World Economy Review - May 2017
The World Bank forecasts that global economic growth will strengthen to 2.7 percent in 2017 as a pickup in manufacturing and trade, rising market confidence, and stabilizing commodity prices allow growth to resume in commodity-exporting emerging market and developing economies.
According to the World Bank`s June 2017 Global Economic Prospects, growth in advanced economies is expected to accelerate to 1.9 percent in 2017, which will also benefit the trading partners of these countries. Global financing conditions remain favorable and commodity prices have stabilized. Against this improving international backdrop, growth in emerging market and developing economies as a whole will pick up to 4.1 percent this year from 3.5 percent in 2016.
Growth among the world`s seven largest emerging market economies is forecast to increase and exceed its long-term average by 2018. Recovering activity in these economies should have significant positive effects for growth in other emerging and developing economies and globally.
Nevertheless, substantial risks cloud the outlook. New trade restrictions could derail the welcome rebound in global trade. Persistent policy uncertainty could dampen confidence and investment. Amid exceptionally low financial market volatility, a sudden market reassessment of policy-related risks or of the pace of advanced-economy monetary policy normalization could provoke financial turbulence. Over the longer term, persistently weak productivity and investment growth could erode long-term growth prospects in emerging market and developing economies that are key to poverty reduction.
"For too long, we`ve seen low growth hold back progress in the fight against poverty, so it is encouraging to see signs that the global economy is gaining firmer footing, World Bank Group President Jim Yong Kim said. With a fragile but real recovery now underway, countries should seize this moment to undertake institutional and market reforms that can attract private investment to help sustain growth in the long-term. Countries must also continue to invest in people and build resilience against overlapping challenges, including climate change, conflict, forced displacement, famine, and disease.
The report highlights concern about mounting debt and deficits among emerging market and developing economies, raising the prospect that an abrupt rise in interest rates or tougher borrowing conditions might be damaging. At the end of 2016, government debt exceeded its 2007 level by more than 10 percentage points of GDP in more than half of emerging market and developing economies and fiscal balances worsened from their 2007 levels by more than 5 percentage points of GDP in one-third of these countries.
The reassuring news is that trade is recovering, said World Bank Chief Economist Paul Romer. The concern is that investment remains weak. In response, we are shifting our priorities for lending toward projects that can spur follow-on investment by the private sector.
A bright spot in the outlook is a recovery in trade growth to 4 percent after a post-financial crisis low of 2.5 percent last year. The report highlights a key area of weakness in global trade, trade among firms not linked through ownership. Such trade through outsourcing channels has slowed much more sharply than intra-firm trade in recent years. This is a reminder of the importance of a healthy global trading network for the less integrated firms that account for the majority of enterprises.
After a prolonged slowdown, recent acceleration in activity in some of the largest emerging markets is a welcome development for growth in their regions and for the global economy, said World Bank Development Economics Prospects Director Ayhan Kose. Now is the time for emerging market and developing economies to assess their vulnerabilities and strengthen policy buffers against adverse shocks.
Economy of the United States
U.S. economic growth slowed less sharply in the first quarter than initially thought, but the weakness was likely an aberration amid a strong labor market that is near full employment. Gross domestic product increased at a 1.2 percent annual rate instead of the 0.7 percent pace reported last month, the Commerce Department said in its second estimate.
That was the weakest performance since the first quarter of 2016 and followed a 2.1 percent rate of expansion in the fourth quarter. The government revised up its initial estimate of consumer spending growth, but said inventory investment was far smaller than previously reported. Economists polled by Reuters had expected GDP growth would be revised up to a 0.9 percent rate.
Growth in consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose at a 0.6 percent rate instead of the previously reported 0.3 percent pace. That was still the slowest pace since the fourth quarter of 2009 and followed the fourth quarter`s robust 3.5 percent growth rate.
Industrial production in April grew at the fastest monthly rate in more than three years, on the back of broad-based gains in the manufacturing sector. The Federal Reserve said that industrial production grew 1% in April, topping the MarketWatch-compiled economist consensus for 0.5% growth. This is the fastest pace of growth since February 2014.
March`s increase was revised down slightly to a 0.4% rise from an initially reported 0.5% gain. But industrial output has been up for three straight months. Compared with a year ago, production was up 2.2%. Manufacturing was hurt by the strong dollar in 2015 and 2016 but business investment has picked up this year.
In April, manufacturing output grew 1% after a 0.4% increase in the prior month. This is also the fastest rate since February 2014. The gain was led to a surge in automotive production, which rebounded 5% after a 3.6% nosedive in March. But the pickup was broad-based. Excluding autos, manufacturing was up a solid 0.7%.
Utilities output rose 0.7% in April after jumping 8.2% in the prior month. Mining output, which includes oil and gas extraction, rose 1.2 after a 0.4% drop in March. Capacity utilization rose to a 20-month high of 76.7% in April from 76.1% in March.
