department and trade, said at a confirmation hearing on Wednesday that he favored “across-the-board” tariffs that would hit entire countries.The volume of trade policy proposals is making the Fed’s already tricky job even more difficult and sowing uncertainty about what to expect from the central bank as it tries to fully wrestle inflation back to more normal levels.Tariffs are broadly seen by economists and policymakers as likely to stoke higher prices for U.S. businesses and consumers at least initially, and over time weigh on growth. That, as well as Mr. Trump’s plans to also enact mass deportations, steep tax cuts and reduced deregulation, has complicated the path forward for the Fed, which is debating how quickly to resume rate cuts and by what magnitude after pressing pause this week.What comes next is far from clear, leaving central bank officials to parse playbooks both old and new to formulate the right strategy.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    Federal Debt Is Now Worrying Even Progressives

    Long a focus of conservatives, the level of public borrowing is starting to concern left-leaning economists. Proposed remedies still differ radically.The 119th Congress began, as it so often has in recent years, with calls from Republican politicians for wrestling down the national debt, which is near a record level relative to the size of the economy.But this time, the G.O.P. had company: Progressive economists and budget wonks, who have often dismissed finger-wagging about debt levels as a pretext for slashing spending on programs for the poor, are starting to ring alarm bells as well.What’s changed? In large part, long-term interest rates look unlikely to recede as quickly as had been hoped, forcing the federal government to make larger interest payments. And the Trump administration has promised to extend and expand its 2017 tax cuts, which will cost trillions if not matched by spending reductions.“I find it easier to stay calm about this threat when I think the interest rate is low and steady, and I think in the past year or so that steadiness has been dented,” said Jared Bernstein, who led the Council of Economic Advisers in the Biden administration. “If one party refuses to raise revenues, and the Democrats go along more than is fiscally healthy, that’s also a big part of the problem.”To be clear, conservative warnings on the debt have generally been met with little action over the past two decades. A paper by two political scientists and an economist recently concluded that after at least trying to constrain borrowing in the 1980s and 1990s, Republicans have “given up the pretense” of meaningful deficit reduction. Democrats and Republicans alike tend to express more concerns about fiscal responsibility when their party is out of power.Historically, the stock of debt as a share of the economy has risen sharply during wars and recessions. It peaked during World War II. In the 21st century, Congress has not managed to bring the debt back down during times of peace and economic growth.Revenues Are Not Keeping Up With Projected SpendingIf not addressed, debt will probably mount to unprecedented levels.

    Source: Congressional Budget OfficeBy The New York TimesSpending Has Been Creeping UpAs a share of economic output, mandatory outlays — mostly Medicare, Medicaid, and Social Security — are growing fastest. But as debt rises, so do interest costs.

    Source: Office of Management and BudgetBy The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    GDP grew at a 2.3% pace in the fourth quarter, less than expected

    GDP accelerated at a 2.3% annualized pace in the fourth quarter, the Commerce Department said. Economists surveyed by Dow Jones had been expecting an increase of 2.5% after growth of 3.1% in the third quarter.
    For the full year, GDP accelerated 2.8%, compared with 2.9% in 2023.
    Consumer spending rose at a robust 4.2% pace and, as usual, amounted to about two-thirds of all activity.
    In other economic news, the Labor Department reported initial unemployment claims totaled 207,000 for the week ending Jan. 25, a sharp decline of 16,000 from the prior period and well below the forecast for 228,000.

    U.S. economic growth slowed a bit more than expected in the final three months of 2024, the Commerce Department reported Thursday.
    Gross domestic product, a measure of all the goods and services produced across the sprawling U.S. economy during the period, showed that the economy accelerated at a 2.3% annualized inflation-adjusted pace in the fourth quarter. Economists surveyed by Dow Jones had been expecting an increase of 2.5% after growth of 3.1% in the third quarter.

