World Economy Review - February 2017
The Organization for Economic Co-operation and Development (OECD) stated that the United States, Japan, Germany and France are all showing signs of economic growth. Forecasts from the OECD are expecting GDP growth in the aforementioned countries to pick up.
The Paris-based organization said its leading indicator (CLI) which purpose is to signal early hints of turning points in economic activity, remained just below its long-term average of 100 at 99.9 for the second consecutive month.
Here are the readings for the following countries:
United States - reading climbed from 99.3 in November 2016 to 99.4 the next month.
Japan - November`s reading was at 100 and rose to 100.1 in December.
Germany - From 100.3, the reading moved higher to 100.5.
France - its November reading of 100.5 edged up 100.6 in the succeeding month.
Meanwhile, Britain`s reading recovered to 99.5 in December from 99.3 in the preceding month.
The OECD described the country as having indefinite indications of accelerating growth, adding that terms regarding its withdrawal from the European Union still affect the British economy negatively.
In the United Kingdom, there are tentative signs of growth gaining momentum, although the CLI remains below trend and uncertainty persists about the nature of the agreement the UK will eventually conclude with the EU, the organization said.
Elsewhere, after a deep recession, Portugal`s economy is steadily recovering thanks to a broad structural reform agenda that has led to improving economic growth, declining unemployment numbers and impressive progress in export performance.
According to a report from the OECD, keeping the momentum for additional reforms is vital to address the remaining challenges and bring about stronger and more inclusive growth.
Additionally, the latest OECD Economic Survey of Portugal also indicates the necessity to lower high levels of public and private sector indebtedness and address non-performing loans in the banking system, which are hindering investment and restraining growth and productivity. The share of non-performing loans in the financial sector makes up over 12% of total loans and is one of the highest levels among European countries.
In Europe, Portugal still has one of the most unequal income distributions. The survey said that the country would need to overcome its legacy of a low-skilled labor force. Enhancing the skills of all Portuguese citizens will definitely boost growth, and will be essential in addressing the inequality.
The OECD also reported that economic inequality has accelerated faster in Sweden than any other developed country in recent decades as top earners have cashed in on growing asset prices while immigrants and unemployed citizens have been left behind.
Nonetheless, the gap between top and bottom earners remains tighter in the Nordic nation than most countries, the OECD added.
However, while real incomes for the wealthiest 5% of the Swedish population have risen nearly 70% since 1990, the poorest 5% have only witnessed a 10% growth.
Income inequality rose more rapidly than in any other OECD country since the 1990s, the OECD report read. The rise in income inequality needs to be contained.
Sweden has been widely regarded as an example of a country that demonstrated fairness and equality, using high taxes to stabilize income difference and support the poorer citizens through high welfare spending.
A rising stock market since deregulation in 1990s and soaring house prices have benefited those with financial assets, however, while fortunate capital gains taxes in relation to income taxes have further benefited the rich.
The OECD also indicated that increases in benefits have slumped wages while high levels of entry wages makes it tough for several lower-skilled individuals, usually many of whom are foreigners, to get jobs.
More than 30% of the foreign born fell below the poverty line, the OECD reported.
The government stated that the Swedish population rose by over 100,000 in 2014 - the result of a then-record high immigration of 127,000 and births outnumbering deaths.
Economy of the United States
U.S. economic growth slowed in the fourth quarter as previously reported, with robust consumer spending offset by downward revisions to business and government investment.
Gross domestic product rose at a 1.9 percent annual rate in the final three months of 2016, the Commerce Department said in its second estimate for the period. That matched the estimate published last month. Output increased at a 3.5 percent rate in the third quarter.
The economy grew 1.6 percent for all of 2016, its worst performance since 2011, after expanding 2.6 percent in 2015.
U.S. industrial production fell in January as unseasonably warm weather caused a major drop in utilities output, offsetting gains in manufacturing and mining, the Federal Reserve said.
The U.S. central bank said its overall industrial production index fell 0.3 percent last month after a downwardly revised 0.6 percent gain in December.
Economists polled by Reuters had forecast industrial production being flat in January. December`s output was originally reported as a 0.8 percent rise. The Fed`s measure of the industrial sector comprises manufacturing, mining, and electric and gas utilities.
The bulk of the January decline was due to a 5.7 percent drop in utilities output because of reduced heating demand. Manufacturing production was up 0.2 percent, matching analysts` forecasts, while mining output rose 2.8 percent.
