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    A Weak Euro Heads to an Uncomfortable Milestone: Parity With the Dollar

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    The list of ailments troubling the eurozone economy was already stark: the highest inflation rate on record, energy insecurity and increasing whispers about a recession. This month, another threat emerged. The weakening euro has raised expectations that it could reach parity with the U.S. dollar.Europe is facing “a steady stream of bad news,” Valentin Marinov, a currency strategist at Crédit Agricole, said. “The euro is a pressure valve for all these concerns, all these fears.”The currency, which is shared by 19 countries, hasn’t fallen to or below a one-to-one exchange rate with the dollar in two decades. Back then, in the early 2000s, the low exchange rate undercut confidence in the new currency, which was introduced in 1999 to help bring unity, prosperity and stability to the region. In late 2000, the European Central Bank intervened in currency markets to prop up the fledgling euro.Today, there are fewer questions about the resilience of the euro, even as it sits near its lowest level in more than five years against the dollar. Instead, the currency’s weakness reflects the darkening outlook of the bloc’s economy.Since Russia invaded Ukraine in late February, the euro has fallen more than 6 percent against the dollar as governments seek to cut Russia from their energy supplies, trade channels are disrupted and inflation is imported into the continent via high energy, commodity and food prices.While a weak euro is a blessing for American holidaymakers heading to the continent this summer, it is only adding to the region’s inflationary woes by increasing the cost of imports and undercutting the value of European earnings for American companies.Many analysts have determined that parity is only a matter of time.One euro will be worth one dollar by the end of the year and fall even lower early next year, according to analysts at HSBC, one of Europe’s largest banks. “We find it hard to see a silver lining for the single currency at this stage,” they wrote in a note to clients in early May.Traders are watching to see if the euro will drop below $1.034 against the dollar, the low it reached in January 2017. On May 13 it came close, falling to $1.035.Diners in a restaurant in Milan, Italy. American vacationers in Europe can enjoy the benefits of a weak euro, but imported goods will cost more.Luca Bruno/Associated PressBelow that level, the prospects of the euro reaching parity become “quite material,” according to analysts at the Dutch bank ING. Analysts at the Japanese bank Nomura predict that parity will be reached in the next two months. For the euro, “the path of least resistance is lower,” analysts at JPMorgan wrote in a note to clients. They expect the currency to reach parity in the third quarter.Economists at Pantheon Macroeconomics said last month that an embargo on Russian gas would push the euro to parity with the dollar, joining other analysts linking the sinking euro to the efforts to cut oil and gas ties with Russia.“The outlook for the euro now is very, very tied to the energy security risk,” said Jane Foley, a currency strategist at Rabobank. For traders, the risks intensified after Russia cut off gas sales to Poland and Bulgaria late last month, she added. If Europe’s supplies of gas are shut off either by a self-imposed embargo or by Russia, the region is likely to tip into recession as replacing Russian energy supplies is challenging.

