Economists expect this to hurt Europe’s economy. Barclays analysts have cut their eurozone growth forecast for this year by 1.7 percentage points to 2.4%. Private consumption, investment and exports are all expected to grow at a slower pace across the continent.
At the same time, prices of energy and other commodities such as wheat and metals are rising sharply. Barclays has raised its 2022 eurozone inflation forecast by 1.9 percentage points to 5.6%.
In other words, the war is provoking a stalemate, which describes a period of high inflation and weak economic growth. The most recent example is the 1970s, when energy supply shocks hit developed economies.
Stagflation is a nightmare for policy makers, who have few good options to rein in runaway prices without hurting the economy. In the United States in the 1970s, Federal Reserve Chairman Paul Volcker was forced to raise interest rates to unprecedented levels to finally bring inflation under control.
Back to the present: Europe may now face a worse than stagflation recession: a possible recession with inflation out of control.
Barclays said that even after the big drop in its forecast, the economy could be worse than expected. The situation is highly uncertain, the bank cautioned.
What is the worst case scenario for Europe’s economy?
According to Capital Economics, a complete ban on Russian energy imports would push Brent crude prices to $160 a barrel and push the eurozone into its third recession since the start of the coronavirus pandemic.
“The collapse in the Russian energy trade will accelerate electricity rationing in parts of Europe, which in turn will break supply chains and add additional inflationary pressures globally,” said economist Carolyn Bain.
“Higher energy prices will also increase the prices of agricultural commodities and industrial metals,” he said.
Russia, which needs energy revenue to finance government spending and keep its economy afloat, has warned the West about imposing sanctions on oil imports.
“The price jump will be unpredictable. It will be $300 a barrel,” said Novak, who also served as energy minister.
US officials are already discussing imposing restrictions on imports. EU leaders have made it clear this week that the bloc cannot yet join the United States, as it will affect households and businesses.
But none of this is good news for central banks – especially the ECB, which meets on Thursday.
Analysts at Barclays wrote, “We think the conflict will keep the ECB in check and an even more liberal stance may be needed as the ECB does whatever it takes to prevent this war from turning into an economic and financial crisis.” will also do (and cost).”
This means there will be no interest rate hikes before March 2023 and no commitment to end quantitative easing. Barclays also expects the central bank to put all options on the table when it comes to maintaining stability.
US gas sets record: $4.17 per gallon
This breaks the previous record of $4.11 per gallon that has stood since July 2008, reports my CNN business colleague Chris Isidore.
As Russia continues its military offensive in Ukraine, gas prices have been rising sharply since Hurricane Katrina slammed oil platforms and refineries along the US Gulf Coast in 2005.
The $4.17 average means the price is up 55 cents a gallon over the past week and 63 cents, or 18%, from February 24, the day Russian forces invaded Ukraine.
The rise in gas prices won’t stop anytime soon, said Tom Kloza, OPIS’s global head of energy analysis.
“I think we’ll hit $4.50 a gallon before it turns around,” Kloza said. “The risk is how bad it gets, how long it lasts. Even $5 per gallon is possible nationwide. I wouldn’t have predicted that before the fight started.”
Great Firewall of Russia?
Russia’s Internet has long been spread across the East and West.
Russian citizens, unlike their Chinese counterparts, are able to access US tech platforms such as Facebook, Twitter and Google, although they are subject to censorship and sanctions – a defining characteristic of China’s internet model.
But Russia’s invasion of Ukraine, which has isolated the country in recent days, could also prove to be the death knell for its worldwide presence on the web, reports my CNN business colleague Rishi Iyengar.
Mood: The Russian government said on Friday it has decided to block Facebook, citing the social network’s moves in recent days to ban Russia-controlled media outlets.
While Facebook is by no means the biggest platform in the country, blocking it may be a symbolic move to indicate that President Vladimir Putin’s government is ready to go after big global names if they don’t tread the party line. admit. (Instagram and WhatsApp, which are more popular in Russia and also owned by Facebook’s parent company Meta, have not been blocked yet).
Already, the country’s main telecommunications regulator, Rozkomnadzor, is pressuring Google over “false” information, and has reportedly banned Twitter as well. Other platforms are opting to cease operations on their own.
The separation from Russia may not pose a potential threat to Western tech platforms, some of which count their audiences in the billions. But these moves have major implications for Russians’ ability to access information and express themselves freely. On a more fundamental level, this could further accelerate the fracturing of the global Internet as we know it.
next
Proceeds from Dix Sporting Goods, Bumble, FIGS and Stitch Fix.
Coming tomorrow: data on US job openings and crude inventory.