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    Fed Officials Appear Unlikely to Change Course Amid Ukraine Conflict

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    Conflict in Ukraine appears unlikely to shake Federal Reserve officials from their plans to pull back support for the economy at this point, but the rapid escalation in tension is sure to draw policymaker attention and could make for even higher inflation in the near term.The central bank has two jobs — fostering full employment and stable prices — and it has been preparing to raise interest rates and make other policy adjustments too cool down the economy as inflation runs at its fastest pace in 40 years.Oil and gas prices have already risen during the conflict and could continue to climb, leading to a higher peak in headline inflation, which includes prices at the pump. The Fed typically avoids reacting to fluctuations in energy prices when setting its policy, given the volatility of fuel costs, but the potential disruption could make ongoing inflation trends all the more painful for consumers.“The Federal Reserve pays very close attention to geopolitical events, and this one of course in particular as it’s the most prominent at this point,” Michelle Bowman, a Fed governor, said on Monday.Ms. Bowman noted that the U.S. has minor banking, financial, and trade interests with Russia, and that “we don’t believe that would have a significant impact” on the economy given the small size of those relationships.“But we do recognize that there are significant opportunities for potential impacts on the energy markets, as we’re moving forward, if things were to deteriorate,” Ms. Bowman added. “Obviously we’ll continue to watch that, and if we believe that might have some influence on the global economy, we’ll take that into account as we’re going into our meetings and discussing the economy more broadly.”High fuel prices could weigh on consumer spending on other goods and services as families devote more of their monthly budgets to energy. If the potential for war makes consumers uncertain about the future or sends stock prices plummeting, it also could weigh on demand as nervous shoppers retrench.Central bankers noted in minutes of their most recent meeting that geopolitical risks “could cause increases in global energy prices or exacerbate global supply shortages,” but also that they were a risk to the outlook for growth.But officials have painted it as more of one risk among many than as a pivotal point of concern.“We actually have seen fighting in this area of the world in the past,” James Bullard, the president of the Federal Reserve Bank of St. Louis, said on CNBC last week. “I do think it’s quite an important foreign policy issue, but I’m not seeing it as a leading macroeconomic issue, at least at this point.”Assessing exactly what the conflict between Russia and Ukraine will mean for the American economy is challenging because it is unclear how much tensions will escalate and because it is not obvious how Russia might respond as the U.S. and Europe prepare sanctions.Plus, while rising fuel prices could push up inflation, global unease is likely to push the value of the dollar higher as global investors move into what they see as “safe-haven” assets. That could make imported goods cheaper, working in the opposite direction to rising fuel costs. More

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    What’s at Stake for the Global Economy as Conflict Looms in Ukraine

