World Economy Review - October 2016
The five-member bloc saw a 5.8 per cent growth in containerized trade with the world in the first half of 2016 on the back of a strong showing by India, says Maersk Line, the world`s largest container shipping company.
"BRICS export-import containerized trade with the world registered a growth of 5.8 per cent in the first half of 2016 as against de-growth of 2.2 per cent in the same period last year," it said.
This growth for BRICS, it said, was "led by India followed by China and is forecast to gain pace next year as Brazil and Russia are expected to emerge from recession, contributing to higher GDP expansion".
Volumes should improve as GDP for BRICS is expected to increase to 5.7 per cent in 2017, an improvement over the previous forecast of 5.3 per cent.
"China is expected to grow more than 6 per cent in 2017, India at 8 per cent, Brazil at more than 0.5 pr cent and Russia at above 1 per cent," it said in a release here.
Economic uncertainty has been a deterrent to investments in infrastructure, which is critically important to help countries lower their supply chain cost and consequently boost exports as well as improve competitiveness.
According to Maersk Line, if a country is able to lower trade costs by 10 per cent, exports can increase by more than 20 per cent.
The heads of BRICS countries are meeting in Goa this weekend to discuss improving collaboration and increasing trade.
While 2016 did not start positively for the world, India paced up in the first half of this year. This growth was on the back of a strong US economy and recovery in the European market.
"That said, it is worth mentioning that trade among BRICS countries continues to grow although China remains BRICS` as well as India`s largest trading partner responsible for 82 per cent of Indian containerized trade." Franck Dedenis, MD, India, Sri Lanka & Bangladesh Cluster, Maersk Line, said: "India export-import trade with BRICS nations has been consistently growing at 4 per cent since 2012." He further said recovery in Brazil and Russian economy is "good news" for BRICS and it might entail an increase of trade among India and China in 2017.
"We are also noticing some interesting trends that are beginning to emerge of late. Rise of India, Thailand and Vietnam as alternative sourcing markets to China can put some pressure on China in future," he said.
China, Maersk said, remains India`s strongest trading partner followed by Russia and Brazil. India`s export-import trade with BRICS nations was strong at 6.5 per cent and 7.8 per cent, respectively, in 2015 and 2016.
Economy of the United States
The U.S. economy expanded at a seasonally adjusted annual rate of 2.9% in the third quarter of 2016, the Commerce Department said. Economists surveyed by The Wall Street Journal had expected a somewhat lower growth rate of 2.5%. It was a pickup from the second quarter`s 1.4% growth pace and marked the strongest quarter of growth in two years.
U.S. industrial output improved slightly in September, suggesting struggling manufacturers and oil producers may be finding their footing in the second half of the year.
Industrial production - a measure of output at factories, mines and utilities - rose a seasonally adjusted 0.1% in September from August, the Federal Reserve said. Overall manufacturing output, which accounts for more than three-quarters of all industrial production, rose 0.2% in September.
Total factory production has increased in three of the past four months, but was flat in September from a year earlier.
Mining production rose 0.4%, its fourth rise in the past five months. The segment, which includes oil drilling, had been battered by a sustained drop in commodity prices. The latest figures suggest the energy sector has stabilized. Still, overall mining output remains 9.4% below its level from a year earlier. Utilities output was down 1% from the prior month in August.
Capacity utilization, a measure of how much industries are making as a share of potential output, rose 0.1 percentage point to 75.4%. September`s rate was 4.6 percentage points below the long-run average, suggesting there is still ample slack across the economy.
Overall August output was revised to a steeper 0.5% decline from an initial estimate of down 0.4%. Capacity use was revised down to 75.3% from an initial estimate of 75.5% for the month.
The U.S. trade deficit fell to a more than 1-1/2 year low in September amid rising exports, but a slump in imports pointed to slowing domestic demand. The Commerce Department said the trade gap narrowed 9.9 percent to $36.4 billion, the smallest since February 2015. August`s trade deficit was revised slightly down to $40.5 billion.
Exports increased 0.6 percent to $189.2 billion in September, the highest level since July 2015. Imports of goods and services dropped 1.3 percent to $225.6 billion in September. The decline in imports is consistent with a slowdown in consumer spending.
Economists polled by Reuters had forecast the trade gap decreasing to $37.8 billion in September after a previously reported $40.7 billion shortfall. When adjusted for inflation, the deficit fell to $55.0 billion from $57.4 billion in August.
U.S. consumer prices increased steadily in September, a sign of slowly building inflation that could nudge the Federal Reserve closer toward raising interest rates. The consumer-price index, measuring what Americans pay for everything from dental care to cars, rose 0.3% from a month earlier, the Labor Department said. Excluding the volatile costs of food and energy, so-called core prices climbed 0.1%.
Overall prices have risen 1.5% over the past year, a sluggish pace historically but still the biggest gain in any 12-month period since October 2014, driven largely by rent and health care cost increases. Core prices rose 2.2% over the period.
