Charting The Global Economy: Inflation Cools In US And UK

Measures of inflation eased in the US and UK last month, propping up bond prices after deep selloffs and bolstering bets on interest-rate cuts.

In the US, the core consumer price index — which strips out food and energy costs — stepped down for the first time in six months, restrained by cheaper hotel stays, a smaller advance in medical care services and relatively tame rent increases. UK inflation unexpectedly cooled for the first time in three months thanks to softer travel costs.

Meanwhile, China's economy — unadjusted for price changes — clocked in last year at the second-slowest pace since it started shifting to a market economy in the late 1970s. While real growth reached 5%, the economy grew just 4.2% when adjusted for deflation.

Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:

US

Consumer prices rose in December by less than forecast, a welcome stepdown that helped arrest a deep selloff in bond markets and reinvigorate bets that the Federal Reserve will cut interest rates sooner than previously thought.

When Fed officials gather in two weeks they're likely to ponder a puzzling trend in markets: Since September, as they lowered short-term interest rates by a full percentage point, longer-term government bond yields moved by a roughly equal amount — but in the opposite direction. To some on Wall Street, the mismatch is evidence the US central bank misread the economy and went too far with rate cuts.

The very richest Americans are among the biggest winners from President Joe Biden's time in office, despite his farewell address warning of an “oligarchy” and a “tech industrial complex” that threaten US democracy.

Europe

UK inflation unexpectedly cooled for the first time in three months in December, prompting traders to increase bets on Bank of England interest-rate cuts this year.

Germany's economy shrank for a second consecutive year in 2024 and is unlikely to grow much in 2025, laying bare the challenge for the country's new government once snap elections are held in February. Gross domestic product fell by 0.2% after dropping 0.3% in 2023.

UK retail sales posted a surprise fall around last month's crucial Christmas period in a fresh setback for the Labour government's hopes of reviving economic growth. Despite growing real incomes, households are in cautious mood amid warnings of an inflation resurgence and expectations of slower declines in borrowing costs.

Asia

President Xi Jinping's government reached last year's 5% growth target, a well-telegraphed victory that came as little surprise. The snapshot from the National Bureau of Statistics showed China's two-track economy continued to be powered by trade while consumer spending remained muted. However, nominal GDP growth — unadjusted for price changes — slowed to 4.2% in 2024, the second-weakest pace since China began transitioning to a market economy in the late 1970s.

China's trade surplus soared to a record last year, driven by strong exports that boosted the economy but may soon be threatened by the incoming Trump administration. Strong demand from overseas has helped provide growth for a domestic economy weighed down by a yearslong housing crisis. Exports accounted for nearly a quarter of the economy's expansion in 2024.

Emerging Markets

Israel and Hamas agreed to free dozens of hostages and pause the war in Gaza that's killed tens of thousands of people in the last 15 months and caused turmoil across the Middle East. A ceasefire will start Sunday — a day before Donald Trump succeeds Joe Biden as US president — and last six weeks, Qatari and American officials, who mediated between the warring sides, said.

Israel raised a record amount of debt last year to fund its multi-front war against Hamas and other Iran-backed militias. The government borrowed 278.4 billion shekels ($75.9 billion), surpassing the country's previous record of 265 billion shekels in 2020 during the Covid pandemic. Most of the borrowing — about 81% — was done in Israel's local bond market.

World

The International Monetary Fund upgraded its global growth forecast for this year, spurred by stronger-than-expected US demand and slowing inflation worldwide that will let central banks continue to cut interest rates.

Indonesia unexpectedly lowered interest rates, while Romania kept borrowing costs unchanged. The Bank of Korea held rates steady as it monitors the currency and political turmoil, while Poland and Kazakhstan stood pat.

China's quest to feed itself has taken it as far as Kenya's macadamia nut groves and Bolivia's cattle ranches, as part of a push in recent years to diversify food sources away from traditional Western suppliers. The market-share loss for US-allied nations is a win for countries from the Global South, which Beijing has sought to court as geopolitics increasingly cleaves the world into distinct blocs.