Economy

Job openings fell by 455,000 in April, from an upwardly revised 11.855 million the previous month.
That helped close the gap between vacancies and available workers, which was 5.46 million.
Hirings and quits were little changed for the month.

A man walking a dog passes by a help wanted sign advertised along East Main Street in East Islip, New York on February 17, 2022.
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Job openings fell by nearly half a million in April, narrowing the historically large gap between vacant positions and available workers, the Bureau of Labor Statistics reported Wednesday.
The openings total declined by 455,000 from the upwardly revised March number to 11.4 million in April, about in line with the FactSet estimate, according to the bureau’s Job Openings and Labor Turnover Survey.

That left a gap of 5.46 million between openings and the available workers, still high by historical standards and reflective of a very tight labor market, but below the nearly 5.6 million difference from March. As a share of the labor force, the job openings rate fell 0.3 percentage point to 7%.
Policymakers at the Federal Reserve watch the jobs numbers closely for signs of labor slack. The shortage of workers has pushed wages sharply higher and fed inflation pressures running at their highest levels since the early 1980s.
“April’s JOLTS report shows the jobs market remains squeaky tight, with near-record job openings and layoffs hitting a record low,” said Robert Frick, corporate economist at Navy Federal Credit Union. “This almost guarantees another healthy employment report on Friday and means employers’ focus is on expansion despite high inflation and pending higher interest rates.”
However, the JOLTS report combined with a closely watched manufacturing reading to show a potential shift in the employment picture.

The ISM manufacturing index showed that firms on balance expect to cut back on the pace of hiring. Specifically, the employment component showed a reading of 49.6, the first sub-50 result since November 2020, according to Bespoke Investment Group.

Anything below 50 represents a reduction as the survey gauges business expansion against contraction. The headline ISM number was 56.1 for May, which was higher than April’s 55.4.
Despite the potential slowdown in manufacturing hires, worker mobility remains strong.
The JOLTS report showed that 4.4 million workers left their positions in April, little changed from the March reading and reflective of the ongoing “Great Resignation” that has seen unprecedented market movement amid the high demand for labor.
Hiring was little changed on the month, though there was a drop-off in the leisure and hospitality sector. The industry saw hiring decline by 77,000, or a half percentage point fall to 7.2%. A year ago, the hire rate was 9%.
The numbers came two days ahead of the pivotal nonfarm payrolls report for May. The Dow Jones estimate is for 328,000 more jobs added, following a gain of 428,000 in April, and the unemployment rate to drop to 3.5%.

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San Francisco Fed President Mary Daly said she backs raising rates aggressively until inflation comes down.
“We need to do that expeditiously, and I see a couple of 50 basis point hikes immediately in the next couple of meetings to get there,” Daly told CNBC.
Daly said she sees some initial signs of a slowing economy and reduced inflation, but will need to see much more progress before the Fed can taper its efforts.

San Francisco Federal Reserve President Mary Daly said Wednesday she backs raising interest rates aggressively until inflation comes down to a reasonable level.
Those moves likely would entail multiple 50 basis point hikes at coming meetings, then a possible rest to see how the central bank policy tightening is combining with other factors in addressing the massive surge in consumer prices.

“We need to do that expeditiously, and I see a couple of 50 basis point hikes immediately in the next couple of meetings to get there,” she told CNBC’s Steve Liesman during an interview on “TechCheck.” “Then we need to look around and see what else is going on.”
Daly said she sees some initial signs of a slowing economy and reduced inflation, but will need to see much more progress before the Fed can taper its efforts.
“We aren’t really there yet, so we need to see those data on a slowing economy bringing demand and supply back in balance, and I need to see some real progress on inflation,” she said. “Otherwise, I would think we just move the rate until we find ourselves at least at neutral and then we look around to see what else needs to be done.”
So far this year, the Fed has enacted two rate increases totaling 75 basis points, including a 50 basis point increase in May. A basis point equals 0.01%
Multiple officials have said the 50 basis point moves are likely to continue despite the fact the central bank usually prefers a per-hike increase of 25 basis points. Though inflation measures such as the consumer price index and the Fed’s preferred core personal consumption expenditures have come off their recent highs, they are still near levels last seen in the early 1980s.

