Charting the global economy: Growth picks up, AI boom continues

(Bloomberg) --Applications for US unemployment benefits fell last week to an almost 60-year low, adding to signs of a stable labor market that will allow the Federal Reserve to focus on inflation.
Meanwhile, the European Central Bank rejected an immediate move to raise interest rates and President Christine Lagarde laid the groundwork for a possible rate hike in September.

And South Korea’s economy grew faster than expected in the second quarter, driven by an artificial intelligence-fueled chip boom that supports the case for further interest-rate increases.


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

First-time applications for US unemployment benefits fell last week to the lowest level since 1969, signaling layoffs remain muted. Initial claims fell by 22,000 to 187,000 in the week ended July 18, according to Labor Department data released Thursday. Continuing claims, a proxy for the number of people receiving benefits, were little changed.

US business activity expanded at the fastest pace in eight months in July as strong domestic demand for services offset cooling factory production, growing supply-chain delays and rising costs. The S&P Global flash composite purchasing managers index rose in July, according to data released Friday.

New-home sales in the US climbed in June for the first time in three months as heavy builder discounting helped offset high mortgage rates and subdued consumer sentiment, data released Friday by the federal government showed.

Europe

Christine Lagarde laid the groundwork for a possible rate hike in September after the ECB rejected an immediate move on Thursday. She said that some colleagues raised the question of whether to act now and pledged to look closely at new data over the coming weeks.

German investor optimism rose to the highest level in five months, a sign of hope that Chancellor Friedrich Merz’s economic reforms will spur growth. An expectations index by the ZEW institute in Mannheim rose in July.

The World Cup, staycations and scorching weather helped Britain’s private sector bounce back in July, though mounting tensions in the Middle East threatened to scupper the nascent rebound. S&P Global’s purchasing managers index jumped to a three-month high.

Asia

South Korea’s economy grew faster than expected in the second quarter, driven by an artificial intelligence-fueled chip boom that supports the case for further interest-rate increases. Gross domestic product grew in the three months through June from the previous quarter, the Bank of Korea said Thursday.

South Korea’s exports extended robust growth in early July as AI-driven demand for semiconductors continued to fuel the economy. Exports adjusted for working-day differences climbed from a year earlier in the first 20 days of July, according to customs office data released Tuesday. That jump took the value of exports to the highest for any July on record.

Japan’s trade deficit unexpectedly widened in June as the weak yen inflated the value of imports and the war in Iran made oil more expensive. The trade deficit expanded to ¥406.9 billion ($2.5 billion) on an unadjusted basis from a revised ¥391.8 billion gap in May, the Finance Ministry reported Wednesday.

Emerging Markets

The South African rand slumped after the central bank defied expectations by leaving interest rates unchanged to support economic growth and revised its inflation forecasts lower. The six-member monetary policy committee maintained the benchmark policy rate at 7%, Governor Lesetja Kganyago told reporters in Pretoria on Thursday.

Bad loans keep piling up in Argentina, dashing hopes that the economic pain unleashed by President Javier Milei’s harsh austerity program had already crested. Milei has slashed inflation from triple-digit levels and returned Argentina’s economy to growth since he took office in 2023. His overhaul plan has won the country a series of sovereign credit upgrades, with the latest coming Tuesday from Moody’s Ratings, while leaving it deep in speculative territory.

World

The European Central Bank held off on a second interest-rate hike. Indonesia and South Africa defied expectations by leaving interest rates unchanged, while Russia and Hungary cut rates.