The economic situation of the world

Inflation in the euro area stood at 0.4% in July, rising from 0.3% in June and 0.1% in May. But the data released by Eurostat conceals profoundly different situations between individual countries. In fact, they range from countries like Greece or Cyprus where prices are down by 2% compared to the previous year, to others like Belgium, Holland or Austria which, conversely, recorded increases of over 1.5%. In the middle the heavyweights. Germany marks a zero change, Italy a rate of 0.8%, France of 0.9%, Spain on the contrary a minus 0.7%.

Price behaviour is under close scrutiny after massive interventions in support of the economy by central banks and governments. Actions that could also have the effect of pushing prices up excessively, above the 2% which is considered an optimal value. At the moment, however, price flares can only be found in Belgium (with an inflation rate that rose from 0.2 to 1.7% in a single month) and, to a lesser extent, in France (from 0.2 to 0, 9%). Outside the euro area, the leap in inflation recorded in Great Britain, which rose to 1% from 0.6% in June, should be noted. The mismatch in the calendar of balances compared to previous years makes the interpretation of these data particularly difficult. In recent weeks, Bank of England chief economist Andy Haldane spoke of the risk of strong inflation if the recovery were to occur faster than expected as some UK indicators were suggesting.

Today the data on orders to manufacturing industries arrived from Germany. Positive but not exciting, in June orders were in fact up by 1.4% compared to May, mainly thanks to domestic demand. Outside Europe, the new liquidity injection decided by the Chinese central bank should be noted, which placed on the market 150 billion yuan, that is to say just under 20 billion euros. The operation follows the larger one of two days ago when the equivalent in yuan of 100 billion euros was entered. Meanwhile, international trade continues to suffer. Japan recorded a drop in its exports of 19.2% in July, a figure that was in any case better than forecasts which expected a contraction of more than 20%.
Finally, first advances on the Gross Domestic Product of the second quarter of Brazil, one of the countries most affected by the Covid emergency at the moment. The decline could fluctuate between 8 and 10% while, according to the Brazilian statistical institute, the whole of 2020 should close with an economy contraction of 4.7%. The official results will be published on September 1st.

By Domenico Greco

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