(Bloomberg) — The Labour Party won a landslide victory in the UK election after the Conservatives imploded following 14 years of rule that became defined by turmoil.
Any euphoria over the size of its win, though, will be quickly overshadowed by the scale of the economic challenges facing the next government.
Among economic data this week, inflation cooled last month in the euro zone, the US labor market showed further signs of moderating and Japan’s household spending retreated.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:
Europe
New British Prime Minister Keir Starmer’s Labour Party took 412 of the 650 seats in the House of Commons, the most since Tony Blair’s 1997 triumph and a remarkable turnaround less than five years since being trounced at the last election. The Tories garnered 121 seats, their worst-ever performance. The pound strengthened.
Euro-zone inflation slowed in June — adding to evidence that price pressures are gradually moving toward the European Central Bank’s 2% target. Consumer prices rose an annualized 2.5% after rising at a 2.6% pace a month earlier.
US
Hiring and wage growth stepped down in June while the jobless rate rose to the highest since late 2021, bolstering prospects that the Federal Reserve will begin cutting interest rates in coming months. Average employment growth over the last three months slowed to the least since the start of 2021, reflecting a labor market that cooled more in the second quarter than previously estimated.
The services sector contracted in June at the fastest pace in four years due to a sharp pullback in business activity and declining orders.
Asia
Japan’s household spending unexpectedly fell in May, raising the likelihood that consumption won’t be a key driver for the economy in the second quarter, and complicating the prospects for the central bank’s next interest rate hike.
A surge of Chinese plastic supply is threatening to overflow in the face of weak domestic demand, morphing into a fresh trade challenge for the rest of the world. Parts of the country’s sprawling petrochemicals sector are running at as little as half capacity as producers cut back. But with the industry still expanding, that restraint is becoming harder to sustain.
Japan’s tax revenues reached another record in the fiscal year ended in March, a positive outcome partly driven by the weak yen and sticky inflation. Even with the revenue gains, Japan’s fiscal plight is severe. It shoulders the heaviest public debt burden among developed nations
Emerging Markets
Peru’s annual inflation accelerated moderately in June in line with economists’ expectations while remaining within the central bank’s target range. Inflation in Peru remains the lowest among Latin America’s major economies and central bank President Julio Velarde has said he expects price increases to close 2024 at 2.2%.
For the past three years, one of the hottest investment plays in Brazil has been the emerging industry for agriculture financing. No longer. The market for the so-called Fiagros, investment funds focused on agricultural receivables such as interest, dividends and land-lease payments, is set to stall this year after a wave of farmer defaults sparked uncertainty.
Turkish inflation eased for the first time in eight months, a faster-than-estimated slowdown from a peak reached in May that puts consumer prices on course for a steep deceleration during the summer months. Turkey is starting to turn the page on two years of a severe cost-of-living squeeze caused by one of the world’s fastest rates of price growth
World
Israel’s war with Hamas and its drain on public finances led to the sharpest decline in sovereign-risk score in emerging markets during the first six months of 2024, while fiscal pressures in Saudi Arabia were the biggest among neighboring Gulf countries, according to Goldman Sachs Group Inc.
Norway is building a grain stockpile to prepare for a potential crisis. The move resonates beyond domestic politics, pointing to a deeper anxiety over food. Governments around the world are fretting over securing supplies for growing populations. In recent years, supply chains have been hit by shocks such as the Covid pandemic, Russia’s war in Ukraine, crop-export bans, shipping disruptions and erratic weather.
–With assistance from Abeer Abu Omar, Beril Akman, Serene Cheong, Sarah Chen, Clarice Couto, Agnieszka de Sousa, Joe Mayes, Yoshiaki Nohara, Reade Pickert, Jana Randow, Marcelo Rochabrun, Dayanne Sousa, Isabella Ward, Erica Yokoyama and Matthew Boesler.
TORONTO – Canada’s main stock index was higher in late-morning trading, helped by strength in energy stocks, while U.S. stock markets also moved up.
