The Lastest Macroeconomic News

31.03.2016 13:07 Russian Economic Crisis Risks Stagnation, Degradation

The Russian economy is locked in an especially bad crisis. It differs significantly from the crises of 1998 and 2008-2009, when rapid downturns were followed by equally rapid recoveries. If anything, the current crisis more closely resembles that of the early 1990s, when Russia was transitioning from a planned to a market economy. Although salaries fell further then - by more than 50 percent - the same institutional problems caused both crises. The norms and rules now in place in the Russian economy are blocking its further development, just as they did back then. Budgets are in the worst condition. The federal budget deficit for 2015 totaled 2 trillion rubles ($32.8 billion) or 2.5 percent of gross domestic product. The combined deficit for all regional and municipal budgets totaled 2.7 trillion rubles ($44.3 billion), or 3.5 percent of GDP - 11 percent more than in 2014. Industrial output fell by 5 percent by May 2015. Household personal incomes dropped last year by 4.7 percent (and by 6.9 percent this February when compared to February 2015). Consumption slumped sharply, causing a 10 percent decline in retail sales. Construction was down by 13 percent in September 2015, and by 7 percent for the year overall. Investment continues to fall for the third consecutive year, and each year the rate of decline increases. Last year alone investment dropped by 8.4 percent. That means the crisis is continuing, and even if this or that sector has already "hit bottom," there is no guarantee that investment will not fall even further - because there are no drivers of growth in the Russian economy.

29.03.2016 13:16 U.S. consumer spending, trade data signal sluggish growth

U.S. consumer spending barely rose in February and inflation retreated, suggesting the Federal Reserve could remain cautious about raising interest rates this year even as the labor market rapidly tightens. Monday`s report from the Commerce Department also showed consumer spending in January was not as strong as previously reported. That, together with other data showing a widening in the goods trade deficit in February, indicated economic growth remained sluggish in the first quarter. "It speaks to the weakening in domestic economic momentum at the start of this year, further reinforcing the Fed`s cautious monetary policy bias," said Millan Mulraine, deputy chief economist at TD Securities in New York. Consumer spending edged up 0.1 percent as households cut back on goods purchases after a downwardly revised 0.1 percent gain in January. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, was previously reported to have increased 0.5 percent in January.

27.03.2016 13:45 Russia`s Economic Depression Continues; Market Info Becoming Harder To Obtain

Russia`s second year in negative growth territory will continue this year, but the good news is that it won`t be as bad as 2015. Back-to-back years of recessionary economics in the Russian economy are the equivalent of an economic depression, with 2017 now dependent on an oil and sanctions lift. Sberbank CIB, one of Russia`s biggest investment banks, said the economy will slip by as much as 1.5% this year. Finding out exactly what is going on is becoming harder given changes to government economic data releases. Russia isn`t in a hurry to tell the market how lousy things still are there. Small and regional banks in Russia continue to shut down. In September, Admiralteisky Bank had its licensed stripped by the Central Bank because it did not have enough reserves, among other issues. At least 100 banks have closed over the last two years ending 2015. The Russian Central Bank has spent billions of dollars on bailouts. Some bank owners have faced charges in court, while others have fled to the U.K. or Cypress. Retail sales and construction declined again in January, by 7.3% and 4.2%, respectively. Both also declined on a monthly basis, Sberbank said in an economic research note on Monday. Industrial output fell 2.2% yearly, but rose 0.4% from December. Agricultural output climbed 2.5% year over year in January as Russian farmers try to make up for import restrictions for European and Turkish fruits and vegetables.

25.03.2016 12:19 The Bank of Finland Thinks Russia`s Economy Isn`t Going To Improve In 2016

Back in the beginning of 2015, most professional macroeconomic forecasters predicted that Russia`s economic contraction would be relatively short and swift. No, there wasn`t universal agreement on the matter, but, based on futures prices, very few market participants thought that the rout in oil prices would be as sharp or sustained as has actually been the case. Because Russia`s economic health is so heavily influenced by the price of oil, the general expectation that energy prices would stabilize lead to a corresponding belief that the damage to the Russian economy would be relatively limited in scope. Things change, though, and as the scale of the collapse in energy prices has become steadily more evident, the expectations for the short-term performance of Russia`s economy have grown steadily more dire. The latest nasty prediction comes courtesy of the Bank of Finland`s Institute for Economies in Transition, which regularly publishes forecasts for the Russian economy. Previously, the Bank of Finland had forecast 2016 GDP growth on the assumption of $54 a barrel oil, a level about 45% below the average price for 2014. That would lead, according to their model, to a GDP loss of about 2%. Now, however, the bank has significantly reduced its expectations for future oil prices: they now project that price will not average $50 a barrel again until the end of 2018. This would mean that Russia`s economy would shrink by a little over 3% in 2016 and that economic growth would not return until 2018.

23.03.2016 12:02 Growth in Tourism Jobs Set to Boost World Economy

The tourism industry is fueling a global economic boost thanks to the addition of 7.2 million jobs worldwide last year. According to the annual economic impact report from the World Travel & Tourism Council (WTTC) released on Monday travel and tourism supported 284 million jobs, that`s one in every 11 jobs internationally. Despite uncertainty in the global economy and specific challenges to travel and tourism last year, the sector grew by 3.1%, contributing a total of 9.8% to the global GDP, David Scowsill, president and CEO of the World Travel & Tourism Council said. He added, Terror attacks, disease outbreaks, currency fluctuations and geopolitical challenges have impacted the sector at a country or regional level, but travel and tourism at the global level continues to produce another robust performance.

