Economy

LONDON (Reuters) – “The longer the war goes on, the greater the chance of an economic recession,” the chief executive of commodity trader Vitol said on Tuesday at a business leaders’ conference organised by the Financial Times.Recession risks were already elevated before Russia’s invasion of Ukraine and the subsequent surge in commodity prices and disruption of supply chains has worsened the adverse economic trends.Recessions have proved notoriously difficult to predict, or identify when they first start, even for the most learned researchers of the business cycle.For the most part, recessions are caused by a complex interaction of output, employment, prices, costs, productivity, interest rates and credit, among other variables, rather than a single external shock such as a spike in oil prices.But a sudden rise in the price of oil, or some other shock, can act as the tipping point if the business cycle has already become susceptible to a downturn, as was probably the case at the start of 2022.COST OF LIVING CRUNCHPrior to Russia’s invasion, the principal economic and financial indicators painted a mixed picture about the state of the U.S. business cycle (https://tmsnrt.rs/37U1EQs).Production and employment indicators were strong, suggesting there was unlikely to be a recession for at least another six to 12 months, but prices and incomes indicators were more pessimistic.U.S. manufacturing output had increased by almost 1.2% over the three months from November to February, according to the Federal Reserve, implying the economy had strong positive momentum.Manufacturers reported a widespread improvement in business conditions, with the Institute for Supply Management’s (ISM) composite indicator at 58.6 in February.The ISM index was well above the 50-point threshold signalling an expansion rather than a contraction, though it had already started to ease back from a peak in the summer of 2021.The number of non-farm jobs had increased by more than 1.7 million between November and February as businesses reopened and rehired after the coronavirus recession and lockdowns.But core consumer prices for items other than food and energy were rising at an annual rate of more than 6%, consistent with the onset of a recession in past business cycles.The Treasury yield curve had flattened significantly and the spread between two-year and 10-year notes had narrowed to levels consistent in the past with the advent of a recession or at least a mid-cycle slowdown.Real personal incomes less transfers (PILT) had fallen by 0.3% between October and January, according to data from the U.S. Bureau of Economic Analysis, as wages failed to keep up with the rise in prices.PILT is one of a suite of indicators the National Bureau of Economic Research’s Business Cycle Dating Committee uses to identify peaks and troughs in the business cycle.The three-month fall in PILT put the indicator in just the 14th percentile for all months since 1990, which helps explain why consumer sentiment has tumbled even as job growth has continued.PILT growth has fallen to rates that heralded the onset of a recessions in 1990, 2001, 2007 and 2020 and mid-cycle slowdowns in 1995, 2005, 2012 and 2015.The contrast between strong manufacturing production and business surveys on the one hand and the weakness revealed by PILT on the other confirms the economy’s main problem is a cost of living crunch.Russia’s invasion and the sanctions imposed in response have intensified this problem by sending oil and gas prices surging and disrupting other manufacturing and food supply chains.TURNING POINT PROBLEMRecessions are difficult to forecast in real time because by definition the onset of the recession is also the peak of the previous expansion.Slowdowns in the business cycle always start when business conditions and employment have been relatively good until recently.Recent buoyancy encourages forecasters to be over-optimistic that positive conditions will persist and they under-estimate the probability the economy is at a turning point.”The largest errors in forecasts … are made in the vicinity of business cycle and growth cycle turning points, particularly peaks,” economist Victor Zarnowitz wrote in his landmark study of business cycles.”Many forecasts are overly influenced by the most recent events or developments; they rely on the persistence of local trends and are insufficiently cyclical,” he said. (“Business cycles: theory, history, indicators and forecasting”, 1992).Forecasters also have professional reputational reasons for maintaining an optimistic outlook and predicting a soft landing for the economy.”A forecaster is understandably anxious to avoid predicting a downturn spuriously or prematurely ahead of others, which explains why some indicators warnings