World Economy Review - April 2014
In a matter of six years, India emerged as the world`s third-largest economy in 2011 from being the tenth largest in 2005, moving ahead of Japan, while the US remained the largest economy closely followed by China, latest figures have revealed.
“The economies of Japan and the UK became smaller relative to the US, while Germany increased slightly and France and Italy remained the same,” according to data released today by the International Comparison Program (ICP), hosted by the Development Data Group at the World Bank Group.
“The relative rankings of the three Asian economies - China, India, and Indonesia - to the US doubled, while Brazil, Mexico and Russia increased by one-third or more,” the report said. The world produced goods and services worth over USD 90 trillion in 2011 and that almost half of the total output came from low and middle-income countries, it said.
According to the major findings of the ICP, six of the world`s 12 largest economies were in the middle-income category (based on the World Bank`s definition). When combined, the 12 largest economies accounted for two-thirds of the world economy and 59 per cent of the population, it said.
The purchasing power parities (PPPs)-based world GDP amounted to USD 90,647 billion, compared with USD 70,294 billion measured by exchange rates, it said, adding that the share of middle-income economies in global GDP is 48 per cent when using PPPs and 32 per cent when using exchange rates.
The six largest middle-income economies - China, India, Russia, Brazil, Indonesia and Mexico - account for 32.3 per cent of world GDP, whereas the six largest high-income economies - US, Japan, Germany, France, UK and Italy - account for 32.9 per cent, the report said.
Asia and the Pacific, including China and India, account for 30 per cent of world GDP, Eurostat - OECD 54 per cent, Latin America 5.5 per cent (excluding Mexico, which participates in the OECD and Argentina, which did not participate in the ICP 2011), Africa and Western Asia about 4.5 per cent each.
“China and India make up two-thirds of the Asia and the Pacific economy, excluding Japan and South Korea, which are part of the OECD comparison. Russia accounts for more than 70 per cent of the CIS, and Brazil for 56 per cent of Latin America. South Africa, Egypt, and Nigeria account for about half of the African economy,” said the report.
“At 27 per cent, China now has the largest share of the world`s expenditure for investment (gross fixed capital formation) followed by the US at 13 per cent. India, Japan and Indonesia follow with 7 per cent, 4 per cent, and 3 per cent, respectively,” the report said. China and India account for about 80 per cent of investment expenditure in the Asia and the Pacific region. Russia accounts for 77 per cent of CIS, Brazil for 61 per cent of Latin America and Saudi Arabia 40 per cent of Western Asia, it said.
The report said low-income economies, as a share of world GDP, were more than two times larger based on PPPs than respective exchange rate shares in 2011. Yet, these economies accounted for only 1.5 per cent of the global economy, but nearly 11 per cent of the world population. Roughly 28 per cent of the world`s population lives in economies with GDP per capita expenditure above the USD 13,460 world average and 72 per cent are below that average.
The approximate median yearly per capita expenditure for the world - at USD 10,057 - means that half of the global population has per capita expenditure above that amount and half below, it said. The five economies with the highest GDP per capita are Qatar, Macao, Luxembourg, Kuwait and Brunei. The first two economies have more than USD 100,000 per capita, the ICP report said.
Eleven economies have more than USD 50,000 per capita, while they collectively account for less than 0.6 per cent of the world`s population. The US has the 12th highest GDP per capita. Eight economies - Malawi, Mozambique, Central African Republic, Niger, Burundi, Congo, Dem. Rep., Comoros and Liberia — have a GDP per capita of less than USD 1,000. The five economies with highest actual individual consumption per capita are Bermuda, US, Cayman Islands, Hong Kong and Luxembourg. The world average actual individual consumption per capita is approximately USD 8,647, it said.
Economy of the United States
The U.S. economy slowed dramatically in the first quarter of 2014, as severe winter weather across much of the country depressed business investment and home construction. The economy`s meager 0.1% GDP growth in January, February and March represented the slowest three-month growth in the economy since the end of 2012, and a sharp deceleration from growth in the second half of 2013, when the economy grew at a 3.4% rate. The data reported by the Commerce Department fell far short of the expectations of Wall Street economists, who had predicted a 1.2 percent rate of growth this quarter, the New York Times reports.
Consumer spending, the biggest driver of economic growth in the United States, actually grew 3.0 percent in the first quarter, nearly consistent with 2013′s fourth quarter growth of 3.3 percent. But nonresidential investment decreased dramatically, as did exports of goods and services.
Economists said the figures were disappointing, but expect the economy`s growth rate to return to between 2.5 and 3 percent in 2014, the Times reported. Analysts were in agreement that much of the hit in the first quarter was due to inventory growth in the end of 2013 and seasonal factors.
