The Lastest Macroeconomic News
06.08.2011 16:46 Standard & Poor`s downgraded the U.S.`s AAA credit rating for the first time since 1917
Standard & Poor`s downgraded the U.S.`s AAA credit rating for the first time, slamming the nation`s political process and criticizing lawmakers for failing to cut spending enough to reduce record budget deficits. S&P lowered the U.S. one level to AA+ while keeping the outlook at “negative” as it becomes less confident Congress will end Bush-era tax cuts or tackle entitlements. The rating may be cut to AA within two years if spending reductions are lower than agreed to, interest rates rise or “new fiscal pressures” result in higher general government debt, the New York-based firm said yesterday. Lawmakers agreed on Aug. 2 to raise the nation`s $14.3 trillion debt ceiling and put in place a plan to enforce $2.4 trillion in spending reductions over the next 10 years, less than the $4 trillion S&P had said it preferred. Even with the specter of a downgrade, demand for Treasuries surged as investors saw few alternatives amid concern global growth is slowing and Europe`s sovereign debt crisis is spreading. “The downgrade reflects our opinion that the fiscal consolidation plan that Congress and the Administration recently agreed to falls short of what, in our view, would be necessary to stabilize the government`s medium-term debt dynamics,” S&P said in a statement late yesterday after markets closed. S&P`s action may hurt the U.S. economy over time by increasing the cost of mortgages, auto loans and other types of lending tied to the interest rates paid on Treasuries. JPMorgan Chase & Co. estimated that a downgrade would raise the nation`s borrowing costs by $100 billion a year. The U.S. spent $414 billion on interest expense in fiscal 2010, or 2.7 percent of gross domestic product, according to Treasury Department data.
17.07.2011 13:55 Russian industrial production rose 5.3 percent in H1 2011 from a year earlier
Russia`s domestic economy is slowly coming to life, judging by the latest string of data from Russia`s statistical agency, Rosstat. Russian industrial production accelerated in June for the first time in five months as corporate investment rebounded. Output at factories, mines and utilities rose 5.7 percent from a year earlier, the most since February, after a 4.1 percent increase in May, the Federal Statistics Service in Moscow said. The median estimate of 14 economists in a Bloomberg survey was for an annual gain of 4.8 percent. In January-June Russian industrial production rose 5.3 percent from a year earlier. Barclays economist Vladimir Pantyushin writes from Moscow in a note to clients that the improvement has been entirely a product of manufacturing sectors — up 7.1% yoy versus 5.0% in May. Industrial manufacturing has been beating other manufacturing sectors over the last two years thanks to consumer demand. Export driven manufacturing sectors, as well as utilities, have decelerated to 1.6% and 1.5% yoy, respectively.
13.07.2011 21:17 China`s GDP growth rate slowed to 9.5 per cent in the second quarter of the year
China`s economy slowed down amid inflation concerns as its GDP growth rate slid to 9.5 per cent in the second quarter from 9.7 per cent in the first, while the economy in general expanded by 9.6 per cent in the first half of this year. China`s GDP growth rate slowed to 9.5 per cent in the second quarter of the year from 9.7 per cent in the first quarter, the National Bureau of Statistics said. The gross domestic product rose by 9.5 per cent in the second quarter, tapering off slightly from the 9.7 per cent growth rate posted in the first quarter, NBS spokesman Sheng Laiyun told a press conference. According to preliminary statistics, the country`s GDP reached 20.446 trillion yuan ($3.146 trillion) in the first six months, Sheng said. China`s economic performance was `generally good` and developed according to macro-economic regulation in the first half, he said. China`s consumer price index, the main gauge of inflation, rose 5.4 per cent year-on-year in the first half of this year, accelerating from 5 per cent in the first quarter of this year.
19.06.2011 13:55 The IMF expects global GDP to rise this year by 4.3%, down from its previous 4.4% estimate
The IMF cut its forecast for global economic growth, albeit slightly. The organization expects global GDP to rise this year by 4.3%, down from its previous 4.4% estimate. “The global economy, hit by slowdowns in Japan and the United States, is expected to reaccelerate in the second half of the year, but growth remains unbalanced and concerted policy action by major economies is needed to avoid lurking dangers,” the IMF advises. For the U.S., the new prediction calls for a 2.5% rise, down from a 2.8% forecast in April. That`s more or less what I`ve been expecting, which is to say growth of some degree. Not great, but enough to keep the macro demons at bay. Next week`s economic data updates may change my view, but as I`ve been discussing this week, the numbers for the U.S. still fall short of risking a new recession. The argument that`s it`s soft patch still look more compelling, if only moderately. Apparently the IMF agrees.
