Charting the Global Economy: Central Banks Start to Pause Hikes

Economy

Charting the Global Economy: Central Banks Start to Pause Hikes

Published

1 year ago

December 10, 2022

Harry Miller

(Bloomberg) — Global central banks are pausing or nearing the end of their interest-rate hiking cycles as inflation shows signs of slowing and recession concerns mount.

Policymakers in Canada and Kazakhstan signaled they may soon hold steady, while central bankers in Brazil and Poland left their key rates unchanged for a third-straight meeting. Next week, the Federal Reserve is expected to step down its pace of rate increases but will likely determine it’s too soon to discuss a pause.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:

World

A US-China trade war, a global pandemic, Brexit and Russia’s war in Ukraine have rattled the once-entrenched ways that the world’s largest economies trade with each other. The shifting contours of the global trading system mark a kind of “reglobalization” where multinational companies are adapting their trade networks to accommodate the new economic and geopolitical challenges.

Australia’s central bank raised its key interest rate to a 10-year high and said it expects to tighten policy further as it seeks to cool the hottest inflation in three decades. Canada and Kazakhstan both raised rates but signaled a pause may be coming, while Brazil and Poland held steady.

A backlog of oil tankers at the Turkish straits continues to build up as negotiations failed to produce a solution to an insurance glitch caused by sanctions on Russian crude. Twenty-six tankers holding more than 23 million barrels of oil from Kazakhstan were unable to pass the Bosphorus and Dardanelles straits as of Wednesday, shipping data compiled by Bloomberg showed.

Asia

China’s exports and imports both contracted at steeper paces in November as external demand continued to weaken and a worsening Covid outbreak disrupted production and cut demand at home. Exports in dollar terms fell almost 9% in November from a year earlier, the biggest slide since February 2020.

Japan’s economy took a smaller hit than first thought during a summer marked by a renewed Covid surge and a plunge in the yen, with a return to growth expected this quarter. Still, consumption was weaker than first thought, raising concerns about the economy’s resilience.

Australia’s economic expansion decelerated in the three months through September as imports jumped, reflecting strong consumption and households’ resilience to the Reserve Bank’s interest-rate increases.

Europe

German factory orders rose in October, a sign of hope for manufacturers in Europe’s largest economy as they struggle with inflation and elevated energy costs due to Russia’s war in Ukraine.

Hungarian inflation accelerated toward one of the European Union’s highest levels as a deepening rift between Prime Minister Viktor Orban and the central bank raised questions about economic policy. Consumer prices rose 22.5% in November from a year ago.

Producer prices rose in November by more than forecast, driven by services and underscoring the stickiness of inflationary pressures that supports Fed interest-rate increases into 2023. The producer price index for final demand climbed 0.3% for a third month and was up 7.4% from a year earlier. The monthly gains for October and September were revised higher.

Recurring applications for US unemployment benefits rose to the highest since early February, suggesting that Americans who are losing their job are having more trouble finding a new one as the labor market shows tentative signs of cooling. Continuing claims have now strung together the three largest increases since May 2020.

Emerging Markets

South African consumer confidence recovered to its strongest level in two years in the fourth quarter as households anticipated better employment prospects and an improvement in their finances.

Turkish inflation slowed for the first time in over a year and a half, though measures to revive the economy ahead of elections in 2023 may keep it elevated for some time. Consumer prices rose an annual 84.4% in November, down from 85.5% the previous month.

At least 15 of the 72 emerging markets in a Bloomberg index now have dollar debt trading at distressed levels, after Russia’s invasion of Ukraine fueled global energy and food price inflation. Although there has been a small rally in the bond market in recent weeks, distressed debt in emerging markets remains a serious weak spot in a global economy preparing for recession.

–With assistance from Beril Akman, Baris Balci, Bryce Baschuk, Christopher Condon, Ekow Dontoh, Selcuk Gokoluk, John Liu, Alex Longley, Ana Monteiro, Neil Munshi, Yoshiaki Nohara, Swati Pandey, Reade Pickert, Augusta Saraiva, Zoe Schneeweiss, Zoltan Simon, Sherry Su, Monique Vanek, Alexander Weber, Erica Yokoyama and Lin Zhu.

