The Lastest Macroeconomic News
25.09.2013 14:02 Economists Cut Mexico GDP Estimate to 1.8% in 2013 and 3.7% in 2014
Economists surveyed by the Bank of Mexico lowered their expectations for the country`s economic growth this year and next after a surprise contraction in gross domestic product in the second quarter. Mexico`s economy now is expected to grow 1.8% this year, according to the average of 35 economists polled in August by the central bank, compared with 2.7% in July, the Bank of Mexico said. The latest estimate is in line with that of the Finance Ministry, which cut its forecast to 1.8% from 3.1% after the government statistics institute reported that GDP shrank 0.74% from the first quarter and expanded just 1.5% from the second quarter of 2012.
The economists also lowered their average estimate for economic growth in 2014 to 3.7% from 4%. The slowdown in the Mexican economy has coincided with an easing of consumer price inflation, which is running at an annual rate of 3.5%, creating conditions for possible interest rate cuts by the Bank of Mexico, although those conditions are seen countered by the likelihood of a reduction in monetary stimulus by the U.S. Federal Reserve that could lead to further weakening of emerging market currencies, including the Mexican peso.
On the inflation front, economists expect the consumer price index to end the year up 3.55%, compared with 3.64% in July, while core inflation is seen ending the year at 2.87% instead of the previous 2.98%. Mexico`s industrial production fell in July from the year-earlier month, and was also down from June, due to lower construction activity, mining and crude-oil output, the National Statistics Institute, or Inegi, said. Inegi said industrial output fell 0.5% from July 2012, with construction off by 6.3% compared with a year earlier, and mining down by 2.1%. Crude-oil output, a subsector of mining, fell 1.9% on year. In contrast, manufacturing rose 2.8% and utilities like electricity and water gained 1.1%, Inegi said. The negative result compared to expectations of a year-on-year drop of 0.7% in a survey of 11 economists by Dow Jones. In seasonally adjusted terms, industrial activity fell in July by 0.08% from June.
The construction sector has been battered in recent months by financial problems at the major home builders, and even the export-oriented auto sector showed some rare weakness in July. Auto production in July slipped 1.4% from a year earlier, while exports were 7.3% lower, according to data from the Mexican Auto Industry Association. Auto production showed signs of a pickup in August, however, when production of cars and light trucks rose 4.1% from a year earlier to 259,100 vehicles, and exports rose 20% to 226,900 vehicles, according to the association. In July, crude-oil production by state oil monopoly Petroleos Mexicanos fell to 2.482 million barrels a day from 2.528 million barrels a day in the year-earlier month. The oil firm is in its ninth year of falling production.
11.09.2013 16:00 The Economist Intelligence Unit says world growth is on the way down
The Economist Intelligence Unit says world growth is on the way down, according to its 2013 year-end forecast released in August 2013. Much of the downturn is due to the big emerging markets. China is growing slower. Russia and India are weaker than expected, and Brazil continues to be a disappointment with major bulge bracket banks lowering their GDP forecasts for the world`s sixth largest economy in August. For analysts at EIU, global economic growth is continuing to weaken in the heart of the countries that once could be counted on to drive growth since the 2008 financial crisis. The EIU reduced their 2013 GDP growth forecasts for Brazil, India and Russia due to soft external demand, weak investment, poor policy choices and financial market pressures stemming from monetary policy in the U.S. The BRICs aren`t the only problem for growth. The U.S. is also weaker than EIU originally expected. They`ve cut 2013 GDP for the U.S. to 1.6%, down from 2%. Despite the downgrade, the U.S. economy continues to recover at a slow but steady pace. The thing is, its growing less than it did over the last five years. On the positive side, the Euro zone is doing better and moving closer to zero growth rather than its current negative output. Euro zone GDP is expected to decline by just 0.5% from 0.8% in EIU`s previous forecast. Overall, global growth this year won`t be as good as 2012′s. The EIU is forecasting global GDP of 2.9% from 3% growth last year, 3.8% in 2011 and 5.1% in 2010 based on purchase power parity rates. Using the market exchange rate methodology for measuring GDP, 2013 is seen coming in at 2% versus 2.2% last year. If the EIU is right in their forecast, 2013s world output will be the slowest annual growth since the financial crisis. In 2009, world output was -2.3%, and in 2008 it was 1.3%. While global growth stagnated in the crisis years because of the U.S. and Europe, this year`s slower growth is mainly due to emerging markets. And, worth noting, emerging markets are slow because of conservative policy responses there (no monetary stimulus and reductions of government investments in China) and weak export markets in the core economies. It is premature — and almost certainly wrong — to declare an end to the emerging market growth story. Most of these countries are in a far better position than they were, say, in the 1990s, when emerging markets endured a series of shocks. Most have less external debt, higher levels of foreign reserves, expanding middle classes, improving productivity and greater access to technology. Many also have relatively young populations, which will swell labor forces and support growth. But the growth momentum has clearly slowed, and reviving it may be more difficult than many emerging market leaders imagine.” — from The Economist Intelligence Unit`s Sept 2013 Global outlook.
