Evelyn Reynolds

KÖNIGSWINTER, Germany — The Group of 7 economic powers agreed on Friday to provide nearly $20 billion to support Ukraine’s economy over the coming months to help keep the country’s government running while it fights to repel a Russian invasion.In a joint statement after two days of meetings, finance ministers from the Group of 7 affirmed their commitment to help Ukraine with a mix of grants and loans. Ukraine needs approximately $5 billion per month to maintain basic government services, according to the International Monetary Fund.The $19.8 billion of financing was agreed on after the United States, which is contributing more than $9 billion in short-term financing, pressed its allies to do more to help secure Ukraine’s future. The statement did not break down how much the other Group of 7 nations will contribute.The European Commission, however, previously agreed to provide up to 9 billion euros of financial assistance. The European Bank for Reconstruction and Development and the International Finance Corporation plan to provide an additional $3.4 billion to Ukrainian state-owned enterprises and the private sector.“We will continue to stand by Ukraine throughout this war and beyond and are prepared to do more as needed,” the statement said.The economic policymakers also acknowledged that more fallout from the war lies ahead, and they pledged on Friday to keep markets open as they combat rising food and energy prices around the world. They also said that their central banks would be closely monitoring inflation measures and the impact that rising prices are having on their economies.“We are very concerned about crises and macroeconomic developments,” Christian Lindner, Germany’s finance minister, said during a closing news conference on Friday, according to an English translation.The two-day summit on the outskirts of Bonn came at a pivotal time for the world economy, with concern mounting that a combination of war, supply chain problems and the lingering effects of the pandemic could lead to a contraction in global output. Finance ministers discussed ways to keep pressure on Russia while minimizing the damage to their economies as they debated the merits of a European embargo on Russian oil and whether seized Russian assets could be used to pay for Ukraine’s reconstruction.“The values of the international community have been totally discarded by Russia,” Mr. Lindner said.Officials from the world’s leading advanced economies discussed other areas for possible collaboration, such as combating climate change and making progress on a global tax agreement that was reached last year but faces implementation problems.But the complicated mix of foreign policy challenges and economic headwinds dominated the meetings.Treasury Secretary Janet L. Yellen warned this week that Europe could be vulnerable to a recession because of its exposure to Russian energy. She does not expect a recession in the United States but said on Thursday that a “soft landing” was not guaranteed as the Federal Reserve raises interest rates to tame inflation.“I think it’s conceivable there could be a soft landing, that requires both skill and luck,” Ms. Yellen told reporters on the sidelines of the Group of 7 summit. “It’s a very difficult economic situation.” More

With just a handful of companies making U.S. infant formula, a shutdown of Abbott’s plant had outsized impact on the supply.In the early 1990s, the nation’s biggest makers of baby formula were under fire.The three largest manufacturers, which controlled 90 percent of the U.S. market at the time, were hit with waves of state, federal and corporate lawsuits, accusing them of attempting to limit competition and using their control of the industry to fix prices. Most of the lawsuits were settled or, in some cases, won by the companies.Three decades later, the $2.1 billion industry is still controlled by a small number of manufacturers, who are again in the cross hairs over their outsized market share.The infant formula market was plunged into disarray when Abbott Laboratories voluntarily recalled some of its most popular powdered formulas in February and shut down its plant in Sturgis, Mich., after four babies who had consumed some of Abbott’s products became sick with bacterial infections.Abbott, which controls 48 percent of the market, has said there was no evidence its formula caused any known infant illnesses and that none of the tests performed by regulators have directly linked the cans of formula the babies consumed to the strains of bacteria, Cronobacter sakazakii, found at the plant.But the ripple effects from that single plant closing have been widespread, highlighting the market power of a single manufacturer and the lack of meaningful competition in an industry governed by rules and regulations designed to protect the incumbents.Stores are limiting purchases of baby formula, with shelves in many markets completely bare. Panicked parents of newborns are calling on friends and family to help locate food for their babies, with some resorting to making their own formula at home. And while the Abbott plant was given the green light this week to start manufacturing again — a move that will still take weeks to rebuild inventory on store shelves — there are growing calls from lawmakers for major changes to how the industry operates.