Category: Business

After the Covid-induced economic crisis of 2020, consumer prices began to rise in 2021 as countries emerged from lockdowns or other restrictions  This was supposed to be the comeback year for the world economy following the Covid pandemic.

Instead, 2022 was marked by a new war, record inflation and climate-linked disasters. It was a “polycrisis” year, a term popularized by historian Adam Tooze. Get ready for more gloom in 2023.

“The number of crises has increased since the start of the century,” said Roel Beetsma, professor of macroeconomics at the University of Amsterdam “Since World War Two we have never seen such a complicated situation,” he told AFP.

After the Covid-induced economic crisis of 2020, consumer prices began to rise in 2021 as countries emerged from lockdowns or other restrictions.

Central bankers insisted that high inflation would only be temporary as economies returned to normal. But Russia’s invasion of Ukraine in late February sent energy and food prices soaring.

Many countries are now grappling with cost-of-living crises because wages are not keeping up with inflation, forcing households to make difficult choices in their spending.

“Everything has become more expensive, from cream to wine and electricity,” said Nicole Eisermann from her stand at the Frankfurt Christmas market.

Central banks played catch-up. They started to raise interest rates this year in an effort to tame galloping inflation — at the risk of tipping countries into deep recessions, since higher borrowing costs mean slower economic activity. Inflation has finally started to slow down in the United States and the eurozone.

Careful spending

Consumer prices in the Group of 20 developed and emerging nations are expected to reach eight percent in the fourth quarter before falling to 5.5 percent next year, according to the Organisation for Economic Cooperation and Development.

The OECD encourages governments to provide aid to bring relief to households.

In the 27-nation European Union, 674 billion euros ($704 billion) have been earmarked so far to shield consumers from high energy prices, according to the Bruegel think tank.

Germany, Europe’s biggest economy and the most dependent on Russia energy supplies, accounts for 264 billion euros of that total.

One in two Germans say they now only spend on essential items, according to a survey by EY consultancy.

“I am very careful but I have a lot of children and grandchildren,” said Guenther Blum, a shopper at the Frankfurt Christmas market.

Rising interest rates have also hurt consumers and businesses, though US Federal Reserve chairman Jerome Powell signalled last week that the pace of hikes could ease “as soon as” December.

He warned, however, that policy will probably have to remain tight for some time to restore price stability.

For her part, European Central Bank president Christine Lagarde sent a clear signal that the ECB would maintain its tightening policy, saying that eurozone inflation had yet to peak.

Economists expect Germany and another major eurozone economy, Italy, to fall into recession. Britain’s economy is already shrinking. Rating agency S&P Global foresees stagnation for the eurozone in 2023.

But the International Monetary Fund still expects the world economy to expand in 2023, with growth of 2.7 percent. The OECD is forecasting 2.2-percent growth.

The coronavirus pandemic, meanwhile, remains a wildcard for the global economy.

China’s zero-Covid policy restrained growth in the world’s second biggest economy, but the authorities have started to relax restrictions following nationwide protests.

Climate costs

But for Beetsma, the biggest crisis is climate change, which is “happening in slow motion”.

Natural and man-made catastrophes have caused $268 billion in economic losses so far in 2022, according to reinsurance giant Swiss Re. Hurricane Ian alone cost an estimated insured loss of $50-65 billion. Floods in Pakistan resulted in $30 billion in damage and economic loss this year.

Governments agreed at United Nations climate talks (COP27) in Egypt in November to create a fund to cover the losses suffered by vulnerable developing countries devastated by natural disasters.

But the COP27 summit ended without new commitments to phase out the use of fossil fuels, despite the need to cut greenhouse gas emissions and slow global warming.

“It is not an acute crisis but a very long-term crisis, protracted,” Beetsma said. “If we don’t do enough this will hit us in unprecedented scale.” (This story has not been edited by thenn.com  staff and is auto-generated from a syndicated feed.)

By, Wolfgang Fengler, Homi Kharas, and Juan Caballero

In his 1969 poem “The Poor,” Roberto Sosa writes “The poor are many /and so/ –impossible to forget.” At that time, over half of the global population lived in extreme poverty ( less than $1.90 per day per person). The World Bank estimates that around 8.5 percent of the world’s population (685 million people) could be extremely poor by the end of 2022, and that poverty is now declining at a very slow rate of only 2 percent a year.

