The Lastest Macroeconomic News
08.06.2015 20:45 Slow Chinese economy impact global
China`s economy had deteriorated recently but the weakness is likely to be more persistent than in the United States, Forsyth Barr broker Peter Young says. Credit had exploded since 2009 and officials were anxious to curb the boom before it became too large to control, he said. Tighter credit conditions had exposed China`s overcapacity, especially in certain sectors such as construction and heavy industry, prompting a sharp downturn in investment. ”Given investment accounts for around 50% of GDP, this adjustment almost certainly has further to run. The authorities have resorted to targeted and small-scale macro stimulus as they endeavor to steer the economy along a new path.” On some measures, China accounted for about 15% of global economic growth as measured by gross domestic product (GDP) and was similar in size to the United States. That meant a slowdown in China would have a significant impact on the rest of the world, including the direct impact of lower global aggregate growth but also through indirect impacts on supply-chain economies (other Asian countries), capital goods producers (Europe and the US) and commodity exporters, such as New Zealand and Australia, Mr. Young said.
04.06.2015 19:00 Russian Inflation Slows More Than Forecast in Boost for Easing
Russian inflation decelerated for a second month, setting the stage for the central bank to ease monetary policy further after the ruble`s crisis last year. Consumer prices rose 15.8 percent from a year earlier in May, compared with 16.4 percent in April, the Federal Statistics Service in Moscow said in a statement. The median estimate of 23 economists surveyed by Bloomberg was 15.9 percent. Prices gained 0.4 percent in the month, the smallest increase since August 2014. The continued slowdown means the central bank can focus on lowering borrowing costs as the economy enters its first recession in six years. The Bank of Russia has cut its benchmark interest rate three times to 12.5 percent after an emergency increase to 17 percent in December as oil prices stabilized and the ruble rebounded. Inflation may slow to 12 percent by year-end, according to the central bank. “If there are no new considerable external shocks, inflation will continue to slow down in accordance with our forecasts,” Bank of Russia Governor Elvira Nabiullina said at a banking conference in St. Petersburg on Thursday. Price growth has started to ease “quickly” in recent months after a jump early in the year caused by the ruble`s weakening, she said. The central bank, whose medium-term inflation target is 4 percent in the medium term, will update its forecasts by the next rate meeting on June 15, according to Nabiullina.
03.06.2015 18:13 Russia`s Economy Contracts 4.2% but Outlook Improves
Russia`s economic contraction deepened in April as its key drivers deteriorated, but the country`s outlook has improved as oil prices have climbed higher, data showed. The economy ministry said gross domestic product contracted by 4.2% in April, compared with a year earlier, after shrinking by 2.7% in March. In the first four months of the year, the economy contracted by 2.4%, said the ministry. The data contrast with recent remarks by government officials, who have said the worst of the economic contraction was over. However, Alexei Kudrin, Russia`s former finance minister, warned late last week that the economy`s contraction was set to intensify in the second quarter. In April, Russia`s economy was dragged into contraction by a drop in manufacturing, mining, construction, retail sales and household incomes, as well as falling capital investment. The data showed that a drop in foreign trade, both in imports and exports, also put pressure on the economy, battered by Western sanctions and a rapid drop in oil prices. However, oil prices have partially recovered in recent months, paving the way for Russia`s economic recovery. The World Bank said Monday it sees the economy shrinking by 2.7% this year before growing by 0.7% next year and by 2.5% in 2017. In April, the World Bank had expected Russia`s economy to contract by 3.8% this year and by 0.3% next year.
01.06.2015 23:52 Russian manufacturing PMI falls to four-month low in May
Russian manufacturing activity shrank to a four-month low in May, the HSBC purchasing managers` index (PMI) showed on Monday, adding to evidence that the economy remains weak. The index`s headline reading fell to 47.6 from 48.9 in the previous month, slipping further below the 50.0 mark that separates expansion from contraction. "The stuttering nature of Russia`s manufacturing sector continued in May, with a rather disappointing set of survey data. Output, new orders and employment were all down since the previous survey," said Paul Smith, senior economist at Markit. The weaker PMI follows data for April which has served as a reminder of the drag on Russia`s economy from low oil prices and Western sanctions linked to the Ukraine crisis. However, inflation is now on a downward trend after currency weakness drove it to a 13-year high earlier in the year, and the latest PMI survey showed rapidly falling output and input prices for manufacturers. "The ongoing trend towards price level stabilisation suggests the macroeconomic environment is showing some sign of improvement," Markit`s Smith said. "This could, in time, help the manufacturing economy regain some lost ground over the coming months."