Industrial production increased 0.7 percent in March after having advanced 1.2 percent in February, the Federal Reserve said. The rise in February was higher than previously reported primarily because of stronger gains for durable goods manufacturing and for mining. For the first quarter as a whole, industrial production moved up at an annual rate of 4.4 percent, just slightly slower than in the fourth quarter of 2013. In March, the output of manufacturing rose 0.5 percent, the output of utilities increased 1.0 percent, and the output of mines gained 1.5 percent. At 103.2 percent of its 2007 average, total industrial production in March was 3.8 percent above its level of a year earlier. Capacity utilization for total industry increased in March to 79.2 percent, a rate that is 0.9 percentage point below its long-run (1972–2013) average but 1.2 percentage points higher than a year prior.
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced that total February exports of $190.4 billion and imports of $232.7 billion resulted in a goods and services deficit of $42.3 billion, up from $39.3 billion in January, revised. February exports were $2.0 billion less than January exports of $192.5 billion. February imports were $1.0 billion more than January imports of $231.7 billion.
In February, the goods deficit increased $2.2 billion from January to $61.7 billion, and the services surplus decreased $0.8 billion from January to $19.4 billion. Exports of goods decreased $2.0 billion to $131.7 billion, and imports of goods increased $0.2 billion to $193.4 billion. Exports of services were virtually unchanged at $58.7 billion, and imports of services increased $0.8 billion to $39.3 billion. The goods and services deficit decreased $1.0 billion from February 2013 to February 2014. Exports were up $3.6 billion, or 1.9 percent, and imports were up $2.6 billion, or 1.1 percent.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. Increases in the shelter and food indexes accounted for most of the seasonally adjusted all items increase. The food index increased 0.4 percent in March, with several major grocery store food groups increasing notably. The energy index, in contrast, declined slightly in March as decreases in the gasoline and fuel oil indexes more than offset increases in the indexes for electricity and natural gas.
The index for all items less food and energy also rose 0.2 percent in March. Besides the 0.3 percent increase in the shelter index, the indexes for medical care, for apparel, for used cars and trucks, and for airline fares also increased. The indexes for household furnishings and operations and for recreation both declined in March.
The all items index increased 1.5 percent over the last 12 months; this compares to a 1.1 percent increase for the 12 months ending February. The index for all items less food and energy has increased 1.7 percent over the last 12 months, as has the food index. The energy index has risen slightly over the span, advancing 0.4 percent.
Total nonfarm payroll employment rose by 288,000, and the unemployment rate fell by 0.4 percentage point to 6.3 percent in April, the U.S. Bureau of Labor Statistics reported. Employment gains were widespread, led by job growth in professional and business services, retail trade, food services and drinking places, and construction.
The number of unemployed persons, at 9.8 million, decreased by 733,000 in April. Both measures had shown little movement over the prior 4 months. Over the year, the unemployment rate and the number of unemployed persons declined by 1.2 percentage points and 1.9 million, respectively.
Among the major worker groups, unemployment rates declined in April for adult men (5.9 percent), adult women (5.7 percent), teenagers (19.1 percent), whites (5.3 percent), blacks (11.6 percent), and Hispanics (7.3 percent). The jobless rate for Asians was 5.7 percent (not seasonally adjusted), little changed over the year.
Economy of the European Union
The Eurozone recovery is expected to pick up in the first quarter of 2014 with a GDP growth rate of +0.4% from the previous quarter after +0.2% and +0.1% respectively in the previous two quarters, Insee said.
In February 2014 compared with January, seasonally adjusted industrial production rose by 0.2% in the euro area (EA18) and by 0.4% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In January industrial production remained stable in the euro area and increased by 0.2% in the EU28. In February 2014 compared with February 2013, industrial production grew by 1.7% in the euro area and by 2.1% in the EU28.
The increase of 0.2% in industrial production in the euro area in February 2014, compared with January 2014, is due to production of intermediate goods rising by 0.6% and non-durable consumer goods by 0.5%, while capital goods remained stable and durable consumer goods fell by 1.2% and energy by 1.7%. In the EU28, the increase of 0.4% is due to production of non-durable consumer goods rising by 0.9%, intermediate goods by 0.5% and capital goods by 0.2%, while durable consumer goods fell by 0.7% and energy by 1.4%. The highest increases in industrial production were registered in Malta (+5.4%), Ireland (+5.0%) and Lithuania (+2.5%), and the largest decreases in Croatia (-2.8%), Estonia (-2.2%) and Romania (-1.3%).
