World Economy Review - April 2017
The global economy is expected to grow 3.5 percent this year, the International Monetary Fund (IMF) said in its World Economic Outlook report.
That figure is up from the previous estimate of 3.4 percent as the bank cited "buoyant financial markets and a long-awaited cyclical recovery in manufacturing and trade under way. It kept its 2018 global growth forecast unchanged at 3.6 percent.
There are still risks, however, against the world economy, such as low productivity growth, high income inequality, inward-looking policies in advanced economies, and the U.S.`s Federal Reserve raising rates faster than expected.
Expectations for the U.S. economy were left unchanged at 2.3 percent for 2017 and 2.5 percent for the following year, but the IMF revised upwards its forecast for most major economies.
The eurozone is estimated to expand by 1.7 percent in 2017, instead of 1.6 percent, while Germany, France and Italy were each revised up 0.1 points to 1.6 percent, 1.4 percent, and 0.8 percent, respectively. The U.K. is anticipated to grow 2 percent this year, instead of 1.5 percent.
Japan`s forecast was revised up 0.4 points to 1.2 percent. The Russian economy is expected to expand 1.4 percent this year instead of 1.1 percent, while 2017projections for China was raised to 6.6 percent from 6.5 percent.
Turkey`s economy is expected to contract to 2.5 percent from 2.9 percent, but the bank kept 2018 forecasts unchanged at 3.3 percent.
Turkey`s outlook "is clouded by heightened political uncertainty, security concerns, and the rising burden of foreign-exchange-denominated debt caused by the lira depreciation," the IMF said.
The IMF also warns of headwinds that could weaken its global projections. The organization highlights the possibility of protectionism and what the report calls "trade warfare".
However, the dominant tone of the report is rather sunnier than it has been for some time. For much of the period since the financial crisis of 2008 the IMF has worried that the recovery was failing to generate momentum.
Economy of the United States
The US economy grew by 0.7% in the first quarter, weaker than expected, according to an advance estimate of gross domestic product from the Department of Commerce. It was the slowest pace in three years, weighed down by weak consumer spending even though business investment was healthy. Economists had forecast GDP rose at an annualized rate of 1%, according to Bloomberg.
The slowdown from the fourth quarter, when the economy grew 2.1%, is in line with the sluggishness that has characterized every first quarter in this recovery. That`s partly because of seasonal-adjustment issues that the Bureau of Economic Analysis has not yet resolved. This time, the lull can also be attributed to weaker consumer spending. Personal consumption grew by 0.3%, the weakest pace since 2009, slowing from a 3.5% growth pace in the fourth quarter.
Data on retail sales and personal outlays released from January through March previewed this drop in spending. Auto sales fell every month in the first quarter. Economists also pointed to delayed tax returns as one reason spending dropped. Private, fixed nonresidential investment - business investment - was a major contributor to growth, as mining exploration rebounded. Homebuilding also boosted the economy in the first quarter. Government spending fell 1.7% amid cuts in defense spending and state and local government expenditures.
Reflecting a substantial rebound in utilities output, the Federal Reserve released a report showing that U.S. industrial production increased in line with economist estimates in the month of March. The report said industrial production climbed by 0.5 percent in March after inching up by 0.1 percent in February. The increase in production matched the consensus estimate.
Utilities output showed a significant increase, spiking by 8.6 percent in March after tumbling by 5.8 percent in the previous month. The report also said mining output edged up by 0.1 percent in March after jumping by 2.9 percent in February, while manufacturing output fell by 0.4 percent after rising by 0.3 percent.
Capacity utilization for the industrial sector rose to 76.1 percent in March from a revised 75.7 percent in February. Economists had expected capacity utilization to climb to 76.2 percent. While capacity utilization in the utilities sector jumped to 75.7 percent, capacity utilization in the mining and manufacturing sectors dipped to 81.9 percent and 75.3 percent, respectively.
The U.S. trade deficit narrowed in March to the lowest level since October as both exports and imports fell. But the politically sensitive trade gap with China rose.