are not heeded,” Zarnowitz wrote.As a result, professional forecasters routinely fail to identify turning points until after they have happened, even when the data starts to become adverse.SHOCKING THE SYSTEMThe critical question is whether the invasion and sanctions will worsen the adverse trends in the economy enough to push it into a significant slowdown or even a full-blown recession.The economic shock caused by Russia’s invasion is much smaller than the one created by the spread of the coronavirus epidemic around the world in the first quarter of 2020.But it is at least as big as the shocks caused by Iraq’s invasion of Kuwait in 1990, the Iranian revolution in 1979 and the Arab oil embargo in 1973, all of which were followed by recessions.The current shock is also propagating through multiple channels simultaneously, including the energy system, the food system, manufacturing supply chains, the international freight network, and the global payments system.Complicating the picture, the U.S. Federal Reserve and other major central banks are trying to reduce inflation, limiting their room to cut interest rates or ease credit conditions to offset any negative impact on business activity.Recessions usually occur when, like now, there is a contradiction between policy objectives, forcing central banks and governments to make an uncomfortable choice, prioritising other goals at the expense of a temporary slowdown in output growth and employment.The scale and complexity of the current shock makes the business-cycle impact particularly hard to forecast but in the context of an already severe inflation problem it is likely to be large and negative.Even if the United States successfully avoids a recession, Europe is much more integrated with the Russian economy, and the probability of a recession is therefore very much higher.The more the conflict and sanctions escalate, and the longer they persist, the larger disturbance to the economy and the greater the probability of a recession ensuing.Related columns:- Western economies on brink of recession as Russia sanctions escalate (Reuters, March 8)- Global recession risks rise after Russia invades Ukraine (Reuters, March 4)- Global economy faces biggest headwind from inflation (Reuters, Oct. 14)John Kemp is a Reuters market analyst. The views expressed are his own More

Volodymyr Zelensky hailed Ukraine’s army for retaking territory from Russia’s invading forces while his chief of staff urged the west to provide more offensive weapons on the eve of a Nato summit.In his regular overnight address, Ukraine’s president said Russian forces had been “defeated” around Kherson, in the south of the country, which became the first sizeable town to fall in the month-long campaign. Ukraine’s army also claims to have retaken Makariv on the outskirts of the capital Kyiv. A senior US defence official said yesterday that Russian forces were struggling with communication, logistics and fuel. Some troops have been evacuated after suffering from frost bite because they lacked proper cold weather gear, the official said. But Jake Sullivan, US national security adviser, warned “this war will not end easily or rapidly”, ahead of President Joe Biden’s visit to Europe.There are signs that the surprising gains made by Ukraine’s army have depleted their supplies of anti-aircraft and anti-tank missiles. Andriy Yermak, Zelensky’s chief of staff, urged western nations to give his country more weapons to fight the Russians. “We cannot win a war without offensive weapons, without medium-range missiles that can be a means of deterrence,” he wrote on Telegram.Zelensky is expected to address a meeting of Nato leaders tomorrow via video-link and make a plea for more military support. EU and G7 leaders are also due to meet tomorrow in Brussels and are expected to announce new sanctions against Russia.More news on UkraineMilitary briefing: Moscow is increasingly relying on “dumb” bombs to regain momentum as it runs out of more sophisticated weaponry.Financial services: BNP Paribas and Crédit Agricole of France are the latest big international bank to sever ties with corporate clients in Russia.Opinion: Putin’s invasion needs a global economic response, writes Martin Wolf. Janan Ganesh argues that the war is not about democracy versus autocracy. Navalny’s sentence suggests that Putin and his allies fear support is brittle, says the FT editorial board.Share your thoughts with us at [email protected] and we may feature them in the newsletter. Here’s the rest of today’s news — GordonFive more stories in the newsKetanji Brown Jackson fends off Republican criticism Joe Biden’s nomination for the Supreme Court defended her work representing Guantánamo Bay prisoners on the second day of her nomination hearing.

