Economy

The prospect of further lockdowns in China prompted a fresh wave of economic anxiety on Monday as investors and companies whose supply chains run through China contemplated the impact of 70 new virus cases that the Beijing government said it had detected over the weekend.The city government ordered one of its districts to test all 3.5 million of its residents for coronavirus in the coming days, a move that may be a prelude to a larger lockdown in China’s capital city. Shanghai, a major port and business center, has been locked down for roughly a month, part of China’s “zero Covid” strategy. Other Chinese cities both large and small have announced their own restrictions on the movement of residents in a bid to keep the virus from spreading.The lockdowns present yet another challenge for global supply chains that have been stressed by pandemic shutdowns and the war in Ukraine, leading to greater competition for goods and higher prices that are fueling inflation worldwide.While the Chinese authorities have sought to keep factories and especially ports operating by keeping workers on the premises in so-called closed-loop systems, the lockdowns have interrupted shipments and lengthened delivery times for many of the global companies that depend on Chinese factories.Phil Levy, the chief economist at Flexport, a freight forwarder, said in an email that while Beijing is an important city, “it is not at the heart of factory production or supply chain operations.” He said lockdowns there would have a more limited impact than previous restrictions in Shanghai and Guangdong, where ports continued to mostly operate.But the effects would depend on where outbreaks occurred — for example whether they shut down a port — and how long lockdowns persisted, Mr. Levy added. “This is a relatively slow part of the year, but there is plenty of catch-up to be done, and things will soon be due to build. The costs will mount the longer this lasts.”The disruptions that are still unfolding in Shanghai and other Chinese cities are likely to reverberate along global supply chains in the coming months. Andrea Huang, a senior director at Overhaul, which monitors company supply chains, said with lockdowns not expected to ease until early or mid-May, the ripple effects for industries like auto and consumer electronics would extend into June or July.In Shanghai, the local authorities on Friday selected some companies in the automotive, semiconductor and other key industries to restart production, but the vast majority of enterprises remain shuttered.Activity at the port has also slowed. According to data from Project44, a logistics platform, the number of vessels that were berthing at the Shanghai port last week had dropped by about half since the lockdown began, while the number of vessels seeking to call at the nearby port of Ningbo jumped as shipping companies tried to get around restrictions. The time that imported containers were spending in the port had also risen sharply, from 4.6 days on March 28 to 14 days on April 23, the company said, as coronavirus testing requirements for truck drivers limited the ability to get containers in and out of the port.Fears of broader lockdowns weighed on global stocks on Monday, while oil and other commodities also fell in anticipation of lower demand.Elisabeth Waelbroeck-Rocha, chief international economist at S&P Global Market Intelligence, said that, in addition to disrupting global supply chains and fueling inflation, coronavirus outbreaks and accompanying lockdowns had undermined Chinese economic growth in March and April, making China unlikely to reach its target of 5.5 percent growth in gross domestic product in 2022.The epicenter of the outbreak shifted from Jilin Province in the northeast to Shanghai, a manufacturing base for high-end auto components, but smaller-scale outbreaks in other regions have largely been brought under control, she wrote in a note. More

WASHINGTON (Reuters) – The International Monetary Fund said on Monday that its staff reached an agreement with Kenyan authorities on policies to complete the third review of Kenya’s loan program, clearing the way for a $244 million disbursement upon Executive Board approval.The Fund said in a statement that the payment would bring total disbursements to about $1.18 billion under Kenya’s three-year, $2.34 billion Extended Fund Facility and Extended Credit Facility arrangements approved in April 2021. More

