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In the latest economic developments around the world, inflation has become a key focus in the United States and Tokyo, as various central banks gear up for policy meetings. Here are some notable updates on the global economy:
United States (US)
In the US, underlying inflation, the Federal Reserve’s preferred gauge, accelerated to a four-month high in September. Simultaneously, consumer spending showed signs of resurgence as the third quarter concluded. This dynamic set the stage for another potential interest rate hike in the coming months. The core personal consumption expenditures price index, excluding volatile food and energy components, increased by 0.3%, while inflation-adjusted household expenditures grew by 0.4%.
The US economy exhibited robust growth in the last quarter, marking its fastest pace in nearly two years. This growth was driven by a surge in consumer spending. The government’s preliminary estimate revealed that the Gross Domestic Product (GDP) expanded at an annualized rate of 4.9%, more than double the pace seen in the second quarter.
Despite surpassing expectations in economic performance, the US encountered a substantial increase in the underlying federal deficit, a concerning fiscal trend. This situation is expected to intensify the already divisive budget debates in Washington and is contributing to rising yields on longer-term US Treasuries, reminiscent of pre-financial crisis levels.
Asia
In Tokyo, consumer price growth unexpectedly quickened in October, marking the first increase in four months. This development hints at inflation’s resilience as the Bank of Japan (BOJ) prepares for its upcoming policy meeting. Tokyo’s figures often serve as leading indicators for national inflation data, which will be announced in the coming month.
South Korea reported a positive shift in early exports, marking the first growth in over a year. This trend indicates a recovery in external demand, providing reassurance to investors and policymakers monitoring global commerce.
Chinese President Xi Jinping took proactive measures to support China’s economy. These actions included issuing additional sovereign debt, raising the budget deficit ratio, and making an unprecedented visit to the central bank. This highlights the Chinese leadership’s concerns about the economy’s outlook and their increased focus on shoring up the economy and financial markets.
Europe
The United Kingdom witnessed a decline in employment for the third consecutive month, signaling the longest drop in employment since the peak of the coronavirus pandemic. This might indicate a softening of inflationary pressures.
In the euro area, private-sector activity at the start of the final quarter of 2023 showed disappointing results, raising concerns about the possibility of a recession. S&P Global’s purchasing managers’ index hit a three-year low in October.
Emerging Markets
Mexico experienced a more significant than expected slowdown in annual inflation in early October, coinciding with the central bank’s commitment to maintaining record-high interest rates in Latin America’s second-largest economy.
World
Israel’s central bank downgraded its economic projections due to the ongoing conflict with Hamas, which is hampering economic growth. Despite these challenges, the bank decided to keep interest rates unchanged, focusing on supporting the shekel.
The European Central Bank left interest rates unchanged for the first time in over a year. Canada also maintained its interest rates. In contrast, Ukraine, Hungary, and Chile lowered their rates, while Turkey and Russia implemented substantial rate hikes.
Lastly, Germany’s economy is on track to surpass Japan’s and become the world’s third-largest in 2023. This transformation is attributed to the weakening of the yen against the dollar and the euro. The International Monetary Fund’s latest projections estimate Germany’s nominal Gross Domestic Product at $4.43 trillion this year, compared to Japan’s $4.23 trillion.
These developments underscore the evolving landscape of the global economy, with inflation and monetary policy decisions taking center stage in various regions.
