Tag: EU

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Euro zone inflation drops to 2.9% in October 2023

EU Inflation

According to the latest data from Eurostat, the statistical office of the European Union, the euro area annual inflation was 2.9% in October 2023, down from 4.3% in September 2023.

The main factor behind the decline in inflation was a sharp drop in energy prices, which fell by some 15% year-on-year in October 2023, compared to a 10.7% decrease in September. 

The euro area economy also contracted by 0.1% in the third quarter of 2023, after growing by 0.6% in the second quarter, according to preliminary estimates from Eurostat. This puts the eurozone on the brink of recession, as high interest rates and weak demand weigh on the economic activity. 

However, some analysts argue that the ECB’s monetary policy is too tight and risks choking off the recovery. They suggest that the ECB should adopt a more flexible approach and consider cutting rates or expanding its bond-buying programme if the economic outlook worsens.

Core inflation

Core inflation which excludes volatile food and energy prices dropped to 4.2% year-on-year in October 2023 from 4.5% in September 2023, according to European Union statistics agency Eurostat.

The agency also revealed Tuesday that the euro zone economy contracted by 0.1% in the third quarter, according to initial estimates, below consensus estimates for GDP to be unchanged from the previous quarter.

Predicition

The ECB expects the euro zone economy to grow by just 0.7% this year, by 1% in 2024 and 1.5% in 2025.

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TikTok’s algorithm is failing to provide a safe and positive experience for its users and for society

TikTok app

TikTok is a popular social media app that allows users to create and share short videos. But, it has faced some controversies regarding its algorithm, design, and data protection.

Tiktok has issues

The company was fined $368 million in Europe for failing to protect children’s data. The Irish Data Protection Commission, which oversees TikTok’s activities in the European Union, said that the company had violated the bloc’s signature privacy law. 

An investigation by the DPC found that in the latter half of 2020, TikTok’s default settings didn’t do enough to protect children’s accounts.

Anti-social app

TikTok drove online ultra online ‘frenzies’ that encouraged anti-social behaviour to spill over into the real world, a BBC Three investigation revealed.

Ex-employees said that the issue was not being tackled for fear of slowing the growth of the app’s business. These ‘frenzies’ were evidenced by interviews with former staffers, app users and BBC analysis of wider social media data. They included false murder accusations, interference in police investigations, school vandalism, and riots.

TikTok’s algorithm is reportedly failing to provide a safe and positive experience for its users and for society

Anti-social algorithm

The algorithm and design means people are seeing videos which they wouldn’t normally be recommended – which, in turn, incentivise them to do unusual things in their own videos on the platform. 

Former employees likened these frenzies to ‘wildfires’ and described them as ‘dangerous’, especially as the app’s audience can be young and impressionable.

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EU interest rates up again to 4%

Eurozone interest rates

Eurozone interest rates have been hiked again to a record high by the European Central Bank (ECB).

The bank raised its key rate for the 10th time in a row, to 4% from 3.75%, as it warned inflation was expected to remain too high for too long.

The latest increase came after forecasts predicted inflation, which is the rate prices rise at, would be 5.6% on average in 2023. However, the ECB signalled that this latest hike could be the last for now.

‘The council considers that the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target’, the bank reportedly said. The central bank originally expected inflation to be ‘transitory’.

It added that it expected inflation in the 20-nation bloc to fall to around 2.9% next year and 2.2% in 2025.

As in other parts of the world, the eurozone has been hit by rising food and energy prices that have squeezed household budgets and from the Russia/Ukraine war. Central banks have been increasing interest rates in an attempt to tame inflation and slow rising prices.

More expensive to borrow

The theory behind increasing rates is that by making it more expensive for people to borrow money, the ‘consumer’ will then have less excess cash to spend, meaning households will buy fewer things and then price rises will ease. But it is a balancing act as raising rates too aggressively could cause a recession.

Interest rates in the UK are currently higher than in the eurozone at 5.25%, but UK inflation is also higher at 6.8%, and the Bank of England is expected to raise rates again next week.

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China’s exports take a dive!

China’s exports plunge

According to latest figures the country’s trade fell more sharply than expected in July 2023, as both global and domestic demand receded amid the pandemic and ongoing tensions with the United States.

China’s exports fell by 14.5% in July 2023 from a year ago, the biggest drop since February 2020, while imports dropped by 12.4%, according to Chinese data. This was much worse than the 5% decline in both exports and imports analysts were expecting.

Poor trade performance

Some of the reasons for the poor trade performance are the rising costs of raw materials, the global shortage of semiconductors, the Covid-19 outbreaks in some regions, and the U.S. sanctions on some Chinese companies. 

China’s trade with the U.S., its largest trading partner, fell in the first seven months of the year. The trade slump has added pressure on China to provide more support for the economy, which has lost momentum after a strong recovery in late 2020 and early 2021.

China’s trade drop July 2023 more than expected

China’s trade situation is also closely watched by other countries, as it reflects the health of the global economy and demand for goods. Some analysts have warned that China’s trade slowdown could signal a broader weakening of consumer spending in developed economies, which could lead to recessions later this year.  China’s trade data also has implications for inflation and monetary policy, as lower import prices could ease inflationary pressures and allow central banks to keep interest rates low.

China’s export to the U.S. and EU down

China’s exports to the U.S. plunged by 23.1% year-on-year in July 2023, while those to the European Union fell by 20.6%, CNBC analysis of customs data showed. Exports to the Association of Southeast Asian Nations fell by 21.4%, according to the data. Chinese imports of crude oil dropped by 20.8% in July from a year ago, while imports of integrated circuits fell by nearly 17%.

China’s imports from Russia fell by around 8% in July 2023 from a year ago, the data showed.

A slowdown in U.S. and other major economies’ growth has dragged down Chinese exports this year. Meanwhile, China’s domestic demand has remained subdued.

Growth areas

Among the few higher-value export categories that saw a significant increase in the first seven months of the year were: cars, refined oil, suitcases and bags. And for imports: paper pulp, coal products and edible vegetable oil were among the categories seeing significant growth in the January to July period from a year ago.

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Euro Zone GDP & Inflation Improves in July 2023

Cash

EU Inflation 5.3% July 2023

Euro zone inflation fell in July, and new growth figures showed economic activity picking up in the second quarter of this year, but economists still fear a recession.

Headline inflation in the EU was 5.3% in July, according to preliminary data released end of July 2023, lower than the 5.5% registered in June. However, it still remains substantially above the European Central Bank’s 2% target.

EU GDP

GDP growth accelerated in the second quarter, expanding by 0.3%, higher than the 0.2% expected by analysts.