US Inflation Drops Below 3% as UK Economy Leads G7 Growth

Published: August 16, 2024 · Updated: June 3, 2025

In a week marked by significant economic developments, the United States has reported a notable decrease in inflation rates, while the United Kingdom emerges as the fastest-growing economy among G7 nations. This summary provides key insights into these crucial shifts in the global economy for the week.

US Inflation Declines Below 3%

The latest report from the Labor Department indicates that US inflation has slowed to an annual rate of 2.9%, marking the lowest level seen in nearly three and a half years. This decline raises the possibility that the Federal Reserve may consider cutting interest rates as early as next month.

Economists observed a slight increase in consumer prices for the month of July, driven primarily by a 0.4% rise in shelter costs. However, the overall consumer price index recorded a modest increase of just 0.2%. Scott Anderson, chief economist at BMO Capital Markets, noted, "This report shows continued progress towards the Fed’s inflation goals." While the diminishing inflation rate suggests a favorable environment for potential rate cuts, there are still concerns regarding the persistence of inflation above the Fed’s target of 2%.

Over the last three months, the consistency of consumer price stability, alongside a modest increase in producer prices, points toward a downward trend in inflation. Despite this positive development, experts remain cautious, indicating that expectations for a substantial rate cut in September may still seem optimistic.

UK’s Economy Exhibits Strong Growth in H1 2024

Across the Atlantic, the UK has reported impressive economic growth, leading its G7 counterparts. The country’s gross domestic product (GDP) grew by 0.6% from April to June this year, attributing this growth to robust performance in the services sector, particularly in areas such as scientific research, information technology, and legal services. Overall, the UK’s economy saw a growth rate of 1.3% in the first half of 2024, bouncing back following a recession in late 2023. The new data comes ahead of impending elections and serves as a boost to Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves. As they prioritize economic growth, they anticipate significant decisions, including potential tax increases, as a means to sustain momentum. However, experts caution that sustaining this growth may pose challenges, raising the likelihood that the Bank of England might hold off on further interest rate cuts, especially following a stall in growth due to weaker service sector performance earlier in the year.

Global Economic Highlights

A selection of additional economic updates from around the globe provides a broader perspective on current trends:

• China: The nation’s factory output continued to decelerate for the third consecutive month in July, with industrial output growing by 5.1% year-on-year— lower than anticipated. Conversely, retail sales exceeded expectations with a 2.7% improvement in July, highlighting mixed signals in the economy.

• United States: The Federal Reserve’s interest payments have surged, adding over $100 billion to the country’s overall interest obligations within the past year, surpassing total spending on NASA, FEMA, and the Small Business Administration combined.

• European Central Bank Predictions: A recent poll indicated that over 80% of economists expect the European Central Bank to enact two additional 25 basis point rate cuts in September and December, which would reduce the deposit rate to 3.25%.

• New Zealand and the Philippines: Both nations have initiated interest rate cuts for the first time in several years; New Zealand reduced its benchmark rate to 5.25%, while the Philippines lowered its target rate to 6.25% to stimulate economic growth amidst declining inflation pressures.

• Consumer Inflation in Ghana and Norway: Ghana’s consumer inflation fell to 20.9% year-on-year from 22.8% in June. Meanwhile, Norway’s central bank maintained its key deposit rate at 4.5%, reflecting concerns over the depreciating krone’s impact on inflation.

• Swiss Economic Growth: Switzerland recorded a GDP growth of 0.5% in Q2, an increase from 0.3% in Q1, driven by strong service sector output offsetting export difficulties.

As relevant economic indicators fluctuate and global financial policies evolve, these developments highlight the interconnected nature of today’s economy, urging businesses and policymakers to adapt promptly to shifting conditions.

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