Charting Global Economy: Inflationary Pressures Keep Building

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Inflation continues to quicken around the world, upping pressure on some central banks to boost interest rates.

Higher inflation may persuade monetary authorities in Mexico and Colombia to hike borrowing costs further and faster. In the U.S., consumer-price increases are broadening out beyond categories associated with economy’s reopening, damping sentiment. 

Along with strained supply chains and the delta variant, price pressures represent another risk to global growth, the International Monetary Fund said, prompting the lender to cut its forecast for this year.

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

U.S.

Prices paid by consumers rose in September by more than forecast, resuming a faster pace of growth and underscoring the persistence of inflationary pressures in the economy. Hotel fares fell, reflecting the impact of the delta variant on travel, but inflation is broadening out beyond categories associated with reopening.

Consumer sentiment fell unexpectedly in early October to the second-lowest level since 2011, as Americans grew more concerned about both current conditions and the economic outlook. Consumers expect inflation to rise 4.8% over the next year, the highest since 2008, the report showed.

Europe

British companies pushed the number of workers on payrolls above pre-coronavirus levels last month, an indication of strength in the labor market that may embolden the Bank of England to raise interest rates.

Germany’s leading research institutes slashed their joint 2021 growth forecast for Europe’s biggest economy as supply logjams delay the nation’s recovery into next year. The downgrade to a 2.4% expansion in gross domestic product, from 3.7% previously, reflects a relentless shortage of inputs, a lack of shipping capacity and -- more recently -- a spike in energy costs that is threatening rebounds across the globe.

Asia

The number of vessels waiting to enter one of the world’s busiest ports jumped to the most since August, threatening to further snarl global supply chains strained by a surge in consumer demand for everything from cars to computers.

China’s credit growth slowed in September, as weakness in the property market amid the Evergrande crisis weighed on financing and lending activities, despite the central bank’s call to stabilize credit expansion.

Emerging Markets

Investors are betting that the two central banks lagging behind Latin America’s rush to raise interest rates are set to pick up the pace. As inflation accelerates, policy makers in Colombia and Mexico are coming under increasing pressure to hike further and faster.

Chile’s central bank stunned economists with a bigger-than-expected interest rate hike for the second straight meeting and signaled it will remove stimulus even faster as inflation expectations soar above target.

World

The International Monetary Fund expressed concern the global economic recovery has lost momentum and become increasingly divided, even as it stuck by its prediction for a robust rebound from the Covid-19 recession. The Washington-based lender now expects output to expand 5.9% worldwide this year, down 0.1 percentage point from what it anticipated in July and a bounce from the 3.1% contraction of 2020.

Just because pandemic inflation is transitory doesn’t mean it’s going away anytime soon. That’s the awkward conclusion that policy makers and investors are arriving at, as prices accelerate all over the world.

©2021 Bloomberg L.P.