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World Inflation hits four-year high in June

posted onAugust 2, 2018

World inflation rose to a four-year high in June, driven by surging energy prices according to figures released Thursday by the Paris-based Organization for Economic Cooperation and Development (OECD).

The international institution said consumer prices in the Group of 20 largest economies -which account for around 85% of the gross world product (GWP) and 80% of world trade and investment-were 3.1% higher in June 2018 than a year earlier, a pickup from the 2.9% rate of inflation recorded in May 2018 and the highest level since June 2014.

Among the G20 emerging economies, annual inflation increased in Brazil (to 4.4%, from 2.9%), Argentina (to 29.5%, from 26.3%), China (to 1.9%, from 1.8%) and South Africa (to 4.4%, from 4.3%). It decreased in Saudi Arabia (to 2.1%, from 2.3%), India (to 3.9%, from 4.0%), Indonesia (to 3.1%, from 3.2%) and the Russian Federation (to 2.3%, from 2.4%). 

Across the OECD's 36 members, most of which are high-income economies, inflation picked up to 2.8% in June 2018, compared with 2.6% in May, reaching its highest level since February 2012. 
In the year to June 2018, annual inflation increased in Canada (to 2.5%, from 2.2%), Italy (to 1.3%, from 1.0%) and marginally in the United States (to 2.9%, from 2.8%).

It was stable in France (at 2.0%), Japan (at 0.7%) and the United Kingdom (at 2.3%), while it decreased slightly in Germany (to 2.1%, from 2.2%). In Lithuania, which became a new OECD Member country on 5 July 2018, annual inflation decreased to 2.6% in June, compared with 2.9% in May.

Energy prices increased by 10.4%, compared with 9.1% in the year to May, the fastest annual increase since November 2011. Food price inflation picked up to 1.8%, compared with 1.4% in May. 
Excluding volatile items such food and energy, OECD annual inflation was unchanged at 2.0% in June 2018.

Annual inflation in the eurozone, picked up to 2.0% in June, compared with 1.9% in May. Excluding food and energy, eurozone inflation decreased, to 0.9%, compared with 1.1% in May. Eurostat’s flash estimate for July points to overall inflation increasing further to 2.1%, driven by energy prices.

In its latest Economic Outlook report, however, the OECD finds that generally, the world economy is in good shape, though of course it’s not all rosy.

The organisation projects that the world economy will grow by 3.8 percent in 2018 and 3.9 percent in 2019, reaching the long-term average prior to the economic crisis. 

OECD attributed improved economic performance to buoyant job creation in many economies, as well as higher private investment, rebound in world trade and favorable fiscal policy in some countries. 

Across the OECD, growth would remain close to 2.5 percent this and next year , while in eurozone it will accelerate by 2.2 percent in 2018 and 2.1 percent in 2019. In the United States, economic growth would accelerate by 2.9 percent in 2018, then inch down to 2.8 percent in 2019, it said.

But tensions are appearing that could threaten  growth. 

"The pace of global expansion over the 2018-19 period is expected to hover near 4%, which is close to the long-term average. However, the Outlook also underlines that significant risks posed by trade tensions, financial market vulnerabilities and rising oil prices loom large, and more needs to be done to secure a strong and resilient medium-term improvement in living standards," OECD wrote.

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