European inflation reaches a record

(Bloomberg) — Subscribe to the New Economy Daily newsletter, follow us @economics and subscribe to our podcast.

Bloomberg’s Most Read

Euro zone inflation rose to a record 7.5% in March from a year earlier, as Russia’s war in Ukraine further pushed up already soaring energy costs.

While that will cost consumers around €230bn ($254bn) this year, household savings should help cushion the blow. In the US, the Fed’s preferred gauge of inflation rose to a new four-decade high, and China’s Covid lockdowns threaten to disrupt supply chains and drive prices higher still.

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

Europe

Euro zone inflation accelerated to a new record high as Russia’s invasion of Ukraine disrupted global supply chains and provided a further boost to already skyrocketing energy costs. Combined with this week’s inflation gluts in Spain and Germany, the data prompted investors to put forward bets on when the European Central Bank will end nearly eight years of negative interest rates.

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

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.

us

The US added nearly half a million jobs in March and the unemployment rate fell more than expected, highlighting a strong labor market that is likely to support aggressive Fed tightening in coming months.

Inflation-adjusted consumer spending declined in February, suggesting that the fastest pace of price increases in four decades is beginning to temper demand. Spending on goods stabilized after rising the previous month, while a decline in Covid-19 cases supported a rebound in spending on services.

US business profits rose 35% last year, the most since 1950, fueled by strong household demand as the economy recovered from the pandemic. In all four quarters of the year, the overall profit margin remained above 13%, a level reached in only one other three-month period over the past 70 years, Commerce Department data shows.

Asia

China’s Covid lockdowns are putting the economy under pressure and threatening to disrupt global supply chains, prompting Beijing to call for more contingency plans to deal with the risks. Purchasing managers’ indices for March showed closures in the trade and technology hub of Shenzhen and the auto city of Changchun reduced factory activity in the month. Services have also been greatly affected.

Japan’s factory output in February posted the first gain in three months, offering only a lukewarm sign of resilience amid fears the economy has regressed. The fractional gain comes at a time when the Japanese economy needs strong manufacturing to help the economy avoid a contraction this quarter and to fuel a recovery in the future.

Emerging markets

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

An exodus of foreign workers from Saudi Arabia has begun to reverse after a year and a half as the economy recovers from the pandemic and oil prices rise. Job creation is the biggest challenge facing Crown Prince Mohammed bin Salman, the kingdom’s de facto leader, as he reshapes an economy dependent on oil exports and foreign labor imports.

World

Governments are not sufficiently aware of the long-term economic consequences of 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 reduce global growth this year by more than 1 percentage point and raise inflation another 2.5 percentage points from already high levels.

Most Read Bloomberg Businessweek

©2022 Bloomberg LP

Previous post This crisis could be the creation of Europe’s carbon market
Next post This is when you need a financial plan
%d bloggers like this: