World Economy Review - January 2017
The global economy was set to accelerate over the next two years but there were uncertainties around exactly what policies the US would put in place and several emerging market economies were now seen growing more slowly, the International Monetary Fund said.
In an update of its October 2016 World Economic Outlook forecasts, the IMF said global gross domestic product would expand at a 3.4% clip in 2017 and by 3.6% in 2018, which was unchanged from its prior projections.
The new set of forecasts included assumptions for a changed policy mix in the States and a higher price of oil, the Fund said. However, advanced economies were now seen expanding slightly more quickly and emerging ones, where financial conditions have generally tightened, a tad more slowly.
Among the former, the IMF now expected saw the US growing at a pace of 2.5% in 2018, which was four tenths of a percentage point more than previously expected.
In parallel, the UK was seen growing 1.4% in that year, versus a prior forecast of 1.7%. That was more than offset by an upwards revision to the IMF`s 2017 projection from 1.1% to 1.5%. Italy on the other hand was now seen growing less in both 2017 and 2018, by 0.7% and 0.8%, respectively, instead of by 0.9% and 1.1%.
Emerging market and developing economies would grow by 4.5% and 4.8% over those same two year, with the former being one tenth of a percentage point less than previously anticipated.
Growth expectations for the Asean-5 and India in 2017 were marked down, as well as those for Latin America and the Caribbean and the Middle East for both years.
Saudi Arabia fared particularly poorly, with the Fund`s economists` new forecasts calling for an expansion of 0.4% and 2.3%, which were 1.6 and 0.3 percentage points than the IMF said in October.
At 0.2%, Brazil`s economy was now seen expanding 0.3 percentage points less quickly in 2017. Mexico would also grow 0.6 percentage points less in both years, with GDP increasing 1.7% and 2.0%.
On a more positive note, the forecast for Chinese GDO growth in 2017 was revised from 6.2% to 6.5%. Despite its markdown for India, the Subcontinent was still seen clocking in with growth of 7.2% and 7.7% over the same time horizon.
Economy of the United States
U.S. economic growth slowed more than expected in the fourth quarter as a plunge in shipments of soybeans weighed on exports, but steady consumer spending and rising business investment suggested the economy would continue to expand.
Gross domestic product increased at a 1.9 percent annual rate, the Commerce Department said in its first estimate of fourth-quarter GDP. That was a sharp deceleration from the 3.5 percent growth pace logged in the third quarter.
As a result, the economy grew only 1.6 percent in 2016, the weakest pace since 2011. Growth in the first half of the year was curbed by cheap oil and a strong dollar, which undercut company profits and weighed on business investment. An inventory correction also hurt growth last year. The economy expanded 2.6 percent in 2015.
U.S. industrial output rose at the fastest pace in more than two years in December as activity surged at utilities and manufacturers inched ahead, the latest sign of steady but unspectacular economic growth.
Industrial production - a measure of output at factories, mines and utilities - jumped 0.8% from a month earlier, the Federal Reserve said, the biggest increase since November 2014. Economists surveyed by The Wall Street Journal expected a 0.7% increase. Capacity use, a measure of slack in the economy, increased 0.6 percentage point to 75.5%, in line with estimates.
Manufacturing output, the biggest component of industrial production, climbed 0.2% in December, led by gains for primary metals and autos. The report showed output by utilities, largely a reflection of the weather, rose 6.6% in December, the strongest gain since December 1989. The move was largely because of a return to more normal temperatures following unseasonably warm weather in November, the Fed said. Mining-sector output was unchanged in December. The oil-and-gas industry posted gains that were offset elsewhere.
Overall industrial production has gained 0.5% over the past 12 months amid small gains for manufacturing, setbacks for miners and a big rise in the utility sector.
The U.S. trade deficit rose slightly in 2016 to $502.3 billion, marking the highest level in four years and underscoring the difficulty the Trump administration faces in bringing the nation`s trade outlook back into balance. The U.S. trade gap was the largest since 2012. The last time the country ran a surplus was in the mid-1970s when Gerald Ford was president.
In December, meanwhile, the trade deficit fell as expected. The gap in the final month of 2016 dipped 3.2% to $44.3 billion, the Bureau of Economic Analysis said. Economists polled by MarketWatch had forecast a $44.9 billion deficit. Exports rose 2.7% $190.7 billion, led by higher shipments of passenger planes and parts. Imports increased a smaller 1.5% to $235 billion as demand for pharmaceutical drugs, cell phones and televisions declined.
