TIME Economy

Avian Flu Outbreak Nearly Doubles Egg Prices

healthiest foods, health food, diet, nutrition, time.com stock, eggs, breakfast, dairy
Photograph by Danny Kim for TIME; Gif by Mia Tramz for TIME

The price jump marks the largest increase recorded since the government began tracking producer costs in 1937

(WASHINGTON) — Prices for the producers of goods and services rose modestly in June, a sign that broader inflation is being kept in check. But an outbreak of avian influenza caused the cost of eggs to nearly double, as prices soared at the fastest pace ever recorded.

The Labor Department said Wednesday that its producer price index increased 0.4 percent in June. Inflation remains tame as producer prices have fallen 0.7 percent over the past 12 months due to lower oil and gasoline costs. Wholesale gas prices rose 4.3 percent last month but are down 30.3 percent from a year ago.

Chicken egg prices jumped 84.5 percent last month, the largest increase recorded since the government began tracking producer costs in 1937. More than 49 million chickens and turkeys died or were euthanized in 15 states this spring as the flu virus spread from the Pacific Northwest into Midwest farms.

Core prices, which exclude energy and food, rose 0.3 percent in June.

Relatively cheap oil has limited inflation across much of the U.S. economy. The cost of Brent crude oil in the markets barely budged for much of June, after climbing at the start of May to nearly $68 a barrel.

Gasoline prices have stayed relatively flat so far in July, dropping to a national average of $2.78 a gallon from $2.80 a month ago, according to AAA. Average retail gas prices have fallen nearly 23 percent over the past 12 months.

Federal Reserve officials are monitoring measures of inflation as they weigh whether to raise a key short-term interest rate. They have kept the federal funds rate at a record low near zero for more than six years, making it cheaper to borrow, spend and invest in ways that aid economic growth.

Fed officials have said they want to be “reasonably confident” that inflation is headed toward their 2 percent target, which would signal a stronger economy.

The Fed will meet for two days starting July 28 to consider interest rates. Still, most private economists believe that September will be the earliest that they will hike rates.

Analysts say the Fed wants assurance that the economy is strong enough to raise rates without disrupting growth. But even once the Fed starts raising rates, Fed Chair Janet Yellen and other officials have said that any increases will be gradual.

MONEY iPhone

The iPhone 6 Costs $47,000 In This Country

iphone-6-venezuela-inflation
Justin Sullivan—Getty Images

And smartphone theft is on the rise.

Punishing inflation and extremely limited supply have made smartphones extraordinarily rare and expensive in Venezuela, Bloomberg reports.

Only two or three stores in the capital city of Caracas even stock high-end phones because vendors must go through the government to acquire inventory. Meanwhile, the country is suffering from a severe shortage of U.S. dollars—partly because of a drop in the price of crude oil, the country’s main export—and an annual inflation rate in the triple digits.

As a result, smartphone prices have risen even faster than the cost of food and basic necessities. A brand new iPhone 6 on a local Venezuelan e-commerce site costs about 300,000 bolivars—or about $47,250, according to the official exchange rate—while a less sophisticated Samsung model might cost about $3,000.

Because of the limited supply, most Venezuelans who can afford a smartphone are forced to settle for cheaper Chinese models.

Unsurprisingly, thieves are increasingly targeting smartphone users, with hundreds of phone thefts in Chacao reported this past spring.

Read next: The Most Amazing Thing About Apple? It Still Looks Cheap

TIME hyperinflation

Hey, Can You Spare 35 Quadrillion? Zimbabwe’s Crazy Exchange Rate

Here’s what hyperinflation can do to your money

You may not be a fan of the economic policy coming out of gridlocked Washington, but at least we’re not Zimbabwe!

For the past twenty years, the African nation has been under the spell of rampant hyperinflation, which was brought on by a combination of factors.

First, severe droughts hit the country’s agricultural sector hard, and then forced reallocation of land gave control of that sector from experienced operators of large farms to inexperienced subsistence farmers, further dragging down output. Finally, the government continued to print and spend money on things such as pension payments for civil war veterans, and to fund the country’s involvement in the neighboring Congo’s civil war.