Meanwhile, the rich—defined by World Data Lab as those in households spending more than $120 per day per person (2017 purchasing power parity)—numbering about 250 million worldwide, capture the most media attention. Oxfam’s “Inequality Kills” report shows that the richest 10 people made $810 billion between March 2020 and November 2021, and that the richest 1 percent are responsible for the same level of carbon emissions as the poorest 3.1 billion people.

In between the rich and poor, lives the middle class ($12-120 per day), numbering some 3.6 billion people. The 2022 OECD Economic Survey of the United States, described a “hollowing out” of the middle class. Their economic analysis has called on governments to help the struggling middle class for several years, and the attention given to inflation, taxes, trade, and energy policy all aims at generating a process of globalization that delivers greater prosperity to the middle class.

However, there are only 4.6 billion people in these three groups out of the 8 billion people on the planet. There are 3.4 billion people who are seemingly forgotten, not extremely poor, not part of the middle class, and not rich. Who are they?

The missing group is perhaps best described as the “vulnerable.” They are not poor enough to feature prominently in the poverty and inequality discourse, yet they have been seriously affected by the recessions caused by COVID-19, and by food and fuel shortages and price increases. Academics have long argued that the most vulnerable groups may not coincide with the poorest groups. For example, Whelan and Maitre look at the experience of Irish households and find that just over one-third of their vulnerable cluster is drawn from the poor, while two-thirds are drawn from the non-poor. They conclude that “poverty and economic vulnerability are obviously related but are still distinct.”

We look at vulnerability in terms of the risk of being pushed back into poverty and the risk of having expectations of entry into the middle class dashed. Both have significant welfare and behavior consequences.

Clearly, the risk of falling back into poverty, usually due to an economic, health, or conflict shock, depends upon a household’s distance from the extreme poverty line. The most vulnerable to this risk are those spending $2-5 per day per person. There are 1.3 billion people in this segment. The bulk of the 85 million people who may have fallen into poverty in 2020 came from this group.

At the other end of the spectrum is a group spending $8-12 per day per person. This group would have had reasonable prospects of joining the middle class in a few years. In normal times, over 100 million people move out of this group into the middle class. This has slowed to 90 million this year and a further loss of 5 million is expected in 2023, meaning that for tens of millions of people, the hope for entry into the middle class has been derailed.

In between, the group spending $5-8 is subject to both kinds of risk, although to a lesser extent. The chance of falling into poverty is smaller, and the prospects for advancing into the middle class are also smaller, so it is a more stable category. Nevertheless, it is a group where income volatility is high—a spell of unemployment, a poor crop, or a family health crisis can create proportionally large income losses. On the other side of the coin, a family member gaining meaningful employment, migrating and sending home remittances, or enjoying a good harvest can propel a family toward the middle class. Both the risk of something bad happening and something good not happening can affect these households significantly.

Figure 1. Global population living in different spending groups

Source: World Data Pro, World Data Lab 2022

Figure 1 shows how the vulnerable are distributed among these spending categories today and in 2030 based on current projections of growth and distribution. The figure shows that the vulnerable are evenly spread across the three categories we have identified. It also shows that there is not likely to be a significant reduction in the size of this group in the next few years.

Given the size of the vulnerable group, governments would do well to pay more attention to them. Targeting social assistance based on spending/income levels is only likely to exclude a substantial portion of the vulnerable group. Additional metrics, based on country-by-country risk characteristics, are needed to build a more resilient population.

This recommendation is particularly important for Asian countries. There, great inroads have been made in reducing the absolute number of extremely poor people, so the vulnerable group is less likely to overlap with those in poverty. At the same time, Asian countries are witnessing severe climate-related shocks, so the vulnerability of many households has increased. By contrast, in Africa, levels of extreme poverty remain high, and the overlap between the vulnerable and the poor is larger. Then, targeting based on poverty, as is commonplace in many social assistance programs, will also assist in building resilience against vulnerability.