Choosing a cereal option, or going for fresh fruits, won’t provide relief, either.Eggs are among the items seeing bigger price gains this year in the Agriculture department’s monthly outlook. The agency sees a 6% to 7% gain — a big change from three months ago, when it predicted a range of a 0.5% rise to 0.5% drop. Cereal and bakery products have the same 6% to 7% projection, as do fresh fruits.Overall, the agency now expects food prices to rise 5% to 6% this year — at least double the forecast of about 2.5% three months ago. Other categories with big increases compared with last month’s outlook are beef, poultry and vegetables. A year ago, the USDA forecast little inflation, or even price drops, for many food groups. An increase of around 5.5% to the median households food budget would ding budgets by around $450 per year, according to calculations by Bloomberg.Food prices have been under pressure from a variety of sources. Crop flows from Ukrainian ports have been disrupted by that nation’s invasion by Russia. Spring planting has also been affected. Ukraine and Russia together account for over a quarter of the world’s trade in wheat and for about a fifth of corn sales. “Among the nearly 50 commodity-price series we study, wheat spot-price changes stand out as a bellwether for food price inflation,” JPMorgan Chase & Co. (NYSE:JPM) analysts Peter McCrory and Daniel Silver wrote in a note last week. Food prices are also under pressure from wage inflation and energy costs. “Given exceptionally tight labor markets and already-elevated inflationary pressure from commodity prices prior to Russia’s invasion of Ukraine, we suspect food inflation will remain firm in months ahead,” the JPMorgan analysts said.The Wall Street bank estimates that each 1% increase in wages in the food-services sector is associated with a 0.34% acceleration in food price inflation.The grocer Albertsons Cos. this month said that it expects food inflation to remain at elevated levels at least through September. And, expectations about year-ahead food price changes among consumers in a monthly Federal Reserve Bank of New York survey hit 9.6% in March, a record for that data series.©2022 Bloomberg L.P. More

The influx of personal tax receipts pushed the amount of cash in the Treasury’s account at the central bank to $908 billion as of April 20, the most since May 2021, data show. The Treasury General Account, or TGA, operates like the government’s checking account at the Fed. When Treasury increases its cash balance, that’s on the liability side of the Fed’s balance sheet, so as that goes up, it drains reserves from the system, and vice versa.As a result, outstanding bank reserve balances dropped by $466 billion in the week ended April 20, the largest weekly decline on record, Fed data show. “Even if the boost to TGA (and hence drain to reserves) was likely a one-off factor associated with year-end tax payments, some of which should now reverse, the medium-term trajectory remains clear: QT is likely to make the outlook for global liquidity for the rest of this year look much more like Q1 than like the spring break markets had been afforded in recent weeks,” Citigroup Inc (NYSE:C). global markets strategist Matt King wrote in a note to clients. The Fed is expected to announce its plans for the balance sheet after unveiling more details in the minutes of the March gathering, likely next week. But it’s just as important how market players — including the Treasury — will respond to the Fed’s moves, and that remains a major unknown. One potential scenario is that it will be felt most acutely as a reduction in bank deposits and reserves, which could put upward pressure on repurchase agreement rates and borrowing benchmarks linked to them, like the Secured Overnight Financing Rate. That would mean an additional tightening of overall financial conditions in addition to the increase in the main fed funds rate target that the central bank intends to continue boosting. It could also hurt liquidity as well as create dislocations — and potentially trading opportunities — in different parts of the U.S. rates market, like futures and swap spreads.Meanwhile, if the Treasury chooses to lean more heavily on issuance of bills rather than longer-term debt to plug the funding gap that will emerge from the Fed stepping back, the amount of excess cash in short-term markets — much of which is currently parked at the central bank’s reverse repo facility — could dwindle. That could also potentially exert upward pressure across short-term interest rates.©2022 Bloomberg L.P. More

The bonds which had missed payments, maturing in 2023 and 2028, were cut to ‘default’ and the overall rating could be further cut to ‘D’ on confirmation of the non-payment after a 30-day grace period.S&P said it does not expect the government to make payments during that period.Sri Lanka’s economic meltdown tracks its roots to 2019, when President Gotabaya Rajapaksa’s government approved a large tax cut that depleted the treasury coffers even more than expected.The weight of COVID-19 further weighed on revenues while the cost of imports sky-rocketed, and the situation deteriorated to the point of large-scale civil unrest on the streets.Earlier this month Sri Lanka suspended its debt service payments and approached the International Monetary Fund.Over the weekend, the IMF said it held “fruitful technical discussions” with Sri Lanka on its loan request, while the World Bank said it was preparing an emergency aid package.Sri Lanka has about $14 billion on foreign bonds outstanding plus $26 billion in local currency debt, according to Refinitiv data.”The negative outlook on our ‘CCC-‘ long-term local currency sovereign rating on Sri Lanka reflects the high risk that the government could restructure its local currency debt amid the country’s economic, external and fiscal pressures,” S&P said in a statement.The Sri Lankan stock market was shut half an hour into trading on Monday, after shares tumbled nearly 10% in their first session since the central bank doubled its interest rates two weeks ago to tame inflation. More