“I don’t meet anyone, contacts, consumers, anyone, who thinks the economy needs help from the Fed right now,” Daly said. “I certainly am comfortable to do what it takes to get inflation trending down to the level we need it to be. I really think these inflation numbers have been going on too long, and consumers, businesses and everyday Americans are depending on us to get inflation back down and bridling it.”
How far Daly and the rest of the Fed are willing to go remains to be seen, and she said that data will dictate how high rates trend.
Most Fed officials estimate the “neutral” level of their benchmark borrowing rate to be around 2.5%. It currently is targeted in a range between 0.75% and 1%.
Daly said issues such as supply chain backlogs, the war in Ukraine and China’s economic reopening after a Covid-related shutdown will be factors on whether inflation has peaked. If she doesn’t see progress, “we need to go into restrictive territory,” she added.

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The labor market may be cooling off, but not by much, according to new data on job openings and turnover.Employers had 11.4 million vacancies in April, according to the Labor Department, down from a revised total of nearly 11.9 million the previous month, which was a record.The April vacancies represented 7 percent of the entire employment base, and left nearly two available jobs for every person looking for work, reflecting continued high demand for labor even as the Federal Reserve begins to tamp it down.The number of people who left their jobs was steady, at six million, also close to the highest number ever recorded, as was the number of people hired, at 6.6 million. The data, gathered on the last business day of April, was reported Wednesday in the Labor Department’s monthly Job Openings and Labor Turnover Survey, or JOLTS report.Employment gaps remain largest in the services sector, where consumers have shifted more of their spending as pandemic restrictions have eased, but they are shrinking. The leisure and hospitality industry had a vacancy rate of 8.9 percent, for example, down from 9.7 percent in March.The State of Jobs in the United StatesThe U.S. economy has regained more than 90 percent of the 22 million jobs lost at the height of pandemic in the spring of 2020.April Jobs Report: U.S. employers added 428,000 jobs and the unemployment rate remained steady at 3.6 percent ​​in the fourth month of 2022.Vacancies: Employers had 11.4 million vacancies in April down from a revised total of nearly 11.9 million the previous month, which was a record.Opportunities for Teenagers: Jobs for high school and college students are expected to be plentiful this summer, and a large market means better pay.Higher Interest Rates: Spurred by red-hot inflation, the Federal Reserve has begun raising interest rates. What does that mean for the job market?The construction and manufacturing industries, however, had the greatest surge in openings. Both reached record highs, showing that demand for housing and goods hasn’t slowed enough to make a dent in available jobs.Wages have escalated rapidly in recent months as employers have competed to fill positions, peaking in March at a 6 percent increase from a year earlier, according to a tracker published by the Federal Reserve Bank of Atlanta. Although not quite fast enough to keep up with inflation, growth has been stronger for hourly workers and those switching jobs. The millions of workers quitting each month tend to find new jobs that pay better, data shows.Employers have struggled to bring workers back from the pandemic, which initially sent labor force participation down to levels not seen since the 1970s, before a wave of women entered the workplace. The economy remains more than a million jobs under its peak employment level in February 2020.Steve Pemberton, chief human resources officer for the employee benefits platform Workhuman, said his firm’s clients gave out 50 percent more monetary awards to their employees in 2021 over the previous year in an effort to increase retention. But he doubts that work force participation will ever reach its prepandemic level given the options available outside traditional employment.“You can’t gig your way to a living wage in some parts of the country,” Mr. Pemberton said. “But for the overwhelming majority of the work force, they might say, ‘Going back to being a full-time employee isn’t something I’m going to do; I’ve found a way to make a living with multiple jobs.’” (The JOLTS report does not capture those working as independent contractors.)Layoffs declined to a low of 1.2 million, indicating that employers are hanging on to as many workers as they can. That number fits with new claims for unemployment insurance, although they’ve been rising since reaching a half-century low in March.Over the weekend, Christopher J. Waller, a Federal Reserve governor, gave a speech explaining how he hoped interest rate increases would slow inflation: by shrinking the number of vacancies without putting too many people out of work.“The unemployment rate will increase, but only somewhat because labor demand is still strong — just not as strong,” Mr. Waller said. “And because when the labor market is very tight, as it is now, vacancies generate relatively few hires.” More

