Charting the Global Economy: US Soft Landing Case Grows Stronger

Charting the Global Economy: US Soft Landing Case Grows Stronger

The rate of price increases in the US slowed down while the employment situation remained strong, supporting the argument that the Federal Reserve can successfully achieve an economic stabilization without causing any abrupt disruptions.

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The inflation measure that the central bank favors showed the least consecutive rises since the end of 2020, prompting an increase in consumer spending. Another report indicated that employers added more jobs than predicted in August, although there was a decrease in wage growth.

Meanwhile, the deceleration of inflation in the Eurozone came to a halt in the previous month, surprising analysts who had anticipated a decrease in price pressures. Conversely, inflation in Zambia picked up pace and reached its highest level since April 2022.

Here are a few of the graphs that were featured on Bloomberg this week regarding the most recent advancements in the worldwide economy.

The primary index that measures personal consumption expenses, excluding the unpredictable food and energy elements, increased by 0.2% in July for a consecutive month. The restrained numbers for inflation highlight the advancements that the Federal Reserve has achieved in the last year in controlling rising prices.

The most recent employment information revealed that the job market is experiencing a regulated decrease in activity, characterized by strong recruitment, slower wage increase, and an increasing number of individuals rejoining the workforce. During August, businesses included 187,000 jobs in a widespread progress, which followed a downward modification to the number of employees in the previous two months.

In August, the decrease in inflation in the Eurozone came to a halt, creating a dilemma for officials at the European Central Bank. They need to consider whether the ongoing pressure is too significant to take a break from raising interest rates. Consumer prices increased by 5.3% compared to the same period last year, which exceeds policymakers' target by more than 2.5 times.

The growth of Britain's overall money supply has come to a halt for the first time in over a decade. This development has sparked worry among monetarists who are calling on the Bank of England to exercise caution in its efforts to combat inflation.

German companies are progressively restraining their investments and considering shifting their production overseas due to exorbitant energy costs domestically. More than half of the companies that participated in the survey claim that the energy transition is adversely impacting their ability to compete, with some stating that the effects are particularly detrimental.

The decline in manufacturing in China improved slightly in August, and there was an improvement in the number of new orders, which gives some optimism that the worst part of the sector's decline might be coming to an end. However, the PMI figures also showed concerning signs outside of manufacturing, indicating that the economy's recovery is still being negatively affected by the property market decline and low consumer spending.

India's economy performed well in its recent evaluation, with strong growth in the services sector and a moderate improvement in manufacturing, despite the presence of relatively high interest rates. The consistent growth in the third largest economy in Asia provides an opportunity for financial authorities to combat inflation before various state elections take place later this year.

Mexico's economic growth in the second quarter was marginally slower than initially projected, despite the country reaping the advantages of its strong trade relations with the US and a solid job market.

In August, Zambia experienced a significant rise in inflation, reaching its highest level in 16 months. This happened shortly after the country's central bank raised its benchmark interest rate for the third consecutive time. The purpose of this measure was to address the growing concerns about increasing prices, which are expected to continue causing economic pressure until the first half of 2025.

China's economy was expected to contribute to one-third of the world's economic growth this year. However, its significant decline in the past few months is causing concern globally. The impact of this slowdown is particularly felt by Asian economies and African countries, which are experiencing a substantial decrease in their trade.

According to data from the US Department of Agriculture, Brazil will have a slightly higher share of global corn exports in the 2023 harvest season, approximately 32%, while the US will only account for around 23%. This decline and loss of competitive edge for the US is certainly disappointing, especially considering their historic influence in using food as a tool in geopolitics.

In an attempt to alleviate the longest recession experienced by Hungary since 1995, policymakers have recently reduced the highest key interest rate in the European Union by a complete percentage point. Likewise, the Dominican Republic has also decided to lower its overnight rate.

Assisted by a team consisting of Maya Averbuch, Ruchi Bhatia, Dominic Carey, Tania Chen, James Hirai, Michael Hirtzer, John Liu, James Mayger, Taonga Mitimingi, Reade Pickert, Jana Randow, Tom Rees, Anup Roy, Augusta Saraiva, Zoe Schneeweiss, Petra Sorge, Fran Wang, and Alexander Weber.

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