Global business is experiencing a synchronized slowdown: Echo Week

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Just days after global finance chiefs described the massive economic collapse in Russia as a result of the war in Ukraine, a business survey could show a growing consistent recession.

This impression may appear on Tuesday – three months after the outbreak of the conflict – as the May Purchasing Managers’ Index is released within hours of the world’s major economies.

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Economists’ surveys on the possible outcomes of 15 indices across the United States and Europe have predicted a single fall.

The index, which is also being released for major Asian economies, will provide a company-centric perspective on how the impact of inflation caused by the conflict in Ukraine is pulling the legacy of the epidemic-crisis and China’s continued coronavirus lockdown.

Concerns that could follow are that stagnation – a harmful combination of rising prices, rising stagnation and rising unemployment – has infected financial markets in the past week and has already dominated a collapse of a group of seven finance ministers.

“Russia’s war on aggression is causing global economic disruption, affecting the security of global energy supplies, food production and exports of food and agricultural products, as well as the functioning of the global supply chain in general,” the G7 ministers said in a statement. Contact after their gathering in Germany.

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Businesses around the world may echo that lament as political leaders and executives join central bankers at the Swiss Mountain Resort in Davos for the World Economic Forum, which begins on Sunday.

What Bloomberg Economics says:

“China’s economy is tracking a much weaker path than we predicted just three weeks ago, when we lowered our growth forecast for 2022. April activity data shows that lockdowns under Covid Zero have done more damage than expected.”

-Chang Shu and Eric Zhu, economists. For a complete analysis, click here

Elsewhere, the release of the US Federal Reserve’s preferred price measure, possible interest rate hikes in New Zealand and South Korea, and the aftermath of Saturday’s election in Australia – which saw Prime Minister Scott Morrison vote for the Conservative Alliance – will probably focus investors’ minds.

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Click here for what happened last week, and what’s coming in the world economy wraps us up below.

The US economy

In the United States, next week’s Marquee report will release April earnings and spending, which also includes the Fed’s preferred inflation measure.

Although the personal spending price index, excluding food and energy, has been seen to cool year on year, the moderate forecast calls for a third-straight 0.3% monthly advance.

Explaining why such a move, Fed Chair Jerome Powell predicted a half-percentage point increase at the central bank’s policy meetings in June and July.

Wednesday’s release of the Federal Open Market Committee’s May discussion minutes could shed more light on what has become of a more aggressive policy response to high price pressures.

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Powell will be delivering “preliminary remarks” via pre-recorded video at 12:20 pm Washington time on Tuesday at an economic conference in Las Vegas. According to the Fed’s weekly agenda, he will not take questions after his appearance.

Among other tap data, Friday’s earnings and expenditure report predicted strong demand at the beginning of the second quarter, despite high inflation.

The government will also release April durable product orders and new-home sales figures. The S&P Global Early May Production and Services Index is set to be released on Tuesday

To find out more, read the full week ahead of Bloomberg Economics for the United States

Asia

In Australia, the lowest unemployment rate since 1970 was not enough to save Morrison’s job in Saturday’s national vote. Labor leader Anthony Albanese, who is ready to take power, has called for a change in policy to deal with rising wages and rising inflation.

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US President Joe Biden, seeking support for his Indo-Pacific Economic Framework, met with the new South Korean President Eun Sook Yol in Seoul on Saturday and began talks with Japanese Prime Minister Fumio Kishidar in Tokyo on Monday.

With both the Reserve Bank of New Zealand and the Bank of Korea meeting to decide on policy, runners ahead of the rate hike are expected to raise borrowing costs again.

Indonesia’s central bank has also joined, although most economists hope it will stop raising interest rates for now.

South Korea’s export figures will show how world trade is holding back amid the disruption caused by China’s lockdown in May. Inflation figures from Tokyo over the weekend will show how the price trend in the capital is evolving in May.

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To find out more, read the whole week ahead of Bloomberg Economics for Asia

Europe, Middle East, Africa

In Europe, Germany’s IFO Business Climate Indicator for May, due to Monday, is likely to show a decline from the previous month, ahead of the next day’s Purchasing Managers’ Indicators. The week in the major eurozone countries will be marked by a holiday on Thursday.

Many policymakers may steal the limelight at a time when global cost of living is becoming a shared concern about stability.

Bank of England Governor Andrew Bailey, who recently warned of an “apocalyptic” global risk from rising food costs, will speak to Bundesbank chief Joachim Nagel at a conference hosted by Austrian central bank governor Robert Holzman on Monday.

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President Christine Lagarde, who is scheduled to comment in Davos on Wednesday, will be one of several European Central Bank officials present.

Market volatility is of interest this week after G-7 ministers drew attention to the financial stability report presented by Sweden’s Riksbank on Tuesday and the ECB on Wednesday.

The Bank of Israel is expected to raise rates by at least 25 basis points on Monday, continuing the hiking cycle that began in April in the face of rising inflation.

Turkey’s central bank is likely to keep rates steady on Thursday for the fifth consecutive month, even as annual consumer inflation reaches 70% for the first time since the 2000s.

In Ghana, policymakers were seen hiking on Monday to curb inflation, an 18-year high of 23.6% – more than double the top edge of a target band. For Nigeria, this is probably a hold on Tuesday as it awaits a strong economic outlook.

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To find out more, read the whole week ahead of Bloomberg Economics for EMEA

Latin America

See first-quarter output data from Peru on Monday showing that growth has returned despite inflation, rising interest rates, and ongoing political unrest.

Reports of inflation in the region’s two largest economies could give some long-awaited good news for their respective central bankers: Mexico is seen posting a negative bi-weekly print, while Brazil’s monthly reading could be at a 12-month low.

Policymakers at both banks were initially slow to respond to the dramatic run-up in consumer prices starting in 2020, but economists are now seeing the second quarter see the highest inflation for both.

Later Tuesday, Chile’s central bank posted a survey of its merchants, when sales data from shopping centers and supermarkets were tapped from Argentina.

The ongoing strike by Brazil’s central workers could hold a lot of data, but Mexico will release trade, current accounts, retail sales, final first-quarter output, and the May 12 meeting minutes of Banksico.

The bank’s eighth consecutive rise has raised its key rate to 7%, and most analysts predict a further 150 basis points tightening – albeit some up to 250bps. Typically around 15,000 words, Banksiko minutes always give investors and analysts plenty to think about.

To find out more, read Bloomberg Economics for Latin America next week

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