The world economy and the Turkish economy have been struggling with inflation for the last 15 years. The Covid-19 pandemic and the Russia-Ukraine war, which occurred before the effects of the 2008 crisis were fully overcome, slowed down global trade and growth rates. In its latest Economic Outlook report, the OECD announced its global growth forecast for 2024 and 2025 as 3.2 percent. September PMI data for the Euro Area showed that contraction continued in the manufacturing sector, and expansion in the services sector lost momentum.
In its September Economic Outlook report, the OECD announced its global growth forecast for 2024 and 2025 as 3.2 percent. In the US, where soft landing scenarios gained strength, annual CPI inflation fell to its lowest level since February 2021, reaching 2.5 percent in August.
September PMI data for the Euro Area showed that contraction continued in the manufacturing sector, and expansion in the services sector lost momentum. In September, the Fed made a swift 50 basis point reduction in policy rates, while the ECB also lowered its benchmark interest rates for the second time this year.
The People's Bank of China announced the most comprehensive stimulus package since the pandemic to achieve the country's 5 percent growth target. In September, the price of Brent crude oil per barrel fell by 6.8 percent on a monthly basis to 71.7 USD, while metal prices followed an upward trend. At the beginning of October, oil prices rose sharply due to increasing geopolitical risks in the Middle East.
OECD raised its 2024 global growth forecast
In its Economic Outlook Report published in September, the OECD stated that the global economy remained resilient in the first half of 2024 and inflation continued its moderate course. The organization raised its global economic growth forecast for 2024 from the 3.1 percent anticipated in May to 3.2 percent, while maintaining it at 3.2 percent for 2025. The OECD revised its growth forecasts for the Turkish economy downwards for 2024 and 2025, announcing them as 3.2 percent and 3.1 percent, respectively. While revising global inflation expectations downwards, the OECD slightly raised its inflation forecasts for Turkey. The report noted that purchasing power has not yet reached pre-pandemic levels in many countries, and highlighted high service inflation, the possibility of financial conditions remaining tight longer than expected, and high debt ratios in developing countries as risk factors for the global economy.
Annual CPI inflation in the US fell to 2.5 percent
Preliminary data for the third quarter in the US indicated that economic activity continued its moderate course. Industrial production in the country expanded by 0.8 percent month-on-month in August, exceeding forecasts, while retail sales rose by 0.1 percent, contrary to expectations of contraction. PMI data for September showed that the strong performance in the services sector continued in the country, while the contraction in the manufacturing sector deepened.
The downward trend in CPI inflation continued in the country in August. During this period, CPI increased by 0.2 percent on a monthly basis, while annual CPI inflation stood at 2.5 percent, its lowest level since February 2021. In the same period, the core personal consumption expenditures (PCE) price index, closely monitored by the Fed for its monetary policy decisions, increased by 0.1 percent monthly and 2.7 percent annually, both below expectations. This data flow indicated that inflationary pressures continued to ease in the country.
Weak outlook persists in the Euro Area economy
Data released in the Euro Area indicated that the weak outlook in economic activity and the slowdown in inflation continued in the region in September. In the region, manufacturing PMI remained below the threshold value at 45.0 in September, marking its 27th consecutive month, while services PMI reached its lowest value since February at 51.4, signaling a loss of momentum in the sector. According to preliminary data, annual CPI inflation in the Euro Area continued its downward trend, reaching 1.8 percent in September, its lowest level since April 2021. During this period, annual core CPI inflation was 2.7 percent, in line with expectations.
Comprehensive economic stimulus package announced in China
In China, where economic activity has been weaker than expected, the Central Bank (PBoC) announced the most comprehensive stimulus package since the pandemic in the last week of September to alleviate deflationary pressures, meet the 5 percent growth target set for 2024, revive the struggling real estate sector, and halt sales in the stock market. Within this scope, the PBoC implemented interest rate reductions for various maturities and also lowered banks' reserve requirement ratios by 50 basis points. As part of the package, home loan interest rates were reduced, and rules governing second home purchases were eased. Furthermore, securities firms, funds, and insurance companies were enabled to utilize central bank resources for their stock purchases.
Commodity markets…
The downward trend in oil prices observed since June continued in September. In the first days of the month, oil prices fell to their lowest level since December 2021, reaching 69.2 USD, due to concerns about the weak global economic activity and the reduction of daily oil demand forecasts by OPEC+ countries in their monthly report. In the second half of the month, escalating geopolitical tensions and hurricanes in the US triggered supply-side concerns, somewhat limiting the decline in prices. Thus, the price of Brent crude oil per barrel decreased by 6.8 percent on a monthly basis, falling to 71.7 USD at the end of September. At the beginning of October, oil prices rose sharply due to increasing geopolitical risks in the Middle East.
In September, the rapid decline in natural gas production in the US Gulf of Mexico due to hurricanes and seasonal effects played a role in natural gas contract prices increasing by 21.5 percent to 2.59 USD compared to the end of August.
Influenced by the weakening dollar index and the stimulus package announced in China, metal commodity prices followed an upward trend in September. During this period, copper prices on the London Metal Exchange increased by 6.3 percent monthly to 9,692 USD per ton, reaching their highest level since early July, while aluminum prices also rose by 7.6 percent. Agricultural commodity prices also generally increased in September. During the said period, wheat and corn prices increased by 3.4 percent and 8.5 percent, respectively, compared to the end of August.
Source: İş Bankası
This content has been translated using artificial intelligence technology.