Recession: Signs strengthen: A recession may be on the horizon for Euro area



Bloomberg — The European Central Bank boosted its key interest rate by a half percentage point, the biggest increase since 2000 and the first in more than a decade as it joins other world monetary authorities trying to rein in rapid inflation.
In the UK, inflation hit a four-decade high, placing greater pressure on the Bank of England to respond with a large rate hike of its own next month. However, the Bank of Japan — facing more moderate inflation as well as a weaker currency — remains intent on adhering to its ultra-low monetary policy as concerns mount about a hard landing for the world economy.
The latest S&P Global indexes this week showed business activity is deteriorating — with gauges contracting for the US and euro area.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy:
Europe
BloombergEconomists are revising their forecasts for the path of euro-area interest rates, but disagree over how fast and far the ECB will ultimately increase borrowing costs. The central bank on Thursday raised its deposit rate to 0% and said future moves will be “data-dependent” and determined by a “meeting-by-meeting approach.”

BloombergPrivate-sector activity in the euro area unexpectedly shrank for the first time since the pandemic lockdowns of early 2021, adding to signs that a recession might be on the horizon.

Bloomberg
UK inflation hit a new 40-year high in June, intensifying the cost of living crisis and heaping pressure on the Bank of England to deliver an aggressive interest-rate increase next month.

BloombergBritish workers rejoined the labor market at the fastest pace since before the pandemic as the cost of living crisis drew more people into jobs. The count of working-aged people outside the jobs market fell by 144,000 in the quarter through May, while employment rose 296,000.

USBloombergBusiness activity contracted in July for the first time in more than two years as manufacturers and service providers signaled sluggish demand that only adds to heightened recession anxieties. The S&P Global flash composite purchasing managers output index slid 4.8 points to 47.5, the weakest reading since May 2020.

BloombergSalaries for workers in Austin and other large Texas cities are climbing toward Silicon Valley levels as a surge in corporate relocations to the Lone Star State drives up demand for employees. Office jobs in the capital city now command almost 25% higher pay on average than they did in 2019, according to an analysis by Dallas-based firm ThinkWhy.
AsiaBloombergBank of Japan Governor Haruhiko Kuroda emphasized his determination to stick with rock-bottom interest rates even if it means a weaker yen after the bank’s latest price forecasts left the door open to continued speculation over policy change. The BOJ is the last holdout on rates among major developed economies.
Bloomberg
South Korea’s early trade data showed exports remained resilient in the face of risks to global economic growth and China’s Covid lockdowns that are disrupting supply chains. Exports advanced 14.5% in the first 20 days of July from a year earlier.
Emerging Markets
BloombergAngolan and Gabonese sovereign bonds are trading at distressed levels, raising the number of emerging-market nations at risk of default to a record. The widening of the distressed club to include oil-producing states shows how few nations are being spared the concern that’s engulfing the developing world about the risk of a global recession and accelerating inflation.

Bloomberg Mexico’s inflation sped up more than expected in early July to the fastest pace since early 2001, boosting expectations that the central bank will match June’s record rate hike at its August meeting.

BloombergRussia and Ukraine reached a deal aimed at releasing millions of tons of grain from Ukraine’s Black Sea ports that, if implemented, would mark a major step toward shoring up global food supplies.

WorldBloombergThe ECB finally joined the global rate-hike club this week, increasing rates by an unexpectedly large 50 basis points. That move was copied by Denmark later that day. Elsewhere, Nigeria raised borrowing costs by a percentage point, South Africa by 75 basis points and Eswatini by 50 basis points. Russia’s central bank went the opposite direction, cutting its benchmark to 8% — below their level before the invasion of Ukraine.

BloombergFor decades, US households bailed out the global economy when it needed a consumer of last resort. America’s latest spending spree has come with a sting in the tail. In effect, the US has been exporting inflation during its pandemic rebound.

BloombergUS Treasury Secretary Janet Yellen called on “trusted” US allies to strengthen trade relationships to shore up global supply chains disrupted by the pandemic, worsened by Russia’s war in Ukraine and threatened longer term by a on China.
–With assistance from Sumio Ito, Heejin Kim, Sam Kim, Carolynn Look, Reade Pickert, Áine Quinn, Alexander Weber, Philip Aldrick, Henrique Almeida, Onur Ant, Andrew Atkinson, Maya Averbuch, Matthew Burgess, Christopher Condon, Zoe Schneeweiss, Enda Curran, Megan Durisin, Toru Fujioka, Selcuk Gokoluk, David Goodman, Shelly Hagan and Ben Holland.