Good evening,A UK parliamentary report today hit out at “disproportionate” and “arbitrary” Covid-19 travel restrictions that had left air passengers confused and delivered a “severe financial shock” to the aviation sector.As our Big Read explains, the last two years have seen the global industry battling for survival against flight bans and strict restrictions on passengers to control the spread of coronavirus. But after shedding thousands of jobs and diving into debt, airlines and airports are now struggling to handle the sudden surge in demand as restrictions are relaxed.The number of scheduled flights is now at 89 per cent of 2019 levels, a jump from just a third a year ago, according to Financial Times analysis of data from consultancy Cirium. (You can see a visual presentation of the data here.)Airlines are in a bullish mood after Easter, the first busy period for two years in many markets and a test for the upcoming summer holiday season. “The demand that we’ve seen over the last five weeks has been historic. We’ve never sold more tickets in any period in [our] public history . . . it’s been remarkable,” Delta chief Ed Bastian told the FT.Recent earnings announcements have brought similarly good news. American Airlines, the US’s largest carrier, last week signalled an end to pandemic losses and a return to profitability in the second quarter as passenger demand surged. Smaller budget operations such as Wizz Air are also optimistic.And although the rebound is mainly from leisure trips, there is renewed hope that business travel could stage a comeback. Travel spending by big US companies was “well over 50 per cent” of pre-pandemic levels in March, the chief financial officer of American Express told the FT last week. Delta said domestic corporate sales in March were 70 per cent of 2019 figures.But while US airlines have been able to drop requirements for passengers to be masked after a legal challenge prevented authorities from implementing the rule, carriers in other countries are still chafing against restrictions. The head of Korean Air told the FT last week that it was “nonsense” for inbound passengers to still require a PCR test.Staff shortages remain a big issue. There were 2.3mn fewer jobs in aviation compared with pre-pandemic levels, according to Oxford Economics, including a 29 per cent fall in contracted staff such as ground handlers. London Heathrow says it needs to recruit an extra 12,000 people to cope with summer demand. The UK’s busiest airport may be helped by a decision by government ministers to relax background checks for new employees.And although airlines are making confident noises about new bookings, it is estimated that the global industry will still lose $11bn this year, taking overall net losses between 2020 and 2022 to $200bn.Governments should have extended more support and airlines should have been less “short-sighted” when cutting staff, says Stephen Cotton, head of the International Transport Workers’ Federation. “Now it’s the workers who are left doing the jobs of two or three people and who are bearing the brunt of the frustration and anger of the passengers.”Latest newsRussia to expel German consulate staff in tit-for-tat move ECB’s De Cos says growth uncertainty could weigh on inflation (Forexlive)Two-thirds of workers might seek new jobs if forced back to office, says global survey (Reuters)For up-to-the-minute news updates, visit our live blogNeed to know: the economyFrench president Emmanuel Macron was comfortably re-elected, giving new impetus to EU policymaking, including the next package of sanctions against Russia. Macron is now Europe’s most powerful politician, says chief foreign affairs commentator Gideon Rachman, and could help the EU become a major geopolitical power, on a par with China and the US. He could however get his wings clipped in the country’s upcoming legislative elections.Latest for the UK and EuropeGerman business confidence bounced back in April, according to the latest Ifo survey, despite fears of surging energy prices and Ukraine-related supply chain disruption. First-quarter German GDP figures are due on Friday.The head of V.Group, the world’s largest ship manager, has urged Nato to provide naval escorts for vessels passing through the Black Sea, off Ukraine’s coast, a region with global importance for food supplies.Global latestBeijing is being hit by panic buying as rising Covid-19 infections spark fears that the city could be hit by a lockdown of the type deployed in Shanghai, where entrances to apartment buildings have been blocked off and authorities are trying to stem viral videos of the city’s hardships. Strict zero-Covid restrictions have put paid to any revival of the country’s stricken property sector.The “Great Cancellation” looks set to continue as hard-pressed consumers ditch not just Netflix but other subscription services and discretionary items. Sectors such as clothing and restaurants are braced for downturns as consumer confidence dips across the world in what columnist Rana Foroohar dubs a global “buying strike”.

