Economy

The fastest inflation in decades is contributing to Americans’ dour view of the U.S. economy.Nearly nine in 10 adults say they are at least somewhat concerned about inflation, according to a survey conducted this month for The New York Times by the online research firm Momentive. Worry about rising prices cut across generational, racial and partisan lines — 85 percent of Democrats and 96 percent of Republicans said they were concerned.The survey was conducted Feb. 1-7, before the tensions over Ukraine and the Russian invasion there led to a jump in energy prices.Fear of inflation is weighing on people’s view of their own finances and the economy overall. About 75 percent of respondents rated the economy as fair or poor, and only 28 percent said they expected their own finances to be better off a year from now, the lowest share in the five years Momentive has conducted the survey. Asked to identify the most important issue facing the country, dozens of respondents volunteered inflation, which wasn’t offered as an option.The findings are consistent with other surveys that have shown a sharp decline in economic confidence in recent months. The University of Michigan’s long-running index of consumer sentiment fell to its lowest level in more than a decade in early February, with a third of respondents spontaneously citing inflation as a concern. The university will release final data for February on Friday.“People just hate inflation,” said Michael R. Strain, an economist with the American Enterprise Institute. “They hate inflation in a way that I just did not understand until last year.”Consumers’ pessimism is striking because most indicators, other than inflation, show that the economy has made significant strides in recent months. The unemployment rate has fallen to 4 percent, and job growth was strong in January despite a jump in Covid-19 cases. Wages are rising at their fastest pace in years.But only 14 percent of employed respondents in the Times survey said they had received a raise large enough to keep up with inflation, down from 33 percent in December. And people are becoming more skeptical that price increases will fade quickly: 76 percent of respondents said they were worried that inflation would “continue for an extended period,” up from 70 percent in December. More

How well did you keep up with the news this week? Take our quiz.Russia’s onslaught breached the suburbs of Kyiv on Friday as armoured columns battled towards Ukraine’s two biggest cities in Europe’s largest military offensive since the second world war.Kyiv residents woke to loud explosions shortly after 4am and reports of Russian armoured vehicles advancing into the northern Kyiv district of Obolon, bringing street fighting to the 3mn-strong capital.Western officials said that stronger than expected Ukrainian resistance on Thursday slowed Russia’s two key objectives of encircling Kyiv and capturing Kharkiv in the north-east, Ukraine’s second-biggest city.Ukraine’s president Volodymyr Zelensky delivered an early morning address to his country as his army warned Russian troops were “moving at speed” towards central Kyiv followed by a column of military trucks. Zelensky claimed that “enemy saboteur groups” were already in Kyiv and that Russia was planning to assassinate him.

