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    Supply Chain Problems Mean Buying a Car Sometimes Takes a Plane Ride

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    The limited supply of new and used vehicles is forcing some Americans to go to great lengths to find and buy them, including traveling to dealers hundreds of miles away.When Rachael Kasper started shopping for a new car in August, she had her heart set on a Ford Escape plug-in hybrid. The problem was that Ford hasn’t made many of them this year because of a computer chip shortage that has slowed auto production around the world.Ms. Kasper first came up empty in her home state of Michigan and, later, in neighboring states. When she expanded to the East Coast, she found one — at a dealership 537 miles away, in Hanover, Pa.“I flew to Baltimore, took a Lyft to the dealer, and then drove all the way home,” said Ms. Kasper, who owns a water-sports equipment retailer. “It was quite an adventure.”The shortage of computer chips, in large part caused by decisions made in the early days of the pandemic, has rippled through the auto industry this year. Manufacturers have had to close plants for lack of parts, leaving car dealers with millions fewer vehicles to sell.As a result, car buyers have had to travel hundreds of miles to find the vehicles they want, give up on haggling and accept higher prices, and even snap up used cars that have been repaired after serious accidents.The supply squeeze coincides with an apparent increase in demand. Some people are trying to avoid mass transit or taxis. Others simply want a vehicle. Many families have saved thousands of dollars thanks in part to government benefits and stimulus payments and because they have been spending less on travel, restaurant meals and other luxuries that have fallen by the wayside because of health concerns.The end of the year is normally a peak selling season, with some automakers running ads in which cars are presented as gifts complete with giant bows. But this year consumers are finding that locating the car of their desires is not quick, easy or cheap.As Ed Matovcik, a wine industry executive in Napa, Calif., neared the end of his lease on a Tesla Model S, he decided to switch to a Porsche Taycan, a German electric car. He ordered one, but it won’t arrive until May, three months after he has to give up the Tesla.He is planning on renting cars until the Taycan arrives and is looking on the bright side. “It’s a different world now, so I don’t really mind the wait,” he said. “I’m thinking of renting a pickup for a week so I can finally clear out my garage.”The disruption to car production has rippled through the automotive world. For a time in the spring and summer of 2020, rental car companies stopped buying new cars and sold many of their vehicles to survive while travel was restricted. Now those companies are seeking to take advantage of a hot rental market and are scrambling to buy cars, often competing with consumers and dealers.The big discounts and incentives that were once standard features of car-buying in the United States have all but disappeared. Instead, some dealers now add an extra $2,000 or $3,000 on top of the list price for new cars. That has left car buyers fuming, but the dealers who are jacking up prices know that if one customer balks, another is usually waiting and willing.In November, the average price of a new car was a record $45,872, up from $39,984 a year ago, according to Edmunds, an auto-data provider. The average price paid for a used car is now more than $29,000, up from $22,679 in 2020, and Edmunds expects it to exceed $30,000 next year for the first time ever.Because of the rising prices of used cars, some consumers are spending to fix up older vehicles and keep them going for longer. More cars that have been damaged in accidents are getting fixed instead of being declared a total loss by insurers and sent to the scrap yard.“The math has changed on whether a car is totaled,” said Peter DeLongchamps, a senior vice president at Group 1 Automotive, a Houston-based auto retailer that operates its own chain of auto-body shops. “Our parts and service business is very good. We’re seeing more cars getting fixed based on the high used values.”Workers assembled a Jeep Grand Cherokee L at a Stellantis plant in Detroit in June. A computer chip shortage has slowed auto production around the world.Bill Pugliano/Getty ImagesThe auto industry’s chip shortage stems from the start of the pandemic, in the spring of 2020, when automakers closed factories for weeks and cut orders for computer chips and other parts. At the same time, homebound consumers were snapping up laptops, game consoles and other electronics, spurring makers of those devices to increase orders for semiconductors. When automakers resumed production, they found chip suppliers had less production capacity for them.As a result, automakers have produced significantly fewer trucks and cars this year than they had planned. In addition to closing plants, they’ve built vehicles without certain features, such as heated seats and electronics that maximize fuel economy. Tesla dropped power lower-back support in the passenger seat of certain models.The Coronavirus Pandemic: Key Things to KnowCard 1 of 4The Omicron variant. More

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    Why Christmas Gifts Are Arriving on Time This Year

