Case for a Soft Landing in the U.S. Grows Stronger

U.S. inflation cooled even as the job market remained resilient, bolstering the case that the Federal Reserve can accomplish a soft landing for the economy.

The central bank’s preferred underlying inflation metric posted the smallest back-to-back increases since late 2020, encouraging a boost in consumer spending. A separate report showed employers added more jobs than forecast in August while wage growth cooled.

In the meantime, inflation in the Eurozone stopped slowing last month, confounding expectations for softer price pressures. Inflation in Zambia quickened to the highest level since April 2022.

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

United States

The core personal consumption expenditures (PCE) price index, which strips out the volatile food and energy sectors, rose 0.2 percent in July for a second month in a row. The subdued inflation figures underscore the progress the Fed has made over the past year in taming price pressures.

Meanwhile, the latest jobs data shows a labor market undergoing a controlled cooling, illustrated by solid hiring, slower earnings growth, and more people returning to the workforce. Employers in August added 187,000 jobs in a broad-based advance, following downward revisions to payrolls in the prior two months.

Europe

Eurozone inflation stopped slowing in August, presenting European Central Bank (ECB) officials with a quandary as they weigh whether pressures are too persistent to risk a pause in interest-rate hiking. Consumer prices rose 5.3 percent from a year earlier, stuck more than two and a half times above the goal sought by policymakers.

Britain’s broad money supply has stopped growing for the first time in at least 13 years, a reading that will deepen concerns among monetarists urging the Bank of England to show restraint in its battle against inflation.

At the same time, German businesses are increasingly curbing investments and eying production abroad amid high energy prices at home. More than half of surveyed companies said the energy transition is having negative or very negative effects on their competitiveness.

Asia

China’s manufacturing contraction eased slightly in August and a gauge of new orders improved, providing some hope that the worst of the sector’s slump may be ending. Outside of manufacturing, though, there were worrying signs in the PMI figures that suggest the economy’s recovery continues to be dragged down by the property downturn and subdued consumer spending.

India’s economy shined in its latest report card on strong services growth and a modest pickup in manufacturing despite still-high interest rates. Steady growth in Asia’s third-largest economy gives room for the financial authorities to fight inflation ahead of several state polls this year.

Emerging Markets

Mexico’s economy expanded at a slightly slower pace than the preliminary estimate in the second quarter, even as the country benefited from the strength of its trade with the U.S. and its own robust labor market.

Zambia’s inflation accelerated to a 16-month high in August, a week after the central bank increased its benchmark interest rate for a third straight time to contain price pressures that are predicted to persist through the first half of 2025.

World Economy

China’s economy was meant to drive a third of global economic growth this year, so its dramatic slowdown in recent months is sounding alarm bells across the world. Asian economies are taking the biggest hit to their trade so far, along with countries in Africa.

In the 2023 harvest year, the United States will account for about 23 percent of global corn exports, well below Brazil’s nearly 32 percent, U.S. Department of Agriculture data show. The steady decline and loss of competitiveness for the U.S. is a blow for a country that has long wielded food as a geopolitical force.

Hungary lowered the highest key interest rate in the European Union by a full percentage point as policymakers try to combat the country’s longest recession since at least 1995. The Dominican Republic cut its overnight rate.

—With assistance from Maya Averbuch, Ruchi Bhatia, Dominic Carey, Tania Chen,  James Hirai, Michael Hirtzer, John Liu, James Mayger, Taonga Mitimingi, Reade Pickert,  Jana Randow, Tom Rees, Anup Roy, Augusta Saraiva, Zoe Schneeweiss, Petra Sorge,  Fran Wang & Alexander Weber.

 

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