Charging the Global Economy: Stalls to the Growth of Rising US Energy Prices

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(Bloomberg) – Inflation in the US appears stubborn while consumer spending shows little sign of any slowdown, forming the basis for a cautious approach to interest rate cuts from the Federal Reserve.

Although inflation has slowed significantly over the past two years, the government’s October consumer price report underscored the challenge facing Fed officials: ensuring that their policy actions support the labor market while guarding against accelerating price pressures.

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Elsewhere, the European Commission sees a gradual strengthening of economic growth in the euro area next year. China’s trade surplus is on pace to hit a record this year, highlighting its continued reliance on imports to offset weak domestic demand.

Here are some charts from Bloomberg this week on the latest developments in the global economy, markets and world politics:

In the US

The so-called core consumer price index – which excludes food and energy costs – rose 0.3% in the third month. In the past three months it has increased by 3.6% annual rate, marking the fastest pace since April, according to Bloomberg data. Economists see the core gauge as a better indicator of inflation than the overall CPI.

Retail sales improved in October, boosted by a jump in auto purchases, while other categories showed some momentum heading into the holiday season. Categories were mixed, but upward revisions to September sales suggest buyers entered the final months of the year stronger than previously thought.

US household debt rose to record levels last quarter, with rising incomes leaving many consumers able to handle the burden, but low-income groups are showing signs of financial strain.

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In Europe

The economic growth of the euro area will increase as barriers to consumption and investment will end, although geopolitics poses a growing threat, according to the European Commission. Gross domestic product will rise by 1.3% next year and by 1.6% in 2026, the EU’s top authority said.

The German economy will not grow next year as existing problems add to cyclical weakness, according to Chancellor Olaf Scholz’s independent expert panel. The survey points to a growing tension, especially after the election of Donald Trump in the US and the fall of the German government.

Corporate redundancies are on the rise in the UK after the Labor government slashed tax breaks and increased levies on owners.

In Asia

China’s trade surplus is on track for a new record this year, putting it at odds with some of the world’s largest economies by increasing global trade imbalances.

India’s trade deficit widened sharply in October as imports rose during the Hindu festival season, although exports led to strong growth.

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Emerging Markets

Argentina’s President Javier Milei predicted on Tuesday that he will change his monetary policy after the end of the year if the currency’s strength remains constant in November and December. Milei said he would reduce the central bank’s monthly pace of interest rate cuts, known as the crawling peg, to 1% from 2% if inflation remains at or below October’s reading of 2.7%.

Russians are grappling with rising food prices, a headache for President Vladimir Putin as he tries to balance the Kremlin’s military ambitions with the need for domestic stability.

The growth of Brazil’s agricultural industry has created an investment frenzy, with the $7 billion capital market attracting people from all walks of life over the past three years. But as many crops around the world send prices plummeting and Brazilian farmers file for bankruptcy at alarming rates, the retail investor is paying the price.

The world

China has made a $1.3 billion bet that a new port in Peru will improve access to South American agricultural profits. Chancay Port, 44 miles north of Lima, is majority owned and operated by China’s Cosco Shipping. While the center promises to reduce transit times for goods to travel between China and South America, major obstacles threaten to undermine its success – especially when it comes to receiving goods from Brazil.

Mexico has introduced a third interest rate cut as a key step towards easing inflation and growing concerns over a slowdown in Latin America’s No. 2 economy. Zambia’s central bank raised key interest rates to their highest level since 2017 to contain inflationary pressures and finance its battered currency. Uruguay held rates unchanged.

—With help from Isis Almeida, Clarice Couto, Rachel Gamarski, Swati Gupta, Jonnelle Marte, James Mayger, Zoe Schneeweiss, Dayanne Sousa, Alex Tanzi, Manuela Tobias, Alexander Weber and Sylvia Westall.

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