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Sri Lanka is struggling with a surge in fuel prices as the island nation’s debt and economic crisis intensifies, with businesses hit by electricity outages and people unable to afford to drive to work. Talks with the IMF have begun but officials and the UN are pushing for immediate help to stave off economic collapse.When China exports its surveillance tech is it also exporting its political values? Listen to the latest episode of our Tech Tonic podcast series on the US-China tech race. Need to know: businessPalm oil prices shot up as Indonesia, the world’s biggest exporter, levied a blanket ban on supplies leaving the country in the latest example of crop protectionism, exacerbating concerns over global food security. Coca-Cola reported its highest quarterly revenues and profits since 2016 as pandemic restrictions eased in venues and customers put up with higher prices. Revenues were up 16 per cent on last year at $10.5bn and profits increased by 24 per cent to $2.8bn.EU legislators finally agreed a new regime at the weekend, forcing Big Tech to police online content more aggressively and keep users safe. The Digital Services Act is likely to be followed by similar rules in the US, Canada and Singapore in coming months. Meanwhile, Twitter is edging closer to accepting Elon Musk’s $43bn bid to buy the company.Sales at Roche were lifted by US demand for Covid-19 tests, but the Swiss pharma group said it expected revenues from coronavirus treatments to decline, a sign that corporate America believes the pandemic is on the wane. This belief may be a tad premature, the Lex column argues.Decades of complex financial investments, opaque corporate ownership stakes and anonymous property purchases have made it difficult to disentangle Russian investments abroad. Sanctions expert Justine Walker says banks need guidance on the extent to which they will be held responsible for failing to stop banned payments or freeze targeted funds.UK supermarkets are having to increase wages to combat staff shortages in what one union has called a “market correction”. Retail is the largest private-sector employer in the country with hundreds of thousands of hourly-paid staff in stores and distribution centres.

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Half of small British companies say growth this year will be hit by rising costs, according to a new survey. The responses point to higher fuel and utility bills, rising National Insurance and business taxes, supply chain disruption and the combination of higher wages and labour shortages.The World of WorkThe historic victory for union organisers at Amazon’s Staten Island facility in New York City is being hailed as a major breakthrough and a successful alternative to traditional recruitment methods, deemed by some to be too out of touch with young people and workers of colour.The UK’s return to the office has stalled, sparking frustration among some bosses as well as government ministers — who hit out at civil servants still working from home. Offices are about a quarter full compared with pre-pandemic numbers, London tube travel is down by half and fewer City workers are in the office on Mondays and Friday.

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Those prepared to return need more than a few “welcome back” perks if they are going to give up the two hours gained by not commuting, writes Rana Foroohar in her discussion of the “cognitive dissonance” of office life in the Swamp Notes newsletter.Some of those preferring to work from home may be suffering from a version of “ergophobia” — an excessive fear of the workplace. Viv Groskop discusses workplace anxiety and how to overcome it.Get the latest worldwide picture with our vaccine trackerAnd finally . . . London has long been an investment magnet for Russian oligarchs but critics say it acts as a laundromat for ill-gotten gains. Watch our new film on how London became the dirty money capital of the world.

Video: How London became the dirty money capital of the world More

WASHINGTON (Reuters) – The U.S. State Department on Monday said it supported the approval of a possible sale of $165 million worth of ammunition to Ukraine to help the country defend itself against Russia’s ongoing invasion.The Ukrainian government had asked to buy various rounds of so-called non-standard ammunition, the department said in a statement, referring to ammunition that does not adhere to NATO standards. More

(Reuters) – Worker demands for more flexibility and security, bolstered by the pandemic and a tight labor market, are only growing more intense as the world economy reopens and some firms begin trying to pull employees back to offices, payroll provider ADP reported in a survey of nearly 33,000 people worldwide.The survey found that two-thirds of workers would consider looking for a new job if forced unnecessarily to return to the office full time.Workers who feel their industry is secure fell from 36% in a similar 2021 survey to 25%. The share actively looking to change jobs rose from 15% to 23%, with a nearly a third mulling the start of a job search compared to 24% in 2021.Half of workers said they were only somewhat or not at all satisfied with their current job, and ADP said issues that emerged during the pandemic — around hours worked and the location, working unpaid time, and stress — were driving employees to negotiate the terms of their current jobs or plot an exit.”The pandemic has sparked a rethink of priorities and workers are signaling a willingness to walk away if employers don’t meet their standards on a variety of fronts,” the ADP survey concluded.The findings track U.S. data showing high levels of job turnover, as well as near-record vacancies as firms struggle to recruit and hold onto workers.The mismatch between the numbers of people looking for work and the number needed to fill vacancies is driving high wage gains in some industries and is one of the key tensions that U.S. Federal Reserve officials feel needs to be resolved to slow high inflation.”The pandemic lingers. The stress induced by the pandemic in the workplace has increased, not decreased,” said ADP chief economist Nela Richardson. More