Charting the Global Economy: ECB Lowers Rates as Inflation Wanes

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(Bloomberg) — The European Central Bank reduced interest rates for the third time this year as a hastier retreat in inflation allows policymakers to offer support to the region’s stuttering economy.

UK inflation slipped below the Bank of England’s target, fueling bets that central bankers will reduce borrowing costs at their final two meetings of the year. Meanwhile, US retail sales strengthened at the end of the third quarter in a sign of robust consumer spending.

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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  

The ECB cut its key deposit rate by a quarter-point to 3.25% and noted the process of taming prices should be complete “in the course of next year” — tweaking its previous language for that landmark to only be reached in the second half of 2025. The move follows a slump in inflation to below 2% for the first time since 2021, alongside softer private-sector activity and cracks in the so-far resilient jobs market.

UK inflation slipped below the Bank of England’s 2% target for the first time in more than three years, spurring investors to bet on a quicker pace of interest-rate cuts in the coming months.

While policymakers in Washington or Beijing might have been pricing in the European Union’s slide into ineffectiveness for years, it has taken the politicians charged with actually steering the European economy some time to accept the seriousness of the challenges they face. But they are starting to get it now.

Britain’s lowest-paid workers are enjoying red-hot pay growth, thanks in part to a huge minimum-wage increase in April. That’s good news for households struggling after a brutal cost-of-living crisis, but not for the Bank of England’s inflation fight. 

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Asia

Japan’s exports declined in September by the most since February 2021, sapping momentum from the country’s economic recovery as global demand weakened. Shipments to China sank 7.3%, while those to the US and Europe fell 2.4% and 9%, respectively.

China’s export growth unexpectedly slowed in September, curbing a trade rebound that has been a bright spot for a weakening economy that policymakers are relying on manufacturing to power.

China’s armed forces held drills off Taiwan that they said were intended as a warning to halt “separatist acts” — a move coming just after the archipelago’s president vowed to stand up to challenges from Beijing. The exercises on Monday involved army, navy, air and missile forces, a spokesperson for the Chinese military said in a statement on social media, adding the drills were “a stern warning” to those pursuing independence.

US & Canada

US retail sales strengthened in September by more than forecast in a broad advance, illustrating resilient consumer spending that continues to power the economy. Following the report, the Atlanta Fed’s GDPNow forecast penciled in a 3.6% annualized increase in personal consumption for the third quarter, which would be the strongest pace this year.

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All but one of Canada’s six biggest lenders now expect the central bank to cut borrowing costs by half a percentage point after inflation fell below the policymakers’ 2% target for the first time in more than three years. The shift highlights a growing consensus that a gradual easing pace from policymakers may not be sufficient to prevent a sustained undershoot of the inflation target as Canada’s economy continues to weaken.

Emerging Markets

Peru’s economy grew more than expected in August compared to a year earlier, as growth continues to be surprisingly robust following a recession in 2023. Growth has been boosted by higher public spending that has impacted Peru’s deficit, which rose to 4% of GDP in August, exceeding the legal limit of 2.8%.

World

Outside of the ECB, Thailand surprised with a quarter-point rate cut. The Philippine central bank lowered rates for the second time this year, while Namibia and Chile also reduced borrowing costs. Singapore kept its monetary settings unchanged, while Indonesia and Turkey and Egypt also held.

Sales of Apple Inc.’s newest iPhones in China are up 20% in their first three weeks compared with 2023’s model, a positive sign for a device that struggled this year to gain traction in the world’s largest smartphone market. While just a three-week snapshot, the data suggests Apple’s 2024 launch is faring better than last year’s.

—With assistance from Philip Aldrick, Irina Anghel, Erik Hertzberg, Kamil Kowalcze, Yian Lee, Alessandra Migliaccio, James Mayger, Tom Rees, Greg Ritchie, Marcelo Rochabrun, Vlad Savov, Zoe Schneeweiss, Craig Stirling, Jorge Valero and Erica Yokoyama.

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