Jump in European Inflation Raises Pressure on ECB to React
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The eurozone started 2022 much as it ended the previous year, with record-setting inflation that defied expectations. Now economists are wondering if the persistently high prices could pressure the European Central Bank to change its position that the situation is temporary.
Inflation for January reached 5.1 percent in January, up slightly from the 5 percent rate in December, another record for the countries that use the euro since data collection began in 1999.
Unusually high energy prices, driven up by tensions between Russia and Ukraine, and continuing economic fallout from the coronavirus pandemic, were cited as the main factors driving prices upward.
Gasoline prices, in particular, have soared in recent weeks. In Germany, drivers are faced with the latest record price for a liter of gas, at 1.712 euros, the equivalent of $7.31 per gallon, the A.D.A.C. motor association said on Wednesday. Diesel fuel, usually more affordable, also reached a high, increasing by nearly three euro cents to 1.640 per liter, or $7 per gallon.
Months ago, many economists had predicted the numbers would begin falling back as the world’s industrial powers returned to work.
“It is a surprise compared to most people’s expectations,” said Marchel Alexandrovich, an economist at Saltmarsh Economics, told Reuters. “And there is a concern that what we’ve seen in the U.S., in Britain, we are now seeing in the eurozone as well, and that is that inflation is proving stickier than expected.”
In the United States, inflation has been running above policymakers’ targets, while in Britain prices rose at their fastest rate in 30 years in December.
Economists expect the high prices will dominate discussion when European Central Bank policymakers meet on Thursday. Observers will be looking for the bank’s president, Christine Lagarde, to signal whether she is backing off her previous conviction that the price surges that began taking hold across Europe late last year are temporary.
In December, the Bank of England became the first major bank to raise its interest rates in an effort to control the rising prices. The Federal Reserve Bank has signaled that it plans to increase interest rates in March.
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The European Union said on Wednesday it would label some nuclear power and natural gas plants, under certain conditions, as “transitional” green investments in order to drastically cut the continent’s greenhouse gas emissions.
The landmark legislation is “a signpost for private investment” and an “important step in transition to a climate neutral economy,” said Mairead McGuinness, the bloc’s commissioner for financial services. “As governments and public authorities we cannot do this alone; we need the private sector to play its full part.”
The move, which can be blocked if enough member states or lawmakers in the European Parliament oppose it, is expected to steer private and public investments into new nuclear plants and gas-fired power stations.
Proponents say nuclear power and natural gas must be supported as “bridges” until renewable technologies — like solar, wind or eventually hydrogen — can generate enough power to replace fossil fuels.
But critics, including many members of parliament, say it promotes energy sources that are harmful for the environment, and that the new rules smack of greenwashing.
The European Commission, the bloc’s executive branch, which published the measure Wednesday, said that the classification was critical to meeting the legally binding target to become climate neutral by 2050. Addressing the criticism, Ms. McGuinness told reporters on Wednesday: “Today’s act might be imperfect, but it is a real solution.”
The plan caps months of fierce political debate. The aim of the so-called taxonomy regulation has been to create “a gold standard” to guide private and public investors, but it became a proxy battle for the future of Europe’s energy mix.
The bloc has been struggling in recent months with skyrocketing gas and electricity prices, but under E.U. law, national governments are tasked with regulating energy, and their policies vary immensely. The legislation published on Wednesday is an attempt to find a compromise between several countries: Those that back the use of nuclear power, led by France; gas-dependent Eastern European nations; and countries including Germany and Luxembourg that oppose the proliferation of nuclear power stations.
Under the plan, nuclear and natural gas plants are labeled “transitional” green energy sources if they meet certain conditions. National governments would need to guarantee safe disposal of radioactive waste, and nuclear plants must undergo regular safety updates, with newly built plants labeled sustainable only until 2045. For natural gas plants, only those that replace coal facilities and meet specific emissions criteria will be classified as sustainable investments.
A draft of the plan, published by the commission on Dec. 31, provoked a broad wave of criticism from some member nations, experts and lawmakers, who said that the consultation period was too brief and denounced the timing of the release during a holiday period. Compounding the confusion surrounding the new rules, the commission did not publish the final legislative act until one hour into a news conference on the topic.
