Economy

ROYDON, England (Reuters) – In a small corner of south-east England, vast glasshouses stand empty, the soaring cost of energy preventing their owner from using heat to grow cucumbers for the British market.Elsewhere in the country growers have also failed to plant peppers, aubergines and tomatoes after a surge in natural gas prices late last year was exacerbated by Russia’s invasion of Ukraine, making the crops economically unviable. The hit to UK farms, which need gas to counter the country’s inclement weather, is one of the myriad ways the energy crisis and invasion have hit food supplies around the world, with global grain production and edible oils also under threat.In Britain it is likely to push food prices higher at a time of historic inflation, and threaten the availability of goods such as the quintessentially British cucumber sandwich served at the Wimbledon tennis tournament and big London hotels.While last year it cost about 25 pence to produce a cucumber in Britain, that has now doubled and is set to hit 70 pence when higher energy prices fully kick in, trade body British Growers says.Regular sized cucumbers were selling for as little as 43 pence at Britain’s biggest supermarket chains on Tuesday.”Gas prices being so sky high, it’s a worrying time,” grower Tony Montalbano told Reuters, while standing in an empty glasshouse at Roydon in the Lea Valley where for 54 years three generations of his family have farmed cucumbers.”All the years of us working hard to get to where we are, and then one year it could just all finish,” he said.All 30,000 square metres of glasshouse at his Green Acre Salads business, which supplies supermarket groups including market leader Tesco (OTC:TSCDY), Sainsbury’s and Morrisons, are currently empty.Montalbano, whose grandfather emigrated from Sicily in 1968 and started a nursery to provide local stores with fresh cucumbers, decided not to plant the first of the year’s three cycles in January.SOARING COSTSLast year he paid 40-50 pence a therm for natural gas. Last week it was 2.25 pounds a therm, having briefly hit a record 8 pounds in the wake of Russia’s invasion. Fertiliser prices have tripled versus last year, while the cost of carbon dioxide – used both to aid growing and in packaging – and hard-to-attain labour have also shot up.”We are now in an unprecedented situation where the cost increases have far outstripped a grower’s ability to do anything about them,” said Jack Ward, head of British Growers.It means a massive contraction for the industry, threatening Britain’s future food security, and further price rises for UK consumers already facing a bigger inflation hit than other countries in Europe following Brexit.UK inflation hit a 30-year high of 6.2% in February and is forecast to approach 9% in late 2022, contributing to the biggest fall in living standards since at least the 1950s.The National Farmers’ Union says the UK is sleepwalking into a food security crisis. It warns that UK production of peppers could fall from 100 million last year to 50 million this year, with cucumbers down from 80 million to 35 million.In winter, the UK has typically imported around 90% of crops like cucumbers and tomatoes, but has been nearly self-sufficient in the summer. The Lea Valley Growers Association, whose members produce about three-quarters of Britain’s cucumber and sweet pepper crop, said about 90% did not plant in January, while half have still not planted and will not plant if gas prices remain high.”There’s definitely going to be a lack of British produce in the supermarkets,” association secretary Lee Stiles said. “Whether there’s a lack of produce overall depends on where and how far away the retailers are prepared to source it from.”Growers in the Netherlands, one of Britain’s key salad suppliers, face similar challenges and have reduced exports. Spain and Morocco do not heat their glasshouses to a large extent, but delivery to the UK in chilled lorries adds time and cost.Joe Shepherdson of the UK’s Cucumber Growers Association said those growers that have planted are using less heat, but that reduces production and increases the risk of disease.PRESSURE ON PRICES Britain’s biggest supermarket groups, including Tesco, Sainsbury’s, Asda and Marks & Spencer (OTC:MAKSY), acknowledge the pressures in the market but say they are confident about supply, stressing their long-term partnerships with growers.How far the increase in production costs will translate to higher prices on the shelf depends largely on whether supermarkets opt to absorb the difference themselves, or pass it on to consumers.Smaller retailers buying from the market may struggle.”Any cut in production from suppliers would undoubtedly put further pressure on prices,” said Andrew Opie, director of food and sustainability at retail industry lobby group the British Retail Consortium.Growers want help from the government. They have lobbied for tax and levies on gas to be removed, but finance minister Rishi Sunak did not mention it in his spring budget last week.Despite the dismal backdrop and after much soul-searching, Montalbano will plant a crop next month, fearing the loss of future contracts if he does not. He may gamble on the British weather, and grow his plants “cold”, with little or no heat.”I feel like I have no choice, because if I don’t, then I lose my place,” he said, in a glasshouse that in a normal March would be packed with bushy green cucumber plants.”Am I going to make anything out of it? I’ll be quite happy to break even this year,” he said. More

