Global inflation remains high but economic growth falling

Inflation accelerated in the US in July. Bloomberg reports:

U.S. consumer prices rose at the fastest pace in 17 years in July, limiting the ability of the Federal Reserve to lower interest rates as economic growth slows.

The cost of living climbed 5.6 percent in the year ended in July, the Labor Department said today in Washington. It was up 0.8 percent from the previous month, twice as much as anticipated...

Costs excluding food and energy increased 0.3 percent for a second month, exceeding the 0.2 percent median forecast of economists surveyed.

The core rate increased 2.5 percent from July 2007, the most since January, after a 2.4 percent year-over-year increase the prior month.

However, financial markets appear to be looking past the inflation data.

Treasuries rose, with benchmark 10-year note yields falling to 3.89 percent at 4:35 p.m. in New York, from 3.94 percent late yesterday. The Standard & Poor's 500 Stock Index advanced 0.6 percent to close at 1,292.93.

Separate reports today reinforced evidence of a weakening job market and continued slump in housing.

The Labor Department reported that 450,000 Americans, more than anticipated, filed first-time claims for jobless benefits last week. Claims averaged 321,400 last year.

The median price for a single-family home in the U.S. dropped 7.6 percent in the second quarter as bank sales of foreclosed homes caused values to tumble in three-quarters of U.S. cities, the National Association of Realtors said.

Sales of single-family houses and condominiums fell 16 percent to 4.913 million at an annualized pace, a 10-year low, the realtors group also said...

Today's figures also showed wages decreased 0.8 percent after adjusting for inflation following a 0.9 percent drop in June. They were down 3.1 percent over the last 12 months, the biggest year-over-year decline since 1990. The drop in buying power is one reason economists forecast consumer spending will slow.

Weakness in the European economy is a little more apparent. From Bloomberg:

Europe's economy contracted for the first time since the introduction of the euro almost a decade ago as faltering sales undermined investment by companies and soaring costs eroded consumer spending power.

Gross domestic product fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent, the European Union statistics office in Luxembourg said today. The year-on-year growth rate slowed for a third straight quarter, to 1.5 percent. Separate figures showed inflation held at 4 percent in July, less than initially estimated.

Even the fast-growing emerging economies may not be able to escape a slowdown. While India's inflation rate hit a 13-year high recently, China produced yet more evidence yesterday that its economy is slowing, as AFP/CNA reports.

China's industrial output growth slowed to a 17-month low in July as weakening exports hit factory production across the nation, official figures showed on Thursday...

Industrial production expanded by 14.7 percent in July from the same month a year ago, down from 16.0 percent in June and 18.0 percent in July last year, the National Bureau of Statistics said.