Stay up to date with the latest from our live blog. We’re also making important Ukraine coverage free to read to keep everyone informed as events unfold. Please share with your friends, family and colleagues. Explainers: How will Russia’s invasion of Ukraine hit the global economy and what is Russia’s endgame?Even in war, some US conservatives share Trump’s embrace of ‘genius’ Putin, writes Lauren Fedor.Sanctions: US ratchets up trade pressure with sanctions on Russia’s biggest bank. But soaring oil prices could constrain the ability of the US to crack down on Putin. Also, what is the impact of throwing Russia out of Swift?Go deeper: Here’s what western Europe can do for Ukrainians — and what Putin’s apologists fail to understand, writes Simon Kuper. Also, historian Mary Elise Sarotte tells the inside story of the west’s efforts to secure a post-cold-war settlement.Opinion: Russia’s assault is unprovoked and based on falsehoods, writes our editorial board. Markets: Oil climbs back above $100 a barrel following a day of Wall Street volatility.Thanks for reading FirstFT Americas. To keep up to date with all that’s happening in Ukraine, sign up here to receive my colleague Valentina Pop’s essential newsletter, Europe Express — Wai KwenFive more stories in the news1. Manufacturers lobby to weaken UN global plastics treaty proposal The draft resolution was aimed at tackling pollution through the entire plastics supply chain, from chemical production to disposal. Some companies want the draft agreement narrowed to cover the waste problem rather than production.2. Wind power companies bid more than $3bn for oceans off New York The largest US offshore wind lease sale has attracted record bids as renewable energy developers compete for prime locations to install turbines.3. Beyond Meat takes a beating as plant-based sector reports slowing sales The industry leader reported a quarterly loss of $80.4mn, more than triple the level of a year before. Rival Maple Leaf Foods said that consumers viewed plant-based meat as an “expensive novelty”.4. Elon Musk says brother ‘had no idea’ about Twitter poll The Tesla chief denied passing information that could have hurt the electric carmaker’s stock price to his brother, after a report that they were the subjects of an insider trading investigation by the US securities regulator.5. Morgan Stanley reveals twin probes into block transactions The Wall Street bank disclosed yesterday that the Securities and Exchange Commission has been examining its block trading business since 2019, and the Department of Justice recently joined with its own investigation.Coronavirus digestBank of America’s co-head of global capital markets in Asia-Pacific is leaving Hong Kong as harsh pandemic restrictions prompt an exodus of executives.Moderna said it expected the pandemic to end this year but forecast that a seasonal booster shot would be needed in the autumn.The days aheadNato summit The transatlantic alliance will hold an emergency meeting of its members’ 30 leaders to discuss what its head described as Russia’s “deliberate, cold-blooded and long-planned invasion” of Ukraine. EU diplomats are also working to enshrine sanctions, including freezing some transactions with Russian banks, into law.Economic data Germany and France are set to release gross domestic product data for the fourth quarter. US consumer spending is forecast to rebound in January as household spending picks up. (FT, WSJ)Berkshire Hathaway shareholder letter Warren Buffett will publish his annual letter to Berkshire Hathaway shareholders tomorrow as the company reports.Join Financial Times journalists and leading experts today at 1pm GMT for an unmissable virtual briefing, Russia’s invasion of Ukraine: what next? Register free here.What else we’re reading Why do some great ideas fail to scale? Early initiatives deliver a sensational result, only to fade at a larger scale — a phenomenon called the “voltage drop”. Tim Harford explains why this happens?

Tim Harford: ‘One common problem is that the original effect was illusory’ © Anna Wray

Opinion: Paul Farmer’s crusade on global healthcare has left a powerful legacy The American physician taught important lessons about the dangers of living in an interconnected world, writes Gillian Tett.Is there a new supercycle in metals and minerals? For years, BHP focused on investing in safe and stable countries. But faced with the challenge of supplying the metals and minerals that will be needed in the shift to the low-carbon economy, the world’s biggest mining company is starting to take on more risk.Capital markets union is crucial to a sovereign EU Without it, the bloc will not be able to secure its ambitions for digitisation and the green transition, writes Theodor Weimer, chief executive of Deutsche Börse.What Meta’s VR advert tells us about the metaverse The virtual world of the Super Bowl video is a radical vision of the future, but also quite a chilling one, writes Jemima Kelly.Rich People’s Problems: superyacht envy Thanks to online auction sites you can find yourself bidding on a boat you’ve never seen. But the result could sink your finances.Related read: How to spend smarter — however wealthy you are.Actor Matthew Broderick’s guide to Broadway“The theatre is about togetherness and we all appreciate how important that is now.”Matthew Broderick backstage in the Hudson Theatre Broadway, New York © Timothy O’Connell More