COLOMBO (Reuters) -Sri Lanka is turning off street lights to save electricity, a minister said on Thursday, as its worst economic crisis in decades brought more power cuts and halted trading on its main stock market.The island of 22 million people is struggling with rolling blackouts for up to 13 hours a day because the government does not have enough foreign exchange for fuel imports. “We have already instructed officials to shut off street lights around the country to help conserve power,” Power Minister Pavithra Wanniarachchi told reporters.The power cuts add to the pain of Sri Lankans already dealing with shortages of essentials and rocketing prices.Retail inflation hit 18.7% in March over the same period a year ago, the statistics department said on Thursday. Food inflation reached 30.2% in March, partly driven by a currency devaluation and last year’s ban on chemical fertilisers that was later reversed.”This is the worst level of inflation Sri Lanka has experienced in over a decade,” said Dimantha Mathew, head of research at First Capital Research.A diesel shipment under a $500 million credit line from India was expected on Saturday, Wanniarachchi said, though she warned that would not fix the issue.”Once that arrives we will be able to reduce load shedding hours but until we receive rains, probably some time in May, power cuts will have to continue,” the minister said.”There’s nothing else we can do.”Water levels at reservoirs feeding hydro-electric projects had fallen to record lows, while demand had hit record highs during the hot, dry season, she said.STOCKS SLIDEThe Colombo Stock Exchange (CSE) cut daily trading to two hours from the usual four-and-a-half because of the power cuts for the rest of this week at the request of brokers, the bourse said in a statement.But shares slid after the market opened on Thursday and the CSE halted trading for 30 minutes – the third time in two days – after an index tracking leading companies dropped by more than 5%.”Concerns on the macro side, together with news of shorter trading hours plus increased power cuts, is driving negative sentiment,” said Roshini Gamage, an analyst at brokerage firm Lanka Securities.The crisis is a result of badly-timed tax cuts and the impact of the coronavirus pandemic coupled with historically weak government finances, leading to foreign exchange reserves dropping by 70% in the last two years. Sri Lanka was left with reserves of $2.31 billion as of February, forcing the government to seek help from the International Monetary Fund and other countries, including India and China. More

In a country better known for eco-tourism and peaceful stability in a turbulent region, Costa Rica’s presidential campaign has been an unusually negative one.Neither Rodrigo Chaves or rival José María Figueres has been widely embraced by the electorate ahead of the presidential run-off due to take place on Sunday. In the first round in February, they garnered less than half of the vote between them. Turnout was low by the country’s standards.Chaves, a former World Bank official who was accused by multiple former colleagues of sexual harassment, has a slight edge over Figueres, a former president, who stepped down as executive director of the World Economic Forum in 2004 amid scrutiny over payments he received from telecoms firm Alcatel-Lucent. Both denied wrongdoing.“[Voters] have to choose between candidates who both have more negatives than positives,” said Jorge Vargas Cullell, director of Costa Rica-based research centre Programa Estado de la Nación. “It’s not a campaign that’s generated a lot of enthusiasm.”A recent poll showed Chaves with 41 per cent of the vote and Figueres at 38 per cent, with the gap tightening and within the margin of error, according to the University of Costa Rica’s centre for political science research (CIEP). The high number of undecided voters, particularly women and young people, could also swing the vote in either direction.During the second round campaigning, “negativity and the lack of policies has been very marked, we’ve seen very grotesque adverts,” said Jesús Guzmán Castillo, researcher