“When something goes wrong, like it has here, you then have a major, serious crisis,” said Representative Rosa DeLauro, a Connecticut Democrat who released a scathing 34-page whistleblower report from a former Abbott employee detailing safety and cleanliness issues at the Sturgis plant. She argued that the industry should be broken up and efforts should be made to promote competition to avoid future shortages.Senator Tammy Duckworth, an Illinois Democrat, urged the Federal Trade Commission last week to conduct a broad study of the infant formula industry and whether market consolidation has led to the dire shortages. Top Biden administration officials have also lamented the power of a few players. On Sunday, Transportation Secretary Pete Buttigieg said the Biden administration should do more to address the industry’s “enormous market concentration.”“We’ve got four companies making about 90 percent of the formula in this country, which we should probably take a look at,” Mr. Buttigieg said on CBS’s “Face the Nation.”Read More on the Baby Formula Shortage A Desperate Search: As the United States faces a baby formula shortage, some parents are rationing supplies, or driving for hours in search of them. A Misleading Narrative: Amid the crisis, Republicans have suggested that the Biden administration is sending baby formula to immigrants at the expense of American families. An Emotional Toll: The shortage is forcing many new mothers to push themselves harder to breastfeed and look for ways to start again after having stopped. What Not to Do: As they struggle to cope, some parents have resorted to strategies like watering down their formula. But there are risks.Today, Abbott is the biggest player. Mead Johnson, which is owned by the conglomerate Reckitt Benckiser, and Perrigo, which makes generic formula for retailers, control another 31 percent. Nestlé controls less than 8 percent.In part, the lack of competition stems from simple math: Few companies or investors are eager to jump into the infant formula industry because its growth is tied to the nation’s birth rate, which held steady for decades until it began dropping in 2007.But the factors that long ago led to the creation of an industry controlled by a handful of manufacturers are primarily rooted in a tangled web of trade rules and regulations that have protected the biggest producers and made it challenging for others to enter the market.The United States, which produces 98 percent of formula consumed in the country, has strict regulations and tariffs as high as 17.5 percent on foreign formula. The Food and Drug Administration maintains a “red list” of international formulas, including several European brands that, if imported, are detained because they do not meet U.S. requirements. Those shortcomings could include labels that are not written in English or do not have all of the required nutrients listed. This week, the F.D.A. said it would relax some regulations to allow for more imports into the United States.Trade rules contained in the United States Mexico Canada Agreement, which replaced the North American Free Trade Agreement, also significantly discourage Canadian companies from exporting infant formula to the United States. The pact established low quotas that trigger export charges if exceeded. American dairy lobbying groups had urged officials to swiftly pass the agreement and supported the quotas at the time.But perhaps the biggest barrier to new entrants is the structure of a program that aims to help low-income families obtain formula. The Special Supplemental Nutrition Program for Women, Infants, and Children, better known as WIC, is a federally funded program that provides grants to states to ensure that low-income pregnant or postpartum women and their children have access to food.The program, which is administered by state agencies, purchases more than half of all infant formula supply in the United States, with about 1.2 million infants receiving formula through WIC.State WIC agencies cannot just buy formula from any manufacturer. They are required by law to competitively bid for contracts and select one company, which becomes the exclusive provider of formula for all WIC recipients in the state. In exchange for those exclusive rights, manufacturers must provide states significant discounts for the formula they purchase.David E. Davis, an economics professor at South Dakota State University, said that exclusive system could make it more difficult for smaller companies to break through. Although manufacturers may sell products to states below cost, Dr. Davis’s research found that brands that secure WIC contracts gain greater prominence on store shelves, creating a spillover effect and resulting in larger sales among families that are not WIC recipients. Doctors may also preferentially recommend those brands to mothers, his research found.The formula shortage is causing retailers to limit purchases, with shelves in many markets completely bare.Kaylee Greenlee Beal for The New York Times“If you don’t have the WIC contract, you’re pretty much a small player,” Dr. Davis said. “Because that locks you out of the WIC market and it pretty much locks you out of the non-WIC market. So firms bid very aggressively to get the WIC contract.”Only three companies have contracts to supply formula through the program: Abbott makes up the largest share, providing formula to about 47 percent of infants that receive WIC benefits, while Mead Johnson provides 40 percent and Gerber, which is manufactured by Nestlé, provides 12 percent, according to the National WIC Association.Navigating the Baby Formula Shortage in the U.S.Card 1 of 6A growing problem. More