A measure of inflation closely watched by the Federal Reserve is expected to show that prices continued to rise in January, accelerating on a monthly basis and increasing from a year earlier at the fastest pace since 1982.Economists expect that the Personal Consumption Expenditures index, which the Fed targets as it aims for 2 percent annual inflation on average over time, rose 6 percent from the previous January. Prices probably climbed 0.6 percent from December, up from 0.4 percent the prior month, based on the central estimate in a Bloomberg survey.The Commerce Department will release the data at 8:30 a.m. on Friday.High inflation remains stubborn at a tense moment. With consumers already struggling with rising costs, Russia’s invasion of Ukraine this week promises to push inflation even higher as prices for oil and other commodities increase.The Fed has been preparing to steadily pull back its pandemic-era economic support in an effort to cool off consumer demand and tame prices. The White House is monitoring inflation closely as rising prices for food, rent and gas shake consumer confidence and dent President Biden’s approval ratings ahead of midterm elections in November.The fresh inflation reading won’t surprise economists or policymakers — the Personal Consumption Expenditures number is fairly predictable because it is based on Consumer Price Index figures that come out more quickly, along with other already available data. But it will reaffirm that price increases, which were expected to prove temporary as the pandemic economy reopened, have instead lasted almost an entire year and seeped into areas not affected by the coronavirus.Price increases have hit a wide array of products and services, including used cars, beef, chicken, restaurant meals and home furnishings, and several trends risk keeping inflation elevated. Notably, wages are rising rapidly, and employers are finding that they can pass their climbing labor costs along to shoppers.Grocery shopping in Queens this month. Price increases are sweeping a growing array of products and services, and several trends could keep them elevated.Amir Hamja for The New York TimesEconomists are also warily eyeing the conflict in Ukraine, which has already caused oil and gas prices to rise and is likely to push commodity costs higher still.Researchers at Goldman Sachs estimate that an increase of $10 per barrel of oil would increase headline inflation in the United States by a fifth of a percentage point while lowering economic output by just under a tenth of a percentage point.Brent crude oil, the global benchmark, rose as much as 6 percent to more than $100 per barrel after Russia invaded Ukraine and could climb further as Russia reacts to sanctions from the United States and Europe. Russia is a major exporter of energy to Europe.“Potentially, Russia could retaliate by limiting oil exports,” Patrick De Haan, head of petroleum analysis at GasBuddy, said on Thursday. Prices at the pump are likely to reflect repercussions from the conflict almost immediately, he said.Russia’s Attack on Ukraine and the Global EconomyCard 1 of 6A rising concern. More

The Federal Reserve’s preferred inflation gauge is expected to have registered another strong monthly gain, in the latest sign that the US central bank needs to reduce the ultra-easy monetary policy that has been in place since the start of the pandemic.The core personal consumption expenditures price index is set to have increased another 0.5 per cent in January, following a similar monthly increase in December, according to a consensus forecast compiled by Bloomberg.That is expected to translate to an annual increase of 5.2 per cent, the fastest pace in roughly four decades and an acceleration from the 4.9 per cent increase recorded in December.Once volatile items such as food and energy are factored in, the PCE index is expected to have jumped 6 per cent from the same time last year, or 0.6 per cent on a month-over-month basis. Fed officials are monitoring inflation data closely as they assess how quickly to raise interest rates this year from today’s near-zero levels.The rising price pressures are expected to have been accompanied by a 0.3 per cent decline in personal incomes and a 1.5 per cent rise in household spending at the start of the year.The data will be published by the commerce department at 8:30am Eastern Time on Friday.The data comes on the heels of Russia’s military invasion of Ukraine, which has left policymakers scrambling to discern the potential economic effects. Comments from a number of Fed officials as well as developments in Ukraine have quietened speculation of a half-point rate rise from the Fed in March. But the US central bank is still expected to proceed with its first rate increase at its next meeting in the middle of next month. Markets currently anticipate a further five quarter-point adjustments during the remainder of the year.

Several officials have spoken out in recent days about potential risks to economic growth and the inflation outlook.Energy prices have soared since the incursion into Ukraine, with Brent crude breaking through $100 a barrel for the first time since 2014, when Russia annexed Crimea. Further gains in energy costs could feed through to prices at the pump and send overall inflation higher, economists say, complicating the Fed’s equations.Raphael Bostic, president of the Atlanta Fed, said on Thursday that while he is watching events in Ukraine closely, it is “appropriate” for the Fed to move away from its emergency policy stance. Mary Daly, San Francisco Fed president, and Thomas Barkin of the Richmond Fed, have expressed similar views, as has Loretta Mester, president of the Cleveland Fed and a voting member of the Federal Open Market Committee this year. More

Moscow relies on the money it makes by selling oil and gas, but that energy fuels Europe’s economy and heats its homes.The punishing sanctions that the United States and European Union have so far announced against Russia for its invasion of Ukraine include shutting the government and banks out of global financial markets, restricting technology exports and freezing assets of influential Russians. Noticeably missing from that list is a reprisal that might cause Russia the most pain: choking off the export of Russian fuel.The omission is not surprising. In recent years, the European Union has received nearly 40 percent of its gas and more than a quarter of its oil from Russia. That energy heats Europe’s homes, powers its factories and fuels its vehicles, while pumping enormous sums of money into the Russian economy.How each country’s dependence on Russian gas has changedShare of total natural gas imports from Russia More

