Economy

Addressing a crowd of activists on Friday in Tula, the capital of Russia’s arms industry, Vladimir Putin crowed that the country’s economy had defeated western sanctions imposed after his invasion of Ukraine.“They predicted decline, failure, collapse — that we would stand back, give up, or fall apart. It makes you want to show [them] a well-known gesture, but I won’t do that, there are a lot of ladies here,” Putin said to a round of applause. “They won’t succeed! Our economy is growing, unlike theirs.”Russia’s president gloated that Russia’s economy had not only withstood an onslaught of sanctions from western countries — but was now bigger than all but two of them. He was referring to the World Bank’s ranking of GDP by purchasing power parity, by which Russia slightly edges ahead of Germany. “All of our industry did their part,” he said. On Tuesday, the IMF appeared to concur with Russia’s president. The IMF revised its own GDP growth forecast for Russia to 2.6 per cent this year, a 1.5 percentage point rise over what it had predicted last October.The Russian economy’s resilience has stunned many economists who had believed the initial round of sanctions over the invasion of Ukraine nearly two years ago could cause a catastrophic contraction. Instead, they say, the Kremlin has spent its way out of a recession by evading western attempts to limit its revenues from energy sales and by ramping up defence spending.Russia is directing a third of the country’s budget — Rbs9.6tn in 2023 and Rbs14.3tn in 2024 — towards the war effort, a threefold increase from 2021, the last full year before the invasion. This includes not only producing hardware, but also giving war-related social payments to those who fight in Ukraine and their families, as well as some spending on the occupied territories. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The significant increase in military expenditure marks “a striking break with Russia’s post-Communist development to date”, a recent Stockholm International Peace Research Institute (SIPRI) paper concluded. Putin’s own top economic officials have warned a surge in public spending comes at the risk of a major overheating of the economy in the near future. But for the time being, it is keeping growth robust.All of this would have been impossible if Russia had not continued to generate colossal revenues from its energy resources, despite sanctions.In 2023, Russia’s energy revenues reached Rbs8.8tn — a decline of about a quarter from the record-breaking result in 2022 but above the average for the past ten years. Despite this, the state has had to resort to increasingly irregular methods to generate revenue from one-off taxes and levies, including “voluntary donations” western businesses have to pay when leaving Russia. “The regime is resilient because it sits on an oil rig,” says Elina Ribakova, a non-resident senior fellow at the Peterson Institute for International Economics. “The Russian economy now is like a gas station that has started producing tanks.”As he announced Russia’s staggering military spending to lawmakers in September, finance minister Anton Siluanov used a Soviet slogan from the second world war to describe the Kremlin’s approach to the budget.“Everything for the front, everything for victory,” Siluanov said.The Kremlin’s shift to what Vasily Astrov, a senior economist at the Vienna Institute for International Economic Studies (WIIW), calls “military Keynesianism” is a radical break from the conservative macroeconomic policy of Putin’s first two decades in power.Technocrats like Siluanov and central bank governor Elvira Nabiullina helped steer Russia through multiple financial crises by aggressively targeting inflation, shoring up the country’s banking system, building up foreign currency reserves, and attempting to rein in additional spending.That approach also proved crucial in mitigating the initial impact of the sanctions at the war’s outset, when western countries froze $300bn of Russia’s sovereign reserves and the Kremlin imposed currency controls to halt an exodus of capital and a run on the banks.“The economic bloc [the finance ministry and central bank] keeps saving the regime. They have proven to be much more useful for Putin than the generals,” says Alexandra Prokopenko, a former Russian central bank official.Avoiding a bigger contraction in the economy allowed the Kremlin to pivot to fuelling growth through spending, Astrov says. Although the authorities officially continue to refer to the war in Ukraine as a “special military operation”, the entire country’s economy has shifted to producing for the war. Addressing a group of arms producers on Friday, Putin said they were “guaranteed to be filling orders for years to come” as Russia ramped up its weapons production and said the defence ministry was paying suppliers 80 per cent of the costs in advance.Vladimir Putin, accompanied by members of the Movement of the First youth group, visits the Russia Expo stand at the Exhibition of Achievements of National Economy in Moscow this week More

