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    GDP Gain in First Quarter Revised Downward in U.S.

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    Consumers eased up on spending in the face of rising prices and high interest rates, Commerce Department data shows.Economic growth slowed more sharply early this year than initially estimated, as consumers eased up on spending amid rising prices and high interest rates.U.S. gross domestic product, adjusted for inflation, grew at a 1.3 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down from 3.4 percent in the final quarter of 2023 and below the 1.6 percent growth rate reported last month in the government’s preliminary first-quarter estimate.The data released on Thursday reflects more complete data than the initial estimate, released just a month after the quarter ended. The government will release another revision next month.The preliminary data fell short of forecasters’ expectations, but economists at the time were largely unconcerned, arguing that the headline G.D.P. figure was skewed by big shifts in business inventories and international trade, components that often swing wildly from one quarter to the next. Measures of underlying demand were significantly stronger.The revised data may be harder to dismiss. Consumer spending rose at a 2 percent annual rate — down from 3.3 percent in the fourth quarter, and 2.5 percent in the preliminary data for the last quarter — and measures of underlying demand were also revised down. An alternative measure of economic growth, based on income rather than spending, cooled to 1.5 percent in the first quarter, from 3.6 percent at the end of 2023.Still, the new data does little to change the bigger picture: The economy has slowed but remains fundamentally sound, buoyed by consumer spending that remains resilient even after the latest revisions. That spending is supported by rising incomes and the result of a strong job market that features low unemployment and rising wages. There is still no sign that the recession that forecasters spent much of last year warning about is imminent.Business investment, a sign of confidence in the economy, was actually revised up modestly in the latest data. Income growth, too, was revised up.Inflation, however, remains stubborn. Consumer prices rose at a 3.3 percent annual rate in the first three months of the year, slightly slower than in the preliminary data but still well above the Federal Reserve’s long-run target of 2 percent.In response, policymakers have raised interest rates to their highest level in decades and have said they will keep them there until inflation cools further. The modestly slower growth reflected in Thursday’s data is unlikely to change that approach.The Fed will get a more up-to-date snapshot of the economy on Friday, when the government releases data on inflation, income and spending in April. More

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    U.S. Economy Grew at 1.6% Rate in First-Quarter Slowdown

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    Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year.The U.S. economy remained resilient early this year, with a strong job market fueling robust consumer spending. The trouble is that inflation was resilient, too.Gross domestic product, adjusted for inflation, increased at a 1.6 percent annual rate in the first three months of the year, the Commerce Department said on Thursday. That was down sharply from the 3.4 percent growth rate at the end of 2023 and fell well short of forecasters’ expectations.Economists were largely unconcerned by the slowdown, which stemmed mostly from big shifts in business inventories and international trade, components that often swing wildly from one quarter to the next. Measures of underlying demand were significantly stronger, offering no hint of the recession that forecasters spent much of last year warning was on the way.“It would suggest some moderation in growth but still a solid economy,” said Michael Gapen, chief U.S. economist at Bank of America. He said the report contained “few signs of weakness overall.”But the solid growth figures were accompanied by an unexpectedly rapid acceleration in inflation. Consumer prices rose at a 3.4 percent annual rate in the first quarter, up from 1.8 percent in the final quarter of last year. Excluding the volatile food and energy categories, prices rose at a 3.7 percent annual rate.Taken together, the first-quarter data was the latest evidence that the Federal Reserve’s efforts to tame inflation have stalled — and that the celebration in financial markets over an apparent “soft landing” or gentle slowdown for the economy had been premature.We are having trouble retrieving the article content.Please enable JavaScript in your browser settings.Thank you for your patience while we verify access. If you are in Reader mode please exit and log into your Times account, or subscribe for all of The Times.Thank you for your patience while we verify access.Already a subscriber? Log in.Want all of The Times? Subscribe. More

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    U.S. Economy Grew at 3.3% Rate in Latest Quarter