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    Fears that a disrupted supply chain could wreak havoc on the logistics industry over the holiday turned out to be wrong as many Americans ordered early and shopped in stores.The warnings started to stream in early this fall: Shop early or you may not get your gifts on time.Global supply chain problems that have led to long delays in manufacturing and shipping could ripple outward, slowing package deliveries to millions of Americans in the weeks and days before Christmas, experts warned. The prospect even became a talking point in conservative attacks on President Biden’s policies.Despite early fears, however, holiday shoppers have received their gifts mostly on time. Many consumers helped themselves by shopping early and in person. Retailers ordered merchandise ahead of time and acted to head off other bottlenecks. And delivery companies planned well, hired enough people and built enough warehouses to avoid being crushed by a deluge of packages at the last minute, as the Postal Service was last year.The vast majority of packages delivered by UPS, FedEx and the Postal Service this holiday season are gifts destined for residential addresses, according to ShipMatrix, a software company that services the logistics industry. And nearly all have arrived on time or with minimal delays, defined as a few hours late for express packages and no more than a day late for ground shipments. The UPS and the Postal Service delivered about 99 percent of their packages on time by that measure between Nov. 14 and Dec. 11, and FedEx was close behind at 97 percent, according to ShipMatrix.“The carriers have done their part. Consumers have done their part,” said Satish Jindel, president of ShipMatrix. “When they work together, you get good results.”That’s not to say the supply chain turmoil is over. About a hundred container ships are waiting off the West Coast to unload their cargo. Big-ticket items, such as new cars, are still hard to find because of a shortage of some critical parts like computer chips. And prices are up for all kinds of goods.But at least when it comes to items that are in stock, delivery companies have given consumers little to complain about. By some measures, in fact, they have done a better job this holiday season than even before the pandemic. In the two full weeks after Thanksgiving, it took about four days from the moment a package was ordered online for it to be delivered by FedEx, according to data from NielsenIQ, which tracks online transactions from millions of online shoppers in the United States. That compares with about 4.6 days for UPS and more than five days for the Postal Service.For UPS and FedEx, those figures are an improvement of about 40 percent from a similar post-Thanksgiving period in 2019, according to NielsenIQ. For the Postal Service, it was a 26 percent improvement.“There’s all these different moving parts that have collaborated to help us get through what might have been a perfect storm to cause problems,” Bill Seward, president of worldwide sales and solutions for UPS, said in an interview. “We feel really good about where we’re at right now.”The achievement is all the more notable given that Americans are on track to spend more this holiday season than the one before — up to 11.5 percent over 2020, according to the National Retail Federation, a trade group.But this year has been different in a critical way: Many people started shopping earlier.The vast majority of packages delivered by UPS, FedEx and the Postal Service this holiday season are gifts destined for residential addresses.Desiree Rios for The New York TimesConsumer surveys, including those commissioned by UPS and NPD Group, a market research firm, found that Americans accelerated their holiday shopping this year, motivated by shortages, shipping delays or earlier sales from retailers.Jennifer Grisham, who lives in Southern California with her husband and three young children, was among them. Concerned by news of supply chain disruptions, Ms. Grisham asked her children to draw up their Christmas wish lists before Halloween, weeks earlier than usual. She had finished shopping by the day after Thanksgiving, which is usually when she starts buying gifts.“I have three kids who still believe in Santa Claus,” she said. “I was not going to bookend these two really dramatic years for us with them suddenly not getting what they wanted.”Ms. Grisham said she had little trouble finding the big-ticket items she pursued: a Barbie Dreamhouse for one daughter, Lego sets for her son and a cat condo for her other daughter, who plans to use it as a home for her stuffed animals.“I’m happy that I got it done early, because I didn’t have to worry about the risk,” she said.Retailers enticed consumers to shop early. Amazon and Target, for example, began holiday deals in October. According to Mr. Seward at UPS, 26 of the company’s 30 largest retail customers started offering substantial deals before Black Friday.Many Americans also eased pressure on UPS and other delivery companies by doing more shopping in stores. After consumers switched to online shopping in droves when the pandemic took hold last year, in-store shopping bounced back strongly this year, according to retail and logistics experts. In September, in-store sales accounted for about 64 percent of retail revenue, up 12 points from its low point during the pandemic, but still somewhat below 2019 levels, according to NPD Group.“We miss people,” Katie Thomas, a top consumer analyst at Kearney, a consulting firm, said about the compulsion to visit stores rather than buy online. “There’s a pent-up demand. We’re seeing people want to dress up again.”Retailers and delivery companies also worked behind the scenes to make sure the supply chain disruptions did not wreak havoc on holiday packages. Retailers worked harder to forecast sales and moved inventory to areas where UPS, FedEx and others had more capacity to pick up packages. Companies that previously relied mostly or exclusively on a single delivery service started doing business with several companies.The delivery companies have spent the past two years building out capacity, too, in response to surging demand. UPS, which in the past did not make deliveries on Saturday in much of the country, has been expanding its weekend service for years. It now offers Saturday deliveries to about 90 percent of the U.S. population. FedEx has added nearly 15 million square feet of sorting capacity to its network since June. And, starting in the spring, the Postal Service, which processes more mail and packages than the other delivery businesses, started leasing additional space and installing faster package-sorting machines around the country.A post office distribution center in Los Angeles last month was already in the holiday swing.Mario Tama/Getty ImagesThe companies have also responded by raising rates, imposing surcharges for larger packages that could slow down their networks, limiting the number of packages they will accept at busy times and penalizing retailers that ship many more or many fewer packages than they had forecast.“We used to think that every package was the same,” Carol Tomé, UPS’s chief executive, told financial analysts in October, explaining her strategy of focusing on quality over quantity. “We don’t think that anymore. So for some shippers, we’re no longer delivering their packages, and that’s OK with us.”The Postal Service doesn’t have the luxury of easily turning away business, but even it has done a better job of managing expectations for holiday package deliveries. Despite the introduction of its first-ever holiday surcharge last year, its delivery performance suffered. This year, however, it has fared much better, thanks to 13 million square feet of new processing space, 112 new high-speed processing machines and the decision to hire peak-season workers earlier.“U.S.P.S. is maybe the most exciting story of all,” said Josh Taylor, senior director of professional services at Shipware, a consulting firm. “The fact that they’re not overwhelmed, that their network can continue to deliver on time, it’s a great development for consumers.”But the holiday crunch does not end on Christmas. Online returns will keep delivery companies busy for weeks.And the pandemic is not yet over. Fear over the spread of the Omicron variant of the coronavirus could drive consumers back to online shopping in the months to come, which would impose new pressures on delivery companies and retailers. More