Outbound shipments in February were expected to increase by 18.2% from a year earlier, according to the median forecast of 11 economists, while imports were expected to rise 25.2%.”We expect a solid growth in sales of key exporting items, including semiconductors, but with a continued rise in oil prices, the trade balance will remain in the negative territory,” said Park Sung-woo, an analyst at DB Financial Investment.The economy reported a $4.83 billion trade deficit in January, as imports increased by 35.3%, outpacing a 15.2% rise in exports.Economies around the world have suffered from a global chip supply shortage and other production bottlenecks because of the rapid spread of the highly infectious Omicron variant of the coronavirus.The supply chain disruption from the Russia-Ukraine conflict is seen limited for now, but it could pose further risks in longer term, with the chip industry taking a hit.The full-month trade data will be published on Tuesday at 9 a.m. (0000 GMT).In the same Reuters poll, economists projected the consumer price index in February would rise 3.5% from a year earlier, slower than in January but not far from a decade-high 3.8% rise in November.That would mark the fifth month of inflation above 3%. The Bank of Korea sharply upgraded its inflation forecast for 2022 to 3.1% from 2% and signalled the bank may need a quicker pace of tightening should price pressures build further because of the Ukraine crisis.On Thursday however, the bank kept the base rate steady at 1.25% to gauge the impact of its back-to-back hikes before raising again.Friday’s poll also showed eight economists gave median estimates of a 0.6% decrease in industrial output in January from December. More

TOKYO (Reuters) -Consumer inflation in Japan’s capital accelerated in February at the fastest annual pace in more than two years, suggesting that soaring fuel and food costs will weigh on consumption and the country’s fragile economic recovery.Analysts expect the crisis in Ukraine to further pace up inflation in coming months through a spike in global energy and commodity prices, adding to woes for Japan’s economy that is heavy reliant on raw material imports.”Import costs were already rising, so any further rise in raw material prices from the Ukraine crisis would deal a huge blow to Japan’s consumption and corporate profits,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.The overall consumer price index (CPI) for Tokyo, considered a leading indicator of nationwide trends, rose 1.0% in February from a year earlier, marking the fastest pace since December 2019, government data showed on Friday.The Tokyo core CPI, which excludes volatile fresh food but includes energy costs, increased 0.5% in February from a year earlier, accelerating from a 0.2% gain in January. It compared with a median market forecast for a 0.4% gain.A 24.2% spike in energy prices was the key driver of the rise in core CPI, underscoring the pain higher fuel costs are inflicting on households and retailers.Prices also rose for a range of foods and services, though the increase was moderated by a temporary drag from cuts in cellphone fees, the data showed.”If energy prices continue to rise, Japan’s core CPI may hit 2% in April and may not slow much thereafter,” Shinke said.Prices for international crude benchmark Brent shot above $105 a barrel after Russia, one of the world’s top oil producers, attacked Ukraine.Prime Minister Fumio Kishida said the government was ready to take further steps to curb fuel costs, on top of subsidies already put in place, to cushion the blow to households.But there is uncertainty on how much such moves could support consumption with rising raw material costs already leading to higher prices for various grocery products including snacks, soy sauce and cooking oil.Japan’s economy has recovered from the COVID-19 pandemic’s initial hit thanks to robust global demand, though curbs on economic activity to combat rising cases of the new Omicron variant have weighed on consumption.Sluggish consumption and weak wage growth have discouraged firms from passing on higher costs to households, keeping consumer inflation distant from the central bank’s 2% target. More

