Charting the global economy: Inflation pressure cools in US, Europe

By Molly Smith and Vince Golle

Inflation cooled in the US and Europe, setting the stage for policymakers in both regions to lower interest rates in September.

On a three-month annualized basis, the Federal Reserve’s preferred measure of underlying US inflation advanced 1.7 per cent in July, the slowest this year. In Europe, consumer prices rose 2.2 per cent in August from a year ago — the tamest since mid-2021 and significantly lower than the 2.6 per cent pace a month earlier.

Meantime, inflation in Tokyo — a leading indicator of the national data due in September — picked up speed in August, supporting the case for the Bank of Japan to continue raising rates at a gradual pace as the bank balances the need to support the economy.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

US

The Fed’s preferred measure of underlying US inflation rose at a mild pace and household spending picked up in July, reinforcing policymakers’ plan to start cutting interest rates next month. However, more sluggish income growth and a decline in the saving rate may raise questions about the durability of consumer spending going forward.

From LA to Chicago and Boston, aging business districts are contending with empty offices and a slow return of workers, while neighborhoods just miles or even blocks away are faring better — or even thriving. Such disparities are unfolding across the US, exposing deep divides in the commercial real estate market and the recovery of cities after the pandemic.

Americans are seeking to change their insurance coverage more frequently than in the past, after a surge in premiums that’s squeezed household budgets, a new industry report shows. While the overall cost of living has climbed some 20 per cent since the start of the pandemic in 2020, auto insurance bills have jumped by almost 50 per cent. 

Europe

The positive inflation news will help sustain the upbeat mood evident at the Federal Reserve’s annual Jackson Hole gathering last week, with Chair Jerome Powell joining ECB and the Bank of England officials in firmly signaling that rates are headed down.

UK house prices fell unexpectedly in August, a sign affordability remained stretched even after the Bank of England eased borrowing costs, according to one of the top mortgage lenders.

Asia

Consumer prices excluding fresh food rose 2.4 per cent in the capital, an acceleration from 2.2 per cent growth in July, the Ministry of Internal Affairs reported. After the BOJ’s July 31 interest-rate hike, Governor Kazuo Ueda indicated his intention to raise the benchmark rate again if price trends develop in line with the bank’s projections. 

China is asking domestic traders to buy less foreign grains as ample supplies and weaker-than-expected demand weigh on prices and threaten its longstanding policy to support local growers. China is the world’s biggest buyer of barley and sorghum, and any sustained curbs on imports would deal a blow to farmers in top exporters such as Australia and the US.

China’s stock of mortgages contracted to the lowest level in nearly three years, underscoring weak confidence in the property sector that’s weighing on growth. The data comes as officials are considering allowing homeowners to renegotiate terms of their mortgages with their lenders or refinance with a different bank, Bloomberg News reported.

Emerging Markets

Missteps and inaction from governments, health agencies and the funders of scientific research have created the perfect environment for the mpox virus to mutate into a strain that is spreading more easily between humans. Despite the availability of an effective vaccine — which costs about $100 a shot — and countries like the US having stockpiled millions of doses, Congo has yet to receive any.

Zambia’s annual inflation rate rose to a 32-month high in August as an El Niño-induced drought continued to wreak havoc on food prices.The dry spell has complicated efforts by the central bank to return inflation to its 6 per cent to 8 per cent target band by next year and meant that it’s had to keep its key interest rate higher for longer.

World

Hungary kept the key interest rate unchanged for the first time in more than a year, while Guatemala and Kazakhstan also held. Israel’s central bank kept its benchmark interest rate at 4.5 per cent, and said it’s likely to refrain from cuts for the rest of the year as the war in Gaza continues. Dominican Republic cut.