Charting the Global Economy: War Fuels Inflation, Saps Sentiment

Surging fuel costs stemming from the Iran war are sparking a rapid run-up in inflation and sinking consumer confidence.Author of the article:You can save this article by registering for free here. Or sign-in if you have an account.(Bloomberg) — Surging fuel costs stemming from the Iran war are sparking a rapid run-up in inflation and sinking consumer confidence.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.In the US, a record increase in the cost of gasoline sparked the steepest advance in a closely watched measure of consumer prices in nearly four years. Consumers in both the world’s largest economy and Canada have become more pessimistic, with sentiment in the US tumbling to a record low.With the situation for oil producers and refineries in the Middle East remaining murky despite a US-Iran ceasefire, inflation will likely remain elevated for months. Meanwhile, New Zealand and India were among a number of central banks keeping interest rates unchanged this week as inflation fears reverberate worldwide. Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Here are some of the charts that appeared on Bloomberg this week on the latest developments in the global economy, markets and geopolitics:WorldSaudi Arabia’s oil exports via the Red Sea are holding steady for now, as the impact of a drone attack on its vital cross-country pipeline has yet to filter through. The strike on Wednesday — hours after a ceasefire was declared in the Iran war — damaged one of 11 pumping stations along the 746-mile (1,200-kilometer) conduit from oil fields in the east to the Red Sea coast in the west. That has reduced throughput by 700,000 barrels a day, the state-run Saudi Press Agency said Thursday.Saudi Arabia said a series of attacks on its critical energy infrastructure disrupted oil and gas production and hit supply to global markets that are already reeling from the Iran war. Global markets and economies have been upended by the energy shock caused by Iran’s effective closure of the Strait of Hormuz, the chokepoint at the mouth of the Persian Gulf.The central banks of New Zealand, India, South Korea, Poland, Romania, Peru, Kenya and Serbia all held interest rates steady against a backdrop of greater inflation risk from higher oil prices.US & CanadaUS inflation surged in March by the most in nearly four years as the war with Iran sent gasoline prices skyrocketing. Despite the 21% rise in gas prices, increases in other categories were relatively tame in March. US consumer sentiment fell in recent weeks to a record low, indicating Americans’ increasing worries about mounting inflation due to the Iran war. Consumers’ perceptions of their current financial situation matched the worst since 2009. Canadian consumer confidence fell to its lowest level in almost a year as the war in Iran sent energy prices soaring and stoked worries about persistent inflation. Just 15% of Canadians see a stronger economy six months from now, compared with 27% four weeks ago.Skyrocketing fuel prices due to the Iran war are fanning the embers of transportation inflation, which were already rising due to a shrinking pool of drivers in the US. Trucking operators have seen diesel prices spike by almost 50% since the start of the US-Israel war against Iran at the end of February.EuropeGerman industrial production unexpectedly fell in February, casting doubt on a swift recovery in Europe’s largest economy even before the Iran war started. The decline offers little reassurance that Europe’s largest economy will deliver on expectations of a meaningful rebound.Investor confidence in the euro-area economy dropped to the lowest in a year due to the Iran war, casting doubt on the region’s nascent recovery.AsiaChina exited factory deflation after more than three years, as energy costs surged when the war in Iran disrupted swaths of global oil supply. China has been trapped in a deflationary spiral since late 2022, as a manufacturing glut and sluggish domestic demand led to intense price wars that eroded company profits and slowed wage growth.Taiwan’s exports jumped to an all-time high as rampant global demand for artificial intelligence chips eclipsed supply chain uncertainties unleashed by the Iran war.Japanese workers’ wages adjusted for inflation rose at the fastest pace since 2021, backing the case for the Bank of Japan to consider a rate hike as soon as this month. Real wages increased 1.9% from a year earlier in February, marking a second straight monthly gain.Emerging MarketsChile’s consumer prices jumped more than expected in March, reflecting the partial impact of the nation’s biggest hike to fuel costs since at least 1980, which will reverberate through the economy in coming months.New doubts about the pace of interest-rate cuts in Brazil are raising concern that defaults, already at record levels, will continue rising and take a bite out of profit at banks and fintechs.—With assistance from Anthony Di Paola, Jarrell Dillard, Curtis Heinzl, Julian Lee, Miaojung Lin, Yujing Liu, Cristiane Lucchesi, Matthew Malinowski, Mark Niquette, Matheus Piovesana, Jana Randow, Augusta Saraiva, Zoe Schneeweiss, Mark Schroers, Chien-Hua Wan, Erica Yokoyama and Charlie Zhu.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.