    The strength of the U.S. dollar has also dragged the euro close to parity. The dollar has become the haven of choice for investors, outperforming other currencies that have also been considered safe places for money as the risk of stagflation — an unhealthy mix of stagnant economic growth and rapid inflation — stalks the globe. Last week, the Swiss franc fell below parity with the dollar for the first time in two years, and the Japanese yen is at its lowest level since 2002, bringing an unwanted source of inflation to a country that is used to low or falling prices.There are plenty of reasons investors are looking for safe places to park their money. Economic growth is slow in China because of shutdowns prompted by the country’s zero-Covid policy. There are recession risks in Europe and growing predictions of a recession in the United States next year. And many so-called emerging markets are being battered by rising food prices, worsening crises in areas including East Africa and the Middle East.“It’s a pretty grim outlook for the global economy,” Ms. Foley said. It “screams safe haven and it screams the dollar.”Also in the dollar’s favor is the aggressive action of the Federal Reserve. With inflation in the United States hovering around its highest rate in four decades, the central bank has ramped up its tightening of monetary policy with successive interest rate increases, and many more are predicted. Traders are betting that U.S. interest rates will climb another 2 percentage points by early next year to 3 percent, the highest level since 2007.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Russia’s Economic Outlook Grows ‘Especially Gloomy’ as Prices Soar

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    LONDON — After sanctions hobbled production at its assembly plant in Kaliningrad, the Russian automaker Avtotor announced a lottery for free 10-acre plots of land — and the chance to buy seed potatoes — so employees could grow their own food in the westernmost fringe of the Russian empire during “the difficult economic situation.”In Moscow, shoppers complained that a kilogram of bananas had shot up to 100 rubles from 60, while in Irkutsk, an industrial city in Siberia, the price of tampons at a store doubled to $7.Banks have shortened receipts in response to a paper shortage. Clothing manufacturers said they were running out of buttons.“The economic prospects for Russia are especially gloomy,” the Bank of Finland said in an analysis this month. “By initiating a brutal war against Ukraine, Russia has chosen to become much poorer and less influential in economic terms.”Even the Central Bank of Russia has predicted a staggering inflation rate between 18 and 23 percent this year, and a falloff in total output of as much as 10 percent.It is not easy to figure out the impact of the war and sanctions on the Russian economy at a time when even using the words “war” and “invasion” are illegal. President Vladimir V. Putin has insisted that the economy is weathering the measures imposed by the United States, Europe and others.Financial maneuvers taken by Moscow helped blunt the economic damage initially. At the start of the conflict, the central bank doubled interest rates to 19 percent to stabilize the currency, and recently was able to lower rates to 14 percent. The ruble is trading at its highest level in more than two years.Empty shelves in a supermarket in Moscow in March. Food prices have shot up, especially for items like imported fruit.Vlad Karkov/SOPA Images/LightRocket, via Getty ImagesAnd even though Russia has had to sell oil at a discount, dizzying increases in global prices are causing tax revenues from oil to surge past $180 billion this year despite production cuts, according to Rystad Energy. Natural gas deliveries will add another $80 billion to Moscow’s treasury.In any case, Mr. Putin has shown few signs that pressure from abroad will push him to scale back military strikes against Ukraine.Still, Avtotor’s vegetable patch lottery and what it says about the vulnerabilities facing the Russian people, along with shortages and price increases, are signs of the economic distress that is gripping some Russian businesses and workers since the war started nearly three months ago.Analysts say that the rift with many of the world’s largest trading partners and technological powerhouses will inflict deep and lasting damage on the Russian economy.“The really hard times for the Russian economy are still in front of us,” said Laura Solanko, a senior adviser at the Bank of Finland Institute for Emerging Economies.The stock of supplies and spare parts that are keeping businesses humming will run out in a few months, Ms. Solanko said. At the same time, a lack of sophisticated technology and investment from abroad will hamper Russia’s productive capacity going forward.The Lukoil refinery in Volgograd. Russia has had to sell oil at a discount, but its tax revenues have risen along with prices.ReutersThe Russian Central Bank has already acknowledged that consumer demand and lending are on a downhill slide, and that “businesses are experiencing considerable difficulties in production and logistics.”Ivan Khokhlov, who co-founded 12Storeez, a clothing brand that evolved from a showroom in his apartment in Yekaterinburg to a major company with 1,000 employees and 46 stores, is contending with the problem firsthand.“With every new wave of sanctions, it becomes harder to produce our product on time,” Mr. Khokhlov said. The company’s bank account in Europe was still blocked because of sanctions shortly after the invasion, while logistical disruptions had forced him to raise prices.“We face delays, disruptions and price increases,” he said. “As logistics with Europe gets destroyed, we rely more on China, which has its own difficulties too.”Hundreds of foreign firms have already curtailed their business in or withdrawn altogether from Russia, according to an accounting kept by the Yale School of Management. And the exodus of companies continued this week with McDonald’s. The company said that after three decades, it planned to sell its business, which includes 850 restaurants and franchises and employs 62,000 people in Russia.“I passed the very first McDonald’s that opened in Russia in the ’90s,” Artem Komolyatov, a 31-year-old tech worker in Moscow, said recently. “Now it’s completely empty. Lonely. The sign still hangs. But inside it’s all blocked off. It’s completely dead.”Nearby two police officers in bulletproof vests and automatic rifles stood guard, he said, ready to head off any protesters.In Leningradsky railway station, at one of the few franchises that remained open on Monday, customers lined up for more than an hour for a last taste of McDonald’s hamburgers and fries.The French automaker Renault also announced a deal with the Russian government to leave the country on Monday, although it includes an option to repurchase its stake within six years. And the Finnish paper company, Stora Enso, said it was divesting itself of three corrugated packaging plants in Russia.A closed McDonald’s in Podolsk, outside Moscow, on Monday. The company said this week it was putting its Russian business up for sale.Maxim Shipenkov/EPA, via ShutterstockMore profound damage to the structure of the Russian economy is likely to mount in the coming years even in the moneymaking energy sector.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    Retail sales rise for the fourth straight month as prices keep climbing.