The Platform on Sustainable Finance, a group of green finance experts which has been advising the commission, objected to the plan.
“The taxonomy was supposed create a steady flow of green investments,” said Henry Eviston from the Wild World Fund Europe’s office, which was part of the advisory group. “Instead, we are going to get a tsunami of greenwashing. It penalizes clean technologies, it will stifle innovation and direct billions of euros to investments in ‘business as usual.’”
And some investors and financial institutions may steer clear of the classifications. The head of the European Investment Bank, Werner Hoyer, said last week that the complexity of rules would make the investors “drowsy.”
The Institutional Investors Group on Climate Change, an association of Europe’s asset managers and investors including BlackRock and Goldman Sachs, said in an open letter that including natural gas undermined “the E.U.’s ambitions to set the international benchmark for credible, science-based standards for classifying sustainable economic activities.”
The regulation is not expected to be blocked by a sufficient number of national governments — under the bloc’s rules, at least 15 out of 27 member states, representing at least 65 percent of the E.U. population, would be necessary to stop it. But Austria and Luxembourg threatened legal action if nuclear power was labeled green. Austria, Denmark, Sweden and the Netherlands earlier this week urged the commission not to include any “fossil gas-based activities” as sustainable.
The plan is also set to face resistance in the European Parliament, although it remains unclear whether a majority of the body’s lawmakers would vote to block it.
Paul Tang, a center-left member of the European Parliament from the Netherlands, said the plan “diverts resources towards energy sources that are not sustainable.”
But Pascal Canfin, a French member of the European Parliament from the center-right Renew political group, the party of President Emmanuel Macron, called the proposal “a good compromise.”
“What we are after is relocation of market capital and public money to what can be useful in the green transition,” he said, “as long as you have the transparency requirement, and as long it is in the transition category.”
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HOUSTON — Oil prices are increasing, again, casting a shadow over the economy, driving up inflation and eroding consumer confidence.
Crude prices rose more than 15 percent in January alone, with the global benchmark price crossing $90 a barrel for the first time in more than seven years, as fears of a Russian invasion of Ukraine grew.
Though the summer driving season is still months away, the average price for regular gasoline is fast approaching $3.40 a gallon, roughly a dollar higher than it was a year ago, according to AAA.
The Biden administration said in November that it would release 50 million barrels of oil from the nation’s strategic reserves to relieve the pressure on consumers, but the move hasn’t made much of a difference.
Many energy analysts predict that oil could soon touch $100 a barrel, even as electric cars become more popular and the coronavirus pandemic persists. Exxon Mobil and other oil companies that only a year ago were considered endangered dinosaurs by some Wall Street analysts are thriving, raking in their biggest profits in years.
Why are oil prices suddenly so high?
The pandemic depressed energy prices in 2020, even sending the U.S. benchmark oil price below zero for the first time ever. But prices have snapped back faster and more than many analysts had expected in large part because supply has not kept up with demand.
Western oil companies, partly under pressure from investors and environmental activists, are drilling fewer wells than they did before the pandemic to restrain the increase in supply. Industry executives say they are trying not to make the same mistake they made in the past when they pumped too much oil when prices were high, leading to a collapse in prices.
Elsewhere, in countries like Ecuador, Kazakhstan and Libya, natural disasters and political turbulence have curbed output in recent months.
“Unplanned outages have flipped what was thought to be a pivot towards surplus into a deep production gap,” said Louise Dickson, an oil markets analyst at Rystad Energy, a research and consulting firm.
On the demand side, much of the world is learning to cope with the pandemic and people are eager to shop and make other trips. Wary of coming in contact with an infectious virus, many are choosing to drive rather than taking public transportation.
But the most immediate and critical factor is geopolitical.
A potential Russian invasion of Ukraine has “the oil market on edge,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies in Washington. “In a tight market, any significant disruptions could send prices well above $100 per barrel,” Mr. Cahill wrote in a report this week.
Russia produces 10 million barrels of oil a day, or roughly one of every 10 barrels used around the world on any given day. Americans would not be directly hurt in a significant way if Russian exports stopped, because the country sends only about 700,000 barrels a day to the United States. That relatively modest amount could easily be replaced with oil from Canada and other countries.
