Geo-Economics and Politics

What to know about the economy this week

Fuel prices and the global economy

Fuel prices have helped drive rapid inflation in the United States. Here's how it is affecting global economy. Image: REUTERS/Mike Blake

Joe Myers
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  • This weekly wrapper brings you the latest stories from the world of economics and finance.
  • Top economy stories: US inflation hits 40-year high; UN warning on cost of living crisis; Interest rate rises continue around the globe.

Economy stories from around the globe

India's annual consumer inflation remained above 7% in June, hitting 7.75% compared to 7.97% in May.

One measure of Australian consumer sentiment has fallen for an eighth straight month to match pandemic lows.

The Bank of Japan's governor has warned of "very high uncertainty" around the economic outlook. Haruhiko Kuroda said, "We won't hesitate to take additional monetary easing steps as necessary."

Mexico's annual inflation hit a 21-year-high in June, reaching 7.99%, its highest mark since January 2001.

Retail sales have fallen again in the United Kingdom, with high inflation keeping consumers away.

The UK economy grew by 0.5% in May, after previously shrinking in April and March, according to Office for National Statistics figures.

The euro has fallen to parity with the US dollar - the first time that has happened since 2002. It comes as draft projections from the European Commission forecast slower growth and higher inflation in the Euro area.

The Bank of Canada increased its policy rate by a full percentage point on Wednesday, citing "higher and more persistent" inflation.

South Korea also raised rates on 13 July - in this case by a half point. It's the biggest increase since the Bank of Korea adopted its current policy system in 1999.

The Philippines has also raised its key interest rate to cool inflation - by 75 basis points.

Spain has announced temporary taxes on power companies and banks to help Spaniards cope with rising inflation.

The International Monetary Fund's (IMF) Managing Director has warned of the risks of a global debt crisis.

Have you read?

Cost of living crisis pushing millions into poverty - UN report

The global cost of living crisis has pushed an additional 71 million people in the world's poorest countries into poverty already, a new report published by the UN Development Programme (UNDP) has warned.

"This cost-of-living crisis is tipping millions of people into poverty and even starvation at breathtaking speed," Achim Steiner, UNDP administrator, said. The UNDP has called for tailored action, including direct cash handouts to the most vulnerable and a widening and extension of the Debt Service Suspension Initiative.

Institutions like the UN, World Bank and International Monetary Fund have a number of 'poverty lines' - one for the poorest countries where people live on $1.90 or less a day. A $3.20-a-day line for lower-middle-income economies and a $5.50-a-day line in upper-middle-income countries.

"We project that the current cost-of-living crisis may have pushed over 51 million more people into extreme poverty at $1.90 a day, and an additional 20 million at $3.20 a day," the report said, estimating it would push the global total to just over 1.7 billion people.


US inflation hits highest levels in 40 years

US consumer prices increased by 9.1% in June, the largest annual increase since 1981. It comes amid high prices for gasoline, food and rent.

The larger-than-expected increase in the year-on-year consumer price index reported by the Labor Department on 13 July also reflected higher prices for healthcare, motor vehicles, apparel as well as household furniture. The CPI increased by the most in nearly 17 years on a monthly basis.

The consumer price index increased 1.3% last month, the biggest monthly gain since September 2005, after advancing 1.0% in May. A 7.5% surge in energy prices accounted for nearly half of the increase in the CPI. Gasoline prices jumped 11.2% after rebounding by 4.1% in May.

The IMF has also warned that avoiding a recession in the United States will be "increasingly challenging". It once again cut its 2022 US growth forecast - down from 2.9% to 2.3%.

12-month percentage change, Consumer Price Index, selected categories
US inflation has hit a 40-year high. Image: US Bureau of Labor Statistics

Some economics research to read this week

A new VoxEU column explores the impact of climate change risks to sovereign debt.

World Bank economists explore the stagflation of the 1970s and what it might mean for the economy today.

Heard of the 'Flynn effect'? Research in Sweden takes a look at a longstanding puzzle in cognitive science.

How can the G20 respond to the global economic climate? Kristalina Georgieva writes for IMF Blog.

Price pressures
Inflation continues to rise in many economies. Image: IMF
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