Major economic news: US and German GDP shows that consumers are key

The US Department of Commerce now estimates that GDP grew by 1.3% in the first quarter, compared with an initial estimate of 1.1%. Growth in consumer spending rose to 3.8% from 3.7% in preliminary estimates. Federal and local government spending also increased more than originally anticipated.

Germany’s GDP, meanwhile, fell by 0.3% this quarter, according to revised figures, compared with the initial report of stagnation. This follows a 0.5% drop in the fourth quarter of 2022, meaning the country is in recession.

“Under the weight of massive inflation, the German consumer has fallen to its knees, dragging the entire economy with it,” says Andreas Scheuerle, an analyst at DekaBank in Frankfurt.

The global economy has been on a bumpy recovery path since the initial post-pandemic recovery as the war in Ukraine and the energy price shock reduced spending by households and businesses.

That said, there are some green shoots. Leading indicators such as the Purchasing Managers Index for major economies show that business activity picked up in the second quarter.

AND agreement to increase the US government debt ceiling to $31.4 trillion over two years seems to be getting closer, following talks between President Joe Biden and the leading Republican in Congress, Kevin McCarthy.

The deal would impose spending limits in many areas, a US official told Reuters. The official said there would likely be an increase in funding for military and veterans discretionary spending, and there would be no change in non-defense discretionary spending.

The deal is also likely to specify how much the government can spend on discretionary programs such as housing and education, according to a person familiar with the talks. However, this would not dictate expenditure on individual categories within these areas.

It is not clear how much time is left for Congress to finalize the deal. The State Treasury was given June 1 as the date on which it may become unable to pay all its debt obligations. But on May 25, he said he would sell $119 billion worth of debt that would collapse on that date, suggesting that June 1 may not be the deadline.

AND the decline in global demand for goods led to a sharp decline in the production of shipping containers, Financial Times reports. According to data from marine research consultancy Drewry, the production of standard-sized containers fell by 71% between the first quarter of 2022 and the same period this year.

The UK is no longer expected to enter a recession this yearsays the International Monetary Fund (IMF). Government moves to stabilize the economy and fight inflation mean GDP is likely to grow by 0.4% in 2023, the IMF says, instead of contracting by the 0.3% it predicted in April.

Tokyo’s headline consumer inflation rate fell in May, but the index, which removes fuel, has hit a four-decade high. This indicates mounting price pressure and may increase expectations of a move away from Japan’s very loose monetary policy.

New Zealand’s central bank has signaled the end of interest rate tightening, after an increase of 25 basis points, it raised them to an over 14-year high of 5.5%. The move went against market expectations in the bank’s most aggressive cycle of rate hikes since 1999.

South Africa’s central bank also raised its key interest rate to a 14-year maximum. An increase of 50 basis points is the “bitter medicine” needed to tame inflation, South African Reserve Bank Governor Lesetja Kganyago has said. Interest rates are currently at 8.25 percent, and the bank has raised its inflation forecasts for this and next year.

Emerging economies will continue to face tighter lending conditions as economic troubles spread from the US, according to Moody’s agency. The credit agency said US monetary policy, tensions in the banking system and the potential fallout from disagreements over the debt ceiling are contributing factors, adding that the US is on track for a mild recession in the second half of this year.

G7 members say they want to reduce risk to their relationship with China – but not separate themselves from it – in order to ensure economic resilience and security. This means diversifying supply chains to avoid lock-in to one country, especially for critical products such as microchips and minerals used in clean energy technologies.

Why exactly does the US have a debt ceiling? Everything is explained by the digital editor of the World Economic Forum in Strategic Intelligence, John Letzing.

Preliminary results from a four-day trial by British skincare manufacturer Five Squirrels suggest it has potential benefits for businesses as it encourages increased investment in equipment and training. It is one of many attempts at a four-day workweek that has attracted the interest of economists and companies keen to find a solution to slowing productivity growth in the UK and other Western economies.