Ketanji Brown Jackson has been nominated to fill the Supreme Court seat that is being vacated by Stephen Breyer © Andrew Harnik/AP

2. US agrees to ease tariffs on UK imports The Biden administration is to suspend the Trump-era levies on UK steel and aluminium products to bolster transatlantic relations. The UK responded by agreeing to lift its retaliatory tariffs on US imports of bourbon, agricultural and other goods from June 1.3. World’s top women’s tennis player quits Australian tennis player Ashleigh Barty announced her retirement from the sport at the age of 25. The winner of last year’s Wimbledon and the Australian Open in January said she was “spent” from the emotional challenges of being on tour.4. JPMorgan chief’s spending plan criticised Jamie Dimon is facing rare investor criticism over a multibillion-dollar plan to modernise the group’s technology and to enter the UK’s competitive retail banking market.5. Taliban reverses decision to allow teenage girls to attend secondary school The U-turn has sparked international condemnation and left desperate students stranded outside campuses. Girls had been allowed to attend primary school but the Taliban had said students from Grade 7, or about age 13, would not be allowed to resume classes.The day aheadUkraine crisis President Joe Biden arrives in Europe ahead of talks with G7 and EU allies. European Commission president Ursula von der Leyen and European Council president Charles Michel will address the EU parliament while Canadian prime minister Justin Trudeau will also address European lawmakers. Ukraine’s president Volodymyr Zelensky is to address French lawmakers virtually following an address to the Japanese parliament.Powell addresses conference Federal Reserve chair Jay Powell will participate in a panel at the Bank for International Settlements Innovation Summit 2022 alongside Bank of England governor Andrew Bailey and Joachim Nagel, president of Germany’s central bank.Ketanji Brown Jackson nomination hearing The US Senate judiciary committee will question president Joe Biden’s nominee to the Supreme Court for a second day. The confirmation hearing is due to finish tomorrow.Earnings Chinese gaming and social media giant Tencent’s fourth-quarter profit is expected to nearly halve, according to Refinitiv data, amid regulatory scrutiny and a slowdown in advertising.Join us on April 7 for our Energy Source Live Summit, when we will take a deep dive into the issues set to reshape the US energy industry in the years to come. Register here.And today sees the launch of Disrupted Times, a newsletter focusing on the changes to business and the economy between Covid and conflict. Sign up hereWhat else we’re reading Why ‘shrinkflation’ means you are paying the same for less Some companies are happy to pass on higher costs to customers — others are more sneaky, says Brooke Masters. And shrinkflation does not stop at manufacturers. Service and hospitality providers are under pressure to find creative ways to preserve their margins. Amazon’s union-busting tactics put to test again The contest for union recognition at the Amazon warehouse in Bessemer, Alabama is being rerun. With postal ballots due to be counted next week, the stakes are even higher this time around.Scientists debate fourth Covid vaccine A fourth vaccine dose offers protection for elderly people and those with health problems, a body of research suggests, but experts have found a lack of evidence to support rolling out a fresh round of jabs more broadly.Wirecard: the case against Markus Braun The former chief executive of the payments company that went bust with debts of €3bn has swapped his life as a paper billionaire and is now facing fraud charges and the possibility of up to 15 years in prison. But his case is not clear cut.Leftist aims to upset France’s apple cart Jean-Luc Mélenchon, the far-left presidential candidate in France, is rising in the polls and hopes to make it to the presidential run-off round. And he might yet surprise pollsters.BooksLeah Quinn’s list of the five best works of fiction about Ukraine covers everything from a ragtag group of alcoholic teenagers to the lives of women in the Donbas region, as well as Fieldwork in Ukrainian Sex, dubbed “the most influential Ukrainian book [since] independence”. More

