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US prices rise at fastest rate in 40 years

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It has been another milestone day for inflation news. Figures published today showed that US prices rose at their fastest rate in nearly 40 years in December, fuelling Federal Reserve fears that inflation is not temporary.

The data, showing US inflation hitting 7 per cent, the biggest year-on-year increase since June 1982. It came a day after Fed chair Jay Powell warned that such rates of increase in the cost of living, if sustained, were a “severe threat” to the US jobs recovery.

The US is not alone. Inflation across rich nations has surged to a 25-year high. The annual pace of consumer price growth in the OECD group of developed nations hit 5.8 per cent in November, according to data released yesterday, up from just 1.2 per cent in the same month the previous year and the highest rate since May 1996.

We also got an insight today into inflation’s impact on companies. British budget hotel operator Whitbread forecast inflation in the hospitality sector would average between 7 and 8 per cent and warned that rising energy and wage costs would mean higher room rates for its guests this year.

Wage costs are rising in part because the pandemic has boosted the power of service sector employees to demand higher pay — and this includes gig economy workers. The challenge that poses for gig business models was captured in this FT interview with Niklas Östberg, chief executive of German food delivery app Delivery Hero, who admitted that he will either have to get people to accept higher prices or service levels will suffer.

The problems caused by inflation are not just around how to calm price increases. In the UK, there is disagreement about how to measure it, as this piece by Paul Lewis, BBC Radio 4’s Money Box presenter, explains.

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Need to know: the economy

China is applying the brakes to its Africa lending. This matters because Chinese banks now make up about one-fifth of all lending to Africa, concentrated in a few strategic or resource-rich countries including Angola, Djibouti, Ethiopia, Kenya and Zambia.

Chart showing China has become a major player in international development finance. Development aid and other official flows, 2000-2017 ($bn in 2017 $ terms)

The more cautious approach comes amid warnings that several African countries could struggle to repay debts. Some nations have reached the limit of their borrowing capacity and the prospect of default looms.

Latest for the UK/Europe

A senior World Health Organization official warned yesterday that more than half of the European population could be infected with Omicron within the next two months. Hans Kluge, the WHO’s regional director for Europe, said that “because of the unprecedented scale of transmission” Europe was now seeing rising rates of hospitalisation.

There was better news for the UK with Covid-19 hospital admissions among adults in England beginning to fall, according to official NHS data, raising hopes that the health service has weathered the wave of Omicron variant infections.

Global latest

Tighter US monetary policy is likely to exacerbate an already difficult outlook for emerging and developing economies, according to the World Bank’s outlook for the global economy.

Line chart of Change in output from pre-pandemic trends, % showing As the rich world recovers, poor countries lag behind

Larger and more persistent scars are likely to remain as developing nations face a perfect storm of events, this piece by Chris Giles explains.

Need to know: business

The largest US businesses are set to deliver bumper results in the upcoming reporting season with companies in the S&P 500 stock index forecast to deliver year-on-year earnings growth of nearly 22 per cent for the final three months of 2021, according to Wall Street estimates collated by data provider FactSet. However, the future looks less bright with analysts concerned about high inflation, supply chain problems and the ongoing spread of the Omicron variant undermining performance in 2022.

Property continues to have a good run despite the onset of Omicron. Savills significantly upgraded its profit forecasts today after the British estate agent enjoyed a rush to buy expensive homes and warehouses at the end of last year.

There was good news also from a clutch of UK retailers today, upgrading their earnings forecasts on the back of better than expected trading over the Christmas period. Further details can be found here.

A stalwart of the British high street, Boots, could be bought by private equity with revelations that buyout groups Bain and CVC are preparing a joint bid for the chemist shop chain.

One industry that has boomed during the pandemic is Covid test kit manufacturing. Most of us might be glad to see the back of them. But FT columnist Brooke Masters senses a longer term opportunity if test manufacturers can convince patients, insurers and governments that it is worth paying for routine screening for all kinds of diseases.

The World of Work

Businesses across the US are temporarily closing or adjusting working hours as the number of Americans infected with Covid reaches an all-time high, underscoring how disruptions linked to the Omicron variant have rippled through the economy.

FT contributing editor Michael Skapinker tackles the management complaint that no one in their team thinks to thank them, noting that bosses would do well to remember that they are there to solve the problems of their employees not vice versa. Read his advice in full here.

Covid cases and vaccinations

Total global cases: 309.2m

Get the latest worldwide picture with our vaccine tracker

And finally…

Do you need a break from work, either at home or the office? In this escapist piece from Life and Arts, FT correspondents in Milan, New York, Hong Kong, London and elsewhere share their favourite places around the places where they live.

‘My place of peace’: Martin Wolf recommends Dulwich Park, one of south London’s most beautiful green spaces © Kayode Fashola/iStock/Getty Images

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