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But any interruption of Russian shipments that transit through Ukraine, or the sabotage of other pipelines in northern Europe, would cripple much of the continent and distort the global energy supply chain. That’s because, traders say, the rest of the world does not have the spare capacity to replace Russian oil.
Even if Russian oil shipments are not interrupted, the United States and its allies could impose sanctions or export controls on Russian companies, limiting their access to equipment, which could gradually reduce production in that country.
In addition, interruptions of Russian natural gas exports to Europe could force some utilities to produce more electricity by burning oil rather than gas. That would raise demand and prices worldwide.
What can the United States and its allies do if Russian production is disrupted?
The United States, Japan, European countries and even China could release more crude from their strategic reserves. Such moves could help, especially if a crisis is short-lived. But the reserves would not be nearly enough if Russian oil supplies were interrupted for months or years.
Western oil companies that have pledged not to produce too much oil are likely to change their approach if Russia was unable or unwilling to supply as much oil as it did. They would have big financial incentives — from a surging oil price — to drill more wells. That said, it would take those businesses months to ramp up production.
What is OPEC doing?
President Biden has been urging the Organization of the Petroleum Exporting Countries to pump more oil, but several members have been falling short of their monthly production quotas, and some may not have the capacity to quickly increase output. OPEC members and their allies, Russia among them, agreed on Wednesday to stick to a plan for increasing production next month by a relatively modest 400,000 barrels a day.
In addition, if Russian supplies are suddenly reduced, Washington is likely to put pressure on Saudi Arabia to raise production independently of the cartel. Analysts think that the kingdom has several million barrels of spare capacity that it could tap in a crisis.
What impact would higher oil prices have on the U.S. economy?
A big jump in oil prices would push gasoline prices even higher, and that would hurt consumers. Working-class and rural Americans would be hurt the most because they tend to drive more. They also drive older, less fuel-efficient vehicles. And energy costs tend to represent a larger percentage of their incomes, so price increases hit them harder than more affluent people or city dwellers who have access to trains and buses.
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But the direct economic impact on the nation would be more modest than in previous decades because the United States produces more and imports less oil since drilling in shale fields exploded around 2010 because of hydraulic fracturing. The United States is now a net exporter of fossil fuels, and the economies of several states, particularly Texas and Louisiana, could benefit from higher prices.
What would it take for oil prices to fall?
Oil prices go up and down in cycles, and there are several reasons prices could fall in the next few months. The pandemic is far from over, and China has shut down several cities to stop the spread of the virus, slowing its economy and demand for energy. Russia and the West could reach an agreement — formal or tacit — that forestalls a full-scale invasion of Ukraine.
And the United States and its allies could restore a 2015 nuclear agreement with Iran that former President Donald J. Trump abandoned. Such a deal would allow Iran to sell oil much more easily than now. Analysts think the country could export a million or more barrels daily if the nuclear deal is revived.
Ultimately, high prices could depress demand for oil enough that prices begin to come down. One of the main financial incentives for buying electric cars, for example, is that electricity tends to be cheaper per mile than gasoline. Sales of electric cars are growing fast in Europe and China and increasingly also in the United States.
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As the halfway point of corporate earnings season approaches, jittery investors are looking to these financial reports for direction. Inflation, geopolitics and other worries dragged down markets last month, but it’s been a different story in the past few days, as robust earnings at big companies steadied nerves, the DealBook newsletter notes.
Earnings for S&P 500 companies are on track for a fourth consecutive quarter of growth above 20 percent, according to FactSet. This is expected to slow to single-digit percentages in the quarters ahead, but analysts also expect companies to gradually expand their margins, squeezing more profit from each dollar generated in revenue.
Ever the optimists, analysts tracked by FactSet expect the S&P 500 index to rise about 17 percent from its current level by the end of the year. In premarket trading on Wednesday, futures suggest that stocks will rise for the fourth day in a row, driven by the headlines from big companies that opened their books for investors on Tuesday:
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Alphabet, Google’s parent company, said its fourth-quarter profit jumped 36 percent, to $20.6 billion. Its shares are up 10 percent in premarket trading, a move worth nearly $200 billion in market value. Alphabet also announced a 20-for-1 stock split, prompting speculation that it could join the Dow Jones industrial average.