21.03.2016 12:03 Russian central bank holds rates, says tight policy to continue

The Russian central bank left its main lending rate at 11 percent on Friday as expected, but its rhetoric about the need to maintain tight monetary policy was more hawkish than many analysts had expected. Its cautious position underscores the continuing risks facing an economy battered by the precipitous decline in oil prices, although matters appear less bleak than they did at the time of the previous rates meeting in January, when the bank had warned it might need to raise rates to battle inflation. Commenting on the latest rates decision, the bank`s governor Elvira Nabiullina said it was too soon to call the all-clear. "The situation in the Russian economy has improved: inflation has fallen, the economic decline has slowed down, the rouble has strengthened," she said. "However, as before there is high uncertainty about the future dynamics of oil prices and other external conditions. In this situation it would be most correct not to make abrupt moves." Analysts had predicted no change in rates given the bank`s tough anti-inflation rhetoric. But most had also expected the bank to soften its rhetoric by floating the possibility of rate cuts in the near future. That rhetoric remained relatively tough however, giving few grounds to expect imminent rate cuts. "To enable the accomplishment of inflation targets, the Bank of Russia may conduct its moderately tight monetary policy for a more prolonged time than previously planned," it said in a statement.

18.03.2016 10:47 Brazilian GDP contracted 3.8% in 2015, the worst among major economies

Brazil`s GDP fared worse than almost any other major economy in 2015, contracting by 3.8%, according to the national statistics agency IBGE. Economic growth in the world`s seventh-largest economy has fallen sharply in recent months, which was due partly to low commodity prices and sluggish global growth. But political paralysis has hampered Brazil`s efforts to tackle its economic problems, including a budget deficit that has reached 10.8% of GDP. President Dilma Rousseff is trying to head off the opposition`s efforts to impeach her over alleged accounting irregularities, which means she cannot afford to alienate supporters in her Workers` Party by cutting spending or raising taxes. Investigations are also continuing into a high-level bribery and corruption scandal involving major construction projects. Ms Rousseff`s predecessor as president, fellow Workers` Party politician Lula da Silva, is one of the people under investigation. Brazil`s economic performance last year vies with that of Russia as the worst in a major economy for 2015. Official figures for Russia`s GDP last year have not yet been released. For Brazil it was the worst set of figures since 1990.

16.03.2016 11:50 Despite Declining Economy, Russia Shows No Signs of Slowing Military Spending

A stumbling Russian economy does not signal any shift in Kremlin spending less on its military and internal security forces, or the beginning of widespread political upheaval, a leading Moscow economist said. Russia`s economy has been in a downward spiral for yearsnot just because of falling oil prices and Western sanctions, but because the government itself is increasingly bloated, spending more and more on weaponry rather than stimulating the country`s business sector, Vladislav Inozemtsev, of Moscow`s Higher School of Economics, told a Washington, D.C. think-tank. Speaking at the Center for Strategic and International Studies (CSIS), he said, The biggest problem for Russia is its own government. He and other economic forecasters predict that its economy will remain in a prolonged slowdown and shrink by at least 2 to 3 percent per year over the next several years.

14.03.2016 13:07 Inflation in Russia Increases

Inflation in Russia showed a return to the increase in the first week of March, accumulating 0.2 percent of increase of the prices. Between March 1st and 9 the indicator rose 0.2 percentage points, up from 0.1 percent recorded from February 21 to 29, outlined a recent report of the National Committee of Statistics (Rosstat). For six consecutive weeks, until February 21, indicator stood at 0.2 percent of price growth and only between January 1 to 11 - the festive holiday of winter - soared to 0.3 percentage points. Thus, inflation accumulated growth since the beginning of the year to March 9, a 1.8 percent (only 1.6 in December 2015) and eight percentage points in annual terms. According to Rosstat, the algorithm is comparatively lower annual index accumulated in February of a 8.1 percent, up from 16.7 percent registered during the same period from 2015. It also stressed the statistical agency the fact that inflation will be located three points below the basic interest rate of the Banco Central of Russia, equal to 11 percent.

11.03.2016 12:42 Has The Russian Economy Already Passed The Bottom?

At the end of 2015, many high-ranking officials of the Russian government assured us that the country`s economy had already passed the bottom of the economic recession. In order to confirm this, they tend to refer to the positive dynamics of the monthly change in GDP, the rate of employment and corporate earnings growth. However, the analysis of the latest key macroeconomic data do not fundamentally support, strictly speaking, such optimistic projections. Talking about the Russian economy, it is crucial to address the oil issue. I assume that all the latest negotiations on the matter of freezing the level of oil production between Russia and OPEC will be crowned with success. Iran will probably receive preferential treatment within the framework of this agreement and will be able to increase production in certain limits. However, given the record levels of commercial oil stocks in the United States, and the U.S. shale oil producers` statements of readiness to restart active oil production when the price is above $40 a barrel, it is possible to predict that during 2016, the average Brent oil price should not exceed the level of $40. This price level implies a lower export tax burden on the Russian oil sector but inevitably leads to reduction in the revenue part of the budget in 2016.

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