The president plans to unveil a new regional economic framework, but some in the region wonder whether it will be an empty exercise.PYEONGTAEK, South Korea — When President Biden arrived on his inaugural mission to Asia on Friday, the first place he headed from the airplane was not a government hall or embassy or even a military base, but a sprawling superconductor factory that represented the real battleground of a 21st-century struggle for influence in the region.The choice of destination to begin a five-day trip to South Korea and Japan underscored the challenges of Mr. Biden’s effort to rebuild American ties to a region where longtime allies have grown uncertain about Washington’s commitments amid anti-trade sentiment at home, while China has expanded its dominance in the economic arena.The president hopes to lure countries back into the American orbit despite his predecessor Donald J. Trump’s decision five years ago to abandon a far-reaching trade pact known as the Trans-Pacific Partnership — but not by rejoining the economic bloc, even though it was negotiated by the Obama administration that he served as vice president. Instead, under pressure from his liberal base at home, Mr. Biden plans to offer a far less sweeping multinational economic structure that has some in the region skeptical about what it will add up to.Mr. Biden will formally unveil the Indo-Pacific Economic Framework on Monday in Tokyo, bringing together many of the same countries from the trade partnership to coordinate policies on energy, supply chains and other issues, but without the market access or tariff reductions that powered the original partnership. Eager for American leadership to counter China, a number of countries in the region plan to sign up and hail the new alignment but privately have expressed concern that it may be an empty exercise.The framework is essentially “a new packaging of existing Biden administration priorities in this economic policy area,” said Scott A. Snyder, the director of U.S.-Korea policy at the Council on Foreign Relations. “And whether or not it really takes off depends on whether partners believe that there’s enough there there to justify being engaged.”Mr. Snyder added that he thought South Korea, for one, was taking seriously the Biden administration’s commitment to invest in the region. “I think they’re believing,” he said. “And we’ll see whether they’re whistling past the graveyard.”But even Mr. Biden’s own ambassador to Japan, Rahm Emanuel, acknowledged the uncertainty in the region over the new economic framework. Countries want to know, “what is it we are signing up for?” he told reporters in Tokyo on Thursday. Is this an alternative to the Trans-Pacific Partnership? “Yes and no,” he said.Understand the Supply Chain CrisisThe Origins of the Crisis: The pandemic created worldwide economic turmoil. We broke down how it happened.Explaining the Shortages: Why is this happening? When will it end? Here are some answers to your questions.A New Normal?: The chaos at ports, warehouses and retailers will probably persist through 2022, and perhaps even longer.A Key Factor in Inflation: In the U.S., inflation is hitting its highest level in decades. Supply chain issues play a big role.The framework is not a traditional free trade agreement but instead an architecture for negotiation to address four major areas: supply chains, the digital economy, clean energy transformation and investments in infrastructure. Jake Sullivan, the president’s national security adviser, said it would be “a big deal” and a “significant milestone” for relations with the region.“When you hear some of the, ‘Well, we don’t quite know. We’re not sure because it doesn’t look like things have looked before,’ I say, ‘Just you wait,’” he told reporters on Air Force One as it made its way across the Pacific. “Because I think this is going to be the new model of economic arrangement that will set the terms and rules of the road for trade and technology and supply chains for the 21st century.”Mr. Sullivan said there will be “a significant roster of countries” joining the framework when Mr. Biden kicks it off on Monday, but administration officials have not identified which countries. Japan, which has signaled that it would rather the United States rejoin the Trans-Pacific Partnership, will nonetheless embrace the new framework as the best it can get at the moment, as will South Korea. Singapore, Thailand and the Philippines have indicated interest in joining, while India and Indonesia have expressed some reservations.Prime Minister Pham Minh Chinh of Vietnam said this month that it was still not clear what the new framework would mean in concrete terms. “We are ready to work alongside the U.S. to discuss, to further clarify what these pillars entail,” he said at a forum held by the Center for Strategic and International Studies.The Financial Times reported that the administration had diluted the language of the organizing statement to entice more countries to join. Some countries are concerned that the United States will force labor and environmental standards on them without the trade-offs of better trading terms, which are off the table because of liberal opposition within Mr. Biden’s party.