(Bloomberg) — Federal Reserve Chair Jerome Powell signaled US central bankers will wait longer to cut borrowing costs following a series of surprisingly high inflation readings, which reduces room for easier policy around the world.
Global finance chiefs convening in Washington for the International Monetary Fund-World Bank spring meetings are sweating the strength of the US economy, as elevated interest rates and a strong dollar force other currencies lower and complicate plans to bring down borrowing costs.
Meanwhile, an escalation of the conflict in the Middle East is raising concerns of a wider regional war that could send oil prices over $100 a barrel.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, geopolitics and markets:
World
The high tide for global interest rates has passed, but respite for the world economy may be limited as policymakers stay wary at the threat of inflation. Powell’s latest pivot creates a quandary for central bankers around the world.
The IMF inched up its expectations for global economic growth this year, citing strength in the US and some emerging markets, while warning the outlook remains cautious amid persistent inflation and geopolitical risks.
The increasingly hopeful economic story of 2024 so far is that of a world headed for a soft landing. Unfortunately that same world is also becoming more dangerous, divided, indebted and unequal.
US
US retail sales rose by more than forecast in March and the prior month was revised higher, showcasing resilient consumer demand that keeps fueling a surprisingly strong economy. So-called control-group sales — which are used to calculate gross domestic product — jumped by the most since the start of last year.
As President Joe Biden this week hailed America’s booming economy as the strongest in the world during a reelection campaign tour of battleground-state Pennsylvania, global finance chiefs convening in Washington had a different message: cool it. While the world’s largest economy is helping support global growth, it also means the US is “slightly overheated,” the IMF’s Kristalina Georgieva said — thanks in part to Washington’s fiscal stance, with the budget gap pushing toward 7% of GDP.
Emerging Markets
Israel reportedly struck back at Iran on Friday morning, following days of frantic diplomacy from the US and European nations in which they tried to convince Israeli Prime Minister Benjamin Netanyahu not to respond too aggressively, if at all, to the Iranian attack. Their main concern is to avoid a wider war in a region already roiled by the Israel-Hamas conflict and which could send oil prices above $100 a barrel.
India forecast an above-normal monsoon this year, raising optimism that ample rains will spur crop output and economic growth, as well as prompt the government to ease curbs on exports of wheat, rice and sugar. Forecast of a normal monsoon bodes well for easing food costs, and headline consumer price inflation eventually, said Anubhuti Sahay, head of economic research, South Asia, at Standard Chartered Plc.
Europe
European Commission President Ursula von der Leyen is unleashing a barrage of trade restrictions against China as she seeks to follow through on a pledge to make the EU a more relevant political player on the global stage. It’s in the area of clean tech where the EU is most fervently fighting to stave off competition from cheap Chinese imports of everything from EVs to solar panels.
UK inflation slowed less than expected last month as fuel prices crept higher, prompting traders to further unwind bets on how many interest rate cuts the Bank of England will deliver this year.
Asia
China reported faster-than-expected economic growth in the first quarter – along with some numbers that suggest things are set to get tougher in the rest of the year. Gross domestic product climbed 5.3% in the period, accelerating slightly from the previous quarter and beating estimates. But much of the bounce came in the first two months of the year. In March, growth in retail sales slumped and industrial output fell short of forecasts, suggesting challenges on the horizon.
–With assistance from John Ainger, Irina Anghel, Enda Curran, Shawn Donnan, James Hirai, Rajesh Kumar Singh, John Liu, Lucille Liu, Eric Martin, Alberto Nardelli, Tom Orlik (Economist), Pratik Parija, Zoe Schneeweiss, Craig Stirling and Fran Wang.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