Although Asian countries have reduced poverty considerably, most people are still vulnerable. In fact, more than half of the Asian population is still poor or vulnerable. It will take another two to three years for Asia to cross the point where the majority of its population is middle-class or rich.

We need to pay more attention to the forgotten 3 billion. They are vulnerable on many dimensions, and their hopes and aspirations are in danger of destruction in today’s slow-growth and volatile economies. Identifying vulnerabilities is more complex than simply adjusting income poverty lines, although it should be one component. But the three-plus billion vulnerable people are many, and so—they should be impossible to forget. (Courtesy: Brookings Instituite)

By, Eswar Prasad & Aryan Khanna

The post-COVID recovery has run out of steam and the global economy is stalling, with many countries already in or on the brink of outright recession amid heightened uncertainty and rising risks. The October 2022 update of the Brookings-Financial Times TIGER indexes shows that growth momentum, as well as financial market and confidence indicators, have deteriorated markedly around the world in recent months.

A series of self-inflicted wounds, ranging from China’s zero-COVID policy to the United Kingdom’s fiscal recklessness, piled on top of persistent supply chain disruptions and the protracted war in Ukraine, have severely constricted space for policy maneuver. High and persistent inflation worldwide, and the actions by central banks to rein it in, are depressing economic activity, dampening household and business confidence, and roiling financial markets.

Major advanced economies such as the eurozone, Japan, and the United Kingdom have been dented by various adverse external shocks, often compounded by sluggish and tepid policy responses, throwing their growth trajectories off kilter. Many developed markets are now facing the combination of steep currency depreciations (relative to the U.S. dollar), rising government bond yields, strained public finances, and tightening policy constraints that have long characterized periods of economic and financial stress in emerging market economies.

The U.S. economy is rife with conflicting signals. Consumer demand remains strong and employment has continued to grow at a reasonably healthy pace. At the same time, GDP growth is anemic while inflation remains high by any measure, leaving the Federal Reserve with little choice but to hike rates further despite the tightening of financial conditions resulting from the stronger dollar and falling values of financial assets.

Energy supply disruptions are fueling inflation and constraining growth in European economies, with prospects of energy shortages in the winter damaging private sector confidence. Emblematic of the stresses on the U.K. economy, the plunge in the pound sterling’s value reflects a combination of these adverse external circumstances, the ongoing fallout from Brexit, and undisciplined fiscal policies. Many European countries face added concerns about populist policies that could increase the risks to fiscal and financial stability.

Japan is the sole major advanced economy that has the luxury of keeping monetary policy loose as inflation remains contained. This could help maintain stable albeit low growth, with the yen’s rapid depreciation not having any appreciable negative effects thus far.

Emerging market economies are facing similar challenges as their advanced economy counterparts, including high inflation and depreciating currencies, but have generally better growth prospects. Still, weak demand worldwide and tighter financial conditions will increase pressure on developing economies with current account deficits. Barring a few exceptions such as Turkey, Sri Lanka, and Venezuela, where rampant economic mismanagement has precipitated currency collapses, emerging markets at large do not seem at imminent risk of balance of payments crises, however.

China is facing a raft of problems resulting from the government’s rigid adherence to a zero-COVID strategy, a faltering real estate sector, and financial system stresses boiling over. Inflation remains under control, though the renminbi’s depreciation relative to the dollar has limited the People’s Bank of China’s ability to cut interest rates. The government and the PBOC have invoked a number of fiscal and monetary stimulus measures, but these have had limited traction in boosting private consumption and investment. Export growth, meanwhile, is likely to be restrained by weak global demand. (Courtesy: Eswar Prasad and Aryan Khanna (Cornell), The Brookings Institution, October 2022)

In the 2022 Global Hunger Index, India ranks 107th out of the 121 countries with sufficient data to calculate 2022 GHI scores. India was ranked 101st in the 2021 ranking.

With a score of 29.1, India has a level of hunger that is serious. It was 28.2 in 2014. The higher the score, the worse is the situation, according to the methodology. There are five levels of hunger severity, according to this methodology. Scores of ≤ 9.9 are Low; 10.0–19.9 are Moderate; 20.0–34.9 are Serious; 35.0–49.9 are Alarming; and ≥ 50.0 are Extremely Alarming. 