“There’s a reason that the original T.P.P. was derailed,” Senator Elizabeth Warren, Democrat of Massachusetts, said at a hearing last month. “It would have off-shored more jobs to countries that use child labor and prison labor and pay workers almost nothing. Let me be clear: The I.P.E.F. cannot be T.P.P. 2.0.”Mr. Emanuel said the administration would describe the new framework process as a “consultation to negotiation,” as he put it. “We have to have an approach that respects countries where they are,” he said. “Meaning where Japan is or where Australia is, is not necessarily where Vietnam or Thailand or the Philippines are.”Moreover, he said, the administration wanted a framework that could survive beyond Mr. Biden’s presidency, unlike the Trans-Pacific Partnership. “We have an interest in saying we are still a player in the Pacific, and China has an interest in saying the U.S. is on its way out,” Mr. Emanuel said.Mr. Biden’s visit to the Samsung semiconductor facility immediately after disembarking from Air Force One served as a reminder of how critical the region is to his immediate priority of unsnarling the supply chain problems that have hurt American consumers back home.Shortly after landing at Osan Air Base, Mr. Biden joined President Yoon Suk-yeol of South Korea at the plant, praising it as a model for the type of manufacturing that the United States desperately needs to head off soaring inflation and to compete with China’s growing economic dominance.“This is an auspicious start to my visit, because it’s emblematic of the future cooperation and innovation that our nations can and must build together,” Mr. Biden said, noting that Samsung will invest $17 billion to build a similar plant in Taylor, Texas.“Our two nations work together to make the best, most advanced technology in the world,” Mr. Biden added, surrounded by monitors showing Samsung employees listening to his remarks. “And this factory is proof of that, and that gives both the Republic of Korea and the United States a competitive edge in the global economy if we can keep our supply chains resilient, reliable and secure.”Employees at the Samsung plant. Mr. Biden’s commerce secretary warned this year that the United States was facing an “alarming” shortage of semiconductors.Doug Mills/The New York TimesWhile demand for products containing semiconductors increased by 17 percent from 2019 to 2021, there has not been a comparable increase in supply, partly because of pandemic-related disruptions. As a result, automobile prices have skyrocketed and the need for more chips is likely to increase as 5G technology and electric vehicles become more widespread.The United States already faces an “alarming” shortage of the semiconductors, Gina Raimondo, Mr. Biden’s commerce secretary, warned this year, adding that the crisis had contributed to the highest level of inflation in roughly 40 years.How the Supply Chain Crisis UnfoldedCard 1 of 9The pandemic sparked the problem. More

Flush with cash, Facebook, Apple, Amazon, Microsoft and Google are positioned to emerge from a downturn stronger and more powerful. As usual.SAN FRANCISCO — Apple, Amazon, Microsoft and the parent companies of Facebook and Google have lost $2.7 trillion in value so far this year, about the annual gross domestic product of Britain.So what have the companies done about this thrashing on Wall Street? Microsoft has doubled its employees’ bonus pool, Google has committed to hiring more engineers, and Apple has showered its top hardware talent with $200,000 bonuses.The dissonance between the stock market’s relative panic and the business-as-usual calm among tech giants foreshadows a period when analysts, investors and economists predict that the world’s largest companies will widen their lead in their respective markets.The bullishness about their prospects reflects an understanding that the companies have tight control of some of the world’s most lucrative businesses: social media, premium smartphones, e-commerce, cloud computing and search. Their dominance in those arenas and toeholds in other businesses should blunt the pains of inflation, even as those challenges hammer big companies such as Walmart and Target and the stock market nears bear market territory.The S&P 500 spent much of Friday below the threshold for what is considered a bear market — commonly defined as 20 percent below its last peak — before rallying late in the afternoon. The index ended the week with a loss of 3 percent, its seventh straight weekly decline. That’s its longest stretch of losses since 2001.In the months ahead, Microsoft, Google, Apple and Amazon are expected to boost hiring, buy more businesses and emerge on the other side of a bearish economy stronger and more powerful — even if they shed some of their total valuation and their relentless growth of the last few years.“Big tech can say, ‘Forget the economy,’” said Richard Kramer, founder of the London-based advisory firm Arete Research. Flush with cash, he said, “they can invest through the cycle.”Read More About Apple‘After Steve’: Jony Ive, who helped define Apple’s iconic look, left as the Tim Cook era took hold. A new book details how they and the company changed following Steve Jobs’s death.A $3 Trillion Company: Four decades after going public, Apple reached a $1 trillion market value in 2018. Now, the company is worth triple that.Trademarks: The tech behemoth has opposed singer-songwriters, school districts and food blogs for trying to trademark names or logos featuring an apple — and even other fruits.AirTags: Privacy groups said that Apple’s new coin-size devices could be used to track people. Those warnings appear to have been prescient.The large companies’ plans contrast sharply with a wave of spending cuts crashing through the rest of the tech sector. Steep declines in share prices at unprofitable companies such as Uber, down 45 percent, and Peloton, down 58 percent, have led their chief executives to cut jobs or consider layoffs. Start-ups