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Industrial production fell 0.6% in October, the Federal Reserve reported Thursday.
The drop was larger than the 0.4% decline forecast by economists surveyed by The Wall Street Journal.
Much of the decline was due to the 10% drop in output for motor vehicles and parts that were affected by the UAW strike against the Big Three domestic producers, the Fed said.
For Darya Stepanova, a mother of two who lives in a small town on the eastern side of the Ural mountains, soaring prices for everything from baby food to nappies have forced her family to cut back on most treats and eating out.
The Stepanov family is one of millions of Russian families having to cut back due to the significant changes forced on Russia's economy by the war in Ukraine and the myriad sanctions imposed by the West.
Stepanova, 34, her five-year-old son, and her newborn son, try to make ends meet on the 50,000 roubles ($550) a month her husband Sergei earns. When she goes through the snow to the shops, she inspects the prices to search for bargains.
"I can see how everything has become more expensive in the course of just these past five years," Stepanova told Reuters in her flat in Sredneuralsk, a town on the shores of Lake Iset about 25 km (15 miles) north of the Urals city of Yekaterinburg and 1400 km (870 miles) east of Moscow.
"Before you could buy food worth a thousand roubles for three or four days easily, but now when you go to the shop a thousand roubles is nothing - you can only buy food for everyday needs, like milk, yogurt, bread and that's it - your thousand has flown away."
Baby milk has quadrupled in price over the five years since her first child, she said, while the price of prams has tripled to 60,000 roubles. Prices for disposable nappies and baby food have at least doubled, she said.
The family's income has not risen by anything like that while the rouble has fallen against the U.S. dollar since February 2022, when President Vladimir Putin ordered troops into Ukraine, making imported goods more expensive in rouble terms.
"There is no money left for treats," Stepanova said. "Of course, you can live without them but life is less fun."
While many families across the world are grappling with price rises, the peculiarities of Russia's wartime economy have spurred high inflation for millions of Russian voters ahead of the 2024 election.
The family did not want to discuss politics, Ukraine or who was to blame for the price rises so it is not immediately clear just what longer-term impact the tougher conditions will have on voting in Russia.
Putin is expected to run in next year's election, a move that would keep him in power until at least 2030.
RUSSIAN ECONOMY
The West imposed what it called the toughest sanctions ever on Russia in an attempt to undermine its economy and force Putin to change course over Ukraine but he refused and has goaded the West for failing to stoke an economic crisis.
Russia, the world's biggest exporter of natural resources, has continued to sell its oil to world markets and the government has hiked military spending to a post-Soviet record while weapons production has soared - as have salaries for contracted soldiers willing to fight.
The International Monetary Fund forecasts Russian growth of 2.2% this year - faster than either the United States or the Euro area - though the Fund has lowered its forecast for 2024 growth to 1.1%.
When Putin came to power in 1999, Russia's nominal gross domestic product was just $210 billion after a decade of chaos and contraction but by 2013 it had grown into a $2.3 trillion economy. Last year, nominal GDP was $2.2 trillion.
Headline inflation was 11.9% last year in Russia and this year the forecast is 7.0-7.5% - while at least 15.7 million people live below the poverty line of 14,375 roubles ($157) per month, according to official statistics.
Igor Lipits, a Russian economist, said official Russian data on levels of poverty were poor - as was the overall picture for the Russian economy - despite often rosy announcements aimed at pleasing the Kremlin leadership.
"The real situation is bad," Lipits said, adding that he saw at minimum stagnation and a serious deterioration in economic health after the March presidential election. "A large part of the Russian population have very low wages."
He said around 20 million people could be in or on the verge of poverty in Russia, that many were in debt amid Central Bank interest rates of 15%, and that some economists thought the rouble could fall after the election.
At a food market in the former imperial capital of St Petersburg, Lyudmila said she and her friends had sought to cut down and search for discounts. She declined to give her second name.
"What option do we have? Of course we won't die and we won't cry - we will try to survive somehow."
The number of Americans filing new claims for unemployment benefits increased more than expected last week, suggesting that labor market conditions continued to ease, which could help the Federal Reserve's fight against inflation.
Initial claims for state unemployment benefits rose 13,000 to a seasonally adjusted 231,000 for the week ended Nov. 11, the Labor Department said on Thursday. Economists polled by Reuters had forecast 220,000 claims for the latest week.
The labor market is cooling as higher interest rates curb demand. Job growth slowed in October and the unemployment rate climbed to 3.9%, the highest level since January 2022. With 1.5 job openings per unemployed person in September, conditions remain fairly tight.
Economists at Goldman Sachs said they did not believe that last month's increase in the jobless rate was a bad omen, noting that the rise in the unemployment rate since April has come entirely from an expansion in the size of the labor force rather than a decline in employment.
Easing labor market conditions, together with subsiding inflation and cooling consumer spending, have bolstered expectations that the Fed's monetary policy tightening cycle is complete. Financial markets are even anticipating an interest rate cut next May, according to CME Group's FedWatch tool. Since March 2022, the Fed has hiked its policy rate by 525 basis points to the current 5.25%-5.50% range.