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    Retail sales rose 0.9 percent in April, increasing for the fourth consecutive month, as consumer prices continue to escalate at their fastest pace in four decades.The increase in spending in the United States last month follows a revised 1.4 percent month-over-month gain in March, when prices for gasoline soared amid Russia’s invasion of Ukraine. Gas prices cooled down slightly in April but were still at elevated levels, while oil prices remain volatile.Consumers pulled back on spending at gas stations, where sales fell 2.7 percent in April, the Commerce Department reported on Tuesday, and the report showed that shopping at grocery stores and building material stores dropped last month.Sales at restaurants and bars were up 2 percent in April, while spending at department stores was up 0.2 percent. Spending at car dealers, which has been hampered by supply chain disruptions and a global computer chip shortage, rose 2.2 percent last month.Economists are laser-focused on upcoming reports on spending because they serve as indicators of how consumers are grappling with inflation and higher interest rates.“Despite the surge in prices weighing on their purchasing power, the U.S. consumer now appears to be single-handedly keeping the global economy afloat,” Paul Ashworth, an economist at Capital Economics, wrote in a note.The Commerce Department’s new data, which isn’t adjusted for inflation, was an early estimate of spending during a month when prices rose 0.3 percent from the prior month. The rapid pace of inflation has led companies to raise prices for their goods to cover the higher costs of commodities, labor and transportation. Companies like PepsiCo and Coca-Cola have introduced higher prices for their products, and airfares are also climbing.To combat inflation, the Federal Reserve started lifting interest rates from near zero in March. Economists are worried that if interest rates are raised too fast, the move could lead the economy into a recession by slowing down consumer demand too much.“To the extent that markets are worried about a growth slowdown, this is good news,” Chris Zaccarelli, chief investment officer for Independent Advisor Alliance, wrote in a note, referring to Tuesday’s report. “But it is also a further catalyst for the Fed to raise rates even higher, in order to get inflation under control.” More

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    Russian Shipping Traffic Remains Strong as Sanctions Take Time to Bite

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    WASHINGTON — Shipping traffic in and out of Russia has remained relatively strong in the past few months as companies have raced to fulfill contracts for purchases of energy and other goods before the full force of global sanctions goes into effect.With the European Union poised to introduce a ban on Russian oil in the coming months, that situation could change significantly. But so far, data show that while commerce with Russia has been reduced in many cases, it has yet to be crippled.Volumes of crude and oil products shipped out of Russian ports, for example, climbed to 25 million metric tons in April, data from the shipping tracker Refinitiv showed, up from around 24 million metric tons in December, January, February and March, and mostly above the levels of the last two years.Jim Mitchell, the head of oil research for the Americas at Refinitiv, said that Russia’s outgoing shipments in April had been buoyed by the global economic recovery from the pandemic, and that they did not yet reflect the impact of sanctions and other restrictions on Russia issued after its invasion of Ukraine on Feb. 24.Crude oil typically trades 45 to 60 days ahead of delivery, he said, meaning that changes to behavior following the Russian invasion were still working their way through the system.“The volume has been slow to decline, because these were contracts that have already been set,” Mr. Mitchell said. Defaulting on such contracts is “a nightmare for both sides,” he said, adding, “which means that even in the current environment nobody really wants to breach a contract.”Russia has stopped publishing data on its imports and exports since Western governments united to announce their array of sanctions and other restrictions. Exports of oil or gas that leave Russia through pipelines can also be difficult for outside firms to verify.But the global activities of the massive vessels that call on Russian ports to pick up and deliver containers of consumer products or bulk-loads of grain and oil are easier to monitor. Ships are required to transmit their identity, position, course and other information through automatic tracking systems, which are monitored by a variety of firms like Refinitiv, MarineTraffic, Kpler and others.These firms say that shipping traffic was relatively robust in March and April, despite the extraordinary