(Bloomberg) — Inflation cooled in the US as well as several European countries in recent readings, offering encouraging signs that central banks in the regions can lower interest rates.
The Federal Reserve’s preferred measure of underlying US inflation increased 0.1% in May, the smallest advance in six months. Consumer prices in France — the euro area’s second-largest economy — slowed a bit in June, while inflation retreated in Spain as well.
It was a different story in Asia, where inflation quickened in Tokyo — a leading indicator of the national data to be released in July — as well as in Australia, which may prompt those policymakers to raise rates.
Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:
US
The so-called core personal consumption expenditures price index, which strips out volatile food and energy items, increased 0.1% from the prior month. That marked the smallest advance in six months. Inflation-adjusted consumer spending posted a solid advance after a pullback in April, driven by goods and fueled in part by a jump in incomes.
The inventory of new US homes stands at the highest since the bursting of the housing bubble more than a decade ago, raising the risk that builders will dial back production in a market longing for cheaper borrowing costs. Nearly 100,000 of those have already been completed and are still awaiting a buyer, the most in more than 14 years.
Of all the battleground states in the US presidential election, none is a greater puzzle for Joe Biden and Donald Trump than Nevada. That’s because the state – with its relatively sparse population and high proportion of Spanish-speaking residents – is unusually difficult to poll.
Europe
French inflation slowed a little — reinforcing the European Central Bank’s decision to begin cutting record-high interest rates and offering an economic bright spot for President Emmanuel Macron two days before elections. A separate release showed inflation in retreat in Spain as well. In Italy, inflation ticked up but remained below 1%.
The Riksbank kept borrowing costs unchanged and said it expects to resume easing again with as many as three cuts in the second half of the year. The Swedish central bank, which held its interest rate at 3.75%, said that consumer-price growth is turning out largely as it anticipated, allowing for further reductions in the benchmark in due course.
Asia
Inflation in Tokyo picked up in June on the back of higher energy prices and industrial output rose more than expected in May, likely keeping the Bank of Japan on track to consider an interest-rate hike as early as July. The weak yen helped underpin price growth in June, and it’s stayed under pressire, trading around 160.60 to the dollar Friday morning in Tokyo.
Australia’s inflation accelerated faster than expected for a third straight month in May, sending the currency higher as traders boosted bets that the Reserve Bank will resume raising interest rates at its next meeting. The report comes after RBA Governor Michele Bullock restated last week that the rate-setting board isn’t ruling out a rate hike after leaving the benchmark at a 12-year high of 4.35%.
China’s fiscal revenue shrank at the fastest pace in more than a year, fueling expectations that the government could make another rare mid-year budget revision to aid an economic recovery. The government’s budget has been under strain as slowing economic growth weighed on tax income, while a multiyear property market downturn slashed its income from land sales.
Emerging Markets
Prime Minister Narendra Modi’s government is considering consumption-boosting measures worth more than 500 billion rupees ($6 billion) in India’s upcoming budget, including tax cuts for lower income individuals for the first time in seven years, according to people familiar with the matter.
Confidence among South Africa’s agricultural businesses fell to the lowest level in almost 15 years as an El Niño-induced drought affected grain crops. The drought coincided with other long-standing challenges, such as inadequate road infrastructure and municipal service delivery. Lingering animal disease challenges and heightened geopolitical tensions are also the concerns for the sector, according to the business chamber.
Pakistan is set to launch a security operation to contain a surge in terrorist attacks that have targeted China’s infrastructure projects and its citizens as Islamabad seeks to bolster economic ties with Beijing. The two governments are looking to revive projects on the China Pakistan Economic Corridor, an infrastructure network of roads, railways and ports under the Belt and Road initiative.
World
Sweden, Guatemala, the Philippines, Turkey and Mexico held. The Czech central bank signaled it’s likely to slow or may even halt rapid monetary easing as officials aim to prevent inflation from staging a comeback. Morocco cut rates for the first time in four years. Colombia also lowered borrowing costs.
Exxon Mobil Corp. took the first step toward its seventh oil project in Guyana, a clear signal the supermajor intends to expand crude output from the South American nation into the next decade.
–With assistance from Ruchi Bhatia, Kevin Crowley, Ismail Dilawar, Kamran Haider, William Horobin, John Liu, Gregory Korte, Swati Pandey, Niclas Rolander, Augusta Saraiva, Michael Sasso, Zoe Schneeweiss, Rene Vollgraaff, Fran Wang and Erica Yokoyama.
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.
