World Economy Review - June 2018
America`s current strategy is not friendly, it is based on unilateralism, former French Prime Minister Jean-Pierre Raffarin said during a lecture at China Europe International Business School (CEIBS) in Shanghai.
Becoming embroiled in a trade war will not only negatively affect the world economy but also the living standards of ordinary people, he said of the United States-initiated trade dispute with China, during an interview with Xinhua on July 8.
China`s consistent efforts in opening up, deepening international collaboration despite the emergence of trade protectionism, unilateralism, and anti-globalization sentiments, are a reflection of Chinese wisdom, he added.
Raffarin, who has visited China many times since the 1970s, said he is impressed by the country`s rapid development, which he believes is a result of its reform and opening up.
"Every time I come to China, I can learn something new," he said, citing the country`s economic and social development, urbanization, and modernization along with the growing competitiveness of Chinese enterprises and poverty alleviation measures that have improved the lives of hundreds of millions of people.
China`s progress has also had global implications. In 2017, the country`s imports accounted for 10.2 percent of the world`s total imports of merchandise, while its exports made up 12.8 percent. This has made China a major trade partner of more than 120 countries and regions, according to data attributed to the WTO in a white paper issued in June under the title "China and the World Trade Organization."
China`s reform and opening-up drive is profound and concrete, and not only promotes the country`s development but also benefits the rest of the world, said Raffarin.
China`s relationship with the European Union is in focus this year as 2018 marks the 15th anniversary of the building of a comprehensive strategic partnership between both sides. China was the EU`s largest import trade partner and second-largest export target market in 2017, according to data from the EU`s statistical office Eurostat.
"Europe and China need to work together to safeguard multilateralism, this is what the world needs," Raffarin said.
Economy of the United States
The U.S. economy slowed more than previously estimated in the first quarter amid the weakest performance in consumer spending in nearly five years, but growth appears to have since regained momentum on the back of a robust labor market and tax cuts.
Gross domestic product was increased at a 2.0 percent annual rate in the January-March period, the Commerce Department said in its third estimate of first-quarter GDP, instead of the 2.2 percent pace it reported last month.
The economy grew at a 2.9 percent rate in the fourth quarter. The downgrade to first-quarter growth reflected weaker consumer spending and a smaller inventory accumulation than the government had estimated last month. Growth estimates for the second quarter are as high as a 5.3 percent rate. Economists had expected first-quarter GDP growth would be unrevised at a 2.2 percent pace.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, braked to a 0.9 percent rate in the first quarter instead of the previously reported 1.0 percent pace. Businesses accumulated inventories at a rate of $13.9 billion, instead of the $20.2 billion pace estimated last month. As a result, inventory investment was neutral to GDP growth instead of adding 0.13 percentage point as reported.
U.S. industrial production increased in June, boosted by a sharp rebound in manufacturing and further gains in mining output, the latest sign of robust economic growth in the second quarter.
The Federal Reserve said industrial production rose 0.6 percent last month after a downwardly revised 0.5 percent decline in May. Economists polled by Reuters had forecast industrial production rising 0.6 percent last month after a previously reported 0.1 percent dip in May.
Industrial production increased at a 6.0 percent annualized rate in the second quarter, faster than the 2.4 percent pace logged in the January-March period.
Manufacturing output surged 0.8 percent in June after decreasing 1.0 percent in May. A 7.8 percent jump in motor vehicle production buoyed manufacturing output last month. Motor vehicle production declined 8.6 percent in May after a fire at a parts supplier caused a sharp drop in the assembly of trucks.
The U.S. trade deficit dropped in May to the lowest level in 19 months as U.S. exports rose to a record level. But the trade gap between the United States and China increased sharply, underscoring the economic tensions between the world`s two biggest economies.
The Commerce Department said that the May trade deficit - the difference between what America sells and what it buys in foreign markets - fell 6.6 percent to $43.1 billion. It was the smallest imbalance since October 2016. Exports climbed 1.9 percent to a record $215.3 billion. Imports were up a smaller 0.4 percent to $258.4 billion.
U.S. consumer prices barely rose in June, but the underlying trend continued to point to a steady buildup of inflation pressures that could keep the Federal Reserve on a path of gradual interest rate increases.
