Charting Economic Waters: A Closer Look at Inflation Relief in the US and UK

Charting Economic Waters: A Closer Look at Inflation Relief in the US and UK

Bloomberg: Inflation has shown signs of easing in both the US and the UK, leading to speculation that central banks on both sides of the Atlantic may consider cutting interest rates by the middle of the coming year.

Meanwhile, there are positive indicators for growth across Europe, although the recovery in the European Union’s eastern countries remains delicate. Economic rebounds in China and Japan are also uncertain due to factors like slowing consumption.

Below are some charts featured on Bloomberg this week, highlighting the latest developments in the global economy:

 

United States (US):

In October, inflation in the US slowed, a development welcomed by the markets as a strong signal that the Federal Reserve might conclude its interest rate hikes. Traders adjusted their expectations, anticipating the first rate cut by the Fed in the first half of the next year.

Discussion surrounds a perceived divide in the US housing market, with new buyers grappling with 8% mortgage rates while existing homeowners continue to benefit from loans under 3%. Notably, a third group emerges – a growing number of Americans who fully own their homes, reaching a record just shy of 40%.

In the past 11 meetings of the Fed’s Open Market Committee, there has been unanimous agreement on actions led by Chair Jerome Powell. This prolonged period of unity conceals underlying differences and uncertainty regarding monetary policy and the economic direction.

 

Europe:

UK inflation has reached its lowest point in two years, strengthening expectations that the Bank of England might cut rates as early as the middle of the next year.

Forecasts from the European Union indicate that the euro area and its major economies will escape a recession as growth is anticipated to return by the end of the year. Factors contributing to this include slowing inflation and a robust job market. Even Germany, which faced challenges amid a manufacturing slump, is predicted to avoid a recession.

The larger economies in the EU’s eastern region are experiencing a fragile rebound as easing inflation encourages consumer spending. However, challenges persist, with inflation slowly diminishing in the coming months and manufacturing impacted by falling demand in the euro area.

 

Asia:

Japan’s economy experienced a contraction over the summer, highlighting the fragility of the country’s recovery. This reinforces the case for continued support from the Bank of Japan and the government. The third-quarter GDP declined at a 2.1% annual rate, primarily due to falling business spending, a lack of recovery in consumer spending, and higher imports.

China’s consumption rebound slowed in October, and private business confidence showed a loss of momentum, indicating a potentially uneven economic recovery.

India’s trade deficit widened to a record last month as imports surged, driven by strong consumer spending ahead of the festival season. A 12.3% increase in inbound shipments to a new high of $65.03 billion was observed, with demand rising for various items, including gold, electronic goods, and crude oil before Diwali – the Hindu festival of lights.

 

Emerging Markets:

Consumer prices in Argentina recorded their fastest rise in more than three decades as the country grapples with economic challenges ahead of the presidential election.

 

Global:

The enduring rivalry between the US and China seems set to persist, with numerous grievances and unresolved disagreements, ranging from the future of Taiwan to fundamental rules of fair economic competition.