Investing.com — Oil prices rise as Russia chokes off a Kazakh oil pipeline claiming it needs to repair storm damage, while U.S. inventories appear to have fallen again last week. The chorus of voices at the Fed calling for actively restrictive policy grows louder. Inflation in the U.K. hits a new 30-year high as the government tries to tackle a cost of living crisis. U.S. stocks are set for a breather at the opening, and China finds the black box from the Boeing (NYSE:BA) 737 that crashed earlier this week. Here’s what you need to know in financial markets on Wednesday, 23rd March.1. Russia chokes off Kazakh oil pipeline as Europe ramps up debate on sanctions Oil prices rose again as Europe’s debate over sanctions on Russian energy exports ratcheted up a day ahead of a crucial summit meeting.Italian Prime Minister Mario Draghi told lawmakers that Russian President Vladimir Putin is not interested in serious peace talks, a conspicuously hawkish tone from a country that is highly dependent on Russian oil and gas. German Chancellor Olaf Scholz, by contrast, reaffirmed his opposition to an immediate embargo, citing the economic costs.Russia has unilaterally tightened the global oil market overnight by closing the Caspian Pipeline Consortium’s export terminal on the Black Sea, claiming that storm damage needs to be repaired. The 700,000 barrel-a-day link largely carries oil from Kazakhstan to world markets.  U.S. crude prices rose 1.8% to $111.25 a barrel, while Brent rose 2.1% to $117.90 a barrel, ahead of U.S. government data on inventories at 10:30 AM ET. According to the API industry group, crude stockpiles fell by a surprisingly large 4.3 million barrels last week.2. Dovish Daly adds to calls for faster rate hikes; Mortgage data, new home sales due San Francisco Federal Reserve President Mary Daly added her voice to those calling for the Fed to raise interest rates above what is seen as the neutral rate in order to bring inflation down.  Daly’s comments follow similar ones from Chair Jerome Powell, governor Chris Waller and St. Louis’ James Bulllard this week, but are notable given that she has been at the dovish end of the spectrum as regards tightening policy in recent months. As such, her comments suggest that a clear majority may be in favor of a 50 basis point rate hike at the Fed’s next meeting.U.S. bond yields have for now stopped their relentless rise, with the 10-year Treasury yield falling by 2 basis points overnight to 2.36%. Their rise will put a sharp focus on weekly data for mortgage applications and rates at 7 AM ET. New home sales data for February are also due later.3. Stocks set to take a breather at opening U.S. stock markets are set to open a little lower on profit-taking after Tuesday’s solid gains.By 6:20 AM ET, Dow Jones futures were down 83 points, or 0.2%, while S&P 500 futures were down 0.3% and Nasdaq 100 futures were down 0.4%. All three indices had risen on Tuesday, having digested the apparent hawkish shift in Fed policy. The Nasdaq Composite rose 2.0%, taking its gains to 9% over the last week.Stocks likely to be in focus later include GameStop (NYSE:GME), after some more buying by its chairman Ryan Cohen, as well as Cintas (NASDAQ:CTAS) and General Mills (NYSE:GIS), which report earnings. Walt Disney (NYSE:DIS) stock may also be volatile as employees in Florida step up protests against the state’s new bill on LGBTQ issues, while BuzzFeed (NASDAQ:BZFD) stock is still ticking up in the wake of its decision to close its loss-making newsdesk.4. U.K. inflation hits 30-year high as cost of living crisis worsensU.K. inflation hit a 30-year high of 6.2% in February, with continued rapid increases in producer prices stoking fears that the peak in consumer inflation may not come for another eight months.The figures create a tense backdrop for the government’s spring budget statement, which is expected to contain some substantial giveaways on fuel taxes, following the lead of France, Italy and others. It isn’t clear whether the government will stick to its prior plans to raise national insurance contributions in order to close a budget deficit which has narrowed more sharply than expected in th last couple of months.Bank of England Governor Andrew Bailey is also scheduled to speak at 8 AM ET (as is Bundesbank head Joachim Nagel, coincidentally)5. China finds ‘Black Box’ of crashed BoeingChinese officials have recovered one of the flight recorders from the Boeing 737-800 that crashed during an internal flight on Monday, according to local media reports.The discovery should allow for a relatively quick clarification on the cause of the crash.Elsewhere in China, internet giant Tencent (OTC:TCEHY) reported growth of only 8% in revenue in the last quarter, the slowest on record.The country’s Covid-19 outbreaks, meanwhile, show no sign of slowing yet, with emergency disease control teams dispatched to 28 of the country’s 31 regions. More

