US prices are rising at their fastest in 40 years

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It was another milestone day for inflation news. Figures released today showed that US prices rose at the fastest rate in almost 40 years in December, fueling fears from the Federal Reserve that inflation is not temporary.

The data showing US inflation hit 7 percent, the sharpest year-on-year rise since June 1982. It came a day after Fed Chairman Jay Powell warned that such rates of cost-of-living increases could, if they continue , a “serious threat” to US jobs recovery.

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

Today we also got an insight into the impact of inflation on companies. UK budget hotel operator Whitbread forecast average hospitality inflation of 7% to 8% 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 strengthened the power of service workers to demand higher wages – and that includes gig economy workers. The challenge that gig business models pose was captured in this FT interview with Niklas Östberg, CEO of German food delivery app Delivery Hero, who admitted he either needs to get people to accept higher prices or that level of service suffers.

The problems caused by inflation are not only to calm the rise in prices. There is disagreement in the UK about how to measure it, as this article by Paul Lewis, host of BBC Radio 4’s Piggy Bank, explains.

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Good to know: the economy

China curbs its Africa loans. This matters as Chinese banks now account for about a fifth of all lending to Africa, which is concentrated in a few strategic or resource-rich countries, including Angola, Djibouti, Ethiopia, Kenya and Zambia.

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

Latest for UK/Europe

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

There was better news for the UK as Covid-19 hospital admissions among adults in England began to fall, according to official NHS data, raising hopes the healthcare system has weathered the wave of Omicron variant infections.

Global latest

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

Line chart of change in production from pre-pandemic trends, % shows While the rich world is recovering, poor countries are lagging behind

Larger and more intractable scars are likely to remain when developing countries face a perfect storm of events, explains this article by Chris Giles.

Good to know: business

The largest U.S. companies are set to deliver record results in the upcoming earnings season, with companies in the S&P 500 stock index forecasting nearly 22 percent annual earnings growth for the final three months of 2021 for the final three months of 2021, according to estimates from data provider FactSet. However, the future looks less rosy as analysts worry about high inflation, supply chain issues, and the continued proliferation of the Omicron variant, which will undermine performance in 2022.

Real estate continues to do well despite the start of Omicron. Savills today revised earnings forecasts sharply higher after the British estate agent had a run on expensive houses and warehouses late last year.

There was also good news today from a group of UK retailers who revised up their profit forecasts on the back of better than expected sales over the holiday season. More details can be found here.

A staple of Britain’s high street, Boots could be bought by private equity after it was revealed that buyout groups Bain and CVC are preparing a joint bid for the drugstore chain.

One industry that has boomed during the pandemic is the manufacture of Covid test kits. Most of us may be happy to see their backside. But FT columnist Brooke Masters sees a longer-term opportunity if test manufacturers can convince patients, insurers and governments that routine testing for all types of diseases is worth paying for.

The working world

companies are in the US close temporarily or adjusting work hours when the number of Americans infected with Covid hits an all-time high, underscoring how the disruptions associated with the Omicron variant have impacted the economy.

FT editor Michael Skapinker looks at the complaint from the administration that nobody on their team thinks to thank them and that bosses do well to remember that they are there to solve their employees’ problems and not the other way around. 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…

Need a break from work, either at home or in the office? In this escapist piece from Life and Arts, FT correspondents in Milan, New York, Hong Kong, London and elsewhere share their favorite spots near where they live.

“My place of peace”: Martin Wolf recommends Dulwich Park, one of the most beautiful green spaces in south London © Kayode Fashola/iStock/Getty Images

Next week — Start each week with a preview of what’s on the agenda. Register here

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