22.08.2013 16:52 Russia`s GDP growth has dipped to 1.4 per cent in the first six months of 2013
Russia`s gross domestic product growth has dipped to 1.4 per cent in the first six months of 2013. This is three times less than the figure for June-January 2012 which stood at 4.5 per cent. However, GDP rose by 1.8 percent year-on-year in July, Deputy Economy Minister Andrei Klepach said on Tuesday, up from 1.5 percent in June. The Bank of Russia has published a report about a week ago saying GDP growth will not exceed 2 per cent this year. Natalya Volchkova, Policy Director at the Center for Economic and Financial Research, says the GDP decline is driven by substantial drop in investments. “On one hand, state sector cannot support the previous volume of investments because of cuts in budget spending brought by slow down of oil price increase. On another hand, business climate for private investors is not getting better and for some segments of business, it is worsening,” Volchkova told The BRICS Post. The slowing growth rate has raised concerns about a possible recession in the Russian economy, but officials in Moscow assert the economy is "stagnant", but not in a recession. “There is no recession. And will not be. Stagnation is probably an appropriate term. There are low growth rates, and these are institutional, structural and macroeconomic factors. This is what we will be tackling for a long time,” Alexei Ulyukayev, Russia’s Minister of Economic Development said in an interview with Kommersant daily earlier this month. The minister claims that the state is burdened by massive social spending that is much higher in Russia compared to other middle income countries. “On one hand, we have huge pension system burden. On the other – expenses on tariff policy have significantly increased – gas supply expenses, goods transportation expenses, railroad expenses, network expenses, energy supply expenses. Finally, we have a very bad income to GDP growth ratio,” Ulyukaev said. Despite the dip in the recent figures, many see this indicator as healthy. “But at the same time, this year`s growth, which we expect to hit only 1.7%, can be easily called healthy: it is not supported either by fiscal expansion (growth in federal government spending will likely decline from 18% in 2012 to just 3% this year), nor by monetary easing (money market rates are at the highest level since crisis times while lending growth has peaked in mid of 2012 and since then decelerating),” writes Maxim Oreshkin, Chief Economist for Russia at VTB Capital, adding that when Russia`s Central Bank starts loosening monetary policy, analysts expect a “powerful recovery, as there is clearly a cyclical factor in the recent slowdown.”
15.08.2013 11:50 Euro area and EU27 GDP both up by 0.3% during the second quarter of 2013
GDP rose by 0.3% in both the euro area (EA17) and the EU27 during the second quarter of 2013, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the first quarter of 2013, growth rates were -0.3% and -0.1% respectively. Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.7% in the euro area and by 0.2% in the EU27 in the second quarter of 2013, after -1.1% and -0.7% respectively in the previous quarter. During the second quarter of 2013, GDP in the United States grew by 0.4% compared with the previous quarter (after +0.3% in the first quarter of 2013). Compared with the same quarter of the previous year, GDP rose by 1.4% (after +1.3% in the previous quarter).