The nation`s trade deficit rose 5.2% in April, keeping the U.S. on track to post a bigger gap in 2017 than in 2016. The deficit climbed to $47.6 billion in April from a revised $45.3 billion in March, the Commerce Department said. Economists polled by MarketWatch had forecast a $46.5 billion gap.
Exports slipped 0.3% to $191 billion, largely owing to decline in autos, networking equipment and consumer goods such as pharmaceuticals. Imports edged up 0.8% to $238.6 billion, however. The U.S. saw a flood of cellphone imports as makers such as Samsung put out new models.
U.S. consumer prices rebounded in April, bolstering the Federal Reserve`s case for continued interest-rate hikes. The consumer price index rose a seasonally adjusted 0.2% in April because of higher energy costs, the Labor Department said. This followed a 0.3% drop in the prior month.
Energy prices jumped 1.1% in April - the biggest increase since January - and were up 9.3% over the past year. Food prices rose 0.2% in April on higher prices for fresh vegetables compared to a 0.3% increase in March.
The core CPI, which excludes volatile food and energy costs, rose a slight 0.1%, reversing a 0.1% decline in March. The rise in the core reading was tamer than expected. Economists surveyed by MarketWatch had expected the overall CPI to rise 0.2% and the core rate to increase by 0.2%.
Consumer prices have risen an unadjusted 2.2% over the past 12 months, down from a 2.4% gain in March and a 2.7% rate in February, which was the highest since February 2012.
Job growth slowed sharply in May to just 138,000, the Labor Department said, an unexpectedly lackluster figure that raises concerns about the labor market but probably not enough to derail an expected Federal Reserve interest rate hike this month.
The unemployment rate ticked down a tenth of a percentage point to 4.3 percent, the lowest since 2001. But that was largely for the wrong reason: About 429,000 people dropped out of the labor force.
The percentage of working-age Americans in the labor force declined last month to 62.7 percent, the third-straight monthly decline and near a four-decade low. Analysts described the data as disappointing.
Economy of the European Union
Seasonally adjusted GDP rose by 0.5% in both the euro area (EA19) and the EU28 during the first quarter of 2017, compared with the previous quarter, according to a flash estimate published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2016, GDP grew by 0.5% and 0.6% respectively.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.7% in the euro area and by 2.0% in the EU28 in the first quarter of 2017, after +1.8% and +1.9% respectively in the previous quarter.
In March 2017 compared with February 2017, seasonally adjusted industrial production fell by 0.1% in the euro area (EA19) and remained stable in the EU28, according to estimates from Eurostat. In February 2017 industrial production also fell by 0.1% in the euro area and remained unchanged in the EU28.
In March 2017 compared with March 2016, industrial production increased by 1.9% in the euro area and by 2.4% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in March 2017 was 202.3 billion, an increase of 13% compared with March 2016 (178.9 bn). Imports from the rest of the world stood at 171.4 bn, a rise of 14% compared with March 2016 (150.7 bn). As a result, the euro area recorded a 30.9 bn surplus in trade in goods with the rest of the world in March 2017, compared with +28.2 bn in March 2016. Intra-euro area trade rose to 168.1 bn in March 2017, up by 12% compared with March 2016.
The first estimate for extra-EU28 exports of goods in March 2017 was 175.6 billion, up by 16% compared with March 2016 (150.8 bn). Imports from the rest of the world stood at 165.1 bn, up by 14% compared with March 2016 (144.9 bn). As a result, the EU28 recorded a 10.5 bn surplus in trade in goods with the rest of the world in March 2017, compared with +5.9 bn in March 2016. Intra-EU28 trade rose to 303.1 bn in March 2017, +11% compared with March 2016.
Euro area annual inflation is expected to be 1.4% in May 2017, down from 1.9% in April 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 May (4.6%, compared with 7.6% in April), followed by food, alcohol & tobacco (1.5%, stable compared with April), services (1.3%, compared with 1.8% in April) and non-energy industrial goods (0.3%, stable compared with April).
The euro area (EA19) seasonally-adjusted unemployment rate was 9.3% in April 2017, down from 9.4% in March 2017 and down from 10.2% in April 2016. This is the lowest rate recorded in the euro area since March 2009. The EU28 unemployment rate was 7.8% in April 2017, down from 7.9% in March 2017 and from 8.7% in April 2016. This is the lowest rate recorded in the EU28 since December 2008. These figures are published by Eurostat.
Eurostat estimates that 19.121 million men and women in the EU28, of whom 15.040 million in the euro area, were unemployed in April 2017. Compared with March 2017, the number of persons unemployed decreased by 253 000 in the EU28 and by 233 000 in the euro area. Compared with April 2016, unemployment fell by 2.225 million in the EU28 and by 1.529 million in the euro area.
Economy of Japan
Japan`s economy started 2017 on solid footing as exports continued to rise and domestic demand returned to growth in the first quarter.