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    Omicron Is an Economic Threat, but Inflation Is Worse, Central Bankers Say

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    Within 24 hours, the Federal Reserve, Bank of England and European Central Bank all stepped forward to deal with price increases.There is still a lot scientists do not know about Omicron. There is cautious optimism — but no certainty — about the effectiveness of vaccines against this fast-spreading variant of the coronavirus, and experts do not fully understand what it means for public health or the economy.But central banks have concluded they don’t have the luxury of waiting to find out.Facing surging inflation, three of the world’s most influential central banks — the Federal Reserve, Bank of England and European Central Bank — took decisive steps within 24 hours of each other to look past Omicron’s economic uncertainty. On Thursday, Britain’s central bank unexpectedly raised interest rates for the first time in more than three years as a way to curb inflation that has reached a 10-year high. The eurozone’s central bank confirmed it would stop purchases under a bond-buying program in March. The day before, the Fed projected three interest rate increases next year and said it would accelerate the wind down its own bond-buying program.The perception that the Bank of England would “view the outbreak of the Omicron variant with greater concern than it actually did” caused the surprise in financial markets, ” Philip Shaw, an economist at Investec in London, wrote in a note to clients. The Fed also “carried on regardless” with its tightening plans, he added.Aside from Omicron, the central banks were running out of reasons to continue emergency levels of monetary stimulus designed to keep money flowing through financial markets and to keep lending to businesses and households robust throughout the pandemic. The drastic measures of the past two years had done the job — and then some: Inflation is at a nearly 40-year high in the United States; in the eurozone it is the highest since records began in 1997; and price rises in Britain have consistently exceeded expectations.It is still unknown how Omicron will affect the economic recovery. Vaccine makers are still testing their shots against the variant.Alessandro Grassani for The New York TimesThe heads of all three central banks have separately decided that the price gains won’t be as temporary as they once thought, as supply chains take a while to untangle and energy prices pick up again.Andrew Bailey, the governor of the Bank of England, said that policymakers in Britain were seeing things that could threaten inflation in the medium-term. “So that’s why we have to act,” he said on Thursday.“We don’t know, of course, a lot about Omicron at the moment,” he added. It could slow the economy, and already there are canceled holiday parties, fewer restaurant bookings, less retail foot traffic and signs that more people are staying home. But Omicron could also worsen inflationary pressures, he said. “And that’s, I’m afraid, a very important factor for us.”Already, price gains have popped higher this year as snarled supply chains and goods shortages have raised shipping and manufacturing costs. Depending on the severity of Omicron and how governments react, the variant could cause factories to shut down and could keep supply chains in disarray and workers at home, prolonging goods and labor shortages and pushing inflation higher.At the same time, policymakers are assuming the impact on the economy will be milder than previous waves of the virus. With each surge in cases and reintroduction of restrictions, the dent to the economy has gotten smaller and smaller. This would lessen the risk that the central banks end up tightening monetary policy into a downturn.Still, it is an awkward balancing act. On the same day the Bank of England raised rates, its staff cut half a percentage point from their growth forecasts for the final three months of the year. By the end of 2021, the British economy will still be 1.5 percent smaller than its prepandemic size, the bank estimated.Christine Lagarde, the president of the European Central Bank, said Omicron had created uncertainty in the face of a strong recovery.Pool photo by Ronald Wittek“From a macroeconomic perspective, it’s unlikely that the fourth wave is going to have as meaningful an impact as we’ve seen even during last winter,” said Dean Turner, an economist at UBS Global Wealth Management.The economic recoveries from the pandemic, though bumpy, haven’t been derailed yet. Unemployment rates are falling in Europe and the United States, and businesses are complaining that is difficult to hire staff. That, combined with the burst of inflation, was enough to bolster the case for some monetary tightening.“There’s a lot of uncertainty with the new variant, and it’s not clear how big the effects would be on either inflation or growth or hiring,” Jerome H. Powell, the Fed chair, said on Wednesday. But there is a “real risk” inflation could be more persistent, he also said, which was part of the reason the bank sped up its plans to taper its bond purchases.Ending the Fed’s bond purchases sooner would give the central bank room to react to a wider range of economic outcomes next year, Mr. Powell said.“The data is pretty glaring,” Mr. Turner of UBS said of recent statistics on inflation and employment. “There’s only so much caution you can get away with,” before central banks need to take action, he said.Omicron has created uncertainty in the face of a strong recovery, Christine Lagarde, the president of the European Central Bank said on Thursday after she outlined how the bank would end its largest pandemic-era stimulus measure.Vaccine-makers are still testing their shots against Omicron and medical officials are encouraging restraint when it comes to socializing rather than implementing new lockdowns, but central bankers are marching ahead because time isn’t on their side. The effect of monetary policy decisions on the wider economy isn’t immediate.The Bank of England is forecasting that inflation will peak at 6 percent in April, three times the central bank’s target. Within such a short time frame, there is little policymakers can do to stop that from happening, but they can try to signal to businesses and unions setting wages that they will act to stop higher inflation from becoming entrenched, said Paul Mortimer-Lee, the deputy director of the National Institute of Economic and Social Research in London. This may prevent higher prices from spilling over into significantly higher wages, which could cause businesses to raise prices even more.While all three central banks are facing similar problems with high inflation and are keeping watch over wage negotiations, their future challenges are different.The Federal Reserve and Bank of England are worried about the persistence of high inflation. For the European Central Bank, inflation in the medium term is too low, not too high. It is still forecasting inflation to be below its 2 percent target in 2023 and 2024. To help reach that target in coming years, the central bank will increase the size of an older bond-buying program beginning in April, after purchases end in the larger, pandemic-era program. This is to avoid “a brutal transition,” Ms. Lagarde said.She warned against drawing strong comparisons between Britain, the United States and the eurozone economies.“Those three economies are at a completely different states of the cycle,” she said. “We are in a different universe and environment,” even though there might be some spillover effects across countries from the actions each central bank takes.Melissa Eddy More

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    What Causes Inflation and Should I Worry About It?

