Charting the Global Economy: Inflation Ebbs in US, France, Spain

Molly Smith and Vince Golle
·5-min read

(Bloomberg) -- Inflation cooled in the US as well as several European countries in recent readings, offering encouraging signs that central banks in the regions can lower interest rates.

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The Federal Reserve’s preferred measure of underlying US inflation increased 0.1% in May, the smallest advance in six months. Consumer prices in France — the euro area’s second-largest economy — slowed a bit in June, while inflation retreated in Spain as well.

It was a different story in Asia, where inflation quickened in Tokyo — a leading indicator of the national data to be released in July — as well as in Australia, which may prompt those policymakers to raise rates.

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 so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.1% from the prior month. That marked the smallest advance in six months. Inflation-adjusted consumer spending posted a solid advance after a pullback in April, driven by goods and fueled in part by a jump in incomes.

The inventory of new US homes stands at the highest since the bursting of the housing bubble more than a decade ago, raising the risk that builders will dial back production in a market longing for cheaper borrowing costs. Nearly 100,000 of those have already been completed and are still awaiting a buyer, the most in more than 14 years.

Of all the battleground states in the US presidential election, none is a greater puzzle for Joe Biden and Donald Trump than Nevada. That’s because the state – with its relatively sparse population and high proportion of Spanish-speaking residents – is unusually difficult to poll.

Europe

French inflation slowed a little — reinforcing the European Central Bank’s decision to begin cutting record-high interest rates and offering an economic bright spot for President Emmanuel Macron two days before elections. A separate release showed inflation in retreat in Spain as well. In Italy, inflation ticked up but remained below 1%.

The Riksbank kept borrowing costs unchanged and said it expects to resume easing again with as many as three cuts in the second half of the year. The Swedish central bank, which held its interest rate at 3.75%, said that consumer-price growth is turning out largely as it anticipated, allowing for further reductions in the benchmark in due course.

Asia

Inflation in Tokyo picked up in June on the back of higher energy prices and industrial output rose more than expected in May, likely keeping the Bank of Japan on track to consider an interest-rate hike as early as July. The weak yen helped underpin price growth in June, and it’s stayed under pressire, trading around 160.60 to the dollar Friday morning in Tokyo.

Australia’s inflation accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting. The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35%.

China’s fiscal revenue shrank at the fastest pace in more than a year, fueling expectations that the government could make another rare mid-year budget revision to aid an economic recovery. The government’s budget has been under strain as slowing economic growth weighed on tax income, while a multiyear property market downturn slashed its income from land sales.

Emerging Markets

Prime Minister Narendra Modi’s government is considering consumption-boosting measures worth more than 500 billion rupees ($6 billion) in India’s upcoming budget, including tax cuts for lower income individuals for the first time in seven years, according to people familiar with the matter.

Confidence among South Africa’s agricultural businesses fell to the lowest level in almost 15 years as an El Niño-induced drought affected grain crops. The drought coincided with other long-standing challenges, such as inadequate road infrastructure and municipal service delivery. Lingering animal disease challenges and heightened geopolitical tensions are also the concerns for the sector, according to the business chamber.

Pakistan is set to launch a security operation to contain a surge in terrorist attacks that have targeted China’s infrastructure projects and its citizens as Islamabad seeks to bolster economic ties with Beijing. The two governments are looking to revive projects on the China Pakistan Economic Corridor, an infrastructure network of roads, railways and ports under the Belt and Road initiative.

World

Sweden, Guatemala, the Philippines, Turkey and Mexico held. The Czech central bank signaled it’s likely to slow or may even halt rapid monetary easing as officials aim to prevent inflation from staging a comeback. Morocco cut rates for the first time in four years. Colombia also lowered borrowing costs.

Exxon Mobil Corp. took the first step toward its seventh oil project in Guyana, a clear signal the supermajor intends to expand crude output from the South American nation into the next decade.

--With assistance from Ruchi Bhatia, Kevin Crowley, Ismail Dilawar, Kamran Haider, William Horobin, John Liu, Gregory Korte, Swati Pandey, Niclas Rolander, Augusta Saraiva, Michael Sasso, Zoe Schneeweiss, Rene Vollgraaff, Fran Wang and Erica Yokoyama.

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