Bloomberg - Evening Briefing - The battle isn’t over

Who ever said the war on inflation would be a straight line ending in a soft landing (or downturn)? While the US Federal Reserve has made a lot of progress over the past two years, this week proved that some battles will be lost along the way. With interest rates still sky high, the American economy has continued to make mincemeat out of Team Recession’s two years of unrealized predictions. But as the central bank chases its 2% inflation target, pockets of a too-hot US economy have proven stubborn. Consumer prices jumped in January, stalling recent disinflation progress and dashing hopes on Wall Street that the Fed would start dropping rates soon. The main contributor to the uptick? Shelter costs. Then there were the prices paid to US producers, which also rose in January by more than forecast. Of course there was also more good news for Americans: Consumer sentiment ticked up again and prices of used cars dropped on a monthly basis by the most since 1969 after the methodology was updated. Broader goods prices and energy also continued to fall.

For many other economies around the globe, however, the post-pandemic economic picture is a grim one. Japan lost its status as the world’s third-largest economy after unexpectedly slipping into recession. And an even smaller economy, that of the UK, fell into a downturn as well, further burying Tory Prime Minister Rishi Sunak’s promises of growth. The European Union slashed its outlook for the euro area, seeing gross domestic product accelerating only slightly. As for Germany: its days as an industrial superpower may be coming to an end. Manufacturing output in Europe’s biggest economy has been trending downward since 2017, and the decline is accelerating as competitiveness erodes.

Commercial-property deals in the US are starting to pick up, and while at first blush that may seem positive, many transactions are at deep discounts, forcing lenders around the world to brace for souring loans. While prices for offices have tumbled in financial centers from London to Tokyo, American cities have seen particularly big declines. And those plunging values are having a ripple effect, given that properties in top-tier US cities were once magnets for global investment. About two dozen US banks had portfolios of commercial real estate loans in late 2023 that federal regulators indicated would merit greater scrutiny, a troubling sign that more lenders may face pressure to bolster reserves. 

Aon Center, the third-tallest tower in Los Angeles, sold for$147.8 million—about 45% less than its last purchase price in 2014. Photographer: Michael Lee/Moment RF

Donald Trump will face the first of four criminal trials on March 25, this one for accounting fraud tied to alleged hush-money payments made to an adult film star. On Friday, Trump was ordered to pay a $364 million judgment as part of a lawsuit in which he was found to have fraudulently manipulated the value of his companies. This week also found the Republican doubling down on his destabilizing approach to NATO. Trump has said he once told a national leader he wouldn’t stand in the way of a Russian attack on a NATO member that was behind on its dues. Now he says that—if elected in November—he’d consider a two-tiered system in which only members who are paid up would be automatically defended by the US. President Joe Biden angrily ripped Trump for his comment, calling it “shameful” and “un-American.” After the Supreme Court struck down the federal right to an abortion, supporters of reproductive rights warned that opponents would eventually seek a nationwide ban. Trump is now said to be telling allies he supports a national abortion ban starting at 16 weeks.

Alexey Navalny, the Russian lawyer and anti-corruption activist who became Kremlin leader Vladimir Putin’s No. 1 domestic enemy, died at 47 in an Arctic prison camp, according to the Russian government. Marc Champion of Bloomberg Opinion writes, “all of those in the West who admire Vladimir Putin for his strength and anti-liberal values should take a long hard look.” Biden too had a message. “Make no mistake,” the Democrat said. “Putin is responsible for Navalny’s death.”

Alexei Navalny appears during a 2021 court hearing in Moscow. Photographer: Kirill KUudryavtsev/AFP

At least 1 million US homes are at risk because of something most Americans don’t know much about: dangerous power quality where sudden surges or sags of voltage can damage appliances and even lead to fires, injuries and death. On the other hand, electric vehicles are starting to challenge fossil fuels not only on the road but within the power grid. EVs are being used to balance power markets in places including the UK.  

Shelter is one of humanity’s most basic needs. But as the global population grows, so too does the construction industry’s carbon and environmental footprint. How can societies rethink the way they build and the structures they create? On this episode of An Optimist’s Guide to the Planet, host Nikolaj Coster-Waldau reveals the revolutionary changes afoot in green architecture and construction. 

In Shelter, Nikolaj Coster-Waldau, right, travels to Kilifi, Kenya, to meet Denis Chek, whose company 14Trees is using 3D-printing to reduce the environmental impact of construction.

• Economists, media in China expect policy easing amid deflation.
• Bank earnings continue with UK lenders, including HSBC, Barclays.
• Latest economic data from Europe’s main economies.
• US retail bellwethers Walmart, Home Depot report. 
• EU delegation travels to India to talk trade; US’s Gallagher in Taiwan.

Guyana’s economy is the fastest growing in the world, driven by its booming oil sector. The South American nation’s reserves are so vast that Venezuela is escalating claims to its oil-rich Essequibo region. On this week’s Bloomberg Originals mini-documentary, we explore the nation’s fossil fuel supply and how a natural resource windfall can create phenomenal wealth—as well as hyperinflation, social upheaval and income inequality.

Local companies are struggling to meet the demands of Guyana’s infrastructure projects, relying on foreign firms to complete work. Photographer: José A. Alvarado Jr./Bloomberg

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