The Labor Department said its Consumer Price Index edged up 0.1 percent as gasoline price increases moderated and apparel prices fell. The CPI rose 0.2 percent in May.
In the 12 months through June, the CPI increased 2.9 percent, the biggest gain since February 2012, after advancing 2.8 percent in May.
Excluding the volatile food and energy components, the CPI rose 0.2 percent, matching May`s gain. That lifted the annual increase in the so-called core CPI to 2.3 percent, the largest rise since January 2017, from 2.2 percent in May.
Economists polled by Reuters had forecast both the CPI and core CPI rising 0.2 percent in June.
U.S. employers kept up a brisk hiring pace in June by adding 213,000 jobs, a sign of confidence in the economy despite the start of a potentially punishing trade war with China.
The job growth wasn`t enough to keep the unemployment rate from rising from 3.8 percent to 4 percent, the government said. But the rate rose for an encouraging reason: More people felt it was a good time to begin looking for a job, though not all of them immediately found one.
Economy of the European Union
In May 2018 compared with April 2018, seasonally adjusted industrial production rose by 1.3% in the euro area (EA19) and by 1.2% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In April 2018, industrial production fell by 0.8% in both zones.
In May 2018 compared with May 2017, industrial production increased by 2.4% in both zones.
The first estimate for euro area (EA19) exports of goods to the rest of the world in May 2018 was 189.6 billion, a decrease of 0.8% compared with May 2017 (191.2 bn). Imports from the rest of the world stood at 173.1 bn, a rise of 0.7% compared with May 2017 (171.9 bn). As a result, the euro area recorded a 16.5 bn surplus in trade in goods with the rest of the world in May 2018, compared with +19.3 bn in May 2017. Intra-euro area trade rose to 162.3 bn in May 2018, up by 0.5% compared with May 2017.
The first estimate for extra-EU28 exports of goods in May 2018 was 160.9 billion, down by 2.7% compared with May 2017 (165.4 bn). Imports from the rest of the world stood at 160.7 bn, down by 1.4% compared with May 2017 (163.0 bn). As a result, the EU28 recorded a 0.2 bn surplus in trade in goods with the rest of the world in May 2018, compared with +2.3 bn in May 2017. Intra-EU28 trade rose to 294.7 bn in May 2018, +1.6% compared with May 2017
Euro area annual inflation is expected to be 2.0% in June 2018, up from 1.9% in May 2018, 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 June (8.0%, compared with 6.1% in May), followed by food, alcohol & tobacco (2.8%, compared with 2.5% in May), services (1.3%, compared with 1.6% in May) and non-energy industrial goods (0.4%, compared with 0.3% in May).
The euro area (EA19) seasonally-adjusted unemployment rate was 8.4% in May 2018, stable compared with April 2018 and down from 9.2% in May 2017. This remains the lowest rate recorded in the euro area since December 2008. The EU28 unemployment rate was 7.0% in May 2018, stable compared with April 2018 and down from 7.7% in May 2017. This is the lowest rate recorded in the EU28 since August 2008. These figures are published by Eurostat.
Eurostat estimates that 17.207 million men and women in the EU28, of whom 13.656 million in the euro area, were unemployed in May 2018. Compared with April 2018, the number of persons unemployed decreased by 154 000 in the EU28 and by 125 000 in the euro area. Compared with May 2017, unemployment fell by 1.828 million in the EU28 and by 1.252 million in the euro area.
Economy of Japan
Japan`s real gross domestic product fell 2.1% on the month in May, according to seasonally adjusted estimates published by the Japan Center for Economic Research.
With exports shrinking 3.8%, external demand pushed down the overall figure by 1.8 percentage points.
Domestic demand also lacked momentum, with consumer spending edging down 0.2% and capital investment sliding 2.1%.
Japan`s industrial production declined as initially estimated in May, preliminary figures from the Ministry of Economy, Trade and Industry showed.
Industrial production dropped a seasonally-adjusted 0.2 percent month-over-month in May, reversing 0.5 percent rise in the previous month. That was in line with the flash data published on June 29. This was the first decrease in four months.
Shipments fell 1.6 percent over the month, while inventories rose by 0.6 percent. The preliminary estimate was confirmed.