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    Countries that depend on the region’s rich supply of energy, wheat, nickel and other staples could feel the pain of price spikes.After getting battered by the pandemic, supply chain chokeholds and leaps in prices, the global economy is poised to be sent on yet another unpredictable course by an armed clash on Europe’s border.Even before the Kremlin ordered Russian troops into separatist territories of Ukraine on Monday, the tension had taken a toll. The promise of punishing sanctions in return by President Biden and the potential for Russian retaliation had already pushed down stock returns and driven up gas prices.An outright attack by Russian troops could cause dizzying spikes in energy and food prices, fuel inflation fears and spook investors, a combination that threatens investment and growth in economies around the world.However harsh the effects, the immediate impact will be nowhere near as devastating as the sudden economic shutdowns first caused by the coronavirus in 2020. Russia is a transcontinental behemoth with 146 million people and a huge nuclear arsenal, as well as a key supplier of the oil, gas and raw materials that keep the world’s factories running. But unlike China, which is a manufacturing powerhouse and intimately woven into intricate supply chains, Russia is a minor player in the global economy.Italy, with half the people and fewer natural resources, has an economy that is twice the size. Poland exports more goods to the European Union than Russia.“Russia is incredibly unimportant in the global economy except for oil and gas,” said Jason Furman, a Harvard economist who was an adviser to President Barack Obama. “It’s basically a big gas station.”An underground gas storage facility in Kasimov, east of Moscow. Russia supplies nearly 40 percent of Europe’s natural gas.Andrey Rudakov/BloombergOf course, a closed gas station can be crippling for those who depend on it. The result is that any economic damage will be unevenly spread, intense in some countries and industries and unnoticed in others.Europe gets nearly 40 percent of its natural gas and 25 percent of its oil from Russia, and is likely to be walloped with spikes in heating and gas bills, which are already soaring. Natural gas reserves are at less than a third of capacity, with weeks of cold weather ahead, and European leaders have already accused Russia’s president, Vladimir V. Putin, of reducing supplies to gain a political edge.And then there are food prices, which have climbed to their highest level in more than a decade largely because of the pandemic’s supply chain mess, according to a recent United Nations report. Russia is the world’s largest supplier of wheat, and together with Ukraine, accounts for nearly a quarter of total global exports. For some countries, the dependence is much greater. That flow of grain makes up more than 70 percent of Egypt and Turkey’s total wheat imports.This will put further strain on Turkey, which is already in the middle of an economic crisis and struggling with inflation that is running close to 50 percent, with skyrocketing food, fuel and electricity prices.And as usual, the burden falls heaviest on the most vulnerable. “Poorer people spend a higher share of incomes on food and heating,” said Ian Goldin, a professor of globalization and development at Oxford University.Ukraine, long known as the “breadbasket of Europe,” actually sends more than 40 percent of its wheat and corn exports to the Middle East or Africa, where there are worries that further food shortages and price increases could stoke social unrest.Lebanon, for example, which is experiencing one of the most devastating economic crises in more than a century, gets more than half of its wheat from Ukraine, which is also the world’s largest exporter of seed oils like sunflower and rapeseed.On Monday, the White House responded to Mr. Putin’s decision to recognize the independence of two Russian-backed territories in the country’s east by saying it would begin imposing limited sanctions on the so-called Donetsk and Luhansk People’s Republics. Jen Psaki, the White House press secretary, said Mr. Biden would soon issue an executive order prohibiting investment, trade and financing with people in those regions.Analysts watching the unfolding conflict have mapped out a range of scenarios from mild to severe. The fallout on working-class families and Wall Street traders depends on how an invasion plays out: whether Russian troops stay near the border or attack the Ukrainian capital, Kyiv; whether the fighting lasts for days or months; what kind of Western sanctions are imposed; and whether Mr. Putin responds by withholding critical gas supplies from Europe or launching insidious cyberattacks.“Think about it rolling out in stages,” said Julia Friedlander, director of the economic statecraft initiative at the Atlantic Council. “This is likely to play out as a slow motion drama.”As became clear from the pandemic, minor interruptions in one region can generate major disruptions far away. Isolated shortages and price surges— whether of gas, wheat, aluminum or nickel — can snowball in a world still struggling to recover from the pandemic.