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Year-Ahead Inflation Outlook Matches Record, NY Fed Survey Finds

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© Reuters. Year-Ahead Inflation Outlook Matches Record, NY Fed Survey Finds

(Bloomberg) — US consumers expect prices to rise even faster over the next year, and that will propel spending to a record, according to a survey from the Federal Reserve Bank of New York.

One-year ahead median inflation expectations climbed in May to 6.6% from 6.3%, tying the highest reading since the survey began in June 2013. That’s going to take a bigger bite out of Americans’ wallets, as forecasts for household spending jumped for a fifth month by a series high 9%, the regional Fed said in its May Survey of Consumer Expectations.

US inflation accelerated to a fresh 40-year high last month, indicating price pressures are becoming entrenched in the economy and shattering consumer confidence. That’s raising bets that the Fed will have to act even more aggressively, starting with what most traders see as a half-point interest rate hike this week.

A quarter of respondents expect prices to jump to a record 10% in the coming year. In contrast, the median forecast for inflation on the three-year horizon remained unchanged at 3.9%, a hopeful sign for the Fed as it tries to keep such expectations anchored.

Respondents in the New York Fed survey were more pessimistic on prices than those polled early June by the University of Michigan, which found that consumers expect prices to advance 3.3% over the next five to 10 years, the most since 2008 and up from 3% in May.

The New York Fed survey highlights the dour mood of the public in more ways than just high prices. The mean probability that the US unemployment rate will be higher one year from now increased for a third month to 38.6% in May. That’s the highest reading since February 2021. 

For the fifth consecutive month, more respondents also said it’s harder to obtain credit compared to a year ago. A jump in respondents ages 40 to 60 in particular saw an increased probability of missing a minimum debt payment over the next three months. One in eight middle-aged consumers expect a payment shortfall, the most since May 2020.

Year-ahead expectations about households’ financial situations also deteriorated in May, with more respondents expecting to be worse off a year from now than they are today — the highest since the survey started in mid-2013.

Higher household spending could be a positive in the sense that it’s the largest contributor to US economic growth. However, Americans are increasingly dipping into savings and loading up on credit cards to support such purchases, and that could tip the Fed to act more aggressively to curb demand.

Expectations in year-ahead price changes for many commodities remain elevated, with rents near a record and consumers’ projections for the cost of food at 9.3%.

 

©2022 Bloomberg L.P.

 

Economy

World economic news now by the morning of Dec. 6

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economic news around the world

The FT reported on tanker jams in the Turkish straits due to the Russian oil price ceiling, and NATO analysts assessed the Bank of Russia’s foreign currency reserves seized abroad – these and other world economic news now for the morning of Tuesday, December 6, read more.

Economic news around the world 

A tanker jam has formed near the Turkish Bosporus and Dardanelles straits, through which ships carrying Crude Oil from Russian Black Sea ports pass. Turkish authorities demanded insurers fully insure ships passing through the straits, after the G7 countries, the European Union and Australia imposed a ceiling on oil prices from Russia, said the Financial Times. 

The newspaper’s sources claimed that ships with Western insurance coverage were delayed, while ships with documents from Russian insurers were allowed through Turkish waters. 

The U.S. and European Union countries have managed to seize no more than a third of Russia’s foreign currency reserves blocked abroad. According to the Atlantic Council, this is $80-100 billion out of a total of $300 billion in foreign currency reserves.

India is in discussions with Apple (NASDAQ:AAPL) to locate iPad production in the country and is exploring options for shipping components for them from China, CNBC reported, citing two sources close to the Indian government. Plans have no specifics so far, but if negotiations with Indian authorities are successful, Apple will expand its presence in the country.

A federal court in Australia has asked UC Rusal (MCX:RUAL) for documents on alumina supplies to Queensland Alumina (QAL), the aluminum company’s ties with the Russian government and entrepreneurs under sanctions, Kommersant reported, citing court data. The documents were asked by the court on the claim of Alumina and Bauxite Company, an Australian “subsidiary” of UC Rusal: it owned 20% of QAL; the share went to Rio Tinto (LON:RIO), which had the remaining 80% of the company.

Earlier we reported that the average house prices in the UK fell by 1.4% in November.

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South Korean exports dropped 14% in November, the highest in 2.5 years

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exports South Korea

South Korea’s exports fell 14 percent year-on-year to $51.91 billion in November, preliminary data from the Ministry of Commerce, Industry and Energy showed. The November drop was the biggest in 2.5 years since May 2020 and was caused both by the deteriorating global economy, which even a Google price chart showed, and a truckers’ strike in the country.

South Korea exports 2022 – reasons for the drop

Exports fell for the second month in a row. Analysts on average expected an 11% decline, according to Trading Economics. Respondents to MarketWatch predicted a 10.5% decline.

Shipments of semiconductor products overseas, the country’s top export item, fell 29.8%; petrochemicals fell 26.5% and steel exports fell 10.6%. Meanwhile, exports of automobiles jumped 31% and petroleum products 26%.

Exports to China, South Korea’s largest trading partner, fell by 25.5%, and to Asian countries – by 13.9%. Below, supplies to the USA grew by 8% and to the European Union – by 0.1%.

In January-November exports rose by 7.8% on the same period last year and reached a record $629.1 billion.

South Korean imports rose 2.7% to $59.2 billion in November, marking the 23rd consecutive month of gains, but the current rate of growth is the lowest since November 2020. Experts had predicted an increase of only 0.2%.

South Korea’s trade deficit last month was $7.01 billion, compared with a surplus of $2,973 billion a year earlier.

The negative balance was recorded for the eighth month in a row. As a result, by the end of 2022, the country may record a foreign trade deficit for the first time since the financial crisis in 2008.

Earlier we reported that the UN estimates the cost of humanitarian aid in 2023 at a record $51 billion.

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The UN estimates humanitarian aid costs in 2023 at a record $51 billion because of an impending humanitarian crisis

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a humanitarian crisis

Joint humanitarian operations will require a record $51.5 billion in 2023 to address urgent problems.

The UN Office for the OCHA estimates that 339 million people will need urgent aid in 2023. At the same time, OCHA called on donor countries to provide funds for assistance in 2023 to the 230 million people most in need, living in 68 countries.

Griffiths explained that aid is needed not only for people experiencing conflicts and disease outbreaks. but also for those suffering the effects of climate change, such as people in peninsular Somalia facing drought and those in Pakistan experiencing severe flooding. For the first time, the growing humanitarian crisis has brought the number of displaced people worldwide to the 100 million mark. Also worsening an already bad situation is the worldwide coronavirus pandemic, which affects the poor. Note that the general economic crisis has begun to negatively affect even the Netflix price chart.

Earlier we reported that house prices in the UK fell by 1.4% in November.

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