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    The increase in gross domestic product, while slower than in the previous period, showed the resilience of the recovery from the pandemic’s upheaval.The U.S. economy continued to grow at a healthy pace at the end of 2023, capping a year in which unemployment remained low, inflation cooled and a widely predicted recession never materialized.Gross domestic product, adjusted for inflation, grew at a 3.3 percent annual rate in the fourth quarter, the Commerce Department said on Thursday. That was down from the 4.9 percent rate in the third quarter but easily topped forecasters’ expectations and showed the resilience of the recovery from the pandemic’s economic upheaval.The latest reading is preliminary and may be revised in the months ahead.Forecasters entered 2023 expecting the Federal Reserve’s aggressive campaign of interest-rate increases to push the economy into reverse. Instead, growth accelerated: For the full year, measured from the end of 2022 to the end of 2023, G.D.P. grew 3.1 percent, up from less than 1 percent the year before and faster than the average for the five years preceding the pandemic. (A different measure, based on average output over the full year, showed annual growth of 2.5 percent in 2023.)“Stunning and spectacular,” Diane Swonk, chief economist at KPMG, said of the latest data. “We’ll take the win.” More

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    War Has Already Hurt the Economies of Israel’s Nearest Neighbors

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    The impact on global growth of the Middle East violence has so far been contained. That’s not the case for Egypt, Lebanon and Jordan, which were already struggling.In the Red Sea, attacks by Iranian-backed Houthi militants on commercial ships continue to disrupt a crucial trade route and raise shipping costs. The threat of escalation there and around flash points in Lebanon, Iraq, Syria, Yemen and now Iran and Pakistan ratchets up every day.Despite the staggering death toll and wrenching misery of the violence in the Middle East, the broader economic impact so far has been mostly contained. Oil production and prices, a critical driver of worldwide economic activity and inflation, have returned to pre-crisis levels. International tourists are still flying into other countries in the Middle East like Saudi Arabia, the United Arab Emirates and Qatar.Yet for Israel’s next-door neighbors — Egypt, Lebanon and Jordan — the economic damage is already severe.An assessment by the United Nations Development Program estimated that in just three months, the Israel-Gaza war has cost the three countries $10.3 billion, or 2.3 percent of their combined gross domestic product. An additional 230,000 people in these countries are also expected to fall into poverty.Iranian-backed Houthi militants have been attacking commercial ships in the Red Sea.Sayed Hassan/Getty Images“Human development could regress by at least two to three years in Egypt, Jordan, and Lebanon,” the analysis warned, citing refugee flows, soaring public debt and declines in trade and tourism — a vital source of revenue, foreign currency and employment.That conclusion echoed an update last month by the International Monetary Fund, which said that it was certain to lower its forecast for the most exposed countries when it publishes its World Economic Outlook at the end of this month.The latest economic gut punches could not come at a worse time for these countries, said Joshua Landis, director of the Center for Middle East Studies at the University of Oklahoma.Economic activity across the Middle East and North Africa was already on a down slide, slipping to 2 percent growth in 2023 from 5.6 percent the previous year. Lebanon has been enmeshed in what the World Bank calls one of the world’s worst economic and financial crises in more than a century and half. And Egypt has been on the brink of insolvency.Since Hamas fighters attacked Israel from Gaza on Oct. 7, about 25,000 Palestinians have been killed by Israel, according to the Gazan health ministry. The strip has suffered widespread destruction and devastation. In Israel, where the Hamas attacks killed about 1,200 people, according to officials, and resulted in 240 being taken hostage, life has been upended, with hundreds of thousands of citizens called into military service and 200,000 displaced from border areas.In Jordan, Lebanon and Egypt, uncertainty