The Lastest Macroeconomic News
04.02.2014 19:33 The old formula of a strong oil plus positive growth equaling strong ruble is not working
On January 31, the ruble-dollar exchange rate was at 35.2, while the buying rate of the euro was 48.1 rubles. That means the ruble has dropped almost 8 percent against the dollar and lost just more than 6 percent against the euro since the start of the year. Over the past 12 months, the picture is even worse, with the ruble having lost 16 percent against the dollar and 20 percent against the euro. The current ruble-euro rate represents a new record low for the Russian currency against that of its main trading partner, the eurozone. That means the cost of imported consumer goods will rise further, thus boosting the inflation rate. Russian tourists can expect to pay a lot more for foreign holidays this year, while expatriates will find their ruble-denominated salaries will not go as far in their home countries. The old formula of a strong oil plus positive growth equaling strong ruble is not working. In February 2009, when the ruble posted its record low of 36.7 against the dollar and recorded its previous record low of 47.25 against the euro, the price of Urals crude had collapsed from the record high of near $140 per barrel, set in June 2008, to only $40 per barrel. During the 2009 recession, gross domestic product declined by 7.8 percent and the Central Bank burned through more than one-third of the country`s foreign exchange reserves. Today the price of Urals crude is at $105 per barrel, a level it has been close to for most of the past three years. While economic growth has been disappointing, the trend is still positive.
03.02.2014 17:57 Cheaper ruble buoys Russian energy companies
The Russian economy has found itself in a fairly unusual situation in recent weeks: oil prices remain high, but the ruble has weakened in value against leading international currencies. This is a dream come true for oil exporters and the Russian treasury is likely to benefit from the increase in revenues. Ordinary consumers, however, will suddenly find goods imported from abroad more expensive. The combination of cheap ruble and expensive oil is fairly unique. At the height of the 1998 and 2008-2009 economic crises, the situation was very different, said Mikhail Krylov, head of the analysis department at United Traders. In 1998, the dollar climbed a record 247 percent against the ruble, while Brent crude fell 33 percent to $12.76 dollars a barrel. In 2009, oil prices fell by 36 percent, and the ruble reached a new low of $36.73 to the dollar, Krylov said. A weaker national currency is always a boon for exporters – but a weak ruble combined with expensive oil is gift to Russia`s oil industry. “This is a great situation for the oil companies because they receive all their revenues in dollars, but pay their taxes in rubles,” Krylov said. “A fall in the ruble exchange rate translates into an almost equivalent rise in the oil exporters` profits because most of the taxes and duties they pay are a flat rate per barrel of crude, not a percentage of their revenues. This is why our projection for the fall in the ruble exchange rate and the rise in the oil exporters` profits is the same: about 12.7 percent." Krylov estimates that the Russian treasury`s energy export revenues will climb to 862 billion rubles ($24.5 billion) this year thanks to the cheap ruble and expensive crude.
31.01.2014 17:52 Euro area`s economy is set to grow in coming months, but the recovery remains fragile
Service providers, retailers and consumers in the 18 countries that share the euro were more confident about their prospects as 2014 began, an indication that the currency area`s economy is set to grow in coming months. However, manufacturers and construction companies were slightly gloomier, the former because of worries about their stocks of unsold goods, an indication that the recovery remains fragile. The euro zone`s long struggle to overcome its interlinked fiscal and banking crises made it difficult for many businesses and households to remain upbeat about the future. But with the gravest threats to the euro zone`s survival now apparently having passed and growth having returned, they are beginning to look ahead with a degree of optimism. The European Commission said its headline Economic Sentiment Indicator--which measures confidence in a number of business sectors and among consumers--rose to 100.9 from 100.4 to reach its highest level since June 2011. Significantly, it moved further about the 100.00 level that denotes the average going back to 1990. The continued pickup in confidence suggests the euro zone`s modest recovery will continue to gain momentum in the months ahead, making it less likely that the European Central Bank will soon decide to provide more stimulus in order to raise an inflation rate many policy makers agree is worryingly low.