At 19.3 per cent, according to the latest data, India has the highest child wasting rate of all countries covered in the GHI. This rate is higher than it was in 1998-1999, when it was 17.1 per cent. Child wasting is the share of children under the age of five who have low weight for their height, reflecting acute undernutrition.

Nepal is ranked higher at 81, Bangladesh at 84 and even Pakistan at 99. India is ranked below African countries like Sudan, Congo, Ethiopia, Nigeria, and Rwanda.

The Global Hunger Index is a peer-reviewed annual report, jointly published by Concern Worldwide and Welthungerhilfe, designed to comprehensively measure and track hunger at the global, regional, and country levels. The aim of the GHI is to trigger action to reduce hunger around the world.

According to the data analysts, since 2000, India has made substantial progress, but there are still areas of concern, particularly regarding child nutrition.

India’s GHI score has decreased from a 2000 GHI score of 38.8 points, considered alarming, to a 2022 GHI score of 29.1, considered serious. India’s proportion of undernourished in the population is considered to be at a medium level, and its under-five child mortality rate is considered low.

While child stunting has seen a significant decrease — from 54.2 per cent in 1998-1999 to 35.5 per cent in 2019-2021 — it is still considered very high.

Each country’s GHI score is calculated based on a formula that combines four indicators that together capture the multidimensional nature of hunger:
Undernourishment: the share of the population with insufficient caloric intake.
Child stunting: the share of children under age five who have low height for their age, reflecting chronic undernutrition.
Child wasting: the share of children under age five who have low weight for their height, reflecting acute undernutrition.
Child mortality: the share of children who die before their fifth birthday, partly reflecting the fatal mix of inadequate nutrition and unhealthy environments.

Hunger is usually understood to refer to the distress associated with a lack of sufficient calories. The Food and Agriculture Organization of the United Nations (FAO) defines food deprivation, or undernourishment, as the habitual consumption of too few calories to provide the minimum dietary energy an individual requires to live a healthy and productive life, given that person’s sex, age, stature, and physical activity level.

Undernutrition goes beyond calories and signifies deficiencies in any or all of the following: energy, protein, and/ or essential vitamins and minerals. Undernutrition is the result of inadequate intake of food in terms of either quantity or quality, poor utilization of nutrients due to infections or other illnesses, or a combination of these immediate causes. These, in turn, result from a range of underlying factors, including household food insecurity; inadequate maternal health or childcare practices; or inadequate access to health services, safe water, and sanitation.

Malnutrition refers more broadly to both undernutrition (problems caused by deficiencies) and overnutrition (problems caused by unbalanced diets that involve consuming too many calories in relation to requirements, with or without low intake of micronutrient-rich foods). Overnutrition, resulting in overweight, obesity, and noncommunicable diseases, is increasingly common throughout the world, with implications for human health, government expenditures, and food systems development. While overnutrition is an important concern, the GHI focuses specifically on issues relating to undernutrition. (IndicaNews)

If you’re planning on retiring in Connecticut, you better start saving yesterday, according to a new report.

Great schools, beautiful shoreline, classic architecture, deep woods, fabulous arts — but you better enjoy all Connecticut has to offer while you’re young. That’s the take-away from a new report that names the Nutmeg State the 3rd most expensive, and 8th worst overall, in which to retire. 

Personal finance website Bankrate ranked each state from the perspective of what matters most to a prospective retiree. The most heavily weighted category was affordability, at 40 percent, followed by well-being (20%), culture and diversity (15%), weather (15%) and crime (10%).

Of course, there’s more than a little subjectivity involved in selecting your final nesting place. Sunbelt states topped Bankrate’s list for retiree nirvana, but what if you burn easily and prefer skiing to snorkeling? And a state’s affordability drops way low for retirees if the home in which they live is already bought and paid for. But let’s all just play along…

Connecticut’s tied for 4th with Vermont in the crime category, and is ranked 8th overall for retiree “well-being,” but takes a beating in the data when it comes to affordability. The state ranks No. 48, right behind affluent enclaves Hawaii and California.

