US debt ceiling suspended, and other economy stories you need to read this week

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum./

Author: Joe Myers, Writer, Forum Agenda

• This weekly round-up brings you the latest stories from the world of economics and finance.
• Top economy stories: US passes bill to suspend debt ceiling; Eurozone inflation eases more than expected; New ILO report warns on employment divide.

1. US passes bill to suspend debt ceiling

The United States House of Representatives and the US Senate have passed a bill to suspend the country’s $31.4 trillion debt ceiling. There was support for the bill from both, which prevented a default. The Federal government was expected to run out of money on Monday to pay its bills.

“This bipartisan agreement is a big win for our economy and the American people,” President Joe Biden said.

The agreement suspends the federal government’s borrowing limit until Jan 2025. It also caps some government spending, recoups unused COVID-19 funds and speeds up the permit process for some energy projects.

2. Economic prospects are hitting employment in developing countries: ILO

A new International Labor Organization (ILO) report has warned that a range of crises, including rising debt levels, are driving a wider divide between employment levels in high- and low-income countries.

Global unemployment this year is expected to drop below pre-pandemic levels, reaching 191 million or a global unemployment rate of 5.3%. However, according to the ILO’s Monitor on the World of Work, low-income countries remain much further behind this figure, at 21.5%.

Increasing debt levels are constraining developing countries, in particular, the report says, hitting policymakers’ scope for interventions.

“The findings of this report are a stark reminder of growing global inequalities. Investing in people through jobs and social protection will help narrow the gap between rich and poor nations and people,” said ILO Director-General Gilbert F. Houngbo.

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3. News in brief: Stories on the economy from around the world

Sri Lanka has cut interest rates for the first time in three years.

UK house prices have seen their biggest fall since 2009 in the 12 months to May, lender Nationwide said on 1 June.

The manufacturing sector in Germany saw its biggest contraction in three years last month. The HCOB Purchasing Managers’ Index dropped from 44.5 in April to 43.2 in May. Figures under 50 show contraction rather than growth.

Catherine Mann of the Bank of England has said the UK has a bigger inflation problem than the United States or the Eurozone. “The gap (between headline and core CPI) that I have in my country is more persistent than the gaps that we see in either of my neighbours, the US or the euro area,” Mann told a discussion hosted by Swiss asset manager Pictet.

It comes as rating agency Moody’s warned on 31 May that high inflation and increased borrowing costs are at risk of pushing the UK, German and US economies into recession.

Thailand’s manufacturing output fell by 8% in April compared to April 2022.

Consumer prices in Australia rose more than expected in April, as fuel and housing prices increased.

The Mexican economy grew for the sixth quarter in a row in the first quarter of this year, with GDP rising 1% compared to the previous three months.

Indian GDP grew at more than 6% from January to March according to government data released on 31 May. The 6.1% figure put the country as one of the world’s fastest-growing emerging economies, Reuters reports.

Ukraine’s economy is faring better than expected, despite the war, the International Monetary Fund has said. The IMF has approved an initial loan of $900m to the country.

Inflation in the 20 Eurozone nations fells to 6.1% in May – down from 7% in April. A Reuters poll had predicted a fall to 6.3%.

4. More on finance and the economy on Agenda

Confused by the US debt ceiling? Read our explainer from earlier in May to help understand why it’s been suspended and what it might mean. And if an agreement wasn’t reached, what would a US debt default mean?

“Financed emissions” has gained traction as a concept as countries and companies attempt to reduce their carbon emissions. Understanding and mitigating these emissions could help drive the transition to a green economy.

Climate-smart agriculture can also help us make progress on emissions, while also improving farm productivity and boosting incomes – but how can it be financed?