These moves plunged Zimbabwe into an economic crisis leading to hyperinflation, which at its height ran at an estimated 8.8 million percent per year.

Now the country has decided to pull the plug on its virtually worthless currency altogether, with the central bank announcing Thursday that it would let citizens exchange its currency for dollars at a rate of 35 quadrillion to $1, according to a report in Reuters.

Zimbabweans hope that this move will finally put an end to its monetary woes, which at one point got so bad that the government was printing 100 trillion dollar bills that couldn’t even cover the cost of a week’s worth of public bus fares.

MONEY The Economy

What’s Inflation?

What's inflation? How is it calculated? And how does it affect your life? Money's Pat Regnier has the answers.

In this Money 101 Explainer, editor Pat Regnier walks through how inflation, the rate of change in the prices you pay for everything in your life, is calculated. He also explains why you might feel that inflation is worse than the government tells you it is, and why a big jump in housing prices might not be a sign of inflation. Also covered are how taxes and Social Security benefits can be linked to inflation, and why the Federal Reserve pays close attention to it.

TIME Economics

El Nino Could Cause Serious Trouble Across Asia

Aerial view of a flooded area in Trinida
Aizar Ralder—AFP/Getty Images Aerial view of a flooded area in Trinidad, Beni, Bolivia on Feb. 24, 2007. Authorities say two months of rain and floods left 35 people dead, 10 unaccounted for, and affected hundreds of thousands of people. The disaster, blamed on the "El Nino" weather phenomenon, also has caused millions of dollars in material losses.

Bad weather on the horizon

You may recall a time in the mid-1990s when American citizens were worried about El Niño, the tropical weather pattern that can cause global changes in temperature and rainfall. Now, according to a new Citigroup report, the next group to pin concerns to El Niño may be bankers.

The report, produced by Citi analysts Johanna Chua and Siddharth Mathur, suggests that the current El Niño (the weather anomaly takes places at unpredictable times, sometimes more than five years apart) could have a deleterious effect on economies in countries in and around Asia.

India, Thailand, The Philippines, and others, where agriculture contributes a major percentage of GDP, might see inflation in food prices, since a severe El Niño can brings dry spells and cause crop damage. In Indonesia, for example, the agriculture sector makes up more than 50% of overall employment.

In economies dependent on farming, long-lasting weather that upends crops will naturally impact farming output, and thus commodity pricing.

With these countries especially vulnerable to economic disruption, it may be more bad news that recent reports indicate we are about to see a particularly violent El Niño.

MONEY Social Security

Your 2016 Social Security Increase Will Probably Disappear

cloud of smoke
Jeremy Hudson—Getty Images

Inflation rates are still too low.

Social Security supports millions of Americans in their retirement, and many of them depend on the program for the vast majority of their overall income. Yet even though retirees have had to make do with minimal cost-of-living increases in their benefits in recent years, early signs suggest the Social Security increase for 2016 could be smaller still — or even disappear entirely.

What goes into calculating your Social Security increase for 2016
Like many of the numbers the government works with, the Social Security Administration indexes benefits to the rate of inflation. New payment rates take effect every January for retirees and other Social Security recipients.

You don’t have to wait that long, however, to determine the number. Specifically, the SSA takes an average from the Consumer Price Index for July, August, and September. It then compares that average to the number from the previous year. The resulting percentage increase corresponds to the amount by which Social Security benefits are adjusted upward to reflect rising costs of living.

Obviously, inflation figures for the summer months are still a long way away. But if you look at April’s CPI figures, you’ll notice the index’s current level is well over a full percentage point below the three-month average from 2014. This means that even if inflation rises at a more typical rate between now and September, it’s unlikely to rise enough to catch up with the drop in the index over the past six months. As a result, the cost of living adjustment could evaporate, leaving Social Security recipients getting exactly the same amount in 2016 that they received this year.

A history of low COLAs
Unfortunately, retirees have had to struggle with small cost of living adjustments for several years. The rise for 2015 was 1.7%, following an increase of 1.5% in 2014 and 1.7% in 2013. Only in 2012 did Social Security recipients collect what seemed like a sizable bump in their monthly checks, a cost of living adjustment amounting to 3.6%.