tensions with Russia since its invasion of Ukraine. That reflects both how long some of the sanctions issued by the West are taking to come into effect and an enduring profit motive for trading with Russia, especially after prices for its energy products and commodities have cratered.Data from MarineTraffic, for example, a platform that shows the live location of ships around the world using those on-ship tracking systems, indicates that traffic from Russia’s major ports declined after the invasion but did not plummet. The number of container ships, tankers and bulkers — the three main types of vessels that move energy and consumer products — arriving and leaving Russian ports was down about 23 percent in March and April compared with the year earlier.“The reality is that the sanctions haven’t been so difficult to maneuver around,” said Georgios Hatzimanolis, who analyzes global shipping for MarineTraffic.Tracking by Lloyd’s List Intelligence, a maritime information service, shows similar trends. The number of bulk carriers, which transport loose cargo like grain, coal and fertilizer, that sailed from Russian ports in the five weeks after the invasion was down only 6 percent from the five-week period before the invasion, according to the service.In the weeks following the invasion, Russia’s trade with China and Japan was broadly stable, while the number of bulk carriers headed to South Korea, Egypt and Turkey actually increased, their data showed.“There’s still a lot of traffic back and forth,” said Sebastian Villyn, the head of risk and compliance data at Lloyd’s List Intelligence. “We haven’t really seen a drop.”Those figures contrast somewhat with statements from global leaders, who have emphasized the crippling nature of the sanctions. Treasury Secretary Janet L. Yellen said on Thursday that the Russian economy was “absolutely reeling,” pointing to estimates that it faces a contraction of 10 percent this year and double-digit inflation. Earlier this week, Ms. Yellen said that the Treasury Department was continuing to deliberate about whether to extend an exemption in its sanctions that has allowed American financial institutions and investors to keep processing Russian bond payments. Speaking at a Senate hearing, she said that officials were actively working to determine the “consequences and spillovers” of allowing the license to expire on May 25, which would likely lead to Russia’s first default on its foreign debt in more than a century.Global sanctions on Russia continue to expand in both their scope and their impact, especially as Europe, a major customer of Russian energy, moves to wean itself off the country’s oil and coal. Trade data suggest that shipments into Russia of high-value products like semiconductors and airplane parts — which are crucial for the military’s ability to wage war — have plummeted because of export controls issued by the United States and its allies.But many sanctions have been targeted at certain strategic goods, or exempted energy products — which are Russia’s major exports — to avoid causing more pain to consumers at a time of rapid price increases, disrupted supply chains and a growing global food crisis.Truckers lined up to cross into Panemune, Lithuania, near the Russian port of Kaliningrad last month.Paulius Peleckis/Getty ImagesSo far, Western governments have levied an array of financial restrictions, including banning transactions with Russia’s central bank and sovereign wealth fund, freezing the assets of many Russian officials and oligarchs, and cutting off Russian banks from international transactions. Canada and the United States have already banned imports of Russian energy, and also prohibited Russian ships from calling at their ports, but the countries are not among Russia’s largest energy customers.The Russia-Ukraine War and the Global EconomyCard 1 of 7A far-reaching conflict. More

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    States Turn to Tax Cuts as Inflation Stays Hot

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    WASHINGTON — In Kansas, the Democratic governor has been pushing to slash the state’s grocery sales tax. Last month, New Mexico lawmakers provided $1,000 tax rebates to households hobbled by high gas prices. Legislatures in Iowa, Indiana and Idaho have all cut state income taxes this year.A combination of flush state budget coffers and rapid inflation has lawmakers across the country looking for ways to ease the pain of rising prices, with nearly three dozen states enacting or considering some form of tax relief, according to the Tax Foundation, a right-leaning think tank.The efforts are blurring typical party lines when it comes to tax policy. In many cases, Democrats are joining Republicans in supporting permanently lower taxes or temporary cuts, including for high earners.But while the policies are aimed at helping Americans weather the fastest pace of inflation in 40 years, economists warn that, paradoxically, cutting taxes could exacerbate the very problem lawmakers are trying to address. By putting more money in people’s pockets, policymakers risk further stimulating already rampant consumer demand, pushing prices higher nationally.Jason Furman, an economist at Harvard University who was an economic adviser under the Obama administration, said that the United States economy was producing at full capacity right now and that any additional spending power would only drive up demand and prices. But when it comes to cutting taxes, he acknowledged, the incentives for states do not always appear to be aligned with what is best for the national economy.