29.05.2015 15:17 Russian Inflation Slides Below 16% for First Time in Months
Year-on-year price inflation in Russia slipped below 16 percent for the first time since February, a news report said Wednesday, as the strengthening of the ruble soothes blistering price rises. Prices rose 0.1 percent in the week ending Monday, May 25th, a report by state statistics service Rosstat said. This brought year-on-year inflation to 15.8-15.9 percent for the week, down from 16.1 percent the previous week, the Interfax news agency calculated. Year-on-year inflation in Russia climbed from 15 percent in January to a high of 16.9 percent in March, according to Rosstat, as the devaluation of the ruble drove up the cost of imported products and components. Inflation first became an urgent issue during the second half of last year when food prices jumped after Russia banned some food imports from countries with sanctions against Moscow over its role in the Ukraine crisis. Price rises were then propelled higher by the devaluation of the ruble, which fell more than 40 percent against the U.S. dollar last year on the back of a steep fall in the price of oil - Russia`s main export - and Western sanctions. Now the ruble is in recovery, having risen more than 30 percent against the dollar since the beginning of February. This is good news for inflation too: The Economic Development Ministry in April lowered its inflation forecast for the year from 12.2 percent to 11.9 percent.
28.05.2015 19:05 Worst Not Over for Russia as Economy Shrinks 4.3% in April
Russia`s economic recession deepened in April as the decline in gross domestic product accelerated to 4.3 percent year-on-year, quashing hopes that the worst of the crisis had passed, state development bank VEB said in a report released Wednesday, May 27th. The drop exceeded many economists` expectations, nipping hopes for a quick economic recovery in the bud. Russia`s GDP dropped by 0.6 percent in April, accelerating from a 0.4 percent decline in March. The economy shrank by a total of 2.5 percent in the first four months of the year, according to VEB. Russia`s economy has slowed sharply since the beginning of last year due to Western sanctions over the Ukraine crisis and a plunge in the price of oil, Russia`s main export. Russian GDP growth fell into negative territory in November last year, dropping 0.5 percent year-on-year for the first time since 2009, according to a report by the Economic Development Ministry. The steep slump in April was led by a 2 percent fall in manufacturing, a 1.5 percent drop in retail and a 0.5 percent decline in mining production, according to the VEB report. The downturn was also aggravated by a fall in the volume of oil exports, the report said, adding that a surge in exports of oil and oil products had propped up the economy in the beginning of the year.
27.05.2015 14:10 The Debt To GDP Ratio For The Entire World: 286%
Did you know that there is more than $28,000 of debt for every man, woman and child on the entire planet? And since close to 3 billion of those people survive on less than 2 dollars a day, your share of that debt is going to be much larger than that. If we took everything that the global economy produced this year and everything that the global economy produced next year and used it to pay all of this debt, it still would not be enough. According to a recent report put out by the McKinsey Global Institute entitled “Debt and (not much) deleveraging“, the total amount of debt on our planet has grown from 142 trillion dollars at the end of 2007 to 199 trillion dollars today. This is the largest mountain of debt in the history of the world, and those numbers mean that we are in substantially worse condition than we were just prior to the last financial crisis. When it comes to debt, a lot of fingers get pointed at the United States, and rightly so. Just prior to the last recession, the U.S. national debt was sitting at about 9 trillion dollars. Today, it has crossed the 18 trillion dollar mark. But of course the U.S. is not the only one that is guilty. In fact, the McKinsey Global Institute says that debt levels have grown in all major economies since 2007.
25.05.2015 11:29 Is Russia`s Economy Rebounding?