With overall output declining in January, the percentage of industrial capacity in use fell 0.3 percentage point during the month to 75.3 percent. Manufacturing capacity use rose 0.1 percentage point to 75.1 percent.
U.S. consumer prices recorded their biggest increase in nearly four years in January as households paid more for gasoline and other goods, suggesting inflation pressures could be picking up.
The Labor Department said its Consumer Price Index jumped 0.6 percent in January after gaining 0.3 percent in December. January`s increase in the CPI was the largest since February 2013. In the 12 months through January, the CPI increased 2.5 percent, the biggest year-on-year gain since March 2012. The CPI rose 2.1 percent in the year to December.
Economists polled by Reuters had forecast the CPI rising 0.3 percent in January and advancing 2.4 percent from a year ago. Inflation is trending higher as prices for energy goods and other commodities rebound as global demand picks up.
The so-called core CPI, which strips out food and energy costs, rose 0.3 percent in January after increasing 0.2 percent in December. That lifted the year-on-year core CPI increase to 2.3 percent in January from December`s 2.2 percent increase.
Economy of the European Union
Seasonally adjusted GDP rose by 0.4% in the euro area (EA19) and by 0.5% in the EU28 during the fourth 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 third quarter of 2016, GDP also grew by 0.4% and 0.5% respectively.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.7% in the euro area and by 1.8% in the EU28 in the fourth quarter of 2016, after +1.8% and +1.9% respectively in the previous quarter.
In December 2016 compared with November 2016, seasonally adjusted industrial production fell by 1.6% in the euro area (EA19) and by 1.0% in the EU28, according to estimates from Eurostat. In November 2016 industrial production rose by 1.5% in the euro area and by 1.6% in the EU28.
In December 2016 compared with December 2015, industrial production increased by 2.0% in the euro area and by 2.9% in the EU28. The average industrial production for the year 2016, compared with 2015, rose by 1.3% in the euro area and by 1.4% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in December 2016 was 178.6 billion, an increase of 6% compared with December 2015 (168.7 bn). Imports from the rest of the world stood at 150.5 bn, a rise of 4% compared with December 2015 (144.4 bn). As a result, the euro area recorded a 28.1 bn surplus in trade in goods with the rest of the world in December 2016, compared with +24.4 bn in December 2015. Intra-euro area trade rose to 137.4 bn in December 2016, up by 5% compared with December 2015.
The first estimate for extra-EU28 exports of goods in December 2016 was 164.4 billion, up by 5% compared with December 2015 (156.1 bn). Imports from the rest of the world stood at 143.5 bn, up by 6% compared with December 2015 (135.4 bn). As a result, the EU28 recorded a 20.9 bn surplus in trade in goods with the rest of the world in December 2016, compared with +20.6 bn in December 2015. Intra-EU28 trade rose to 247.7 bn in December 2016, +5% compared with December 2015.
Euro area annual inflation is expected to be 2.0% in February 2017, up from 1.8% in January 2017, 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 February (9.2%, compared with 8.1% in January), followed by food, alcohol & tobacco (2.5%, compared with 1.8% in January), services (1.3%, compared with 1.2% in January) and non-energy industrial goods (0.2%, compared with 0.5% in January).
The euro area (EA19) seasonally-adjusted unemployment rate was 9.6% in January 2017, stable compared to December 2016 and down from 10.4% in January 2016. This remains the lowest rate recorded in the euro area since May 2009. The EU28 unemployment rate was 8.1% in January 2017, down from 8.2% in December 2016 and from 8.9% in January 2016. This is the lowest rate recorded in the EU28 since January 2009. These figures are published by Eurostat.
Eurostat estimates that 19.969 million men and women in the EU28, of whom 15.620 million were in the euro area, were unemployed in January 2017. Compared with December 2016, the number of persons unemployed decreased by 96 000 in the EU28 and by 56 000 in the euro area. Compared with January 2016, unemployment fell by 1.733 million in the EU28 and by 1.101 million in the euro area.
Economy of Japan
Japan`s economy grew at an annualized rate of 1.0 percent in October-December, posting a fourth straight quarter of expansion, led by solid exports and firmer capital expenditure, government data showed.
The preliminary reading for fourth-quarter gross domestic product compared with the median estimate of 1.1 percent growth in a Reuters poll of economists. It followed a revised 1.4 percent expansion in the prior quarter, the Cabinet Office data showed.