“You have to look at the backdrop against which this is coming,” said Gregory Daco, chief economist for EY-Parthenon. “There is high inflation, strained supply chains and uncertainty about what central banks are going to do and how insistent price rises are.”Ukraine’s port of Mykolaiv. The Middle East and Africa are especially reliant on Ukraine’s exports of wheat and corn.  Brendan Hoffman for The New York TimesThe additional stresses may be relatively small in isolation, but they are piling on economies that are still recovering from the economic body blows inflicted by the pandemic.What’s also clear, Mr. Daco added, is that “political uncertainty and volatility weigh on economic activity.”That means an invasion could have a dual effect — slowing economic activity and raising prices.In the United States, the Federal Reserve is already confronting the highest inflation in 40 years, at 7.5 percent in January, and is expected to start raising interest rates next month. Higher energy prices set off by a conflict in Europe may be transitory but they could feed worries about a wage-price spiral.“We could see a new burst of inflation,” said Christopher Miller, a visiting fellow at the American Enterprise Institute and an assistant professor at Tufts University.Also fueling inflation fears are possible shortages of essential metals like palladium, aluminum and nickel, creating another disruption to global supply chains already suffering from the pandemic, trucker blockades in Canada and shortages of semiconductors.The price of palladium, for example, used in automotive exhaust systems, mobile phones and even dental fillings, has soared in recent weeks because of fears that Russia, the world’s largest exporter of the metal, could be cut off from global markets. The price of nickel, used to make steel and electric car batteries, has also been jumping.It’s too early to gauge the precise impact of an armed conflict, said Lars Stenqvist, the chief technology officer of Volvo, the Swedish truck maker. But he added, “It is a very, very serious thing.”“We have a number of scenarios on the table and we are following the developments of the situation day by day,” Mr. Stenqvist said Monday.The West has taken steps to blunt the impact on Europe if Mr. Putin decides to retaliate. The United States has ramped up delivery of liquefied natural gas and asked other suppliers like Qatar to do the same.A front line position in Luhansk Oblast, in eastern Ukraine, a scene of mortar attacks. “This is likely to play out as a slow motion drama,” said one analyst.Tyler Hicks/The New York TimesThe demand for oil might add momentum to negotiations to revive a deal to curb Iran’s nuclear program. Iran, which is estimated to have as many as 80 million barrels of oil in storage, has been locked out of much of the world’s markets since 2018, when President Donald J. Trump withdrew from the nuclear accord and reimposed sanctions.Some of the sanctions against Russia that the Biden administration is considering, such as cutting off access to the system of international payments known as SWIFT or blocking companies from selling anything to Russia that contains American-made components, would hurt anyone who does business with Russia. But across the board, the United States is much less vulnerable than the European Union, which is Russia’s largest trading partner.Americans, as Mr. Biden has already warned, are likely to see higher gasoline prices. But because the United States is itself a large producer of natural gas, those price increases are not nearly as steep and as broad as elsewhere. And Europe has many more links to Russia and engages in more financial transactions — including paying for the Russian gas.Oil companies like Shell and Total have joint ventures in Russia, while BP boasts that it “is one of the biggest foreign investors in Europe,” with ties to the Russian oil company Rosneft. Airbus, the European aviation giant, gets titanium from Russia. And European banks, particularly those in Germany, France and Italy, have lent billions of dollars to Russian borrowers.“Severe sanctions that hurt Russia painfully and comprehensively have potential to do huge damage to European customers,” said Adam Tooze, director of the European Institute at Columbia University.Depending on what happens, the most significant effects on the global economy may manifest themselves only over the long run.One result would be to push Russia to have closer economic ties to China. The two nations recently negotiated a 30-year contract for Russia to supply gas to China through a new pipeline.“Russia is likely to pivot all energy and commodity exports to China,” said Carl Weinberg, chief economist at High Frequency Economics.The crisis is also contributing to a reassessment of the global economy’s structure and concerns about self-sufficiency. The pandemic has already highlighted the downsides of far-flung supply chains that rely on lean production.Now Europe’s dependence on Russian gas is spurring discussions about expanding energy sources, which could further sideline Russia’s presence in the global economy.“In the longer term, it’s going to push Europe to diversify,” said Jeffrey Schott, a senior fellow working on international trade policy at the Peterson Institute for International Economics. As for Russia, the real cost “would be corrosive over time and really making it much more difficult to do business with Russian entities and deterring investment.” More