at the CIEP. “It’s meant that a lot of people are demotivated to go out and vote.”One advert that appeared on social media compared voting for Chaves to people throwing themselves off a building, causing outrage over its portrayal of suicide. Figueres’ campaign said it did not make or endorse the ad.Whoever wins will have to manage cutting the deficit under a deal with the IMF and tackle high unemployment and inflation while navigating a divided congress and voters disenchanted with traditional parties.Chaves worked at the World Bank for more than 25 years, eventually running its Indonesia office. While at the bank, multiple female colleagues said he made unwelcome sexual comments, inquiries about personal relationships and attempted to kiss them, according to an administrative tribunal decision at the institution. The bank later apologised to the women for mishandling the sexual harassment claims. Shortly before Chaves left the institution he was demoted and his access to the premises was later restricted, the tribunal decision showed. Figueres, who was president from 1994 to 1998, has scored poorly with voters on the issue of corruption. He was investigated by prosecutors over payments worth more than $900,000 from Alcatel-Lucent for consulting work after he left office. At the time of the investigation he lived outside the country and did not return until after prosecutors dropped it. No charges were ever brought.Both candidates, who declined interview requests, have previously denied wrongdoing. Figueres and Chaves have both vowed to renegotiate a deal struck last January with the IMF for a $1.8bn credit line. The country’s deficit was more than 5 per cent of GDP in 2021, with the debt burden growing.If elected they will face the difficult task of trying to bring down the budget deficit amid growing fatigue with those measures, said economist and former central bank chief Ronulfo Jiménez.“Whoever wins, regardless of what they think . . . reality will bite, Costa Rica needs to follow the agreement with the fund,” he said. “Politically it’s getting increasingly difficult to comply with the fiscal rules.”On paper the two broadly centrist candidates, both of whom studied in the US, appear economically orthodox. Figueres has highlighted his experience while Chaves, who lived outside the country for much of his career, has cast himself as the change candidate.Neither candidate is seen as particularly close to the private sector, though some economists and business leaders have expressed worries over Chaves as a lesser-known entity. He served briefly as finance minister in the current administration, but it is not clear who he would choose for his own economic team if elected.“One of the challenges is how to generate more private investment . . . to generate more jobs and really shrink the high unemployment rate,” said economist Fernando Naranjo, who served in Figueres’ previous administration and is on the boards of companies in the tourism and agriculture sectors.

One of Central America’s most peaceful democracies, Costa Rica is a haven for those fleeing authoritarianism in Nicaragua, and its GDP per capita is more than three times that of El Salvador or Honduras.Despite the relative stability, inequality has grown and affiliation with traditional parties has dropped. Carlos Alvarado, the outgoing president, will end his term as one of the least popular leaders in Latin America, according to CID Gallup polling. The pandemic economic recovery has been better than expected, but unemployment is high at 13 per cent.For Costa Rica to pass urgently needed reforms such as in pensions and the health system, the winner of Sunday’s run-off has to be ready to accept this new reality and work with other parties, Vargas Cullell said.Neither of the two candidates’ parties will have a majority in Congress. Figueres’ National Liberation party won 19 of 57 seats in the recent vote, compared to 10 for Chaves’ Social Democratic Progress party.“They are both weak candidates, who have [congressional] minorities, and are not loved by the electorate,” Vargas Cullell said. “The risk is neither understands that today governing in Costa Rica means pure coalition politics.” More