The increase of 1.7% in industrial production in the euro area in February 2014, compared with February 2013, is due to production of intermediate goods rising by 4.2%, capital goods by 4.0% and non-durable consumer goods by 2.8%, while production of durable consumer goods fell by 0.6% and energy by 8.5%. In the EU28, the increase of 2.1% is due to production of intermediate goods rising by 4.6%, capital goods by 4.5%, non-durable consumer goods by 2.7% and durable consumer goods by 1.5%, while production of energy fell by 7.2%. The highest increases in industrial production were registered in Slovakia (+9.0%), Romania (+8.9%) and Hungary (+8.2%), and the largest decreases in the Netherlands (-8.9%), Finland (-5.4%) and Lithuania (-2.1%).
The first estimate for the euro area (EA18) trade in goods balance with the rest of the world in February 2014 gave a 13.6 billion euro surplus, compared with +9.8 bn in February 2013. The January 2014 balance was +0.8 bn, compared with -4.8 bn in January 2013. In February 2014 compared with January 2014, seasonally adjusted exports rose by 1.2% and imports by 0.6%. These data are released by Eurostat.
The first estimate for the February 2014 extra-EU28 trade balance was a 4.4 bn euro surplus, compared with +1.2 bn in February 2013. In January 2014 the balance was -13.3 bn, compared with -17.2 bn in January 2013. In February 2014 compared with January 2014, seasonally adjusted exports rose by 0.9% while imports fell by 0.5%.
Euro area annual inflation is expected to be 0.7% in April 2014, up from 0.5% in March, according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in April (1.6%, compared with 1.1% in March), followed by food, alcohol & tobacco (0.7%, compared with 1.0% in March), non-energy industrial goods (0.1%, compared with 0.2% in March) and energy (-1.2%, compared with -2.1% in March).
The euro area (EA18) seasonally-adjusted unemployment rate was 11.8% in March 2014, stable since December 2013, but down from 12.0% in March 2013. The EU28 unemployment rate was 10.5% in March 2014, stable compared with February 2014, but down from 10.9% in March 2013. These figures are published by Eurostat.
Eurostat estimates that 25.699 million men and women in the EU28, of whom 18.913 million were in the euro area, were unemployed in March 2014. Compared with February 2014, the number of persons unemployed decreased by 66 000 in the EU28 and by 22 000 in the euro area. Compared with March 2013, unemployment decreased by 929 000 in the EU28 and by 316 000 in the euro area.
Among the Member States, the lowest unemployment rates were recorded in Austria (4.9%), Germany (5.1%) and Luxembourg (6.1%), and the highest in Greece (26.7% in January 2014) and Spain (25.3%). Compared with a year ago, the unemployment rate increased in ten Member States, remained stable in three and fell in fifteen. The highest increases were registered in Cyprus (14.8% to 17.4%), the Netherlands (6.4% to 7.2%), Italy (12.0% to 12.7%) and Croatia (16.6% to 17.3%), and the largest decreases in Hungary (11.2% to 7.9% between February 2013 and February 2014), Latvia (13.9% to 11.6% between the fourth quarters of 2012 and 2013), Portugal (17.4% to 15.2%) and Ireland (13.7% to 11.8%).
Economy of Japan
For now, economists are hopeful that Japan can manage the shock from the tax increase without falling into a recession. Japanese GDP will expand at an annual rate of 4.4 percent in the first quarter of 2014, according to a monthly survey of 45 economists by Bloomberg, and then contract 3.5 percent in the second quarter. By the third quarter, the economy should be growing again, with GDP growth expected to come in at 2 percent.
Japanese industrial production rose 0.3% on month in March, the government said, as firms moderated output ahead of an expected drop in demand after an April sales tax increase. The rise, after adjustment for seasonal factors was slightly smaller than the 0.5% increase forecast by economists surveyed by The Wall Street Journal and the Nikkei. It came after a 2.3% fall in February, data from the Ministry of Economy, Trade and Industry showed, when heavy snow weakened output. On a yearly basis, industrial production gained 7.0 percent - also below expectations for 7.2 percent but unchanged from the previous month.
Consumer demand for big ticket items such as cars ahead of an April sales tax increase has helped support industrial production in recent months. Since companies have to plan output weeks or months in advance of selling to consumers, however, economists say that output likely peaked in January. Weak demand for Japanese goods overseas has also kept firms from ramping up output.
Yet companies see output recovering from May despite the higher sales tax. Companies expect output to fall 1.4% on month in April before edging up 0.1% in May, according to a survey of firms included in the report. METI kept its assessment that industrial production is picking up.
Japan`s trade deficit quadrupled in March as export growth slowed and energy imports continued to rise. A weak Japanese currency, which pushed up the cost of imports, also contributed to the widening gap. The deficit rose to 1.45 trillion yen ($14bn), up from 356.9bn yen during the same month a year ago. Japan`s overall imports rose 18.1% in March, compared to a year ago, while exports rose at an annual rate of 1.8%.
Japan`s core consumer price index (CPI) rose 1.3 percent in April from a year earlier for the 10th straight month of expansion chiefly due to higher prices of energy and certain home appliances, the government said.