The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased from 32,000 to 1.865 million during the week ending Nov. 4, the claims report showed. The so-called continuing claims have increased since September.
Most economists have attributed the rise to difficulties adjusting the data for seasonal fluctuations rather than a material change in the labor market. They expect this to be ironed out when the government revises the data next spring.
"It is not a reason to expect a materially higher unemployment rate in the November monthly jobs report," said Lou Crandall, chief economist at Wrightson ICAP in New York.
While some agreed that the seasonal adjustment was an issue, they also viewed the sustained increase as a sign that more unemployed people were experiencing longer spells of joblessness.
President Biden has been touting his economic record in the buildup to the 2024 presidential election, taking a term used to denigrate his economic policies by more conservative columnists—Bidenomics—and turning it into a slogan that may end up defining his campaign.
But Ken Griffin, the billionaire founder of the hedge fund and financial services giant Citadel, isn’t buying the Bidenomics campaign strategy. “I mean, whoever told him to run on Bidenomics has no idea how to read an economics textbook,” the Wall Street titan told Bloomberg at the Global Macro Conference in Miami Tuesday.
Griffin, who gave a total of $60 million to Republican campaigns in the 2022 election cycle, including to Florida Gov. Ron DeSantis’ successful reelection campaign, noted that consumer prices have increased almost 20% since Biden took office, but real wage growth has been stagnant. At the same time, the national deficit has increased to $1.7 trillion this year, while the national debt now sits at a record $33.7 trillion. “The American public knows things aren’t working in this economy for them,” he said.
But while many average Americans have struggled under the Biden presidency, Griffin’s own wealth has soared. In 2020, when Biden was elected, Griffin was worth $15.5 billion, according to the Bloomberg Billionaires Index. Today, he’s worth $36 billion.
Investing in the future? Or spending recklessly?
Griffin’s Bidenomics critique hits at the heart of the debate between many economists and average Americans over the health of the economy. The economists note that, according to most figures, the economy is doing pretty well. Despite the challenging headwinds of the pandemic as well as multiple wars in the Middle East and Europe, GDP continues to grow, inflation is fading, and real wage growth has returned in recent months.
But the average American disagrees—big time. Years of spiraling prices, rising interest rates, deteriorating housing affordability, and brewing geopolitical conflict abroad have left many Americans feeling uncertain and left behind—a fact reflected in the dismal consumer confidence numbers and in Biden’s unpopularity in polls.
Biden has attempted to reassure voters, routinely highlighting the U.S.’s rapid recovery from COVID-19 relative to other developed nations and the strength of the labor market as key feats of his administration. “We’re living through one of the greatest job-creation periods in our history. And, folks, it’s not an accident,” he said in September. “That literally is our economic plan in action—Bidenomics in action.”
The passage of ambitious spending programs exemplifies the Biden administration’s strategy of investing in growth and labor—at any cost. But that cost, some critics say, is substantial national debt, which fuels inflation down the line.
Last year, Congress passed Biden’s $280 billion CHIPS and Science Act—meant to boost domestic research and manufacturing of critical semiconductors. That followed the prior year’s $1.2 trillion Infrastructure Investment and Jobs Act—meant to revitalize America’s roads, bridges, and railways, as well as improve broadband access, overhaul the electric grid, and create a national supercharging network for electric vehicles. The laws have become cornerstones of Biden’s presidential record, intended to reverse what he calls decades of under-investment in U.S. infrastructure and manufacturing capability.
But despite these long-term investments, most Americans aren’t sold on the economy’s immediate future. Almost 70% of Americans believe the economy is getting worse, and roughly 60% disapprove of Biden’s handling of it, according to a recent poll from the Suffolk University Sawyer Business School/USA Today.
It’s not just consumers who are pessimistic about the economy, Griffin said, noting that Wall Street isn’t too happy, either. “It’s working for no one,” he said. “This is the price of bad economic policies.”
A representative for Citadel declined to comment on Griffin’s take.
When it comes to the presidential election in 2024, the Citadel founder warned that “people are going to vote with their pocketbook,” which means Biden needs to focus on policies that will control inflation and increase real wages. That’s a tall order, though, since the main tool to fight inflation—the Federal Reserve’s interest rate hikes—works by raising borrowing costs and inflicting pain on consumers.
If people do end up voting with their pocketbook, the stock market’s recent surge is likely to help Biden’s case. With inflation fading and the prospect of the end of the Fed’s 20-month-long interest rate hiking campaign coming into view, the S&P 500 has surged over 17% year-to-date. But for now, despite the stocks’ surge, most polls still show Bidenomics is out of favor.
A November Bankrate survey found that 3 in 4 Americans believe their personal finances are either worse off or about the same since Biden took office.
“The plight of the economy over the next 12 months may help to dictate whether it was wise, or not, for President Biden to trumpet the branding of ‘Bidenomics’,” Bankrate senior economic analyst Mark Hamrick said of the data. “The risk for President Biden is that he’ll get more blame than credit for the economy. But there’s still a long way to go before Election Day.”