about the war’s course is eating away at consumer and business confidence, which is likely to drive down spending and investment, I.M.F. analysts wrote.Rising prices in Egypt continue to gnaw at households’ buying power.Mauricio Lima for The New York TimesEgypt, the Arab world’s most populous country, has still not recovered from the rise in the cost of essential imports like wheat and fuel, a plunge in tourist revenue, and a drop in foreign investment caused by the coronavirus pandemic and the war in Ukraine.Lavish government spending on showy megaprojects and weapons caused Egypt’s debt to soar. When central banks around the world raised interest rates to curb inflation, those debt payments ballooned. Rising prices within Egypt continue to gnaw away households’ buying power and business’s plans for expansion.“No one wants to invest, but Egypt is too big to fail,” Mr. Landis said, explaining that the United States and I.M.F. are unlikely to let the country default on its $165 billion of foreign loans given its strategic and political importance.The drop in shipping traffic crossing into the Red Sea from the Suez Canal is the latest blow. Between January and August, Egypt brought in an average of $862 million per month in revenue from the canal, which carries 11 percent of global maritime trade.James Swanston, an emerging-markets economist at Capital Economics, said that according to the head of the Suez Canal Authority, traffic is down 30 percent this month from December and revenues are 40 percent weaker compared to 2023 levels.“That’s the biggest spillover effect,” he said.For these three struggling economies, the drop in tourism is particularly alarming. In 2019 tourism in Egypt, Lebanon and Jordan accounted for 35 percent to nearly 50 percent of their combined goods and services exports, according to the I.M.F.Displaced Palestinians on their way from the north of the Gaza Strip to its south last year.Samar Abu Elouf for The New York TimesIn early January, confirmed tickets for international arrivals to the wider Middle East region for the first half of this year were 20 percent higher than they were last year, according to ForwardKeys, a data-analysis firm that tracks global air travel reservations.But the closer the fighting, the bigger the decline in travelers. Tourism to Israel has mostly evaporated, further hammering an economy upended by full-scale war.In Jordan, airline bookings were down 18 percent. In Lebanon, where Israeli troops are fighting Hezbollah militants along the border, bookings were down 25 percent.“Fears of further regional escalation are casting a shadow over travel prospects in the region,” Olivier Ponti, vice president of insights at ForwardKeys.In Lebanon, travel and tourism has previously contributed a fifth of the country’s yearly gross domestic product.“The number one site in Lebanon is Baalbek,” said Hussein Abdallah, general manager of Lebanon Tours and Travels in Beirut. The sprawling 2,000-year-old Roman ruins are so spectacular that visitors have suggested that djinns built a palace there for the Queen of Sheba or that aliens constructed it as an intergalactic landing pad.Now, Mr. Abdallah said, “it is totally empty.” Mr. Abdallah said that since Oct. 7, his bookings have dropped 90 percent from last year. “If the situation continues like that,” he said, “many tour operators in Beirut will go out of business.”Travel to Egypt also dropped in October, November and December. Mr. Landis at the Middle East Center in Oklahoma mentioned that even his brother canceled a planned trip down the Nile, choosing to vacation in India instead.The top tourist site in Lebanon is the 2,000-year-old Roman ruins of Baalbek, said Hussein Abdallah, general manager of Lebanon Tours and Travels in Beirut. Now, he said, “it is totally empty.”Mohamed Azakir/ReutersKhaled Ibrahim, a consultant for Amisol Travel Egypt and a member of the Middle East Travel Alliance, said cancellations started to pour in after the attacks began. Like other tour operators he offered discounts to popular destinations like Sharm el-Sheik at the southern tip of the Sinai Peninsula, and occupancy hit about 80 percent of normal.He is less sanguine about salvaging the rest of what is considered the prime tourist season. “I can say this winter, January to April, will be quite challenging,” Mr. Ibrahim said from Medina in Saudi Arabia, where he was leading a tour. “Maybe business drops down to 50 percent.”Jim Tankersley More