Rishi Sunak is under pressure to use today’s financial statement to deliver relief for hard-pressed households amid the biggest “cost of living crisis” for decades.Against the backdrop of a 1970s-style energy crunch, the chancellor is expected to help households facing soaring energy, petrol and food bills as well as rising taxes.Sunak is widely expected to cut fuel duty. Some MPs hope that he will cut taxes or reduce the impact of the planned 1.25 percentage point rise in National Insurance contributions, designed to raise £12bn for the NHS and social care.Yet officials have played down the idea that the chancellor could use today’s statement to provide a fresh support package for household energy bills.In February, Sunak announced a £9bn package to help people deal with spiralling bills, including a £200 loan to every household and a further £150 rebate for those in council tax bands A to D.That was designed to help address a jump in the “energy cap” — which governs most domestic fuel bills — from £1,277 to £1,971 from April.Since then, however, Russia’s invasion of Ukraine has caused another jump in wholesale gas prices which could — experts believe — propel annual bills to more than £3,000 by the year-end.However, officials have briefed in recent weeks that it would be premature to announce specific measures to address the next increase in the energy cap when it will not be announced by energy regulator Ofgem in August — coming into effect in October. More

WASHINGTON (Reuters) – U.S. President Joe Biden has few appealing policy options to get record high U.S. gasoline prices under control ahead of the critical summer driving season, when millions of Americans fill their tanks and hit the road for vacations.”The President and our national security team and our economic team are working overtime right now to evaluate and examine a range of domestic options,” White House spokeswoman Jen Psaki said on Tuesday.Publicly, White House officials have said all options are on the table: a gasoline tax holiday or gas cards that would provide rebates to consumers; potential deals to remove sanctions on Iranian and Venezuelan crude exports; and possible relaxation of the Jones Act, a law requiring domestic cargo to be carried on American-made tankers using union labor.Privately, officials say all the options are politically complicated and none of them may actually lower gas prices much, according to two sources familiar with the administration’s thinking. “They are perusing the menu and can’t find anything they want to eat,” said Stephen Brown, a veteran oil lobbyist who consults energy companies. U.S. pump prices reached all-time highs last week following Russia’s invasion of Ukraine, threatening to upend the economy. While fuel prices are soaring around the world, Republicans in the U.S. Congress have blamed Biden’s energy policies. Many think it can boost their chances during midterm elections in November.Biden “is faced with an angry electorate who sees the price of the pump more frequently than the suffering of the Ukrainians,” said Ed Hirs, an energy economist at the University of Houston.Hirs said the policy options can help lower gasoline prices modestly but will not do much to dent soaring crude oil prices which are the real problem. Retail gasoline prices have eased from a record of $4.331 hit on Friday but remained at $4.316 per gallon on Tuesday, according to American Automobile Association data. Crude oil futures remained at around $110 a barrel even after retreating substantially from a high of roughly $139 a barrel on March 7.Republicans and others have criticized negotiations with Venezuela and Iran to try and get their oil back into the global market, saying the White House is caving in to dictators.TAX HOLIDAYA federal gas tax holiday would not reduce prices much, but would hurt financing for infrastructure projects that rely on the revenue. A motorist buying 10 gallons at current prices would save less than $2 if the federal gas tax were waived.Most states impose a higher gas tax such as Pennsylvania’s 57.6-cent-a-gallon, the highest in the nation and California’s 53.3 cents per-gallon. Several states, such as Florida and Maryland, are moving to suspend their gas taxes.Lawmakers have asked U.S. refinery officials for input on the gas tax holiday, according to numerous interviews, and the answers were not encouraging.”We are telling them that it will not have a large impact on gasoline prices. … to lower gas prices, it starts with lowering oil prices,” said a top official at a U.S. refiner. MORE ETHANOL?A bipartisan group of U.S. Farm Belt lawmakers has been pushing the White House to lift the summertime ban on higher ethanol blends of gasoline, called E15, which is now cheaper than the standard E10 fuel. But E15 is prohibited in the summer due to smog concerns, and White House climate officials oppose lifting the prohibition. Also the refining industry is bitterly opposed to boosting ethanol consumption, and the step would increase demand for corn at a time when high food prices are adding to inflation.Asked about E15 gasoline, Psaki responded only that it was “in the menu of options.”JONES ACTWaiving the Jones Act could help move oil to refineries on the East and West Coasts that lack pipeline access. But it could anger labor