This article is an on-site version of our Disrupted Times newsletter. Sign up here to get the newsletter sent straight to your inbox three times a weekToday’s top storiesFor up-to-the-minute news updates, visit our live blogGood evening.The valuations of Meta, Amazon, Alphabet and Apple, all part of the so-called Magnificent Seven, diverged this week as the Big Tech groups strived to impress Wall Street and convince shareholders that years of unproven bets on the metaverse and costly investments in AI would deliver results.Meta agreed to its first ever dividend payout for investors, indicating that Mark Zuckerberg, chair and CEO of Facebook, Instagram and WhatsApp’s parent company, is more willing to play by Wall Street’s rules to secure the investment needed for its metaverse and generative AI projects. In response, Meta saw its shares jump 21 per cent as investors reacted excitedly to the potential dividend payouts of up to $86bn in 2024 and a $50bn share buyback programme. Amazon shares were up 7.3 per cent in early trading today. This is thanks to a robust holiday season for the retail giant and a 13 per cent increase in sales to $24.2bn within its cloud computing division AWS in the three months to December. Meta and Amazon are on course to gain a combined $293bn in market capitalisation on Friday.Microsoft’s cloud revenues also rose 20 per cent to $25.9bn in the final quarter of 2023, while Alphabet’s Google Cloud services business reported revenue of $9.2bn, a 26 per cent rise from the same period last year. Despite Microsoft and Google both reporting strong quarterly results earlier this week, Alphabet, Google’s parent company, saw its shares fall more than 8 per cent since the results. Alphabet narrowly missed forecasts for growth in its advertising business, which accounts for almost 80 per cent of its top line. Both Alphabet and Microsoft warned that capital expenditure would be higher in 2024 as they make yet more significant investments in data centres and servers to compete in the arms race to develop cutting-edge generative AI technology.Investors await the launch of Alphabet’s AI Gemini Ultra, as well as more concrete evidence that AI integrated services will transform into serious financial gains. The shares of Apple and Alphabet are the worst performing of the Big Tech companies to have reported this week. Their combined market capitalisation has fallen $334bn since Monday.Apple is set to launch its Vision Pro headset in the US today, marking its most significant product release since the Apple Watch and the culmination of CEO Tim Cook’s boldest project since taking over from co-founder Steve Jobs in 2011. Despite Apple’s revenue growth to $119.6bn, marking a 2 per cent increase and breaking a four-quarter decline, concerns loom over a significant sales drop in China, amid geopolitical tensions and competition from Huawei. Its shares fell despite Apple’s overall strong performance and record earnings from its services division. Need to know: UK and Europe economyThe Bank of England held UK interest rates at 5.25 per cent yesterday, despite progress on taming inflation. BoE governor Andrew Bailey said: “We need to see more evidence that inflation is set to fall to the 2 per cent target.”In the eurozone, inflation fell to 2.8 per cent in January after a brief uptick to 2.9 per cent in December. The renewed decline looks set to strengthen investors’ expectations that the European Central Bank could cut interest rates as early as this spring.More than 1.1mn UK taxpayers missed the January 31 self-assessment filing deadline. This marks a 10 per cent rise on last year, according to data from the tax authority, with the fines expected to generate at least £110mn for HMRC.The EU has agreed a deal with Hungary’s Viktor Orbán on a €50bn financial aid package for Ukraine. The compromise came after an unprecedented campaign of pressure on the Hungarian prime minister.Deutsche Bank announced plans yesterday to “accelerate” payouts to shareholders and said it was on target to beat a target of returning €8bn by 2025. Need to know: global economyUS jobs growth last month outstripped estimates as the economy added 353,000 jobs, almost twice as many as the 180,000 jobs expected by economists. You are seeing a snapshot of an interactive graphic. This is most likely due to being offline or JavaScript being disabled in your browser.The US Federal Reserve remains cautious in its quest to bring inflation under control. While Fed chair Jay Powell made clear interest rate cuts are coming, they’re unlikely to arrive by the Fed’s next meeting in March, he said.America’s oil supermajors ExxonMobil and Chevron have announced their second-biggest annual profits in a decade despite a slide in energy prices. Exxon posted full-year net income of $36bn while Chevron followed with $21.4bn. The results come a day after Shell announced $3.5bn of share buybacks after reporting annual profits for 2023 of more than $28bn.Nigeria has devalued its currency for the second time in eight months. The naira lost nearly 40 per cent of its value against the dollar after the methodology used to calculate the official exchange rate was changed. Nuclear power projects are typically racked by technical issues, staff shortages and supply-chain disruptions. The International Energy Agency says nuclear projects starting between 2010 and 2020 are on average three years late, even as it forecasts nuclear power generation will hit a record high next year. Need to know: businessSuperdry co-founder and chief executive Julian Dunkerton is in discussions with a number of potential financing partners. After reports of a potential takeover, Superdry said on Friday, “These discussions are at a preliminary stage and no decisions have been made.”BAE Systems has bought a UK technology specialist developing “heavy-lift” drones capable of delivering supplies or evacuating troops. The Berkshire-based Malloy Aeronautics has been bought by the FTSE 100 defence group for an undisclosed sum.The Singapore-based fast-fashion company Shein has been accused of breaching its own legal settlements and continuing to sell copycat items despite pledging to stop.Tesla is issuing a software fix for 2.2mn of its vehicles over a small font size on warning lights. The font size, according to the US National Highway Traffic Safety Administration, “can make critical safety information difficult to read.” This is the latest setback at the end of a difficult week for the US vehicle maker. Its boss Elon Musk said yesterday that Tesla would “immediately” hold an investor vote on whether to move its corporate registration to Texas after a court judgment in Delaware voided his $56bn pay package.Science round upJapan brought back to life a spacecraft that lost power after landing upside down on the Moon. Japan is the fifth nation to land on the moon after the Soviet Union, the US, China and more recently India, but the feat was undercut by a power problem that threatened to jeopardise the mission.Philanthropist Nicole Shanahan is spending $100mn to unlock so-called reproductive longevity which involves slowing the ageing process of ovaries, enabling women have children for longer. Scientists have shed new light on how Alzheimer’s spreads through the brain and found the first evidence of transmission between people, via a now-banned human growth hormone extracted from cadavers. Crispr gene editing has been used for the first time to treat sufferers of angioedema, a debilitating hereditary swelling disorder, fuelling hopes that the pioneering technique will be able to combat a wide range of diseases.  Science commentator Anjana Ahuja says the EU risks losing out in the race to transform agriculture through the gene-editing of crops as scientists in Africa and elsewhere forge ahead.Neuralink cofounder Elon Musk said his company has conducted its first brain-computer interface implant on a person.Some good newsSea otters are helping to keep the shores of a central Californian estuary from crumbling into the ocean — by feasting on shore crabs. The crustaceans’ vegetation-munching habits and burrowing contribute to unstable salt-marsh banks.Otters eat the crabs that have been causing shorelines to crumble More