Farmers are spending more to keep tractors and combines running. Shipping and trucking companies are passing higher costs to retailers, which are beginning to pass them on to shoppers. And local governments are paying hundreds of thousands of dollars extra to fill up school buses. Construction costs could soon rise, too.The source is the sudden surge in the price of diesel, which is quietly undercutting the American and global economies by pushing up inflation and pressuring supply chains from manufacturing to retail. It is one more cost of the war in Ukraine. Russia is a major exporter of both diesel and the crude oil that diesel is made from in refineries.Car owners in the United States have been shocked by gasoline prices of more than $4 a gallon, but there has been an even bigger increase in the price of diesel, which plays a critical role in the global economy because it powers so many different kinds of vehicles and equipment. A gallon of diesel is selling for an average of $5.19 in the United States, according to government figures, up from $3.61 in January. In Germany, the retail price has shot up to 2.15 euros a liter, or $9.10 a gallon, from €1.66 at the end of February, according to ADAC, the country’s version of AAA.Fueling stations in Argentina have begun rationing diesel, jeopardizing one of the world’s leading agricultural economies, and energy analysts warn that the same could soon happen in Europe, where some businesses report spending twice as much on diesel as they did a year ago.“Not only is it a historic level, but it’s increased at a historic pace,” said Mac Pinkerton, president of North American surface transportation for C.H. Robinson, which provides supply chain services to trucking companies and other customers. “We have never experienced anything like this before.”The sharp jump is putting immense pressure on trucking firms, especially smaller operations that are already suffering from driver shortages and scarce spare parts. Many can pass increased fuel costs on to their customers only after a few weeks or months.Eventually consumers will feel the effect in higher prices for all manner of goods. While hard to quantify, inflation will be most visible for big-ticket items like automobiles or home appliances, economists say.“Really, everything that we buy online or in a store is on a truck at some point,” said Bob Costello, the chief economist for American Trucking Associations.Trucks lining up on Terminal Island between the Port of Long Beach and the Port of Los Angeles.Alex Welsh for The New York TimesManufacturers are also heavy users of diesel, leading to higher prices for factory goods. Food will go up in price because farm equipment generally runs on diesel.“It’s not just the fuel we put into pickups, tractors, combines,” said Chris Edgington, an Iowa corn farmer. “It’s a cost of transporting those goods to the farm, it’s a cost of transporting them away.”At the start of the pandemic, diesel prices dropped steeply as the global economy slowed, factories shut down and stores closed. But beginning in early 2021 there was a sharp rebound as truck and rail traffic resumed. Prices, which increased pretty steadily last year, picked up momentum in January as Russia massed troops near Ukraine and then invaded. Low stockpiles of the fuel, particularly in Europe, have added to the price pressures.“Diesel is the most sensitive, the most cyclical product in the oil industry,” said Hendrik Mahlkow, a researcher at the Kiel Institute for the World Economy in Germany who has studied commodity prices. “Rising prices will distribute through the whole value chain.”Refineries, which turn crude oil into fuels that can be used in cars and trucks, have tried to play catch-up on both sides of the Atlantic in recent months. But they have not been able to make more diesel, gasoline and jet fuel fast enough. That is in part because refineries have closed in Europe and North America in recent years and more of the world’s fuels are being refined in Asia and the Middle East.Since January 2019, refinery capacity has declined 5 percent in the United States and 6 percent in Europe, according to Turner, Mason & Company, a consulting firm in Dallas.Europe is particularly vulnerable because it relies on Russia for as much as 10 percent of its diesel. Europe’s own diesel production is also dependent on Russia, which is a big supplier of crude oil to the continent. Some analysts say Europe may have to begin rationing diesel as early as next month unless the shortage eases.Diesel prices and Germany’s dependence on Russian energy were among the factors that on Wednesday prompted Germany’s Council of Economic Experts to cut its forecast for growth in 2022 by more than half, to 1.8 percent.Russian diesel has been flowing to Europe since the invasion last month, but traders, banks, insurance companies and shippers are increasingly turning away from the country’s diesel, oil and other exports.Several large European oil companies have announced that they are leaving Russia. TotalEnergies, the French oil giant, said this month that it would stop buying Russian diesel and oil by the end of the year.The market for oil and diesel is global, and companies can usually find another source if their main supplier can’t deliver. But no oil company or country can quickly make up for the loss of Russian energy.Saudi Arabia, for example, has not increased diesel exports because one of its largest refineries is undergoing maintenance. The kingdom and its allies in OPEC Plus have also refused to ramp up crude oil production because they are happy to have oil prices stay high. Russia belongs to the group and has significant sway over its fellow members.Christine Hemmel is a manager of a trucking company in Ober-Ramstadt, Germany, that has been in her family for four generations. Her family’s business has almost all the challenges that medium-size haulers have faced since the pandemic’s outbreak.The Russia-Ukraine War and the Global EconomyCard 1 of 6Rising concerns. More