UK prime minister Boris Johnson on Wednesday stepped up his calls on the EU to agree to scrap “pointless” checks on goods entering Northern Ireland under the region’s post-Brexit trading regime.Johnson’s remarks came after former UK premier Tony Blair, who signed the 1998 Good Friday Agreement that ended three decades of conflict in Northern Ireland, said the post-Brexit trading arrangements finalised by Johnson were a “bad deal” that risked undermining the peace accord.Johnson has indicated he is willing to take unilateral action to rip up the Northern Ireland protocol contained in his Brexit deal with the EU — which requires checks on goods going to the region from Great Britain — unless Brussels agrees to sweeping changes. The two sides have been in protracted talks about a possible compromise on the protocol.The post-Brexit trading regime has sparked a political crisis in Northern Ireland, with the biggest unionist force, the Democratic Unionist party, boycotting the region’s assembly and government following elections last month.Johnson is preparing legislation that would enable the UK to set aside parts of the Northern Ireland protocol, including the section covering trade.The UK prime minister told Mumsnet, an online parenting forum: “All that we’re trying to do is to get rid of some pretty pointless and bureaucratic checks on stuff that’s going from GB to Northern Ireland.“Now, I did the [Northern Ireland] protocol, I negotiated it. The problem is that I thought that it would be implemented with common sense and pragmatism.”Among other proposed changes to the protocol, the UK wants the EU to agree that no checks should be done on goods coming from Great Britain that are staying in Northern Ireland.Blair called for “maximum flexibility” from the two sides to try to reach an agreement on the protocol.He said that “if left unresolved, the issues at the heart of the protocol have the capability of causing an enlarged trade conflict between the UK and the EU, or undermining the Good Friday Agreement — and quite possibly both”.Johnson has also said the protocol is undermining the peace accord.But Mary Lou McDonald, leader of the nationalist Sinn Féin party, which won the elections in Northern Ireland last month, rubbished the notion that the Good Friday Agreement was at risk because of the protocol.

“Nothing could be further from the truth,” she said in Brussels, where she and party vice-president Michelle O’Neill met EU Brexit negotiator Maroš Šefčovič.McDonald said the protocol was “necessary” and was working, and accused Johnson’s government of acting in “bad faith”.The Good Friday Agreement underpinned an open border on the island of Ireland as part of efforts to preserve peace.Under Johnson’s Brexit deal, Northern Ireland was left in the EU single market for goods, and checks were introduced on products entering the region from Great Britain.Northern Ireland’s unionist parties object to how the deal introduced a border in the Irish Sea, saying it undermines the region’s status as part of the UK.DUP leader Sir Jeffrey Donaldson called on the EU to “take note and recognise the harm the [Northern Ireland] protocol is doing to political stability”.Thomas Byrne, Ireland’s minister for Europe, appealed for British ministers to talk to their Irish counterparts to build trust and find a solution to the Northern Ireland protocol. “The UK-Ireland relationship is a foundation of the peace process,” he said. “It is essential it should be maintained and nurtured. It is not being at the moment.”He played down the prospect of swift retaliation by Brussels to any UK unilateral action on the Northern Ireland protocol. More