Recession fears have eased. Growth and job gains are beating expectations. Inflation is cooling. Consumers are happier. The president is waiting to benefit.A run of strong economic data appears to have finally punctured consumers’ sour mood about the U.S. economy, blasting away recession fears and potentially aiding President Biden in his re-election campaign.Mr. Biden has struggled to sell voters on the positive signs in the economy under his watch, including rapid job gains, low unemployment and the fastest rebound in economic growth from the pandemic recession of any wealthy country.For much of Mr. Biden’s term, forecasters warned of imminent recession. Consumers remained glum, and voters told pollsters they were angry with the president for the other big economic development of his tenure: a surge of inflation that peaked in 2022, with the fastest rate of price growth in four decades.Much of that narrative appears to be changing. After lagging price growth early in Mr. Biden’s term, wages are now rising faster than inflation. The economy grew 3.1 percent from the end of 2022 to the end of 2023, defying expectations, including robust growth at the end of the year. The inflation rate is falling toward historically normal levels. U.S. stock markets are recording record highs.The Federal Reserve, which sharply raised interest rates to tame price growth, signaled this week that it was likely to start cutting rates soon. “This is a good economy,” Jerome H. Powell, the Fed chair, whose central bank is independent from the White House, declared at a news conference this week.The Conference Board’s consumer confidence index has jumped in each of the past two months. A key component of it, in which consumers rate their current economic situations, is closing in on its recent high from February 2020, on the eve of the coronavirus pandemic.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

