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Breaking world news

IMF: global GDP could decrease 0.5% on trade tension

Trade frictions between the US and China as well as other countries could wipe USD 455 bn, or 0.5%, off global GDP next year, IMF warned in a statement. “The principal threat stems from continuing trade tensions,” IMF Managing Director Christine Lagarde said, adding that US-China tariffs could make a “significant dent” in the global recovery. According to the statement, “decisive action” is required to help prevent the global economy from sliding into a new crisis. Lagarde participated in a two-day meeting of G20 finance ministers and central bank governors in Fukuoka, Japan. “Most importantly, trade and geopolitical tensions have intensified. We will continue to address these risks, and stand ready to take further action,” the communique said. Notably, the final communique language reportedly excluded, at the insistence of the United States, a proposed clause to “recognize the pressing need to resolve trade tensions” from a previous draft. However, US Treasury Secretary Steven Mnuchin made it clear that he disagreed with several conclusions in the communique and Lagarde’s statement. “We are somewhat concerned about what we see as a slowdown in Europe, China and other areas of the world,” he later said in an interview, adding that he does not think trade tension is the reason as the slowdown got under way last year.

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US inflation slows down in May

US consumer prices increased 0.1% m-o-m in April against April (+0.3% m-o-m), US Department of Labor data show. Meanwhile, annual inflation slowed down from 2% to 1.8%, whereas analysts on average forecast the CPI to rise 0.1% m-o-m and 1.9% y-o-y. The core CPI was up 0.1% m-o-m in May and 2% y-o-y. US energy prices climbed 0.6% m-o-m, including a 0.5% drop in gasoline prices. Food prices and healthcare services rose 0.5%. Clothing prices have remained unchanged over the past two months. Real hourly earnings (excluding inflation) grew 1.3% y-o-y in May after rising 1.2% in April. As experts point out, Department of Labor numbers for May mean that steady inflation will not be achieved for some time despite record low unemployment and stable wage growth.

China set to take measures to boost growth

Amid rising trade pressure from the US, Chinese authorities should act to give the economy a boost and maintain sufficient liquidity in the financial sector, Vice Premier of the State Council of China Liu He claimed. Addressing an economic forum in Shanghai, he pointed out that the government holds a sufficient set of policy tools to achieve this goal. “We do face some external pressure at the moment…The external pressure will help us improve innovation and self-development…” said Liu He who also leads the Chinese delegation in the trade talks with the US. The Chinese government will act more decisively to speed up reform and open up the economy to the outside world, he added.

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