The increase of core CPI, which excludes volatile fresh foods, maintained the same growth pace since December, after picking up from 1.2 percent in November, according to the Ministry of Internal Affairs and Communications. The gain was largely attributed to rising gasoline and electricity prices, the ministry said. Japan`s energy costs rose in the wake of the weaker yen and growing need for fossil fuel to substitute for nuclear power generation following the March 2011 radiation crisis in Fukushima.
The ministry also said prices of overseas package tour also pushed up the core CPI. For the whole of fiscal 2013 through March 31, the core measure rose 0.8 percent on the year, marking the first rise in five years since fiscal 2008, when it marked 1.2 percent.
According to official data released by the country`s Statistics Bureau, Japan`s unemployment rate remained unchanged in March at 3.6%, from a month before. The bureau said the percentage of the total work force that is unemployed and actively seeking employment during the previous month remained unchanged at a seasonally adjusted 3.6%, from 3.6% in February. The rate also was also similar to the 3.6% that analysts had expected for the month of March. The unemployment rate in March was at the lowest level since the 3.5% registered in July 1997. The job-to-applicant ratio was 1.07 - beating forecasts for 1.06 and up from 1.05 in February. The participation rate was 59.1%, up from 58.8% in the previous month. The number of employed persons in March was 62.98 million, an increase of 520,000 or 0.8% on year.
Economy of Russia
Russia`s Gross Domestic Product (GDP) growth was estimated at 0.9% in March 2014, as compared to 1.3% in March 2013, the Russian Economic Development Ministry said. In addition, the ministry updated the year-on-year GDP dynamics for this year`s January and February, thus raising the indicators to 0.7% and 0.9% respectively (compared to initial estimates of 0.5% and 0.3%). The aforesaid changes were connected with the Russian Statistics Service`s revision of 2011-2013 macroeconomic indices. The Statistics Service re-calculated the 2013 quarters` dynamics and specified the low basis favorable impact on the assessment of this year`s first quarter. In January-March 2014, Russia`s GDP growth is preliminary estimated at 0.8%. According to the ministry, the country`s GDP increase, exclusive seasonal and calendar factors, edged up 0.1% in March versus February 2014.
In all, in the first three months Russia`s GDP, exclusive the seasonal factor, went down by 0.5%, as against October-December 2013. Thus, the decline in the dynamics was registered for the first time after three quarters of growth in row (from April to December 2013).
According to the Economic Development Ministry, the March economic upward dynamics was mainly caused by the continued hike in the trade (4%) and industrial production (1.4%), which was supported by the growth in the processing industry production (3.5%) and mining output (0.6%). Touching upon the economic growth failing factors of March 2014, the ministry pointed to the pre-tax dynamics due to the oil-and-gas-export slide-down and the drop in the construction industry (3.1% decline), which was, in turn, caused by the investment demand reduction (4.3% decrease).
Russia`s annual industrial production growth slowed in March compared with the preceding month, as it faced pressure by declining activity in the utility sector, data from the Federal Statistics Service showed. After expanding by 2.1% on the year in February, industrial production grew by 1.4% in March. Monthly data, however, showed that industrial production growth accelerated to 9.7% in March from 1.6% in February. In the first quarter of 2014, production grew by 1.1% on the year and contracted by 12.4% compared with the fourth quarter of last year. The economy ministry expects industrial output to increase by 1.3% this year after it showed no growth in 2013.
Russia`s foreign trade surplus was estimated at $51.3 billion in January-March 2014, which was 6.65% more than in the same period of the preceding year, the Russian Economic Development Ministry said. In the period under review, Russia`s export amounted to $122.9 billion (1.8 % decline), while import totaled $71.6 billion (7.1% decrease). In March 2014, the country`s foreign trade surplus made up $20 billion, which was 27.4% more than in the same month of 2013. Besides, Russia`s export grew by 5.4% to $46.9 billion, while import shrank by 6.6%. In February, the foreign trade surplus of the Russian Federation was at $12.4 billion. Therefore, the indicator skyrocketed by 61.3% in March versus February. Under the Economic Development Ministry forecast, Russia`s foreign trade surplus is expected to be at $183 billion.
Inflation in Russia in the month of March was the highest in nine months, fuelled by the decline of the ruble as the country faced off against the West over the Ukraine crisis. Consumer prices grew 6.9 percent from a year ago, up from a gain of 6.2 percent in February, according to the Federal Statistics Service in Moscow. This exceeded the average estimate of a growth of 6.8 percent in a Bloomberg survey of 18 economists. Prices plunged 1 percent in March, against forecasts of 0.9 percent as the economy slid further. Russia Unemployment Rate dipped from previous 5.6% to 5.4% in March.
06.05.2014 17:17