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    Why Companies Struggled to Navigate Olympics Sponsorships

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    The debacle over Olympic sponsorship shows how the U.S.-China relationship has turned into a minefield for companies trying to do business in both countries.WASHINGTON — Companies usually shell out for Olympic sponsorship because it helps their business and reflects well on their brands. But this year, with the Olympics in Beijing, Procter & Gamble paid even more to try to prevent any negative fallout from being associated with China’s repressive and authoritarian government.The company, one of 13 “worldwide Olympic partners” that make the global sports competition possible, hired Washington lobbyists last year to successfully defeat legislation that would have barred sponsors of the Beijing Games from selling their products to the U.S. government. The provision would have blocked Pampers, Tide, Pringles and other Procter & Gamble products from military commissaries, to protest companies’ involvement in an event seen as legitimizing the Chinese government.“This amendment would punish P.&G. and the Olympic movement, including U.S. athletes,” Sean Mulvaney, the senior director for global government relations at Procter & Gamble, wrote in an email to congressional offices in August.Some of the world’s biggest companies are caught in an uncomfortable situation as they attempt to straddle a widening political gulf between the United States and China: What is good for business in one country is increasingly a liability in the other.China is the world’s biggest consumer market, and for decades, Chinese and American business interests have described their economic cooperation as a “win-win relationship.” But gradually, as China’s economic and military might have grown, Washington has taken the view that a win for China is a loss for the United States.The decision to locate the 2022 Olympic Games in Beijing has turned sponsorship, typically one of the marketing industry’s most prestigious opportunities, into a minefield.Companies that have sponsored the Olympics have attracted censure from politicians and human rights groups, who say such contracts imply tacit support of atrocities by the Chinese Communist Party, including human rights violations in Xinjiang, censorship of the media and mass surveillance of dissidents.“One thing our businesses, universities and sports leagues don’t seem to fully understand is that, to eat at the C.C.P.’s trough, you will have to turn into a pig,” Yaxue Cao, editor of ChinaChange.org, a website that covers civil society and human rights, told Congress this month.The tension is playing out in other areas as well, including with regards to Xinjiang, where millions of ethnic minorities have been detained, persecuted or forced into working in fields and factories. In June, the United States will enact a sweeping law that will expand restrictions on Xinjiang, giving the United States power to block imports made with any materials sourced from that region.Multinational firms that are trying to comply with these new import restrictions have found themselves facing costly backlashes in China, which denies any accusations of genocide. H&M, Nike and Intel have all blundered into public relations disasters for trying to remove Xinjiang from their supply chains.Explore the Games Propaganda Machine: China has used a variety of tools such as bots and fake social media accounts to promote a vision of the Games that is free of controversy.Aussie Pride: Australia has won more medals than ever before at the 2022 Winter Games. Could the country turn into a winter sports wonderland?At High Speed: The ‘Snow Dream’ train line, built to serve the Winter Olympics, has been a source of excitement — and a considerable expense.Reporter’s View: A typical day in Beijing for our reporters may include a 5 a.m. alarm, six buses, a pizza lunch and lots of live-blogging. For some, it’s the first time back in China in a while.Harsher penalties could be in store. Companies that try to sever ties with Xinjiang may run afoul of China’s anti-sanctions law, which allows the authorities to crack down on firms that comply with foreign regulations they see as discriminating against China.Beijing has also threatened to put companies that cut off supplies to China on an “unreliable entity list” that could result in penalties, though to date the list doesn’t appear to have any members.“Companies are between a rock and a hard place when it comes to complying with U.S. and Chinese law,” said Jake Colvin, the president of the National Foreign Trade Council, which represents companies that do business internationally.President Biden, while less antagonistic than his predecessor, has maintained many of the tough policies put in place by President Donald J. Trump, including hefty tariffs on Chinese goods and restrictions on exports of sensitive technology to Chinese firms.The Biden administration has shown little interest in forging trade deals to help companies do more business abroad. Instead, it is recruiting allies to ramp up pressure on China, including by boycotting the Olympics, and promoting huge investments in manufacturing and scientific research to compete with Beijing. The pressures are not only coming from the United States. Companies are increasingly facing a complicated global patchwork of export restrictions and data storage laws, including in the European Union. Chinese leaders have begun pursuing “wolf warrior” diplomacy, in which they are trying to teach other countries to think twice before crossing China, said Jim McGregor, chairman of APCO Worldwide’s greater China region.He said his company was telling clients to “try to comply with everybody, but don’t make a lot of noise about it — because if you’re noisy about complying in one country, the other country will come after you.”Some companies are responding by moving sensitive activities — like research that could trigger China’s anti-sanctions law, or audits of Xinjiang operations — out of China, said Isaac Stone Fish, the chief executive of Strategy Risks, a consultancy.An NBC production crew in Beijing. An effort to prevent Olympic sponsors, like NBC, from doing business with the U.S. government was cut from a defense bill last year.Gabriela Bhaskar/The New York TimesOthers, like Cisco, have scaled back their operations. Some have left China entirely, though usually not on terms they would choose. For example, Micron Technology, a chip-maker that has been a victim of intellectual property theft in China, is closing down a chip design team in Shanghai after competitors poached its employees.“Some companies are taking a step back and realizing that this is perhaps more trouble than it’s worth,” Mr. Stone Fish said.But many companies insist that they can’t be forced to choose between two of the world’s largest markets. Tesla, which counts China as one of its largest markets, opened a showroom in Xinjiang last month.“We can’t leave China, because China represents in some industries up to 50 percent of global demand and we have intense, deep supply and sales relationships,” said Craig Allen, the president of the U.S.-China Business Council.Companies see China as a foothold to serve Asia, Mr. Allen said, and China’s $17 trillion economy still presents “some of the best growth prospects anywhere.”“Very few companies are leaving China, but all are feeling that it’s risk up and that they need to be very careful so as to meet their legal obligations in both markets,” he said.American politicians of both parties are increasingly bent on forcing companies to pick a side.“To me, it’s completely appropriate to make these companies choose,” said Representative Michael Waltz, a Florida Republican who proposed the bill that would have prevented Olympic sponsors from doing business with the U.S. government.Mr. Waltz said participation in the Beijing Olympics sent a signal that the West was willing to turn a blind eye to Chinese atrocities for short-term profits.The amendment was ultimately cut out of a defense-spending bill last year after active and aggressive lobbying by Procter & Gamble, Coca-Cola, Intel, NBC, the U.S. Chamber of Commerce and others, Mr. Waltz said.Procter & Gamble’s lobbying disclosures show that, between April and December, it spent more than $2.4 million on in-house and outside lobbyists to try to sway Congress on a range of tax and trade issues, including the Beijing Winter Olympics Sponsor Accountability Act.Lobbying disclosures for Coca-Cola, Airbnb and Comcast, the parent company of NBC, also indicate the companies lobbied on issues related to the Olympics or “sports programming” last year.Procter & Gamble and Intel declined to comment. Coca-Cola said it had explained to lawmakers that the legislation would hurt American military families and businesses. NBC and the Chamber of Commerce did not respond to requests for comment.Many companies have argued they are sponsoring this year’s Games to show support for the athletes, not China’s system of government.In a July congressional hearing, where executives from Coca-Cola, Intel, Visa and Airbnb were also grilled about their sponsorship, Mr. Mulvaney said Procter & Gamble was using its partnership to encourage the International Olympic Committee to incorporate human rights principles into its oversight of the Games.“Corporate sponsors are being a bit unfairly maligned here,” Anna Ashton, a senior fellow at the Asia Society Policy Institute, said in an event hosted by the Center for Strategic and International Studies, a Washington think tank.Companies had signed contracts to support multiple iterations of the Games, and had no say over the host location, she said. And the funding they provide goes to support the Olympics and the athletes, not the Chinese government.“Sponsorship has hardly been an opportunity for companies this time around,” she said. More

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    For China, Hosting the Olympics Is Worth Every Billion