31.01.2014 15:45 Japan inflation quickens to over five-year high, output rebounds
Japan`s core consumer inflation rose at the fastest pace in more than five years in December and the job market improved, encouraging signs for the Bank of Japan as it seeks to vanquish deflation with aggressive money printing. Factory output also grew in December and manufacturers expect to keep increasing production, although some analysts fret about potential damage from the recent turmoil in emerging markets. Core consumer prices (CPI), which excludes fresh food but include energy costs, rose 1.3 percent in December from a year ago, data showed on Friday, just above a median market forecast for a 1.2 percent gain. That followed a 1.2 percent increase in November, and marked the fastest annual gain since 1.9 percent in October 2008, data from the Ministry of Internal Affairs and Communications showed. Last year, Japan`s core consumer prices rose 0.4 percent, the first increase in five years. Japan`s industrial output rose 1.1 percent in December, suggesting that robust domestic demand is underpinning the economy as consumers rush to beat a national sales tax hike in April. This is making up for soft exports to emerging markets. The rise roughly matched a median market forecast of a 1.2 percent increase, and followed a 0.1 percent drop in November. Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 6.1 percent in January and increase 0.3 percent in February, data showed.
30.01.2014 19:31 U.S. GDP Advances 3.2% in 4th Quarter of 2013
The U.S. economy expanded at a steady clip in the fourth quarter as consumers opened their wallets and businesses picked up investment, marking one of the best six-month periods of growth in a decade. Gross domestic product, which is the broadest measure of goods and services produced across the economy, grew at a seasonally adjusted annual rate of 3.2% in the fourth quarter, the Commerce Department said. Economists surveyed by Dow Jones expected fourth-quarter activity to grow by 3.2%. Across 2013, the economy expanded at a 1.9% pace. The last time the economy expanded by at least 3% annually was before the recession, when it reached a 3.4% pace in 2005. In 2012, GDP grew at a 2.8% rate. Healthy spending by consumers and businesses and stronger exports helped drive fourth-quarter growth and offset declines from the government and residential sectors. Imports, which subtract from GDP, increased. The latest GDP figures show the economy expanded at a 3.7% pace in the second half of 2013, which was sharply higher than the 1.8% pace in the first half of the year. That marked the strongest second-half growth since 2003, when the economy expanded at a 5.8% pace.
30.01.2014 15:00 IMF Raises Outlook for Global and US Economies
The International Monetary Fund is slightly more optimistic about the global and U.S. economies this year than it was three months ago. In an updated outlook, the global lending organization forecasts that the world economy will grow 3.7 percent in 2014 and that the U.S. economy will grow 2.8 percent. The global forecast is 0.1 percentage point higher and the U.S. forecast 0.2 point higher than the IMF`s October forecast. By 2015, the IMF forecast the U.S. economy will grow 3 percent, or 0.4 percentage point lower than its October forecast. The IMF reduced its outlook because a recent budget agreement left in place most of the spending cuts. The IMF had expected most of those cuts to have been eliminated by next year. For the countries in Europe using the common euro currency, the IMF forecasts stronger growth. The region is emerging from recession after a lingering debt crisis. This year the IMF projects 1 percent growth and 1.4 percent in 2015. Germany, the biggest economy in Europe, will grow 1.6 percent this year it projects, up from 0.5 percent growth in 2013. China is expected to grow 7.5 percent in 2014 and 7.3 percent in 2015. Both 2014 and 2015 projections were slightly higher than the IMF`s October forecast, but lower than the 7.7 percent growth reported for 2013. For Japan, the IMF forecast growth of 1.7 percent this year, the same as 2013, but a slowdown to 1 percent growth in 2015.
29.01.2014 17:29 UK GDP: British economy growing at fastest rate since 2007
Full year growth in 2013 was the strongest in six years, but the pace of the recovery slowed in the final quarter, the Office for National Statistics has reported. GDP grew by 0.7 per cent in the final three months of 2013, a touch down on the 0.8 per cent recorded in the third quarter. That leaves the economy still 1.3 per cent below the level of output achieved in the first quarter of 2008, while the US and Germany have already long surpassed their pre-financial crisis output peaks. Fourth quarter growth was also lower than implied by various industry surveys, which suggested an expansion of over 1 per cent in the three month period. However, the ONS said GDP grew by 1.9 per cent over the full year, marking the best performance since 2007, when the economy put on 3.4 per cent. And the consensus from forecasters is that the recovery will continue to strengthen in 2014. The figures were exactly in line with the expectations of City analysts, but some suggested that the moderation in the recovery would help the Bank of England Governor, Mark Carney, in his quest to keep interest rates on hold, despite unexpectedly rapid falls in unemployment.