The U.S. gained 161,000 jobs in October and hiring was stronger in the prior two months than previously reported, reflecting steady gains in employment that are likely to spur the Federal Reserve to raise interest rates soon. Economists polled by MarketWatch had predicted a 175,000 increase in new nonfarm jobs.
The unemployment rate dipped to 4.9% from 5%, the government said. Average hourly wages rose 0.4% to $25.92. Hourly pay increased 2.8% from October 2015 to October 2016, the most rapid 12-month gain since mid-2009. Hours worked were flat at 34.4 hours.
Total employment gains for September and August, meanwhile, were 44,000 higher than previously reported. The government said 191,000 new jobs were created in September instead of 156,000. August`s gain was raised to 176,000 from 167,000.
Economy of the European Union
Seasonally adjusted GDP rose by 0.3% in the euro area (EA19) and by 0.4% in the EU28 during the third quarter of 2016, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2016, GDP had also grown by 0.3% in the euro area and by 0.4% in the EU28.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.6% in the euro area and by 1.8% in the EU28 in the third quarter of 2016, after +1.6% and +1.8% also in the previous quarter.
In August 2016 compared with July 2016, seasonally adjusted industrial production rose by 1.6% in the euro area (EA19) and by 1.4% in the EU28, according to estimates from Eurostat. In July 2016 industrial production fell by 0.7% in both zones.
In August 2016 compared with August 2015, industrial production increased by 1.8% in both zones.
The increase of 1.6% in industrial production in the euro area in August 2016, compared with July 2016, is due to production of durable consumer goods rising by 4.3%, capital goods by 3.5%, energy by 3.3% and intermediate goods by 1.4%, while production of non-durable consumer goods fell by 0.6%. In the EU28, the increase of 1.4% is due to production of capital goods rising by 3.8%, durable consumer goods by 2.7%, energy by 1.9% and intermediate goods by 0.9%, while production of non-durable consumer goods fell by 0.5%.
Among Member States for which data are available, the highest increases in industrial production were registered in the Czech Republic (+12.1%), the Netherlands (+4.4%) and Germany (+3.1%), and the largest decreases in Ireland (-13.4%), Finland (-3.5%) and Sweden (-2.9%).
The increase of 1.8% in industrial production in the euro area in August 2016, compared with August 2015, is due to production of durable consumer goods rising by 4.9%, capital goods by 2.6%, intermediate goods by 2.0% and energy by 1.5%, while production of non-durable consumer goods fell by 0.1%. In the EU28, the increase of 1.8% is due to production of durable consumer goods rising by 4.6%, capital goods by 3.3%, intermediate goods by 1.9%, energy by 0.2% and non-durable consumer goods by 0.1%.
Among Member States for which data are available, the highest increases in industrial production were registered in the Czech Republic (+7.7%), Slovenia (+5.9%) and Poland (+5.1%), and the largest decreases in Ireland (-8.5%), Sweden (-6.2%) and Malta (-3.9%).
The first estimate for euro area (EA19) exports of goods to the rest of the world in August 2016 was 160.3 billion, an increase of 8% compared with August 2015 (148.1 bn). Imports from the rest of the world stood at 141.9 bn, a rise of 4% compared with August 2015 (136.9 bn). As a result, the euro area recorded a 18.4 bn surplus in trade in goods with the rest of the world in August 2016, compared with +11.2 bn in August 2015. Intra-euro area trade rose to 121.6 bn in August 2016, up by 6% compared with August 2015. These data are released by Eurostat.
The first estimate for extra-EU28 exports of goods in August 2016 was 136.5 billion, up by 3% compared with August 2015 (132.1 bn). Imports from the rest of the world stood at 143.9 bn, up by 8% compared with August 2015 (133.8 bn). As a result, the EU28 recorded a 7.4 bn deficit in trade in goods with the rest of the world in August 2016, compared with -1.7 bn in August 2015. Intra-EU28 trade rose to 228.5 bn in August 2016, +6% compared with August 2015.
Euro area annual inflation is expected to be 0.5% in October 2016, up from 0.4% in September 2016, according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in October (1.1%, stable compared with September), followed by food, alcohol & tobacco (0.4%, compared with 0.7% in September), non-energy industrial goods (0.3%, stable compared with September) and energy (-0.9%, compared with -3.0% in September).
The euro area (EA19) seasonally-adjusted unemployment rate was 10.0% in September 2016, stable compared to August 2016 and down from 10.6% in September 2015. This is the lowest rate recorded in the euro area since June 2011. The EU28 unemployment rate was 8.5% in September 2016, stable compared to August 2016 and down from 9.2% in September 2015. This is the lowest rate recorded in the EU28 since February 2009. These figures are published by Eurostat.
Eurostat estimates that 20.789 million men and women in the EU28, of whom 16.181 million were in the euro area, were unemployed in September 2016. Compared with August 2016, the number of persons unemployed decreased by 150 000 in the EU28 and by 101 000 in the euro area. Compared with September 2015, unemployment fell by 1.596 million in the EU28 and by 905 000 in the euro area.
