The Lastest Macroeconomic News
02.03.2014 00:22 U.S. economic growth revised sharply downward
The recovery appeared to be reaching escape velocity at the end of December, but it turns out the economy wasn`t expanding quite as fast as initially thought — and that doesn`t bode well for hopes of a breakout this year. The Commerce Department sharply reduced its estimate of fourth-quarter growth to a moderate 2.4% annual rate. Friday`s revision downsized big gains in consumer spending and exports from its initial estimate of 3.2% in January. The updated figures on total economic output, known as gross domestic product, indicated the economy entered this year with less momentum than analysts had anticipated. And the lower rate added to concerns that recent lackluster economic data could signal even weaker growth in the weather-battered first quarter. Consumer spending was higher than the 2% annual growth rate in the third quarter. And the pace at the end of last year was the best since the first three months of 2012. The revised export data also were strong, growing at the fastest pace in three years. In addition, business investment was revised up to a 4.5% annual rate in the fourth quarter from the initial estimate of 3.4%. But it was down dramatically from a 17.2% increase in the third quarter.
27.02.2014 15:33 Russia`s economy: Stronger than you think
Many people who remember the collapse of the Soviet Union in 1991 and its tumultuous aftermath believe that Russia`s economy today must be impoverished and unstable — and far behind booming China. Wrong. The International Monetary Fund (IMF) said Russia`s per capita income last year — measured in terms of purchasing power parity — is roughly US$18,600 (S$23,500), nearly double China`s per capita income of around US$10,000. And, according to World Bank data, extreme poverty is close to zero, compared with 11.8 per cent in China in 2009 (the most recent year for which data is available). After several years of political infighting and unnecessary delay, macroeconomic stabilization was achieved and Russia`s economic growth was restored, especially as world oil and gas prices began to rise. From 2001 to last year, Russia`s gross domestic product grew at a robust 4.4 per cent average annual rate. Russia achieved a good measure of financial stability as well. The IMF puts Russia`s inflation rate at 6.9 per cent last year, with unemployment at 5.5 per cent, while the budget deficit was only 0.3 per cent of GDP. Moreover, Russia`s foreign-exchange reserves stand at a healthy US$500 billion. However, Russia could achieve still greater success by basing its economy on two growth engines rather than one. Oil and gas will continue to provide a strong lift to the country for years to come, especially as China becomes a major customer. Nevertheless, Russia also has vast and still under-developed potential in many global high-tech industries. Russia has the know-how, skilled engineering and natural-resource base to become a global competitor in a range of major high-tech industries, including nuclear energy, commercial aviation, commercial space technology (including satellites and GPS), ICT hardware and software, electric vehicles, high-speed rail, petrochemicals, and heavy equipment for the mining and hydrocarbon sectors. All of these industries will benefit from the potential for enormous demand growth in large markets such as China, Africa and India. However, achieving long-term growth led by high-tech industries requires a business environment that encourages private-sector investment, including openness to foreign players. Moreover, the social and political environment must be conducive to a high-tech labour force, providing an attractive quality of life, ensuring civil liberties, and supporting entrepreneurship and creativity. Finally, economic policies must promote technological advances and global technical cooperation in promising sectors.
26.02.2014 17:36 World economic recovery struggling to gain traction
Another month of slower factory activity in China and a sharp decline in a closely watched gauge of U.S. manufacturing added to concern about the state of the global economy. Surveys also showed business activity across the 18-country euro zone slowed this month, confounding expectations of an acceleration. U.S. stocks edged higher, however, as investors continued to shrug off tepid data while stocks in Europe recouped earlier losses, though sentiment remained fragile. Investors were also concerned about minutes of the Federal Reserve`s most recent meeting, which showed the U.S. central bank was set to keep winding down its stimulus spending despite recent softer economic data. "While we expect the recovery to continue during the course of this year, the market remains volatile in the near-term as investors are nervous on the back of the U.S. tapering story," Henk Potts, equity strategist at Barclays Wealth, said.