The Labor Department said its Consumer Price Index rose 0.3 percent in December after a 0.2 percent gain in November. In the 12 months through December, the CPI increased 2.1 percent, the biggest year-on-year rise since June 2014. The CPI rose 1.7 percent in the year to November. The gains were in line with economists` expectations. The CPI increased 2.1 percent in 2016, up from a gain of 0.7 percent in 2015.
The so-called core CPI, which strips out food and energy costs, rose 0.2 percent in December after the same increase in November. As a result, the core CPI was up 2.2 percent in the 12 months through December, from 2.1 percent in November.
The U.S. generated 227,000 new jobs in January to mark the biggest gain in four months. Economists polled by MarketWatch had predicted a 197,000 increase in new nonfarm jobs. The unemployment rate rose a tick to 4.8%, the government said.
Average wages edged up 0.1% to $26 an hour. Hourly pay increased 2.5% from January 2015 to January 2016, down from 2.8% in the prior month. Hours worked was unchanged at 34.4 after December`s figure was revised up slightly.
Combined employment gains for December and November, meanwhile, were 39,000 lower than previously reported. The government said 157,000 new jobs were created in December instead of 156,000. November`s gain was chopped to 164,000 from 204,000.
Economy of the European Union
Seasonally adjusted GDP rose by 0.5% in the euro area (EA19) and by 0.6% in the EU28 during the fourth 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 third quarter of 2016, GDP had grown by 0.4% in the euro area and by 0.5% in the EU28.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.8% in the euro area and by 1.9% in the EU28 in the fourth quarter of 2016, after also +1.8% and +1.9% in the previous quarter.
Over the whole year 2016, GDP grew by 1.7% in the euro area and by 1.9% in the EU28.
In November 2016 compared with October 2016, seasonally adjusted industrial production rose by 1.5% in the euro area (EA19) and by 1.6% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In October 2016 industrial production rose by 0.1% in the euro area, while it fell by 0.1% in the EU28.
In November 2016 compared with November 2015, industrial production increased by 3.2% in the euro area and by 3.1% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in November 2016 was 184.2 billion, an increase of 6% compared with November 2015 (173.8 bn). Imports from the rest of the world stood at 158.3 bn, a rise of 5% compared with November 2015 (150.9 bn). As a result, the euro area recorded a 25.9 bn surplus in trade in goods with the rest of the world in November 2016, compared with +22.9 bn in November 2015. Intra-euro area trade rose to 154.0 bn in November 2016, up by 5% compared with November 2015.
The first estimate for extra-EU28 exports of goods in November 2016 was 156.8 billion, up by 5% compared with November 2015 (148.7 bn). Imports from the rest of the world stood at 149.9 bn, also up by 5% compared with November 2015 (143.0 bn). As a result, the EU28 recorded a 6.9 bn surplus in trade in goods with the rest of the world in November 2016, compared with +5.7 bn in November 2015. Intra-EU28 trade rose to 281.0 bn in November 2016, +5% compared with November 2015.
Euro area annual inflation is expected to be 1.8% in January 2017, up from 1.1% in December 2016, according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in January (8.1%, compared with 2.6% in December), followed by food, alcohol & tobacco (1.7%, compared with 1.2% in December), services (1.2%, compared with 1.3% in December) and non-energy industrial goods (0.5%, compared with 0.3% in December).
The euro area (EA19) seasonally-adjusted unemployment rate was 9.6% in December 2016, down from 9.7% in November 2016 and down from 10.5% in December 2015. This is the lowest rate recorded in the euro area since May 2009. The EU28 unemployment rate was 8.2% in December 2016, stable compared to November 2016 and down from 9.0% in December 2015. This remains the lowest rate recorded in the EU28 since February 2009. These figures are published by Eurostat.
Eurostat estimates that 20.065 million men and women in the EU28, of whom 15.571 million were in the euro area, were unemployed in December 2016. Compared with November 2016, the number of persons unemployed decreased by 159 000 in the EU28 and by 121 000 in the euro area. Compared with December 2015, unemployment fell by 1.839 million in the EU28 and by 1.256 million in the euro area.
Economy of Japan
The Nikkei, Japanese daily, reports a forecast from eleven private research institutes on the Japanese growth numbers. Japan`s economy is likely to grow at a moderate pace of around 1% through fiscal 2017 led by brisk exports of cars and electronic parts. Q4 2016 GDP likely will show an annualized 1% increase. Real GDP growth likely will stay between 1.0% and 1.5% in the first half of 2017, above the potential growth rate of about 0.8%.
Industrial production in Japan climbed 0.5 percent on month in November, the Ministry of Economy, Trade and Industry said. That beat forecasts for an increase of 0.3 percent following the 1.5 percent jump in November. On a yearly basis, industrial production climbed 3.0 percent - in line with expectations and down from 4.6 percent in the previous month. Industrial production is forecast to rise 3% on the month in January and 0.8% in February.