On a quarter-on-quarter basis, GDP rose 0.2 percent, versus 0.3 percent growth expected by economists.
Industrial production in Japan was down 0.8 percent on month in January, the Ministry of Economy, Trade and Industry said. That missed forecasts for an increase of 0.4 percent following the 0.7 percent gain in December.
On a yearly basis, industrial production climbed 3.2 percent - also shy of expectations for 4.4 percent but unchanged from the previous month. Output is forecast to rise 3.5 percent in February and drop 5 percent in March.
Japan posted a larger-than-expected trade deficit in January as imports increased for the first time in two years, driven up by higher oil prices. Japan`s merchandise trade balance with the rest of the world came to a Y1.087 trillion deficit. Economists polled by the Nikkei had forecast a Y629.3 billion deficit.
Overall imports climbed 8.5% in January to Y6.509 trillion for the first rise in 25 months. One of the main factors driving up the nation`s import bill was a 41% jump in oil prices in yen terms from a year earlier. Exports rose for the second straight month in January, though the 1.3% gain was smaller than a Wall Street Journal forecast for a 4.3% increase.
Japanese consumer prices picked up in January for the first time in almost a year, government data showed, halting a long string of declines as Tokyo struggles to put deflation in the rear view mirror.
A key inflation index, which excludes the volatile cost of fresh food, rose 0.1% from a year earlier, the internal affairs ministry said. The rise, largely due to rebound in oil and energy prices, marked the first uptick in 11 months and ended the longest string of declines in more than five years.
Japan`s unemployment rate in January fell 0.1 percentage point from the previous month to 3.0 percent, while household spending continued to drop, pointing to persistent weakness in domestic demand, government data showed.
Separate data showed the country`s job availability stood at 1.43 in January, unchanged from December when it marked the highest level since July 1991, according to the Ministry of Health, Labor and Welfare. The figure means 143 positions were available for every 100 job seekers.
Economy of Russia
The Russian economy shrank 0.2 percent in 2016, following a downwardly revised 2.8 percent contraction in 2015, according to estimates from the statistical office. It compares with earlier projections of a 0.6 percent decline from the Minster of the Economy. Activity fell less in construction (-4.3 percent compared to -4.9 percent in 2015), wholesale and retail trade (-3.6 percent compared to -8.1 percent) and hotels and restaurants (-3.5 percent compared to -4.5 percent). Meanwhile, output rebounded for manufacturing (1.4 percent from -4.1 percent), utilities (2.4 percent compared to -1.2 percent), transport and communication (0.4 percent compared to -0.9 percent), financial activities (2.3 percent compared to -6 percent) and real estate (0.9 percent compared to -0.5 percent). In addition, agriculture rose at a faster 3.5 percent (3 percent in 2015) while mining slowed (0.2 percent compared to 0.4 percent).
Industrial production in Russia increased 2.3 percent year-on-year in January of 2017, following a downwardly revised 0.2 percent gain in December and missing market expectations of a 2.9 percent rise. Main activities rose at a faster pace: manufacturing (2 percent compared to -1.3 percent in December), mining (3.3 percent compared to 2.1 percent) and water and sewerage (1.6 percent from -0.3 percent) On a monthly basis, industrial output shrank 23.8 percent.
Russian trade surplus increased by 4.7 percent to $11.83 billion in December 2016 from $11.3 billion in the same month a year earlier, well above market expectations of a $9.85 billion surplus. Exports rose 8.3 percent, the second consecutive monthly increase since July 2014; and imports went up 10.6 percent, the fifth month in a row of growth. Considering the full 2016, the trade surplus shrank 39.1 percent to $90.4 billion from $148.5 billion in 2015, as exports fell 17.5 percent and imports declined at a much slower 0.8 percent.
Consumer prices in Russia increased 5 percent year-on-year in January of 2017, following 5.4 percent rise in the previous month and below market expectations of 5.1 percent. It was the lowest inflation rate since June 2012, as prices increased at a slower pace for food; clothing and footwear; furnishings and household equipment and recreation and cultural activities. On a monthly basis, prices went up 0.6 percent, compared to 0.4 percent rise in December.
The unemployment rate in Russia increased to 5.6 percent in January of 2017 from 5.3 percent in December and well above market expectations of 5.6 percent. It was the highest jobless rate since May 2016. The number of unemployed people increased by 185 thousand to 4.288 million and the number of economically active people decreased by 100 thousand to 75.9 million, representing 52 percent of total population.
06.03.2017 21:26:33