Inflation rises as Global Economic Growth is Curbed

According to business surveys released Tuesday, growth in the US and worldwide economies slowed in May as high prices and increasing interest rates dampened demand.

According to S&P Global surveys, business activity in services firms in the United States, the eurozone, the United Kingdom, and Australia all increased more slowly in May as prices rose. According to the firm's purchasing managers index polls, industries in key global economies are experiencing supply-chain disruptions as a result of Covid-19 increases and the Ukraine conflict, as well as increasing gasoline prices and rising salaries. Separate data released in the United States on Monday indicated a slowdown in a portion of the housing market. The Commerce Department reported that sales of newly constructed single-family houses fell for the fourth consecutive month in April, falling 16.6% from the previous month to a seasonally adjusted annual rate of 591,000. That was the slowest rate of sales since the outbreak began in April 2020.




This year, the global economy will face a slew of challenges, including China's Covid-19 lockdowns, surging oil and food prices, Russia's invasion of Ukraine, and central banks' widening efforts to tackle excessive inflation by raising borrowing costs.

Some companies are preparing for a severe slowdown in growth or a downturn in the economy. Best Buy Co., an electronics retailer, reported lower sales and profitability in the most recent quarter and stated its fiscal year results will be worse than expected due to additional sales campaigns and higher supply-chain expenditures. Abercrombie & Fitch Co. suffered a quarterly deficit as freight and product expenses increased.


In the United States, S&P Global said that its composite purchasing managers index, which gauges activity in both the manufacturing and service sectors, fell to 53.8 in May, down from 56.0 in April and the slowest pace of expansion in four months. S&P Global's index for the eurozone's services and manufacturing sectors decreased to 54.9 in May from 55.8 in April, according to the company. A value above 50.0 indicates an increase in activity, whereas a figure below that indicates a decrease. While the polls indicate that growth will continue in the second quarter, they appear to have overstated the global economy's strength in the first three months of the year. Economic production in the 38 countries of the Organization for Economic Cooperation and Development was just 0.1 percent higher in the three months through March than it was in the final quarter of 2021, a marked deceleration from the 1.2 percent rise seen in the three months through December. According to a study released Tuesday, CEOs at 56 of Europe's largest firms have become far more pessimistic about their prospects; in Italian manufacturing. According to Capital Economics economists, the PMIs have historically predicted growth in affluent nations of approximately 0.5 percent. "This reflected volatility in imports and inventories, as well as the effects of Covid limitations," Ariane Curtis said, "all of which should decrease from now on, allowing the PMIs to offer a more accurate steer."


According to purchasing managers' polls, the United Kingdom has suffered the greatest reduction in activity as a result of the invasion. According to S&P Global, the country's PMI fell to 51.8 in May from 58.2 in April, the lowest level in 15 months. In April, household energy prices soared, pushing inflation to a four-decade high.


"In the United Kingdom, we are seeing a very large negative impact on real wages due to rising prices of commodities we import, particularly energy," Bank of England Governor Andrew Bailey said in a speech on Monday. "We expect this to have a significant impact on demand."


The United Nations this Monday dropped its prediction for global economic growth in 2022 to 3.1 percent from 4 percent, and its forecast for US economic growth to 2.6 percent from 3.5 percent, citing the conflict's impact on oil and food prices. These concerns are shared by business executives. In the six months since the last poll, chief executive officers at 56 of Europe's largest corporations have become substantially more pessimistic about their prospects, according to a study issued Tuesday by the Conference Board. The confidence index dropped from 63 to 37, with a result below 50.0 suggesting that more CEOs are pessimistic about the future than positive.

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