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Exxon Mobil earned $8.9 billion in the fourth quarter, propelled by higher energy prices, in a sharp reversal from its $20 billion loss a year ago. The company said it would resume its stock buyback program, spending $10 billion over the next two years.
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General Motors reported a sharp drop in fourth-quarter profit, but a 55 percent jump in annual earnings for 2021, to a record $10 billion. The automaker said it expected to ramp up production this year, with factories running at a normal clip by the second half as supply chain shortages ease.
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Starbucks said quarterly profit jumped 31 percent at the end of last year, to $816 million. The coffee chain said that it would keep raising prices, and that a series of price increases on menu items in recent months had not had “any meaningful impact to customer demand.”
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UPS reported $3.1 billion in fourth-quarter profit, surpassing analyst expectations, and recorded operating margins bigger than it has achieved in years. Its shares soared 14 percent on Tuesday after the report, to a record high. The shipping giant raised its dividend by nearly 50 percent, its biggest increase since going public, and said it would hit revenue and margin targets a year earlier than expected.
Noteworthy companies reporting earnings next include Meta later on Wednesday and Amazon on Thursday. Both of their stocks are trading higher premarket.
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Executives with Grindr, the world’s most popular gay dating app, have pulled it from Apple’s app store in China over concerns about data regulations, marking the latest of a series of foreign departures from the Chinese market following new rules.
Grindr’s services continue to function in China, although in the past China’s government has taken steps to block services that do not follow its rules. In this case, the rules include a new personal information protection law that requires Chinese government permission for customer data to be transmitted outside the country’s borders.
Headquartered in West Hollywood, Calif., the app pioneered location-based dating. Grindr has occasionally gotten into hot water over its handling of personal data. In 2018 the social network, which is aimed at gay, bisexual, transgender and queer people, faced widespread criticism for sharing users’ H.I.V. status, sexual tastes and other intimate details with outside software vendors.
The Chinese internet is one of the most difficult operating environments for foreign companies in the world, with state-dictated censorship and disclosure rules that can force companies to hand over consumer data.
Recent laws in China designed to protect consumer data have made things even more difficult for foreign firms, which must seek state permission to transmit data outside the country. State policing of the internet has also increased in recent weeks, as Beijing prepares for the Winter Olympics, which begin on Friday.
Grindr moved to pull the app last week because of difficulties complying with the new regulations, said a company official who declined to be named. Over the past year, many of the few foreign internet firms still operating in China have taken similar steps. In October, LinkedIn said it would close its China site, citing a challenging operating environment. Shortly after, Yahoo followed suit.
Like many major internet services, Grindr has in the past found itself caught between the United States and China. The American government forced Grindr’s previous Chinese owner to sell the company in 2020 over national security concerns about sensitive data the company possessed.
Wall Street’s rebound continued for a fourth day on Wednesday, with tech stocks leading the gains after Alphabet and chip-maker Advanced Micro Devices both reported stronger than expected results for the last three months of 2021.
The Nasdaq composite rose 0.8 percent in early trading Wednesday, and is up about 8 percent from its lowest point of the year, which it hit last Thursday. The S&P 500 gained about 0.6 percent in early trading, and has climbed about 5 percent since Thursday — cutting its losses for the year in half.
The rebound has come in part as big companies, including Microsoft, Apple and, most recently, Alphabet, have reported strong results. Earnings for companies in the S&P 500 are on track for a fourth consecutive quarter of growth above 20 percent, according to FactSet.
The reports have offset some concerns about a slowdown in profit and economic growth that might come as interest rates climb this year. Those worries had pushed the S&P 500 down more than 9 percent last month.
On Wednesday, Alphabet, Google’s parent company, rose about 9 percent a day after the company reported that its profit grew 36 percent to $20.64 billion in the last three months of 2021. On Tuesday, Alphabet also reported that its ad sales grew 32 percent year-over-year to $61.2 billion during the three months ended in December.
Advanced Micro Devices rose 9.6 percent in early trading, gains that made it the best-performing stock in the S&P 500, after the company reported better-than-expected results and issued a strong forecast for the first quarter.
Last week, Apple issued better-than-expected results, reporting an 11 percent increase in revenue and a 20 percent jump in profit in its most recent quarter. Its shares were up about 0.4 percent on Wednesday.
