Elsewhere, the World Bank reported a 10% surge in global food prices during July, caused by drought in the US and Eastern Europe. The news generated speculation that higher food prices could fuel inflationary pressures – particularly for nations who are net importers of grain.
Share prices rallied at the end of the month following a speech by US Federal Reserve chairman Ben Bernanke that triggered fresh speculation the US central bank might initiate additional quantitative easing measures to kick-start the country’s economy. Bernanke described the country’s economic predicament as “far from satisfactory”
US economic growth for the second quarter was revised upward to 1.7% from 1.5%, but remains below the previous quarter’s growth of 2%. The Congressional Budget Office warned that higher taxes and lower levels of government spending could undermine economic expansion in the US next year. As for markets, the Dow Jones Industrial Average rose 0.6% during August.
After stagnating during the first three months of 2012, the eurozone’s economy contracted by 0.2% during the second quarter – although the overall euro region is not technically in recession since its economy has not yet registered two consecutive quarters of negative growth. Germany’s Dax index and the French CAC 40 rose by 2.9% and 3.7% respectively over August.
In comparison, the UK economy – which is already in recession – contracted less severely than initially estimated during the second quarter of 2012, shrinking by 0.5% during the period rather than by the 0.7% that was previously calculated. The boost was provided by stronger-than-
Various factors continued to place Japan’s economy – and its exporters – under pressure, including the persistent strength of the yen, the eurozone’s sovereign debt crisis and an anaemic economic recovery in the US. The benchmark Nikkei 225 index rose by 3% during the month, despite disappointing news about consumer confidence and industrial production.