A conflict that could develop into Europe’s biggest since the second world war has shattered hopes of a strong global economic recovery from coronavirus at least in the short term.Russia’s invasion of Ukraine on Thursday shook financial markets and the increased geopolitical tensions are set to exacerbate high inflation and supply chain bottlenecks. The direct impacts of lower trade with Russia, economic sanctions levied on Moscow by the US and EU, and financial contagion are likely to be outweighed by the indirect consequences from the effect on business and consumer confidence and commodity markets, economists said.These repercussions could range from relatively limited to extremely serious. If energy prices continued to soar, for example, it could easily tip the global economy into a second recession in three years. Economists said the following issues are the big ones to watch. How bad does the war get?Russian president Vladimir Putin’s desired endgame is unclear. Analysts are considering several scenarios that range from a change of government in Kyiv to a Moscow-friendly regime to a wholesale attempt to redraw the international boundaries of Europe and beyond. Holger Schmieding, chief economist at Berenberg Bank, said the first thing to consider was “how bad does the war get?” — which would determine the likely response in financial and energy markets in the days to come. The wider global response will be just as crucial, said other economists. Tim Ash, economist at BlueBay Asset Management, singled out China, which has signalled its willingness to help Russia manage the financial fallout from its military actions. Beijing’s response would be vital in terms of the wider consequences, which could range from the malign — for example, more tension over its own relationship with Taiwan — to more benign diplomatic outcomes. “Either [China] sees it as an opportunity to go into Taiwan, or as an opportunity to improve relations with the US,” he said. Are markets able to withstand the geopolitical shock?Leading global financial markets were sharply down on Thursday but the outcome could have been more extreme, suggesting they were surprised by Putin’s actions but do not yet think the most severe market shocks, akin to a financial crisis, are likely. This leaves open the possibility that they have further to fall, with consequences for corporate and household wealth, consumption and global confidence. Neil Shearing, chief economist at Capital Economics, noted that, while there was a sell-off in equities, bond yields declined and credit spreads have not widened much, suggesting the market reaction was orderly and not indicative yet of expectations of a wider war across Europe.The avoidance of a market meltdown was not global and many emerging economies were hit with much sharper swings. Kevin Daly, portfolio manager at Aberdeen Asset Management, noted steep sell-offs in Ghana, Turkey, Egypt and Pakistan, citing a flight to safety from financially vulnerable countries.Randy Kroszner, deputy dean at the University of Chicago Booth School of Business and a former Federal Reserve governor, said recession risks would show up in the difference in yields of investment-grade compared with non-investment-grade debt, which had not widened extensively on Thursday. He added that the yields on sovereign debt of countries geographically close to the crisis would offer a good indicator of whether markets began to fear a wider conflict.How badly could confidence be hit?Crucial for the global economy will be whether households and businesses become significantly more cautious, spending less and saving more in response to Russia’s actions. Ian Shepherdson, chief economist at Pantheon Macroeconomics, said slower growth was inevitable. “Consumer sentiment everywhere will weaken further . . . That has to mean slower economic growth than would otherwise have been expected in Europe, the US and most emerging markets,” he added.Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Depending on how long this crisis continues there could be a significant loss of confidence among businesses and consumers.”Economists also warned about the pressures on businesses exposed to supply chains in which Russia plays a crucial but little-known role, such as the production of critical raw materials. The country supplies about 40 per cent of the world’s palladium, a key component of catalytic converters in petrol-powered vehicles as well as electronic devices. How do energy concerns affect the wider inflation picture?Europe is highly dependent on gas from Russia and cannot quickly find alternative supplies if pipelines are cut. With a mild winter coming to an end and storage levels across Europe higher than had been expected by some energy analysts, the issue of gas supplies has become less acute but will return later in the year if the crisis continues.The more immediate concern is the impact of the crisis on the price of oil, gas and other commodities. A sharp rise would add to inflation and hit consumers.“Our modelling suggests that in a worst-case scenario oil prices could rise to $120-140 a barrel,” said Capital Economics’ Shearing. “If sustained through the rest of this year, and we see a corresponding increase in European natural gas prices, that would add about 2 percentage points to advanced economy inflation — more in Europe, less in the US. So that’s an additional squeeze on real incomes.” Pantheon’s Shepherdson said the US would be relatively insulated overall, although the continued rise in prices would hit shale oil and gas producers but hit the pockets of American energy consumers.This may add to pressure on central banks to boost interest rates. Already, the US Federal Reserve last month signalled it would begin raising rates from March to control rampant inflation. Fed chair Jay Powell last month declined to say how many rate rises there would be this year.Krishna Guha, vice-chair of Evercore ISI, said the invasion “complicates the ability of central banks on both sides of the Atlantic to engineer a soft landing from the pandemic inflation surge”, and expected financial markets to scale back their expectations that central banks would raise interest rates.

Video: Russian troops heading ‘at speed’ to Kyiv More