Economy of Japan
Japanese gross domestic product likely rose 1% on the quarter in the three months ended September, with exports picking up speed as the world economy starts to regain strength. The annualized real GDP reading is based on average projections by 10 private research houses, including the Daiwa Institute of Research, BNP Paribas Securities and SMBC Nikko Securities. The July-September period would mark a third consecutive quarter of growth.
Industrial output in Japan was unchanged on a monthly basis in September, the Ministry of Economy, Trade and Industry said. That missed forecasts for an increase of 0.9 percent following the 1.3 percent gain in August. On a yearly basis, production gained 0.9 percent - shy of expectations for a 1.9 percent increase following the 4.5 spike in the previous month.
Shipments were up 1.1 percent on month and down 0.1 percent on year. Inventories were down 0.4 percent on month and 2.0 percent on year. The production forecast shows an increase of 1.1 percent in October and 2.1 percent in November.
Japan`s trade balance swung to a surplus in September, as exports fell less than expected. Customs figures showed exports in September totaled 5.97 trillion yen. Imports fell 16.3 per cent from a year earlier to 5.47 trillion yen. The surplus of 498.3 billion yen compared with a deficit of 18.7 billion yen in August. Japan`s trade balance has mostly fallen in recent months as the value of the yen has risen against the US dollar.
Japan`s consumer price index fell in September for the seventh consecutive month, with a 0.5% decrease compared to the same month of 2015, according to official data. The index, which excludes fresh food due to its volatility, remained flat compared to August, when the indicator also showed a drop of 0.5% year-on-year, according to the Ministry of Internal Affairs and Communications.
The current CPI trend makes it increasingly difficult for the Bank of Japan to achieve its 2% inflation target at the earliest date possible, with the goal of ending nearly two decades of deflation.
The unemployment rate in Japan came in at a seasonally adjusted 3.0 percent in September, the Ministry of Internal Affairs and Communications said. That was beneath forecasts for 3.1 percent, which would have been unchanged from the August reading. The job-to-applicant ratio came in at 1.38, matching forecasts and up from 1.37 in the previous month. The participation rate was 60.5 percent, up from 60.3 percent a month earlier.
The average monthly household expenditure with two or more residents stood at 267,119 yen ($2,540). Meanwhile, the average household income per capita advanced 2.7% year-on-year to 424,553 yen.
Economy of Russia
Russia`s GDP fell by 0.7% in annual terms in the first nine months of 2016, according to the Ministry for Economic Development. The result was a disappointment as a few good months of growing manufacturing in the summer had some analysts pointing towards a more optimistic scenario with a contraction of only 0.2% for this year.
However, manufacturing is closely tied to state spending and the cash-strapped government cut spending in July, which was immediately apparent in the industrial production numbers.
On an annual basis, according to the Russian Ministry of Economic Development, in September of 2016 GDP fell by 0.7% in the first nine months - by 0.7% year on year, the ministry said in a statement. Seasonally adjusted Russian GDP fell by 0.2% in September with positive dynamics of seasonally adjusted growth seen in mining and retail, it added.
However, some analysts are confident that the worse-than-expected result is a one-off associated with the summer slowdown. A very large part of state spending comes in the last three months of the year and this should feed through to above trend industrial production as winter closes in and better growth figures.
Industrial production in Russia fell 0.8 percent year-on-year in September of 2016 following 0.7 percent growth in the previous month and below market expectations of 0.6 percent growth. It was the biggest decrease since January, as manufacturing production declined 1.6 percent (+0.1 percent in August). In contrast, electricity, gas and water rose at a faster 1.4 percent (+1.3 percent in August) and mining and quarrying increased 2.1 percent (+1.8 percent in August). On a monthly basis, industrial output went up 1.8 percent. Industrial Production in Russia is reported by the Federal State Statistics Service.
Russia`s trade surplus decreased to $4.9 billion in August 2016, from a $8.8 billion surplus a year earlier and well below market expectations of $7.2 billion. It was the lowest trade surplus since April 2009, as exports dropped 7.2 percent while imports rose for the first time since December 2013 by 13 percent. Considering the first eight months of the year, the trade surplus shrank 48.7 percent to USD 55.7 billion, as exports fell 25.7 percent and imports declined 5.6 percent. Balance of Trade in Russia is reported by the Central Bank of Russia.
Russian inflation delayed to 0.4% in October, accumulating a CPI growth of 4.5% since the beginning of the year and annual inflation of 6.1%, according to latest information from Rosstat. The inflation slowed in comparison with the previous year, showing stabilization of the country`s economy.
The unemployment rate in Russia remained unchanged in September, official data showed. In a report, Russian Federation State Committee on Statistics said that Russian Unemployment Rate remained unchanged at a seasonally adjusted annual rate of 5.2%, from 5.2% in the preceding month. Analysts had expected Russian Unemployment Rate to remain unchanged at 5.2% in September.
07.11.2016 15:33:18