The Global Economy Unpacked: 5 Key Developments

The Hot Topics of the Global Economy

To understand the current global economic landscape, a summary of the main events of the week can be enlightening.
From the US to the Eurozone, passing through the UK and the emerging markets, several nations observed by the markets played key roles, with the release of new economic data.

1.
Europe under Pressure, Between Inflation and Elections

The European week was marked first by the UK election, while the anticipation for the uncertain outcome of the French runoff grows.
The Labour Party of the new British Prime Minister Keir Starmer secured 412 out of 650 seats in the House of Commons, the highest number since Tony Blair’s triumph in 1997, marking a significant turnaround less than five years after their defeat.
The Conservatives obtained 121 seats, their worst performance ever.
The pound strengthened.

Meanwhile, inflation in the Eurozone slowed in June, adding to the evidence that price pressures are gradually moving towards the European Central Bank’s 2% target.
Consumer prices rose by 2.5% after increasing at a pace of 2.6% the previous month.
However, Lagarde has been cautious about future moves, signaling that a rate cut in July is unlikely.

2.
US, End of Resilience?

Hiring and wage growth declined in June, while the unemployment rate rose to its highest level since the end of 2021, reinforcing expectations that the Fed will begin cutting interest rates in the coming months.
The average employment growth over the last three months slowed to the lowest since the beginning of 2021, reflecting a labor market that cooled more in the second quarter than previously estimated.

The service sector experienced its fastest contraction in June in the last four years due to a sharp drop in economic activity and orders.
However, what alarms the US is the debt.
Powell stated that the level of indebtedness is becoming unsustainable, and some rating agencies have also sounded the alarm.

3.
Uncertainty in Asia

Household spending in Japan unexpectedly decreased in May, raising the likelihood that consumption will not be a key factor for the economy in the second quarter, complicating prospects for the central bank’s next interest rate hike.
In China, a plastic supply wave risks remaining unsold due to weak domestic demand, turning into a new trade challenge for the rest of the world.

Parts of the country’s petrochemical sector are operating at less than half of their capacity as producers cut production.
However, with the industry still expanding, this restriction is becoming harder to sustain.
Japan’s tax revenues reached another record in the year ending in March, a positive result partly driven by a weak yen and persistent inflation.

4.
Turkey, Turning Point on Inflation?

Turkish inflation slowed for the first time in eight months, a faster slowdown than expected from the peak reached in May.
This puts consumer prices on track for a sharp deceleration during the summer months.
Turkey is beginning to turn the page after two years of severe cost-of-living contraction caused by one of the world’s fastest price growth rates.

5.
Impending Wheat Crisis?

Norway is building a wheat reserve to prepare for a potential crisis, signaling deep concerns about food security beyond Norwegian territory.
Governments worldwide are worried about ensuring supplies for a growing population.
In recent years, supply chains have been hit by shocks like the Covid pandemic, Russia’s war in Ukraine, export bans on crops, shipping disruptions, and extreme weather conditions.

The agricultural and commodities sectors have faced several unexpected blows, and the surge in basic commodity prices could still disrupt global economies.