are pruning their workforces as venture capital funding slows.Those companies’ plummeting values will create buying opportunities, said Toni Sacconaghi, a tech analyst at Bernstein, a research firm. Large deals may be difficult because the Federal Trade Commission is scrutinizing takeover moves by Facebook, Apple, Amazon, Microsoft and Google, he said, but smaller deals for emerging technology or engineers could be rampant.As people return to work and travel, they are making fewer Amazon purchases, leaving the company with more space and staff than it needs.Roger Kisby for The New York TimesDuring the Great Recession, Facebook, Amazon, Google, Apple and Microsoft acquired more than 100 companies from 2008 to 2010, according to Refinitiv, a financial data company. Some of those deals have become fundamental to their businesses today, including Apple’s acquisition of the chip company P.A. Semi, which contributed to the company’s development of its new laptop processors, and Google’s acquisition of AdMob, which helped create a mobile advertising business.“The big will get bigger and the poor will get poorer,” said Michael Cusumano, deputy dean of the Sloan School of Management at the Massachusetts Institute of Technology. “That’s the way network effects work.”There are caveats to this sense of invulnerability. The big companies’ plans could always change if the economy continues to deteriorate and consumers pull back even further on their spending. And some of the big companies are more vulnerable than others.Meta Platforms, Facebook’s parent company, has fared worse than its peers because its business is facing long-term challenges. It has posted falling profits as its user growth slows amid rising competition from TikTok, and changes in Apple’s privacy policy stymie its ability to personalize ads.Mark Zuckerberg, Meta’s chief executive, has responded by instituting a temporary hiring freeze for some roles. During a recent all-hands meeting with staff, employees asked if layoffs would follow. Mr. Zuckerberg said that job cuts weren’t in the company’s current plans and were unlikely in the future, according to a spokesman. Instead, he said the company was focused on slowing spending and limiting its growth.Amazon sent a similar signal to its employees last month after it posted disappointing results. In a call with analysts, Brian Olsavsky, the company’s finance chief, said Amazon would look to corral costs after it doubled spending on warehouses and staff to keep pace with pandemic orders. As people return to work and travel, they are making fewer Amazon purchases, leaving the company with more space and staff than it needs.But Amazon’s lucrative cloud business, Amazon Web Services, or A.W.S. for short, continues to gush profits. The company plans to lean into its success in the months ahead by increasing its spending on data centers. It also has committed to raising the cap on base compensation of its corporate staff to $350,000, from $160,000. And it is investing in a plan to build a network of satellites to deliver high-speed internet by launching 38 rockets into space.Between them, Facebook, Microsoft, Google, Apple and Amazon had nearly $300 billion in cash, excluding debt, at the end of March, according to Loup Ventures, an investment firm specializing in tech research.The cash reserves could fund accelerated stock buybacks as share prices fall, analysts say. Doing so would increase the companies’ earnings per share, deliver more value to investors and signal to the market that their firms are more valuable than Wall Street is willing to acknowledge.The companies roared ahead during the pandemic as people sequestered at home immersed themselves in a digital world. Customer orders soared on Amazon, for everything from hand sanitizer to Instant Pots. Shuttered stores shifted sales online and ramped up Google and Facebook advertising. Remote students and employees splurged on new iPhones, iPads and Macs.The last tech giant to cull its ranks during a major downturn, Microsoft, is doing the opposite during this turbulent period. Emboldened by a business that has proved more durable than its peers, Microsoft is sweetening salaries, boosting its investments in cloud computing and standing by a $70 billion acquisition of Activision Blizzard that it expects to unlock more sales for its gaming empire.A Call of Duty event in Minneapolis in 2020. Microsoft’s acquisition of Activision Blizzard is expected to unlock more sales for its gaming empire.Bruce Kluckhohn/USA Today Sports, via ReutersSimilar resilience has been on display at Google and Apple. Google, a subsidiary of Alphabet, recently overhauled its performance review process and told staff that they would likely get pay increases, according to CNBC. It also plans to increase its spending on data centers to support its growing cloud business.Tim Cook, Apple’s chief executive, has a longstanding philosophy that Apple should continue to invest for the future amid a downturn. It more than doubled its staff during the Great Recession and nearly tripled its sales. Lately, it has increased bonuses to some hardware engineers by as much as $200,000, according to Bloomberg.John Chambers, who steered Cisco Systems through multiple downturns as its former chief executive, said the companies’ strong businesses and deep pockets could afford them the chance to take risks that would be impractical for smaller competitors. During the 2008 downturn, he said Cisco allowed distressed automakers to pay for technology services with credit at a time when competitors demanded cash. The company risked having to write down $1 billion in inventory, but emerged from the recession as the dominant provider to a healthy auto industry, he said.