Even if Social Security recipients don’t get any increase in 2016, it wouldn’t be an unprecedented event for the program. In both 2010 and 2011, the SSA made no changes to overall benefit payments, as dramatic declines in prices kept the inflation rate negative during both years.

Indeed, some retirees’ monthly checks might decline in 2016 if prices keep up this behavior. Many Social Security recipients have Medicare premiums taken out of their monthly payments, and if those premiums rise, it could result in smaller net amounts being paid to retirees. Many retirees faced this situation in 2010 and 2011.

Be ready for no Social Security increase in 2016
The only silver lining in a year in which Social Security doesn’t pay a COLA is that low inflation should — at least theoretically — be good for retirees. If price levels stay constant, then your money will keep going as far as it did in past years. That can make it easier to make ends meet on a fixed budget.

Many retirees, though, are convinced that the inflation figures on which Social Security cost of living adjustments are based don’t reflect their actual expenses. With a different set of priorities than typical American adults, retirees can experience personal inflation rates far in excess of what government figures state.

Nevertheless, without full-blown Social Security reform, recipients are likely to endure an even more painful year of flat benefits than they have faced in recent years. Unless trends such as cheaper gas prices reverse themselves quickly, retirees will have to get used to the idea that their monthly Social Security benefits aren’t likely to rise until 2017 at the earliest.

TIME India

This Country Looks Like It Will Grow Faster Than China This Year

A worker at a company processing steel in Khopoli, India, in 2014.
Bloomberg/Getty Images A worker at a company processing steel in Khopoli, India, in 2014.

By almost a full percentage point

India’s economic growth may surpass China’s much sooner than initially expected, with the International Monetary Fund (IMF) forecasting earlier this week that Delhi will take the lead in 2015.

The IMF’s World Economic Outlook, released Tuesday, indicates that India’s growth rate will rise to 7.5% this year, while China’s is expected to drop to 6.8% from 7.4% last year.

India’s growth will “benefit from recent policy reforms” under new Prime Minister Narendra Modi, the report says, with the resulting rise in investment and reduction in oil prices. “Lower oil prices will raise real disposable incomes, particularly among poorer households, and help drive down inflation,” it predicts.

The IMF forecast was substantiated by a Monday report from research firm Capital Economics, which said consumer price inflation dropped unexpectedly in March and raised the possibility of a third unscheduled cut in interest rates this year.

China’s declining growth over the past year has also been well documented, and Bloomberg reported Wednesday that Japan will soon overtake it as the United States’ largest overseas creditor.

With the World Bank also predicting that India’s growth rate will hit 8% by 2017, it looks like the upward economic trajectory anticipated by many when Modi came to power could have begun.

Read next: What I Learned in India About Financial Advice

Listen to the most important stories of the day.

MONEY inflation

What Today’s Inflation Report Means for Fed Rate Hikes

150324_INV_LowInflation
Getty Images—(c) Brand New Images

While slightly improved, inflation remains below the Fed's target. What does that mean for interest rates?

U.S. consumer prices rebounded slightly from last month’s precipitous drop-off, while prices were flat over the past 12 months.

The Consumer Price Index increased 0.2% last month as oil stopped its dramatic fall, and was unchanged compared to this time last year, according the the Labor Department. So-called core inflation, which strips out volatile energy and food prices, rose by 1.7%, still well below the Federal Reserve’s 2% target.

Prices had fallen the three previous months.

While firmer than previous months, these low inflation rates come at a critical time for the Federal Reserve.

Investors have received mixed messages from central bank officials and economic data recently. For months, the Fed had reassured Wall Street that it would be patient when it comes to removing its accommodative monetary policy. Last week, though, the Fed dropped the word “patient” from its statement, implying that interest rates could rise soon—perhaps as early as June.

Yet in the same breath, the Fed lowered its growth and inflation expectations in the near term and signaled that even if rates are lifted soon, they won’t climb as rapidly as previously thought. That caused the stock market to soar.

