Charting the global economy: European inflation soars to record highs


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(Bloomberg) – Eurozone inflation hit a record 7.5% in March from a year ago as Russia’s war in Ukraine further inflated already rising energy costs .

Although it will cost consumers about 230 billion euros ($254 billion) this year, household savings should help cushion the blow. In the United States, the Federal Reserve’s favorite inflation gauge has hit a new four-decade high, and Covid lockdowns in China threaten to disrupt supply chains and drive prices up even further.

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

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Europe

Eurozone inflation accelerated to a new record high as Russia’s invasion of Ukraine rattled global supply chains and provided a new driver for already rising energy costs. Combined with inflation overshoots this week in Spain and Germany, the data has investors betting on when the European Central Bank will end nearly eight years of negative interest rates.

The energy crisis that is shaking the euro zone will inflict on consumers an additional bill equivalent to 1.8% of its gross domestic product, according to analysis by Bloomberg Economics. Rising heating and electricity costs, along with higher fuel prices for motorists, will combine to add 230 billion euros ($255 billion) to household spending, estimate Jamie Rush and Maeva Cousin .

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UK households saved less of their income in the final quarter of last year to maintain living standards in an early sign of the pressures they face from runaway inflation.

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The United States added nearly half a million jobs in March and the unemployment rate fell more than expected, highlighting a robust labor market that should support aggressive Fed tightening in the coming months. to come.

Inflation-adjusted consumer spending fell in February, suggesting the fastest pace of price increases in four decades is starting to temper demand. Spending on goods calmed after the previous month’s surge, while a decline in Covid-19 cases supported a recovery in spending on services.

US corporate profits jumped 35% last year, the most since 1950, driven by strong household demand as the economy rebounded from the pandemic. In all four quarters of the year, the overall profit margin remained above 13%, a level reached in only another three-month period in the past 70 years, according to Commerce Department data.

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Asia

China’s Covid lockdowns are putting the economy under pressure and threatening to disrupt global supply chains, prompting Beijing to demand more contingency plans to deal with the risks. The Purchasing Managers’ Indexes for March showed that the shutdowns of the Shenzhen Technology and Trade Center and Changchun Automotive City reduced factory activity during the month. Services have also been hit hard.

Japan’s industrial production in February recorded the first gain in three months, offering only a tepid sign of resilience amid fears the economy could turn around in reverse. The partial gain comes at a time when the Japanese economy needs strong manufacturing to help the economy avoid a contraction this quarter and fuel a recovery ahead.

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Emerging Markets

Colombia surprised markets with a lower-than-expected interest rate hike after the central bank came under fire from senior politicians. Analysts expected a bigger boost given recent inflationary shocks and an economy that is now operating near capacity. The central banks of Chile, the Czech Republic and Mozambique were among those that also hiked rates.

An exodus of foreign workers from Saudi Arabia began to reverse after a year and a half as the economy recovered from the pandemic and oil prices rose. Job creation is the biggest challenge facing Crown Prince Mohammad bin Salman, the kingdom’s de facto ruler, as he reshapes an economy dependent on exporting oil and importing labor foreign work.

World

Governments are not sufficiently aware of the longer-term economic fallout from the Russian invasion of Ukraine, says Laurence Boone, chief economist at the OECD. Earlier this month, the Paris-based OECD estimated that the effects of the conflict will cut global growth this year by more than a percentage point and drive inflation up another 2.5 percentage points. from already high levels.

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