unions. Washington has temporarily taken the step during emergencies such as after Hurricane Katrina and when hackers shut down the largest U.S. fuel pipeline. “There is no way the White House does this,” said one refining source. “There’s a history of lifting this during supply concerns, that’s not the problem.”GAS CARDSThe White House considered giving Americans gas cards to help offset high prices, but ditched the plan for now due to opposition from lawmakers who questioned the effectiveness, according to a source familiar with the discussions. There were fears that issuing gas cards would be cumbersome for the Internal Revenue Service and could delay income tax returns. A senior administration official also cited fraud concerns, noting that cards have been stolen out of mailboxes. “We are talking to congress about all ideas, all have a good and a bad,” the official said. More

WASHINGTON (Reuters) -The Biden administration on Wednesday announced new steps to crack down on real estate appraisers who perpetuate property inequalities by assigning lower home price estimates to Black and Latino owners.Mortgage finance agency Freddie Mac (OTC:FMCC) found in 2021 that Black and Latino people were more likely to have their homes valued under the agreed sales price than white homesellers. Such an appraisal can limit the size of a mortgage that can be written on a property, forcing homeowners to sell at a lower price or cancel a sale altogether. It can also reduce the amount available during a refinancing.”Bias in home valuations limits the ability of Black and brown families to enjoy the financial returns associated with homeownership, thereby contributing to the already sprawling racial wealth gap,” the White House said in a statement accompanying its new plan. Senior administration officials said the aim is to bolster appraisal standards, increase the diversity of the workforce tasked with creating those estimates and make it easier to report discrimination that violates federal law. Federal Housing Finance Agency Acting Director Sandra Thompson praised the roadmap, saying her organisation “does not tolerate housing discrimination” and would remain focused on ensuring fair lending practices.gU.S. Vice President Kamala Harris is scheduled to unveil the effort during a White House event later on Wednesday.Federal officials say lower appraisals have contributed to wide gaps in wealth between Black and Latino Americans and their white peers. White applicants received appraisals lower than their contracted sales price 6.5% of the time, compared to 9.5% for Latino and 8.6% for Black applications, Freddie Mac found.Last June, Joe Biden became the first sitting U.S. president to visit the Tulsa, Oklahoma site where hundreds of Black Americans were massacred by a white mob in 1921, vowing in his speech to combat racial discrimination in housing and address biased home appraisals. More

WASHINGTON (Reuters) – The White House will announce on Wednesday a funding opportunity of $2.9 billion earmarked by the Transportation Department for major infrastructure projects this year, as part of a $1-trillion law Congress approved in 2021.U.S. Transportation Secretary Pete Buttigieg and White House Infrastructure Coordinator Mitch Landrieu will unveil the plans at an event held at a major bridge linking the U.S. capital of Washington with Arlington, Virginia.The grant funding offers “a once-in-a-generation opportunity to fix our outdated infrastructure and invest in major projects for the future of our economy,” Buttigieg said. Applications are due by May 23.The figure includes $1 billion for projects of national or regional significance that are too large or complex for traditional funding programs, which Buttigieg described as the “cathedrals of our infrastructure.”Such structures could be bridges or tunnels linking two states, new rail and transit lines or freight hubs integrating ship, train and truck traffic.The department also plans to award $300 million for rural projects and $1.55 billion for other highway, multimodal freight and rail projects.A potential funding recipient is a $12.3-billion project that aims to build a new tunnel between New York City and New Jersey and reconstruct an existing one.Buttigieg said he expected the project to apply for funding but it would face review, like all the rest. On a visit to the existing tunnel, Buttigieg added, he saw a “sense of urgency around those much needed upgrades.”The Hudson (NYSE:HUD) Tunnel Project is a key component of the Gateway Program, a major project to overhaul much of the aging rail infrastructure in the New York City area. The New York City-area rail tunnel, which opened in 1910, was damaged in 2012 when Superstorm Sandy flooded parts of the city.Congress approved $66 billion for rail as part of the massive infrastructure bill, with passenger railroad Amtrak receiving $22 billion. The bill also sets aside $36 billion for competitive grants. More