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Economy

Poland has EU's second highest emissions in relation to size of economy – Notes From Poland

Published

3 hours ago

April 18, 2024

Harry Miller

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Poland has EU’s second highest emissions in relation to size of economy Notes From Poland

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Economy

IMF's Georgieva warns "there's plenty to worry about'' in world economy — including inflation, debt – Yahoo Canada Finance

Published

4 hours ago

April 18, 2024

Harry Miller

WASHINGTON (AP) — The head of the International Monetary Fund said Thursday that the world economy has proven surprisingly resilient in the face of higher interest rates and the shock of war in Ukraine and Gaza, but “there is plenty to worry about,” including stubborn inflation and rising levels of government debt.

“ Inflation is down but not gone,” Kristalina Georgieva told reporters at the spring meeting of the IMF and its sister organization, the World Bank. In the United States, she said, “the flipside” of unexpectedly strong economic growth is that it ”taking longer than expected” to bring inflation down.

Georgieva also warned that government debts are growing around the world. Last year, they ticked up to 93% of global economic output — up from 84% in 2019 before the response to the COVID-19 pandemic pushed governments to spend more to provide healthcare and economic assistance. She urged countries to more efficiently collect taxes and spend public money. “In a world where the crises keep coming, countries must urgently build fiscal resilience to be prepared for the next shock,” she said.

On Tuesday, the IMF said it expects to the global economy to grow 3.2% this year, a modest upgrade from the forecast it made in January and unchanged from 2023. It also expects a third straight year of 3.2% growth in 2025.

The world economy has proven unexpectedly sturdy, but it remains weak by historical standards: Global growth averaged 3.8% from 2000 to 2019.

One reason for sluggish global growth, Georgieva said, is disappointing improvement in productivity. She said that countries had not found ways to most efficiently match workers and technology and that years of low interest rates — that only ended after inflation picked up in 2021 — had allowed “firms that were not competitive to stay afloat.”

She also cited in many countries an aging “labor force that doesn’t bring the dynamism” needed for faster economic growth.

The United States has been an exception to the weak productivity gains over the past year. Compared to Europe, Georgieva said, America makes it easier for businesses to bring innovations to the marketplace and has lower energy costs.

She said countries could help their economies by slashing bureaucratic red tape and getting more women into the job market.

Paul Wiseman, The Associated Press

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Economy

Nigeria’s Economy, Once Africa’s Biggest, Slips to Fourth Place – BNN Bloomberg

Published

5 hours ago

April 18, 2024

Harry Miller

(Bloomberg) — Nigeria’s economy, which ranked as Africa’s largest in 2022, is set to slip to fourth place this year and Egypt, which held the top position in 2023, is projected to fall to second behind South Africa after a series of currency devaluations, International Monetary Fund forecasts show.

The IMF’s World Economic Outlook estimates Nigeria’s gross domestic product at $253 billion based on current prices this year, lagging energy-rich Algeria at $267 billion, Egypt at $348 billion and South Africa at $373 billion.

Africa’s most industrialized nation will remain the continent’s largest economy until Egypt reclaims the mantle in 2027, while Nigeria is expected to remain in fourth place for years to come, the data released this week shows.

Nigeria and Egypt’s fortunes have dimmed as they deal with high inflation and a plunge in their currencies.

Bola Tinubu has announced significant policy reforms since he became Nigeria’s president at the end of May 2023, including allowing the currency to float more freely, scrapping costly energy and gasoline subsidies and taking steps to address dollar shortages. Despite a recent rebound, the naira is still 50% weaker against the greenback than what it was prior to him taking office after two currency devaluations.

Read More: Why Nigeria’s Currency Rebounded and What It Means: QuickTake

Egypt, one of the emerging world’s most-indebted countries and the IMF’s second-biggest borrower after Argentina, has also allowed its currency to float, triggering an almost 40% plunge in the pound’s value against the dollar last month to attract investment.

The IMF had been calling for a flexible currency regime for many months and the multilateral lender rewarded Egypt’s government by almost tripling the size of a loan program first approved in 2022 to $8 billion. This was a catalyst for a further influx of around $14 billion in financial support from the European Union and the World Bank.

Read More: Egypt Avoided an Economic Meltdown. What Next?: QuickTake

Unlike Nigeria’s naira and Egypt’s pound, the value of South Africa’s rand has long been set in the financial markets and it has lost about 4% of its value against the dollar this year. Its economy is expected to benefit from improvements to its energy supply and plans to tackle logistic bottlenecks.

Algeria, an OPEC+ member has been benefiting from high oil and gas prices caused first by Russia’s invasion of Ukraine and now tensions in the Middle East. It stepped in to ease some of Europe’s gas woes after Russia curtailed supplies amid its war in Ukraine.

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