On a yearly basis, industrial production growth accelerated to 4.2 percent in May from 2.6 percent in April.
The trade gap in Japan increased sharply to JPY 578.3 billion in May of 2018 from JPY 204.4 billion a year earlier. Figure was worse than market expectations of a JPY 235 billion deficit, mainly due to a jump in imports. In May, imports rose by 14 percent year-on-year to JPY 6,901 billion, beating consensus of a 8.2 percent rise and reaching the highest value since January. Exports rose at a slower 8.1 percent to JPY 6,323 billion, above expectations of a 7.5 percent gain and marking the strongest growth in four months despite rising trade tension. Considering the first five months 2018, Japan`s trade deficit narrowed to JPY 104.7 billion from JPY 590.1 billion in the same period of the preceding year.
A key measure of consumer inflation in Japan held steady in May, ending a two-month run of declines, while the headline gauge ticked up for first time since February.
Japan`s core consumer price index, which excludes fresh food prices but not fuel costs, stood at 0.7 per cent in May, according to the country`s statistics bureau, in line with a median estimate from economists polled by Reuters predicting no change from April`s level.
Core inflation is the focus of the Bank of Japan`s 2 per cent inflation target.
Headline inflation rose 0.7 per cent year on year last month, edging higher from a 0.6 per cent pace in April and ending two months of deceleration, but was still substantially lower from a peak of 1.5 per cent touched in February.
But core-core inflation, excluding both fresh food and fuel and energy prices, slowed further from the 0.4 per cent rate seen in April to just 0.3 per cent year on year last month, marking the weakest pace of price growth since December.
Japan`s seasonally-adjusted unemployment rate stood at 2.2% in May, down 0.3% when compared to the same period last year and the joint-lowest level since October 1992, according to data from Statistics Japan. The number of unemployed persons in May 2018 was 1.58 million, a decrease of 520,000 when compared to the previous year.
Japan`s employment rate in May was 60.3%, an increase of 1.4% when compared to last year. The number of employed persons in May was 66.98 million, an increase of 1.51 million from the previous year. Meanwhile, the country`s labour force participation rate for May stood at 61.7%, up 0.9% compared to last year. Job availability in May stood at 1.60, up from 1.59 in April, meaning there were 160 jobs to every 100 job applicants.
Economy of Russia
Russia`s gross domestic product advanced by 1.3 percent year-on-year in the first quarter of 2018, matching the preliminary estimate and following a 0.9 percent growth in the previous period. The stronger expansion was mainly driven by gains in financial and insurance, real estate activities and public administration. In addition, output rebounded for manufacturing and mining.
Industrial production in Russia increased by 3.7 percent year-on-year in May of 2018, well above market expectations of 0.8 percent and easing from an upwardly revised 3.9 percent rise in the previous month, which was the highest growth in industrial production since August of 2017. Output slowed for mining & quarrying (1.3 percent from 2.5 percent in April) while production advanced faster for manufacturing (5.4 percent from 5.3 percent). Additionally, production fell for electricity, gas, steam & air conditioning supply (-0.7 percent from 0.5 percent) and water supply sewerage, waste management & remediation activities (-0.5 percent from -2.8 percent). On a monthly basis, industrial production went up 1.5 percent, after a 3.1 percent drop in April.
Russia`s trade surplus widened by 75.5 percent to USD 15.15 billion in May 2018 from USD 8.63 billion in the same month a year earlier, but still below market expectations of a USD 18.06 billion surplus. Exports jumped 29.2 percent to USD 36.51 billion and imports rose at a softer 8.8 percent to USD 21.36 billion.
Russia`s annual inflation rate edged down to 2.3 percent in June 2018 from 2.4 percent in the previous month, still above market expectations of 2.2 percent. Food prices fell from a year earlier while cost of both non-food products and services rose at a faster pace. The Consumer Price Index in Russia increased 0.50 percent in June of 2018 over the previous month.
The unemployment rate in Russia went down to 4.7 percent in May of 2018 from 5.2 percent in the corresponding month of the previous year, below market expectations of 4.9 percent. It was the lowest jobless rate since at least October 1992. In April, the jobless rate was higher at 4.9 percent.
17.07.2018 20:32:31