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    The Stock and Bond Markets Are Getting Ahead of the Fed.

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    Stock and bond markets have been rallying in anticipation of Federal Reserve rate cuts. But don’t get swept away just yet, our columnist says.It’s too early to start celebrating. That’s the Federal Reserve’s sober message — though given half a chance, the markets won’t heed it.In a news conference on Wednesday, and in written statements after its latest policymaking meeting, the Fed did what it could to restrain Wall Street’s enthusiasm.“It’s far too early to declare victory and there are certainly risks” still facing the economy, Jerome H. Powell, the Fed chair, said. But stocks shot higher anyway, with the S&P 500 on the verge of a new record.The Fed indicated that it was too early to count on a “soft landing” for the economy — a reduction in inflation without a recession — though that is increasingly the Wall Street consensus. An early decline in the federal funds rate, the benchmark short-term rate that the Fed controls directly, isn’t a sure thing, either, though Mr. Powell said the Fed has begun discussing rate cuts, and the markets are, increasingly, counting on them.The markets have been climbing since July — and have been positively buoyant since late October — on the assumption that truly good times are in the offing. That may turn out to be a correct assumption — one that could be helpful to President Biden and the rest of the Democratic Party in the 2024 elections.But if you were looking for certainty about a joyful 2024, the Fed didn’t provide it in this week’s meeting. Instead, it went out of its way to say that it is positioning itself for maximum flexibility. Prudent investors may want to do the same.Reasons for OptimismOn Wednesday, the Fed said it would leave the federal funds rate where it stands now, at about 5.3 percent. That’s roughly 5 full percentage points higher than it was in early in 2022. Inflation, the glaring economic problem at the start of the year, has dropped sharply thanks, in part, to those steep interest rate increases. The Consumer Price Index rose 3.1 percent in the year through November. That was still substantially above the Fed’s target of 2 percent, but way below the inflation peak of 9.1 percent in June 2022. And because inflation has been dropping, a virtuous cycle has developed, from the Fed’s standpoint. With the federal funds rate substantially above the inflation rate, the real interest rate has been rising since July, without the Fed needing to take direct action.But Mr. Powell says rates need to be “sufficiently restrictive” to ensure that inflation doesn’t surge again. And, he cautioned, “We will need to see further evidence to have confidence that inflation is moving toward our goal.”The wonderful thing about the Fed’s interest rate tightening so far is that it has not set off a sharp increase in unemployment. The latest figures show the unemployment rate was a mere 3.7 percent in November. On a historical basis, that’s an extraordinarily low rate, and one that has been associated with a robust economy, not a weak one. Economic growth accelerated in the three months through September (the third quarter), with gross domestic product climbing at a 4.9 percent annual rate. That doesn’t look at all like the recession that had been widely anticipated a year ago.To the contrary, with indicators of robust economic growth like these, it’s no wonder that longer-term interest rates in the bond market have been dropping in anticipation of Fed rate cuts. The federal funds futures market on Wednesday forecast federal funds cuts beginning in March. By the end of 2024, the futures market expected the federal funds rate to fall to below 4 percent.But on Wednesday, the Fed forecast a slower and more modest decline, bringing the rate to about 4.6 percent.Too Soon to RelaxSeveral other indicators are less positive than the markets have been. The pattern of Treasury rates known as the yield curve has been predicting a recession since Nov. 8, 2022. Short-term rates — specifically, for three-month Treasuries — are higher than those of longer duration — particularly, for 10-year Treasuries. In financial jargon, this is an “inverted yield curve,” and it often forecasts a recession.Another well-tested economic indicator has been flashing recession warnings, too. The Leading Economic Indicators, an index formulated by the Conference Board, an independent business think tank, is “signaling recession in the near term,” Justyna Zabinska-La Monica, a senior manager at the Conference Board, said in a statement.The consensus of economists measured in independent surveys by Bloomberg and Blue Chip Economic Indicators no longer forecasts a recession in the next 12 months — reversing the view that prevailed earlier this year. But more than 30 percent of economists in the Bloomberg survey and fully 47 percent of those in the Blue Chip Economic Indicators disagree, and take the view that a recession in the next year will, in fact, happen.While economic growth, as measured by gross domestic product, has been surging, early data show that it is slowing markedly, as the bite of high interest rates gradually does its damage to consumers, small businesses, the housing market and more.Over the last two years, fiscal stimulus from residual pandemic aid and from deficit spending has countered the restrictive efforts of monetary policy. Consumers have been spending resolutely at stores and restaurants, helping to stave off an economic slowdown.Even so, a parallel measurement of economic growth — gross domestic income — has been running at a much lower rate than G.D.P. over the last year. Gross domestic income has sometimes been more reliable over the short term in measuring slowdowns. Ultimately, the two measures will be reconciled, but in which direction won’t be known for months.The MarketsThe stock and bond markets are more than eager for an end to monetary belt-tightening.Already, the U.S. stock market has fought its way upward this year and is nearly back to its peak of January 2022. And after the worst year in modern times for bonds in 2022, market returns for the year are now positive for the investment-grade bond funds — tracking the benchmark Bloomberg U.S. Aggregate Bond Index — that are part of core investment portfolios.But based on corporate profits and revenues, prices are stretched for U.S. stocks, and bond market yields reflect a consensus view that a soft landing for the economy is a near-certain thing.Those market movements may be fully justified. But they imply a near-perfect, Goldilocks economy: Inflation will keep declining, enabling the Fed to cut interest rates early enough to prevent an economic calamity.But excessive market exuberance itself could upend this outcome. Mr. Powell has spoken frequently of the tightening and loosening of financial conditions in the economy, which are partly determined by the level and direction of the stock and bond markets. Too big a rally, taking place too early, could induce the Fed to delay rate cuts.All of this will have a bearing on the elections of 2024. Prosperity tends to favor incumbents. Recessions tend to favor challengers. It’s too early to make a sure bet.Without certain knowledge, the best most investors can do is to be positioned for all eventualities. That means staying diversified, with broad holdings of stocks and bonds. Hang in, and hope for the best. More