Nonfarm payrolls expanded by 353,000 for the month, better than the Dow Jones estimate for 185,000. The unemployment rate held at 3.7%, against the estimate for 3.8%.
Average hourly earnings increased 0.6%, double the monthly estimate. On a year-over-year basis, wages jumped 4.5%, well above the 4.1% forecast.
Job growth was widespread in January, led by professional and business services with 74,000. Other significant contributors included health care (70,000) and retail trade (45,000).

Job growth posted a surprisingly strong increase in January, demonstrating again that the U.S. labor market is solid and poised to support broader economic growth.
Nonfarm payrolls expanded by 353,000 for the month, much better than the Dow Jones estimate for 185,000, the Labor Department’s Bureau of Labor Statistics reported Friday. The unemployment rate held at 3.7%, against the estimate for 3.8%.

Wage growth also showed strength, as average hourly earnings increased 0.6%, double the monthly estimate. On a year-over-year basis, wages jumped 4.5%, well above the 4.1% forecast. The wage gains came amid a decline in average hours worked, down to 34.1, or 0.2 hour lower for the month.

Job growth was widespread on the month, led by professional and business services with 74,000. Other significant contributors included health care (70,000), retail trade (45,000), government (36,000), social assistance (30,000) and manufacturing (23,000).
“This just reaffirms that the jobs market is entering 2024 on solid ground,” said Daniel Zhao, lead economist at Glassdoor. “The fact that job growth was so widespread across industries is a healthy sign. Coming into today’s report, we were concerned about how concentrated jobs were in really just three sectors — health care, education and government. While it is great to see those sectors drive job gains, there was no guarantee that would be enough to support a health labor market.”
The report also indicated that December’s job gains were much better than originally reported. The month posted a gain of 333,000, which was an upward revision of 117,000 from the initial estimate. November also was revised up, to 182,000, or 9,000 higher than the last estimate.
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While the report demonstrated the resilience of the U.S. economy, it also could raise questions about how soon the Federal Reserve will be able to lower interest rates.
“Make no mistake, this was a blowout jobs report and will vindicate the recent posturing by the Fed which effectively ruled out an interest rate cut in March,” said George Mateyo, chief investment officer at Key Private Bank. “Moreover, strong job gains combined with faster than expected wage gains may suggest an additional delay in rate cuts for 2024 and should cause some market participants to recalibrate their thinking.”

Futures markets shifted after the report, with traders now pricing in a better than 80% chance that the Fed does not cut interest rates at its March meeting, according to the CME Group.
Stocks were mixed following the report. The Dow Jones Industrial Average dropped at the open but the S&P 500 and Nasdaq both were positive. Treasury yields surged.
The January payrolls count comes with economists and policymakers closely watching employment figures for direction on the larger economy. Some high-profile layoffs recently have raised questions about the durability of what has been a powerful trend in hiring.
A more encompassing measure of unemployment that includes discouraged workers and those holding part-time jobs for economic reasons edged higher to 7.2%. The household survey, which measures the number of people actually holding jobs, differed sharply from the establishment survey, showing a decline of 31,000 on the month. The labor force participation rate was unchanged at 62.5%.