02.08.2013 12:33 Recession in Russia is not excluded anymore
Russian manufacturing unexpectedly shrank in July, with a gauge of conditions in the industry falling to the lowest since December 2009 and marking the first contraction in almost two years, according to HSBC Holdings Plc. The HSBC Russia Manufacturing Purchasing Managers` Index fell to 49.2 from a four-month high of 51.7 in June, HSBC said, citing data compiled by London-based Markit Economics. The median estimate of three economists in a Bloomberg survey was for a drop to 50.9. Readings above 50 indicate expansion. Declining production follows a surprise contraction in service industries in June, adding to evidence the Russian economy is slowing. The drop, combined with signs of a weakening labor market and slower inflation, suggests stimulus measures may help revive growth, according to HSBC. “This should move forward cuts in key policy rates in Russia,” Alexander Morozov, chief economist for Russia at HSBC, said in the statement. “Output, new orders and employment –- all key PMI indexes –- marked significant falls to below the 50 point no-change mark in July.” Russia`s economic downward trend is mainly due to the unpredictable economic policy, Russian experts of the Moscow Higher School of Economics stated. In the first half year of 2012, the industrial production grew by 3.1%. By contrast, in the first six months of 2013, the industrial production only increased by 0.1%. Russia`s construction output even was down by 8%.
21.07.2013 12:58 Russia`s economy expanded at a slower pace than expected in the second quarter
Russia`s economy expanded at a slower pace than expected in the second quarter, increasing the likelihood that the country will grow at well under 3 per cent this year. Gross domestic product rose at an annual rate of 1.9 per cent between April and June, Andrei Klepach, the deputy economy minister, said, bringing GDP growth for the first half to 1.7 per cent after a particularly weak start to the year. Analysts blamed the low growth on a slowdown in investment, which accounts for about a fifth of Russia`s GDP, as well as weak external demand from key export markets such as the EU. Russian retail sales are now growing at about 3 to 4 per cent on an annual basis, versus 7-8 per cent this time last year. Meanwhile, both the public and private sectors are more constrained in their ability to raise wages. Analysts expect growth to pick up significantly in the second half of the year, partially thanks to a weak comparative period in 2012, as well as expectations of a strong harvest. At present, analysts forecast the economy to grow at 2.8 per cent for 2013, but Ivan Tchakarov, chief economist at Renaissance Capital, said he expected the consensus forecast to fall to at least 2.5 per cent. “If in the first half of the year it`s 1.7 per cent growth, you definitely need a GDP growth of about 3 per cent in the second half in order to get to 2.5 per cent growth for the year,” Ivan Tchakarov said.
03.07.2013 18:06 HSBC cuts 2013 growth forecasts for several Latin American economies
Global banking giant HSBC (NYSE: HBC) has slashed its 2013 GDP growth forecasts for several Latin American economies, the bank said in a report. "Latin America is still the two-speed region it has been for some time. Yet, although the starting points differ, growth is decelerating across the board," said HSBC. "Risks - a slowdown in China, wobbles in commodity markets, and a petering out of the domestic demand boom - have turned into actual headwinds." The UK-based bank notes that it has become more difficult for Latin America`s economies to find shelter from these downward pressures. As a result, it is reducing this year`s regional growth forecast to 2.7% from 2.8% last year. Forecast changes for 2013 growth affect Brazil (to 2.4%, from 2.6%), Chile (to 4.5%, from 4.8%), Peru (to 5.8%, from 6.2%), Uruguay (to 3.5%, from 4.0%) and Venezuela (to -0.9%, from -0.6%). Brazil`s GDP growth downgrade by HSBC came almost at the same time as the country released industrial production (IP) figures that cast even greater doubt about the health of Latin America`s biggest economy. Brazilian IP posted a 2% month-on-month contraction in May in seasonally adjusted terms, below the consensus forecast of a 1% contraction. Mexico`s 2013 growth forecast had already been cut by HSBC earlier in the second quarter, to 2.9% from 3.2%. A report this week from HSBC`s Mexican unit also showed that the country`s manufacturing purchase managers` index for June reached its lowest level since the data collection began in April 2011, by falling to 51.3 from 51.7 in May.
