The Lastest Macroeconomic News
14.02.2014 17:18 China`s slowdown will ripple across global economy
The reaction was slow in coming, but financial markets and corporate bosses have been jolted awake to China`s relentless growth decline and are scrambling to cope with wrenching changes in global business. For the past decade, China poured money into building new factories, highways and apartment blocks. That propelled explosive growth at home and a flood of money to exporters of iron ore and other commodities such as Australia and Peru. But now, Beijing has put the brakes on that boom. Like a captain turning a heavy ship in choppy seas, its leaders are trying to steer the world`s second-largest economy away from reliance on investment and toward being a consumer society. Growth has marched steadily downward over the past two years as Beijing clamped down on a spending boom that analysts worry has pushed debt to dangerous levels. That has meant less Chinese demand for imported goods from copper and cement to factory machinery and earth movers. China is far from falling off a financial cliff, but last year`s 7.7 per cent growth was barely half of 2007`s 14.2 per cent. Global stock markets slid after an unexpected fall in January manufacturing drew attention to the depth of the slowdown. Growth looks set to fall further amid weakness in trade, retail sales and manufacturing. Already, slumping Chinese demand has led to job cuts at mines in Australia and elsewhere. Other companies that looked to China to drive revenues are cutting sales forecasts. Some have pulled out and profits are down, possibly endangering jobs abroad. As for Chinese companies, they face tougher competition at home. That, combined with weaker investment, could lead to job or wage cuts if Beijing fails to manage the challenges of its transition. That might hurt consumer spending, leading to a downward spiral.
11.02.2014 18:22 The 3 Biggest Threats to Japan`s Economy in 2014
Japan`s economy has been the biggest story in global investing over the past year. In that time, Japan`s Nikkei 225 stock index has roared to gains of more than 47%, fueled by a combination of unprecedented stimulus and a weakening yen that has reignited growth in the Japanese economy after more than two decades of stagnation. The Nikkei`s ranked among the top global markets in the world despite a year where major indices rallied worldwide, and it has investors seeing green in 2014`s encore. However, past performance is no indicator of future results. If Japan can`t keep inflation and growth on target, or if it loses a handle on either its debt or its relations with pivotal trade partner China, the country`s economic turnaround could be short-lived -- and Japan investors may see their expectations for a repeat performance of the Nikkei`s big 2013 gains left unfulfilled.
11.02.2014 14:24 The global economy without steroids
The fact that the advanced economies are bouncing back is good news for everyone. But, for the emerging and developing economies that dominated global growth over the last five years, it raises an important question: Now, with high-income countries joining them, is business as usual good enough to compete? The simple answer is no. Just as an athlete might use steroids to get quick results, while avoiding the tough workouts that are needed to develop endurance and ensure long-term health, some emerging economies have relied on short-term capital inflows (so-called “hot money”) to support growth, while delaying or even avoiding difficult but necessary economic and financial reforms. With the US Federal Reserve set to tighten the exceptionally generous monetary conditions that have driven this “easy growth,” such emerging economies will have to change their approach, despite much tighter room for maneuver, or risk losing the ground that they have gained in recent years. As is true of an exhausted athlete who needs to rebuild strength, it is never easy for a political leader to take tough reform steps under pressure. But, for emerging economies, doing so is critical to restoring growth and enhancing citizens` wellbeing.
08.02.2014 15:09 Russia`s Economic Performance Is Actually Very Similar To Other East European Countries
Ever since it was lumped in with the BRICs, people have judged the performance of Russia`s economy primarily in comparison to India, Brazil, and China. While Russia does not necessarily come out looking bad when compared to Brazil, if you look only at headline GDP growth numbers then it is clearly lagging pretty far behind India, China, and several other of the more dynamic emerging markets. Quite a lot of people never thought Russia belonged in the BRICs in the first place, and the calls for removing it from the club grew ever louder as its 2013 GDP number were repeatedly revised downward to a measly 1.3%. While the BRICs are an interesting concept, and while Jim O`Neill, the person who coined the term, accurately predicted a strong shift in economic gravity away from the developed world, the simple fact is that Brazil, Russia, India, and China are extremely different countries with extremely different cultures, politics, economics, and demographics. Apart from being large, they just don`t have very much in common. It makes far more sense to compare Russia to the countries with which it shares the myriad aftereffects of state socialism. Russia and the countries of Central and Eastern Europe are, of course, not identical. But in trying to build market structures on the wreckage of the command economy, Russia and other post-Communist countries have shared many of the same economic, social, and political challenges. They inherited economies that were way too focused on heavy industry and that had extremely under-developed service sectors. Manufacturing both employed way too large a percentage of the workforce and was extraordinarily inefficient. Banking systems were practically non-existent, and the management of state finances was chaotic (at best). Due in large part to uncertainty over the new “rules of the game,” corruption was pervasive and on a scale rarely seen in other periods of history. This was a specific set of challenges that few countries outside of Eastern Europe had to face.
06.02.2014 22:26 Brazil Industrial Output Rises 1.2% in 2013
Output at Brazil`s mines and factories rose slightly less than expected in 2013 as a weak second half of the year undercut growth. Brazil`s industrial production rose 1.2% in 2013 after contracting 2.5% in 2012, the Brazilian Geography and Statistics Institute, or IBGE, said. Economists polled by the local Estado news agency had expected industrial production to rise 1.3%. But industrial production fell 3.5% in December from November and was down 2.3% from December 2012, the IBGE said. Both figures were much weaker than expected. The December swoon was the worst since a 12.2% decline in December 2008. The poor December performance underscores the weak second half for Brazil`s manufacturing sector as higher interest rates and the end of tax breaks on big-ticket purchases such as cars, home appliances and furniture crimped demand. Brazil`s industry grew a meager 0.3% in the second half of 2013 after expanding 2.1% in the first half, the IBGE said. Brazil`s manufacturing sector, which accounts for about 25% of gross domestic product, has been an important factor in the country`s lackluster economic growth. In the third quarter, Brazil`s economy contracted 0.5%, the country`s worst economic performance since the depths of the financial crisis in early 2009. Fourth-quarter growth is also expected to be weak after industrial production contracted 0.3% in the period.
05.02.2014 18:39 Russian Inflation Decelerates First Time in Four Months on Food
Russian inflation decelerated in January for the first time in four months as food costs eased. Consumer prices rose 6.1 percent from a year earlier compared with 6.5 percent in December, leaving inflation above the central bank`s target for a 17th month, the Federal Statistics Service in Moscow said in an e-mailed statement. That matched the median estimate of 20 economists in a Bloomberg survey. Price growth quickened to 0.6 percent in the month from 0.5 percent, also in line with analyst forecasts. Above-target increases in the cost of living have hurt the central bank`s ability to head off the worst economic slowdown since a 2009 recession. Policy makers led by Bank Rossii Chairman Elvira Nabiullina are targeting an inflation rate of 5 percent this year, after overshooting their 5 percent to 6 percent range in 2013. The central bank left its main lending rates unchanged in December for a 15th month.
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.