World Economy
English
main news reviews statistics articles links about
 

World Economy Review - April 2008

The International Monetary Fund cut its 2008 outlook for world economic growth for the second time this year, in a move that acknowledged housing and credit problems in the United States were exacting a heavy toll on the global economy. The IMF said it expects the pace of global growth to slow to 3.7 percent this year, down from its January forecast of 4.1 percent and lower still from the 4.8 percent rate it predicted in October last year. The latest revision puts world growth at its lowest since 2002, when growth was 3.1 percent, according to IMF data. "I can confirm the IMF`s current aggregate world growth forecast for 2008 is 3.7 percent," an IMF spokesman said, confirming reports about the IMF`s World Economic Outlook due on April 9. Earlier, IMF Chief Economist Simon Johnson said the U.S. economy has come to "a virtual standstill" and will remain weak in coming quarters owing to deeper problems in housing and credit markets. Still, Johnson avoided saying the United States was in recession. Media have reported that the IMF growth outlook will put U.S. economic growth for 2008 at 0.5 percent from a previous forecast of 1.5 percent.
Growth in Europe is expected to slow significantly in 2008-09, reflecting spillovers from weaker global growth, rising commodity prices and the strains in financial markets. Europe`s economy is resilient but not immune to global economic threats, the IMF said as it defended its recent gloomy outlook on the region. According to the IMF, GDP growth in the Eurozone will slow to 1.4% this year and 1.2% in 2009. In 2007, growth was 2.6%. The projections in the Regional Economic Outlook have not changed from those in the World Economic Outlook released on April 9th. Michael Deppler, the IMF`s European director, who is about to retire, said this represented a "middle-of-the-road view" of the likely effects of economic shocks such as the global financial crisis, a looming US recession and the euro`s appreciation to record levels.
Economic growth in Russia and emerging European economies will likely cool this year as financial market turmoil curbs access to credit and demand for oil, the International Monetary Fund said. Russia, which logged growth of 8.1 percent last year, will see growth moderate to 6.8 percent this year and then 6.3 percent next year. Growth in the Commonwealth of Independent States was expected to ease to 7.0 percent this year from 8.5 percent in 2007. Risks to the outlook were tilted to the downside.

Economy of The United States

The US economy slowed to a crawl in the first three months of this year, with gross domestic product growing just 0.6% for the second quarter in a row, according to advance data released today by the Commerce Department. The anemic growth was consistent with expectations by analysts who have been predicting an economic slowdown or shallow recession for much of this year. A main contributor to the slow growth was a drop-off in personal consumption, which accounts for about three-quarters of the nation`s economic demand. Personal consumption grew just 1.0% in the first quarter compared with 2.3% growth in the fourth quarter of 2007. The decline was led by a 6.1% decrease in purchases of durable goods and a 1.3% decrease in nondurable goods. The only area of increase was the consumption of services, which rose 3.4% in the first quarter of this year, compared with a 2.8% increase in the last three months of last year. The housing sector continued to contract at a blistering rate - the equivalent of a 26.7% decline in residential investment over the last year, the department said. The Commerce Department noted that the advance report is based on incomplete data and the results are likely to be revised in coming months.
U.S. industrial production rose 0.3% in March, the Fed said. Production in February was revised to a drop of 0.7%, compared with the previous estimate of a 0.5% decline. Capacity utilization rose 0.2% to stand at 80.5% in March from 80.3% in the previous month. The rise in production was unexpected. Economists had been anticipating that May`s production would fall 0.1%. For the first quarter, industrial production is down 0.1%, after rising 0.4% in the final three months of 2007. This is Industrial production was up 1.6% in the past year. Utility output surged 1.9% in March, while the output of consumer goods was flat in the month. Manufacturing output rose 0.1% in March, held down by a large decline in output of motor vehicles. Output of mining rose 0.9% after rising 0.3% in February. Semiconductor production rose by 3.9%, while computer equipment rose 1.5%. Output of motor vehicles fell by 5.4% in March. Excluding motor vehicles, industrial production was up 0.6% in March. Production of non-industrial supplies rose 0.4% in March. The production of business equipment rose 0.6% remaining flat in the previous month. Output of construction materials was down 0.2% after falling 1.3% in the previous month.
The U.S. employment rate fell to 5 percent in April, with the economy shedding 20,000 jobs, much less than the 75,000 analysts had expected, according to a report from the U.S. Department of Labor`s Bureau of Labor Statistics. Economists had been bracing for the report, predicting a greater loss in jobs that would take the unemployment rate to 5.2 percent. The U.S. unemployment rate is down from March, when employers shed 80,000 jobs, leaving the rate at 5.2 percent. But it is up from 4.5 percent during April 2007.
The Commerce Department reported March personal consumption expenditures rose 0.4 percent, above the 0.3 increase expected in the Thomson IFR Markets poll of economists and above the 0.1 percent rise in February. Real inflation-adjusted personal consumption expenditures rose just 0.1 percent in March after no change in the previous month. Personal income rose 0.3 percent for the month, as expected, and down from the surprisingly high 0.5 percent increase in February.
U.S. President George Bush says tax rebates for more than 130 million American households should help stimulate an economy hurt by falling home prices and higher food and energy costs. More than 7 million Americans should see the tax rebates in their bank accounts in the coming week. Those who chose to receive their refunds through the mail should have their checks early next month. President Bush says the rebates of up to $600 a person and $300 per child will help stimulate the economy by the start of the third economic quarter in July.