Economists have been waiting for Americans to shift from buying goods, like furniture and appliances, and toward spending on vacations, restaurant meals and other services as the pandemic fades, betting the transition would take pressure off supply chains and help inflation to moderate.Rapid wage growth could make that story more complicated. Demand for services is rising just as many employers are struggling to find workers, which could force them to continue raising wages. While positive for workers, that could keep overall inflation brisk as companies try to cover their labor costs, speeding up price increases for services even as they begin to moderate for goods.Heavy spending on goods during the pandemic has been a driver of the recent inflation burst. Consumers began snapping up items a few months after pandemic lockdowns began and have kept on buying. Spending on services also has recovered, but much more slowly. That shift in what people are purchasing has roiled supply chains, which were not built to produce, ship and deliver so many cars, treadmills and washing machines.Policymakers spent months betting that as the virus waned and consumers resumed more normal shopping patterns, prices of goods would slow their ascent or even fall. That would pull down inflation, which has been running at its fastest pace in 40 years.But that transition — assuming it happens — may do less to cool inflation than many had hoped. A big chunk of what the government defines as “services” inflation comes from rental housing costs, which often move up alongside wage growth, as households can afford more and bid up the cost of a limited supply of housing units. And when it comes to discretionary services, like salons and gyms, labor is a major cost of production. Rising pay likely means higher prices.Jason Furman, a Harvard economist who served as a top adviser to President Barack Obama, said the shortage of workers in many service industries means that if demand for services goes up, prices will too. That means a shift in spending back to services won’t necessarily result in an overall slowdown in the pace of price increases.“An awful lot of services are incredibly constrained,” he said. “As we shift back to services, we’ll get more services inflation and less goods inflation, and I don’t think it’s at all obvious that the result of that is less inflation.”While America has gotten used to thinking about shortages in products — couches are out of stock, shoes are back-ordered — labor shortfalls could mean that services will also end up oversubscribed, allowing providers to charge more.MaidPro, a home-cleaning firm, has seen a surge in demand from professionals who are spending more time at home. But it is having trouble finding workers to keep up, said Tom Manchester, the company’s president.“Our demand right now outstrips our supply of being able to service that demand,” he said. “Demand has just continued to be strong — like double-digit strong. And if we could find qualified pros to meet the demand, we’d be even more ahead than we are today.”An Amazon employee delivering packages in Manhattan. Americans have continued to buy goods even as services have rebounded.Gabby Jones for The New York TimesMr. Manchester said hourly wages were up $1 to $3, adding to costs at a time when cleaning products have gotten pricier and higher gas prices have made travel reimbursements more expensive. MaidPro franchisees have been able to pass those costs on to their customers, both via fuel surcharges and outright price increases that have more or less kept up with inflation.So far, they have lost few customers — in part because few competitors have capacity to take on new customers.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“If someone has someone that they really like coming in to clean their home, they don’t want to lose them,” he said. “They don’t want to risk saying, ‘I want to move away from MaidPro and try to find someone else,’ because in nine out of 10 instances, that someone else isn’t available.”Some economists argue that if goods inflation slows, that could still help price gains overall to moderate, even amid rising wages. Prices for products that last a long time rose 11.6 percent in the year through January, and prices for shorter-lived products like cosmetics and clothing were up 7.2 percent, still much stronger than services inflation.