Japan`s monthly trade balance came to Y641.4 billion in surplus in December, up sharply from a Y138.9 billion surplus a year earlier for the fourth month in which the value of exports exceeded imports, the ministry said. Economists surveyed by the Nikkei had forecast a Y290.0 billion surplus.
Japanese export volumes also expanded 8.4% in December from a year earlier, following a 7.4% gain in November, marking the second straight month of increase, according to the data. Imports fell 2.6% to Y6.038 trillion in December, the 24th consecutive monthly fall, according to the data.
Japan`s core consumer prices fell at the slowest annual pace in nearly a year in December, data showed, a sign inflation should pick up in coming months on a rebound in oil costs and rising import costs from a weak yen.
The nationwide core consumer price index, which includes oil products but excludes volatile fresh food prices, slipped 0.2 percent in December from a year earlier, government data showed, compared with a median market forecast for a 0.3 percent fall. It was the 10th straight month of declines but the smallest fall since February 2016, when there was a flat reading. Data showed overall consumer prices rose 0.3 percent in December from a year earlier.
The unemployment rate held steady at 3.1% in December, matching analysts` forecast, the national statistics bureau said. Joblessness has been steady over the past 12 months, fluctuating between 3% and 3.3%. That`s well below levels seen after the financial crisis, when unemployment rose above 5%.
Japan`s job availability ratio, which is obtained by dividing monthly job openings by the number of active applications, rose to 1.43 in December from 1.42 the previous month. This means there were 143 job opening for every 100 job-seekers in the workforce.
The unemployment rate in Japan decreased to 3.1 percent in 2016 for the first time in more than twenty years, the Ministry of Internal Affairs and Communications said. According to the ministry`s statement, the number of unemployed people in Japan amounts to 2,08 million people, while 3.3 percent out of them are men and 2.8 are women.
In 2016, 64,4 million people in Japan were recorded employed, what is 640,000 more than the year before, the statement specified. The non-working part of the population, including persons over the age of 65, decreased to 44,2 million people.
Economy of Russia
Russia is getting closer to pulling out of its recession. A preliminary estimate showed that Russia`s GDP dipped by 0.2% in 2016, according to the Federal Statistics Service. This was above expectations of a contraction of 0.5%, according to the Bloomberg consensus.
Taking a look under the hood, data suggests that two industries in particular pushed the economy forward: Manufacturing rose by 1.4% in 2016 and the production of natural resources was up by 0.2%. However, on the flip side, consumption remained weak. Wholesale and retail trade dropped by 3.6%.
Additionally, the Federal Statistics Services also revised 2015 GDP to a 2.8% drop, compared to the prior estimate of a 3.7% contraction. This revision appears to be due to the inventory cycle exerting a smaller drag on growth. According to the GDP figures, gross capital formation fell by much less than previously thought (-13.0% versus -20.9%), whereas fixed investment actually fell more.
Industrial production in Russia rose 3.2 percent year-on-year in December of 2016, following a 2.7 percent gain in November and beating market expectations of a 1.5 percent rise. It is the biggest increase since December of 2014 as main activities rose faster: manufacturing (2.6 percent compared to 2.5 percent), mining (2.9 percent compared to 2.7 percent in November) and electricity, gas and water (5.5 percent from 4.1 percent) On a monthly basis, industrial output jumped 7.4 percent.
Russian trade surplus increased by 2.2 percent to $9.14 billion in November 2016 from $8.94 billion in the same month a year earlier, well above market expectations of a $7.6 billion surplus. Exports rose 4.9 percent, the first increase since July 2014; and imports went up 6.4 percent, the fourth consecutive month of growth. Considering the first eleven months of 2016, the trade surplus shrank 42.7 percent to $78.59 billion from $137.21 billion in the same period of 2015, as exports fell 19.8 percent and imports declined at a much slower 1.9 percent.
Consumer prices in Russia increased 5 percent year-on-year in January of 2017, following 5.4 percent rise in the previous month and below market expectations of 5.1 percent. It was the lowest inflation rate since June 2012, as prices increased at a slower pace for food; clothing and footwear; furnishings and household equipment and recreation and cultural activities. On a monthly basis, prices went up 0.6 percent, compared to 0.4 percent rise in December.
The unemployment rate in Russia declined to 5.3 percent in December of 2016 from 5.4 percent in November and below market expectations of 5.4 percent. The number of unemployed people decreased by 11 thousand to 4.103 million and the number of economically active people increased by 200 thousand to 76.9 million, representing 52 percent of total population.
07.02.2017 22:02:04