“Just because we removed the word ‘patient’ from the statement doesn’t mean we are going to be impatient,” Yellen said in a press conference after the statement was released. “Moreover, even after the initial increase in the target funds rate, our policy is likely to remain highly accommodative to support continued progress toward our objectives of maximum employment and 2% inflation.”

Fed Vice Chair Stanley Fischer said yesterday that rates would likely rise this year. The federal funds rate, Fischer said, will be determined by economic conditions, rather than by a predictable path.

Competing economic indicators and measurements are complicating the Fed’s dual-mandate of price stability and maximum employment. Employers hired nearly 300,000 workers last month, and the unemployment rate dipped to a post-recession low of 5.5%.

Yet wages aren’t growing strongly and the strong dollar, while a boon for U.S. tourists traveling abroad, has made U.S. exporters less competitive globally. Low oil prices save hundreds, if not thousands, of dollars for drivers annually, but have weighed heavily on the bottom line of energy companies.

The Fed seems to be inclined to raise rates given the improving labor market, but has been hamstrung by a lack of meaningful inflation and consistent wage acceleration. By increasing the cost of borrowing, the Fed runs the risk of slowing down economic activity in the midst of a burgeoning recovery. Will interest rates really rise before economists can see the whites of inflation’s eyes?

MONEY interest rates

Higher Interest Rates Are Coming. Here’s Who Wins and Who Loses

150319_INV_InterestRates
Getty Images

The Fed says rate hikes will be gradual, but they'll affect everything in the economy, from your mortgage to your job to your 401(k).

Federal Reserve chair Janet Yellen has signaled, by omitting the word “patient” from her latest statement, that the central bank could begin raising interest rates as early as this summer. On Monday, Stanley Fischer also suggested in a speech that rate hikes are likely before the end of the year.

The rise is likely to be slow and bumpy. Still, the Federal Reserve’s benchmark short-term interest rate has been near zero since the financial crisis in 2008, and it’s been a long time since investors, borrowers and consumers have dealt with a rising-rate environment. The Fed’s decision to move rates in the other direction, when it comes, is something you’re sure to feel in your wallet.

So here’s a primer on who is helped and who is hurt when the Fed makes borrowing more expensive.

Helped: Anyone looking a safe place to stash money

Savings and money market accounts today offer an average interest rate of only 0.44%, according to Bankrate, but the good news for savers is that rising interest rates should buoy yields across the board. One caution is that if the Fed moves slowly, that means the interest earned on your accounts probably won’t bump up very quickly either. So if saving more this year is a big priority for you, take matters into your own hands with these moves, geared toward powering up your savings.

Hurt: New borrowers, and anyone with an adjustable loan

Rising interest rates push up borrowing costs for home and auto loans. If you already locked in a 30-year mortgage at the ultra-low rates that have prevailed over the past several years, you were probably smart. According to Freddie Mac, 30-year mortgage rates are 3.7% on average today, compared with nearly 6% a decade ago.

But the millions of Americans who hold adjustable-rate mortgages could end up paying more. Mortgages are typically pegged to the 10-year Treasury bill. While the Federal Reserve doesn’t control this rate directly, long-term rates typically rise in response to the short-term rates the central bank sets. The good news? Since Treasuries are a safe haven for global investors, yields are generally being held down by high demand—which rises every time there’s bad news in, for example, Europe. So mortgage rates might rise comparatively slowly even after the Fed takes action.

Not so clear: Anyone looking for a job or a raise

One of the Federal Reserve’s mandates is is to maintain full employment. When unemployment rises, it can try to stimulate growth by cutting rates. The idea is that cheaper borrowing makes it easier for consumers to spend and for businesses to expand and hire new workers. The flipside is that higher interest rates and tighter money supply can make hiring less likely. That’s one of the reasons the Fed has been so hesitant to raise rates in recent years, and there’s a risk that a too-early rate hike will cut off job growth.

Of course, keeping interest rates low for too long can come with its own danger: inflation. If there’s no “slack” left in the labor market—meaning that basically everyone who wants to work and can work already has a job—the easy availability of money will stop creating jobs and instead show up in the economy as higher prices. Ideally, the Fed would wait to raise rates until the precise moment when employment tops out and before inflation takes off. But where exactly that point is can be a contentious issue. At the moment inflation is very low and wages have yet to take off (suggesting some slack is left.) But a series of strong jobs reports seems to have some on the Fed wanting to get ahead of the curve.