Facebook will publish its quarterly earnings report on Wednesday after markets close, while Amazon is set to release its reports on Thursday.
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Starbucks will increase prices this year, the coffee giant said on Tuesday, blaming supply chain disruptions and a sharp rise in labor costs.
For the last three months of last year, the company’s profit soared 31 percent, to $816 million, Starbucks said in reporting its quarterly earnings on Tuesday. Revenue grew to $8.1 billion, a 19 percent jump compared with the same quarter a year ago.
The company raised prices in October 2021 and again in January 2022, executives said on Tuesday, and more increases are coming.
“We anticipate supply chain disruptions will continue for the foreseeable future,” said Kevin Johnson, the president and chief executive of Starbucks. “We have additional pricing actions planned through the balance of this year, which play an important role to mitigate cost pressures including inflation.”
The price of menu items at fast-food restaurants rose 8 percent in 2021, the biggest jump in more than 20 years, according to government data, with the chains citing higher costs for food, transportation and workers.
Starbucks also said it had increased spending on Covid-19 pay, including paid time off for employees to receive vaccinations or to those who contracted the virus. It also said it was spending more on training “to address labor market conditions.”
“Although demand was strong, this pandemic has not been linear,” Mr. Johnson said in a statement, adding that the company had “experienced higher-than-expected inflationary pressures.”
John Culver, the chief operating officer, said the price increases had not made “any meaningful impact to customer demand.”
Starbucks shares fell as much as 5 percent in after-hours trading after it announced its results for its fiscal first quarter, before recovering some of those losses.
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Officials from OPEC countries and their allies agreed on Wednesday to continue feeding a modest amount of additional oil into an increasingly tight market, a move that may add new uncertainty to energy markets.
Oil prices rose after the meeting, settling near $90 a barrel for Brent crude, the international standard. Prices have risen about 14 percent this year alone, adding to inflation and raising living costs for consumers around the world, including in the United States.
OPEC and its allies, known as OPEC Plus, have kept tight control of production over the course of the pandemic as demand has slowly grown. But there are new questions looming, including the possibility that Russia will invade Ukraine, and the chance of a new nuclear deal with Iran that would allow it to start selling its oil on the market.
Analysts at Goldman Sachs warned in a note after the meeting that “the combination of rising geopolitical tensions (Ukraine and Iran) and prices approaching politically sensitive levels are likely to increase volatility.”
Normally, such conditions could prompt expectations that OPEC Plus would seek a substantial increase in output.
The oil ministers, though, decided to stick with a plan, set in July, to increase production next month by a relatively modest 400,000 barrels a day.
But OPEC Plus has consistently fallen short of its targets in recent months, and so analysts say that the result is likely to be an addition of around 250,000 barrels a day, or about a quarter of a percent of global demand.
At this point, Saudi Arabia, still the key decision maker in OPEC Plus, appears to see no reason to depart from this cautious plan. The Saudis are content to see rising oil revenues replenish their own coffers, and they can argue that geopolitical tensions may be distorting the market.
“While attention is focused on other topics and they are able to say at least some of this increase in prices is driven by geopolitical tensions, then they can avoid having difficult discussions,” said Richard Bronze, head of geopolitics at Energy Aspects, a research firm, referring to Saudi Arabia.
The Saudis may also worry that Iran, a potential source of significant additional supplies, may start putting more oil on the market later this year. Oil analysts are growing optimistic that a deal could be reached in the coming months between Tehran and Washington over Iran’s nuclear program, leading to some lifting of the sanctions that are crimping the Islamic Republic’s oil sales.
What it will take for Saudi Arabia to loosen up is the subject of much speculation. Stronger arm-twisting by the Biden administration may be required, some analysts say. The de facto leader of OPEC may change its calculations if “conventional war breaks out on European soil and crude prices soar past the $100-a-barrel mark,” wrote Helima Croft, an analyst at RBC Capital Markets, an investment bank.
Analysts say that markets may well heat up further in the coming weeks, especially if conflict over Ukraine threatens to disrupt energy flows. Inventories of oil are well below their long run averages, creating the risk of price spikes. Any disruption involving Russia, a major oil exporter, would send shudders through the markets.
