Take Two: US consumer confidence falls, G7 plans ‘Belt and Road’ rival
What do you need to know?
The effect of sustained high inflation and the perceived threat of recession were reflected in weaker US consumer confidence readings for June. The Conference Board index fell more than expected to a 16-month low of 98.7, from May’s 103.2, while a separate measure that tests confidence for six months out fell more sharply. Federal Reserve Chair Jerome Powell acknowledged the risk that action to rein in prices could spark an economic contraction, but argued the risk was greater of leaving inflation untamed. His comments, at a European Central Bank (ECB) conference in Portugal, were echoed by ECB President Christine Lagarde who warned the low inflation of the pre-pandemic era would not quickly return.
Around the world
China manufacturing activity swung into growth territory in June, rising to 51.7 from 48.1 in May, according to the Caixin Purchasing Managers’ Index (PMI). That was the fastest pace of expansion in 13 months and above analysts’ expectations. Official government data had already indicated a rebound in both manufacturing and services activity for the month, with the National Bureau of Statistics reporting a particularly sharp rise in services and construction PMI, to 54.7 from 47.8 in May. Manufacturing PMIs from Japan and South Korea both showed expansion slowing in June but remained above 50, indicating growth.
Figure in focus: $600bn
Leaders of the Group of Seven (G7) nations have pledged to raise $600bn to finance infrastructure in middle- and low-income countries, in what is being seen as an answer to China’s Belt and Road project. The money for the Partnership for Global Infrastructure and Investment will come from public and private funds over five years, and seek to tackle climate change, improve global health, build digital infrastructure and drive equality. US President Joe Biden said the scheme would allow developing countries to “see the concrete benefits of partnering with democracies”.
Words of wisdom
Skimpflation: A term suggesting that companies are cutting back, or skimping, on what they provide to their customers, while continuing to charge the same amount or more. While shrinkflation generally refers to products shrinking in physical size, while the cost remains the same, skimpflation relates to the quality of the product or the service. Examples include consumers waiting longer for items they have ordered to be delivered, airlines cancelling flights and hotels reducing the frequency of housekeeping services, as companies struggle with rising costs and labour shortages.
What’s coming up
On Tuesday, June services and composite PMI data are reported for Japan, China, the Eurozone and the UK, followed by the US services and composite PMI on Wednesday. The minutes of the latest Federal Open Market Committee meeting are also published on Wednesday. On Friday, Japan publishes its Economy Watchers Survey, which is designed to give a regional picture of economic trends within the country. US unemployment data is also released on Friday.