The IMF boosted its global inflation forecast for next year – to 5.8% from the 5.2% predicted three months ago – and said it sees consumer price increases lingering well above central bank targets in most countries until 2025. What’s more, the institution now sees global growth of just 2.9% for next year, down slightly from its earlier outlook, and below the 3.8% average of the two decades before the pandemic. The US was one of the few countries where the IMF upgraded its growth prediction, thanks to resilient consumer spending in the world’s biggest economy.
Sticking to the US, consumer prices rose by 3.7% in September, matching the annual pace set in August and defying expectations for a slim slowdown to 3.6%. The news underscores how a strong labor market is continuing to boost consumer spending and keep price pressures elevated. Core inflation, which strips out volatile food and energy prices, came in at 4.1% – in line with economist estimates and down from August’s 4.3%. Following the data’s release, traders modestly increased bets that the Federal Reserve (the Fed) would hike rates again before year-end, though the odds are still around 50/50.
The Fed’s most aggressive rate-hiking run in decades has resulted in huge losses in the Treasury market over the past two years. US government bonds with maturities of ten years or longer, which are highly sensitive to changing interest rates, have now declined by a stunning 46% since their peak in March 2020. That’s just shy of the 49% drop in US stocks following the burst of the dot-com bubble at the start of the century.
China, which drove the luxury industry’s record-breaking sales since 2020, relaxed its pandemic restrictions this year. But economic troubles dampened consumer confidence, leading high-end goods conglomerate LVMH to report a nasty sales slowdown in Asia (excluding Japan). And because that’s LVMH’s prime market, the firm’s overall revenue grew just 9% last quarter from the same time last year – roughly half the pace notched in the first half of the year.
Oil prices have been climbing since the summer on the back of dwindling stockpiles and supply cuts from Russia and Saudi Arabia. And after taking a little breather at the start of the month, oil prices jumped again last week with renewed instability in the Middle East, which accounts for nearly one-third of the world's oil supply. Although geopolitical events usually cause only temporary shifts in oil prices, today’s low global oil inventories mean that any potential supply disruptions could have an outsized effect on the market.
China’s Golden Week holiday was supposed to showcase the country’s long-awaited recovery, with revelers splashing enough cash to give the world’s second-biggest economy a much-needed boost. Just over 800 million domestic trips were made over the eight-day vacation, bringing in $103 billion in domestic tourism revenue. That landed short of official projections and was only a tiny bit better than the pre-pandemic total in 2019 – despite this year’s celebrations lasting a day longer. That’s a sign that China’s economy as a whole is still far from fighting fit.