Economy of The European Union

Euro area (EA13) GDP grew by 0.4% and EU271 GDP by 0.5% in the fourth quarter of 2007 compared with the previous quarter, according to second estimates from Eurostat, the Statistical Office of the European Communities. In the third quarter of 2007, growth rates were +0.7% in the euro area and +0.8% in the EU27. In comparison with the same quarter of the previous year, seasonally adjusted GDP grew in the fourth quarter of 2007 by 2.2% in the euro area and by 2.5% in the EU27, after +2.7% and +2.9% respectively in the previous quarter. In the fourth quarter of 2007 and among the Member States for which seasonally adjusted GDP data are available, Slovakia (+3.3%) recorded the highest growth rate compared with the previous quarter, followed by Poland (+2.0%) and the Czech Republic (+1.7%). In the fourth quarter of 2007, household final consumption expenditure decreased by 0.1% in the euro area and increased by 0.1% in the EU27 (after +0.5% and +0.6% in the previous quarter). Investment increased by 0.8% in the euro area and by 1.2% in the EU27 (after +1.1% and +1.4%). Exports rose by 0.6% in the euro area and by 0.9% in the EU27 (after +2.0% in both zones). Imports decreased by 0.3% in the euro area and by 0.1% in the EU27 (after +2.5% and +3.0%).
The seasonally adjusted eurozone industrial production grew by 0.3 percent in February this year, compared with January, the EU`s statistical office Eurostat reported. Industrial production for the 27-member European Union (EU) rose by 0.5 percent in February, it added. Meanwhile, year-on-year rise in industrial production in February was 3.1 percent in the eurozone and 3.3 percent in the EU. Industrial production in February grew in 16 of the 27 EU member nations, remained stable in the Netherlands and dropped in three countries. The highest increases were registered in Slovenia with 4.5 percent, Lithuania 3.6 percent and Poland 2.2 percent, while Greece recorded the biggest decrease at minus 4.7 percent.
The Eurozone (EA15) seasonally-adjusted unemployment rate stood at 7.1% in March 2008, unchanged compared with February. It was 7.5% in March 2007. The EU27 unemployment rate was 6.7% in March 2008, also unchanged compared with February. It was 7.3% in March 2007 according to the EU`s statistics office Eurostat.
EURO-ZONE inflation accelerated last month to the fastest pace since 1992, official data showed on Monday, giving the European Central Bank more reason to look with concern on the announcement of a big wage agreement in Germany. Eurostat, the European statistics agency, said prices rose in March at a 3.6% annual rate in the 15 countries that share the euro, the highest rate since June 1992. The rate in February was 3.3%, which had itself been a record. Inflation is running far above the European Central Bank`s 2% guideline. In recent months, high prices for energy and food in particular have pushed up inflation and are cited as reasons that household spending is being held back. The concern about rising prices is not confined to the euro zone. In a speech on Monday, the governor of the Bank of England, Mervyn King, noted that "food prices on world markets are more than 50% higher, and oil prices two-thirds higher, than they were a year ago".
The European Commission has said that financial market turmoil, a slowing US economy and soaring commodity prices will curb growth in the region more than expected. In its spring economic forecast, the Commission says euro zone growth will slow to 1.7% this year and 1.5% next year, that is down from 2.8% and 2.6% in the last two years. European economic and monetary affairs commissioner Joaquin Almunia said: "This shows some impact coming from the financial turmoil and the US slowdown indeed, but from the second quarter of the year onwards, we start again growth in the EU and the euro area and this allows us a positive profile regarding growth at the end of this year and in particular throughout 2009". The Commission said a surge in food and oil prices is dampening consumer demand and therefore growth. It has raised its price growth forecast. Inflation hit a record high of 3.6% year-on-year in March and the Commission now expects it to be 3.2% in the whole of 2008 from 2.1% last year and to ease to 2.2% in 2009. The European Central Bank is predicting inflation at 2.9% this year and 2.1% in 2009. ECB Chairman Jean-Claude Trichet and his policymakers have said that the best way they can keep inflation contained is by leaving interest rates unchanged for now.
The German government expects the country`s economy to grow 1.2 percent during 2009, economy minister Michael Glos said. The four leading German research institutes expect the economy to grow 1.4 percent next year. Glos confirmed the government expects the economy to grow 1.7 percent this year. In 2007, GDP growth was at 2.5 percent. He said the government expects the number of jobless in 2008 and 2009 to reach 3.2 million on average. The German government expects the country`s 2008 inflation rate to come in around 2.6 percent and to drop to 1.8 percent in 2009, sources close to the government told German news agency dpa. The inflation rate figures match the most recent estimates by four leading German research institutes, which revised their estimates upwards in mid April.