The New England winters didn’t work in Connecticut’s favor either; the state ranked No. 39 when it came to weather, a dip mitigated somewhat by its No. 14 ranking in culture and diversity.

Connecticut’s overall score of 23 tied that of Hawaii and Washington. 

The best state for retirees, according to BankRate, and your own intuition, is Florida. The Sunshine State not only scored high for its weather (No. 5), but was ranked first in culture and diversity, and 18th in affordability.

New York has lost more residents than any other state, a new report by moveBuddha, a company that calculates moving cost, said.  New York, maybe the people don’t quite love you anymore.

According to a new report by moveBuddha, a site where people can calculate their moving costs, New York lost more residents than any other state between April 1, 2020 and July 1, 2021, according to the U.S. Census Bureau population estimates.

Over that period, the state lost 319,020 people. New York state’s population as of 2020 was 20.2 million, according to the Census Bureau.

The report also used data collected from users looking for moving options on moveBuddha’s website between January 1, 2022 and August 5, 2022.  There were around 282,000 queries during this period.

New York is the fourth most-searched state to move out of this year, the company added. That’s behind New Jersey, California, and Illinois.

People are leaving for reasons that include unemployment or underemployment, skyrocketing rents, high cost of living, and high taxes, as compared to other states, moveBuddha said in the study.

People also appear to be leaving the Empire State for warmer pastures. New York to Los Angeles was the most popular search on moveBuddha. About 20% of New Yorkers looking to move were planning to head to Florida, followed by California, and Texas.

Of course, some parts of New York City are still hot. Rising rents and increasing pressure for workers to be in the office is driving demand for apartments in the city.

There’s also evidence that some people who left New York City earlier in the pandemic are coming back. And some are ready to spend on real estate. ‘Out of towners’ returning to New York (many of whom are actually returning former residents) have an average maximum housing budget of $1.3 million, while locals have budgeted an average maximum of $998, 011 for a home purchase, a recent Redfin report found.

But moveBuddha says that neighborhoods in Queens, the Bronx and Brooklyn all have more folks looking to leave, rather than move in, this year.

The report also found that four of the top 10 counties that saw a population decline between the same time period are in New York City: New York County (i.e. Manhattan), Kings County (i.e. Brooklyn), Bronx County, and Queens County.

Based on users searching on the moveBuddha site, the number of moves-out outnumbered the number of moves-in Jamaica, N.Y., Bronx, N.Y. and Staten Island, N.Y. the fastest.

In other words, for every 100 people moving out of Jamaica, only 27 people moved in. In the Bronx, that number was 36, and in Staten Island, 27.

The most popular city of origin for people moving to New York was San Francisco, moveBuddha added.

Nonetheless, there have been some gains for the Empire State: moveBuddha saw a lot more people moving in than out into Webster, N.Y., Ithaca, N.Y., and Fairport, N.Y.

The typical home price in Webster and in Fairport, or otherwise together known as Rochester, N.Y., was around $218,000, according to Zillow’s Home Value Index. Home values are up 11.2% from the previous year.

In Ithaca, a college town, the typical home is roughly $302,000, according to Zillow. Homes have grown in value by 21.3% from last year.

Got thoughts on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]

(AP) — The U.S. economy is caught in an awkward, painful place. A confusing one, too. Growth appears to be sputtering, home sales are tumbling and economists warn of a potential recession ahead. But consumers are still spending, businesses keep posting profits and the economy keeps adding hundreds of thousands of jobs each month.

In the midst of it all, prices have accelerated to four-decade highs, and the Federal Reserve is desperately trying to douse the inflationary flames with higher interest rates. That’s making borrowing more expensive for households and businesses.

The Fed hopes to pull off the triple axel of central banking: Slow the economy just enough to curb inflation without causing a recession. Many economists doubt the Fed can manage that feat, a so-called soft landing.

Surging inflation is most often a side effect of a red-hot economy, not the current tepid pace of growth. Today’s economic moment conjures dark memories of the 1970s, when scorching inflation co-existed, in a kind of toxic brew, with slow growth. It hatched an ugly new term: stagflation.