24.02.2014 22:34 Shock investment slump and no Sochi surge deepens Russia`s economic woes
A dramatic slump in capital investment by Russian companies in January pointed to Russia`s ailing economy continuing to deteriorate fast. There was no sign in data of a boost from preparations for the Sochi Olympics as investment fell by 7 percent compared with a year earlier, a huge undershoot compared with analysts` forecasts in a Reuters poll of a 0.5 percent rise. The unexpected plunge in investment last month comes after a year of stagnation. It fell by 0.3 percent in 2013, according to official estimates - a major factor behind lackluster economic growth of 1.3 percent last year. The investment malaise underscores the poor state of Russia`s business climate and boosts the argument of those calling for structural reforms to diversify an economy that is too dependent on stagnant natural resource sectors. The central bank lowered its mid-term economic growth forecasts, anticipating growth of below 2 percent until at least 2016, in an acknowledgement that Russia`s economy will be sickly for some time.
24.02.2014 18:42 G20 vows to boost world economy by $2 trillion
Finance chiefs from the 20 largest economies agreed Sunday to implement policies that will boost world GDP by more than $2 trillion over the coming five years. The world economy has sputtered since the 2008 financial crisis and global recession that followed. Progress in returning economic growth to pre-crisis levels has been hampered by austerity policies in Europe, high unemployment in the U.S. and a cooling of China`s torrid expansion. The centerpiece of the $2 trillion commitment made at the Sydney meeting is to boost the combined gross domestic product of G20 countries by 2 percent above the levels expected for the next five years, possibly creating tens of millions of new jobs. World GDP was about $72 trillion in 2012. The communiqué from the meeting said signs of improvement in the global economy are welcome but growth remains below the rates needed to get people back into work and to meet their aspirations. The G20 said it would "significantly raise global growth" without overtaxing national finance through measures to promote competition and increase investment, employment and trade. As an initial step toward achieving the $2 trillion target, each country will present a comprehensive growth strategy to a summit of leaders scheduled for November in the Australian city of Brisbane. The International Monetary Fund forecasts the world economy will grow 3.7 per cent this year. It said the G20 plan could lift annual world economic growth by half a percentage point for the next five years.
23.02.2014 17:55 Sliding ruble to drag Russian economy into recession
Russia`s GDP growth turned negative in January, with the lowest investment since 2010. Analysts say uncertainty surrounding the ruble, which hit its all-time low against the euro on Wednesday, is weighing on the economy and could drag it into recession. Russia`s GDP shrank during the first month of 2014, though so far there are no exact numbers. Inward investment slid 7 percent year on year in January, as real income was down 1.5 percent and wages grew the slowest since 2009, according to the report by Russia`s statistics service Rosstat. Retail growth also slowed to a four-year low at 2.4 percent. Ruble devaluation will benefit Russian exporters, but it won`t have any effect on investment, as the companies will keep their money in dollar accounts abroad. Analysts say the recent fall was caused by the announcement by Russia`s Ministry of Finance that it would buy about $6 billion (212 billion rubles) from the market by the end of May to transfer additional oil revenue to the Reserve Fund. The so-called banking “clean-up” in Russia was another huge blow to the economy, as the country`s banks have cut lending and people are shifting their savings from smaller banks to big state-owned ones.
19.02.2014 17:56 Emerging-Market Tremors Shake the World Economy
Emerging-market crises were supposed to be passé - a relic of the rocky 1990s, when investors suffered through the Tequila Crisis and the Asian Contagion in rapid succession. But history is stubbornly repeating itself. Emerging markets erupted afresh during last summer`s Taper Tantrum - who comes up with these names, anyway?- and as 2014 begins there`s turmoil from South America to Asia. Most at risk are poorly governed countries such as Argentina and Ukraine that became addicted to hot money from foreign investors in search of high returns. Those capital flows are sloshing back to developed economies like the U.S., leaving submerging economies behind. Countries with stronger finances and a unified citizenry are in less trouble, so the likelihood of another full-blown emerging-markets crisis remains low. Yet some of them could be dragged down if investors flee in a panic. “Events can unfold very rapidly if a disorderly process takes hold,” Morgan Stanley (MS) analysts warned clients on Jan. 27. Each emerging country is unhappy in its own way, making it hard to predict what happens next - and prescribe a one-size-fits-all policy fix. “You don`t have a silver bullet here,” says Pablo Goldberg, head of emerging-markets research at HSBC Securities (HSBC).