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    For many cities, the Games make no economic sense. National pride and an enthusiasm for building transportation infrastructure change the equation for Beijing.ZHANGJIAKOU, China — To make an Olympic ski jump, China clad a hillside in steel and blanketed it with artificial snow. To construct a high-speed rail line linking the venues and Beijing, engineers blasted tunnels through the surrounding mountains. And to keep the coronavirus at bay, workers are conducting tens of thousands of P.C.R. tests on Games participants every day.Hosting the Winter Olympics is costing China billions of dollars, a scale of expenditure that has made the event less appealing to many cities around the world in recent years. More and more of them have concluded that the Games are not worth being left with a hefty bill, white elephant stadiums and fewer benefits from tourism than they had hoped.But China looks at the Games with a different calculus. Beijing has long relied on heavy investments in building railway lines, highways and other infrastructure to provide millions of jobs to its citizens and reduce transportation costs. With the 2022 Games, it also hopes to nurture an abiding interest in skiing, curling, ice hockey and other winter sports that could increase consumer spending, particularly in the country’s chilly and economically struggling northeast.The Zhangjiakou National Ski Jumping Center for the 2022 Winter Olympics. Beijing hopes the Games will nurture interest in skiing and other winter sports that could boost consumer spending.Hiroko Masuike/The New York TimesPerhaps most important of all to China’s leader, Xi Jinping, the Olympics are a chance to demonstrate to the world his country’s unity and confidence under his leadership.“For China’s international image, prestige, and face, as the Chinese would say, nothing is too expensive,” said Jean-Pierre Cabestan, a political scientist at Hong Kong Baptist University.Still, with China’s economy already slowing, and a dimming outlook for global growth, as well as concerns that the Omicron variant of the coronavirus would lead to more shutdowns and choking of global supply chains, Beijing has been wary of spiraling costs. Even Mr. Xi acknowledged the event had to be streamlined, saying last year that the aim was to hold a “simple, safe, splendid” event.Making hockey skates at Hongwei Sports Goods Company’s facilities in Zhangjiakou.Kevin Frayer/Getty ImagesPractically every Olympic Games in recent years has triggered disputes over cost overruns. A study at Oxford University had found that the operating costs of Olympics held since 1960 have averaged nearly three times what the host cities originally bid.The city of Sochi in Russia, which hosted the Winter Olympics in 2014, spent and invested more than $50 billion — half of which was on infrastructure. When Beijing hosted the Summer Olympics in 2008, it said it had spent $6.8 billion, but that did not include the tens of billions more it used to build roads, stadiums, subway lines and an airport terminal.Names to WatchKamila Valieva: The doping case surrounding the Russian figure skater, who will be allowed to compete but won’t be able to receive medals, echoes another dark Olympic era.Kaillie Humphries: The bobsledder, who left Canada after accusing her coach of mental abuse, won gold for the U.S. in monobob.Erin Jackson: The speedskater’s gold ended a U.S. drought and made her the first African American to medal in the sport.Chris Corning: The American snowboarder, who is more calculating and quiet than his competitors, thinks his sport has an image problem. He wants to fix it.This time, China has set a budget of about $3 billion, a figure that includes the building of competition venues, but not projects like a $1 billion high-speed rail line and a $5 billion expressway.Yang Qian, an Olympic sport shooter, during the Winter Olympics torch relay at the Badaling Great Wall on Feb. 3 in Beijing. One way China saved money was by shortening the torch relay.Kevin Frayer/Getty ImagesThe pandemic is making the Games even more expensive. The bill for last summer’s Olympics in Tokyo included $2.8 billion in coronavirus prevention costs alone. China’s “zero Covid” strategy, which focuses on eradicating outbreaks, has meant infection control measures are much more elaborate.China’s concerns about the pandemic have dashed hopes that the Games would draw tourists. Organizers said last autumn that they would not sell tickets to foreign spectators. Then they announced last month that most Chinese residents would not get to go, either, prompting a last-minute rush by hotel managers in Beijing to cut drastically the high room rates they had set for February.Despite these difficulties, Chinese authorities have insisted that they have stayed within the operating budget.Officials have said the lack of spectators has meant fewer employees are needed at the Games. China also saved money by canceling a welcoming ceremony for foreign visitors and shortening the torch relay to just three days, the Beijing organizing committee said in an emailed reply to questions. Beijing has also been able to reuse competition venues, a giant media center and other facilities built for the 2008 Summer Olympics.The National Stadium, also known as the Bird’s Nest. Hosting the Winter Olympics is costing China billions of dollars, a scale of expenditure that has made the event less appealing to many cities.Hiroko Masuike/The New York TimesAt $3.1 billion, China’s operating budget is comparable to the average, inflation-adjusted cost of hosting previous Winter Olympics, according to the University of Oxford researchers.“Judging by the cost of previous Winter Olympics, that should be enough to cover the cost, especially when you consider that many of the facilities have already been built,” said one of the experts, Bent Flyvbjerg, a professor of major program management at Oxford.But it is hard to assess what portion of the coronavirus prevention costs, if any, is being included in the budget, Mr. Flyvbjerg said. Chinese accounting is often opaque, and there are many budgets in which health spending can be counted, he said.The government has also pressed businesses to take on more of the cost of hosting the Games. Other host cities of previous Olympics spent heavily to build lodging for athletes and journalists and a media center. China has taken a different approach.In Zhangjiakou, an area near Beijing where some competitions are being held, the Chinese authorities have temporarily taken over the Malaysian-owned Genting Secret Garden ski resort. The resort expanded its capacity to 3,800 rooms and vacation apartments, up from 380 before China won its Olympic bid. Lim Chee Wah, the founder and a co-owner of the resort, said in an interview that he had not been told how much the government would compensate him for the use of the resort for most of the winter season, but that he trusted it would be fair.Apartments at the Genting Secret Garden ski resort in 2019. The resort is near the venue for some of the events at the 2022 Games.Greg Baker/Agence France-Presse — Getty Images“We said, fine, thank you, but we’ll negotiate how to do the compensation — that will be done later,” he said.China also doesn’t count long-term infrastructure investments made in the years before the Games.The national government spent $2 billion building an expressway from northwest Beijing to Yanqing, where Olympic sliding and Alpine skiing events are being held, and an additional $3.6 billion to extend the expressway to the Taizicheng valley, where the ski resorts are.Before Beijing won its bid to host the 2022 Olympics, the government began spending $8.4 billion on a high-speed rail line that whisks travelers from Beijing toward Inner Mongolia at speeds of up to 217 miles per hour. After winning the Olympics, Beijing added $1 billion to that project to build an extra segment that peels off the main line and goes up into the mountains to Taizicheng.“The Chinese are not counting any of that — they say they would have built that anyway,” said Andrew Zimbalist, a professor at Smith College who has published three books about the economics of the Olympics. “I question whether they were going to do it anyway, and if they were going to do it anyway, why do they have to host the Olympics.”Big Air Shougang, the location of the freestyle skiing and snowboarding events.Hiroko Masuike/The New York TimesResort owners like Mr. Lim of Genting hope the new infrastructure will help develop the industry. In expanding the resort 10-fold ahead of the Olympics, he said, he had been told to expect that the national rail service would run 15 or 20 trains a day to the Taizicheng valley.In an email reply to questions, China’s national railway said it ran 15 bullet trains daily in each direction when the line opened at the end of 2019. But the schedule was cut drastically just a month later when the pandemic began, to five trains on most days, and an extra five on peak travel days.China regards the Olympics as transforming Beijing, which gets only a foot of natural snow most winters, into a global destination for winter sports.“The success in opening the Winter Olympics has brought positive economic benefits and created new sources of growth for the local economy,” said the top spokesman for the city of Beijing, Xu Hejian.Liu Yi More

