Inflation, Rising Rates Curb Global Economic Growth
Slower reported growth due to rising prices and concerns over interest rates, survey finds.
3 min
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Growth in the U.S. and global economies slowed in May as high inflation and rising interest rates dented demand, business surveys said Tuesday.
Business activity at services businesses in the U.S., eurozone, U.K. and Australia all grew more slowly in May amid rising prices, according to S&P Global surveys. The firm’s purchasing managers index surveys also reported Tuesday that factories in major global economies face supply-chain disruptions related to Covid-19 surges and the Ukraine war, as well as higher fuel costs and rising wages.
Separate U.S. figures on Monday pointed to slower growth in a segment of the housing market. The Commerce Department said purchases of newly built single-family homes declined in April for the fourth straight month, dropping 16.6% in April from the prior month to a seasonally adjusted annual rate of 591,000. That marked the slowest pace of sales since April 2020 at the start of the pandemic.
New-home sales are a relatively narrow slice of all U.S. home sales, and sales figures can be volatile and subject to revisions. Still, the drop adds to signs the housing market is slowing amid record home prices and rising mortgage rates.
The global economy faces a series of obstacles this year, ranging from Covid-19 lockdowns in China, soaring energy and food prices, Russia’s invasion of Ukraine and a broadening drive by central banks to combat high inflation by increasing borrowing costs.
Some businesses are planning for a significant slowdown in growth or economic contraction.
Electronics retailer Best Buy Co. reported falling sales and profits for the latest quarter and said its results for the current fiscal year will be worse than it had previously predicted amid increased sales promotions and higher supply-chain expenses. Abercrombie & Fitch Co. swung to a quarterly loss, hurt by higher freight and product costs.
Retailers have posted mixed results for the first quarter. Last week, Walmart Inc. and Target Corp. posted weaker-than-expected earnings.
The surveys of purchasing managers at businesses in some of the world’s largest and richest economies indicate that activity continues to be supported by the easing of restrictions on the services sector as Western societies learn to live with Covid-19, with sectors such as tourism experiencing a strong recovery. Still, high inflation, geopolitical tensions and rising interest rates are clouding the outlook.
In the U.S., S&P Global said its composite purchasing managers index—which measures activity in both the manufacturing and services sectors—was 53.8 in May, down from 56.0 in April and the weakest rate of growth in four months. Separately, S&P Global said its index for the eurozone’s services and manufacturing sectors fell to 54.9 in May from 55.8 in April. A reading above 50.0 points to an expansion in activity, while a figure below that threshold points to a contraction.
While the surveys point to continued growth in the second quarter, they appear to have exaggerated the strength of the global economy during the first three months of the year.
According to the Organization for Economic Cooperation and Development, economic output in its 38 members was just 0.1% higher in the three months through March than it was in the final quarter of 2021, a sharp slowdown from the 1.2% growth recorded in the three months through December.
Economists at Capital Economics say that, based on their history, the PMIs pointed to growth in rich countries of around 0.5%.
“This partly reflected volatility in imports and inventories and the effects of Covid restrictions, all of which should fade from now on allowing the PMIs to give a more accurate steer,” wrote Ariane Curtis in a note to clients.
Facing the full brunt of the jump in energy prices triggered by Russia’s attack on Ukraine, European policy makers are preparing for tough economic times ahead.
“It’s now very clear that the economic toll of this war is world-wide,” said Irish Finance Minister Paschal Donohoe after heading a meeting of eurozone treasury chiefs Monday. “High prices and disruption to food supplies are rippling across the world with very serious consequences for the most vulnerable in our societies.”
According to the surveys of purchasing managers, the U.K. has suffered the sharpest blow to activity in the wake of the invasion. S&P Global said its PMI for the country slumped to 51.8 in May from 58.2 in April to hit its lowest level in 15 months. Inflation hit a four-decade high in April as home energy prices surged.
“In the U.K., we are facing a very big negative impact on real incomes caused by the rise in prices of things we import, notably energy,” said Andrew Bailey, governor of the Bank of England, in a speech Monday. “We expect that to weigh heavily on demand.”
Citing the impact of the conflict on energy and food prices, the United Nations last week lowered its forecast for global economic growth in 2022 to 3.1% from 4%, and its forecast for U.S. economic growth to 2.6% from 3.5%.
Business leaders share those worries. A survey conducted by the Conference Board and released Tuesday found chief executive officers at 56 of Europe’s leading companies had become much more gloomy about their prospects in the six months since the last poll. The measure of confidence fell to 37 from 63, with a reading below 50.0 indicating that more CEOs are pessimistic than optimistic about the outlook.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: May 24, 2022.