The Commerce Department said that the gap in goods and services slipped to $43.7 billion, down from $43.8 billion in February. Exports dropped 0.9 percent to $191 billion, pulled down by falling auto exports. Imports fell 0.7 percent $234.7 billion as imports of crude oil and other petroleum products slid.
Consumer prices in the U.S. unexpectedly decreased in the month of March, according to a report released by the Labor Department, with prices showing their first drop in a year. The Labor Department said its consumer price index fell by 0.3 percent in March after inching up by 0.1 percent in February. Economists had expected consumer prices to come in unchanged. The drop by the consumer price index reflected its first decrease since February of 2016.
Excluding food and energy prices, the core consumer price index edged down by 0.1 percent in March following a 0.2 percent increase in the previous month. Core prices had been expected to rise by 0.2 percent. Lower prices for wireless telephone services, used cars and trucks, new vehicles, and apparel contributed to the drop in core prices.
With the monthly drop in prices, the annual rate of consumer price growth slowed to 2.4 in March from 2.7 percent in February. Core consumer prices in March were up by 2.0 percent compared to a year ago, reflecting a slowdown from the 2.2 percent growth seen in February.
The economy generated 211,000 new jobs in April, rebounding from a disappointing March and pointing to steady U.S. economic growth ahead. Economists polled by MarketWatch had predicted a 190,000 increase in nonfarm jobs. The unemployment rate dipped to 4.4% from 4.5%, a postrecession low last matched in May 2007, the government said. Average wages climbed 0.3% to $26.19 an hour. Hourly pay increased 2.5% from April 2016 to April 2017, down from 2.6% in the prior month. Hours worked rose 0.1 hour to 34.4 hours a week. The government cut its estimate of new jobs created in March to 79,000 from 98,000. February`s gain was raised to 232,000 from 219,000.
Economy of the European Union
Seasonally adjusted GDP rose by 0.5% in the euro area (EA19) and by 0.4% in the EU28 during the first quarter of 2017, compared with the previous quarter, according to a preliminary flash estimate published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2016, GDP had grown by 0.5% in the euro area and by 0.6% in the EU28.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.7% in the euro area and by 1.9% in the EU28 in the first quarter of 2017, after +1.8% and +1.9% in the previous quarter.
In February 2017 compared with January 2017, seasonally adjusted industrial production fell by 0.3% in the euro area (EA19) and by 0.2% in the EU28, according to estimates from Eurostat. In January 2017 industrial production rose by 0.3% in both zones. In February 2017 compared with February 2016, industrial production increased by 1.2% in the euro area and by 2.1% in the EU28.
The decrease of 0.3% in industrial production in the euro area in February 2017, compared with January 2017, is due to production of energy falling by 4.7% and non-durable consumer goods by 1.1%. Production of durable consumer goods remained stable, while capital goods rose by 0.9% and intermediate goods by 1.0%. In the EU28, the decrease of 0.2% is due to production of energy falling by 3.9% and non-durable consumer goods by 0.9%, while production of durable consumer goods rose by 0.4% and both capital goods and intermediate goods by 0.8%.
Among Member States for which data are available, the largest decreases in industrial production were registered in Ireland (-15.5%), France (-1.6%) and Croatia (-1.5%), and the highest increases in Bulgaria and Slovenia (both +3.6%), Hungary (+3.4%) and Latvia (+3.2%).
The increase of 1.2% in industrial production in the euro area in February 2017, compared with February 2016, is due to production of energy rising by 2.4%, both intermediate goods and durable consumer goods by 2.0% and capital goods by 1.2%, while production of non-durable consumer goods fell by 2.4%. In the EU28, the increase of 2.1% is due to production of capital goods rising by 2.5%, durable consumer goods by 2.4%, intermediate goods by 2.3% and energy by 1.9%, while production of non-durable consumer goods fell by 1.5%.
Among Member States for which data are available, the highest increases in industrial production were registered in Greece (+11.2%), Latvia (+10.6%) and Estonia (+9.0%), while decreases were observed in Ireland (-10.0%) and France (-0.8%).
