Charting Global Economy: U.K. Inflation Soars, China Cuts Rates

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The fastest inflation in three decades and a booming labor market are adding pressure on the Bank of England to raise interest rates.

Soaring energy costs are also contributing to decades-high inflation in Germany at the producer level, while China’s central bank reduced interest rates to stoke its economy.

Meanwhile, expensive crude oil risks driving up global food prices that are already near a record high.

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

Europe

Britain’s inflation rate surged unexpectedly to the highest since 1992, sharpening a squeeze on households and adding to pressure on the government and Bank of England to respond.

Britain’s labor market grew strongly despite a surge in coronavirus infections late last year, with vacancies hitting a record 1.25 million in the fourth quarter and unemployment falling unexpectedly. 

German producer price inflation rose in December by the most in data back to 1949, mainly due to rising electricity and gas costs. Factory output prices surged 24.2% from a year earlier.

Unemployment in the European Union may be declining, yet that doesn’t take into account about 7.5 million people who are willing to work but have given up on searching for a job. The so-called underemployment rate was worse in Spain, Italy and Greece at the end of the third quarter.

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Asia

China’s economy grew at a strong pace of 8.1% in 2021, a number seemingly at odds with headlines about a crashing property market and a crackdown on big technology companies. 

Containers are stacking up at the already backed-up Shenzhen port in China as congestion in the U.S. and Europe ripples back to Asia, delaying ships picking up goods from the manufacturing and technology hub. Manufacturers in southern China are currently making a last push to ship out goods before the Lunar New Year holiday which starts next week.

U.S. & Canada

With the midterm elections looming in November, the Biden administration is under increasing pressure to show it’s willing to punish China for not holding up its end of the bargain in their trade agreement signed two years ago. 

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The era of historically low interest rates, which inflated Canadians’ wealth and facilitated their spending, is coming to an end. As early as next week, the Bank of Canada will start a campaign of tighter monetary policy that will test the country’s debt-laden consumers and reveal whether its robust economic recovery has staying power.

Emerging Markets

Indonesia’s central bank gave the first signs Thursday that it will begin normalizing policy, even as it left its benchmark interest rate unchanged. In a briefing in Jakarta, Governor Perry Warjiyo said Bank Indonesia will start raising banks’ reserve requirement ratio, hiking it to 5% in March with additional increases to come.

World

China, in an effort to bolster economic growth, became the first central bank to cut rates in 2022. Ukraine and Sri Lanka both hiked this week, following peers in South America and eastern Europe to use their initial monetary policy meetings of the year to increase borrowing costs to temper surging inflation.

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Near-record food prices risk climbing further as soaring crude oil increases the appeal of turning more agricultural commodities into biofuels. Benchmark palm oil futures in Kuala Lumpur traded near a record, raw sugar hovered around a two-week high in New York, while soybeans, soybean oil and corn climbed in Chicago. 

Ocean shipping rates are expected to stay elevated well into 2022, setting up another year of booming profits for global cargo carriers — and leaving smaller companies and their customers from Spain to Sri Lanka paying more for just about everything.

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