18.02.2014 20:13 The world economy will have a bumpy 2014. But the recovery is not, yet, at risk
For much of 2013 the world`s big stock markets had a magical quality about them. They soared upwards - America`s S&P 500 index rose by 30% last year, and Japan`s Nikkei by 57% - buoyed by monetary stimulus and growing optimism about global growth. Over the past month, the magic has abruptly worn off. More than $3 trillion has been wiped off global share prices since the start of January. The S&P 500 is down by almost 5%, the Nikkei by 14% and the MSCI emerging-market index by almost 9%. However, the assessment of the evidence to date is that investors` gloom is overdone. A handful of disappointing numbers does not mean that America`s underlying recovery is stalling. China`s economy is slowing, but the odds of a sudden slump remain low. Although other emerging markets will indeed grow more slowly in 2014, they are not heading for a broad collapse. And the odds are rising that monetary policy in both Europe and Japan is about to be eased further. Global growth will still probably exceed last year`s pace of 3% (on a purchasing-power parity basis). For now, this looks more like a wobble than a tumble.
18.02.2014 13:10 Russia`s Growing Regional Debts Threaten Stability
Since the 2009 financial crisis, the Kremlin has allowed Russia`s regions to take the brunt of the country`s economic decline in order to keep the federal government seemingly healthy, with a nominally small budget deficit and large currency reserves. But now most of Russia`s regional governments` debt is so high, it is becoming dangerous for the federal government and big banks and could soon become unmanageable. Most of Russia`s regional governments have always had some level of debt, but resource-based export revenues have kept it mostly manageable since the 1998 crisis. However, since the 2008-2009 financial crisis, most of the regions` debt has risen by more than 100 percent - from $35 billion in 2010 to an estimated $78 billion in 2014, and Standard & Poor`s has estimated that this will rise to $103 billion in 2015. Russia`s overall government debt - the federal and regional governments combined - is around $300 billion, or 14 percent of gross domestic product. This is small for a country as large as Russia, but the problem is that so much of the debt is concentrated in the regions, which do not have as many debt reduction tools as the federal government does. Of the 83 regional subjects in Russia, only 20 will be able to keep a budget surplus or a moderate level of debt by 2015, according to Standard & Poor`s calculations. This leaves the other 63 regions at risk of needing a federal bailout or defaulting on their debt.
17.02.2014 18:49 Japan`s GDP miss – What went wrong?
Japan`s economy grew at a much slower pace than expected at the end of 2013, stoking fears that Abenomics` momentum has stalled, but some economists say the dip will prove fleeting. Japan`s economy grew 0.3 percent in the fourth quarter of last year from the previous quarter, below analysts` expectations in a Reuters` poll for a 0.7 percent gain, data showed. On an annualized basis the economy grew 1 percent, below expectations of 2.8 percent. Japan`s growth in the fourth quarter was fueled by strong rises in private consumption – which grew 0.5 percent on quarter – and non-residential investment, which ticked up 1.3 percent on quarter. However, faster private demand was offset by slower public demand, and a sharp decline in net exports, which shaved 0.5 percentage points off headline growth, lowered the overall figure. Prime Minister Shinzo Abe`s ambitious plan to reform Japan`s struggling economy has included aggressive monetary easing, fiscal stimulus and structural reform. Since it has been put into action, it has been effective in dragging Japan out of recession and helped stimulate a healthy level of inflation – last recorded at 1.3 percent year on year - but doubts remain over Abe`s commitment to structural reform.