The first estimate for euro area (EA19) exports of goods to the rest of the world in February 2017 was 170.3 billion, an increase of 4% compared with February 2016 (163.2 bn). Imports from the rest of the world stood at 152.6 bn, a rise of 5% compared with February 2016 (144.9 bn). As a result, the euro area recorded a 17.8 bn surplus in trade in goods with the rest of the world in February 2017, compared with +18.2 bn in February 2016. Intra-euro area trade rose to 149.1 bn in February 2017, up by 5% compared with February 2016. These data are released by Eurostat.
The first estimate for extra-EU28 exports of goods in February 2017 was 146.5 billion, up by 7% compared with February 2016 (137.0 bn). Imports from the rest of the world stood at 144.8 bn, up by 8% compared with February 2016 (134.5 bn). As a result, the EU28 recorded a 1.7 bn surplus in trade in goods with the rest of the world in February 2017, compared with +2.6 bn in February 2016. Intra-EU28 trade rose to 265.9 bn in February 2017, +3% compared with February 2016.
Euro area annual inflation is expected to be 1.9% in April 2017, up from 1.5% in March 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 April (7.5%, compared with 7.4% in March), followed by services (1.8%, compared with 1.0% in March), food, alcohol & tobacco (1.5%, compared with 1.8% in March) and non-energy industrial goods (0.3%, stable compared with March).
The euro area (EA19) seasonally-adjusted unemployment rate was 9.5% in March 2017, stable compared to February 2017 and down from 10.2% in March 2016. This is the lowest rate recorded in the euro area since April 2009. The EU28 unemployment rate was 8.0% in March 2017, down from 8.1% in February 2017 and from 8.7% in March 2016. This remains the lowest rate recorded in the EU28 since January 2009. These figures are published by Eurostat.
Eurostat estimates that 19.716 million men and women in the EU28, of whom 15.515 million in the euro area, were unemployed in March 2017. Compared with February 2017, the number of persons unemployed decreased by 56 000 in the EU28 and by 5 000 in the euro area. Compared with March 2016, unemployment fell by 1.647 million in the EU28 and by 991 000 in the euro area.
Among the Member States, the lowest unemployment rates in March 2017 were recorded in the Czech Republic (3.2%), Germany (3.9%) and Malta (4.1%). The highest unemployment rates were observed in Greece (23.5% in January 2017) and Spain (18.2%).
Compared with a year ago, the unemployment rate in March 2017 fell in twenty-three Member States, remained stable in France and Austria, while it increased in Denmark (from 6.0% to 6.2%), Italy (from 11.5% to 11.7%) and Lithuania (from 8.0% to 8.1%). The largest decreases were registered in Croatia (from 14.0% to 11.3%), Portugal (from 12.0% to 9.8%), Spain (from 20.3% to 18.2%) and Ireland (from 8.3% to 6.4%).
Economy of Japan
Japan`s real gross domestic product shrank 1.3% from a month earlier in March, registering its first contraction in three months, the Japan Center for Economic Research reported. Exports slid 2.3% after a strong month in February.
Weaker domestic economic activities, sluggish private-sector demand in particular, also took a toll. Housing investment decreased 4.5% following a sharp drop in construction starts in February. Consumer spending slid 0.5%, led by a decline in new-car sales. Government expenditure went up by 0.1%.
Japan`s real gross domestic product for the January-March period probably increased around 0.5% on the quarter, according to an average of private-sector forecasts, marking the country`s longest growth streak in more than a decade. Annualized GDP growth is expected to stay above 1% this quarter and beyond, beating Japan`s medium-term potential growth rate, which is thought to be on the upper end of the 0-1% range.
Japanese industrial production fell 2.1% on month in March, the Ministry of Economy, Trade and Industry said. The fall was worse than a 1.0% fall forecast by economists surveyed by the Nikkei, and came after a 3.2% increase in February. Industrial output edged up 0.1% in the January-March period from the previous quarter.
The ministry kept its assessment of production unchanged, saying that production was picking up. Still, economists say that Japanese output has been picking up as the world economy recovers. According to a survey included in the report, manufacturers expect output to jump 8.9% in April, before decreasing 3.7% in May.
