Charting the global economy: US spending rises, weather looms

(Bloomberg) --US consumer spending showed little sign of buckling from the fallout of the Iran war, even as prices rose at the fastest pace in three years.
Meantime, China is finally making progress on its fiscal deficit, and the Bank of Japan is touting the economic benefits of the global artificial intelligence boom.

Looking ahead, extreme heat and droughts threaten to push up prices globally.


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

US

US consumer spending accelerated in May even as prices rose at the fastest pace in more than three years, suggesting Americans are powering through the fallout from the Iran war. The personal consumption expenditures price index rose 4.1% from a year earlier, the most since April 2023, Bureau of Economic Analysis data showed.

Sales of new homes in the US fell again in May to the lowest level since the start of the year as heavy discounts failed to offset high mortgage rates. Purchases of new single-family homes decreased by 7.3% to an annual rate of 580,000 last month, according to government figures.

US President Donald Trump said he has ordered the Department of Justice to look into gasoline prices, complaining that they aren’t falling fast enough. “The big Oil Companies are not dropping their price at the pump commensurate with the sharply lower prices they are paying for Oil,” he said in a post on Truth Social. Part of the reason pump prices haven’t fallen faster stems from summertime demand and fuel requirements.

Europe

Europe’s outsized holdings of US Treasuries give it significant sway in any future standoff with Trump, according to new research. If nations in the region including the UK were to end the privileged treatment of US government debt in banking and insurance regulations, demand for those bonds would fall by about $200 billion over a decade, a study by the Kiel Institute for the World Economy said. That would add as much as $42 billion per year to US fiscal costs because of rising yields.

France’s state auditor said the country lacks a credible plan to cut spending and tackle a crushing debt burden, adding to uncertainty on public finances in the build-up to 2027 presidential elections. The government has failed to map out a path of harsh adjustments needed to reach its target of narrowing the deficit to 3% of economic output by 2029 from 5.1% last year, the Cour des Comptes said in its annual report.

Asia

China narrowed its cumulative fiscal deficit for the first time in more than two years, pressing ahead with austerity despite muted domestic demand and slowing economic growth. The combined shortfall under China’s two biggest government budgets shrank 4.1% in the first five months from the same period a year earlier to 3.16 trillion yuan ($466 billion), according to Bloomberg calculations based on data released by the Ministry of Finance.

The Bank of Japan is increasingly highlighting the economic benefits of the global artificial intelligence boom, viewing strong demand for AI-related products as a buffer against the drag from higher energy prices linked to the Middle East conflict.

India’s central bank Governor Sanjay Malhotra gave his clearest indication yet that he’s in no rush to raise interest rates as a fragile US-Iran truce continues to weigh on the oil market. Speaking to local news channel ET Now, Malhotra said it was “premature” to discuss monetary policy tightening, and if policymakers were convinced they needed to move, they would have changed the policy stance at the June meeting to indicate a more hawkish outlook.

Emerging Markets

Mexico’s annual inflation eased far more than expected in early June. Consumer prices rose 3.55% in the first two weeks of the month compared to the same period last year, the national statistics institute said.

South African consumer confidence darkened in the second quarter as households confronted a sharp rise in fuel prices caused by fallout from the Iran war. First National Bank’s consumer-confidence index compiled by the Bureau for Economic Research slumped to -19 in the three months through June. That was the lowest reading since the first quarter of 2025.

World

The central banks of Mexico, Paraguay, Morocco, and Thailand left interest rates unchanged. Hungary lowered rates.

Economists predict that the higher temperatures climb, the more bloated household costs like groceries may become. Extreme heat alone could raise global inflation by 0.3 percentage points to 1.2 percentage points a year starting in 2035, according to one study. “You start to have a situation that is more like a new shock happening every year,” says Maximilian Kotz, a researcher at the Barcelona Supercomputing Center who co-authored the study with European Central Bank staff.