Hurt: Owners of bonds and bond funds

You likely have a portion of your money, in a retirement portfolio such as a 401(k), invested in bonds.

Rising interest rates mean falling bond prices. Bonds typically pay a fixed coupon, so when prevailing rates rise, the value of your bond portfolio falls until its yield matches what’s available elsewhere on the market. The size of your losses depend on how steeply rates rise and the maturity, yield and other characteristics of the bonds you own. Wall Street sums up a bond’s interest rate sensitive with a figure called duration. You can look a bond fund’s average portfolio duration at sites like Morningstar. In general, duration tells you how large a capital loss you can expect for each 1% increase in rates. So Vanguard Total Bond Fund, with an average duration of 5.6, would fall about 5.6% with a 1% increase in rates.

There’s good news though: If you own a bond fund, the decline in your fund’s value will be made up with higher payouts as your fund acquires new bonds with higher yields. You’re likely to be made whole in a few years. Future bond investors benefit, too.

Not so clear: Stock investors

Whether rising interest rates will help or hurt U.S. stocks is a more complicated question.

All else being equal, a hike should hurt. One big reason is many investors choose whether to put money into either stocks or bonds, as bond yields pay more stocks become comparatively less attractive. But there are lots of other things to consider. For instance, stocks typically reflect investors’ attitudes about the overall health of the economy. And the if the Fed is signaling that it might raise rates, then it also thinks the economy is healthy enough to handle it. Other investors might view this as a bullish signal.

What does history say? The record is mixed. Stock researcher S&P Capital IQ recently examined 16 previous rate tightening cycles since World War II and found that the Fed’s moves led to stock market declines of 5% or more about four-fifths of the time. However, a separate study by T. Rowe Price looked at the question slightly differently: T. Rowe examined nine instances since 1954 that the Fed has raised rates following a recession. It found an average market gain of 14% a year later. In other words, it’s hard to know exactly how the market will react—except to say that it could be bumpy ride.

Helped: Banks

Banks make money by borrowing at low short-term interest rates (think checking and savings deposits) and lending it out at higher, longer-term rates. In an ideal world, they’d love short-term rates to remain at rock bottom, as long as longer term rates are high too. So you might not think they’d be cheering for a short-term interest rate increase.

Their problem has been that long-term rates aren’t high, but low. Meanwhile short-term interest rates can’t really go below the zero they’re stuck at. That’s left them little room in the middle. A rate hike will could give banks a window of opportunity to earn more attractive “spreads” once the Fed moves.

Helped: Anyone looking to spend U.S. dollars abroad

When interest rates rise, it pushes the value of U.S. currency up. That’s good for American consumers who want to buy foreign goods (and go on European vacations) cheaply.

Hurt: Anyone looking to sell things to foreigners.

But there are dangers in a too-strong dollar. If our currency is too strong, it means it willll be harder to sell U.S.-made products globally—which would be bad for economic growth.

Not so clear: Foreign stock funds

Most international-stock mutual funds hold assets denominated in other currencies, like the euro. The strong dollar means those assets they are worth less, all else being equal. (Some funds “hedge” their currency exposure.)

Over the past year, the MSCI All-Cap World EX-USA index is up 14.6% in local currency terms through Feb. 28. But according to Morningstar, the average foreign stock mutual fund—with roughly half its assets in Europe —has falled 0.06%.

On the other hand, the a strong buck isn’t all bad for foreign stocks. Companies in countries with weaker currencies will be able to export more goods to the U.S, boosting their earnings. And while it’s no fun to see your market winning vanish, investors are usually better off riding out such currency swings. When the dollar next weakens, your foreign stocks will have a tail wind.

One special case is emerging markets stocks. Razor-thin U.S. interest rates have been a boon for them, as U.S. investors, frustrated by dismal yields at home, have shifted money abroad. Once that changes, much of that money could rush back home.

Your browser is out of date. Please update your browser at http://update.microsoft.com