“Companies break away during downturns,” Mr. Chambers said.Excelling will require disregarding the broader market’s gloom, said David Yoffie, a professor at Harvard Business School. He said previous downturns had shown that even the strongest businesses were susceptible to profit pressures and prone to pulling back. “Firms get pessimistic like everyone else,” he said.The first test for the biggest companies in tech will be contagion from their peers. Amazon’s shares in the electric vehicle maker Rivian Automotive have plunged more than 65 percent, a $7.6 billion paper loss. Apple’s services sales are likely to be crimped by a slowdown in advertising by app developers, which rely on venture-capital funding to finance their marketing, analysts say. And start-ups are scrutinizing their spending on cloud services, which will likely slow growth for Microsoft Azure and Google Cloud, analysts and cloud executives said.“People are trying to figure out how to spend smartly,” said Sam Ramji, the chief strategy officer at DataStax, a data management company.Regulatory challenges on the horizon could darken the big tech companies’ prospects, as well. Europe’s Digital Markets Act, which is expected to become law soon, is designed to increase the openness of tech platforms. Among other things, it could scuttle the estimated $19 billion that Apple collects from Alphabet to make Google the default search engine on iPhones, a change that Bernstein estimates could erase as much as 3 percent of Apple’s pretax profit.But the companies are expected to challenge the law in court, potentially tying up the legislation for years. The probability it gets bogged down leaves analysts sticking to their consensus: “Big Tech is going to be more powerful. And what’s being done about it? Nothing,” Mr. Kramer of Arete Research said.Jason Karaian contributed reporting. More

The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”Also in the dollar’s favor is the aggressive action of the Federal Reserve. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. Traders are betting that U.S. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

The administration says federal spending trends are helping rein in price increases, but the economic calculus may be more complicated.As Americans deal with the highest inflation in decades, President Biden has declared that combating rising costs is a priority for his administration. Lately, he has cited one policy in particular as an inflation-fighting tool: shrinking the nation’s budget deficit.“Bringing down the deficit is one way to ease inflationary pressures in an economy,” Mr. Biden said this month. “We reduce federal borrowing and we help combat inflation.”The federal budget deficit — the gap between what the government spends and the tax revenue it takes in — remains large. But Mr. Biden has pointed out that it shrank by $350 billion during his first year in office and is expected to fall more than $1 trillion by October, the end of this federal budget year.Rather than stemming from any recent budget measures by his administration or Congress, the deficit reduction largely reflects the rise in tax receipts from strong economic growth and the winding down of pandemic-era emergency programs, like expanded unemployment insurance. And for many experts, that — plus the reality that deficits have a complicated relationship with inflation — makes the budget gap a surprising talking point.“It’s probably not something they should be taking credit for,” Dan White, director of government consulting and fiscal policy research at Moody’s Analytics, said of the Biden team’s emphasis on deficit reduction. The expiration of the programs is mostly “not making things worse,” he said.The Biden administration’s March 2021 spending package helped the economic rebound, but it also meant the deficit shrank less than it otherwise would have last year. In fact, the $1.9 trillion relief plan probably added to inflation, because it pumped money into the economy when the labor market was starting to heal and businesses were reopening.But the White House has explained its new emphasis on deficit reduction and fiscal moderation in terms of timing. Administration officials argue that back in March 2021, the world was uncertain, vaccines were only beginning to roll out and spending heavily on support programs was an insurance policy. Now, as the labor market is booming and consumer demand remains high, the administration says it wants to avoid ramping up spending in ways that could feed further inflation.“Supply chains have created challenges in ramping up production as quickly as we were able to support demand,” said Heather Boushey, a member of the White House Council of Economic Advisers. “The point he’s trying to make is that the plan, moving forward, is responsible and is not aimed at adding to demand.”Moody’s Analytics estimates that inflation will be about a percentage point lower this year than it would be had the government continued spending at last year’s levels.But few people, if anyone, expected those programs to continue. And while it is possible to make a rough estimate about how much fading fiscal support is helping with the inflation situation, as Moody’s did, a range of economists have said that it is hard to know how much it matters for inflation with precision.Understand Inflation and How It Impacts YouInflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Inflation Calculator: How you experience inflation can vary greatly depending on your spending habits. Answer these seven questions to estimate your personal inflation rate.