The S&P/TSX composite index was up 34.91 points at 23,736.98.
In New York, the Dow Jones industrial average was up 178.05 points at 41,800.13. The S&P 500 index was up 28.38 points at 5,661.47, while the Nasdaq composite was up 133.17 points at 17,725.30.
The Canadian dollar traded for 73.56 cents US compared with 73.57 cents US on Monday.
The November crude oil contract was up 68 cents at US$69.70 per barrel and the October natural gas contract was up three cents at US$2.40 per mmBTU.
The December gold contract was down US$7.80 at US$2,601.10 an ounce and the December copper contract was up a penny at US$4.28 a pound.
This report by The Canadian Press was first published Sept. 17, 2024.
OTTAWA – Canada’s inflation rate fell to two per cent last month, finally hitting the Bank of Canada’s target after a tumultuous battle with skyrocketing price growth.
The annual inflation rate fell from 2.5 per cent in July to reach the lowest level since February 2021.
Statistics Canada’s consumer price index report on Tuesday attributed the slowdown in part to lower gasoline prices.
Clothing and footwear prices also decreased on a month-over-month basis, marking the first decline in the month of August since 1971 as retailers offered larger discounts to entice shoppers amid slowing demand.
The Bank of Canada’s preferred core measures of inflation, which strip out volatility in prices, also edged down in August.
The marked slowdown in price growth last month was steeper than the 2.1 per cent annual increase forecasters were expecting ahead of Tuesday’s release and will likely spark speculation of a larger interest rate cut next month from the Bank of Canada.
“Inflation remains unthreatening and the Bank of Canada should now focus on trying to stimulate the economy and halting the upward climb in the unemployment rate,” wrote CIBC senior economist Andrew Grantham.
Benjamin Reitzes, managing director of Canadian rates and macro strategist at BMO, said Tuesday’s figures “tilt the scales” slightly in favour of more aggressive cuts, though he noted the Bank of Canada will have one more inflation reading before its October rate announcement.
“If we get another big downside surprise, calls for a 50 basis-point cut will only grow louder,” wrote Reitzes in a client note.
The central bank began rapidly hiking interest rates in March 2022 in response to runaway inflation, which peaked at a whopping 8.1 per cent that summer.
The central bank increased its key lending rate to five per cent and held it at that level until June 2024, when it delivered its first rate cut in four years.
A combination of recovered global supply chains and high interest rates have helped cool price growth in Canada and around the world.
Bank of Canada governor Tiff Macklem recently signalled that the central bank is ready to increase the size of its interest rate cuts, if inflation or the economy slow by more than expected.
Its key lending rate currently stands at 4.25 per cent.
CIBC is forecasting the central bank will cut its key rate by two percentage points between now and the middle of next year.
The U.S. Federal Reserve is also expected on Wednesday to deliver its first interest rate cut in four years.
This report by The Canadian Press was first published Sept. 17, 2024.
FREDERICTON – New Brunswick‘s finance minister says the province recorded a surplus of $500.8 million for the fiscal year that ended in March.
Ernie Steeves says the amount — more than 10 times higher than the province’s original $40.3-million budget projection for the 2023-24 fiscal year — was largely the result of a strong economy and population growth.
The report of a big surplus comes as the province prepares for an election campaign, which will officially start on Thursday and end with a vote on Oct. 21.
Steeves says growth of the surplus was fed by revenue from the Harmonized Sales Tax and federal money, especially for health-care funding.
Progressive Conservative Premier Blaine Higgs has promised to reduce the HST by two percentage points to 13 per cent if the party is elected to govern next month.
Meanwhile, the province’s net debt, according to the audited consolidated financial statements, has dropped from $12.3 billion in 2022-23 to $11.8 billion in the most recent fiscal year.
Liberal critic René Legacy says having a stronger balance sheet does not eliminate issues in health care, housing and education.
This report by The Canadian Press was first published Sept. 16, 2024.
