World Economy Review - August 2016
The amount of goods traded globally fell sharply in the second quarter after a flat performance in the first few months of 2016, highlighting a major challenge for leaders around the world grappling with soft growth.
The volume of merchandise traded globally dropped by 0.8% from April to June following no change in the first quarter, according to the CPB World Trade Monitor produced by the Netherlands.
Weaker trade patterns reflect fresh economic struggles in various countries and less demand among consumers, the main drivers of growth. Import volume fell the most in the Euro area (-1.8%) in the runup to the Brexit vote. Imports to Japan also dropped 1.3% and they declined 0.6% in the U.S.
Export volume fell 0.7% overall, but the poor performance was not universal. Exports rose 0.4% in the U.S. after declining in the prior two quarters. Export volume also climbed 1% in Japan, with the Eurozone the major laggard.
There are some signs world trade has partly rebounded in the third quarter, but 2016 is shaping up to be a difficult year. The IMF, World Bank and OECD, the three most influential global economic organizations, have all recently cut global growth forecasts for 2016 in part because of a soured trade outlook.
The strong dollar has weighed heavily on U.S. trade and China is not growing as fast, two major sources of the slowdown in world trading volume. Lower commodity prices have also hurt developing nations, giving them less money to spend on imports.
Another complication: growing resistance in the U.S., Britain and elsewhere against free trade.
The Federal Reserve, meanwhile, has held off raising U.S. interest rates partly because of worries about the global economy. The U.S. economy appears to have gained momentum lately, however, and central bankers are expected to signal again this week that higher interest rates are on the way.
Economy of the United States
U.S. economic growth was a bit more sluggish than initially thought in the second quarter as businesses aggressively ran down stocks of unsold goods, offsetting a spurt in consumer spending. Gross domestic product expanded at a 1.1 percent annual rate, the Commerce Department said in its second estimate of GDP. That was slightly down from the 1.2 percent rate reported last month. The revision also reflected more imports than previously estimated as well as weak spending by state and local governments. The economy grew at a 0.8 percent pace in the first quarter. It grew 1.0 percent in the first half of 2016.
U.S. industrial production rose more than expected in July, according to Federal Reserve data. Industrial output increased 0.7 percent in July month after an downwardly revised 0.4 percent increase in June. Economists polled by Reuters had forecast industrial production climbing 0.3 percent in July month.
Manufacturing output rose 0.5 percent in July. Mining production, a category that includes oil and gas extraction, rose 0.7%. Utilities output rose 2.1% from the prior month, which several economists attributed to an abnormally warm July. Capacity utilization, a measure of how much industries are making as a share of potential output, rose 0.5 percentage point to 75.9% in July.
The US trade deficit in goods and services dropped from $44.7bn in June to $39.5bn in July, according to the Department of Commerce. Overseas sales of goods and services increased by $3.4bn month-on-month to reach $186.3bn, while imports declined by $1.8bn to $225.8bn.
Exports of goods increased by $3.4bn to $124.1bn, led by increased sales of soybeans, precious metals and chemicals-fertilizers, which saw the deficit in the goods balance drop by $5.3bn to $60.3bn. Goods imports on the other hand fell by $1.9bn to $184.4bn as the US sourced fewer consumer and capital goods (excluding automobiles) from abroad. The services surplus on the other hand slipped by $0.1bn to $20.9bn.
The Labor Department said that the flat reading in its Consumer Price Index was the weakest since February and followed two straight monthly increases of 0.2 percent. In the 12 months through July, the CPI rose 0.8 percent after increasing 1.0 percent in June. Economists had forecast the CPI would be unchanged in July and rise 0.9 percent from a year ago.
The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in July. It had risen by 0.2 percent in the previous three consecutive months. The year-on-year core CPI increased 2.2 percent after rising 2.3 percent in June.
The U.S. added 151,000 new jobs in August and the unemployment rate held steady at 4.9 percent, according to the monthly jobs report from the Bureau of Labor Statistics. Both those metrics fell short of expectations: Economists were expecting about 180,000 new jobs, and a slight dip in the unemployment rate, to 4.8 percent, NPR`s Yuki Noguchi has reported.
