May 9th, 2022
Top economics stories: Brexit drives rise in UK food prices, new report says; US consumer confidence falls; Concerns about global economic growth continue.
By Joe Myers
Writer, Formative Content
- This weekly wrapper brings you the latest economics stories from the world of economics and finance.
- Top economics stories: Brexit drives increase in UK food prices; US consumer confidence falls; Concerns about global economic growth continue.
1. Top global economics stories
Economists at Germany’s Deutsche Bank have warned that the US faces a recession next year as the Federal Reserve will be forced into aggressive monetary tightening in the face of rapid inflation.
Most Asian stocks fell on Wednesday as the US dollar hit a two-year high. Concerns over the global economy have seen investors seek safe havens, such as the dollar and government bonds.
Thailand has cut its economic growth forecast because of the impact of rising inflation and the war in Ukraine. Its finance ministry now expects GDP to rise by 3.5% this year, down from a forecast of 4% in January.
Russia is looking at adjustments to its foreign exchange controls to avoid situations where the rouble exchange rate deviates on a shadow market from official levels, Central Bank Governor Elvira Nabiullina said last week.
The Canadian dollar will remain at the centre of the country’s financial system, the central bank chief said on Monday, responding to questions about a Conservative leadership candidate’s pledge to make Canada the blockchain capital of the world. “There are promising benefits from innovation in the financial sector. Having said that, we certainly expect the Canadian dollar will remain at the centre of the Canadian financial system,” Tiff Macklem said in testimony before a committee of the House of Commons.
In the US, Lael Brainard has been confirmed as Vice-Chair of the Federal Reserve Board of Governors. However, COVID-related absences and political challenges threaten to delay three other nominees.
Australia’s core inflation has accelerated to its fastest pace since 2009.
Sales of new homes in the US fell to a four-month low in March. The drop suggests that rising borrowing costs and high prices are hitting the market.
2. Brexit-related trade barriers drive 6% rise in UK food prices
A new report from the London School of Economics Centre for Economic Performance says that Brexit-linked trade barriers have driven a 6% increase in UK food prices.
Price rises on products typically imported from the European Union – such as fresh pork or tomatoes – were more pronounced than on items that come from other nations, the report found. The study covered the two years to the end of the 2021 and aimed to strip out the impacts of COVID-19.
“Additional barriers at the border such as checks, increased waiting times and additional paperwork are costly for producers,” the researchers said. “Firms could change the partner countries from which they are importing, or purchase domestically. But assuming they were operating in the most efficient manner initially, any change is going to incur extra costs. These costs may then be passed on to consumers.”
However, Brexit is not the primary driver of rising inflation and the UK’s cost-of-living crisis, the group behind the research said.
3. US consumer confidence falls in April
Independent business research group The Conference Board’s US Consumer Confidence Index dipped slightly in April, after rising in March.
“The Present Situation Index declined, but remains quite high, suggesting the economy continued to expand in early Q2,” said Senior Director of Economic Indicators Lynn Franco. “Expectations, while still weak, did not deteriorate further amid high prices, especially at the gas pump, and the war in Ukraine. Vacation intentions cooled but intentions to buy big-ticket items like automobiles and many appliances rose somewhat.
“Still, purchasing intentions are down overall from recent levels as interest rates have begun rising. Meanwhile, concerns about inflation retreated from an all-time high in March but remained elevated. Looking ahead, inflation and the war in Ukraine will continue to pose downside risks to confidence and may further curb consumer spending this year.”
Economics research to read this week
How does your degree impact your earnings? New British research explores.
A VoxEU column looks at the lessons from COVID-19’s impact on trade for future crises.
What are the potential costs of cutting off Russian energy imports? Researchers take a look at firm-level data.
This article was originally published by World Economic Forum, on April 28, 2022, and has been republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License. You can read the original article here. The views expressed in this article are those of the author alone and not of the WorldRef.
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