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what that means for inflation.State Intervention: As inflation stays high, lawmakers across the country are turning to tax cuts to ease the pain, but the measures could make things worse. How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.The tie between budget deficits and inflation is also more complex than Mr. Biden’s statements suggest.Deficits, which are financed by government borrowing, are not inherently inflationary: Whether they push up prices hinges on the economic environment as well as the nature of the spending or cutback in revenue that created the budget shortfall.Policies that reduce the deficit could be inflationary, for instance. A big, broadly distributed stimulus that gives direct cash aid to low- and middle-income households could be more than offset in a budget by revenue from large tax increases on the wealthy. But shuffling much of that money to people who are likely to spend it quickly could cause demand to outstrip supply, leading to inflation. Alternatively, spending that would enlarge deficits — like debt-financed investments in energy infrastructure — could reduce inflation over time if the program improves efficiency, expands capacity or makes production cheaper.“I’ll fall back on the typical economist answer and say: It depends,” said Andrew Patterson, a senior international economist at Vanguard.The last time the federal government had a budget surplus was 2001. Since 1970, there have only been four years in which the U.S. government taxed more than it spent. Over that period, there have been times of both high and low inflation.“There’s no simple-minded deficit-to-inflation link — you have to look at both the demand and the supply side of the economy,” said Glenn Hubbard, a professor of finance and economics at Columbia University who headed the Council of Economic Advisers under President George W. Bush. The existence or absence of high inflation has more to do with imbalances in the real economy than with complex budget math. “If aggregate demand grows much faster than aggregate supply, you will see inflation,” he said.Complicating matters in the current situation, the stimulus from the last couple of years is still trickling out into the economy because consumers have amassed savings stockpiles that they are spending down, and because state and local governments continue to use untapped relief funds.And stimulus-stoked demand is far from the only reason prices are rising. Over the past year, because of factory shutdowns and overburdened transit routes, companies have struggled to expand supply to meet booming demand. Shortages of cars, couches and construction materials and raw components have helped to push costs higher.Grocery shoppers in Los Angeles. The White House has argued that a shrinking federal budget deficit will help rein in consumer prices.Alisha Jucevic for The New York TimesRecent global developments are worsening the situation. The Chinese government’s latest lockdowns to contain the coronavirus threaten to shake up factory production and shipping, while the war in Ukraine has caused fuel and food prices to increase.Employers are also raising wages as they scramble to hire in a hot job market, and that increase in labor costs is prompting some companies to raise prices to protect their profit levels. Some companies are even increasing their profits, having discovered that they can charge more in an era of hot demand.The demand drag from fading pandemic relief doesn’t appear to have been large enough to substantially offset those other forces. To date, price gains for a range of goods and services have mostly accelerated.Inflation F.A.Q.Card 1 of 5What is inflation? More

Eleven auction records for artists — six by women — were smashed on Thursday night in two sales at Sotheby’s.Two blockbuster weeks of marquee evening sales ended in Manhattan on Thursday night with doubleheader Sotheby’s auctions of rising stars and established contemporary names that raised a combined $283.4 million — and smashed 11 records for artists, including six by women. This pushed the running total for various spring sales at Sotheby’s, Christie’s and Phillips to more than $2.5 billion.“The market is stronger than ever,” said the New York dealer David Benrimon, adding, “The Macklowe sale made nearly a billion dollars.” He was referring to Sotheby’s record-breaking $922 million auction of the Macklowe Collection, which concluded on Monday as the S&P Index continued to slide.