30.05.2011 23:05 Russia`s gross domestic product has grown 0.1 percent in April compared to March
Russia`s gross domestic product (GDP) has grown 0.1 percent in April compared to March. In the first quarter of 2011 Russia`s GDP has grown 4.1 percent year-on-year , the Federal Statistics Service (Rosstat) said. "In the first quarter of 2011, the physical volume of gross domestic product compared to the same period of 2010 amounted to 104.1 percent to preliminary estimates," the service said in a statement, adding that it will give more details about Russia`s Q1 GDP growth in the middle of June. However, the growth was slower than a previous forecast of 4.5 percent from the Economy Ministry. In April, Russian Prime Minister Vladimir said Russia`s GDP was projected to grow at 4.2 percent this year, adding that the forecast meant that by early 2012 "the Russian economy will fully recover losses caused by the crisis." In 2010, Russia recorded a 4-percent GDP growth after the worst recession in decades with its economy shrinking 7.9 percent in 2009.
15.05.2011 15:24 Eurozone GDP rose 0.8% in the first quarter of 2011 compared with the previous quarter
Eurozone GDP rose 0.8% in the first quarter of 2011 compared with the previous quarter, according to flash estimates published by Eurostat, the statistics office of the European Union. In the fourth quarter of 2010, growth rates were +0.3% in the Eurozone and +0.2% in the EU27. In Q1 2011, EU27 growth was also 0.8%. It was reported at the end of last month that US GDP in the quarter rose by 0.4%. Compared with the same quarter of the previous year, seasonally adjusted GDP increased by 2.5% in both the Eurozone and the EU27 in the first quarter of 2011, after +2.0% and +2.2% respectively in the previous quarter. During the first quarter of 2011, US GDP increased by 0.4% compared with the previous quarter (after +0.8% in the fourth quarter of 2010). Compared with the same quarter of the previous year, US GDP rose by 2.3% (after +2.8% in the previous quarter). American data is reported each quarter at an annualised rate. The German economy is regaining pace and the gross domestic product (GDP) rose 1.5% in the first quarter of 2011 on the previous quarter, as reported by Destatis, the German federal statistics office. The pre-crisis level of early 2008 has been exceeded. Meanwhile, France`s Institut national de la statistique et des études économiques (INSEE) reported that French GDP increased by 1.0% in volume terms after +0.3% in the previous quarter - - the steepest rise since 2006 Q2. There is no data for Ireland while Greece and Portugal had economic contractions at 4.8% and 0.7% respectively.
27.04.2011 14:04 Russian government approves of basic parameters of 2012-2014 economic forecast
The Russian government has approved of the basic parameters of the national social and economic development forecast for 2012-2014, Deputy Economic Development Minister Andrei Klepach told a news briefing on April 21th. He acknowledged that the considered options were below the potential the Russian economy might achieve. Klepach said that in 2012 GDP growth was expected at 3.5 percent, and "further on we may come close to 4.2-4.6 percent a year." Industrial production growth in 2012 should reach 8.8 percent, and in 2014, 9.6 percent. "Import will show outpacing growth," Klepach said. "This sort of economic growth suggests the real incomes of the population have been up by more than 4 percent over one year, which is slightly higher than the growth of the economy itself. In other words, the economy is becoming more socially oriented," he said. Klepach pointed to success in "significantly reducing the rate of growth in electricity prices." "But for the action taken, in 2011 it would almost touch 20 percent, while for the time being it is expected at 13-15 percent for end consumers," Klepach said. He added that "one of the options being considered would peg the prices of electricity, gas and rail transport to inflation." However, Klepach remarked that "this option has not been studied yet and research into it will take four to six weeks."
02.04.2011 11:27 The World bank lowered its forecast of Russia`s economic growth rates in 2011 to 4.4 percent
The government`s social spending measures appeared to bear fruit last year, resulting in declining poverty rates, although Russians are likely to face additional inflationary pressure ahead of the 2012 presidential elections, the World Bank said. The government should focus on controlling inflation in the short term, as the growth of budget expenditures is possible due to upcoming elections and preparations for the Sochi Olympics in 2014, the bank warned in a report.
According to the report, the government`s economic policy should be aimed at "a more ambitious fiscal adjustment and a long-term non-oil fiscal deficit of about 4.3 percent of gross domestic product," as the budget remains vulnerable to a sudden decline in oil prices.
Zeljko Bogetic, the World Bank`s leading economist for Russia, said efficient budget policy was crucial, since the Russian economy largely depended on oil prices. The country is facing a risk of returning to "the oil curse" with high oil prices resulting in "unjustified government expenditures, especially in the pre-election time," he told reporters at the bank`s Moscow office. The government should reduce the budget`s vulnerability to new spending by cutting the non-oil fiscal deficit, which currently stands at a very high level of 12.7 percent of GDP, Bogetic said, adding that the government`s current plan to reduce the budget deficit was "reasonable."
