The global economy is full of events, data, and expectations. Here are 5 things you should absolutely know about it.
Last week, various global markets including the European Central Bank, the Tokyo Stock Exchange, and those in China and the US, released important economic data. These indicators provide valuable insights into the current state of the world economy, particularly in light of the complex and rapidly changing global context.
In 5 points, here’s what you need to know to understand economics and finance.
1. The ECB focuses on June
The European Central Bank once again left interest rates unchanged, specifying at the meeting on 7 March that the 2% inflation objective will be achieved by guaranteeing a sufficiently restrictive level of monetary policy until necessary time.
There was no precise mention of the next and expected rate cut but with a relevant indication: the data for April and, above all, for June will be crucial for making decisions on rates. Lagarde herself said this at the conference, thus increasing expectations about the decrease in rates in the summer.
2. The Eurozone is stagnating
The ECB’s latest quarterly outlook sets inflation at 2.3% this year - down from 2.7% in December - and revises the forecast for 2025 to 2%. The economy, meanwhile, is expected to expand by 0.6% in 2024 compared to 0.8% previously.
Most officials are converging on a timetable for the June rate cut, although some would like quicker action as the continent’s economy struggles to emerge from more than a year of stagnation.
The failure of the Eurozone economy to expand in the fourth quarter was due to the collapse in trade. The region’s outlook this year is not much better.
3. Unclear US job data
According to a report from the Bureau of Labor Statistics, nonfarm payrolls rose by 275,000 last month after a downward revision of 167,000 from the previous two months.
Digging beneath the surface, the data showed that part of the increase in the unemployment rate to 3.9% is due to people entering the workforce and not immediately finding employment.
Julia Pollak, chief economist at ZipRecruiter, noted that the continued decline in manufacturing employment remains a riddle despite heavy federal investment in the sector.
4. Uncertain future for China
This week, China held its 14th National People’s Congress, where it laid out plans for its economy, albeit with less detail than in the past.
The Economist’s editor-in-chief, Zanny Minton Beddoes, put this in the context of slower growth and the Chinese people’s “sense of loss of confidence”.
Meanwhile, consumer prices in China rose for the first time since August, breaking a string of contraction that has put pressure on the growth potential of the world’s second-largest economy.
The consumer price index rose 0.7% in February from a year earlier, according to the Office for National Statistics, recovering from the biggest drop since 2009 in January. Producer prices fell 2.7%, continuing the longest streak of declines since 2016.
“I think it is too early to conclude that deflation in China is over ”, said Zhang Zhiwei, president and chief economist of Pinpoint Asset Management. “Domestic demand is still quite weak. It takes time for the fiscal push to be transmitted to the economy and help domestic demand recover”.
Beijing has said it aims to boost economic growth this year by around 5%, similar to last year, although a more ambitious target this time.
Among other stimulus, authorities have detailed plans to issue 1 trillion yuan ($139 billion) in ultra-long-term special sovereign bonds and tap into additional funds unspent since late last year. Policymakers set a target inflation rate of 3%.
Unlike other countries, including the United States, which are struggling to contain price growth, China is facing a period of deflation after the initial push of the post-pandemic reopening. The risk is that lower prices will push consumers to accumulate more and more liquidity and companies to curb spending, further weighing on economic growth.
5. Argentina crisis
Consumers in Argentina are running out of options to protect themselves from runaway price increases as President Javier Milei’s austerity measures send the country deeper into recession.
Spending by small and medium-sized businesses – Argentina’s largest employment sector – slumped 25.5% in February from a year ago, the third straight month of double-digit losses.
Original article published on Money.it Italy 2024-03-09 15:24:19. Original title: Economia globale in pillole, 5 cose da sapere assolutamente
