World Economy Review - December 2017
The global economy may this year see its fastest growth since 2011, driven mostly by African countries. It will also be its most energy-hungry ever, according to the latest Global Economy Watch (GEW) forecast by PwC.
"Among the 17 countries with a faster economic growth than China will be India, Ghana, Ethiopia and the Philippines, which will lead to a broader growth in Africa and the Asian economies. According to our GEW, of the ten fastest growing economies, eight could be African," said Csaba Polacsek, business advisory partner at PwC Hungary.
PwC released its final Global Economy Watch of 2017, with predictions for 2018. According to a press release sent to the Budapest Business Journal, one of the main findings of the final GEW of last year is that global economic growth may be the fastest since 2011.
PwC says that the global economy will likely grow by almost 4% in purchasing power parity (PPP) terms. More importantly, it stresses, this growth is expected to be broad-based and synchronized, rather than dependent on a few countries.
The main engines of the global economy (the United States, emerging Asia and the Eurozone, which comprised 60% of world GDP in 2017) are expected to contribute almost 70% of economic growth in 2018 in PPP terms, compared to their post-2000 average of around 60%, PwC says.
PwC also expects that this year will be "the beginning of the end of easy money," with the European Central Bank (ECB) likely to further reduce its monthly asset purchases in 2018. Generally, PwC expects monetary policy to somewhat tighten in the G7, reflecting closing output gaps in some advanced economies and stable inflation expectations.
The global economy is on course to consume almost 600 quadrillion British thermal units (BTUs) of energy this year, double its 1980 level and the highest level on record, PwC predicts. India and China together will consume about 30% of global energy, which will be about six times more than the African continent. Reflecting the slow shift towards renewable energy sources, 10% of global energy consumption is expected to be in renewables, with China consuming twice as much renewable energy as the United States, PwC says.
As for oil prices, PwC expects them to remain broadly stable in real terms in 2018. In November, OPEC and its allies agreed to extend the 1.8 million barrels per day (mb/d) supply cut until the end of 2018. Though part of OPEC, Iran was permitted a lower cut, to 10.05 mb/d, as it recovers from nuclear-related sanctions. This is likely to keep oil output growth modest, provided the deal proves viable over time.
Economy of the United States
Economic activity in the U.S. unexpectedly grew at a slightly slower than previously estimated rate in the third quarter, according to a report released by the Commerce Department.
The report said real gross domestic product surged up by 3.2 percent in the third quarter compared to the previously estimated 3.3 percent jump. Economists had expected the pace of growth to be unrevised.
The Commerce Department said the downward revision to the pace of GDP growth primarily reflected slightly slower than previously estimated consumer spending growth.
U.S. industrial production rose 0.2 percent in November due to a rebound in extracting oil and natural gas after a stoppage due to Hurricane Nate.
The Federal Reserve said that mining activity climbed 2 percent last month, while manufacturing activity rose 0.2 percent. Production of machinery and primary metals contributed to gains in the factory sector, while the overall growth for industrial output largely came from restarting oil and natural gas drilling. Production at utilities fell 1.9 percent. During the past 12 months, total industrial production has increased 3.4 percent.
The U.S. trade deficit increased more than expected in November as imports of goods surged to a record high amid strong domestic demand, making it likely that trade will subtract from economic growth in the fourth quarter.
The Commerce Department said the trade gap widened 3.2 percent to $50.5 billion. That was the highest level since January 2012 and followed an upwardly revised $48.9 billion shortfall in October. Economists polled by Reuters had forecast the trade deficit increasing to $49.5 billion in November after a previously reported $48.7 billion deficit in the prior month.
Imports rose 2.5% to a record $250.7 billion on more inbound shipments of consumer goods and industrial supplies. Exports climbed 2.3% to all-time high of $200.2 billion, led by increased shipments of automobiles, consumer merchandise and capital goods including commercial aircraft.
The Labor Department said its Consumer Price Index increased 0.4 percent last month after edging up 0.1 percent in October. That raised the year-on-year increase in the CPI back to 2.2 percent from 2.0 percent in October.
Last month`s increase in the CPI was in line with economists` expectations. Excluding the volatile food and energy components, consumer prices ticked up 0.1 percent as prices for airline fares and household furnishing fell.
The so-called core CPI advanced 0.2 percent in October. As a result, the annual increase in the core CPI slowed to 1.7 percent in November from 1.8 percent in October.
The U.S. created 148,000 jobs in December, the slowest pace in three months. Economists polled by MarketWatch had predicted a 198,000 increase in nonfarm jobs. The unemployment rate remained steady at 4.1% for the third straight month. Worker pay increased 2.5% from December 2016 to December 2017, up from 2.4% in the prior month. The average workweek was flat at 34.5 hours.
Economy of the European Union
Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and the EU28 during the third quarter of 2017, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2017, GDP grew by 0.7% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.6% in both the euro area and the EU28 in the third quarter of 2017, after +2.4% in both zones in the second quarter of 2017.
In October 2017 compared with September 2017, seasonally adjusted industrial production rose by 0.2% in the euro area (EA19) and by 0.3% in the EU28, according to estimates from Eurostat. In September 2017, the industrial production fell by 0.5% in both zones.
In October 2017 compared with October 2016, industrial production increased by 3.7% in the euro area and by 4.2% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in October 2017 was 187.9 billion, an increase of 8.8% compared with October 2016 (172.6 bn). Imports from the rest of the world stood at 168.9 bn, a rise of 10.1% compared with October 2016 (153.4 bn). As a result, the euro area recorded a 18.9 bn surplus in trade in goods with the rest of the world in October 2017, compared with +19.2 bn in October 2016. Intra-euro area trade rose to 160.0 bn in October 2017, up by 9.7% compared with October 2016. These data are released by Eurostat.