The brutal end of Sri Lanka’s civil war in 2009 was followed by a repressive calm. But there was still an economic peace dividend. Hapless government, however, made a cautionary example of the Asian nation. Last month, it defaulted on its debt. A nation that held $7.9bn in reserves in 2019 now needs help from allies to pay for deliveries.There is much to Sri Lanka’s travails that is singular. In 2019, a new government tried to build popular support with a cut to income tax and value added tax. According to the IMF’s estimates, Sri Lanka’s gross debt will have risen from 91 per cent of annual output in 2018 to 119 per cent in 2021.But a portion of the damage of the past few years was not unique to Sri Lanka. As a tourism hub, it was particularly vulnerable to the coronavirus pandemic. The disease, though, damaged balance sheets around the world. The Institute of International Finance estimates that, for a panel of 32 emerging markets (not including Sri Lanka), total debt — public and private — is up by 20 percentage points, to 248 per cent of gross domestic product. This extra debt is a worry: during the crisis, poorer countries were helped by ultra-low interest rates in richer economies. That created a flow of cheap money that they could surf. As inflation has taken off in the developed world, however, so interest rates are now rising in response. Investors can no longer risk as much in emerging markets. States cannot afford to borrow.It is not only higher rates doing the damage. Lower expected growth and new fiscal problems driven by the war in Ukraine are also a worry. The food and fuel price surge is causing havoc. According to the UN, key foods are 19 per cent more expensive than they were in December. So states must step in to help their people. It is possible that such pressures will lead to a series of defaults. As during some previous international crises, the IMF may find itself trying to extinguish fires on many fronts at once. There remain problems, too, with how the world deals with defaulting states; for one thing, there is no functional code for helping countries to restructure debts. The treatment of debt-distressed nations is still largely built on the assumption that the main creditors of a struggling nation will be a few rich countries and the institutions they dominate. According to the IMF, as recently as 2006, 86 per cent of poorer nations’ external debt was owed to a group of richer states — known as the Paris Club — and to multilateral organisations. Today, that figure is just 58 per cent. By contrast, private bondholders and China have between them gone from holding 5 per cent of poorer nations’ debt in 2006 to 29 per cent of the total. China has also proved to be needlessly secretive in its dealings, so sovereign debt is more opaque than it was, as well as more fractured.A “common framework”, introduced by the G20 and Paris Club, was intended to help resolve this problem by drawing together creditors with distressed debtors to make restructuring easier. But it has stalled. The three cases where it has been requested — Zambia, Chad and Ethiopia — are stuck. Without an effective process to draw lenders together and assign losses, China’s influence will grow: its prominence as a lender means its strategy for handling defaults may dominate in contrast to previous crises. China is indeed a large creditor to Sri Lanka. If the coming months and years do, as feared, produce a string of sovereign defaults, the extent of the resulting pain and mess will depend on Beijing’s willingness to share losses, rather than exploit its debtors. That makes Sri Lanka an important test case for the rest of the developing world. More

Good evening,Shanghai’s shops welcomed city residents back today after a gruelling two-month lockdown that had confined 25mn people to their homes in one of the strictest anti-Covid lockdowns in China since the pandemic began.Policymakers will be hoping that the (still partial) reopening of stores and public transport in China’s biggest city and financial centre can help address the sharp slowdown in growth fuelled by the country’s zero-Covid strategy of mass testing, harsh lockdowns, travel bans and forced quarantine.The damage has been widespread, from retail sales, which were down 11 per cent in April, to manufacturing, which shrank for the third month in a row in May, according to new survey data out this morning. Fresh restrictions announced today in Hong Kong are a reminder that the virus is still far from done.During the pandemic peak periods of 2020 and 2021, Chinese manufacturing benefited from surging demand for computing and domestic tech. However, as economies reopened the emphasis shifted to services, denting demand for Chinese exports, which grew just 3.9 per cent in April, the slowest rate since July 2020. Rising inflation, fuelled by Russia’s invasion of Ukraine, makes a repeat of the previous export-led recovery, supported by domestic consumption, even less likely. The country also remains mired in a property sector crisis.

