World Economy Review

The economic reports, which were published in March 2007, showed the World economy grew moderately in the fourth quarter of 2006.
So, the US economy grew at an annual rate of 2.5 percent in the fourth quarter, according to the "final" estimates released by the Bureau of Economic Analysis. The growth rate was 0.3 percentage point more than in the "preliminary" estimates released in February. In the third quarter, real gross domestic product grew 2.0 percent. For 2006, the annual growth rate was 3.3 percent, compared with 3.2 percent in 2005.
Euro area (EA12) and EU25 GDP both grew by 0.9% in the fourth quarter of 2006, compared to the previous quarter, according to first estimates released by Eurostat, the Statistical Office of the European Communities. In the third quarter of 2006, growth rates were 0.6 percent in both the euro area and the EU25. Compared to the fourth quarter of 2005, seasonally adjusted GDP rose by 3.3 percent in the euro area and by 3.4 percent in the EU25, after 2.7 percent and 3.0 percent respectively for the previous quarter.
The Japan`s economy grew 1.2 percent in real terms in the October-December period, an annualized rate of 4.8 percent, according to a preliminary government report. The quarterly rise marks the eighth straight quarterly increase since the January-March period in 2005, the Cabinet Office report showed.
The Russia`s economy grew 7.7 percent in real terms in the October-December period, according to a preliminary report of The Economy Ministry. In 2006, Russia`s GDP grew 6.8 percent.
Also, The Russian Economy Ministry has hiked the GDP forecast for 2007 by 0.1 percentage points from 6.1 percent to 6.2 percent. The inflation forecast for 2009 and 2010 was lowered from 5.5-6.8 percent to 5.5-6.5 percent and from 5.0-6.5 percent to 5-6 percent, respectively.

United States Economy

The US economy grew at an annual rate of 2.5 percent in the fourth quarter, according to the "final" estimates released by the Bureau of Economic Analysis. The growth rate was 0.3 percentage point more than in the "preliminary" estimates released in February. In the third quarter, real gross domestic product grew 2.0 percent. For 2006, the annual growth rate was 3.3 percent, compared with 3.2 percent in 2005.
The step up in fourth quarter GDP growth primarily reflected accelerations in consumer spending, exports, and Federal government spending and a downturn in imports-moderated by downturns in investment in inventories and in equipment and software. The higher GDP growth rate, in comparison to the preliminary estimate, reflected upward revisions to inventory investment and consumer spending. In contrast, investment in equipment and software was revised down.
U.S. workers were less productive last quarter than initially estimated and labor costs jumped, making it harder for the Federal Reserve to reduce interest rates even as manufacturing and housing continue to slump. Productivity, a measure of how much an employee produces for each hour of work, rose at an annual rate of 1.6 percent, down from the 3 percent pace reported last month, the Labor Department said in Washington. Labor costs climbed 6.6 percent, reflecting a one-time increase in bonuses.
Industrial production in the U.S. rose last month by the most since November 2005, as manufacturing rebounded and the return of cold weather prompted a surge in utility use. The 1 percent increase in production at factories, mines and utilities was more than forecast and followed a 0.3 percent January decline, the Federal Reserve`s figures showed today.
Capacity utilization, which measures the proportion of plants in use, rose to a five-month high of 82 percent from 81.4 percent. The report suggests factories are making headway in their efforts to reduce inventories, pointing to a rebound in manufacturing that`s been a source of weakness for the economy. Improved factory demand backs the Federal Reserve`s forecast that growth will strengthen in the second half of the year.
As widely expected by the markets, the Federal Open Market Committee FOMC has left its overnight target rate fixed at 5.25%, pointing the risk of inflationary pressures as their main worry. The Fed acknowledges recent data showing both higher inflation and a weaker economy.
According to the FOMC statement, "the Committee`s predominant policy concern remains the risk that inflation will fail to moderate as expected. Future policy adjustments will depend on the evolution of the outlook for both inflation and economic growth, as implied by incoming information".
The Fed has held its key short-term rate at 5.25% since last June. Given the statement many economists continue to see the FOMC on hold for the most of 2007.