“I think all these tax cuts in states are adding to inflation,” Mr. Furman said. “The problem is, from any governor’s perspective, a lot of the inflation it is adding is nationwide and a lot of the benefits of the tax cuts are to the states.”States are awash in cash after a faster-than-expected economic rebound in 2021 and a $350 billion infusion of stimulus funds that Congress allocated to states and cities last year. While the Biden administration has restricted states from using relief money to directly subsidize tax cuts, many governments have been able to find budgetary workarounds to do just that without violating the rules.Last week, Gov. Ron DeSantis of Florida signed a $1.2 billion tax cut that was made possible by budget surpluses. The state’s coffers were bolstered by $8.8 billion in federal pandemic relief money. Mr. DeSantis, a Republican, hailed the tax cuts as the largest in the state’s history.“Florida’s economy has consistently outpaced the nation, but we are still fighting against inflationary policies imposed on us by the Biden administration,” he said.Adding to the urgency is the political calendar: Many governors and state legislators face elections in November, and voters have made clear they are concerned about rising prices for gas, food and rent.“It’s very difficult for policymakers to see the inflationary pressures that taxpayers are burdened by right now while sitting on significant cash reserves without some desire to return that,” said Jared Walczak, vice president of state projects with the Center for State Tax Policy at the Tax Foundation. “The challenge for policymakers is that simply cutting checks to taxpayers can feed the inflationary environment rather than offsetting it.”The tax cuts are coming in a variety of forms and sizes. According to the Tax Foundation, which has been tracking proposals this year, some would be phased in, some would be permanent and others would be temporary “holidays.”Next month, New York will suspend some of its state gas taxes through the end of the year, a move that Gov. Kathy Hochul, a Democrat, said would save families and businesses an estimated $585 million.In Pennsylvania, Gov. Tom Wolf, a Democrat, has called for gradually lowering the state’s corporate tax rate to 5 percent from 10 percent — taking a decidedly different stance from many of his political peers in Congress, who have called for raising corporate taxes. Mr. Wolf said in April that the proposal was intended to make Pennsylvania more business friendly.States are acting on a fresh appetite for tax cuts as inflation is running at a 40-year high.OK McCausland for The New York TimesMr. Furman pointed to the budget surpluses as evidence that the $1.9 trillion pandemic relief package handed too much money to local governments. “The problem was there was just too much money for states and localities.”A new report from the Tax Policy Center, a left-leaning think tank, said total state revenues rose by about 17.6 percent last year. State rainy day funds — money that is set aside to cover unexpected costs — have reached “new record levels,” according to the National Association of State Budget Officers.Yet those rosy budget balances may not last if the economy slows, as expected. The Federal Reserve has begun raising interest rates in an attempt to cool economic growth, and there are growing concerns about the potential for another recession. Stocks fell for another session on Monday, with the S&P 500 down 3.2 percent, as investors fretted about a slowdown in global growth, high inflation and other economic woes.Cutting taxes too deeply now could put states on weaker financial footing.The Tax Policy Center said its state tax revenue forecasts for the rest of this year and next year were “alarmingly weak” as states enacted tax cuts and spending plans. Fitch, the credit rating agency, said recently that immediate and permanent tax cuts could be risky in light of evolving economic conditions.