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As our colleagues at Nikkei Asia report today, big name manufacturers such as Apple are starting to move some of their production out of China after the strict lockdowns in and around Shanghai dented supply chains.The country’s leaders have acknowledged that it will struggle to record positive growth in the current quarter and potentially fall short of its annual target of 5.5 per cent as it continues to battle coronavirus outbreaks. President Xi Jinping could even become the first Chinese leader in almost 50 years to see growth fall behind that of the US.The slowdown also has serious implications beyond China’s borders. As our excellent visual representation of the country’s woes explains, its economy had been expected to continue to drive about one-fifth of all global GDP growth until at least 2026.However, the FT editorial board says the deteriorating outlook could provide an opportunity for Beijing to not only reconsider aspects of zero-Covid, but also its treatment of foreign direct investors, many of whom are planning to pivot away from the country.A focus on reducing red tape and ensuring equal treatment with local competitors could help alleviate some of the gloom, it adds. “What is good for them is good for China’s own economy.”Disrupted Times will take a short holiday break on Friday and return on Monday June 6Latest newsDelta expects second-quarter revenue to hit pre-pandemic levels Boris Johnson says it would be “irresponsible” to quit as UK prime ministerVersace and Michael Kors owner Capri Holdings pushes up profit forecastFor up-to-the-minute news updates, visit our live blogNeed to know: the economyEurozone unemployment remained at a record low of 6.8 per cent in April, official data showed today, with the relative strength of the labour market a key item on the European Central Bank’s agenda when it meets to discuss monetary policy next week. The news follows record inflation figures published yesterday of 8.1 per cent in the year to May. Meanwhile, retail sales in Germany, the bloc’s biggest economy, fell by a more than expected 5.4 per cent in April. Unhedged writer Robert Armstrong contrasts Europe’s cost-push inflation with demand-pull in the US.Crude oil prices yesterday breached the $120 mark thanks to increased global demand and disruption of supplies from Russia. EU leaders agreed to stop most imports, while Russian oil cargoes were also hit by an insurance ban. Here’s our explainer on what the measures mean for global markets.Latest for the UK and EuropeWall Street banks warned of the “grim outlook” for the pound as high inflation and an economic slowdown lead to further declines for the UK currency. Soaring energy bills are one of the biggest problems for consumers and our Money Clinic podcast offers some tips for beleaguered households. Even the seemingly unstoppable rise of house prices seems to be cooling a little.Disrupted times could well be the new slogan for UK airports. Staff shortages have led to travel chaos, just as the country’s busiest week for flying since the start of the pandemic gets under way with the school half-term break and a two-day public holiday for the Queen’s platinum jubilee. A summer strike is also looming over pay.Western sanctions and embargoes are beginning to hit Russian consumers, but buoyant revenues from energy exports and interventions from President Vladimir Putin are helping cushion the impact. Unemployment has remained steady and inflation has begun to slow.Global latestUS Treasury secretary Janet Yellen admitted she was “wrong” last year about the threat of rising inflation. US president Joe Biden told Federal Reserve chief Jay Powell that he would respect the “independence” of the central bank as it begins to tighten monetary policy and ramp up interest rates. Robert Armstrong detects a whiff of optimism in recent personal consumption data.International economy news editor Claire Jones examines the differing approaches to monetary policy among the world’s central banks and what they mean for investors. And if you’ve only got time to read one analysis today, try Martin Wolf’s latest: Twelve propositions on the state of the world.Sri Lanka has appealed for food aid from its neighbours as its debt crisis intensifies. Fears around global food supplies have sparked a rush for potash, a crucial crop fertiliser that Russia and Belarus supply 40 per cent of. Sanctions are causing collateral damage for developing countries that are unable to buy grain from Russia.Global health expert Nina Schwalbe calls for a new global compact on vaccines after Covid-19 and now monkeypox have highlighted hoarding by richer countries. Recent efforts to waive intellectual property rules for Covid jabs are a good start, but more needs to be done to spread manufacturing capacity and development plus shift the business model from charity to self-reliance, she argues.Need to know: businessPfizer will exit Haleon, its joint consumer health venture with GlaxoSmithKline, after its stock market debut next month in the largest London listing for a decade. GSK meanwhile is buying Boston-based biotech Affinivax in a $3bn deal to bolster its vaccines business. Takeda, Asia’s largest pharma company, says the risk of a global recession, the impact of Covid-19 and the war in Ukraine could force drugmakers to cut prices.Small UK businesses are struggling to cope with the spiralling costs of energy, goods and services, with more than half reporting elevated input prices, according to an official survey. Even discount retailers are finding it tough as the economic outlook weakens. B&M’s forecast of lower profits sent its shares diving 11 per cent yesterday.A senior executive at BlackRock, the world’s largest asset manager, told the Financial Times that the exodus of foreign talent from Asia was temporary and that the region remained attractive despite political tensions and repeated lockdowns.Executives are buying shares in their own companies at a rapid rate in what some analysts say is an encouraging sign for the US stock market. “Insiders are saying ‘we don’t see a massive event coming’ . . . [that] these are really good buying opportunities,” says one portfolio manager.Airbus is boosting jet production in one of the strongest signs yet that the aviation industry is overcoming the turbulence of the pandemic. But while there is clear demand for new energy-efficient planes, supply chain problems have complicated the manufacturing process, writes industry correspondent Sylvia Pfeifer.Brooke Masters, US investment and industries editor, says retailers are increasingly mining their huge customer bases to cross-sell other companies’ products and earn some useful commission, while their core businesses suffer from soaring input prices and supply chain problems.The World of WorkDiversity, equity and inclusion strategies are now commonplace in major companies, but one thing is often missing: class. Our latest Working It podcast examines why so many working-class people feel alienated and how companies can help them thrive and advance.Get the latest worldwide picture with our vaccine trackerAnd finally . . . As Britain enters a long holiday weekend of celebrations for the Queen’s platinum jubilee, art critic Jackie Wullschläger looks at 70 years of royal portraiture and the long history of regal image management.The Queen sits for a portrait by the artist Lucian Freud in 2001 © David Dawson/Bridgeman Images More