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    Fed Officials Hint That Rate Increases Are Over, and Investors Celebrate

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    Stocks and bonds were buoyed after even inflation-focused Federal Reserve officials suggested that rates may stay steady.Federal Reserve officials appear to be dialing back the chances of future interest rate increases, after months in which they have carefully kept the possibility of further policy changes alive for fear that inflation would prove stubborn.Several Fed officials — including two who often push for higher interest rates — hinted on Tuesday that the central bank is making progress on inflation and may be done or close to done raising borrowing costs. Economic growth is cooling, reducing the urgency for additional moves.Christopher Waller, a Fed governor and one of the central bank’s more inflation-focused members, gave a speech on Tuesday titled “Something Appears to Be Giving,” an update on a previous speech that he had titled “Something’s Got to Give.”“I am encouraged by what we have learned in the past few weeks — something appears to be giving, and it’s the pace of the economy,” Mr. Waller said. “I am increasingly confident that policy is currently well positioned to slow the economy and get inflation back to 2 percent.”Michelle Bowman, another Fed governor who also tends to be inflation-focused, said that she saw risks that factors like higher services spending or climbing energy costs could keep inflation elevated. She said that it was still her basic expectation that the Fed would need to raise rates further. Even so, she did not sound dead-set on such a move, noting that policy was not on a “preset course.”“I remain willing to support raising the federal funds rate at a future meeting should the incoming data indicate that progress on inflation has stalled or is insufficient to bring inflation down to 2 percent in a timely way,” Ms. Bowman said.Taken together with other recent remarks from Fed officials, the latest comments offer an increasingly clear signal that central bank policymakers may be finished with their campaign to increase interest rates in a bid to slow demand and cool inflation. Interest rates are already set to a range of 5.25 to 5.5 percent. The Fed’s next meeting will take place on Dec. 12-13, and investors are overwhelmingly betting that the central bank will hold rates steady, as policymakers did at their last two meetings.Investors appeared buoyed by the Fed officials’ comments. Higher interest rates raise costs for consumers and companies, typically weighing on markets. The two-year Treasury yield, which is sensitive to changes in investors’ interest rate expectations, fell noticeably on Tuesday morning, extending its drop through the afternoon. Yields fall as prices rise. The move initially provided a tailwind to the stock market, helping lift the S&P 500 from its earlier fall to a gain of 0.4 percent, before the rally eased and the index drifted lower to an eventual rise of 0.1 percent.Fed officials have been nervously watching continued strength in the economy: Gross domestic product expanded at a breakneck 4.9 percent annual rate in the third quarter. The concern has been that continued solid demand will give companies the wherewithal to continue raising prices quickly.But recently, job growth has eased and consumer price inflation has shown meaningful signs of a broad-based slowdown. That is giving policymakers more confidence that their current policy setting is aggressive enough to wrestle price increases fully under control.Still, as both Mr. Waller and Ms. Bowman made clear, Fed officials are not yet ready to definitively declare victory — data could still surprise them. And while a recent run-up in longer-term interest rates had been helping to cool the economy, the move has already begun to reverse as investors predict a gentler Fed policy path.The 10-year Treasury yield, one of the most important interest rates in the world, has fallen drastically in recent weeks after shooting up in previous months, curtailing a sell-off in the stock market and lifting investor optimism. But higher stock prices and cheaper borrowing costs could prevent growth and inflation from slowing as quickly.“The recent loosening of financial conditions is a reminder that many factors can affect these conditions and that policymakers must be careful about relying on such tightening to do our job,” Mr. Waller said on Tuesday. More

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    U.S. Economic Growth Accelerated in the Third Quarter