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    Far From the Big City, New Economic Life

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    GAINESBORO, Tenn. — There is not much to suggest prosperity in Gainesboro, a hamlet of 920 in Tennessee’s Upper Cumberland region. Almost one in seven homes are vacant. One-quarter of the population lives in poverty.Yet from his office in the Jackson County Courthouse, County Mayor Randy Heady outlines a picture of plenty: Revenue from sales and occupancy taxes almost doubled in the last fiscal year, and he expects another 20 percent increase this year. “Sales tax is up, occupancy tax is up, liquor tax is up,” he said.And outsiders are flocking into the county. “They are coming from other states, trying to get away from the high taxes,” Mr. Heady said. “People are moving from Arizona and California, New York and New Jersey.”Economists have long voiced fear that rural places like this are being left behind. The last of the textile businesses, once an economic mainstay, departed in the 1990s. Jackson County and several other counties in the Upper Cumberland are considered “distressed” or “at risk” by the Appalachian Regional Commission. More

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    Inflation in Europe Expected to Peak Early This Year

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    Inflation in countries using the euro, which has soared to record-setting heights in recent months, is expected to peak in the first quarter of this year, the European Commission said on Thursday, as consumers feel the bite of higher energy prices and rising costs of key goods.Euro area inflation for the January-March period will reach 4.8 percent, up from 4.6 percent in the fourth quarter of last year, which was a record since the bloc started measuring inflation collectively in 1997, the commission said in its quarterly economic forecast. Inflation is expected to move down over the course of the year, but it won’t reach the 2 percent benchmark target set by the European Central Bank until 2023, the forecast said.Economies will continue to grow as the impacts of the pandemic ease, by an expected 4 percent in the euro area this year, according to the forecasts, and by the end of this year will have recovered all their pandemic-era economic losses.But inflation will outpace that average rate of economic expansion, eroding gains and the benefits that such growth would otherwise bring to Europeans.In comments to the news media, Paolo Gentiloni, the European commissioner for the economy, said that the mix of high energy prices and persistent staff shortages caused by the coronavirus were hitting Europe’s economic recovery.“Supply constraints have grown and energy prices have continued to be very high,” Mr. Gentiloni said. “This has contributed to dent further manufacturing production and again pushed inflation above expectations, with a negative impact on consumers’ purchasing power.” More

