World Economy
Русский English
main news reviews statistics articles links about
 

World Economy Review - June 2007

Russia is likely to revise its GDP growth forecast upwards as it should reach 7 pct in 2007, Russian media reported Economic Development and Trade Minister German Gref said in June. "Soon from now, we`ll see our GDP forecast raised from 6.5 pct to 7 pct for 2007," - he said. "In the first five months this year GDP has risen 7.7 pct year-on-year," - he said.
Also in June, the White House lowered its official forecast for economic growth to 2.3 pct for 2007 from 2.9 pct predicted six months ago. The forecast is compiled by the White House Council of Economic Advisers, the White House Office of Management and Budget and the Treasury Department.
That 2.3 pct growth depends on the expected rebound from quite weak growth in the first quarter. "A variety of indicators signal a faster-growing US economy for the rest of the year", - said CEA Chairman Edward Lazear. "Unemployment remains remarkably low, business inventories are lean compared with sales, and now industrial production is on the rise".
France`s statistics office Insee forecasts 2.1 pct GDP growth for 2007, down slightly from the 2006 growth figure of 2.2 pct, although supported by continuing solid domestic demand.
The Insee GDP figure, given in its quarterly report on the French economy, is marginally lower than the OECD`s estimate of 2.2 pct GDP growth for 2007 and government estimates of 2.25-2.5 pct, and compares unfavourably with the European Commission forecast of 2.4 pct growth. Economy of Eurozone is forecasted to grow by 2.6 pct in 2007.
Japan`s GDP will grow 2.1 pct this year and 2.3 pct next year, the government said. GDP of China is forecast to grow 10.8 percent from a year earlier, the fastest rate since 1995, according to the report of the People`s Bank of China.

Economy of United States

The U.S. economy expanded at an annual pace of 0.7 percent last quarter, the slowest in four years, and a gauge of inflation watched by the Federal Reserve was unexpectedly revised up. The increase in gross domestic product compares with the 0.6 percent rate estimated last month and followed a 2.5 percent gain in the last three months of 2006, according to a Commerce Department report. The price measure rose at the fastest rate since the second quarter of 2006.
The slower growth, combined with the greater-than-forecast inflation, increases the chances that the Fed will keep interest rates unchanged, as it did today, for many more months. More recent reports on trade, retail sales and inventories suggest the pace of expansion has already picked up and may exceed 3 percent in the quarter ending this week.
"The economy will accelerate from the first half into the second half," - said Stephen Stanley, chief economist at RBS Greenwich Capital in New York. "We are probably going to have continued pressures" on inflation.
Industrial production in the U.S. stalled last month as mild weather reduced demand for electricity and manufacturers of cars and machinery scaled back. Production at factories, mines and utilities was unchanged in May following a 0.4 percent gain in April that was smaller than originally reported, Federal Reserve figures showed. Economists had forecast industrial production would rise 0.2 percent after a previously reported gain of 0.7 percent the prior month, according to the median of 79 forecasts in a Bloomberg News survey. Capacity utilization, which measures the proportion of plants in use, fell to 81.3 percent from 81.5 percent the prior month. Factory output, which accounts for about four-fifths of the total, rose 0.1 percent after a 0.2 percent increase the prior month, according to the Fed`s production report. Mining output, which includes oil drilling, increased 0.5 percent last month, after falling 0.6 percent. Utility production fell 1.3 percent after increasing 3.4 percent, the report showed.
Purchases of new homes in the U.S. dropped in May, signaling demand is still faltering in the second year of the housing slowdown. Sales fell 1.6 percent to an annual pace of 915,000 last month from a revised 930,000 rate the prior month that was lower than previously estimated, the Commerce Department said today in Washington. The supply of unsold homes at the current sales pace rose. A jump in mortgage rates this month and a glut of unsold properties on the market will continue to discourage home construction, economists said. The housing slump, already the worst since 1991, will restrain the economy for the rest of the year and potentially into next. The median price of a new home fell 0.9 percent to $236,100 last month from $238,200 a year earlier, today`s sales report from Commerce showed. Sales of new homes were down 16 percent from the same time last year. The number of homes that are completed and waiting to be sold fell by 2,000 to 177,000.

Economy of European Union

France`s statistics office Insee forecasts 2.1 pct GDP growth for 2007, down slightly from the 2006 growth figure of 2.2 pct, although supported by continuing solid domestic demand.
The Insee GDP figure, given in its quarterly report on the French economy, is marginally lower than the OECD`s estimate of 2.2 pct GDP growth for 2007 and government estimates of 2.25-2.5 pct, and compares unfavourably with the European Commission forecast of 2.4 pct growth. Economy of Eurozone is forecasted to grow by 2.6 pct in 2007.
The IFO business climate index fell from 108.6 to 107.0 in June, falling short of the estimate of 108.4. The expectations index came out at 102.8, down from 104.8 in the previous month. The current assessment index declined to 111.4, below the estimate of 112.5 and the prior reading of 112. IFO, one of five institutes that produce twice-yearly forecasts for the German government, also increased its prediction for growth this year to 2.6 percent from a December estimate of 1.9 percent. The economy`s expansion will slow to 2.5 percent next year, Ifo said in an e-mailed report. The economy grew 2.8 percent last year. But IFO`s projection is lower than that of other forecasters. The Kiel-based Institute for World Economics, one of the five, said June 14 that economic growth will accelerate to 3.2 percent this year. The Paris-based Organization for Economic Cooperation and Development predicts the pace of growth will hold at 2.8 percent.