The United States isn’t there yet. Though growth appears to be faltering, the job market still looks quite strong. And consumers, whose spending accounts for nearly 70% of economic output, are still spending, though at a slower pace.

So the Fed and economic forecasters are stuck in uncharted territory. They have no experience analyzing the economic damage from a global pandemic. The results so far have been humbling. They failed to anticipate the economy’s blazing recovery from the 2020 recession — or the raging inflation it unleashed.

Even after inflation accelerated in spring of last year, Fed Chair Jerome Powell and many other forecasters downplayed the price surge as merely a “transitory” consequence of supply bottlenecks that would fade soon. It didn’t.

Now the central bank is playing catch-up. It’s raised its benchmark short-term interest rate three times since March. Last month, the Fed increased its rate by three-quarters of a percentage point, its biggest hike since 1994. The Fed’s policymaking committee is expected to announce another three-quarter-point hike Wednesday.

Economists now worry that the Fed, having underestimated inflation, will overreact and drive rates ever higher, imperiling the economy. They caution the Fed against tightening credit too aggressively.

“We don’t think a sledgehammer is necessary,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, said this week.

Here’s a look at the economic vital signs that are sending frustratingly mixed signals to policymakers, businesses and forecasters:

THE OVERALL ECONOMY

As measured by the nation’s gross domestic product — the broadest gauge of output — the economy has looked positively sickly so far this year. And steadily higher borrowing rates, engineered by the Fed, threaten to make things worse.

“Recession is likely,” said Vincent Reinhart, a former Fed economist who is now chief economist at Dreyfus and Mellon.

After growing at a 37-year high 5.7% last year, the economy shrank at a 1.6% annual pace from January through March. For the April-June quarter, forecasters surveyed by the data firm FactSet estimate that growth equaled a scant 0.95% annual rate from April through June. (The government will issue its first estimate of April-June growth on Thursday.)

Some economists foresee another economic contraction for the second quarter. If that happened, it would further escalate recession fears. One informal definition of recession is two straight quarters of declining GDP. Yet that definition isn’t the one that counts.

The most widely accepted authority is the National Bureau of Economic Research, whose Business Cycle Dating Committee assesses a wide range of factors before declaring the death of an economic expansion and the birth of a recession. It defines a recession as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.”

In any case, the economic drop in the January-March quarter looked worse than it actually was. It was caused by factors that don’t mirror the economy’s underlying health: A widening trade deficit, reflecting consumers’ robust appetite for imports, shaved 3.2 percentage points off first-quarter growth. A post-holiday-season drop in company inventories subtracted an additional 0.4 percentage point.

Consumer spending, measured at a modest 1.8% annual rate from January through March, is still growing. Americans are losing confidence, though: Their assessment of economic conditions six months from now has reached its lowest point since 2013 in June, according to the Conference Board, a research group.

INFLATION

What’s agitating consumers is no secret: They’re reeling from painful prices at gasoline stations, grocery stores and auto dealerships.

The Labor Department’s consumer price index skyrocketed 9.1% in June from a year earlier, a pace not seen since 1981. The price of gasoline has jumped 61% over the past year, airfares 34%, eggs 33%.

And despite widespread pay raises, prices are surging faster than wages. In June, average hourly earnings slid 3.6% from a year earlier adjusting for inflation, the 15th straight monthly drop from a year earlier.

And on Monday, Walmart, the nation’s largest retailer, lowered its profit outlook, saying that higher gas and food prices were forcing shoppers to spend less on many discretionary items, like new clothing.

The price spikes have been ignited by a combination of brisk consumer demand and global shortages of factory parts, food, energy and labor. And so the Fed is now aggressively raising rates.

“There is a risk of overdoing it,” warned Ellen Gaske, an economist at PGIM Fixed Income. “Because inflation is so bad right now, they are focused on the here and now of each monthly CPI report. The latest one showed no letup.’’

Despite inflation, rate hikes and declining consumer confidence, one thing has remained solid: The job market, the most crucial pillar of the economy. Employers added a record 6.7 million jobs last year. And so far this year, they’re adding an average of 457,000 more each month.