NEW DELHI (Reuters) – Many Indians are cutting down on fried food and even vegetables as the Ukraine war inflates the prices of items from edible oils to fuel, threatening a sputtering recovery in the consumption-based economy after two years battling COVID-19.Consumers in Asia’s third-largest economy are feeling the bite as companies pass on a surge in costs since the invasion, battling the first hikes in five months this week in the prices of diesel and petrol, as well as more expensive vegetable oils.”God only knows how we will manage this level of price rise,” said Indrani Majumder, the sole earner in a family of four in the eastern city of Kolkata, adding that the past two years of the pandemic had brought a halving in salaries.These days her family eats more boiled food to save on the cost of edible oil, she said. It is just one of almost a dozen homes were people said they were taking similar steps.India’s economy expanded at a pace slower than expected in the quarter from October to December, and economists forecast a further dent to growth in the current one, as high fuel prices bring a jump in inflation. Graphic: India’s inflation above central bank’s tolerance level: https://graphics.reuters.com/INDIA-INFLATION/INDIA/egvbklgkdpq/chart.png Private consumption contributes the largest share of gross domestic output, at nearly 60%.But since the invasion late in February, which Russia calls a special operation, Indian firms have raised prices of milk, instant noodles, chicken and other key items by about 5% to 20%.About 800 million of a population of nearly 1.4 billion received free government supplies of staple foods during the pandemic, and even small price rises now can mean a knock for their budgets.Families’ finances could stay anaemic for the third year in a row, warned Pronab Sen, formerly India’s chief statistician.”The process of rebuilding savings was only beginning post the pandemic,” he added. “Because of this latest shock, they will have to cut back on consumption.”DARKENING PICTURESurging global prices of crude have prompted companies in the import-dependent nation to raise retail prices of petrol and diesel twice this week. India imports 85% of its crude oil, which has seen prices rise nearly 50% this year.The South Asian nation is also the world’s biggest importer of edible oil, shipping in nearly 60% of its needs.But the price of palm, the country’s most widely consumed edible oil, has jumped 45% this year. And supplies of sunflower oil, which Ukraine and Russia produce in large quantities, have been disrupted.Some wholesalers said their sales of edible oil had fallen by a quarter in the past month as prices rose.These factors helped keep India’s retail inflation in February above the central bank’s comfort level of 6% for the second month in a row, while the wholesale rate was more than 13%.”The timing of input price inflation could not have been worse in the context of a slowing consumption trend,” financial services firm Jefferies said in a note.The central bank has said it is monitoring crude and commodity prices ahead of its next monetary policy meeting in early April. But markets do not expect the Reserve Bank of India to change key rates, as it looks to prioritise growth.This stance compares with global central banks, which have either raised rates or are weighing whether to do so to curb inflation. For instance, policymakers of the U.S. Federal Reserve called this week for big rate hikes in May.For consumers, there is little relief in sight.The Confederation of All India Traders estimates input costs for makers of consumer durables and fast moving consumer goods (FMCG) to rise another 10% to 15% this month as fuel prices rise, an expense destined to be passed on to the final consumer.In Kolkata, vegetable vendor Debashis Dhara said higher transport costs would bump up vegetable prices by a further 5% this week. His sales have already halved since February.India’s Mother Dairy and Amul raised milk prices by nearly 5% this month, while FMCG companies such as Hindustan Unilever (NYSE:UL) and Nestle are charging more for items such as instant noodles, tea and coffee.Broiler chicken prices have jumped nearly 45% in six months to a record 145 rupees ($1.90) a kg this week, as key feed ingredients corn and soymeal have become costlier after supplies from the Black Sea region were affected.Fertiliser prices have shot up to a record $150 a tonne since Russia, one of the biggest producers, rolled tanks and soldiers into Ukraine.”It has become very difficult to manage our monthly budget,” said Archana Pawar, a housewife in the financial capital of Mumbai. “This kind of price rise is forcing us to cut down consumption.”($1=76.1150 Indian rupees) More