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    What is inflation, why is it up and whom does it hurt? A run through common questions about the ongoing price burst.Inflation has become central to the American zeitgeist in 2021 in a way that it hadn’t been for decades. Google searches are up. Supply chain issues feature into popular Instagram posts. The satire website The Onion warned in a recent headline that “higher prices may force Americans to eat reasonable portions on Thanksgiving.”Even as inflation hits its highest level since 1982 and inserts itself as a topic of popular discussion, trying to understand it can be a mind-bending task. Some people who have studied markets and the economy for years often do not know the ins and outs of how inflation is calculated. Its aftereffects on society — from who wins and who loses to whether it is good or bad news — are nuanced.Here’s a guide to help explain what inflation is, including how it is measured and what it means for your economic security and savings.What is inflation?Inflation is a loss of purchasing power over time: It means your dollar will not go as far tomorrow as it did today.Inflation is typically expressed as the annual change in prices for a basket of goods and services. In the United States, there are two main inflation gauges.One, the Consumer Price Index or C.P.I., measures the cost of things urban consumers buy out of pocket. The other, the Personal Consumption Expenditures index, or P.C.E., is released at more of a lag and measures things people consume, including things they do not pay for directly — notably health care, which insurance and government benefits help to cover. The two indexes are also built slightly differently.The Federal Reserve, America’s central bank and the institution in charge of keeping prices from increasing too rapidly, targets 2 percent annual increases in the P.C.E. index on average over time. A little bit of consumer price inflation is generally viewed as desirable, in part because it gives companies room to adjust to a changing economy — one where labor and commodities might cost more — without being forced out of business.What causes inflation?In the short term, high inflation can be the result of a hot economy — one in which people have a lot of surplus cash or are accessing a lot of credit and want to spend. If consumers are buying goods and services eagerly enough, businesses may need to raise prices because they lack adequate supply. Or companies may choose to charge more because they realize they can raise prices and improve their profits without losing customers.But inflation can — and often does — rise and fall based on developments that have little to do with economic conditions. Limited oil production can make gas expensive. Supply chain problems can keep goods in short supply, pushing up prices.The inflationary burst America has experienced this year has been driven partly by quirks and partly by demand.What to Know About Inflation in the U.S.The Fed’s Pivot: Jerome Powell’s abrupt change of course moved the central bank into inflation-fighting mode.Fastest Inflation in Decades: The Consumer Price Index rose 6.8 percent in November from a year earlier, its sharpest increase since 1982.Why Washington Is Worried: Policymakers are acknowledging that price increases have been proving more persistent than expected.Who’s to Blame for Rising Prices?: Here are the most obvious candidates — and where the evidence looks strongest.The Psychology of Inflation: Americans are flush with cash and jobs, but they also think the economy is awful.On the quirk side, the coronavirus has caused factories to shut down and has clogged shipping routes, helping to limit the supply of cars and couches and pushing prices higher. Airfares and rates for hotel rooms have rebounded after dropping in the depths of the pandemic. Gas prices have also contributed to heady gains recently.But it is also the case that consumers, who collectively built up big savings thanks to months in lockdown and repeated government stimulus checks, are spending robustly and their demand is driving part of inflation. They are continuing to buy even as costs for exercise equipment or outdoor furniture rise, and they are shouldering increases in rent and home prices. The indefatigable shopping is helping to keep price increases brisk.Where is inflation headed and should I be worried?Officials say they do not yet see evidence that rapid inflation is turning into a permanent feature of the economic landscape, even as prices rise very quickly: The C.P.I. measure rose by 6.8 percent in the year through November, the fastest pace since 1982.There are plenty of reasons to believe that the price burst will fade. Much of the increase this year owes to shortages of goods — from bicycles to cars and beds — that are likely to eventually ease as companies figure out how to produce and transport what people want to buy in a pandemic-altered economy. Many households also have built up savings, in part because of repeated stimulus payments, but they eventually could exhaust those.Plus, before the pandemic, aging demographics and high inequality in income and wealth had combined to drag inflation