US ECONOMY & POLITICS

U.S. Inflation-Adjusted Spending Falls as Prices Temper Demand – Bloomberg, 3/31/2022

• U.S. inflation-adjusted consumer spending declined in February, suggesting the fastest pace of price increases in four decades is starting to temper demand.
• Purchases of goods and services, adjusted for changes in prices, fell 0.4% from the prior month, following a 2.1% jump in January, according to Commerce Department figures Thursday. Spending on goods settled back after the prior month’s surge, while a decline in Covid-19 cases supported a pickup in outlays for services.
• The personal consumption expenditures price index, which the Federal Reserve uses for its inflation target, increased 0.6% from a month earlier and 6.4% from February 2021, the most since 1982.
• Unadjusted for inflation, spending advanced 0.2% from January, while incomes rose 0.5%.
• The core PCE price index, which excludes food and energy and is often seen as a more reliable guide to underlying inflation, rose 0.4% from the prior month and was up 5.4% from a year ago.
• Inflation-adjusted goods expenditures declined 2.1% from the prior month after a January surge of 5.6%. Spending on services climbed 0.6%, the most in seven months.
• The personal saving rate — or personal saving as a share of disposable income — ticked up to 6.3%, though remains near an eight-year low. When adjusted for inflation, disposable personal income declined for a seventh straight month.

U.S. Jobless Claims Edge Higher Amid Tight Labor Market – Wall Street Journal, 3/31/2022

• New applications for U.S. unemployment benefits rose slightly last week, indicating a strong labor market in which employers are holding on to their workers amid high demand.
• Initial jobless claims, a proxy for layoffs, rose by 14,000 to a seasonally adjusted 202,000 last week, the Labor Department said Thursday, up from the week before when they reached a revised 188,000, matching the lowest level in more than 52 years reached back in December.
• The four-week moving average, which smooths out volatility, decreased to 208,500 from a revised 212,000.
• Continuing claims, a proxy for the total number of people receiving payments from state unemployment programs, moved slightly down to 1.3 million for the week ended March 19 from the previous week.
• Continuing claims are reported with a one-week lag.

Mortgage Rates Surge to Highest Since 2018 – Wall Street Journal, 3/31/2022

• The average rate for a 30-year fixed-rate loan jumped to 4.67%, mortgage-finance giant Freddie Mac said Thursday, marking the weekly figure’s highest reading since December 2018.
• The 30-year fixed rate rose from 4.42% a week ago, continuing a steady rise that has pushed home-loan rates within sight of 5% for the first time in four years.
• At the beginning of the year, the average rate on America’s most popular home loan was 3.22%.
• Rising rates are reducing refinances, which powered much of the mortgage market’s boom in 2020 and 2021.
• About four million Americans could lower their monthly mortgage payments through a refinancing in February, down from close to 16 million a year ago, according to mortgage-data firm Black Knight.
• Refinancings are expected to make up 33% of mortgage originations this year, down from 59% in 2021, according to the Mortgage Bankers Association.

EUROPE & WORLD

Russia Set for Steep Slump and Long Stagnation in Wake of Ukraine War – Wall Street Journal, 3/31/2022

• Russia’s invasion of Ukraine will cause their economies to contract this year by about 10% and 20%, respectively, the region’s leading development bank said Thursday in one of the most in-depth economic assessments to date of the war’s impact on the two countries.
• The European Bank for Reconstruction and Development said the slump in Russia would likely turn into a long period of stagnation while neighboring economies would rebound next year as long as a sustainable cease-fire is secured over the coming months.
• While Ukraine will suffer more in the short term because of the extensive damage to its physical infrastructure, Russia faces more long-term challenges from an exodus of well-educated workers and the loss of access to Western technologies under current sanctions, the bank said.
• The bank said it estimates that the territory most directly affected by the fighting accounts for 60% of Ukraine’s annual economic output and that about a third of Ukrainian businesses have had to suspend operations.
• Electricity consumption is down 60% on normal levels for this time of year, it said.
• Assuming that a cease-fire can be negotiated in the next two months, the EBRD expects Ukraine’s gross domestic product to contract by a fifth this year, compared with its previous estimate of 3.5% growth.
• The economy should then rebound and grow by 23% in 2023 if it receives reconstruction assistance.
• The EBRD lowered its growth forecasts for all but two of the 33 countries in which it invests beyond Ukraine, stretching across North Africa, Central Asia, the Caucasus and Central and Eastern Europe.
• The exceptions are Azerbaijan and Turkmenistan, both of which are large producers of natural gas.

