Charting the Global Economy: US CPI softens, UK economy expands

Underlying US inflation showed few signs of accelerating in July as the energy-price shock from the war in Iran continued to fade, reinforcing the case for the Federal Reserve to hold off on interest-rate hikes in the near term.
Economies in Europe continued to show resilience, with the UK expanding in June and France also expected to maintain its momentum this quarter.

In emerging markets, investors continued to favor higher-yield assets, while South Korean stocks entered a technical bull market on renewed AI optimism.


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

US

Core inflation was subdued in July, likely easing pressure on the Fed to raise interest rates. The consumer price index, excluding often-volatile food and energy categories, increased 0.2% from a month earlier, according to Bureau of Labor Statistics data out Wednesday. On an annual basis, it advanced 2.5%, matching the slowest pace since March 2021.

Small-business optimism rose in July to the highest level in almost a year as firms ramped up hiring plans and inflation pressures eased. The net share of US small businesses planning to add jobs jumped to the highest level since October 2022 while the share planning to make capital outlays in the months ahead advanced to the strongest reading since the end of 2024.

The government sold 30-year bonds at the highest interest rate in a quarter of a century, a testament to investors’ demand for compensation to finance the nation’s growing deficit. The yield at the $25 billion sale Thursday came in at 5.216%, the most since 2001, even as a drop in oil prices supported US debt in secondary-market trading.

A boom in old-fashioned, offline hobbies has helped bolster consumer spending at a time of anxiety about high prices and wars abroad. The splurge is showing in national data, with hobby categories as a share of overall goods consumption at the highest on record, beating even the pandemic, according to government figures compiled by Bloomberg.

Europe

The UK economy unexpectedly expanded in June, as sunny weather and World Cup football helped cap another quarter of healthy growth. GDP rose 0.3% after flatlining in May, the Office for National Statistics said. Businesses in alcohol manufacturing, food and beverage serving and TV production were among those saying the World Cup boosted sales in June as England progressed through the tournament.

Around 90,000 of London’s white-collar jobs are poised to transfer to other parts of the UK over the next five years, as Prime Minister Andy Burnham’s devolution drive and the capital’s cost pressures encourage businesses to shift work elsewhere. The move is estimated to transfer as much as £9 billion ($12.1 billion) of employers’ spending to regional centers like Manchester, Leeds and Birmingham over the next five years, according to an analysis.

France’s economy is set to maintain its momentum this quarter, thanks to growth in key sectors and cooler inflation, the central bank said. At the same time, the bank warned of “significant uncertainty,” citing the “geopolitical situation in the Middle East and weather conditions through the end of summer, when new heat waves could still occur.”

Asia

China’s consumer prices rose at the slowest pace in six months while factory-gate inflation eased for the first time since the Iran war broke out in late February, in another sign that reflation momentum is fading as the oil shock subsides and domestic spending languishes.

Australia’s central bank chief Michele Bullock adopted a hawkish stance after keeping interest rates unchanged for a second straight meeting on Tuesday, warning it’s “quite possible” that further tightening will be needed.

Japan’s government is supportive of a near-term rate hike by the Bank of Japan, with the next move likely either in September or October, people familiar with the matter told Bloomberg amid central bank’s fears over yen weakness. Prime Minister Sanae Takaichi can’t force the BOJ to set specific interest rates, but can send signals that might influence its decisions.

Emerging Markets

The average borrowing cost of emerging-market companies has fallen to the lowest level since January relative to US corporates as global bond investors’ diversification into higher-yielding assets drives an outperformance. The outperformance is driven by oil companies that are helping to bridge a supply gap arising from the Mideast conflict.

A revival in the global AI trade pushed South Korean stocks into a technical bull market, marking a dramatic turnaround from last month’s historic rout. Enthusiasm for tech hardware stocks is returning on evidence of continued massive AI spending by global Big Tech firms in the latest results.

JPMorgan downgraded Brazil’s stocks to neutral from overweight, saying they “would rather stay on the sidelines than pay for uncertainty” as concerns over the presidential election make them increasingly wary of the outlook for the fiscal deficit and the economy.

World

In addition to Australia’s decision, central bankers in Romania held interest rates at the highest level in the European Union, while Norway, Serbia, Kenya, Uganda, Namibia, Mauritius and Peru also stood pat.