steadily lower for years as people preferred to save money instead of spending it, and those basic economic building blocks haven’t changed.But there are concerning signs that inflation is becoming stickier, meaning that it might last rather than fading with time. Rents have picked up sharply as home prices have risen and would-be buyers have found themselves locked out of ownership. Consumers are slowly starting to anticipate higher prices, though long-term inflation expectations have yet to jump drastically higher.In the longer term, the (sometimes contested) theory goes, high inflation can become entrenched if workers begin to expect it and can successfully negotiate wage increases to cover their climbing costs. Companies, facing higher labor bills, may manage to pass the costs onto consumers — and voilà, you have a situation where pay and prices push one another steadily upward.Is inflation bad?Whether inflation is “bad” depends on the circumstances.Most everyone agrees that super fast price increases — often called hyperinflation — spell trouble. They destabilize political systems, turn middle-class workers into paupers overnight, and make it impossible for businesses to plan. Weimar Germany, where hyperinflation helped to usher Adolf Hitler into power, is often cited as a case in point.Moderate price gains, even ones a bit above the Fed’s official goal, are a topic of more-serious debate. Slightly higher inflation can be good for people who owe money at fixed interest rates. If I sell coconuts for $1 and owe my bank $200 today, but next year I am suddenly able to charge $1.05 for my coconuts, my debt becomes easier for me to pay back: Now I only have to sell a little bit over 190 coconuts plus interest.But inflation can be tough for lenders. The bank to whom I owe my $200 is obviously not happy to get 190 coconuts worth of money instead of 200 coconuts worth. While politicians and the public rarely cry for bankers, the same is true for people with savings that bear low interest: Their holdings will not go as far. Inflation can be especially tough for people on fixed incomes, like students and many retirees.For workers taking home paychecks, whether inflation is a good or bad thing hinges on what happens with wages. If a worker’s pay goes up faster than prices increase, they can still find themselves better off in a high-inflation environment.Wages are growing quickly right now, especially for lower earners, but some measures suggest the growth is not keeping pace with inflation as it picks up steeply. Still, many households are also receiving transfers from the government — including an expanded Child Tax Credit — which could keep some families’ financial situations from deteriorating.How does inflation affect the poor?High or unpredictable inflation that isn’t outmatched by wage gains can be especially hard to shoulder for poor people, simply because they have less wiggle room.Poor households spend a bigger chunk of their budgets on necessities — food, housing and especially gas, which is often a contributor to bouts of high inflation — and less on discretionary expenditures. If rich households face high inflation and their wages do not keep up, they may have to cut back on vacations or dining out. A poor family may be forced to cut back on essentials, like food.“For lower income households, price increases eat up more of their budget,” said Laura Rosner-Warburton, a senior economist at MacroPolicy Perspectives, pointing out that some research suggests that poor people may even end up paying comparatively more for the same products. That may be partly because they lack the free cash to take advantage of temporary discounts.Around the world, poor people historically have reported greater concern around inflation, and that is also the case in the United States in the current episode.How does inflation affect the stock market?Really high inflation typically spells trouble for stocks, said Aswath Damodaran, who teaches corporate finance and valuation at New York University’s Stern School of Business. Financial assets in general have historically fared badly during inflation booms, Mr. Damodaran said, while real assets like houses have better held their value.The reason is simple.“You need to make higher returns to break even,” he explained. While it might have been attractive to invest money for a 3 percent annual payback before an inflationary burst, once inflation has taken off to 4 percent, your investment would actually be declining in terms of real-world purchasing power.Plus, inflation can be tough on the underlying business. Companies that lack pricing power — meaning that they cannot easily pass costs on to customers — suffer the worst, because they are forced to absorb input cost increases by taking a hit to their profit margin.High inflation can also spur the Federal Reserve to increase interest rates as it tries to cool off the economy and slow demand. If the central bank does so drastically, it could even plunge the economy into a recession, which would also be bad for stocks — along with everyone else.“The worse inflation is, the more severe the economic shutdown has to be to break the back of inflation,” Mr. Damodaran said. More