Ukrainian Troops Push Forward as Russian Forces Regroup – Wall Street Journal, 3/31/2022

• Ukrainian officials said their armed forces are pressing forward against Russian military units around Kyiv, seeking to exploit Moscow’s efforts to regroup after weeks of heavy losses.
• After taking the city of Irpin to the northwest of Kyiv this week, Ukrainian forces are now engaged in heavy fighting in the neighboring towns of Bucha and Hostomel, officials said.
• In the Chernihiv region to the north of the capital, Ukrainian forces retook a village and were pushing for further gains, officials said, while warning that it was too early to say Russian forces were withdrawing.
• In Ukraine’s east, an area long coveted by Moscow, Russia has been intensifying attacks. Russian forces have been attacking the city of Lysychansk for the past two days. Shelling by Russian troops killed at least seven people and injured dozens overnight, officials said.
• Russian Defense Ministry spokesman Igor Konashenkov said on Thursday that Russian forces had gained ground in their offensive to take swaths of Donbas and claimed further missile attacks against Ukrainian military infrastructure.
• The statement came the day Russian President Vladimir Putin signed a decree on the spring draft, which is set to bring 134,500 new conscripts into the armed forces as others end their voluntary service.
• Russia has previously admitted that conscripts have taken part in its military campaign in Ukraine, though Defense Minister Sergei Shoigu said on Tuesday that no new recruits will be sent to conflict zones.

Putin Says Gas Exports to Be Halted If Payments Not Made in Rubles – Bloomberg, 3/31/2022

• Russia will halt gas supplies to buyers from ‘unfriendly’ states unless they switch to payments in rubles from April 1, President Vladimir Putin said, the latest strike in a struggle with Europe over energy sales.
• “To buy Russian gas, they need to open ruble accounts in Russian banks,” Putin told officials in a televised speech Thursday.
• “It is from those accounts that gas will be paid for starting April 1.
• If such payments aren’t made, we will consider this a failure by the client to comply with its obligations.”
• Buyers should open special accounts in state-controlled Gazprombank to allow foreign currency to be swapped to rubles for settlements, according to an order signed by Putin.

Shanghai Will Lock Down 16 Million in Toughest Virus Test Yet – Bloomberg, 3/31/2022

• Part two of Shanghai’s phased lockdown will see some 16 million people confined to their homes, with residents urged to isolate from members of their own household as authorities seek to curtail a record outbreak that’s brought unprecedented disruptions to the financial hub.
• Residents in the western part of the city, where about two-thirds of Shanghai’s population lives, will begin a four-day lockdown at 3 a.m. on Friday.
• That’s two hours before the eastern half — home to almost 9 million people — emerges from their own lockdown that began early Monday morning.
• Late Wednesday, Shanghai’s communist party chief Li Qiang vowed to disrupt the spread of the virus through “whole-region static management”, using a phrase that in other parts of the country have indicated the toughest of movement curbs.
• Several cities in the northeastern province of Jilin, already sealed off for more than two weeks, implemented static management last week that meant residents were completely barred from leaving their homes.

Chinese manufacturing, services contract together for first time since 2020 – Reuters, 3/31/2022

• Activity in Chinese manufacturing and services simultaneously contracted in March for the first time since the height of the country’s COVID-19 outbreak in 2020, adding to the urgency for more policy intervention to stabilise the economy.
• The official manufacturing Purchasing Managers’ Index (PMI) fell to 49.5 from 50.2 in February, the National Bureau of Statistics (NBS) said on Thursday, while the non-manufacturing PMI eased to 48.4 from 51.6 in February. read more
• The sub-index for production fell below the 50-point mark for the first time since October, to 49.5, indicating a contraction. The gauge for new orders was also in negative territory.
• Weakening production and demand sped up the contraction in factory jobs, with the employment sub-index slipping to 48.6 in March, the lowest since February 2021.
• China’s official composite PMI, which combined manufacturing and services, stood at 48.8 in March versus 51.2 in February.
• The composite PMI was at its second-lowest reading on record since February 2020, when the initial COVID outbreak sent the index plummeting to 28.9.

Factmonster – TODAY in HISTORY

• The Eiffel Tower in Paris officially opened. (1889)
• Daylight Saving Time went into effect in the United States. (1918)
• The Dalai Lama, fleeing Chinese repression of an uprising in Tibet, arrived at the Indian border and was granted political asylum. (1959)
• President Lyndon Johnson announced that he would not run for re-election. (1968)