    The report closes out 2024 on a somewhat downbeat note, though growth held reasonably solid. For the full year, GDP accelerated 2.8%, compared with 2.9% in 2023. Growth was 2.5% from Q4 of 2023 to Q4 of 2024. Thursday’s release was the first of three estimates the department’s Bureau of Economic Analysis will provide.
    “Today’s GDP report confirms that the U.S. economic expansion continued apace into the end of 2024 on relatively firm footing,” wrote Mike Reynolds, vice president of investment strategy at Glenmede. “As goes the consumer, so goes the broader economy in the U.S., and household spending put in an exceptionally strong showing in Q4.”
    Growth held up largely on the backs of consumers who continued to spend briskly despite the ongoing burden of high prices on everything from homes to cars to eggs at the supermarket. While inflation is well off the boil from its mid-2022 40-year high, it remains a burden for households, particularly those on the lower end of the income scale.
    Consumer spending rose at a robust 4.2% pace and, as usual, amounted to about two-thirds of all activity. Government spending also provided a boost, accelerating at a 3.2% level.
    Trade was a drag on growth in the period, with imports, which subtract from the GDP calculation, off 0.8%. Exports also declined 0.8%. Gross private domestic investment slumped by 5.6%, shaving more than a full percentage point off the topline number. An easing in inventories also cut nearly 1 percentage point.

    In other economic news Thursday, initial unemployment claims totaled 207,000 for the week ending Jan. 25, a sharp decline of 16,000 from the prior period and well below the forecast for 228,000, the Labor Department reported. Continuing claims, which run a week behind, also fell, down 42,000 to 1.86 million.
    The resilience of the U.S. economy and the relative deceleration in inflation has allowed the Federal Reserve to assume a patient stance on monetary policy. Though the Fed cut its key interest rate by a full percentage point in the last four months of 2024, officials have indicated that aggressive reductions are unlikely this year.
    At the recently concluded Fed meeting, central bankers gave no indication that they are expecting cuts anytime soon, with Chair Jerome Powell insisting that he is in no hurry to ease.
    Fed officials have been expressing some concern about whether the moves lower in inflation have stalled. Thursday’s report showed that the so-called chain-weighted price index, which measures prices and accounts for consumers substituting less-expensive products for more costly items, increased 2.2% on the quarter, faster than the 1.9% move in the third quarter but slightly below the 2.3% estimate.
    However, the data also showed that consumers are dipping into savings to fund their purchases. The personal saving rate was 4.1%, down 0.2 percentage point from the prior quarter, for the lowest level in two years. More

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    U.S. Economy Grew 2.3 Percent in Fourth Quarter

    Gross domestic product grew by 2.3 percent in the fourth quarter, capping a more robust year than expected. Policy uncertainty clouds the outlook.Growth slowed but remained resilient at the end of 2024, leaving the U.S. economy on solid footing heading into a new year — and a new presidential administration — that is full of uncertainty.U.S. gross domestic product, adjusted for inflation, grew at a 2.3 percent annual rate in the fourth quarter of last year, the Commerce Department reported on Thursday. That was down from 3.1 percent in the third quarter but nonetheless represented an encouraging end to a year in which the economy again defied expectations.Robust consumer spending, underpinned by low unemployment and steady wage growth, helped keep the economy on track despite high interest rates, stubborn inflation and political turmoil at home and abroad. For the year as a whole, measured from the end of 2023 to the end of 2024, G.D.P. increased 2.5 percent, far ahead of forecasters’ expectations when the year began.“We ended on a pretty strong note,” said Diane Swonk, chief economist for the accounting firm KPMG. “It’s stunning how resilient and strong the economy has been.”The figures are preliminary and will be revised at least twice as more data becomes available.But the economy entered the new year facing a new set of challenges. The whirlwind start to President Trump’s second term — including sweeping changes to immigration policy, a spending freeze that was announced and then rescinded and steep tariffs that could take effect as early as this weekend — has increased uncertainty for households and businesses. Economists warn that his proposals on trade and immigration, in particular, could lead to faster inflation, slower growth or both.“You really have all the right ingredients to support sustainable growth, but the question is, where will it be in 12 months’ time?” said Gregory Daco, chief economist for the consulting firm EY-Parthenon. “The risk is you break the economy.”We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    German economy shrinks by 0.2% in fourth quarter, more than expected

    The German economy contracted in the fourth quarter, after logging a slight uptick in the three months ending in September.
    Analysts polled by Reuters had been expecting the gross domestic product (GDP) to decline by 0.1%.
    Household and government consumption expenditures increased, but exports were “significantly lower” than in the previous quarter, German statistics agency Destatis said.