The World Bank supports the Finance Ministry`s recent initiative to put additional revenues coming from the oil and gas sector in reserve as a measure to lower inflation rates, said World Bank economist Sergei Ulatov. "We support this decision because it`s aimed to fulfill two tasks — first to lower inflation rates and second not to cause additional expenditures," Ulatov said.
Inflation stood at 8.8 percent in 2010, while the Central Bank expects that it will drop to 6 percent to 7 percent this year. "Inflation is Russia`s main problem in the short term," Bogetic said. He said inflation was not only a macroeconomic problem but a social one as well, because it resulted in serious pressure on real incomes for the middle and lower class. Low-income households were most affected by the surge in food prices, which caused a 5 percent drop in consumption, the report said.
However, the government`s social support measures, which included increasing pensions and wages in the public sector as well as unemployment benefits, resulted in the percentage of the population living below the poverty line falling from 13.2 in 2009 to 12.7 last year, it said. An impoverished person, according to the government figure, is anyone earning less than 5,902 rubles ($208) per month.
The World Bank expects a further decline of the poverty rate, which is likely to reach 11.2 percent this year and 10 percent in 2012 due to the positive economic growth rates and falling unemployment.
The bank lowered its forecast of economic growth rates in 2011 to 4.4 percent, compared with last year`s prediction of 4.5 percent. Bogetic said cutting inefficient expenditures was one possible way to reduce budget spending and prevent inflation growth. Additional funds, which will appear as a result of the move, could be used to finance "priority infrastructure projects," he said.
Upgrading transport and road infrastructure will require significant budget spending, while the funds currently appropriated for these purposes are not sufficient, the World Bank said. The government plans to spend a total of 644 billion rubles on upgrading transportation infrastructure this year, with 453 billion rubles being spent on road maintenance.
20.03.2011 15:12 The cost of the Japanese earthquake and tsunami to the country`s economy will be 2% of the country`s GDP
The Secretary General of the Organisation for Economic Co-operation and Development, Angel Gurria, says he believes the cost of the Japanese earthquake and tsunami to the country`s economy will be 2% of the country`s GDP. But he said he believed reconstruction could provide a boost to the economy and that it would be funded by the Japanese people. The head of the OECD said he was concerned that the nuclear crisis in Japan after last week`s earthquake could lead to an unmerited global backlash against nuclear power. China has suspended approvals for planned nuclear power plants while Germany has shut down its nuclear plants that began operating before 1980 in response to the emergency in Japan after last week`s quake and tsunami. "I`m worried there could be a backlash against the alternative of nuclear power and that it might be stopped or perceived to be wrong, without taking into account the exceptional circumstances," OECD head Angel Gurria told BBC radio. "We continue to believe that nuclear is part of the solution, not all of the solution, to fight climate change, but also to make sure we have enough electricity for the economy to work. "We should not allow this accident to deviate us from this conviction." Gurria, who has been visiting London to present a report on the British economy, said that the cost of rebuilding Japan would push up debt levels but that people were the priority. "I don`t think that when have we situations like this you should discuss too much the debt to GDP ratio, you just do what you have to do," he said. "The priority is to have people safe, provide them with what they need, then deal with the nuclear plant. In this case, it`s whatever it takes, people first. It means deficits may increase and it means it may take longer for the expected consolidation." Gurria said that Japan would absorb most of the cost thanks to its high domestic savings. "The insurance and reinsurance costs will be important, but most of the costs will stay in Japan itself," he said. "Nobody will lend Japan yen except the Japanese people.
07.03.2011 15:50 Brazil recorded a 7.5-per cent annual GDP growth in 2010 over the previous year
Brazil, Latin America`s largest and the world`s fifth-largest nation recorded a 7.5-per cent annual GDP growth in 2010 over the previous year, becoming the world`s seventh-largest economy surpassing Italy. According to latest data released by the Brazilian Institute of Geography and Statistics (IBGE), Brazil`s economy grew to 3.67 trillion Brazilian reals ($2.1 trillion) in 2010. Commenting on the strongest growth in 24 years, Brazilian president Dilma Rousseff said, "It`s a very reasonable number which shows Brazil has the capacity to grow." "The 2010 growth rates demonstrate that the Brazilian economy is growing at a significant and sustainable pace, which supports the country`s plans for long-term investment projects," the nation`s finance minister Guido Mantega said. "We expect GDP to grow around 4.5 to 5.0 per cent in 2011, a rate that would be sustainable and generate no inflationary pressures," Mantega further stated. The growth was led by the industry sector, which expanded 10.1 per cent, followed by the agriculture sector recording 6.5 per cent growth and services sector 5.4 per cent.