This Week’s Economic Highlights: US Inflation Dips Below 3% and UK Leads G7 Growth

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

In this week’s round-up of significant economic news, developments in the US and UK economies have captured attention, alongside updates from the global market landscape. The latest reports indicate that US inflation has dropped to its lowest rate in nearly three and a half years, while the UK emerges as the fastest-growing economy within the G7 for the first half of 2024. ## US Inflation Declines Below 3%

The latest data from the US Labor Department reveals that annual inflation has slowed to 2.9%, marking the lowest point since early 2021. This decline raises speculation about the possibility of the Federal Reserve cutting interest rates as soon as next month.

For the month of July, the consumer price index rose by just 0.2%, primarily driven by a 0.4% increase in shelter costs. Economists are pointing to three successive months of stable consumer prices coupled with a modest increase in producer prices as evidence that inflation is trending downwards. Scott Anderson, chief economist at BMO Capital Markets, stated, "This report shows continued progress towards the Fed’s inflation goals." While the data suggests that there is room for a rate cut, he emphasized that market expectations for a more substantial reduction may be overly optimistic.

Despite these encouraging trends, higher rents and inflation remaining above the Fed’s 2% target indicate that a significant rate cut next month is still uncertain.

UK Economy Sees Rapid Growth

The UK is currently experiencing the fastest economic growth among G7 nations, with the gross domestic product (GDP) rising 0.6% from April to June. Over the first half of 2024, the economy has grown by a total of 1.3% following a recession at the end of 2023, according to the latest reports from the Office for National Statistics.

The growth is largely attributed to dynamism in the services sector, particularly in fields such as scientific research, information technology, and legal services. This positive economic momentum is timely for Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves, coinciding with efforts to bolster their growth agenda ahead of upcoming elections. However, analysts caution that sustaining this growth may prove challenging, suggesting that the Bank of England might hold off on implementing additional rate cuts despite recent economic improvements. In June, growth had initially stalled due to weak performance in services, although manufacturing showed signs of recovery.

Global Economic News Brief

Other noteworthy global economic developments this week include:

• China: The country’s factory output saw a slowdown for the third consecutive month, with industrial production growing 5.1% year-on-year, falling short of expectations. However, retail sales showed unexpected improvement, rising by 2.7% in July.

• United States: Interest payments by the Federal Reserve have surged, adding over $100 billion to the national interest bill in the past year, surpassing total spending on various important governmental areas, including NASA and FEMA.

• Europe: According to recent polls, more than 80% of economists predict that the European Central Bank will likely implement two 25 basis point rate cuts by the end of the year, aiming to bring the deposit rate down to 3.25%.

• New Zealand and the Philippines: Both nations have undertaken significant monetary policy adjustments, with New Zealand cutting its benchmark rate for the first time in four years and the Philippines also lowering its target rate, suggesting a trend toward easing monetary policy in response to changing inflation dynamics.

• Ghana: Consumer inflation has eased for the fourth consecutive month, now standing at 20.9% year-on-year.

• Norway and Switzerland: Norway’s central bank has maintained its key deposit rate at 4.5%, while Switzerland’s GDP grew 0.5% in the second quarter, demonstrating resilience in the services sector against export challenges.

Conclusion

This week’s economic outlook reveals significant shifts and trends affecting both the US and UK economies, along with ongoing adjustments in global financial policies. As inflation rates fluctuate and growth trajectories evolve, stakeholders are advised to stay informed and vigilant regarding the implications for monetary policy and market conditions.

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