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    Biden Touts Low Unemployment Rate Despite Economic Anxiety

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    Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world.Whether it’s reporting on conflicts abroad and political divisions at home, or covering the latest style trends and scientific developments, Times Video journalists provide a revealing and unforgettable view of the world. More

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    How Omicron Could Knock Economic Recovery Off Track

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    The latest zigzag in the pandemic has already curtailed travel, but its broader impact on growth and inflation isn’t likely to be known for several weeks.LONDON — This week, Marisha Wallace finally had to admit that her planned five-day ski holiday in Switzerland in mid-December was not salvageable: The Swiss government’s sudden decision to impose a 10-day quarantine on some international travelers meant she wouldn’t be able to leave her hotel or return home to London on her scheduled flight.“It’s the way of the world right now,” said Ms. Wallace, an actress and a singer. “You can’t plan anymore.”That provisional state, amplified across the world, has left the still-fragile economy in a state of suspense as spiking coronavirus infections and the new variant Omicron have popped up around the globe.“There’s no way to know how bad it will get,” said Ángel Talavera, head of European economics at Oxford Economics.The forecasting firm has sketched out three scenarios, including one that predicts no discernible effect on economic growth and one severe enough to slash next year’s in half. It will take several weeks before there is more clarity, Oxford concluded.The current round of restrictions has already reduced travel and dampened consumer confidence. A virulent, vaccine-resistant strain could send the economy into a tailspin again, while a mild one could leave health care systems unburdened and allow the recovery to get back on track.As a report released Wednesday from the Organization for Economic Cooperation and Development showed, although growth has been uneven, the world economy this year bounced back more quickly and strongly than had been anticipated. The report, compiled largely before the latest coronavirus news, nevertheless warned that growth was projected to slow: in the eurozone, to 4.3 percent next year from 5.2 percent in 2021; and in the United States, to 3.7 percent in 2022 from 5.6 percent.The organization characterized its outlook as “cautiously optimistic.” But it reiterated how much economic fortunes are inextricably tied to the coronavirus: “The economic policy priority is to get people vaccinated,” the report concluded.Travelers from South Africa being tested at the Amsterdam airport on Tuesday.Remko De Waal/Anp/Agence France-Presse — Getty ImagesIndeed, Omicron’s threat to the recovery is just the latest in a series of zigzags that the world economy has endured since the coronavirus began its march across continents last year. Hopes that an ebbing pandemic would permit daily life and commerce to return to normal have been repeatedly frustrated by the virus.Even before this latest variant was discovered, a fourth wave of infections transformed Europe into a Covid hot spot and prompted new restrictions like lockdowns in the Netherlands and Austria.During earlier outbreaks, trillions in government assistance helped quickly resuscitate the struggling U.S. and European economies. It also brought some unexpected side effects. Combined with pent-up demand, that support helped produce a shortage of labor and materials and rising inflation.Given how much debt was racked up in the past 18 months, such aid is unlikely to recur even with a sharp downturn — and neither are wholesale closures. Vaccines provide some protection, and many people say they are unwilling to go back into hibernation.People and business alike have shifted into a wait-and-see mode. “A lot of things do seem like they are on hold, like labor market or overall consumption decisions,” said Nick Bunker, director of economic research for the job site Indeed.How that will affect unemployment levels and inflation rates is unclear. Jerome H. Powell, the Federal Reserve chair, indicated on Tuesday that concern about stubborn inflation was growing. The O.E.C.D. also warned that inflation could be higher and last longer than originally anticipated.Omicron’s appearance just adds to the uncertainty, Laurence Boone, the organization’s chief economist, said in an interview.The Nativity Hotel in Bethlehem. Israel on Sunday decided to close its borders to foreign tourists after the Omicron variant was detected.Hazem Bader/Agence France-Presse — Getty Images“If it’s something we can cope with, like the virus we have so far, then it may prolong disruptions of the supply chain, and inflation could take longer to sort out,” she said. But if the new variant causes wider shutdowns and plunging confidence, she added, it could reduce the spending binge and dampen rising prices.In recent days, governments have reacted with a confusing hodgepodge of stern warnings, travel bans, mask mandates and testing rules that further cloud the economic outlook. That patchwork response combined with people’s varying tolerance for risk means that, at least in the short term, the virus’s latest swerves will have a vastly different effect depending on where you are and what you do.In France, Luna Park, an annual one-month amusement fair held in the southern city of Nice and slated to open this weekend, was called off after the government suddenly requisitioned the massive warehouse where roller coasters, shooting galleries and merry-go-rounds were being set up in order to convert the space to an emergency vaccination center.“Today I find myself trying to save my company, and I’m not sure that I can,” said Serge Paillon, park’s owner. He feared he would face huge losses, including 500,000 euros (about $566,000) he had already invested in the event, as well as refunds for tickets that had been on sale for several monthsMr. Paillon furloughed 20 employees. Another 200 festival workers who were coming from around the country to manage the 60 games and rides were told to stay home.“For a year and a half, it was already a disaster,” Mr. Paillon said. “And now it’s starting again.”Israel’s decision on Saturday to shut its borders to all foreign tourists for two weeks is likely to reduce the number of tourists in Israel and the occupied territories this December by up to 40,000, or nearly 60 percent of what was expected, according to a government estimate.Wiatt F. Bowers had to cancel his trip to Tel Aviv, the fifth time in 18 months he has had to scrap a planned trip to Israel.Agnes Lopez for The New York TimesWiatt F. Bowers, an urban planner, had planned to leave Jacksonville, Fla., for Tel Aviv on Wednesday but had to cancel — the fifth time in 18 months that he had to scrap a planned trip to Israel. He will rebook, but doesn’t know when.Foreign tourism, which brought a record 4.55 million tourists to Israel in 2019, had already nearly vanished. Between March 2020 and September 2021, nonresident foreigners were barred from entering Israel — and, by extension, the occupied territories, where entry and exit are controlled by Israel.In Bethlehem, where tourism is the main industry, income consequently fell more than 50 percent, said the mayor, Anton Salman, in a phone interview.Elias al-Arja, the chief of the Arab Hotel Association, which represents about 100 Palestinian hotels in the occupied territories, said he was concerned less about the short-term effect of the sudden travel ban than about the long-term message of unpredictability it sent to potential visitors.“The disaster isn’t the groups who canceled over the next two weeks,” Mr. al-Arja said. “How can I convince people to come to the Holy Land after we promised them that you can come, but then the government closes the border?”Reluctance to travel, though, could mean an upswing in other sectors if the new variant is not as harmful as people fear. Jessica Moulton, a senior partner at McKinsey & Company in London, said previous spending patterns during the pandemic showed that some money people would otherwise use for travel would instead be spent on dining.She estimated that the roughly $40 billion that British consumers saved on travel last summer was used for shopping and eating out.At the moment, Ms. Moulton said, “to the extent that Omicron decreases travel, which will happen as we head into Christmas, that will benefit restaurants.”Even before the latest variant was discovered, a fourth wave of infections transformed Europe into a Covid hot spot and prompted new restrictions like lockdowns in Amsterdam.Peter Dejong/Associated PressIn Switzerland, where travelers from Britain and 22 other countries must now quarantine, the effect of the policy change on hotels was immediate.“The majority of travelers from England — between 80 to 90 percent — have already canceled,” said Andreas Züllig, head of HotellerieSuisse, the Swiss hotel association.Ms. Wallace, who canceled her trip to the Cambrian Hotel in Adelboden, was one of several people who changed their reservations at the hotel after the Swiss government made its announcement on Friday, just one week before the slopes open.“This obviously has an impact on our very important winter and Christmas business,” said Anke Lock, the Cambrian’s manager, who estimated that 20 percent of the hotel’s December bookings were at risk.For now, though, most guests are watching and waiting, Ms. Lock said: “We’ve changed the bookings from guaranteed to tentative.”Extreme uncertainty about the economy may turn out to be the only certainty.Patrick Kingsley More