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The New York Times Company reached its goal of 10 million subscriptions ahead of schedule, the company said Wednesday, aided substantially by the 1.2 million it gained by buying the sports news website The Athletic.
The $550 million deal for The Athletic, which was announced last month, was completed on Tuesday, the company said.
In the final three months of 2021, before the Athletic acquisition, The Times added 375,000 digital subscriptions, the company said in its quarterly earnings report. Those additions included 171,000 to its core news product, meaning the majority were for The Times’s other digital offerings: Games, which includes crosswords; Cooking, its recipes app; Wirecutter, its product-recommendation site; and Audm, which produces audio versions of text-based journalism.
By the last week of December, The Times had almost 8.8 million subscriptions. Nearly 5.9 million were for digital news, more than two million were for the other digital products, and a shade under 800,000 were for the print newspaper.
The Times also announced a new goal on Wednesday: It will aim, it said, to have at least 15 million subscribers by the end of 2027.
One subscriber may account for more than one subscription. The subscriber metric, which will be included in The Times’s next earnings report, reflects the company’s desire to market a bundle of several digital subscriptions as a one-stop shop not only for news but other diversions and needs. At the end of last year, the company said, The Times had approximately 7.6 million subscribers paying for the 8.8 million subscriptions.
Meredith Kopit Levien, the company’s president and chief executive, said in a statement that The Times’s executives believed there were “at least 135 million” potential subscribers in the United States and around the world — adults “paying or willing to pay for one or more subscriptions to English-language news, sports coverage, puzzles, recipes or expert shopping advice.”
The Times established its earlier goal, of 10 million subscriptions by 2025, three years ago, when it had 4.3 million. As subscriptions to The Times’s core digital news app continued to grow and as Games and Cooking each amassed more than one million subscriptions, it became apparent the company would surpass the goal early.
Then, last month, The Times said it would buy The Athletic, whose 400 journalists cover more than 200 sports teams in the United States, Britain and Europe, in an all-cash deal worth $550 million. The Times said Wednesday that the deal had been financed by “cash on hand,” meaning without borrowing money.
In addition to closing on The Athletic, The Times said this week that it was acquiring the viral online puzzle Wordle, which will be added to the Games app (and remain free, at least initially).
For the fourth quarter of 2021, the company reported adjusted operating profit of $109.3 million, a 12 percent increase from a year earlier, and revenue of $594.2 million, a 16.7 percent rise. Operating costs rose at virtually the same rate, to $500.1 million. Subscription revenue rose about 11 percent, to $351.2 million.
For the year, revenue grew 16.3 percent, to $2.1 billion — making 2021 The Times’s first $2 billion year since 2012. Operating costs were up 12.2 percent, to $1.8 billion. While subscription revenue grew 13.9 percent, to $1.4 billion, the year also represented a rebound for advertising, where revenue grew to $497.5 million, a 26.8 percent increase from 2020, though still 6.2 percent less than it brought in before the pandemic, in 2019.
The company said it expected subscription revenue to increase 11 to 15 percent in the current quarter, which includes two months with The Athletic as part of the company. The Times added that it expected digital subscription revenue to rise 23 to 28 percent and ad revenue to gain 17 to 21 percent. Costs will rise 18 to 22 percent, the company said.
The company’s board of directors raised the dividend 2 cents per share, to 9 cents, and authorized a $150 million stock repurchase, the company said. While the buyback will affect only Class A shares, which are available to the public, the dividend will apply both to those shares and to Class B shares, which are primarily owned by the Ochs-Sulzberger family that controls The Times.
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We’d like to learn more about how employers are monitoring and evaluating worker productivity.
Monitoring can take place in person or remotely, in high-paying jobs and low-wage ones, and can come in many forms: scores, dashboards, mandatory screenshots, time trackers or requirements to be filmed or recorded. In some workplaces, the productivity metrics are visible to employees, while in others, measurement is done quietly.
If you’re familiar with these practices, or other variations, we’d appreciate hearing from you. These experiences may help shape our reporting.
We won’t use your name or identifying information without your permission and we may contact you to hear more. If you’d prefer an even more secure means of communication, you can send your responses (and any records, images or other information) to nytimes.com/tips.
Source: https://www.nytimes.com/live/2022/02/02/business/stock-market-economy-news