The unemployment rate, at 3.6% for four straight months, is near a half-century low. Employers have posted at least 11 million job openings for six consecutive months. The government says there are two job openings, on average, for every unemployed American, the highest such ratio on record.

Job security and the opportunity to advance to better positions are providing the confidence and financial wherewithal for Americans to spend and keep the job machine churning. (Courtesy: Associated Press)

Annual home price growth dropped by nearly 2 percentage points in June, the largest single-month slowdown on record, according to new research.

Black Knight, a real estate software and analytics company that has been tracking the metric since the early 1970s, found that annual home price growth fell from
19.3 percent in May to 17.3 percent in June as the Federal Reserve continued hiking interest rates to cool off demand.

• Existing home sales have fallen for five consecutive months as record prices and those higher interest rates drive more Americans out of the market. Black Knight’s analysis found that seasonally adjusted home sales were down by more than 21 percent since the start of the year.
• Slowing sales have led to recent inventory increases, according to Black Knight, but nationally, the United States still faces a shortage of 716,000 home listings. The company estimates it would take more than a year for inventory levels to fully normalize even with record increases.

“While this was the sharpest cooling on record nationally, we’d need six more months of this kind of deceleration for price growth to return to long-run averages,” said Ben Graboske, the president of Black Knight’s data and analytics division. (The Hill)

U.S. inflation surged to a new four-decade high in June because of rising prices for gas, food and rent, squeezing household budgets and pressuring the Federal Reserve to raise interest rates aggressively — trends that raise the risk of a recession.

The government’s consumer price index soared 9.1% over the past year, the biggest yearly increase since 1981, with nearly half of the increase due to higher energy costs. 

Lower-income and Black and Hispanic American have been hit especially hard, since a disproportionate share of their income goes toward essentials such as transportation, housing and food. But with the cost of many goods and services rising faster than average incomes, a vast majority of Americans are feeling the pinch in their daily routines.

For 72-year-old Marcia Freeman, who is retired and lives off of a pension, there is no escape from rising expenses.

“Everything goes up, including cheaper items like store brands,” said Freeman, who visited a food bank near Atlanta this week to try and gain control of her grocery costs. Grocery prices have jumped 12% in the past year, the steepest climb since 1979.

Accelerating inflation is a vexing problem for the Federal Reserve, too. The Fed is already engaged in the fastest series of interest rate hikes in three decades, which it hopes will cool inflation by tamping down borrowing and spending by consumers and businesses.

The U.S. economy shrank in the first three months of the year, and many analysts believe the trend continued in the second quarter.

“The Fed’s rate hikes are doing what they are supposed to do, which is kill off demand,” said Megan Greene, global chief economist at the Kroll Institute. “The trick is if they kill off too much and we get a recession.” 

The likelihood of larger rate hikes this year pushed stock indexes lower in afternoon trading. The central bank is expected to raise its key short-term rate later this month by a hefty three-quarters of a point, as it did last month.

As consumers’ confidence in the economy declines, so have President Joe Biden’s approval ratings, posing a major political threat to Democrats in the November congressional elections. Forty percent of adults said in a June AP-NORC poll that they thought tackling inflation should be a top government priority this year, up from just 14% who said so in December.

After years of low prices, a swift rebound from the 2020 pandemic recession — combined with supply-chain snags — ignited inflation.

Consumers unleashed a wave of pent-up spending, spurred by vast federal aid, ultra-low borrowing costs and savings they had built up while hunkering down. As home-bound Americans spent heavily on furniture, appliances and exercise equipment, factories and shipping companies struggled to keep up and prices for goods soared. Russia’s war against Ukraine further magnified energy and food prices.

In recent months, as COVID fears have receded, consumer spending has gradually shifted away from goods and toward services. Yet rather than pulling down inflation by reducing goods prices, the cost of furniture, cars, and other items has kept rising, while restaurant costs, rents and other services are also getting more expensive.

The year-over-year leap in consumer prices last month followed an 8.6% annual jump in May. From May to June, prices rose 1.3%, following a 1% increase from April to May.

