Geo-Economics and Politics

What you need to know about the global economy this week

Economy stories from around the globe.

Economy stories from around the globe. Image: REUTERS/Eric Gaillard/File Photo

Joe Myers
Writer, Forum Agenda
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  • This weekly round-up brings you the latest stories from the world of economics and finance.
  • Top economy stories: The latest on the US economy; ECB policy-makers make case for large interest rate hike; Inflation remains high globally.

Economy stories from around the globe

US consumer confidence rebounded more than expected in August after three straight months of declines. The number of people planning a holiday rose to an eight-month high – a positive signal for consumer spending.

Lending to Eurozone companies continued to rise in July, exceeding expectations for a slowdown driven by recession fears.

Core consumer prices in Japan's capital Tokyo rose at their fastest pace in nearly eight years in August.

European Central Bank President Christine Lagarde says that the bank needs to take climate change into account when making decisions as it has a clear impact – particularly on inflation.

The German economy grew by 0.1% in April-June compared with the previous quarter, and by 1.7% on the year. This beat the expectations of analysts, who saw the economy as being on the edge of a downturn.

Investors have increased their bets against the euro, assuming that it will fall in value amid concerns about the continued impact of record energy prices.

French annual inflation slowed more than expected in August, dropping to 6.5% from 6.8% in July.

India's economy expanded at its fastest rate in a year between April and June, with gross domestic product (GDP) rising by 13.5%.

Canada's GDP rose at a 3.3% annualized rate in the second quarter, as it benefited from rising commodity prices and the lifting of pandemic lockdowns, Bloomberg reports.

Eurozone inflation hit an all-time high in August, jumping by 9.1% on the year. Even without the key inflation drivers of energy and food, the figure hit a fresh high of 4.3%.

China will publish detailed steps for 19 new economic policies in early September, designed to support growth.

The Danish government has cut its economic growth forecasts for this year and next, amid high inflation and economic uncertainty.

Have you read?

US economy contracts mildly in second quarter, but underlying data doesn't suggest recession

The US economy contracted at a more moderate pace than initially thought in the second quarter, as consumer spending offset some of the drags on GDP, dispelling fears that a recession is under way.

That was underscored by details of a report from the Commerce Department on 25 August, showing the economy growing steadily last quarter when measured from the income side. The underlying economic strength fits in with recent upbeat readings on the labour market, retail sales and industrial production.

"We have had a tremendous recovery, this is a mid-cycle slowdown and not a recession," said Brian Bethune, an economics professor at Boston College. "Employment is still growing, which means basically, production is still growing, but there are these supply chain problems."

GDP shrank by 0.6% on the year in the second quarter, the government said in its second estimate. That was an upward revision from the previously estimated 0.9% decline. The economy contracted at by 1.6% in the first quarter.

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ECB makes case for interest rate hike

European Central Bank (ECB) policy-makers have made the case for a large increase in interest rates, as inflation remains high.

ECB Board Member Isabel Schnabel, French central bank Chief François Villeroy de Galhau and Latvian central bank Governor Mārtiņš Kazāks all argued for forceful or significant policy action while speaking at the US Federal Reserve's annual Jackson Hole Economic Symposium.

"Both the likelihood and the cost of current high inflation becoming entrenched in expectations are uncomfortably high," Schnabel said. "In this environment, central banks need to act forcefully."

The ECB raised rates by 50 basis points to zero last month and a similar or even bigger move is now expected on 8 September.

Some economics research to read this week

A VoxEU column looks at a new climate finance framework, aligning grants, concessionary loans and private-sector incentives.

New research explores the dynamics of inflation in the United Kingdom.

price inflation economy
Contributions to changes in realized inflation since the fourth quarter of 2019. Image: VoxEU/CEPR

New data from Mozambique shows the impact of digital job-matching platforms on labour outcomes for young people.

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Geo-Economics and PoliticsFinancial and Monetary Systems
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