Charting the Global Economy: Inflation Hits Incomes and Spending

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(Bloomberg) — US consumer spending merely edged up in April as war-driven inflation pressures sapped incomes and pushed the saving rate to an almost four-year low.

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Disposable incomes, after adjusting for price changes, slid for a third straight month and suggested household demand may stay subdued without some relief from inflation.

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Price pressures also mounted in France, Italy and Spain. Next week’s inflation figure for the 21-nation euro zone as a whole is set to push further beyond the 3% level it reached in April.

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

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US

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Inflation-adjusted consumer spending increased just 0.1% last month, while the personal consumption expenditures price index rose 3.8% from a year earlier, the most since 2023. The figures suggested consumers are facing increasing pressures as uneven hiring trends and the rising cost of living erodes incomes and savings.

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A combination of factors including bad weather, tariffs and a dwindling cattle herd are already pushing up grocery prices at an above-average pace. In April, they rose by the most in nearly four years, and economists say the impact of the Iran war and a potential El Niño weather pattern will only add to pressures into 2027.

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Europe

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Inflation jumped in France, Italy and Spain, backing the case for the European Central Bank to raise interest rates for the first time since 2023. Propelled by the war-induced surge in energy costs, consumer prices rose 2.8% from a year ago in May in France, 3.3% in Italy and 3.6% in Spain.

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French consumer confidence fell more than expected in May, underscoring risks to the euro area’s second-largest economy as the effects of the Iran war spread. France is under mounting pressure from the fallout of the Iran war, with businesses losing confidence and increasingly planning to raise prices.

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Finland’s economy clocked in broad-based growth in the first quarter, providing some relief to a country that has struggled with rising public debt after years of low growth. Output in the Nordic nation is growing for the second consecutive quarter in a turnaround for what’s been Europe’s worst performing economy since 2020.

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Norway’s economy expanded somewhat less than expected last quarter owing mainly to slowing car sales and lower power production, reducing the odds that the nation’s central bank will extend tightening already next month.

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Asia

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China let the interest rate on a one-year policy loan to banks decline to a record low, according to people familiar with the matter, a sign Beijing is stepping up efforts to support an economy that’s losing momentum.