03.07.2013 17:23 HSBC now sees Chinese growth in 2013 at 7.4% compared to 8.2% previously
HSBC now sees Chinese growth in 2013 at 7.4% compared to 8.2% previously. For 2014, they see growth at 7.4% compared to 8.4%. "In our view, markets will be disappointed by the continuation of sluggish economic growth. We sense that many investors expect the Chinese government to implement further fiscal stimulus over the summer if GDP growth fails to pick up. Our economists` view is that, since the government is now putting more emphasis on balanced growth and market reforms, it will tolerate GDP growth in the 7-7.5% range and will therefore take no strong measures to boost growth unless there is a risk of growth slowing to 7%", HSBC said. Goldman Sachs also cut its estimate for 2013 Chinese gross domestic product to 7.4% from 7.8%, citing weaker economic indicators and tightening of financial conditions. “China has basically said goodbye to 8% GDP growth in spirit if not in statistics and will have to embrace slower growth, with the average annual growth rate in the next seven years to 2020 perhaps falling to the vicinity of 6%,” wrote Goldman Sachs China strategist Jiming Ha in a June 10 research report.
16.06.2013 15:51 World Bank Cuts Global Outlook as China Slows
The World Bank cut its forecasts for this year, citing a deeper than expected recession in Europe and a slowdown in China and India. Renewing fears about growth, it said the global economy was likely to grow by 2.2% this year, a downgrade from its January forecast of 2.4%. The World Bank also cut its forecast for growth in 2014 to 3.1% from 3%, but maintained its prediction that global GDP would increase by 3.3% in 2015. "While there are markers of hope in the financial sector, the slowdown in the real economy is turning out to be unusually protracted," said Kaushik Basu, senior vice-president and chief economist at the bank. "This is reflected in the stubbornly high unemployment in industrialised nations, with unemployment in the eurozone actually rising, and in the slowing growth in emerging economies." The bank is now predicting the eurozone economy will shrink by 0.6% this year, compared with an earlier forecast of a 0.1% decline in GDP. The currency bloc`s economy is then expected to grow by 0.9% in 2014 and 1.5% in 2015. The World Bank highlighted slowing growth in China, as authorities there seek to rebalance the economy, and said India`s annual growth had dropped below 6% for the first time in 10 years. It said there was concern that the US might begin to ease its support of the world`s largest economy by withdrawing quantitative easing, or the use of central bank cash to buy up sovereign debt in the hope that financial institutions will reinvest the windfall in the wider economy. The bank added that austerity programmes, high unemployment, and weak consumer and business confidence would continue to impede growth in higher-income countries. It downgraded its forecasts for developing countries` GDP to 5.1% this year from an earlier forecast of 5.5%. Growth in 2014 and 2015 is expected to be 5.6% and 5.7% respectively.
25.05.2013 11:19 S&P warns of economic slowdown if Russia fails to improve investment climate
US RATINGS agency Standard & Poor`s (S&P) warned that Russia faced harsh economic times unless the government improved its poor investment climate and implemented long-delayed privatisation and reform. Russia has seen more than a decade of largely uninterrupted economic growth, thanks to its lucrative oil and gas industries, to become the world`s eighth-largest economy. However, now that energy prices had stabilised, experts warn Russia is unlikely to grow as quickly unless it aggressively reforms its economy. S&P said in a report published on Thursday that it expected Russia`s economic growth to slow to 3% this year — the slowest rate the country had seen since 1999 — and that "growth will remain constrained without structural reforms to support it". The ratings agency`s report adds to a growing list of warnings for the Russian economy. The European Bank for Reconstruction and Development forecasts just 1.8% growth while the country`s own economic ministry predicts 2.4% growth. Even the country`s Economic Development Minister Andrei Belousov has warned Russia risks a recession unless rapid steps are taken. S&P is concerned the authorities would not be ready for tough measures if the economic situation gets worse.
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