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    From Liverpool to London, Inflation Means Tighter Wallets and Colder Homes

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    LIVERPOOL, England — For the past few weeks Vincent Snowball hasn’t needed to use the weekly food bank that runs out of a church near Liverpool’s city center. But he’s still there each Tuesday, laying out fabric swatches to advertise his upholstering services, and to socialize with the people he grew up with.Like many people across Britain, Mr. Snowball, 61, has been forced to cut down his already modest expenses to stabilize his finances. Prices are rising at their fastest pace in three decades.“I go to Tesco and I get a shock,” he said, referring to Britain’s ubiquitous supermarket chain. The prices there are “troubling,” he said. Instead he shops at Aldi, the rapidly growing chain that claims to be the cheapest supermarket in Britain.Prices are rising steeply in the United States and across Europe, driven by rising energy costs and supply-chain issues triggered by the easing of pandemic rules. But in Britain, there is a fear that sharply escalating heat and electricity bills, combined with food inflation, will push millions more into poverty.The Bank of England on Thursday lifted interest rates for the second time in two months — moving before the Federal Reserve or the European Central Bank. But policymakers acknowledge there is little they can do about the global factors driving inflation.Up and down the country, people are turning their heat down or off, switching to cheaper supermarkets, taking fewer car trips, cutting out takeout and restaurant meals, and abandoning plans for vacations.Because natural gas prices have risen so much, Vincent Snowball rarely turns on his heat, using it mainly for hot water. “I’m very conscious about what I use,” he said.Mary Turner for The New York TimesThursday brought more painful news when the government’s price cap on energy bills was raised by 54 percent, or about 700 pounds ($953) annually, reflecting high global prices for natural gas. The increase will affect 22 million households beginning in April. That same month, a large rise in National Insurance, a payroll tax that finances the National Health Service, among other things, will also take effect, further shrinking take-home pay.Although inflation is expected to peak in April, at 7.25 percent, Bank of England economists say household finances will continue to erode: For the next two years, household incomes after inflation and taxes will be less than the year before, the bank said. This will be the third stretch of time in about a decade that real wages have shrunk in Britain.This period is “somewhat unprecedented because it comes on the back of a very huge Covid shock” and Brexit, said Arnab Bhattacharjee, a professor of economics at Heriot-Watt University in Edinburgh and a researcher at Britain’s National Institute of Economic and Social Research.Mr. Snowball’s gas bill has risen, after a surge in natural gas prices in Europe late last year, and so he mostly uses it for hot water. Despite living in the northwest of England, he rarely turns the heating on. “I’m very conscious about what I use,” he said.But there are limits to how much Mr. Snowball can withstand. He receives about £300 ($403) in state support toward his £550 monthly rent and another £213 a month in working tax credits, financial support for people on low incomes. There aren’t any luxuries to cut.Having cup of tea and a chat at the food pantry run by Micah Liverpool, a charity. Since the pandemic began, the number of Britons receiving the main public income benefit has doubled.Mary Turner for The New York Times“There’s millions of people like that,” Mr. Snowball said.Although the British economy has slowly shaken off much of the torpor from the sharp recession brought on by the coronavirus, millions aren’t enjoying the recovery. Since the start of the pandemic, the number of people receiving Universal Credit, the main government income benefit, doubled to six million. Since the peak nearly 11 months ago, it has fallen only to 5.8 million. The number of people using food banks also jumped, according to the Trussell Trust, a nonprofit that provides emergency food packages, and independent groups.A cost-of-living crunch was forewarned last fall but “what came as a surprise this time round was the degree of food price inflation,” Mr. Bhattacharjee said. “This has not happened in the past decade.” In December alone, food and nonalcoholic drink prices rose 1.3 percent, the fastest monthly pace since 2011.For more and more people, it’s impossible to ignore. Katie Jones’s main food shopping trip, which she does twice a month, used to cost up to £80; now it’s more likely to be £100. Ms. Jones, 33, works full time in Liverpool city center at a branch of a national coffee shop chain. She lives across the River Mersey with her partner and their three children where, in December, the energy bills increased from £95 a month to £140.“We no longer have takeaways in the house,” she said. “Partly it was for health reasons, but I also noticed just how much it costs.” And there are fewer date nights with her partner because she can’t push the cost of them out of her head.In Earlsfield, the local food bank has had to cut more expensive food and toiletry items from its packages.Mary Turner for The New York TimesFood inflation is hurting those who are trying to help. Managers of the Earlsfield Foodbank in southwest London recently decided to cut items from their offering — including juice, snacks, cheese and peanut butter — because they are too expensive now. And they will provide fewer toiletries and household items, such as laundry detergent.Each week, the food bank buys a wide variety of fresh vegetables and fruit, and other food, to supplement its donations. In the past few weeks, the cost of supplies has increased worryingly.“That number is going up and isn’t really sustainable throughout the year,” said Charlotte White, the manager.As the cost of purchases rises, so does the list of people seeking help. Last week, eight more people registered with Earlsfield Foodbank, and 71 people received food parcels. In March 2020, they were averaging 25 guests a week, with fewer families and working people.“Families are already at, if not beyond, breaking point,” said Ruth Patrick of the University of York and the lead academic of Covid Realities, a national project in which about 150 low-income parents and care-providers have documented their experiences through the pandemic. “We get a really dominant message coming through about fear and anxiety and worry about how people will get by.”“Probably, I was quite comfortable last year,” said Joanne Barker-Marsh. “Now there is no buffer.” She is considering selling her home, which is becoming less affordable.Mary Turner for The New York TimesThrough the project, Joanne Barker-Marsh, 49, has found some emotional, and at times financial, support. She lives in a two-bedroom house on the outskirts of Manchester with her 12-year-old son Harry, and worries that, with its high ceilings and uncarpeted floors, it is too cold. Understand Rising Gas Prices in the U.S.Card 1 of 5A steady rise. More