Economy of Japan

Japan`s economy grew at an annualised pace of 3.3 percent in the first quarter, much faster than previously thought (2.4 percent) as firms raised capital spending on new plant and equipment, the government said.
Japan`s gross domestic product (GDP) grew 0.8 percent in the three months to March, the Cabinet Office said, better than an initial estimate of 0.6 percent quarter-on-quarter. It was a ninth straight quarter of growth for the world`s second largest economy, although slower than the three months to December when GDP grew by a revised 1.3 percent quarter-on-quarter. The main reason for the upward revision was an upgrade to corporate capital spending to a 0.3 percent gain quarter-on-quarter compared with a 0.9 percent drop previously, after the fourth quarter`s 2.7 percent expansion.
Japanese machinery orders rose in April for the first time in three months but a slower-than-expected pace, the government said, prompting concerns about the outlook for business investment in the world`s second-largest economy. Core machinery orders rose 2.2 per cent in April from March, helped by orders from non-manufacturers such as financial firms and insurers, the cabinet Office said. The rise undershot economists` forecast for 4.4 per cent rise. Moreover, unadjusted core orders in April plunged 9.0 per cent from the year-earlier month - the biggest fall since a 9.9 per cent drop in October 2004. Machinery orders are widely regarded as a leading indicator of corporate capital investment, which accounts for about 15 per cent of Japan`s gross domestic product. Still, the data marked the first on-month rise since January, rebounding from a 4.5 per cent fall in March and a 4.9 per cent drop in February, and analysts were optimistic that machinery orders will likely get back into an uptrend in the near future.
Corporate profits in Japan are improving although production remains weak, the government said, maintaining its monthly assessment that the world`s second- largest economy is recovering. "The economy is recovering, despite weakness in industrial production in some sectors", - the Cabinet Office said in its monthly economic report in Tokyo today. Japan`s longest postwar expansion is in its 65th month. The Cabinet Office upgraded its evaluation of consumer spending to "picking up" from "showing signs of picking up". Households increased spending for a fourth month in April, capping the longest winning streak in three years even as wages declined for a fifth month. Economic and Fiscal Policy Minister Hiroko Ota said the recovery in private consumption remains fragile. Spending "isn`t that strong as wage growth has stalled", - she told reporters in Tokyo today.
China`s economy may grow at the fastest pace in 12 years in 2007 and inflation is likely to exceed the central bank`s target, the People`s Bank of China said in a report published on Friday.
Gross domestic product (GDP) is forecast to grow 10.8 percent from a year earlier, the fastest rate since 1995, the central bank said in the China Securities Journal today. Consumer prices may rise 3.2 percent, compared with the 3 percent target.

Economy of Russia

Russia saw its GDP surge by 7.7 percent in the first five months of 2007 (compared to 6 percent in January-May 2006), and by 7.9 percent in May 2007, Russia`s Economy Minister German Gref told journalists today. Gref explained that in May 2007 the Russian economy managed to overcome a certain slowdown in the GDP growth registered in April and recovered its pace seen in Q1. The minister referred to increased investment demand and expanding construction and manufacturing as the chief driving factors. Thus, net of seasonal and calendar factors, the monthly average GDP growth is set at 0.7 percent. Gref elaborated that industrial production rose by 7.4 percent, agricultural production by 2.3 percent and construction by 25.2 percent in 5M 2007. Meanwhile, manufacturing grew by 11.9 percent in 5M 2007, while mining by 3.4 percent alone, which the minister believes to be a positive sign.
Russia`s National Statistics Service released official data Thursday confirming that the country`s GDP growth in the first three months of 2007 was 7.9%, up three points year-on-year.
Russia is likely to revise its GDP growth forecast upwards as it should reach 7 pct in 2007, Russian media reported Economic Development and Trade Minister German Gref as saying. "Soon from now, we`ll see our GDP forecast raised from 6.5 pct to 7 pct for 2007", - he said.
Meanwhile, the International Monetary Fund (IMF) and the World Bank expect Russia`s GDP to expand more than 7% in 2007. Chief Economist for Russia John Litwack said GDP would grow by more than 7% in 2007, which is considerably higher than the government`s forecast of 6.5%. According to the World Bank, economic growth also facilitated an increase in wages: "Current trends in wage growth, together with the continued real appreciation of the ruble, suggest that the average monthly dollar wage in Russia for 2007 should exceed $500". In the current situation, Russians would like their wages to grow faster than inflation, which went up to 4.7% in January-May, according to the Russian government. The World Bank reported that official estimates placed wage growth at 18.5% in January-April.

www.ereport.ru - 01.07.2007 18:07