Japan posted its first trade surplus in six years in fiscal 2016, standing at ¥4.01 trillion, as the value of imports fell sharply amid persisting low oil prices, government data showed. It was the first annual surplus on a fiscal year basis since the March 2011 Fukushima nuclear disaster, which prompted Japan to import more fossil fuels as its nuclear power plants were taken offline amid heightened safety concerns. But lower energy prices have helped take pressure off Japan`s trade balance.
Imports for the year to March 31 tumbled 10.2 percent from a year earlier to ¥67.52 trillion, for the third consecutive year of decline, as crude oil and liquefied natural gas imports continued to slide. Exports dropped 3.5 percent to ¥71.52 trillion, reflecting decreased shipments of cars and steel.
In March alone, Japan reported a ¥614.7 billion trade surplus, for the second straight month of black ink. Exports grew 12 percent to ¥7.23 trillion, for the fourth consecutive month of expansion, helped by growth in auto parts shipments. Imports surged 15.8 percent to ¥6.61 trillion on increased oil and coal imports.
Japanese consumer prices rose in March for the third straight month on the back of higher energy costs, official data showed, as Tokyo battles to end years of deflation. After stripping out the volatile cost of fresh food, nationwide consumer prices increased 0.2 per cent from a year earlier, the internal affairs ministry said, matching analyst expectations.
That follows a 0.2 per cent rise in February and after the Bank of Japan trimmed its annual inflation forecast, warning that its official target - already running four years late - was likely to be delayed once again.
Japan`s unemployment rate remained steady at 2.8 percent in March, according to government data. The number of unemployed people in March was 1.88 million, a decrease of 280,000 or 13 percent from the same month last year, according to the Ministry of Internal Affairs and Communications.
The number of employed people increased by 1.1 percent or 690,000 year-on-year, amounting to a total of 64.33 million. Meanwhile, the number of jobs available per 100 job seekers in Japan rose to 145 in March, marking the best level of job availability since November 1990.
Economy of Russia
The Russian economy grew by around 0.2-0.4 percent year on year in the first quarter, the central bank said, as consumer demand picked up and capital investment rose. The central bank also said it expected gross domestic product to grow by around 0.3-0.5 percent in the second quarter compared to the first in seasonally adjusted terms.
Russia`s industrial production increased by 0.8 percent year-on-year in March 2017, recovering from a 2.3 percent drop in the previous month but missing market expectations of 1.2 percent gain. Output rebounded sharply for manufacturing (1 percent from -5.1 percent in February) and distribution of water, sewage (3.4 percent from -19.3 percent). Also, production and distribution of electricity and gas rose by 0.4 percent (from 2.7 percent in February) and mining output edged up 0.2 percent (after showing no growth in February). On a monthly basis, industrial production jumped 12.7 percent, following a 0.6 percent drop in February.
Russian trade surplus increased by 40.3 percent to $10.17 billion in February 2017 from $7.2 billion in the same month a year earlier, while slightly below market expectations of a $10.5 billion surplus. Exports jumped 28 percent to $25.75 billion and imports went up 21.1 percent to $15.58 billion.
Consumer prices in Russia increased by 4.3 percent year-on-year in March 2017, easing from a 4.6 percent rise in the previous month and in line with market expectations. It was the lowest inflation rate since June 2012, as prices rose at a slower pace for food (3.1 percent from 3.3 percent in February); clothing and footwear (6.1 percent from 6.6 percent); transport (5.2 percent from 6.1 percent); furnishings and household equipment (3.3 percent from 3.9 percent); and alcoholic beverages and tobacco (7.6 percent from 8 percent). On a monthly basis, prices edged up 0.1 percent after advancing by 0.2 percent in February.
The unemployment rate in Russia declined to 5.4 percent in March of 2017 from 5.6 percent in the previous month and below market expectations of 5.6 percent. The number of unemployed people decreased by 117 thousand to 4.109 million and the number of economically active people fell by 200 thousand to 75.9 million, representing 52 percent of total population.
06.05.2017 13:56:45