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    European Steel Plan Shows Biden’s Bid to Merge Climate and Trade Policy

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    A potential agreement on steel trade provides the clearest look yet at how the Biden administration plans to implement a trade policy that is both protectionist and progressiveWASHINGTON — President Biden has promised to use trade policy as a tool to mitigate climate change. This weekend, the administration provided its first look at how it plans to mesh those policy goals, saying the United States and the European Union would try to curb carbon emissions as part of a trade deal covering steel and aluminum.The arrangement, which American and European leaders aim to introduce by 2024, would use tariffs or other tools to encourage the production and trade of metals made with fewer carbon emissions in places including the United States and European Union, and block dirtier steel and aluminum produced in countries including China.If finalized, it would be the first time a U.S. trade agreement includes specific targets on carbon emissions, said Ben Beachy, the director of the Sierra Club’s Living Economy program.“No U.S. trade deal to date has even mentioned climate change, much less included binding climate standards,” said Mr. Beachy.The announcement was short on details, and negotiations with European leaders are likely to face multiple roadblocks. But it provided an outline for how the Biden administration hopes to knit together its concerns about trade and climate and work with allies to take on a recalcitrant China, at a time when progress on multicountry trade negotiations at the World Trade Organization has stalled.“The U.S. leads the world in our clean steel technology,” Gina Raimondo, the secretary of commerce, said in an interview on Monday. She said the United States would work with allies “to preference cleaner steel, which will create an incentive to make more investments in technology,” resulting in fewer carbon emissions and more jobs.In the same interview, Katherine Tai, the United States Trade Representative, said the potential agreement would restrict market access for countries that don’t meet certain carbon standards, or that engage in nonmarket practices and contribute to global overcapacity in the steel sector — accusations that are often levied at China.The effort would seek to build “a global arrangement that promotes not just fair trade in steel but also pro-climate and responsible trade in steel,” Ms. Tai said.Kevin Dempsey, the president of the American Iron and Steel Institute, said at an industry forum in Washington on Tuesday that the arrangement would be “positive for the U.S. industry,” which has the lowest carbon intensity per ton of steel of the major steel-producing countries.China accounts for nearly 60 percent of global steel production. Its use of a common steel-production method causes more than twice as much climate pollution as does the same technology in the United States, according to estimates by Global Efficiency Intelligence.In its announcement on Saturday, the Biden administration also said it had reached a deal to ease the tariffs that former President Donald J. Trump had imposed on European metals while the governments work toward the carbon accord.The United States would replace the 25 percent tariff on European steel and a 10 percent tariff on European aluminum with a so-called tariff-rate quota. In return, the European Union would drop the retaliatory tariffs it imposed on other American products, like bourbon and motorcycles.Under the new terms, 3.3 million metric tons of European steel would be allowed to enter the United States duty-free each year, with any steel above that volume subject to a 25 percent tariff.European producers would be allowed to ship 18,000 metric tons of unwrought aluminum, which often comes in the form of ingots, and 366,000 metric tons of wrought or semifinished aluminum into the United States each year, while volumes above that would be charged a 10 percent tariff, the commerce department said.To qualify for zero tariffs, the steel must be entirely made in the European Union — a provision designed to keep cheaper steel from countries including China and Russia from finding a backdoor into the United States via Europe.Supporters of free trade have criticized the Biden administration for relying on the same protectionist trade measures used by the Trump administration, which deployed both tariffs and quotas to protect domestic metal makers.Jake Colvin, the president of the National Foreign Trade Council, said the announcement would ratchet down trade tensions between the United States and Europe. But he called the trade barriers “an unwelcome form of managed trade” that would add costs and undermine American competitiveness.Ms. Tai said the administration had made a deliberate choice not to heed calls “for the president to just undo everything that the Trump administration had done on trade.”Mr. Biden’s plan, she said, “is that we formulate a worker-centered trade policy. And that means not actually going back to the way things were in 2015 and 2016, challenging us to do trade in a different way from how we’ve done it earlier, but also, critically, to challenge us to do trade in a way different from how the Trump administration did.”A factory in southern China that makes steel parts. The trade proposal would block dirtier steel and aluminum produced in countries including China.The New York TimesThe focus on carbon emissions differs from that of the Trump administration, which rejected any attempts to negotiate on carbon mitigation and withdrew the United States from the Paris Agreement on climate change.But negotiations with Europe will face challenges, among them developing a common methodology for measuring how much carbon is emitted as certain products are made. Still, the announcement suggests that the United States and Europe might be ready to work toward a collaborative approach on lowering carbon emissions, despite past differences on how the problem should be addressed.European leaders have long advocated an explicit price on the carbon dioxide that companies emit while making their products. In July, the European Union proposed a carbon border adjustment mechanism that would require companies to pay for carbon emissions produced outside Europe, to discourage manufacturers from evading Europe’s restrictions on pollution by moving abroad.An explicit tax on carbon has met with more resistance in the United States, where some politicians want to update regulatory requirements or put the onus on companies to invest in cleaner production technology.Todd Tucker, the director of governance studies at the Roosevelt Institute, said the latest announcement suggested that the European Union may be “a little bit more flexible” on how the United States and other partners would go about lowering emissions. Mr. Biden’s reconciliation bill, for example, contains a proposal for a “green bank” that could provide financing for firms to transition to cleaner technologies, he said.“If the U.S. ends up achieving decarbonization through more of an investments and industrial-policy approach, it seems like they’re OK with that,” Mr. Tucker said.Though the earliest negotiations over carbon emissions in the steel sector involve the European Union, the Biden administration says it wants to quickly extend the partnership to other countries.In twin announcements on Sunday, the Department of Commerce said it had begun close consultations with Japan and the United Kingdom “on bilateral and multilateral issues related to steel and aluminum,” with a focus on “the need for like-minded countries to take collective action.”Both Japan and the United Kingdom still face a 25 percent tariff on steel exports to the United States imposed by Mr. Trump.The talks suggest a template for how the Biden administration will try to engage allies to counter China’s growing economic heft and make progress on goals like climate and workers rights.The administration has rejected Mr. Trump’s “America First” approach to trade, saying the United States needs to work with like-minded countries. But they have also acknowledged that the inefficiency of negotiations at the World Trade Organization, and distanced themselves from broader, multicountry trade deals, like the Trans-Pacific Partnership.The announcements suggest that the Biden administration may not see comprehensive trade deals as the most effective way to accomplish many of its goals, but rather, industry-specific agreements among a limited number of democratic, free-market countries. That approach is similar to the cooperation the United States announced with the European Union for the civil aircraft industry in June.Ms. Raimondo said the agreement to ease the tariffs on the European Union was a “very significant achievement” that would help to alleviate supply chain problems and lower prices for companies that use steel and aluminum to make other products.“It’s all kind of a table setter to a global arrangement, whereby we work with our allies all over the world over the next couple of years,” she said. More

