• United States (US) inflation accelerated on-year in May
• Monthly gross domestic product (GDP) in the United Kingdom (UK) declined for the second straight month
• China’s manufacturing activity improved
  

Concerns over inflation, central bank actions and their possible downsides to global growth remained center stage in May. Inflation continued to accelerate in major advanced economies, defying expectations of it peaking in March-April. In response, the US Federal Reserve (Fed) and the Bank of England (BoE) raised rates again in their June meetings, while the European Central Bank (ECB) has signaled its first hike for July. This has raised concerns over a protracted global growth slowdown, particularly for the US where recession fears are rising. Its yield curve has inverted (i.e., short-term rates are rising faster than long-term rates as markets expect more rate hikes). Historically, an inverted yield curve in the US has usually preceded recession.

With the Russia-Ukraine conflict persisting, Europe has announced a sanction on Russian energy, leading to Brent crude oil and other commodity prices remaining elevated.

Thus, central banks in the West are acting faster and front-loading rate hikes to tackle the inflation hydra. In the East, however, central banks in China and Japan have reiterated their commitment to easy monetary policy, to support their economies. China’s zero-Covid policy has impacted the trade of its major partners (e.g., Japan) as well as domestic consumption. This, too, is contributing to rising uncertainty on global growth outlook.