“We have in mind a big decline in goods prices,” said Roberto Perli, the head of global policy research at the investment bank Piper Sandler. “It would take a lot of increase in service prices to actually offset that.”Outright declines in goods prices are not guaranteed. Take cars: Rapid price growth in new and used autos was a big driver of inflation last year, and many economists expect those prices to dip in 2022. But Jonathan Smoke, the chief economist at Cox Automotive, said continued shortages mean prices for new cars are likely to continue rising, and issues with new car supply could spill over to blunt the expected decline in used car costs.And services inflation is now also coming in fast. It ran at 4.6 percent in the year through January, the quickest pace since 1989, and it has been posting large monthly gains since autumn. That is enough to keep inflation above the Federal Reserve’s 2 percent goal even if product prices stop accelerating.While goods have taken up a bigger chunk of household budgets in recent months than they did before the pandemic, Americans still spend nearly twice as much on services as on goods overall.“You don’t need a lot of extra services inflation to make up for your lost goods inflation,” Mr. Furman said.Restaurants, hotels and other discretionary services aren’t the only places where persistent demand could run up against limited supply, Mr. Furman argued. Many nonurgent health care services saw a decline in demand during the pandemic and are now experiencing a rebound amid a shortage of nurses and other skilled workers.Inflation F.A.Q.Card 1 of 6What is inflation? More

The UK economy grew faster than previously estimated in the final quarter of last year, but surging inflation resulted in a fall in households’ real income, shrinking savings and lower growth in spending even before the war in Ukraine led to soaring energy prices. UK gross domestic output grew 1.3 per cent between the third and fourth quarters of last year, stronger than the initial reading of 1 per cent according to the Office for National Statistics.Compared with the fourth quarter of 2019, before the pandemic, output was down only 0.1 per cent, revised from the previous estimate of a 0.4 per cent fall, meaning that the economy had largely recovered from the hit of the pandemic.The UK recovery is lagging those of the US and the eurozone, which passed pre-pandemic levels in the final quarter of 2021, although the German economy was still 1.1 per cent below this level.Output growth in health and social work activities was revised up to 4.3 per cent following the surge of Covid-19 infections and the extension of the vaccination programme. That pushed government expenditure to about 9 per cent above pre-pandemic levels, highlighting how a large part of the economic rebound is down to the government’s efforts to deal with the pandemic. In contrast, household expenditure rose less than previously estimated and was 1 per cent below pre-pandemic levels. This comes as real household disposable income fell by 0.1 per cent, reflecting surging inflation. Real income, adjusted for inflation, fell even before the jump in consumer prices expected in April and the autumn as the regulator increases its energy price cap to reflect escalating gas and oil prices following Russia’s invasion of Ukraine. This means that households bought more goods and services by reducing their savings. The household saving ratio, the average percentage of disposable income that is saved, decreased to 6.8 per cent in the last quarter of 2021, down from 7.5 per cent in the previous three months and the lowest since the start of the pandemic, ONS data showed.Barret Kupelian, senior economist at advisory firm PwC, said: “The revisions imply that UK households are entering a period where they will face a very substantial hit to their living standards with a smaller savings buffer than initially anticipated.“In the absence of further government support, this could mean that household consumption is cut back further and faster than initially estimated,” he added. “The quarterly pace of growth will slow as the squeeze on real incomes continues to bite,” said Paul Dales, economist at consultancy Capital Economics. He added that with high inflation more of a problem than weak GDP growth, the Bank of England was likely to raise interest rates from 0.75 per cent now to 2 per cent next year.Despite an upward revision, business investment was 8.6 per cent below pre-pandemic levels. The extremely low level is “due to Brexit uncertainty”, according to Samuel Tombs, chief UK economist at consultancy Pantheon Macroeconomics.Exports were also a hefty 15.7 per cent below their level in the final quarter of 2019. Tombs said that UK “exports have consistently underperformed relative to other advanced economies since Q1 2021, suggesting that Brexit is largely to blame”. More