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    Britain Braces for Higher Rates as Bank of England Meets

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    In an effort to combat rapid price rises in Britain, the Bank of England raised interest rates on Thursday, its first back-to-back increases in more than 17 years, and said it would start to shrink its enormous holdings of government and corporate bonds.Inflation is already at its fastest pace in three decades: The annual rate rose to 5.4 percent in December. But by April the central bank expects it to climb to about 7.25 percent, the highest projection the bank has ever made. In response, the policymakers voted to raise interest rates by 25 basis points to 0.5 percent.But four of the nine policymakers wanted to do something bolder: a 50-basis point increase, a move twice as big. The bank has never approved a rate increase that large before.The Bank of England raised interest rates in December for the first time in three and half years, looking past the economic uncertainty created by Omicron and focusing on the battle against inflation.In the end, the bank only expects Omicron to have weighed on Britain’s economy in December and January, whereas inflation is proving a much more persistent problem. Inflation far exceeds the central bank’s 2 percent target and even after it’s expected to peak in April will stay above 5 percent for the rest of the year.Half of the increase in inflation between now and April will be because of higher energy prices, the Bank of England said. Earlier on Thursday, Ofgem, Britain’s energy regulator, announced that the price cap on energy bills would rise by 54 percent in April for 22 million households. The government has said it will try to mitigate the pain by giving millions of households £350, or $476, off bills this year in the form of grants and loans.The rest of the projected inflation increase over the next three months is expected to be split between higher prices for goods and services.One of the major concerns for policymakers is that businesses and consumers will begin to assume that rapid cost increases will continue, causing workers to demand higher wages in response and businesses to continue to raise their prices, fueling a cycle that keeps inflation rates higher for longer.In January, Catherine Mann, a member of the bank’s rate-setting committee, said it was the job of monetary policy to “lean against” expectations that could lead to this scenario.But there are already signs it is happening. The central bank’s economists expect wage settlements to rise by nearly 5 percent over the next year, based on surveys with businesses it consults.Still, prices are rising faster than wages. For months, the higher inflation rates have prompted concerns about a cost-of-living crisis in Britain, as the budgets of households, particularly low-income ones, are squeezed by the most rapid food price inflation in a decade, higher energy bills and other rising costs.The squeeze is set to be even worse than the central bank projected just three months ago. For 2022, the bank’s measure of net income after taxes and inflation is expected to fall by 2 percent from last year, and fall again in 2023. In November, the central bank had projected a 1.25 percent decline in 2022.Since 1990, that measure of income has only fallen twice before on an annual basis, in 2008 and 2011.But eventually the squeeze is destined to hamper the overall economy. Growth in gross domestic product is “expected to slow to subdued rates,” according to the minutes of rate-setting meeting which concluded on Wednesday. “The main reason for that is the adverse impact of higher global energy and tradable goods prices” on incomes and spending. The central bank also expects it to push the unemployment rate back up to 5 percent, after falling to 3.8 percent in the first quarter.That economic slowdown is expected to push inflation back below the central bank’s target by 2024.On Thursday, policymakers also voted to begin reducing the bank’s bond holdings. The bank will stop reinvesting the proceeds from bonds that mature in their holdings, which are made up of £875 billion in government bonds and £20 billion in corporate bonds. Over the course of this year and next year, £70 billion in government bonds will mature and shrink the size of the bank’s balance sheet. The bank will also sell its corporate bond holdings over the next two years. More