Job growth for the past few months was also revised - June numbers went down, to 271,000 from 292,000, and July went up, to 275,000 from 255,000 (which was already stronger than expected). The net change was a slight drop, with about 1,000 fewer jobs added in the past two months than the BLS had originally believed.
Average hourly earnings rose by 3 cents, to $25.73. The percentage of involuntary part-time workers, as well as the labor force participation rate and the number of long-term unemployed, all saw little change.
Economy of the European Union
Seasonally adjusted GDP rose by 0.3% in the euro area (EA19) and by 0.4% in the EU28 during the second quarter of 2016, compared with the previous quarter, according to a flash estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2016, GDP grew by 0.6% and 0.5% respectively. Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.6% in the euro area and by 1.8% in the EU28 in the second quarter of 2016, after +1.7% and +1.8% respectively in the previous quarter.
In June 2016 compared with May 2016, seasonally adjusted industrial production rose by 0.6% in the euro area (EA19) and by 0.5% in the EU28, according to estimates from Eurostat. In May 2016 industrial production fell by 1.2% and 1.1% respectively. In June 2016 compared with June 2015, industrial production increased by 0.4% in the euro area and by 0.5% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in June 2016 was 178.8 billion, a decrease of 2% compared with June 2015 (182.8 bn). Imports from the rest of the world stood at 149.5 bn, a fall of 5% compared with June 2015 (157.4 bn). As a result, the euro area recorded a 29.2 bn surplus in trade in goods with the rest of the world in June 2016, compared with +25.5 bn in June 2015. Intra-euro area trade fell to 150.2 bn in June 2016, down by 1% compared with June 2015. These data are released by Eurostat.
The first estimate for extra-EU28 exports of goods in June 2016 was 151.4 billion, -5% compared with June 2015 (159.8 bn). Imports from the rest of the world stood at 143.8 bn, -4% compared with June 2015 (150.5 bn). As a result, the EU28 recorded a 7.7 bn surplus in trade in goods with the rest of the world in June 2016, compared with +9.3 bn in June 2015. Intra-EU28 trade fell to 272.1 bn in June 2016, -1% compared with June 2015.
Euro area annual inflation is expected to be 0.2% in August 2016, stable compared with July 2016, according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in August (1.3%, compared with 1.4% in July), followed by services (1.1%, compared with 1.2% in July), non-energy industrial goods (0.3%, compared with 0.4% in July) and energy (-5.7%, compared with -6.7% in July).
The euro area (EA19) seasonally-adjusted unemployment rate was 10.1% in July 2016, stable compared to June 2016 and down from 10.8% in July 2015. This remains the lowest rate recorded in the euro area since July 2011. The EU28 unemployment rate was 8.6% in July 2016, stable compared to June 2016 and down from 9.4% in July 2015. This remains the lowest rate recorded in the EU28 since March 2009. These figures are published by Eurostat.
Eurostat estimates that 21.063 million men and women in the EU28, of whom 16.307 million were in the euro area, were unemployed in July 2016. Compared with June 2016, the number of persons unemployed decreased by 29 000 in the EU28 and by 43 000 in the euro area. Compared with July 2015, unemployment fell by 1.688 million in the EU28 and by 1.034 million in the euro area.
Economy of Japan
Japan`s economy nearly stalled in the second quarter amid falling exports and weak corporate investment, showing the nation is still largely dependent on government stimulus for growth. The economy expanded an annualized 0.2% in the April-June quarter, compared with a revised 0.8 percent rate in January-March period, Japan`s government said.
Industrial output in Japan was flat on month in July, the Ministry of Economy, Trade and Industry said. That missed forecasts for an increase of 0.7 percent following the 2.3 percent jump in June. On a yearly basis, industrial production fell 3.8 percent - also missing forecasts for a decline of 3.0 percent following the 1.5 percent drop in the previous month. According to a survey by the Ministry of Economy, industrial production is expected to rise 4.1 percent in August but fall 0.7 percent in September.
Japan recorded a 513.5 JPY billion surplus in July of 2016, compared to a 261.39 JPY billion deficit a year earlier and beating market consensus of a 283.7 JPY billion surplus, as exports fell less than imports. Year-on-year, sales dropped by 14.0 pct to 5,728.41 JPY billion in July, following a 7.4 pct fall in June and in line with estimates. Imports decreased by 24.7 pct to 5,214.90 JPY billion, compared to an 18.8 pct decrease in a month earlier while market expected a 20.6 pct drop.