JPMorgan Chase chief executive Jamie Dimon on Wednesday warned investors to brace themselves for an economic “hurricane” as the war in Ukraine and policy tightening by the Federal Reserve roil markets.Dimon struck a gloomier tone on the economic outlook than in remarks he made just last week during JPMorgan’s first investor day in two years, when he referred to the threats as “storm clouds”.“I said they’re storm clouds, they’re big storm clouds here. It’s a hurricane,” the CEO of the largest US bank by assets said at a financial services conference organised by Autonomous Research. “That hurricane is right out there down the road coming our way. We just don’t know if it’s a minor one or Superstorm Sandy . . . And you better brace yourself.”The comments from Dimon, whose forecasts are closely followed on Wall Street, came as US stocks whipsaw over doubts about the health of the US economy. Dimon warned investors that the war in Ukraine would continue to put pressure on global commodity markets and that the conflict could push oil prices up to $150 or $175 a barrel. Brent crude, the international oil benchmark, is trading at about $117. The EU this week agreed a ban on seaborne oil imports from Russia as it tightens sanctions on Moscow over its invasion of Ukraine. “We’re not taking the proper actions to protect Europe from what’s going to happen in oil in the short run. And we’re not taking the proper actions to protect you all from what’s going to happen to oil in the next five years, which means it almost has to go up in price,” Dimon said. He also warned of the risk of market volatility as the Fed implements its policy of “quantitative tightening”, under which it will begin shrinking its roughly $9tn balance sheet in an effort to combat high inflation.“They do not have a choice because there’s so much liquidity in the system,” he said. “They have to remove some of the liquidity to stop the speculation, to reduce home prices and stuff like that. And you’ve never been through QT.”With the Fed retreating, the supply of US Treasury securities available to investors will balloon, resulting in market volatility, Dimon warned. “That’s a huge change in the flow of funds around the world. I don’t know what the effect of that is. I’m prepared for, you talk about a minimum [of] huge volatility,” he said. Dimon said that “bright clouds” for the US were healthy consumer spending, plentiful jobs and rising wages, and added that the banking industry “is in great shape”.“I think it’s OK to hope that it will end up OK. I hope it. That’s my goldilocks, I hope,” Dimon said. “Who the hell knows?” More