“Substantial tax policy changes can negatively affect revenues and lead to long-term structural budget challenges, especially when enacted all at once in an uncertain economic environment,” Fitch said.The state tax cuts are taking place as the Biden administration struggles to respond to rising prices. So far, the White House has resisted calls for a gas tax holiday, though Jen Psaki, the White House press secretary, said in April that President Biden was open to the idea. The administration has responded by primarily trying to ease supply chain logjams that have created shortages of goods and cracking down on price gouging, but taming inflation falls largely to the Fed.The White House declined to assess the merits of states’ cutting taxes but pointed to the administration’s measures to expand fuel supplies and proposals for strengthening supply chains and lowering health and child care costs as evidence that Mr. Biden was taking inflation seriously.“President Biden is taking aggressive action to lower costs for American families and address inflation,” Emilie Simons, a White House spokeswoman, said.The degree to which state tax relief fuels inflation depends in large part on how quickly the moves go into effect.Gov. Laura Kelly backed a bill last month that would phase out the 6.5 percent grocery sales tax in Kansas, lowering it next January and bringing it to zero by 2025. Republicans in the state pushed for the gradual reduction despite calls from Democrats to cut the tax to zero by July.Understand the 2022 Midterm ElectionsCard 1 of 6Why are these midterms so important? More

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    How Rising Mortgage Rates Are Affecting the Housing Market

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    Mortgage costs have jumped as the Federal Reserve has raised rates. With higher rates come fewer offers.Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers.This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday. An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it.“We didn’t have the competing offers that would drive up the price,” Mr. Solis said. “It’s not crazy like it was.”Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come. Mortgage rates have surged in response, jumping to 5 percent from slightly more than 3 percent since the start of the year.That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment. And the higher cost comes on top of a more than 30 percent rise in home prices over the past two years, according to Zillow.Now early data and interviews across the industry suggest that many buyers have finally been exhausted by declining affordability and cutthroat competition, causing the gravity-defying pandemic housing market to start easing up.Open houses have thinned. Online searches for homes have dropped. Homebuilders, many of whom have accrued backlogs of eager buyers, say rising mortgage rates have forced them to go deeper into those waiting lists to sell each house. In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels. Builders have also grown increasingly concerned about rising mortgage rates and surging home prices.“There is a lot more concern than there had been,” said Ivy Zelman, chief executive of Zelman & Associates.By any standard that prevailed before 2020, this would be a hot real estate market. Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year. Still, after two years of torrid demand, agents had become accustomed to fielding multiple offers for each listing and setting price records each weekend. That frenzy, brought on by pandemic migrations and the growing centrality of the home as a space where people both live and work, is now subsiding.“We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,” said Daryl Fairweather, chief economist at Redfin.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.For buyers, however, the market will still feel plenty competitive. Even if prices aren’t rising at the pace of the past two years, homes are selling within a week of being listed and posting no significant price declines.Construction in Missoula, Mont. Among homebuilders, “there is a lot more concern than there had been,” said Ivy Zelman of Zelman & Associates.Tailyr Irvine for The New York TimesThat rising mortgage rates have not had more of an effect shows how difficult it is to tamp down prices and bring demand into balance in an economy where a lack of supply — marked by half-empty car lots, furniture order backlogs and a paucity of homes for sale — is playing a guiding role.In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices. Those trends would have echoed through the broader economy, with fewer people spending on moving vans and new couches, and as existing homeowners felt on less solid financial footing and potentially curbed their own spending. Instead, economists are predicting that prices will continue to rise — by double digits in some forecasts — through the year.