WTO cuts global trade forecast; US inflation jumps to 40-year high of 8.5% – business live | Business

6m ago09:08

Full story: US inflation climbed to 8.5% in March, highest rate since 1981

Dominic Rushe

Prices in the US climbed at their highest rates since 1981, rising 8.5% over the year to the end of March as the war in Ukraine drove up energy costs for Americans, the labor department announced on Tuesday.

The latest Consumer Price Index (CPI) – which measures the prices of a basket of goods and services – comes after the index rose by 7.9% in the year through February, the fastest pace of annual inflation in 40 years.

Driven up by continuing supply chain issues, soaring demand and rising energy prices, inflation is now at levels unseen in the US since Ronald Reagan took the White House from Jimmy Carter.

March’s rise in US inflation to an eye-watering 8.5% may mark the peak, says Andrew Hunter, senior US economist at Capital Economics:

The surge in energy prices helped drive headline CPI inflation up to a new 40-year high of 8.5% in March but, with base effects set to become much more favourable and signs that monthly gains in core prices are moderating, we expect that to mark the peak.

The 18.3% m/m jump in gasoline prices resulted in an 11% m/m surge in CPI energy, enough to drive overall headline consumer prices up by a huge 1.2% m/m. But with crude oil prices now falling back, that move will be partly reversed in April, and we expect energy inflation to decline significantly over the rest of this year.

Dan Boardman–Weston, CEO & CIO at BRI Wealth Management, says the US Federal Reserve could raise US interest rates by 50 basis points, not a more modest 25bp, next month.

The rate of inflation is running at the highest level in 40 years, due to large increases in the cost of energy, food and accommodation. The figures will add further pressure to the Fed to accelerate the pace of interest rate increases and potentially hike by 0.50% at the next meeting, as opposed to the traditional 0.25%.

However, the significant increases in the cost of living and the interest rate increases will start to have a detrimental impact on the growth outlook for the American economy, which could cause the Fed to divert course throughout the latter half of 2022 or 2023. The Fed has a tricky task ahead of them and historically have struggled to battle inflation without lowering economic growth.”

Rob Clarry, investment strategist at wealth managers Tilney Smith & Williamson, says the Ukraine war contributed to the inflation jump (through higher energy and commodity costs).

As expected, US consumer prices have continued to rise rapidly. Domestically, strong consumer demand and a tight labour market are contributing to elevated inflation.

Additionally, ongoing strains in global supply chains and the impact of the Russian invasion of Ukraine have led to high levels of imported inflation.

Hinesh Patel, portfolio manager at Quilter Investors, warns that lockdowns in China could create more supply chain disruption, and even higher prices.

“The Federal Reserve will feel emboldened today to press ahead with its aggressive hiking of interest rates as it looks to combat inflation. While used car prices and other non-essential items have begun to reach their price peak, the headline figures today illustrates how much of this is an energy-related shock. Ultimately, this will continue for some time as oil producers remain content with where the oil price currently sits and the war in Ukraine rages on, adding pressure for further sanctions on Russian gas and oil.

Were it not for China’s most recent lockdowns chocking off oil demand in the short-term the situation could be even worse. Furthermore, the longer Shanghai remains shut the larger the probability of yet another supply chain price shock.

More details of the jump in US inflation:

Gasoline, housing costs and food prices all helped to push up US inflation last month.

Gasoline prices jumped 18.3% in March alone, and accounted for over half of the 1.2% monthly increase in inflation, while the food index rose 1% last month.

Over the last year, energy prices have jumped 32% in the US, including a 48% increase in gasoline prices at US forecourts, and a 21.6% rise in natural gas prices.

The prices of food for home consumption jumped 10% over the last year, which is the largest 12-month increase since the period ending March 1981.

The inflation report says:

The index for meats, poultry, fish, and eggs increased 13.7 percent over the last year as the index for beef rose 16.0 percent.

The other major grocery store food group indexes also rose over the past year, with increases ranging from 7.0 percent (dairy and related products) to 10.3 percent (other food at home).

The Shelter index, which measures the cost of housing, jumped by 5% over the last year.

Core inflation (which strips out food and energy) rose by 6.5%, the largest 12-month change since August 1982.

Just in: US inflation has jumped to a new 40-year high, as the Ukraine war drove up energy prices.

Consumer prices across the US surged by an annual rate of 8.5% in March, new data shows, up from 7.9% in February. That’s the highest annual inflation rate since December 1981.

Prices rose by 1.2% in March alone, accelerating from the 0.8% rise seen in February.

1h ago08:10

Richard Partington

Back in the UK, Frances O’Grady will stand down as general secretary of the Trades Union Congress at the end of the year.

The first woman to hold the post in the TUC’s 154-year-old history, she said it had been the greatest honour of her life and a privilege to serve the trade union movement during a turbulent decade for workers in the aftermath of the 2008 financial crisis.

O’Grady has been general secretary of the TUC, the UK union movement’s umbrella group, since January 2013. Early in the Covid pandemic she played a key role alongside Carolyn Fairbairn, then head of the CBI, the business lobby group, in drawing up the furlough scheme with the chancellor, Rishi Sunak.

US small business confidence has fallen again, with the share of owners reporting that inflation was their single most important problem the largest since 1981.

The National Federation of Independent Business said its Small Business Optimism Index dropped 2.4 points to 93.2 in March, the third straight month of readings below the 48-year average of 98.

A gauge of the economic outlook hit a record low:

Today’s protesters at Lloyd’s of London are calling for an end to all new fossil fuel investments and insurance.

Clare Walmsley, a spokesperson from Extinction Rebellion, explains that the Lloyd’s market is supporting the fossil fuel industry by providing insurance for projects which contribute to the climate emergency.

By underwriting the world’s most deadly fossil fuel projects, they are creating climate chaos – floods, famine, wildfires and death. Insuring new oil and gas projects in the North Sea will do nothing to solve the cost of living crisis either. Instead, it locks us into a system that’s already pushing millions into poverty.

“We can see from Lloyd’s long racist history, that it has always been happy to trade lives for profit. Its business was kickstarted by insuring the trans-Atlantic slave trade.

Today its underwriters support projects that sacrifice Indigenous, Black and brown communities on the frontlines of fossil fuel extraction and climate breakdown.”

In 2020, the Lloyd’s of London insurance market apologized for its “shameful” role in the 18th and 19th Century Atlantic slave trade and pledged to fund opportunities for black and ethnic minority groups.

Lloyd’s of…