Economy of Asia

Japan`s economy is expected to show growth at an annualised rate of 0.76 percent in the first quarter ended March, slightly outpacing an average estimate of 0.42 percent made earlier, a monthly survey by the government-linked Economic Planning Association showed. The survey, conducted between March 27 and April 3, covered 37 private sector economists, with replies received from 36 of them. For the second quarter, the economists expect annualised growth of 1.12 percent on average, compared to the 1.34 percent rise forecast in March.
Japan`s industrial production went down by 3.1 percent month-on-month in the seasonally adjusted terms in March, the government said. The index of industrial shipments lost 3.9 percent to 107.0 while that of industrial inventories gained 0.2 percent to 105.6, according to a preliminary report released by the Ministry of Economy, Trade and Industry. The index of output at mines and factories read 106.8, compared with the gauge of 100 for 2005, said the report.
Inflation finally appears to be making a comeback in Japan. Excluding food, it rose to an annual rate of 1.2% in March, a ten-year high, while consumer prices excluding food and energy rose by 0.1% year-on-year, the first positive number since 1998. The data supports "growing anectodal evidence" that Japan is moving out of deflation and that the trend isn`t just to do with commodities, says Christopher Wood of CLSA. Consumers` inflation expectations have been trending higher; they now expect inflation of 3.1% in a year`s time. The emergence from deflation is "potentially hugely bullish" for stocks, given the positive implications for companies pricing power and hence their margins.
Japan`s unemployment rate dipped to 3.8 percent in March from 3.9 percent in the previous month as the medical and welfare sector, transportation, and restaurant and hotel service sector stepped up hiring despite a challenging profit environment due to higher costs of basic materials, government data showed. Economists had expected the jobless rate to come in at 3.9 percent in March, according to a median estimate from the Nikkei business daily. The male jobless rate rose to 3.8 percent last month from 4.0 percent in February while the female unemployment rate rose to 3.9 percent from 3.8 percent in the previous month, the Ministry of Internal Affairs and Communications said. The unemployment rate fell to a low of 3.6 percent last July, the lowest level since February 1998.

Economy of Russia

The Russia Economic Development and Trade Ministry said in a statement that Russia`s GDP grew 8% YoY in the first quarter of 2008 compared to the same period of 2007. The Federal State Statistics Service said GDP grew 7.4% in the first quarter of 2007. The ministry said Urals oil cost an average of USD 93.6 per barrel in the first quarter of 2008 compared to USD 54.2 in the same period of 2007. Russian foreign trade increased 50.3% in the quarter, including a 55.2% rise in exports and a 41.6% increase in imports.
Russia`s industrial production expanded 6.2 percent in the first quarter of 2008 compared to the same period a year earlier. In March alone, industrial production increased 6.5 percent year-on year, and 11.7 percent compared to February 2008, the Federal State Statistics Service said. Processing industries which showed a growth of 8.7 percent made the greatest input into the industrial production index. Net capital inflow into Russia, which is reaping the benefit from high world oil prices, reached a record $82.3 billion in 2007, almost double the previous year`s figure, Russia`s Central Bank earlier said. Foreign direct investment in Russia is expected to exceed last year`s figure of $28 billion in 2008, Arkady Dvorkovich, a senior economic adviser to the Russian president, said at the Russian economic and financial forum in Switzerland in March.
Russia Central Bank first deputy chairman Alexei Ulyukayev said the nation`s inflation will be just under 10 percent in 2008, down from last year`s 11.9 percent level, Interfax reported. "I am firmly convinced that we have every chance to significantly lower inflation this year compared to last year and put it at single digits just below 10 percent", Ulyukayev said. The official also stated that the year-on-year inflation was still too high, at 14 percent. Inflation is driven not only by global factors, but also by domestic ones, including the policies of the Central Bank and the Finance Ministry, as well as natural monopolies` tariff policies, Ulyukayev stated. Meanwhile, he pointed out that it was possible to keep the inflation rate within the target of 10 percent in 2008, although it was a very difficult task. Russia`s Economic Development and Trade Ministry earlier this month said full year inflation would range from 9 percent to 10 percent, up from an earlier 8 percent to 9.5 percent forecast range.

www.ereport.ru - 02.05.2008 21:46:07