“I don’t think it’s going to stop the housing market,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon. For years the United States has suffered from a chronically undersupplied housing market. Home building plunged after the Great Recession and remained at a recessionary pace long after the economy and job market had recovered. Even today, the pace of home building remains below the heights of the mid-2000s, before the 2008 financial crisis and housing market crash.This makes it a good time to be a seller — assuming you don’t need to buy. Christopher J. Waller, a governor at the Fed, is living this out.“I sold my house yesterday in St. Louis to an all-cash buyer, no inspection,” Mr. Waller said in panel discussion on Monday. “But I’m trying to buy a house in D.C., and now I’m on the other side, going: ‘This is insane.’”He noted that the sharp rise in mortgage rates over recent months should have an effect on what happens with housing.The recent lack of new building was not for lack of interest. Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years. Their desire to buy houses and start families has collided with scant supply, leading to an increase in prices.Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately. New home completions remain low, however, because the tight labor market and supply chain disruptions have homebuilders scrambling to find wood, dishwashers, garage doors — and workers.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Biden to Allow Higher-Ethanol E15 Gas to Be Sold All Summer

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    WASHINGTON — President Biden announced on Tuesday a plan to suspend a ban on summertime sales of higher-ethanol gasoline blends, a move that White House officials said was aimed at reducing gas prices but that energy experts predicted would have only a marginal impact at the pump.The Environmental Protection Agency will issue a waiver that would allow the blend known as E15 — which is made of 15 percent ethanol — to be used between June 1 and Sept. 15. The White House estimated that approximately 2,300 stations in the country offer the blend and cast the decision as a move toward “energy independence.”“E15 is about 10 cents a gallon cheaper,” Mr. Biden said, speaking after taking a tour of a production facility that produces 150 million gallons of bioethanol annually. “And some gas stations offer an even bigger discount than that.”“When you have a choice, you have competition,” Mr. Biden added. “When you have competition, you have better prices.”The decision to lift the summertime ban comes as Mr. Biden faces growing pressure to bring down energy prices, which helped drive the fastest rate of inflation since 1981 in March. A gallon of gas was averaging $4.10 on Tuesday, according to AAA. Last month, the president announced a plan to release one million barrels of oil a day from the U.S. Strategic Petroleum Reserve over the next six months.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.Ethanol is made from corn and other crops and has been mixed into some types of gasoline for years as a way to reduce reliance on oil. But the blend’s higher volatility can contribute to smog in warmer weather. For that reason, environmental groups have traditionally objected to lifting the summertime ban, as have oil companies, which fear greater use of ethanol will cut into their sales.How much the presence of ethanol holds down fuel prices has been a subject of debate among economists. Some experts said the decision was likely to reap larger political benefits than financial ones.“This is still very very small compared with the strategic petroleum reserve release,” said David Victor, a climate policy expert at the University of California, San Diego. “This one is much more of a transparently political move.”Lawmakers in corn-producing states have been urging Mr. Biden to use biofuels to fill the gap created by the United States ban on importing Russian oil. Oil refiners are required to blend some ethanol into gasoline under a pair of laws, passed in 2005 and 2007, intended to reduce the use of oil and the creation of greenhouse gases by mandating increased levels of ethanol in the nation’s fuel mix every year. However, since passage of the 2007 law, the mandate has been met with criticism that it has contributed to increased fuel prices and has done little to reduce greenhouse gas pollution.Inflation F.A.Q.Card 1 of 6What is inflation? More

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    Supply Chains Tainted by Forced Labor in China, Panel Told