While inflation probably exceeded 7% this month, the ECB has long argued that it is likely to dip back below target in the coming years as energy price rises are not expected to persist.”It is also plausible that medium-term inflation will not revert to the pre-pandemic below-target equilibrium but, conditional on appropriately-calibrated monetary policy, rather may stabilise around the ECB’s 2% target,” Lane said in a speech. “We should also be fully prepared to appropriately revise our monetary policy settings if the energy price shock and the Russia-Ukraine war were to result in a significant deterioration in macroeconomic prospects,” Lane added.The ECB plans to end bond purchases in the third quarter, a prerequisite to any interest rate increase, but has not made any commitments about a rate hike, although a growing number of conservative policymakers are calling for a move before the end of the year. Lane however stressed that given the uncertainty, the ECB must maintain “two-sided” optionality, meaning the next move could be either tightening or easing. “More than ever, it is important to maintain optionality in the conduct of monetary policy,” he said. More

China’s manufacturing and services activity contracted in March for the first time in almost two years, highlighting the economic strains of the government’s strict coronavirus measures.The official manufacturing PMI, a gauge of factory activity in which a reading of 50 separates monthly expansion from contraction, fell to a five-month low of 49.5. The non-manufacturing PMI dropped to 48.4, its lowest level since August.The PMI data were released just hours after state media reported that Premier Li Keqiang, head of China’s State Council, was preparing efforts to support economic growth, which has been hit by Covid-19 outbreaks in Shanghai and north-eastern Jilin province.While the specific measures were not revealed, the State Council noted that 40 per cent of this year’s Rmb3.65tn ($575bn) quota for special-purpose bonds — largely used for infrastructure investment — had already been dispersed. It also warned government agencies to refrain from “measures detrimental to the stabilisation of market expectations” and to prepare “contingency plans to deal with the possibility of encountering greater uncertainties”. Zhao Qinghe, senior statistician at the National Bureau of Statistics, said coronavirus outbreaks across China were affecting enterprises. He noted some companies had complained of insufficient personnel owing to the virus and added that a gauge of delivery times was at its lowest level since March 2020, shortly after the pandemic erupted in central China. The State Council’s pledge marked the second time in as many weeks that the Chinese government had attempted to shore up confidence in the country’s economic outlook.

On March 16, a State Council committee headed by Liu He, President Xi Jinping’s closest economic adviser, made similar pledges in an effort to reassure investors rattled by Covid outbreaks as well as the economic fallout of Russia’s invasion of Ukraine.In the wake of Liu’s intervention, the finance ministry said it would not proceed with long-delayed plans to introduce a property tax in various cities. China’s securities regulator also urged state-owned enterprises and financial institutions to help stabilise the country’s financial markets.China is battling its worst Covid-19 outbreaks in two years after largely containing the virus since its initial outbreak through strict lockdown measures, quarantine, travel restrictions and mass testing. This week, Shanghai, the country’s main financial centre, was locked down for universal testing that divided the city in half and sealed it off from the rest of the country. Previously, officials had indicated no lockdown would be imposed.The four-day lockdown of Shanghai’s eastern Pudong region, which is home to about 9mn people and includes its famous financial district, is scheduled to end at 5am on Friday morning. About 16mn people living in the city’s western Puxi area will then begin their four-day lockdown.

On Thursday, Shanghai officials said that 5,653 cases had been confirmed on March 30, down slightly from 5,982 a day earlier.Julian Evans-Pritchard, senior China economist at Capital Economics, said the PMI data “suggests that the economy is contracting at its fastest pace since the height of the initial Covid-19 outbreak in February 2020”.The non-manufacturing decline was “driven entirely by a sharp drop in the services index”, he added, “as strict movement restrictions and citywide lockdowns were reimposed, and consumers became more cautious amid the renewed virus flare-up”. More