On May 15th, it was reported by the Federal Statistics Service that Russia`s GDP in the first quarter of 2015 had fallen by 1.9% from a year earlier. This follows year-on-year figures of a modest 0.4% GDP gain in last year`s final quarter and, prior to that, a 0.9% rise in Q3. Normally when an industrialised economy publishes such figures, one might conclude that recent times have been disastrous. However, Russia`s Q1 performance is a clear improvement on the predictions of many analysts. There is no disputing the fact that a 1.9% contraction in national output is of grave concern. The impact of Western sanctions, the dramatically lower price of oil compared to this time last year and weaker consumption levels resulting from significantly higher interest rates have all played a crucial part in Russia`s current woes. However, there does appear to be some cause to be optimistic, or at the very least less pessimistic about the current economic climate. If one looks back to the economic quagmire in which Russia found itself towards the end of last year, the situation today is an unequivocal improvement on what many were predicting at the time. By mid-December, the ruble was in freefall and Russia`s benchmark interest rate was hiked from 10.5% to 17% by the central bank in the space of one day. This triggered an almost immediate 10% drop in the currency`s value, followed by an additional 11% plunge the following day to all-time lows. To compound matters, sanctions resulting from Russia`s political crisis with Ukraine and the annexation of Crimea had been imposed by US-led Western powers, initially in March 2014 and then extended at later stages throughout the year. A liquidity crisis from an increasingly isolated Russia was widely expected, with many predicting several banking defaults, widespread capital flight and a severe curtailment of access to Russia`s traditional sources of finance. Today, the ruble is still approximately 30% weaker against the US dollar than at the same time last year. However, it has rebounded spectacularly in 2015 and is currently the best-performing currency of the year.
22.05.2015 12:23 Russia: economy in tatters, or business as usual?
Much has been said over the last six months about the collapse of the Russian economy as a result of sanctions and the falling oil price, on top of other negative factors such as bureaucracy and corruption, high inflation, inefficiencies in production, ageing infrastructure, a failure to innovate and diversify and capital flight. A slew of economic data point to a deep recession, and US President Barack Obama describes Russia`s economy as being in tatters. No one seems to be denying the long-term negative impact on the economy; even the government expects two tough years ahead, a prediction regarded as hopelessly optimistic by many economists. However, anecdotally at least, it doesn`t feel like a financial meltdown here in Russia. There are no Venezuela-style food queues, or queues for foreign hard currency. Shopping centres in Moscow are buzzing with people buying western imported goods, supermarkets remain fully stocked (although the steak is now Argentinian and not Australian), new cafés and other outlets are popping up everywhere and the usual temporary wooden terraces are being constructed on pavements outside restaurants to catch the summer tourist trade (these tourists being mostly Russians from other parts of the country, as has always been the case). Roads are still gridlocked, public transport still packed and the airports are overrun with Russian sun-seekers flying off to Florida, Rome, Turkey and Thailand, along with those travelling to other cities in Russia to reunite with relatives and loved ones. In business circles, deal activity and investment has slowed but continues, even among western companies operating in Russia for many years now, who will quietly admit to making far better returns here than in developed and saturated western markets or indeed some of the other emerging markets around the world. Some major corporates like Adidas have scaled-back, but few have pulled out altogether. Electrical goods retailer Eldorado has announced new plans for expansion and the likes of Nestlé, Burger King and Ikea have all reaffirmed their commitment to the Russian market. This picture is in total contrast to 2008/2009, when the global financial crisis hit Russia hard and deal activity all but stopped.
21.05.2015 11:32 Rouble strength poses challenge for Russia`s central bank
The rouble rose to its highest level against the dollar in nearly six months on higher oil prices, negating attempts by Russia`s central bank to stem currency strength. Oil`s bounceback has proved restorative to the energy-dependent economy and tensions over Ukraine have partially eased, helping the rouble to gain more than 45 per cent on the dollar since the end of January. After soaring to nearly Rbs80 to the dollar in mid-December as falling oil prices and economic sanctions tolled, Moscow embarked on a series of emergency measures such as interest rate raises and currency intervention, buying the rouble and selling US dollars. A weaker rouble has proved beneficial to some parts of Russia`s industrial sector, making exporters more competitive and increasing the likelihood of consumers and companies buying homegrown goods. Russia`s central bank last week said it would begin buying the dollar and other international currencies to replenish its dwindling foreign exchange reserves, a move interpreted by some currency strategists as an attempt to bear down on the rouble`s rise.
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