The first estimate for extra-EU28 exports of goods in October 2017 was 159.4 billion, up by 8.6% compared with October 2016 (146.8 bn). Imports from the rest of the world stood at 159.6 bn, up by 10.6% compared with October 2016 (144.4 bn). As a result, the EU28 recorded a 0.3 bn deficit in trade in goods with the rest of the world in October 2017, compared with a surplus of 2.4 bn in October 2016. Intra-EU28 trade rose to 292.8 bn in October 2017, +10.7% compared with October 2016.
Euro area annual inflation is expected to be 1.4% in December 2017, down from 1.5% in November 2017, 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 December (3.0%, compared with 4.7% in November), followed by food, alcohol & tobacco (2.1%, compared with 2.2% in November), services (1.2%, stable compared with November) and non-energy industrial goods (0.5%, compared with 0.4% in November).
The euro area (EA19) seasonally-adjusted unemployment rate was 8.7% in November 2017, down from 8.8% in October 2017 and from 9.8% in November 2016. This is the lowest rate recorded in the euro area since January 2009. The EU28 unemployment rate was 7.3% in November 2017, down from 7.4% in October 2017 and from 8.3% in November 2016. This is the lowest rate recorded in the EU28 since October 2008. These figures are published by Eurostat.
Eurostat estimates that 18.116 million men and women in the EU28, of whom 14.263 million in the euro area, were unemployed in November 2017. Compared with October 2017, the number of persons unemployed decreased by 155 000 in the EU28 and by 107 000 in the euro area. Compared with November 2016, unemployment fell by 2.133 million in the EU28 and by 1.561 million in the euro area.
Economy of Japan
Japan`s real gross domestic product grew 0.8% on the month in November, thanks mainly to solid consumer and corporate spending, the Japan Center for Economic Research said. Capital spending by businesses climbed 1%, while consumer spending rose 0.5%. Domestic demand as a whole, which includes these factors as well as inventories at private-sector companies, lifted GDP growth by 0.5 percentage point.
Industrial output in Japan climbed a seasonally adjusted 0.6% on month in November, the Ministry of Economy, Trade and Industry said in preliminary reading. That beat expectations for an increase of 0.5%, which would have been unchanged from the October reading.
On a yearly basis, industrial production advanced 3.7% - again beating forecasts for 3.6% but down from 5.9% in the previous month. According to the survey of production forecast, industrial output is expected to rise 3.4% in December and fall 4.5% in January.
Japan`s trade surplus fell sharply in November, the government said, as the rising cost of oil and smartphone imports outweighed strong exports of cars and steel.
The world`s third-largest economy logged a surplus of 113.4 billion yen ($1 billion), a 22% drop from a 146.5-billion-yen surplus a year earlier, according to finance ministry data. Exports rose a perky 16.2% on the year but imports rose by a lower than expected 17.2%.
Japan`s core consumer prices rose 0.9 percent in November from a year earlier, picking up from a 0.8 percent rise the previous month, the government said.
The core consumer price index, excluding fresh food prices due to their volatility, increased for the 11th consecutive month, according to the Ministry of Internal Affairs and Communications, though it remains far below the Bank of Japan`s 2 percent target.
Excluding energy and fresh foods, so-called "core-core" consumer prices rose just 0.3 percent from the previous year.
Unemployment in Japan has fallen to its lowest level in 24 years as robust economic growth leads to a deepening shortage of labour. The unemployment rate dropped 0.1 percentage points in November to 2.7 per cent, the lowest figure since December 1994 when Japan was descending into what had become known as its lost decade.
The ratio of open jobs to applicants, regarded as a more sensitive indicator of the labour market than unemployment, rose from 1.55 to 1.56. That is the highest since January 1974, during Japan`s era of rapid economic growth.
Economy of Russia
Russia`s gross domestic product rose 1.8 percent year-on-year in the third quarter of 2017, the Federal Statistics Service said, confirming an earlier estimate. That was slower than in the second quarter, when the economy grew 2.5 percent, its highest level since the third quarter of 2012. In the first nine months of this year GDP rose 1.6 percent, Federal Statistics Service said.
Russia`s industrial production shrank 3.6 year-on-year in November 2017 after showing no growth in the previous month and missing market expectations of a 0.2 percent gain. It was the steepest contraction in industrial production since October 2009, as output fell for manufacturing (-4.7 percent from 0.1 percent in October), extraction of raw materials (-1 percent from -0.1 percent), electricity and gas (-6.4 percent from -2.1 percent) and distribution of water, sewage (-5.7 percent from -1 percent). On a monthly basis, output fell 0.2 percent.
Russia`s trade surplus widened by 50 percent to USD 9.83 billion in October 2017 from USD 6.56 billion in the same month a year earlier, but below market expectations of a USD 9.98 billion surplus. Exports increased 27.1 percent to USD 31.45 billion while imports went up at a slower 18.8 percent to USD 21.62 billion. In January to October, the trade surplus widened sharply to USD 90.24 billion from USD 69.53 billion in the same period of 2016.
Russia`s consumer price inflation was unchanged at 2.5 percent year-on-year in December 2017, missing market expectations of 2.6 percent, a preliminary estimate showed. The figure stood at its lowest level since the series began in 1991, well below the central bank`s target of 4 percent. The Consumer Price Index in Russia increased 0.4 percent in December of 2017 over the previous month.
Russian unemployment rate fell to 5.1 percent in November 2017 from 5.4 percent in the same month of the previous year and in line with market expectations. The number of unemployed declined by 227 thousand to 3.887 million.
12.01.2018 21:49