With collapsing oil and energy prices, shifting demographics (rise in the retiring population vs fall in the working age population), and strong currencies, among others; world economies struggle with growth rates, inflation and budget deficits. Despite slower growth rates, such strong economies still maintain stable growth levels in the third quarter.
Eurozone: Low inflation and unemployment rates
Inflation in the Eurozone was below 2pc in October since consumer prices were flat at 0pc. This will make the European Central Bank intensify its quantitative easing programme by the end of 2015. In addition, unemployment rates among the 19 single currency member states dropped to a three-year low to 10.8pc last month. Those figures suggest that the Eurozone is heading towards the right path of economic recovery.
“It is hard to find justification for the ECB’s apparently increasing worries in today’s inflation figures”, said Teunis Brosens at ING, according to the telegraph.
“Aside from headline inflation, which this year has been driven primarily by oil, services inflation has been moving sideways this year. Core inflation has even crept up rather than down, now trending around 0.9pc versus 0.7pc a year ago.”
Unemployment rates continue to decrease in the Eurozone area, yet, there is a wide gap between the Eurozone’s most robust and weakest economies. The lowest unemployment rates were in Germany, the strongest economy in the single currency area, which recorded 4.5pc; while the highest unemployment rates were in Greece, the weakest economy in the Eurozone, which reach 25pc.
Economic growth in Spain, the Eurozone’s fourth largest economy, has fallen to its lowest pace recording 0.8pc in the third quarter of the year. Annual growth surged to 3.4pc in the third quarter, compared to 3.1pc at the same time last year. Besides Spain’s high unemployment was down to a four year low at 21.2pc in the third quarter.
The economic recovery is being boosted by strong consumer spending and investment, but imports and exports are likely to have tumbled over the quarter, said Apolline Menut at Barclays, according to the telegraph.
Spain, like most global economies, has been affected by the slowdown of China and the emerging markets which apparently have driven its economic growth in recent years.
Despite the improving performance of the Spanish Economy, the European Commission has asked Madrid to re-write its national budget for 2016, implementing more cuts and raising revenues so as to abide by the EU spending rules. Yet, Madrid has claimed it will meet its mandated budget targets, and that the deficit will fall to -2.8pc in 2016.
The US: Less consumer spending
Meanwhile consumer spending increased less than expected in September. Purchases rose 0.1 per cent, the lowest gain since January, after hiking 0.4 per cent in August, Commerce Department figures showed Friday in Washington. American spending has been waning amid turmoil in financial markets after slowdown of the emerging markets. It seems that the Americans need wage increases in order to boost economic growth.
“There was a definite loss of momentum as we were coming out of the third quarter, but don’t worry too seriously about that,” said Scott Brown, chief economist at Raymond James Financial Inc. in St. Petersburg, Florida. “The job growth is positive, but we’ll need to see better wage growth down the line.”
Last Friday, the Labour Department report indicated that wages and salaries hiked 0.6 per cent in the third quarter and were up 2.1 per cent from the same time last year. Low inflation, however, balances weak income gains. The Commerce Department’s report indicated the price index tied to consumer purchases fell 0.1 per cent in September from the previous month, the first decrease since January.
Fed officials said last Wednesday that they will consider tightening policy at their next meeting in December, in order to reach their employment and inflation goals.
Low unemployment and inflation rates in 2015 have helped American consumers and have supported spending needed for economic growth. Disposable income increased 0.2 per cent in September compared to the previous month after adjusting for inflation. It was up 3.4 per cent over the past year, the most since February. The saving rate rose to 4.8 per cent compared to 4.7 per cent in August.
Canada: A slower growth
Canada, similarly, continues to grow but at a slower pace. Statistics Canada reported that real GDP hiked 0.1 per cent in August. That August growth would make the third-quarter of the year the strongest one, after the rebound of 0.4 per cent in June and 0.3 per cent in July. Such a sluggish growth in August was what Canadians expected after the falling oil prices.
“After the lows earlier in the year and highs of the June-July rebound, it was back to reality for the Canadian economy in August. And given the lingering effects of the oil price shock in some areas of the country, that reality appears to be one of very modest growth,” Canadian Imperial Bank of Commerce economist Andrew Grantham said.
The August increase was a result of the robust growth in manufacturing and retail sales as well as a continued surge in energy and mining output.
