Economic Growth

What you need to know about the global economy this week

Top economy stories: US jobs market grows by more than expected; Turkish inflation exceeds 80%; ECB increases interest rates.

Top economy stories: US jobs market grows by more than expected; Turkish inflation exceeds 80%; ECB increases interest rates. Image: REUTERS/Albert Gea

Joe Myers
Writer, Forum Agenda
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Economic Progress

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  • This weekly round-up brings you the latest stories from the world of economics and finance.
  • Top economy stories: US jobs market grows by more than expected; Turkish inflation exceeds 80%; ECB increases interest rates.

Economy stories from around the globe

South Korea's main inflation rate slowed in August – the first time it has done so in seven months. But data suggests inflation will remain elevated for some time.

The German economy is on track to contract for three consecutive quarters starting from the current July-September period, according to a Reuters poll of economists.

Turkish inflation has exceeded 80% for the first time since September 1998, rising to 80.2% in August from 79.6% in July.

British construction companies saw their activity fall for a second straight month in the face of uncertainty about the country's economic outlook, a survey showed on 6 September.

Japan's household spending grew for a second consecutive month in July, but inflationary pressures have cast doubt on a revival in consumption.

And the Japanese economy grew more than initially reported in the second quarter, as the lifting of local COVID-19 restrictions boosted consumer and business spending.

World Trade Organization Director-General Ngozi Okonjo-Iweala has told Bloomberg that the outlook for global trade is "not promising".

Australia's central bank has increased interest rates by half a percentage point – the fourth month in a row it has made such a move. It takes the cash rate to 2.35%, its highest level since 2015.

The US trade deficit narrowed in July, with exports hitting a record high. It's a trend that could see trade continuing to contribute to GDP growth in the third quarter.

The Eurozone economy grew more than previously estimated in the second quarter. The adjustment showed bigger boosts from consumer and government spending.

Have you read?

US job growth solid in August

US employers hired more workers than expected in August, but moderate wage growth and a rise in the unemployment rate to 3.7% suggest that the jobs market is starting to loosen. This data has raised optimism that US central bank the Federal Reserve could act to slow the economy without triggering a recession, Reuters reports.

The Labor Department's closely watched employment report on 2 September – which also showed 107,000 fewer jobs created in June and July than initially estimated – did not decisively settle the debate on whether the Fed would deliver an interest rate hike of 75 basis points or half-a-percentage point at its policy meeting this month.

The increase in the unemployment rate to a six-month high came as nearly 800,000 people entered the labour market, driving the size of the workforce to a record high. The labour market remains strong, underscoring the economy's resilience despite GDP contracting in the first half of 2022.

"The increase in employment offers yet another rebuttal to the idea that the economy is already in recession," said Michael Feroli, Chief US Economist at JPMorgan in New York. "The report keeps alive the hope that a soft landing is still a possibility."

US employment figures economy
A snapshot of US employment. Image: Bureau of Labor Statistics

ECB raises interest rates

The European Central Bank (ECB) raised its key interest rates by 75 basis points yesterday – a move described as " unprecedented" by Reuters.

The bank also promised further increases in an effort to tackle inflation across the bloc. Following up on a large July rate hike, the ECB raised its deposit rate to 0.75% from zero and lifted its main refinancing rate to 1.25%, the highest level for both since 2011.

"We expect to raise interest rates further, because inflation remains far too high and is likely to stay above our target for an extended period," ECB Chief Christine Lagarde said, adding that Thursday's decision was unanimous.

"We think it will take several meetings," she said. "How many is several? It’s probably more than two, including this one, but it’s probably also going to be less than five," Lagarde said, suggesting that rate hikes could continue into early 2023.

ECB hikes policy rate by record 75 bps global economy
A snapshot of ECB interest rates. Image: Reuters

Some economics research to read this week

China's GDP growth will average 4.5% over this decade, according to a new forecast from Oxford Economics.

A new VoxEU column looks at the links between health and economic growth.

An NBER Working Paper looks at a new way of measuring poverty in the United States – household expenditure.

Official and supplemental measures of US poverty, 2004-19 economy news
Various measures of poverty in the US. Image: NBER
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Economic GrowthGeo-Economics and PoliticsFinancial and Monetary Systems
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