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    Fed Expected to Announce Plan to Slow Bond Buying Amid Rapid Inflation

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    The Federal Reserve is expected to announce a plan to taper off its bond buying. With inflation surging, economists’ eyes are already turning to rates.Jerome H. Powell, the Federal Reserve chair, is on the cusp of accomplishing something that would have seemed like a victory a year ago: Central bankers are expected to announce a plan to wean the economy off their asset-buying program on Wednesday without roiling markets, a delicate maneuver that was in no way assured.Instead, Mr. Powell and his colleagues face pressing questions about their next steps.Inflation is running at its fastest pace in roughly three decades, and hopes that the jump in prices will quickly fade have dimmed as supply chain snarls deepen and fuel costs rise. Wages are increasing swiftly, and consumers and businesses are coming to expect faster price increases, pumping up the risk that high inflation will become a fixture as employers and workers adjust their behavior.Though the Fed is expected to announce this week that it will slow the $120 billion in asset purchases it has been carrying out each month to support the economy, Wall Street economists have already turned their attention to how worried the central bank is about brisk inflation and whether — and when — it might start raising interest rates in response.“The question in the mind of the market is 100 percent what comes next,” said Roberto Perli, a former Fed economist who is now head of global policy at Cornerstone Macro.Slowing bond buying could lead to slightly higher long-term borrowing costs and take pressure off the economy at the margin. But raising interest rates would likely have a more powerful effect when it comes to cooling off the economy. A higher federal funds rate would cause the cost of buying a car, a house or a piece of equipment to rise and would slow consumer and business demand. That could tamp down price gains by allowing supply to catch up to spending, but it would slow growth and weigh on hiring in the process.The Fed has signaled that bond buying could wrap up completely by the middle of next year. Economists increasingly expect the Fed to move its policy rate up from near-zero, where it has been since March 2020, as soon as next summer.Goldman Sachs economists now expect a rate increase to come in July 2022, a full year earlier than they had previously anticipated. Deutsche Bank recently pulled its forecast forward to December 2022. Investors as a whole now put better than 50 percent odds on a rate increase by the Fed’s June 2022 meeting, based on a CME Group tool that tracks market pricing.But raising rates poses a risky trade-off for Fed policymakers. If inflation moderates as the economy gets back to normal and pandemic-related disruptions smooth out, higher borrowing costs could leave fewer people employed for little reason. And with a smaller number of paychecks going out each month, demand would likely weaken over the longer run, which could drag inflation back to the uncomfortably low levels that prevailed before the start of the pandemic.“The risk is not really about the Fed beginning its rate hikes behind the curve,” said Skanda Amarnath, executive director of Employ America, a group focused on encouraging policies that help the work force. “The risk is that the Fed overreacts to this.”That markets are penciling in rate increases more quickly could suggest that they are optimistic about the economy’s chances, said Neil Dutta, head of U.S. economics at Renaissance Macro. The Fed has said that before lifting rates, it wants to see the economy return to full employment and inflation that exceeds its 2 percent target and is on track to average it over time. Investors might think those targets will be met by the middle of next year.“If it was a problem, why aren’t stocks falling?” Mr. Dutta said of the earlier rate increase expectations. “The economy has done better than anticipated.”Still, millions of jobs remain missing from the labor market, and employment growth has slowed sharply. Payrolls expanded by just 194,000 jobs in September, and while fresh hiring data due on Friday is expected to show that companies added 450,000 workers in October, the trajectory is anything but certain.If workers take a long time to come back to the job market, either because they lack child care or fear contracting the coronavirus, it could be the case that the Fed finds itself in a conundrum where inflation is high but full employment remains elusive. Mr. Powell has signaled that such a situation, in which the Fed’s goals are in conflict, is a risk. But he has also said the economy is not there yet.The future of Jerome H. Powell as the Fed chair is being debated within the Biden administration, complicating the decision on rates.Stefani Reynolds for The New York Times“I do think it’s time to taper,” Mr. Powell said at a recent virtual conference. “I don’t think it’s time to raise rates.”Understand the Supply Chain CrisisCard 1 of 5Covid’s impact on the supply chain continues. More