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    Gross domestic product expanded at a 4.9 percent annual rate over the summer, powered by prodigious consumer spending. But the pace is not expected to be sustained.The United States economy surged in the third quarter as a strong job market and falling inflation gave consumers the confidence to spend freely on goods and services.Gross domestic product, the primary measure of economic output, grew at a 4.9 percent annualized rate from July through September, the Commerce Department reported Thursday. It was the strongest showing since late 2021, defying predictions of a slowdown prompted by the Federal Reserve’s interest rate increases.The acceleration was made possible in part by slowing inflation, which lifted purchasing power even as wage growth weakened, and a job market that has shown renewed vigor over the past three months.It’s a far cry from the recession that many had forecast at this time last year, before economists realized that Americans had piled up enough savings to power spending as the Fed moved to make borrowing more expensive.“There’s been an enormous increase in wealth since Covid,” said Yelena Shulyatyeva, senior economist for the bank BNP Paribas, referring to recent Fed data that showed median net worth climbed 37 percent from 2019 to 2022. “People still take not just one vacation, not just two, but three and four.”That level of spending in turn fueled robust job growth in service industries like hotels and restaurants even as sectors that benefited from pandemic shopping trends, like transportation and warehousing, returned to more normal levels. And with layoffs still near record lows, workers have little reason to hold off on making purchases, even if it means using a credit card — an increasingly pricey option as interest rates drift higher.One beneficiary of those open pocketbooks is Amanda McClements, who owns a home goods store in Washington, D.C., called Salt & Sundry. Sales are up about 15 percent from last year and have finally eclipsed 2019 levels.“People can’t get enough candles; that continues to be our top seller,” Ms. McClements said. They are also “entertaining more post-pandemic, so we do really well in glassware, tableware, beautiful linens.”Ms. McClements said business hadn’t been uniformly strong, though: Her plant store, Little Leaf, never snapped back from the depths of the pandemic, and it closed this year. “We’ve been experiencing a really uneven recovery,” she said.Although consumers propelled the bulk of the economy’s growth in the third quarter, other factors contributed as well. Residential investment, for example, provided a boost even in the face of higher interest rates: Those who already own homes have little incentive to sell, so newly constructed homes are the only ones on the market.“The third quarter would be that sweet spot where higher mortgage rates kept people in place, builders capitalized on the lack of existing supply, and that showed up as an improvement from prior quarters,” said Bernard Yaros, lead U.S. economist at Oxford Economics.The rebound in growth will probably be brief. Pitfalls loom in the fourth quarter, including the depletion of savings, the resumption of mandatory student loan payments and the need to refinance maturing corporate debt at higher rates.But for now, the United States is outperforming other large economies, in part because of its aggressive fiscal response to the pandemic and in part because it has been more insulated from impact of the Ukraine war on energy prices.“We’re talking about the eurozone and U.K. certainly looking like being on the cusp of recession, if not already in recession,” said Andrew Hunter, deputy U.S. economist for Capital Economics, an analysis firm. “The U.S. is still the global outlier.”Jeanna Smialek More

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    Russia’s Economy Is Increasingly Structured Around Its War in Ukraine