One potentially important caveat in the report could be the divergence between average hourly earnings and hours worked. Retail trade saw a fresh historical low of 29.1 hour in data going back to March 2006.
“This suggests that employers chose to reduce hours rather than resort to layoffs for the moment,” the Conference Board said in a report analysis.
Broader layoff numbers, such as the Labor Department’s weekly report on initial jobless claims, show companies hesitant to part with workers in such a tight labor market.
Gross domestic product growth also has defied expectations.
The fourth quarter saw GDP increase at a strong 3.3% annualized pace, closing out a year in which the economy defied widespread predictions for a recession. Growth in 2023 came even as the Fed further raised interest rates in its quest to bring down inflation.
The Atlanta Fed’s GDPNow tracker is pointing toward a 4.2% gain in the first quarter of 2024, albeit with limited data of where things are heading for the first three months of the year.
The economic, employment and inflation dynamics make for a complicated picture as the Fed seeks to ease monetary policy. Earlier this week, the Fed again held benchmark short-term borrowing costs steady and indicated that rate cuts could be ahead but not until inflation shows further signs of cooling.

Chair Jerome Powell indicated in his post-meeting news conference that the central bank does not have a “growth mandate” and said central bankers remain concerned about the impact that high inflation is having on consumers, particularly those on the lower end of the income scale.
Outside of the wage numbers, recent data is showing that inflation is moving in the right direction.
Core inflation as measured by personal consumption expenditures prices was just 2.9% in December on a year-over-year basis, while six- and three-month gauges both indicated the Fed is at or around its 2% goal.
Still, the Atlanta Fed’s measure of “sticky” inflation, which focuses on items such as housing, medical care services and insurance costs, was at 4.6% on a 12-month basis in December.
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NEW YORK (Reuters) -The rally that has taken U.S. stocks to an all-time high is expected to have another powerful driver in 2024: companies buying back more of their own shares. Stock buybacks are projected to increase this year after ebbing in 2023, fueled by forecasts of stronger corporate earnings that are expected to leave companies with excess cash. The total amount of buybacks could rise to $1 trillion on an annualized basis, Deutsche Bank said. S&P 500 companies are expected to increase earnings by 10% in 2024 after a 3% rise in 2023, according to LSEG data. Buybacks, in turn, are seen rising by at least 4% this year, according to Goldman Sachs. The bank estimates they fell by 15% in 2023. “The fact that now we have earnings growth that clearly bottomed in 2023, interest rates that have declined from their peaks and improving economic sentiment all point to an increase in buybacks going forward,” said Ben Snider, an equity strategist at Goldman Sachs.A likely increase in corporate demand for stock “should be supportive for equity valuations and for share prices,” he said.Corporate buybacks can help stock performance in several ways. By reducing the number of shares outstanding, buybacks make earnings and other per-share metrics that are commonly used in valuing equities look more robust.Greater corporate demand for stock also can push up prices, while companies repurchasing shares when stock prices decline allows buybacks to buffer against more extreme volatility, according to Goldman’s Snider.Higher earnings should leave companies able to spend on buybacks even after outlays for key items such as capital expenditures and paying down debt, Deutsche Bank’s strategists wrote in a recent report. “If earnings continue to be robust, buybacks and buyback announcements should also start to pick up and will be an important driver for equities,” the Deutsche Bank strategists said.The S&P 500 is up over 2% in 2024 and stands near record highs, after rising 24% last year. In the past few weeks, Wells Fargo said it expects to repurchase more shares in 2024 than last year, homebuilder Lennar (NYSE:LEN) increased its share buyback plan by up to $5 billion, while defense contractor Northrop Grumman (NYSE:NOC) said it planned at least $2 billion in repurchases in 2024.Stock buybacks by Bank of America corporate clients have been above seasonal levels for 11 straight weeks, the firm’s analysts said in a note earlier this week.SIGNALING TO INVESTORSGrace Lee, senior portfolio manager at Columbia Threadneedle Investments, said defense and aerospace company RTX’s October announcement that it would repurchase $10 billion of its shares, even as the company faced a major issue with its aerospace engines, sent a “very strong signal” that helped convince her to stick with the stock. RTX shares are up about 13% in the past three months.In general, buybacks are “really about the company signaling to investors on what they think of their stock,” Lee said. “We have got to trust that management is doing the right thing by implementing buybacks as opposed to looking for other ways to deploy their capital.”Of course, buybacks are one of several factors investors are looking at as they assess the trajectory of stocks. Cooling inflation and resilient growth have boosted the case for a so-called economic soft landing that has whetted market participants’ appetite for stocks. Expectations that the Federal Reserve will soon begin lowering interest rates have also encouraged investors, though Chairman Jerome Powell on Wednesday said a widely anticipated March cut was unlikely.At the same time, some investors are less convinced that corporate executives will embark on a buyback spree this year.Jason Pride, chief of investment strategy and research at Glenmede, said the combination of record high stock prices, more expensive valuations and still-high interest rates could make companies think twice about buybacks. The S&P 500 is trading at a forward price-to-earnings ratio of 20 times, well above its long term average of 15.7 times, according to LSEG Datastream.”The financing logic would tell you that 2024 is a year in which you are less incentivized to do buybacks than 2023, because of higher stock prices and higher interest rate costs,” Pride said. More

