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Today’s data, which shows the UK CPI at its highest level in 30 years and US producer prices rising to record levels, is the latest reminder that inflationary pressures around the world are showing little sign of abating.
The stronger-than-expected jump in UK inflation to 7 percent in March from 6.2 percent in the previous month was driven by rising fuel prices, which rose 9.9 percent, resulting in an annual rate of increase of 30.7 percent. The pain consumers are feeling was highlighted yesterday by an academic study showing Brits are now more worried about the cost of living than catching Covid-19.
British companies are also feeling the strain. Tesco, the country’s largest supermarket group, said this morning its profits would suffer as it tries to remain competitive amid rising costs and tighter household budgets.
US producer prices rose a more-than-expected 11.2 percent in March – the fastest pace since the annual rate was first calculated in 2010 – as the war in Ukraine begins to hit the world’s largest economy and puts pressure on Americans company.
The US PPI reading comes on the heels of yesterday’s announcement that the consumer price index hit 8.5 percent, the fastest rate of increase since 1981, adding – as in the UK – pressure on the country’s central bank to take action to curb rising prices . Although the 1.2 percent monthly increase was the fastest since September 2005, there was some better news, namely that “core” CPI (excluding volatile items like food energy) rose just 0.3 percent, the slowest rise since September.
Federal Reserve official James Bullard told the Financial Times it was a “fantasy” to think the bank could bring inflation down without raising interest rates to the point where they could constrain the economy, given that he was a Increase demanded to curb growth.
US President Joe Biden’s latest ploy to ease the pressure on consumers is to temporarily relax restrictions on the amount of ethanol in gasoline, which could save motorists 10 cents a gallon, albeit at the risk of smog to cause.
Concerns are also growing elsewhere. New Zealand today hiked interest rates by the largest amount in 22 years. In mainland Europe, Otmar Issing, one of the founding fathers of the euro, has criticized the “misguided” response of the European Central Bank, which he says has been “living in a fantasy” and has suffered from a “misdiagnosis” of the reasons for the rise in inflation and now risked the prospect of stagflation.
The ECB will announce its latest monetary policy moves tomorrow.
Search our inflation tracker to compare the latest numbers around the world.
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Good to know: the economy
That Lockdown in Shanghai has brought production to a halt in Kunshan, one of the world’s largest electronics manufacturing hubs, and has exacerbated the strain on global supply chains. Asia editor Robin Harding says the economic fallout for the rest of the world from the lockdown of China’s largest onshore financial center and city is huge. The US has ordered the withdrawal of non-essential consular staff.
An EU ban of Russian energy would trigger a “sharp recession” in Germany, causing production to fall 2.2 percent next year with the loss of 400,000 jobs, according to the country’s top economists. However, Kyiv is pressing Brussels for an embargo. German investors are also becoming increasingly pessimistic about the future of their country.
Russia said it would sue if sanctions forced not to pay its bonds, but academics and lawyers have dismissed the threat as “payment theater.” says Robert Armstrong in his (award-winning) Unhedged newsletter sanctions hurt the country a lot. According to a former finance minister, Moscow is forecasting a 10 percent decline in economic output this year.
Latest for UK and Europe
Unemployment in Britain fell to pre-pandemic levels of 3.8 percent earlier this year, according to official data, but the employment rate remained unchanged at 75.5 percent. Job vacancies remain high and the inactivity rate has increased as people have left the labor force for family reasons, retirement or illness.
The UK is set to become the first country in the world to pay pharmaceutical companies a fixed fee antibiotics to address the growing problem of antimicrobial resistance, which kills more than 1 million people each year. The “subscription” model aims to encourage companies to develop new medicines and stop overprescribing.
Ukraine Finance Minister Sergii Marchenko called for immediate financial support for his country in an FT interview, with the spending-earnings gap expected to reach $7 billion a month in April and May.
Global latest
The International Energy Agency cut theirs global oil demand Forecast to 99.4 million barrels per day this year from 99.7 million barrels per day, but said the market would avoid a “sharp” deficit as emergency reserves and slower demand from China combined with lower production from Russia equalize
The war will limit growth trade in goods by a third this year, from 4.7 percent to 3 percent, according to new World Trade Organization forecasts. It also lowered economic growth forecasts from 4.1 percent to 2.8 percent, with an estimated 3.2 percent for 2023. WTO chief Ngozi Okonjo-Iweala wrote in the FT that policymakers should address structural weaknesses in a coordinated response to global supply chain issues.
Sri LankaThe economic and currency crisis deepened when the country’s finance ministry suspended payments on its government bonds. She has approached the IMF to formulate a recovery plan and receive financial support. The Lex column warned that a bailout could provide a blueprint for similar situations elsewhere. The turmoil is a blow to the Rajapaksa family, which has dominated the country’s politics for years.
Good to know: business
Stocks from some of the world’s most important industrial metals have fallen to a critically low level due to rising electricity prices and the war in Ukraine. Stocks of aluminium, copper, nickel and zinc have collapsed by up to 70 percent in the past year.
BlackRock, the world’s largest wealth manager, reported better-than-expected first-quarter profit of $1.46 billion as investor inflows continued despite the turmoil in financial markets. However, JPMorgans Profits fell 42 percent to $8.28 billion as business slowed and the bank set aside $1 billion in loan loss reserves. Here’s what to watch as US earnings season kicks off.
fund manager were caught in the rare event that global stocks and bonds fell simultaneously in the first quarter. The two key markets are supporting global finance and the synchronized decline is making it difficult for investors to try to balance the risks. Almost three-quarters of large institutional investors were pessimistic about global economic growth, the highest proportion since 1995, according to a Bank of America survey.
Complete telecom giant Nokia followed rival Ericsson and left Russia. The two companies, along with Chinese groups Huawei and ZTE, are the dominant players in Russia’s wireless network equipment market. The former deputy head of Aeroflot wrote in the FT that the Russian business community should stand up to President Vladimir Putin.
As we highlighted in Monday’s Disrupted Times, airlines are struggling to meet rising customer demand while shedding waves of employees to Covid-19. British Airways is suffering the effects of the virus, on top of IT problems and the cancellation of 1,200 flights so far this year. easyjet was hit the hardest but still hopes to report a reduction in losses for the six months to the end of March.
The outlook is rosier for US airlines. American Airlines, the largest in the US, revised its first-quarter revenue guidance, while Delta told the FT it “never sold more tickets” than in the last five weeks. US airlines are working to ensure that the end of the mask requirement on board continues as planned next Monday.
The coronavirus crisis has highlighted the extent to which the world’s pharmaceutical supply depends on Asia, even for the most basic ingredients. Our colleagues from Nikkei Asia conclude their series on China’s role in the global healthcare supply chain and how it might affect the next pandemic.
The working world
Flexible working has helped many workers disabilities thrive during the pandemic, but how can we make these improvements permanent? Isabel Berwick talks to an activist and FT staffer about disability inclusion in the latest Working It podcast.
Covid cases and vaccinations
Total Global Cases: 490.8 million
Total doses administered: 11.4бн
Get the latest worldwide picture with our vaccine tracker
And finally . . .
air quality is becoming an increasingly important factor for homebuyers looking for a new property, writes Health and Science reporter Oliver Barnes. Cleaner air is now synonymous with proximity to family and friends and access to public transport as a motivation for moving house.
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