Fuelled by increase in the prices of oil, shelter and food, the inflation rate in the US rose to 9.1 per cent in June. The inflation rate rise was the largest 12-month increase since the period ending November 1981.

The US Bureau of Labour Statistics said: “Over the last 12 months, the all items index increased 9.1 percent before seasonal adjustment.”

“The Consumer Price Index for All Urban Consumers (CPI-U) increased 1.3 per cent in June on a seasonally adjusted basis after rising 1.0 per cent in May,” it said.

According to the Bureau, the increase was broad-based, with the indexes for gasoline, shelter, and food being the largest contributors.

The energy index rose 7.5 per cent over the month and contributed nearly half of the all items increase, with the gasoline index rising 11.2 per cent and the other major component indexes also rising.

The food index rose 1.0 percent in June, as did the food at home index.

The all items – less food and energy – index rose 5.9 per cent over the last 12 months. The energy index rose 41.6 percent over the last year, the largest 12-month increase since the period ending April 1980.

The food index increased 10.4 per cent for the 12-months ending June, the largest 12-month increase since the period ending February 1981. (IANS)

Goldman Sachs reckons crude oil prices are going to $140 in the coming months. JPMorgan said they could even surge to $380 in a worst-case scenario. UBS reckons they’ll hit $130 in September.

But Citi is bucking the trend. The investment bank’s strategists predict oil will fall sharply by the end of the year, from prices of around $100 a barrel on Friday.

Francesco Martoccia, the bank’s head of European commodities strategy, warned in note to clients Tuesday that oil prices could even slump to $65 a barrel by December, if a nasty recession hits.

The same day, oil prices tumbled, with US benchmark WTI crude dropping below $100, as investors worried that central banks’ interest-rate hikes would trigger sharp slowdowns in economic growth. “The timing was exquisite,” Martoccia told Insider this week.

Yet Martoccia and his colleagues expect oil to drop even if there’s no drastic slowdown. Their so-called base case is that the price of global benchmark Brent crude tumbles to $85 a barrel by the end of the year — that’s around 18% lower than Friday’s price of $104.

At the heart of Citi’s contrarian view is its expectation that Russia will keep exporting and producing crude, even as the US and its allies batter the country with sanctions.

Many analysts expect Russian energy exports to fall sharply by the end of the year as the European Union gradually bans purchases from the country. The G7 is also exploring how to cap Russian oil prices — which could cause exports to drop further.

The logic is simple. Unable to sell its oil, Russia will shut down production. Buyers will then be competing for the remaining global supplies, driving up oil prices.

But Citi takes a different view. Its strategists believe India and China will ramp up purchases, keeping Russian oil pumping and alleviating the pressure on the market. “We actually don’t see a supply crunch in the making,” Martoccia said.

Crude oil exports to European countries in the OECD will drop from 2.5 million barrels a day in the first quarter of the year to 970,000 in the fourth, Citi predicts.

Yet it thinks China will step up its imports from 1.4 million to 2.3 million barrels a day, and India from 110,000 to 950,000 a day. Other developing economies will lift their purchases slightly, meaning Russia will be exporting more crude by the end of the year than at the start.

“I’m skeptical that the governments wouldn’t listen to their own energy needs, because we have seen already protests and riots around the world because of the increase in food prices and energy prices,” Martoccia said.

The other key ingredient in oil prices is demand. Citi thinks the world’s appetite for oil is going to slow over the coming months as the global economy cools.

Martoccia said Europe in particular is likely to cut back on its energy consumption. Many economists expect the eurozone to fall into a recession as a result of soaring inflation driven by rocketing natural gas prices. Germany has already started to dim its streetlights to save energy.

“When you look at the gas demand, for instance, from the industrial complex in Italy, or even the orders of one of the biggest industrial facilities, it’s going down,” he said. “And eventually you have to see spillover effects elsewhere.”

Oil-price prediction is a difficult game. Many analysts say the opposite to Citi, arguing Russian production will fall, and a Chinese economic recovery and the return of global tourism will boost demand.

Citi is hedging its bets. It thinks there’s a 30% chance oil jumps back up to around $120 by the end of the year. “This year, it’s very difficult to have a high conviction,” Martoccia said.