'We estimate that rising gas and food prices will create an effective 0.7 percent point drag on real disposable personal income in 2022 with larger drags for lower-income households,” economists at Goldman Sachs say.
The U.S. stock market put in a resilient performance on Thursday, given the data showing inflation surging to a new 40-year high even before the impact of the recent sanctions on Russia, what appeared to be a pretty dismal result from the Russian-Ukrainian meeting of foreign ministers in Turkey, and a surprisingly hawkish decision by the European Central Bank.
Besides commodity prices, the Goldman team also noted that consumer sentiment tends to be affected by geopolitical crises, and already gauges from Morning Consult and Ipsos have dropped. The downgrade to Europe’s growth prospects will hit U.S. exports, and a tightening of financial conditions will also weigh on U.S. growth.
The chart It wasn’t that long ago when European stocks were the trendy call for 2022, on the logic that the region would benefit from the NextGenerationEU spending and a later recovery from COVID-19 than the U.S. Investors aren’t sharing that view now, with the largest-ever retreat from European equities on record.
China ordered a COVID-19 lockdown of the nine million residents of the northeastern city of Changchun.
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