Economy of European Union

Euro area (EA12) and EU25 GDP both grew by 0.9% in the fourth quarter of 2006, compared to the previous quarter, according to first estimates released by Eurostat, the Statistical Office of the European Communities. In the third quarter of 2006, growth rates were +0.6% in both the euro area and the EU25. Compared to the fourth quarter of 2005, seasonally adjusted GDP rose by 3.3% in the euro area and by 3.4% in the EU25, after +2.7% and +3.0% respectively for the previous quarter. During the fourth quarter of 2006, household final consumption expenditure increased by 0.6% in both zones (after +0.7% in the euro area and +0.6% in the EU25 in the third quarter of 2006).
Investments grew by 1.2% in the euro area and by 1.5% in the EU25 (after +0.6% and +0.9%). Exports rose by 3.7% in the euro area and by 2.9% in the EU25 (after +1.8% and +0.3%). Imports increased by 1.9% in the euro area and by 1.7% in the EU25 (after +2.2% and +0.2%). Over the whole year 2006, GDP grew by 2.6% in the euro area and by 2.9% in the EU25, compared to +1.4% and +1.7% respectively for 2005.
Reflecting an improvement in Eurozone business conditions for the 20th consecutive month, the seasonally adjusted RBS/NTC Manufacturing PMI rose for the first time in four months in February, up slightly to 55.6 from the 11-month low of 55.5 in January, according to statistics released Thursday by the Royal Bank of Scotland (RBS). This improved performance indicated by the PMI is a result of stronger growth in new orders for February, which increased for the first time in four months,if only moderately.
The UK manufacturing sector PMI rose more than expected in February. The latest survey by the Chartered Institute of Purchasing and Supply (CIPS) and the Royal Bank of Scotland showed its index of manufacturing activity at 55.4 in February. The 19th successive month of expansion was stronger than the 53.2 in January. The JPMorgan Global Manufacturing Purchasing Managers’ Index rose from January`s 1.5-year low of 52.4 to record a four-month peak of 53.7. The PMI was led higher by stronger trends in production, new orders and employment. Improved growth of international trade volumes also contributed to the latest expansion.
A report issued by the British Office for National Statistics showed that the U.K. economic growth in the fourth quarter has unexpectedly gone down as services expanded less than previously estimated. According to the report, Britain`s gross domestic product (GDP) rose 0.7 percent in the fourth quarter, the same pace as the previous quarter, while overall investment growth in the quarter was 2.6 percent from the previous three months.
The Bank of England Governor said that the U.K. economy showed no obvious signs of concern after steady expansion in the past five quarters. He added that the new report could allow policy makers to issue three rate increases beginning with August to slow the economy down. The report also showed that in 2006 as a whole, the U.K. economy has expanded 2.8 percent, as the workforce reached a record 32 million jobs in December and house prices gained 10 percent.

Economy of Japan

The Japan`s economy grew 1.2 percent in real terms in the October-December period, an annualized rate of 4.8 percent, according to a preliminary government report. The quarterly rise marks the eighth straight quarterly increase since the January-March period in 2005, the Cabinet Office report showed.
Japan`s machinery orders rose the most in five months in January, signaling that capital spending will keep fueling growth in the world`s second-largest economy. Non-government machinery orders, excluding shipping and utilities, rose a seasonally adjusted 3.9 percent to 1.09 trillion yen ($9.4 billion) from December, when they fell 0.7 percent, according to a Cabinet Office report released in Tokyo today. The median estimate of 40 economists surveyed by Bloomberg News was for a 1.4 percent gain.
The machinery report indicates spending plans within six months and may offset concern growth will slow after industrial output fell in January. Tokyo Electron Ltd. said yesterday it would build its first factory in a decade, joining companies upgrading machinery as the economy emerges from a decade of post 1980s asset-bubble stagnation.

Economy of Russia

The Russia`s economy grew 7.7 percent in real terms in the October-December period, according to a preliminary report of The Economy Ministry. In 2006, Russia`s GDP grew 6.8 percent.
The Russian Economy Ministry has hiked the GDP forecast for 2007 by 0.1 percentage points from 6.1 percent to 6.2 percent, Gennady Kuranov, deputy head of the ministry`s macroeconomic forecasting department, told journalists. According to him, this forecast was included in Russia`s social and economic development program for 2008-2010.
Kuranov pointed out that the secondary adjustment in the program had been made due to the lower inflation forecast for 2009-2010. Thus, inflation forecast for 2009 and 2010 was lowered from 5.5-6.8 percent to 5.5-6.5 percent and from 5.0-6.5 percent to 5-6 percent, respectively.