29.01.2014 14:07 Russian GDP grew 1.4 percent in 2013
The initial estimate for Russia`s GDP growth in 2013 - 1.4% - corresponds to the Economic Development Ministry`s final forecast. "The pace of economic growth last year can not under any circumstance be considered satisfactory: 1.4%," Economic Development Minister Alexei Ulyukayev said during the government hour in the Federation Council on Wednesday. Economic growth last year was held back due to a number of factors, both external (recessions in countries that are Russia`s trading partners) and domestic factors (low level of investment), Ulyukayev said. In December, the Economic Development Ministry said GDP growth in 2013 would equal 1.4%. However, Deputy Economic Development Minister Andrei Klepach said in January that based on data from Rosstat the full-year result might be lower: 1.3%. However, after Rosstat reported better-than-expected data on industrial production in 2013, up 0.3%, Ulyukayev said GDP growth in 2013 most likely totaled 1.4%.
28.01.2014 19:31 World Economic Situation and Prospects 2014: global economy is improving but remains vulnerable
The global economy is expected to grow at a pace of 3.0 per cent in 2014 and 3.3 per cent in 2015, compared with an estimated growth of 2.1 per cent for 2013, according to the United Nations World Economic Situation and Prospects 2014 (WESP) report, launched on 20 January 2014. The world economy experienced again subdued growth in 2013, but some improvements in the last quarter have led to the UN`s more positive forecast. The euro area has finally ended a protracted recession. Growth in the United States strengthened somewhat. A few large emerging economies, including China and India, managed to backstop the deceleration they experienced in the past two years and veered upwards moderately. Developing countries as a whole will benefit from resilient domestic demand and an improvement in global conditions. These factors point to increasing global growth. However, the WESP stresses that the employment situation will continue to be challenging and warns that international capital flows to emerging economies are expected to become more volatile, in particular in the case of a bumpy exit from the quantitative easing programmes by the U.S Federal Reserve. Other main uncertainties and risks include the remaining fragility in the banking system and the real economy in the euro area. Beyond the economic domain, geopolitical tensions in Western Asia and elsewhere remain serious risks. These and other risk factors, unfolding unexpectedly, could derail the world economy far beyond the report`s projections.
26.01.2014 14:34 Will China Overtake US Economic GDP World Leadership by 2028?
The headline story, framed by London`s Center for Economic and Business Research has China overtaking the U.S. as the world`s leading generator of gross domestic product within 14 years. This has taken into account an annual U.S. GDP increase of barely reaching 3%, while China, despite increasing problems in agricultural to industrial conversion, will manage a doubling of the U.S. rate during that time period. When delving into the broader projections of the CEBR report, it indicates a further weakening of the European economy as a whole. It posits a slower-growth Germany and France, who would do much better if the European Community broke up, an event that CEBR and other knowledgeable analyst don`t expect. Other items of interest are an optimistic outlook for the United Kingdom, which is expected to leapfrog both Germany and current Eucom`s No. 2 France by 2028. But CEBR is especially high on India and its booming technological advances, expecting it to overtake Japan in the world`s No. 3 slot by the 2028 mark. The London-based international economic forecaster also expects Brazil to combine its natural resource potential, geographic size, and population exceeding 200 million to be the first previously underdeveloped global nation to join the world`s top five producers of goods and services by 2030. Although CEBR`s projections of shifting world standings are built on sound futuristic developments, it`s very likely that current leaders U.S., China, Germany, France and the U.K. will hold their own in the immediate term, while Brazil and India have the likeliest possibility of developing into world-class leadership positions during the following 2020-2030 decade.
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