Gross domestic product grew by an annualized 2.2 per cent in the three months ended March, according to a preliminary estimate from Japan`s Cabinet Office. That was up a full percentage point from growth of 1.2 per cent in the December quarter and came in comfortably above a median forecast from economists surveyed by Reuters predicting growth would tick up to 1.7 per cent.
Quarter-on-quarter GDP rose 0.5 per cent in the first quarter, accelerating from a 0.3 per cent rise in the previous quarter and dead-on a median forecast from economists.
Japanese industrial production rose 4.0% on month in April, government data showed, posting the biggest jump in nearly six years. Output of cars and semiconductor production equipment buoyed the figures for the biggest percentage gain since June 2011, when industrial production jumped 4.2% in the aftermath of the massive earthquake and tsunami that struck Japan earlier that year. Still, the gain was lower than a 4.5% rise forecast by economists polled by the Nikkei.
The figure has been volatile in recent months. In March, industrial production fell 2.1%, after rising 3.2% in February. A survey included in the report suggests that volatility could continue in coming months. Manufacturers expect output to fall 2.5% in May, before increasing 1.8% in June.
Japan`s trade balance for April was a surplus of Y481.7 billion, down 40.6% from a year ago. That was in line with the Y515 billion surplus expected by economists polled by the Nikkei.
Japanese exports rose 7.5% in April, buoyed by strong demand in Asia for semiconductors, semiconductor-making equipment and steel. It was the fifth consecutive month of increase for exports, data from Japan`s Ministry of Finance showed. The increase was in line with the 8.2% increase expected by economists according to a Wall Street Journal survey.
Imports surged 15.1 percent versus the median estimate for a 14.8 percent increase, rising for the fourth straight month on rising energy costs.
Japan`s consumer price index (CPI) for all items met expectations by rising 0.4 percent year-on-year in April - the fourth straight month of increases, official data released on Friday showed. The country`s core CPI, which excludes fresh food prices, also inched up by 0.3 percent year-on-year, but missing Reuters estimate of a 0.4 percent increase, the data showed.
The increase was largely due to higher energy costs. Stripping away energy and fresh food items, Japan`s consumer price index was flat from the year ago, underscoring the challenges still facing the central bank after years of stimulus to hit its 2 percent inflation target.
Japan`s unemployment rate held at a multi-decade low in April as the ratio of jobs to applicants rose more than expected. Japan`s jobless rate held steady at March`s level of 2.8 per cent, at the lowest level since June 1994 for a third straight month, according to the Statistics Bureau. That was bang-on a median forecast from economists surveyed by Reuters.
The job-to-applicant ratio inched higher to 1.48 from the previous month`s level of 1.45, marking the equal-highest level since March of 1974 and besting expectations of a more marginal rise to 1.46.
The latest readings continue to point to strong levels of employment and build on improvements from the first three months of 2017, as a Labour Force Survey released by the stats bureau in early May showed Japan`s jobless population fell 10.7 per cent year on year in the first quarter to 1.9m.
Economy of Russia
The Russian economy continued to expand modestly in the first quarter of 2017, growing 0.5 percent year on year, preliminary data from the Federal Statistics Service showed. It was unclear what drove economic growth in the January-March period as the statistics service, Rosstat, only reveals a breakdown of the data with a time lag.
Gross domestic product (GDP) returned to growth in the fourth quarter, expanding by 0.3 percent after seven quarters of contraction that were mainly caused by a drop in oil prices and Western sanctions over Russia`s role in the Ukraine crisis.
Russia`s industrial production increased by 2.3 percent year-on-year in April 2017, following a 0.8 percent rise in the previous month and above market expectations of 0.6 percent gain. It was the strongest rise since January, as output went up at a faster pace for mining (4.2 percent from 0.2 percent in March) and electricity and gas (5.5 percent from 0.4 percent). In contrast, production slowed down for manufacturing (0.6 percent from 1 percent) and distribution of water, sewage (2.1 percent from 3.4 percent). On a monthly basis, industrial production decreased 2.3 percent.
Russian trade surplus increased by 61.7 percent to $12.6 billion in March 2017 from $7.8 billion in the same month a year earlier and above market expectations of a $11.9 billion surplus. It was the largest trade surplus since June of 2015, as exports jumped 35.2 percent to $31.3 billion and imports went up 21.8 percent to $18.7 billion.
Consumer prices in Russia increased by 4.1 percent year-on-year in April 2017, easing from a 4.3 percent rise in the previous month and below market expectations of 4.2 percent. It was the lowest inflation rate since May 2012, as prices increased at a slower pace for housing and utilities, clothing and footwear and transport. On a monthly basis, prices went up 0.3 percent after advancing by 0.1 percent in March.
The unemployment rate in Russia declined to 5.3 percent in April of 2017 from 5.9 percent in the same month a year ago and well below market expectations of 5.5 percent. It was the lowest jobless rate since December last year. The number of unemployed people decreased by 470 thousand to 4.050 million while the number of economically active people fell by 400 thousand to 75.9 million, representing 52 percent of total population.
07.06.2017 11:34:23