    The Frankfurt skyline at dusk on a November day.
    Helmut Fricke | Picture Alliance | Getty Images

    The German economy shrank by 0.2% quarter-on-quarter in the three months ending in December, according to preliminary data released by Germany’s statistics office Destatis on Thursday.
    The figure is adjusted for price, calendar and seasonal variations.

    Analysts polled by Reuters had been expecting the gross domestic product (GDP) to decline by 0.1%.
    Household and government consumption expenditures increased, but exports were “significantly lower” than in the previous quarter, Destatis said.
    “After a year marked by economic and structural challenges, the German economy thus ended 2024 in negative territory,” it added.
    Carsten Brzeski, global head of macro at ING, said that there was now “a high likelihood this downturn will lead to a winter recession.”
    Germany’s issues appear to be currently concentrated in the country’s industry, but this could change, he said in a note on Thursday.

    “Given the importance of industry for the entire economy, spillovers to other sectors – be it via sentiment or real economic channels – are already happening.”
    The crucial industry is also not set for a “substantial recovery” as issues with inventories and order books persist and tariffs on exports to the U.S. loom, Brzeski noted.
    Thursday’s figures compare to a 0.1% rise of the country’s GDP in the third quarter of last year. Germany’s economic performance has long been sluggish, with quarterly GDP readings mostly hovering around the flatline in the past two years. The economy has however managed to avoid a technical recession.
    On an annual basis, the German economy contracted in both 2023 and 2024, by 0.3% and 0.2% respectively.
    Some respite is expected in 2025, with the German government on Wednesday revealing its forecast of 0.3% growth for the year — still a notably downward revision from it’s previous estimate of 1.1% growth.
    “The diagnosis is serious,” Robert Habeck, economy and climate minister, said during a press conference Wednesday, according to a CNBC translation.
    He added that the German economy has been stagnating for a long time. He pointed to both internal and global political uncertainty as factors leading to the cut to expectations, and added that the outgoing government had been unable to fully implement its growth plans as its term was ending early.
    A federal election in Germany is slated for Feb. 23, which is earlier than originally planned due to the break up of the country’s ruling coalition late last year.
    Habeck also said that there were structural issues weighing on the German economy, echoing comment made by the Finance Minister Jörg Kukies last week.
    “The structural weaknesses of our economy absolutely have to be addressed,” Kukies told CNBC. “It’s really important that we embark on a path of economic growth.” More

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    Lutnick Grilled on Trump’s Tariffs and China During Confirmation Hearing

    Howard Lutnick, a wealthy donor to President Trump who has been chosen to lead the Commerce Department, defended Mr. Trump’s plans to impose broad tariffs and said he would take a tough stance on technology sales to China during his Senate confirmation hearing on Wednesday.If confirmed, Mr. Lutnick would lead on trade policy and oversee a broad portfolio of government programs touching on business promotion, technology and science. He told lawmakers that he favored “across-the-board” tariffs that would hit entire countries rather than specific products, to equal out America’s trading relationships.He said that, while he believed tariffs on China “should be the highest,” governments in Europe, Japan and South Korea had also taken advantage of the United States on trade. He said that American farmers, ranchers and fishers were being “treated with disrespect around the world.”“We need that disrespect to end, and I think tariffs are a way to create reciprocity, to be treated fairly, to be treated appropriately,” he said. Mr. Lutnick also insisted that tariffs would not cause inflation, though many economists say tariffs are often at least partly passed on to consumers in the form of higher prices.Asked about China’s recent advances in artificial intelligence, Mr. Lutnick said he would take a tough stance on the department’s oversight of technology sales to China, and back up U.S. export controls with the threat of tariffs. He said that the recent A.I. technology released by the Chinese start-up DeepSeek had been underpinned by Meta’s open platform and chips sold by the U.S. company Nvidia.“We need to stop helping them,” he said of China, adding: “I’m going to be very strong on that.”Senator John Thune of South Dakota, the Republican majority leader, during Mr. Lutnick’s confirmation hearing on Wednesday. Republicans promoted Mr. Lutnick’s personal story, describing him as someone who had achieved great success despite facing adversity.Eric Lee/The New York TimesWe are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More