“When stock markets take a nosedive,” Benrimon added, “people look to invest in art. It’s more tangible. The art market is bulletproof.”Indeed, with Sotheby’s auction of the Macklowe collection and Phillips setting its company record for a public sale on Wednesday night, the top end of the art market still seems to be booming despite the recent slide in stocks, prompted by growing concerns over inflation’s impact and the war in Ukraine.The results seemed to endorse the upbeat assessment of the latest annual Art Basel and UBS Global Art Market Report, which said international art sales had “recovered strongly” from the coronavirus pandemic, with sales reaching an estimated $65.1 billion in 2021, up 29 percent from the previous year.But some experts, mindful of the recent sudden collapse of the market for NFTs, or nonfungible tokens, noted that sooner or later, the art world would once again be affected by events in the wider world.Christina Quarles’s “Night Fell Upon Us Up On Us,” estimated at $600,000 to $800,000, sold for $4.5 million, a record for the artist at auction. via Sotheby’s“Art tends to be a lagging market,” said Doug Woodham, managing partner of Art Fiduciary Advisors, a New York-based firm that provides art-related financial advice. “Speculative capital flooded into the market in the late 1980s, then stocks crashed in 1990,” added Woodham, a former Christie’s executive, recalling the effect of Iraq’s invasion of Kuwait. “The art market didn’t crash until 1991.”Woodham, along with many market observers, has noted the large amounts of international capital that has been invested in works by young up-and-coming painters, some of which have yielded massive short-term returns for speculators.Last year, global auction sales of paintings by artists under 40 soared to $259.5 million, a 177 percent increase on 2020, according to data provided by Artprice, a French-based auction analytics company.Eager to jump on this fast-moving bandwagon, Sotheby’s has come up with a new format called “The Now” sales, focusing on works by the most coveted names of the moment. On paper, this 23-lot offering was meant to be the warm-up act for the main sale of works by established contemporary artists, but with so much attention — and money — being focused on younger names, for many, this was the evening’s main event.Like hungry chicks in a nest, banks of Sotheby’s staff members screamed telephone bids as Lot 1, the 2020 painting “Falling Woman,” by the New York-based artist Anna Weyant, set the tone. Estimated at $150,00 to $200,000, it sold to an online bidder for $1.6 million, beating the record $1.5 million set for the artist at Christie’s last week.Female artists and artists of color continued to be the dominant forces in the market for works by younger contemporaries. Sotheby’s proudly announced before “The Now” sale that, for the first time, female artists outnumbered men at one of its auctions.Capitalizing on Simone Leigh’s representation of the United States at the Venice Biennale (where one of her sculptures also won a Golden Lion award), Sotheby’s included the life-size mixed media female head “Birmingham,” from 2012. This triggered another feeding frenzy of phone competition, the hammer finally falling at a record $2.2 million, 10 times the presale upper estimate.Complex, multilayered paintings of the Los Angeles-based Christina Quarles have impressed critics and visitors at the Biennale’s central exhibition. This acclaim appeared to supercharge her market, with the 2019 canvas “Night Fell Upon Us Up On Us” soaring to a record $4.5 million. The previous auction high for her works had been $685,500.Over all, “The Now” sale raised $72.9 million, with all the works sold and nine artists reaching new highs. The admired American painters Avery Singer ($4.9 million) and Jennifer Packer ($2.3 million), both of whom are under 40, were also among the record breakers.“Over the last five years, so much money has gone into young and midcareer artists,” said Woodham. “The sort of art that speculative capital has chased tends to plummet the most.”Estimates on the sale of works by more famous contemporary names that followed were routinely higher, but with the financial stakes raised, Sotheby’s, like Christie’s and Phillips, tried to protect its high-profile lots from failure with guaranteed minimum prices pledged by third parties. Of the 27 lots on offer, eight were certain to sell courtesy of this mechanism.The big-ticket lot of the night was Francis Bacon’s imposing, gold-framed painting “Study of Red Pope 1962, 2nd Version 1971.” Though guaranteed by Sotheby’s, no third party pledged a guarantee, perhaps aware that it had previously failed at auction in 2017. Nonetheless, it sold for $46.3 million to one bidder.Just two artist records were set in this second session. The Irish-born abstract painter Sean Scully achieved a new high. Scully’s 1985 painting “Song,” a harmony of blue, yellow and orange stripes, ended the sale on a high with a price of $2 million.Sotheby’s contemporary sale, the last of a marathon series of evening auctions, raised $210.5 million from 27 lots. Bidding was noticeably more subdued after all the excitement of “The Now” sale.William O’Reilly, the New York-based president of Dickinson, the private advisers and fine art dealers, said that competition in the second sale was more muted because Sotheby’s had to offer high estimates to secure works. And tastes were changing.“This is the new traditional,” said O’Reilly, characterizing the works produced by the world’s most famous contemporary artists who have either died or are over age 40. “It’s for connoisseurs.”Sean Scully’s 1985 “Song” sold at auction on Thursday for $2 million with fees, a record for the artist.via SothbysThough this spring series of auctions couldn’t be characterized as anything other than a success, art trade professionals expressed concern about the market over the coming few months, particularly if rising inflation and interest rates close the tap on what has been routinely termed “free money,” or cheap debt, that has bought so much big-ticket art at auction.Todd Levin, a New York-based art adviser, said that when art markets dip, the problem is supply, rather than demand.“It’s not so much that prices for art drop,” he said. “You just don’t see great works on the market. They disappear. They stay on collectors’ walls.” More