Hello. Today we look at the threat of stagflation, this week’s European Central Bank meeting and how some Americans still aren’t receiving their benefits.
A Concerning Combination
The world economy risks turning stagflationary.
While policy makers once hoped we’d now be seeing decent growth and slowing inflation, obstacles to that outlook are emerging by the day.
The mounting concern now is of a toxic mixture of weak demand and accelerating prices.
Risk one is the delta variant, which, as Enda Curran details, is undermining efforts to rev up factories, offices and schools.
There goes the demand side, but the new form of the coronavirus is also hurting supply chains, limiting the worldwide provision of key products. That shock, which is building just as Christmas nears, threatens to force up inflation too.
Meanwhile, natural gas prices are witnessing a historic surge, catapulting the cost of the fuel to seasonal highs in most major markets just as winter approaches in the northern hemisphere.
Soarings bills could crimp households’ spending and erode their wages through inflation, a stagflationary combination especially if families and businesses react to rising utility charges by pushing up pay and prices.
See more on gas prices here and the brewing aluminum surge here
Price Pressure
Energy inflation is soaring across G-7 economies
Source: Organization for Economic Cooperation and Development
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For policy makers, this environment is a conundrum. To date, most have focused on spurring their economies with stimulus, arguing the inflation surge would prove temporary. Now that view will be tested.
Catherine Mann, recently recruited by the Bank of England from Citigroup, has some words of comfort. She used a speech to Australian businesses today to argue inflation isn’t set to follow a 1970s-style spiral, in part because firms have less pricing power and tight labor markets don’t necessarily ignite wages.
For an overall economic recovery, science will ultimately be the key.
High inoculation rates are allowing advanced-world governments to resist another round of shutdowns, opting instead for targeted measures that include vaccination requirements for public places such as restaurants.
Meanwhile, emerging markets could be worse off: Manufacturing and tourism-led economies like Vietnam and Thailand have already been forced to close factories and turn away visitors.
That’s why wealthy countries could face mounting pressure to divert vaccines to lower-income regions. A new analysis shows they’ll likely have about 1.2 billion extra doses available by the end of the year.
Note: Mapped data show rate decision schedules for distinct central banks
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The European Central Bank will decide this week if it should dare to dial down emergency stimulus while the pandemic still menaces the euro-zone economy.
The threat posed by the delta variant of the coronavirus could yet embolden policy makers on Thursday to keep up the “significantly higher” pace of bond purchases they adopted earlier this year. But advanced vaccination rates, a robust rebound and inflation that is already at the fastest in a decade are all reasons to consider a downward shift in gears.
Elsewhere, at least eight other central banks globally are due to deliver monetary decisions, including Australia and Canada. While most are likely to keep their stance unchanged, Russia and Ukraine could deliver interest-rate increases.
Click on the blue links to read any of the stories in full:
Joblessness nightmare | For millions of Americans, the Labor Day weekend brings the end of federally funded emergency unemployment benefits and a lurch into the uncertain economic recovery.
Income redistribution | China’s push for “common prosperity” is not just about taxing the rich but also directing resources into rural areas and to those on lower incomes, according to one of the country’s most prominent experts studying wage inequality.
UAE trade | The United Arab Emirates plans to deepen its trade ties in fast-growing economies in Asia and Africa, and draw $150 billion in foreign investment from mainly older partners to reposition itself as a global hub for business and finance.
U.K. choices | Chancellor Rishi Sunak is facing five crucial fiscal decisions — including whether to deliver the biggest overnight welfare-benefit cut in history and the largest state pension increase in 30 years, according to the Resolution Foundation think tank.
German ship demand | Factory orders in Europe’s biggest ecnomy unexpectedly rose in July, driven by a surge in export demand for ships.
Taper debate | Australia’s central bankers are set to revisit the question of whether to delay a planned taper of bond purchases as a worsening outbreak of the delta variant dims economic prospects.
Need-to-Know Research
Working Obstacles
Japan lags in employment rates for working-age disabled people
Sources: U.S. Department of Labor (2021), German Federal Statistical Office (2017), U.K. Office of National Statistics (2019), Japan labor ministry (2020), Japan Cabinet Office (2016), Bloomberg
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Paralympics host Japan’s track record for integrating people with disabilities into the workforce lags many of its peers. The proportion of working-age disabled people with a job there is around 19%, based on a Bloomberg calculation, compared with 30% in the U.S.
Disappointment over the U.S. August jobs report is all but certain to push Federal Reserve policy makers to delay considering a move to scale back asset purchases at their Sept. 21-22 meeting.
Bloomberg New Economy Conversations — China’s Tech Crackdown: Join New Economy Forum Editorial Director Andrew Browne on Sept. 8 as he analyzes the sweeping regulatory crackdown underway in China. The private sector helped power China’s economic rise, but President Xi Jinping seems determined to rein in what he sees as its excesses. Is this transitory or a game-changing shift? Joining Andy are Keyu Jin, Associate Professor of Economics at the London School of Economics & Political Science, and Kevin Rudd, President and Chief Executive Officer of the Asia Society. Register here.
TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets also climbed higher.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
This report by The Canadian Press was first published Sept. 13, 2024.
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.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in the base metal and energy sectors, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 172.18 points at 23,383.35.
In New York, the Dow Jones industrial average was down 34.99 points at 40,826.72. The S&P 500 index was up 10.56 points at 5,564.69, while the Nasdaq composite was up 74.84 points at 17,470.37.
The Canadian dollar traded for 73.55 cents US compared with 73.59 cents US on Wednesday.
The October crude oil contract was up $2.00 at US$69.31 per barrel and the October natural gas contract was up five cents at US$2.32 per mmBTU.
The December gold contract was up US$40.00 at US$2,582.40 an ounce and the December copper contract was up six cents at US$4.20 a pound.
This report by The Canadian Press was first published Sept. 12, 2024.