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    The nation’s finances have proven resilient, despite punishing sanctions, giving it leeway to pump money into its military machine.“Everything needed for the front,” Russia’s finance minister declared, echoing a Soviet slogan from World War II as he talked about the government’s latest spending plans.The government still calls its invasion of Ukraine a “special military operation,” but the new budget figures make clear that the economy is increasingly being restructured around war.Nearly a third of the country’s spending next year — roughly $109 billion — will be devoted to “national defense,” the government announced late last month, redirecting money that might otherwise have flowed to health care, education, roads and other sectors. More tellingly, 6 percent of the nation’s total output is being funneled toward Russia’s war machine, more than double what it was before the invasion.Since Russia sent soldiers across the border in February 2022, its economy has had to adapt to dramatic changes with astonishing speed. The European Union, its biggest trading partner, quickly broke economic relations, upending well-established supply chains and reliable sources of income from abroad. The United States used its financial might to freeze hundreds of billions of dollars in Russian assets and cut the country off from the global financial system.Nineteen months later, the economic picture is decidedly mixed. The Russian economy has proved to be much more resilient than many Western governments assumed after imposing a punishing string of sanctions.Moscow has found other buyers for its oil. It has pumped money into the economy at a rapid pace to finance its military machine, putting almost every available worker into a job and raising the size of weekly paychecks. Total output, which the Russian Central Bank estimates may rise as much as 2.5 percent this year, could outpace the European Union and possibly even the United States.Yet that is only part of the story. As Laura Solanko, a senior adviser at the Bank of Finland Institute for Economies in Transition, said: “When a country is at war, gross domestic product is a fairly poor measure of welfare.” Producing bullets adds to a country’s growth rate without necessarily improving the quality of life.The insistent demand for foreign currency — to pay for imported goods or provide a safe investment — has also caused the value of the ruble to sink at a precipitous pace. Last week, it fell to a symbolic break point of 100 to the dollar, further fueling inflation and raising anxiety levels among consumers.Shoppers buying meat at the central market in Rostov-on-Don, Russia, in 2021. Inflation in Russia has driven up the price of meat and other products since the start of the war in Ukraine.Sergey Ponomarev for The New York TimesThe spike in government spending and borrowing has seriously stressed an already overheated economy. The central bank rapidly raised interest rates to 13 percent over the summer, as annual inflation continued to climb. Higher rates, which make it more expensive for businesses to expand and consumers to buy on credit, is likely to slow growth.Consumers are also feeling the squeeze for daily purchases. “Dairy products, especially butter, meat and even bread have gone up in price,” said Lidia Adreevna as she shopped and examined prices at an Auchan supermarket in Moscow. She blamed the central bank.“Life changes,” she offered, “nothing stays forever, not love, or happiness.”Other pensioners at the store also spoke about increases in meat and poultry prices, something almost half of Russians have noticed in the past month, according to survey data from the Moscow-based Public Opinion Foundation published Friday. Respondents also noted increases in the price of medicine and construction materials.Moscow imposed a temporary ban on diesel and gasoline exports last month in an effort to ease shortages and slow rising energy prices, but the restrictions further reduced the amount of foreign currency coming into the country.The exodus of funds is so worrying that the government has warned of reinstating controls on money leaving the country.With a presidential election scheduled in March, President Vladimir V. Putin acknowledged last month that accelerating inflation fueled by a weakened ruble was a major cause of concern. Getting a handle on price increases may discourage the government from embarking on its usual pre-election social spending.Lower standards of living can be “uncomfortable even for an authoritarian government,” said Charles Lichfield, deputy director of the Atlantic Council’s Geoeconomics Center.Since Russia imports a wide range of goods — from telephones and washing machines to cars, medicine and coffee — he said a devalued ruble makes “it more difficult for consumers to buy what they’re used to buying.”A Karachi Port Trust security guard keeping watch over the Clyde Noble, a Russian crude oil tanker berthed at the Karachi Port in Pakistan in June. Pakistan received discounted Russian crude oil as part of a new deal between Islamabad and Moscow.Rehan Khan/EPA, via ShutterstockThe United States, the European Union and countries allied with Ukraine have doggedly tried to cripple Russia with sweeping sanctions.The impact was swift and sharp in the spring of 2022. The ruble tumbled, the central bank increased rates to 20 percent to attract investors, and the government imposed strict controls on capital to keep money inside the country.But the ruble has since bounced back and interest rates come down. Russia found eager buyers elsewhere for its oil, which was selling at vastly discounted prices; liquefied natural gas; and other raw materials. More recently, Russia has become adept at evading the $60 per barrel price cap on oil imposed by the Group of 7 nations as global oil prices have once again started to rise.China is among the nations that have stepped up to buy energy and sell goods to Russia that they previously might have exchanged with European nations. Trade with China rose at an annual rate of 32 percent in the first eight months of this year. Trade with India tripled in the first half of the year, and exports from Turkey rose nearly 89 percent over the same period.Meanwhile, the war is gobbling up other parts of Russia’s budget aside from direct military spending. An additional 9.2 percent of the budget is slated for “national security,” which includes law enforcement. There is money for injured soldiers and for families of those killed in battle, and for “integrating new regions,” a reference to occupied territory in Ukraine.Sergei Guriev, a Russian economist who fled the country in 2013 and is now provost at Sciences Po in Paris, said accurately assessing the Russian economy is difficult. The existing economic models were designed before the war and based on different assumptions, and the published budget figures are incomplete.What that means for Russian households on a daily basis is harder to discern.“Overall, it’s very hard to compare quality of life before and after the war,” Mr. Guriev said. “It’s hard to know what Russians think. People are afraid.”Valerie Hopkins More