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Passwords aren’t enough to fend off hackers; these dongles are the best defense
4 min
Strong passwords are very important, but they’re not enough to protect you from cybercriminals.
Passwords can be leaked or guessed. The key to online security is protecting your account with a strong secondary measure, typically a single-use code. This is referred to as “two-factor authentication,” or 2FA, as the nerds know it.
I’ve written about all the different types of 2FA, such as getting those codes sent via text message or generated in an authenticator app. Having any kind of second factor is better than none at all, but physical security keys—little dongles that you plug into a USB port or tap on your phone during account logins—offer the highest level of protection.
Security keys have been around for over a decade, but now they’re in the spotlight: Apple recently introduced support for them as an optional, added protection for Apple ID accounts. Last month, Twitter removed text-message-based authentication as an option for nonpaying users, recommending instead an authenticator app or security key.
Some people are hesitant to use security keys because carrying around a physical object seems burdensome and they come with a $30-and-up added cost. Plus, what happens if they get lost?
I’ve used security keys since 2016 and think they are actually easier to manage than codes—especially with accounts that don’t require frequent logins. They’re not only convenient, but they can’t be copied or faked by hackers, so they’re safer, too.
Here’s how to weigh the benefits and common concerns of adding one or two of these to your keychain.
Which security key should I use?
Many internet services support the use of security keys, and you can use the same security key to unlock accounts on many different services. I recommend two from industry leader Yubico:
- YubiKey 5C NFC ($US55) if you have a USB-C laptop or tablet
- YubiKey 5 NFC ($US50) for devices with older USB ports
Other options include Google’s Titan security keys ($30 and up). In addition to working with laptops and tablets with USB ports, these keys are compatible with smartphones that have NFC wireless. Most smartphones these days have that, since it’s the technology behind wireless payments such as Apple Pay.
Adam Marrè, chief information security officer at cybersecurity firm Arctic Wolf, recommends that your chosen key is certified by the FIDO Alliance, which governs the standards of these devices.
How do security keys work?
To add a key, look in the security settings of your major accounts (Facebook, Twitter, Google, etc.). During setup, it will prompt you to insert the key into your laptop or tablet’s port or hold the key close to your phone for wireless contact.
Apple requires you to add two security keys to your Apple ID account, in case you lose one.
Typically, when you log in, you just go to the app or website where you’ve set up a key, enter your username and password as usual, then once again insert the key into the device or hold it close. (Some keys have a metal tab you have to press to activate.) At that point, the service should let you right in.
Why are they so secure?
Getting those two-factor login codes via text message is convenient, but if you are someone criminals are targeting, you could be the victim of SIM swapping. That’s where thieves convince carriers to port your number to a new phone in their possession, and they use it along with your stolen password to hack your accounts.
Even if they don’t go to all that trouble, criminals might try to trick you to hand them your codes, by calling you or spoofing a website you typically visit. At that point they can use the code for about 60 seconds to try to break in, said Ryan Noon, chief executive at security firm Material Security.
Security keys protect you in two ways: First, there’s no code to steal, and second, they use a security protocol to verify the website’s domain during login, so they won’t work on fake sites.
You can also add an authenticator app such as Authy to your most important accounts, to use only as a backup. But once you add these secure methods, you should consider removing the text-message code option.
In the rare case that someone snoops your passcode then steals your iPhone, beware: The perpetrator could still make Apple ID account changes using only the passcode, and even remove security keys from your account.
What happens if you lose your key?
The most important rule of security keys is to buy an extra one (or two).
“Think of your security key as you would a house or car key,” said Derek Hanson, Yubico’s vice president of solutions architecture. “It’s always recommended that you have a spare.”
If you lose a security key, remove it from your accounts immediately. You should have already registered your spare or an authenticator app as a backup to use in the meantime.
Where can you use a security key?
Start with your most valuable accounts: Google, Apple, Microsoft, your password manager, your social–media accounts and your government accounts.
When it comes to financial institutions, many banks don’t offer security-key protection as an option, though most leading crypto exchanges do.
What comes after security keys?
Security professionals and tech companies widely agree that passkeys are the future. They’re a new type of software option that combines the high security of a physical key with the convenience of biometrics such as your face or fingerprints. Passkeys are supported across the Android, iOS, Mac and Windows platforms, and some of your favourite sites already let you use them.
You can create a passkey on Facebook in security settings by following the app’s instructions under the security-key option. Dropbox has a similar passkey setup. Once you’re done, you’ll use your face or fingerprint as a second factor, instead of a code or key.
Eventually, physical security keys could be what we keep safe in strong boxes, as backups for our biometric-enabled passkeys. Even then, you’re probably going to want to have spares.
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