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    Human rights activists and others urged the Biden administration to cast a wide net to stop imports of products made with forced labor in Xinjiang.WASHINGTON — Human rights activists, labor leaders and others urged the Biden administration on Friday to put its weight behind a coming ban on products made with forced labor in the Xinjiang region of China, saying slavery and coercion taint company supply chains that run through the region and China more broadly.The law, the Uyghur Forced Labor Prevention Act, was signed by President Biden in December and is set to go into effect in June. It bans all goods made in Xinjiang or with ties to certain entities or programs that are under sanctions and transfer minority workers to job sites, unless the importer can demonstrate to the U.S. government that its supply chains are free of forced labor.It remains to be seen how stringently the law is applied, and if it ends up affecting a handful of companies or far more. A broad interpretation of the law could cast scrutiny on many products that the United States imports from China, which is home to more than a quarter of the world’s manufacturing. That could lead to more detentions of goods at the U.S. border, most likely delaying product deliveries and further fueling inflation.The law requires that a task force of Biden administration officials produce several lists of entities and products of concern in the coming months. It is unclear how many organizations the government will name, but trade experts said many businesses that relied on Chinese factories might realize that at least some part or raw material in their supply chains could be traced to Xinjiang.“I believe there are hundreds, perhaps thousands, of companies that fit the categories” of the law, John M. Foote, a partner in the international trade practice at Kelley Drye & Warren, said in an interview.The State Department estimates that the Chinese government has detained more than one million people in Xinjiang in the last five years — Uyghurs, Kazakhs, Hui and other groups — under the guise of combating terrorism.China denounces these claims as “the lie of the century.” But human rights groups, former detainees, participating companies and the Chinese government itself provide ample documentation showing that some minorities are forced or coerced into working in fields, factories and mines, in an attempt to subdue the population and bring about economic growth that the Chinese government sees as key to stability.Rushan Abbas, the founder and executive director of the nonprofit Campaign for Uyghurs, who has written about the detention of her sister in Xinjiang, said at a virtual hearing convened by the task force on Friday that forced labor had become a “profitable venture” for the Chinese Communist Party, and was meant to reduce the overall population in Xinjiang’s villages and towns.“The pervasiveness of the issue cannot be understated,” she said, adding that forced labor was made possible by “the complicity of industry.”Gulzira Auelkhan, an ethnic Kazakh who fled Xinjiang for Texas, said in the hearing that she had been imprisoned for 11 months in Xinjiang alongside ethnic Kazakhs and Uyghurs who were subject to torture and forced sterilization. She also spent two and a half months working in a textile factory making school uniforms for children and gloves, which her supervisors said were destined for the United States, Europe and Kazakhstan, she said through a translator.It is already illegal to import goods made with slave labor. But for products that touch on Xinjiang, the law will shift the burden of proof to companies, requiring them to provide evidence that their supply chains are free of forced labor before they are allowed to bring the goods into the country.Supply chains for solar products, textiles and tomatoes have already received much scrutiny, and companies in those sectors have been working for months to eliminate any exposure to forced labor. By some estimates, Xinjiang is the source of one-fifth of the world’s cotton and 45 percent of its polysilicon, a key material for solar panels.But Xinjiang is also a major provider of other products and raw materials, including coal, petroleum, gold and electronics, and other companies could face a reckoning as the law goes into effect.In the hearing on Friday, researchers and human rights activists presented allegations of links to forced labor programs for Chinese manufacturers of gloves, aluminum, car batteries, hot sauce and other goods.Horizon Advisory, a consultancy in Washington, claimed in a recent report based on open-source documents that the Chinese aluminum sector had numerous “indicators of forced labor,” like ties to labor transfer programs and the Xinjiang Production and Construction Corps, which has been a target of U.S. government sanctions for its role in Xinjiang abuses.Xinjiang accounts for about 9 percent of the global production of aluminum, which is used to produce electronics, automobiles, planes and packaging in other parts of China.The State Department estimates that China has detained more than one million people in Xinjiang in the last five years. The Urumqi No. 3 Detention Center has room for at least 10,000 people. Mark Schiefelbein/Associated Press“China is an industrial hub for the world,” Emily de La Bruyère, a co-founder of Horizon Advisory, said at the hearing.The Latest on China: Key Things to KnowCard 1 of 4Marriages and divorces. More