LONDON (Reuters) -The right time for the Bank of England to cut interest rates is probably still some time away, due to uncertainty about the persistence of longer-term inflationary pressures the central bank’s Chief Economist Huw Pill said on Friday.”Crucially, for me at least, we don’t have sufficient evidence yet. So that moment at which Bank Rate cuts might be possible is still some way off,” Pill told businesses in an online briefing hosted by the central bank.He said the central bank should look through any temporary return of inflation to its 2% target in the months to come that was driven by external factors, and focus on keeping policy tight enough to squeeze out domestic inflationary pressures.The BoE kept interest rates at 5.25% on Thursday, with Pill among the 6-3 majority for the decision. Two BoE policymakers voted for a quarter-point rate rise, while one policymaker voted for a cut in rates to 5%.The central bank forecast inflation would fall from 4% in December to its 2% target in the second quarter of 2024, due to lower energy prices, but then rise back towards 3% by the end of the year as the effect of lower energy prices faded.Pill said that although he expected BoE policy would need to stay restrictive for some time to reduce the pressures on inflation from rapid rises in wages and services prices, that did not mean rates had to stay unchanged.”That need for restriction doesn’t mean the Bank Rate has to stay at its current levels indefinitely,” he said. More

In Latin America’s largest economy, output was up 1.1% in December from the previous month, IBGE said, growing at its fastest pace since March and extending the positive streak in place since August.Market participants polled by Reuters had expected a 0.3% increase.Industrial output is now back above its February 2020 level, the statistics agency noted in a report, although still 16.3% below its all-time high in May 2011.Production stuttered for most of 2023 as elevated borrowing costs took their toll but started to pick up in the second half of the year with the central bank easing monetary policy. “Overall, this is a strong report, and leading indicators suggest the industrial sector will continue to contribute to growth over the first half,” Pantheon Macroeconomics’ chief Latin America economist Andres Abadia said.”Survey data have been improving consistently in recent quarters despite many domestic and external challenges.”Production growth in December was driven by durable goods output, which rose more than 6% from the previous month, IBGE said. Intermediate goods and non-durable goods production were also up, with capital goods the only area to post a drop.Overall production in December also grew 1.0% from a year earlier, the agency said, well above the 0.1% growth forecast by economists polled by Reuters.President Luiz Inacio Lula da Silva’s government has set “re-industrializing” Brazil as a priority and earlier this month unveiled an industrial development plan for the next 10 years aimed at boosting growth with state credits. More

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