Charting The Global Economy: US Inflation Exceeds Forecasts

US inflation last month was a touch stronger than forecast, helping to consolidate market bets that the Federal Reserve will opt for a smaller interest-rate cut in November.

In Germany, Europe’s largest economy, orders placed with manufacturers tumbled by the most since the start of the year. The UK economy returned to growth and the French government put forth a plan aimed at tackling a mounting budget deficit.

Meanwhile, wages for new workers in China fell, pointing to a fragile job market that’s fueling persistent deflation and holding back the world’s second-larged economy.

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

US & Canada

Underlying US inflation rose more than forecast in September, representing a pause in the recent progress toward moderating price pressures. The higher-than-expected inflation figures, along with last week’s blowout US jobs report, will likely amplify the debate whether the Federal Reserve will opt for a small interest-rate cut next month or pause after a large September reduction.

Florida residents awoke Thursday to the devastation from Hurricane Milton, which ripped through the Tampa area, barreled across the state and spawned deadly tornadoes before spinning out into the Atlantic. Since some areas are still cut off, a full assessment isn’t possible yet in a state that was also slammed in late September by another major storm, Hurricane Helene.  

Income inequality in Canada has grown to the widest this century, as high interest rates add to the debt burdens of lower-earning households while boosting investment yields for higher-paid people. In the second quarter, the top 40% of households had 65.2% of the disposable income, while the lowest-income groups had 18.2%. That gap of 47 percentage points was the largest since Statistics Canada began recording the data in 1999.

Europe

The UK economy returned to growth in August, putting Prime Minister Keir Starmer on track for a modest recovery before worries about his first budget began to weigh on sentiment. Services, production and construction all expanded on the month.

The French government unveiled a budget for next year that aims to deliver a €60.6 billion ($66.2 billion) remedy for its creaking public finances and rebuild investor confidence even as it risks eviction by a hostile parliament. Spending cuts will account for just over two thirds of what Finance Minister Antoine Armand called an unheard-of fiscal effort, with the rest coming from higher taxes on businesses, the wealthy and energy.

Factory orders in Germany plummeted in August, marking yet another setback for industry in a year when Europe’s biggest economy has failed to deliver a much-awaited recovery.

Prime Minister Michel Barnier’s plan to raise taxes on the rich could prompt some to move out of France and others who might have been considering settling in the country to cancel their plans, according to wealth and tax advisers.

Asia

China is investigating whether to raise tariffs on European large-engine vehicles and will start collecting levies on brandy, escalating a trade spat after the European Union decided to impose tariffs on Chinese electric vehicles. The action against European car and brandy exporters comes after the EU decided last week to impose tariffs of as high as 45% on imports of Chinese electric vehicles for five years.

Wages offered to new hires in China declined after two straight quarters of gains, in a sign of a weakening labor market that’s exacerbating persisting deflation and weighing on economic growth. Expectations are now building that the government will introduce more help in the form of public spending, which could offer subsidies to households and boost consumption.

Japan saw the highest number of bankruptcies since 2013 in the six months through September, as companies were increasingly hit by rising costs. A record 472 out of the 4,990 firms cited inflation as the main reason they went bankrupt, the report showed. Construction, manufacturing and retail were among the sectors that had the highest number of cost-driven bankruptcies, according to the report.

The World Bank raised its economic growth forecast for South Asia for this year, citing stronger domestic demand in India and faster recoveries elsewhere in the region. South Asia’s economy will expand 6.4% in 2024, keeping it on track to be the world’s fastest-growing region, the World Bank said.

Emerging Markets

Argentina’s monthly inflation reached the lowest level since late 2021, scoring a significant win for President Javier Milei as he makes lowering price spirals the centerpiece of his administration.

Brazil’s annual inflation sped up roughly in line with estimates in September after the nation’s energy regulator hiked electricity costs in response to the worst drought on record. Power regulator Aneel began applying additional charges to electricity bills at the start of September in response to sinking reservoir levels at hydroelectric plants. About two-thirds of Brazil’s power supply comes from hydro, and prices are set to climb even higher in October due to lack of rainfall.

For years Bolivia was considered the Latin American socialist country that achieved an elusive combination of economic growth, low inflation and declining poverty. It was all paid for by a boom in natural gas exports. Then it all imploded, taking Bolivia’s socialist dream with it.

World

New Zealand’s central bank stepped up the pace of easing as policymakers become more concerned about the economic slowdown. The Bank of Korea cautiously reduced rates, while Uganda and Kenya also eased. Uruguay, India, Israel, Serbia and Kazakhstan held. Peru surprised by holding rates steady.