Investors are underestimating the severity of the “global food shock”, which is set to hammer public finances and stir up social unrest in emerging market countries for years to come, according to rating agency S&P Global.Food prices have soared since Russia’s invasion of Ukraine stymied the flow of agricultural produce from one of the world’s top exporters of wheat and other grains as well as sunflower oil. Combined with an accompanying surge in oil prices, this is likely to pressure the creditworthiness of a slew of emerging economies, S&P Global said in a report published on Wednesday.“Rising energy and food prices represent yet further balance-of-payments, fiscal, and growth shocks to the majority of emerging markets. This intensifies strains on their public finances and ratings, which are already impacted negatively by the global pandemic,” said Frank Gill, sovereign specialist for Europe, Middle East and Africa at the ratings firm.S&P Global said that although many of the sovereigns most exposed to the rising pressure from food prices already had low credit ratings, the negative economic or political fallout of the food shock could contribute to further downgrades. Emerging market bonds have steadied in recent days after suffering the worst start to a year in decades because of rising global interest rates.Investors in emerging market debt said food costs had become a looming problem for poorer countries since the war. “For emerging markets, food is a much more significant part of your disposable income. If you’re a big importer or a poorer country this is painful. This is an issue that can cause governments to fall,” said Uday Patnaik, head of emerging market debt at Legal & General Investment Management.Sri Lanka, which defaulted on its international debts last month, was an example of where surging food prices contributed to dwindling foreign reserves as well as a rise in protests and social instability. The government has faced severe shortages of essential goods and has appealed for food assistance from a food bank operated by the South Asian Association for Regional Cooperation.“Sri Lanka was already highly distressed before the Ukraine conflict. But [the food price shock] was the final straw that pushed them over the edge,” said Patnaik.The report said low and low-to-middle income countries in Central Asia, the Middle East, Africa and the Caucasus would be worst hit by the immediate shocks in the food commodity markets. In the Caucasus, Tajikistan and Uzbekistan have a high food import dependency, and normally buy the bulk of their wheat from Kazakhstan which has export restrictions in place. Of the Arab states, Morocco, Lebanon, Egypt and Jordan rely on Ukraine for their food supply and were susceptible to war-induced price disruption. Given that many of these countries had limited capacity to replace imports with substitutes, adjustment to the price shocks would lead to lower food availability, raising the risk of social unrest, according to the report.

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Not all emerging market debt has been affected, however, with the commodity price increases benefiting raw material producers. “For the middle eastern countries, you might be paying more for agricultural products but that is more than offset by crude prices,” said Patnaik.Brett Diment, head of global emerging market debt at Abrdn noted that, while local currency bonds in the JPMorgan GBI-EM index have delivered total returns of minus 10.5 per cent so far this year in dollar terms, there is wide divergence between countries. Brazilian debt, for example, has rallied in part thanks to its status as a leading agricultural exporter. After the invasion, Abrdn cut its exposure to large food importers such as Egypt but increased its exposure to agricultural commodity producers including Brazil and Argentina. “We’ve already seen the impact of food inflation play out in the market,” said Diment. “Egypt devalued its currency in March, but Argentina, Brazil, and Uruguay as big food exporters have all performed very strongly.” He said the movements in bond and foreign exchange markets “presupposes we don’t see another leg higher in food prices” as the issue has moved up the global political agenda leading to optimism about possible grain and vegetable oil exports being shipped out of Ukraine. Absent that, “we could see things get worse again for vulnerable countries”, he added.S&P Global said rising input costs such as fertilisers and machinery were placing additional costs on agricultural production. Russia, a leading fertiliser exporter, could continue with export controls and increasing competition for key agricultural inputs in 2022 and 2023 would limit the output rises, prolonging the impact from high food prices.“International markets appear to be viewing the fallout of the war in Ukraine on food prices as a single-year shock,” the report said. “In contrast, we believe the shock to food supply will last through 2024 and beyond.” More