Japanese consumer prices continued to fall in July, suggesting that the Bank of Japan may have to act again in a bid to spark inflation in the world`s third-largest economy. The core consumer price index--which excludes fresh food--slid 0.5% on year in July, following a revised 0.4% drop in June. That was worse than a 0.4% fall forecast by The Wall Street Journal and the Nikkei. Electricity and gasoline were among the items falling in price, weighing on the index. Stripping out energy prices and food, consumer prices rose 0.3% on year, compared with a revised 0.5% increase in June.
Japan`s unemployment rate dropped to 3 percent in July marking the lowest level in 21 years, as the national employment landscape is improving, the government said. According to the Ministry of Internal Affairs and Communications, the unemployment rate on a seasonally adjusted basis was 3 percent in July, with the number of employed persons in the recording month totaling 64.79 million, an increase of 980,000 or 1.5 percent from the previous year.
The number of unemployed persons in July, meanwhile, was 2.03 million, the ministry said, which is a decrease of 190,000 or 8.6 percent from the previous year. The job availability in Japan held steady in July at 1.37, which means that there were 137 positions available for every 100 people looking for work. For women, the unemployment rate dropped 0.3 percentage point to 2.7 percent and for men it was unchanged in July at 3.2 percent.
Economy of Russia
Russia`s economy contracted by 0.6% in the second quarter, better than analysts were expecting and reaffirming the growing feeling that the worst has passed for the Russian economy. The Federal Statistics Service (Rosstat) released a flash estimate that shows the Russian economy contracted 0.6% y/y in Q2, improving from the 1.2% y/y decline in Q1.
That was better than both the VTB Capital and Bloomberg consensus forecasts (-0.8% y/y) and in line with the projections from the Ministry for the Economy.
Available monthly statistics suggest that the improvement was on the back of supply side strength and changes in inventories. In 2Q16, industrial production turned positive, at 1.0% y/y, after having contracted for five quarters in a row. The structure of the recovery is also promising, as two out of three main segments are on the rise: manufacturing added 1.8% y/y and mining and quarrying was 0.9% y/y higher (electricity, gas and water production, meanwhile, was flat in annual terms in 2Q16).
Russia`s industrial output growth halted in July after a short-lived rebound earlier this year, data from Rosstat showed. Industrial output decreased by 0.3% on the year in July and contracted by 0.9% in monthly seasonally adjusted terms.
The data suggests that the Russian economy has yet to begin a stable economic recovery path. In July, the economy ministry said the economy is likely to return to growth later this year, pointing at industrial production as one of the most important drivers for the recovery.
In July, the manufacturing sector had the largest negative impact on the overall performance of the sector, supporting a purchasing managers survey that showed poor demand for Russian products. Manufacturing output declined by 1.5% on the year and by 1.4% on the month. The mining sector output rose by 1.8% on the year in July and by 3% compared with the preceding month. The utility sector output increased by 0.8% on the year and by 0.5% on the month.
Russia`s trade surplus decreased to USD 8.1 billion in June 2016, from a USD 13.8 billion surplus a year earlier while above market expectations of USD 7.46 billion. It was the biggest trade surplus since December last year, as exports and imports dropped at a slower 19.8 percent and 1.4 percent, respectively. Considering the first six months of the year, the trade surplus shrank 49.9 percent to USD 44.7 billion from USD 89.3 billion in the same period of 2015. Balance of Trade in Russia is reported by the Central Bank of Russia.
Consumer inflation in Russia slowed in August, raising the likelihood of a rate cut in September, data showed. Annual inflation slowed to 6.9% in August from 7.2% in July, diving further below the central bank`s key interest rate of 10.5%.
Russian unemployment rate was recorded at 5.3 percent in July of 2016, compared to 5.4 percent in the previous month, Rosstat said. The figure came below market expectations of 5.4 percent and was the lowest since September 2015. The number of unemployed people decreased by 52 thousand to 4.125 million while economically active increased by 0.1 million to 76.9 million (53 percent of population).
06.09.2016 13:44:39