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Record-high food inflation is tightening its grip on the global economy, most critically in developing nations where financial distress is contributing to increased political instability.
The costs of staples such as wheat and cooking oils continue to accelerate as Russia’s war in Ukraine, a key exporter of commodities, upends trade and fuels concern about shortages. High energy prices are also adding to inflationary pressures.
In Sri Lanka, consumer prices accelerated to about 19% — the highest in Asia — and could keep climbing to 25%, according to the central bank, which just increased interest rates by an unprecedented seven percentage points. The soaring costs have sparked street protests calling for the president’s ouster.
An emergency meeting by Pakistan’s central bankers resulted in the biggest rate hike since 1996 as more political chaos and higher oil prices risk developing into a full-blown economic crisis.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
World
Global food prices are surging at the fastest pace ever as Russia’s war in Ukraine chokes crop supplies, piling more inflationary pain on consumers and worsening a global hunger crisis. The war has wreaked havoc on supply chains in the crucial Black Sea breadbasket region, upending global trade flows and fueling panic about shortages of key staples such as wheat and cooking oils.
Across Ukraine’s farm belt, silos are bursting with 15 million tons of corn from the autumn harvest, most of which should have been hitting world markets. The stockpiles — about half the corn Ukraine had been expected to export for the season — have become increasingly difficult to get to buyers, providing a glimpse into the war has wrought in the approximately $120 billion global grains trade.
Emerging Markets
Pakistan’s central bank raised interest rates by 250 basis points following an emergency meeting, as escalating political chaos at home and higher global oil prices threaten to spill over into a full-blown economic crisis. The key rate now stands at 12.25%. Central banks in Peru, Uruguay, Romania, Poland and Serbia also tightened policy.
Sri Lanka’s central bank also raised borrowing costs — by an unprecedented 700 basis points amid economic and political turmoil that has sparked street protests and left President Gotabaya Rajapaksa with a minority in parliament.
Turkish inflation soared to a fresh two-decade high in March, leaving the lira increasingly vulnerable by depriving the currency of a buffer against market selloffs. Turkey’s ultra-loose monetary policy is out of sync with the rising hawkishness of many of the world’s central banks at a time its economy is bracing for commodity shocks unleashed by Russia’s invasion of Ukraine.
Europe
European natural gas prices gained after five days of declines on concerns that Russian flows through key transit country Ukraine may be disrupted. Russian military operations are putting the stability of flows to Europe at risk, Gas Transmission System Operator of Ukraine said.
German factory orders fell for the first time in four months in the runup to Russia’s invasion of Ukraine, underscoring concerns over slower growth in Europe’s largest economy. Expectations for Germany’s economic recovery have been slashed after the war in Ukraine sent energy prices higher.
Chancellor Olaf Scholz reiterated his opposition to reversing Germany’s exit from nuclear power to help cut reliance on Russian energy, saying the technical challenges would be too great. Germany is rushing to end its heavy dependence on Russian fossil fuels but the process has been complicated by the decision by former Chancellor Angela Merkel’s previous government to shut down the country’s nuclear power plants.
U.S.
The U.S. trade deficit held close to a record in February as the merchandise shortfall shrank and the surplus in services declined, partly reflecting the impact of broadcast rights for the Olympics. Services imports increased to a record $51.6 billion, with about half of the rise coming from the biggest monthly increase in charges for use of intellectual property since 2016.
Spot rates for shipping goods in containers to the U.S. from Asia fell for a sixth straight week, the longest skid of the pandemic, as Covid-19 lockdowns disrupt trucking, warehouses and port operations in China. The market for ocean freight is softening partly because that’s what it typically does after Chinese Lunar New Year. There’s also growing uncertainty about U.S. consumer demand for goods given the broader acceleration in inflation and a shift back to services.
Asia
Containers full of frozen food and chemicals are piling up at China’s biggest port in Shanghai as the lock down of the city and virus testing means truckers can’t get to the docks to pick up boxes. Shanghai is now the epicenter of China’s worst Covid outbreak in two years, with almost 20,000 new cases reported just on Wednesday.
Japan’s household spending dropped in February for a second straight month amid virus restrictions, adding to evidence that the economy contracted last quarter as Prime Minister Fumio Kishida’s government mulls support measures. Outlays fell 2.8% from January, led by drops in spending on transport, communications and housing.
Japanese households’ inflation expectations climbed to the highest level in more than 13 years as rising energy costs impacted sentiment, even as overall price gains remain well below the Bank of Japan’s target.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
