World Economy Review

The International Monetary Fund raised its forecast for global growth this year led by China and cautioned that a failure of nations to contain soaring public debt might have “severe” consequences for the world economy.
The IMF said the global economy will expand 4.2 percent in 2010, the fastest pace since 2007, compared with a January forecast of 3.9 percent. Emerging nations including China and India are leading the world out of its worst recession since World War II, with Europe and Japan trailing the U.S. among advanced economies, the fund said in its World Economic Outlook.
After governments spent trillions of dollars to revive growth, the IMF said the challenge facing policy makers gathering in Washington this week is debt near postwar records. The richest nations face growing pressure from investors to draft plans to reduce budget deficits, while emerging economies try to fuel domestic demand and avoid asset bubbles amid a surge of foreign investment.
“The global recovery has evolved better than expected, but in many economies the strength of the rebound has been moderate given the severity of the recession,” the IMF said. “Activity remains dependent on highly accommodative macroeconomic policies and is subject to downside risks, as fiscal fragilities have come to the fore.”
Finance ministers from the Group of Seven industrial nations meet later today in the U.S. capital. Tomorrow, finance ministers and central bankers from the Group of 20 developed and emerging economies meet to debate how and when to remove fiscal and monetary stimulus as the global expansion strengthens.
This year, advanced economies including the U.S., Germany and Japan will grow 2.3 percent, more than the 2.1 percent forecast in January, with unemployment forecast to stay close to 9 percent through 2011. The expansion in advanced nations will reach 2.4 percent next year, the fund said.
Emerging and developing economies including Brazil and Russia will grow 6.3 percent this year, a 0.3 percentage point increase from the previous forecast. Next year they will expand 6.5 percent, the fund said. “Economies that are off to a strong start are likely to remain in the lead, as growth in others is held back by lasting damages to financial sectors and household balance sheets,” the IMF said.
U.S. GDP will expand 3.1 percent this year before slowing to 2.6 percent in 2011, the IMF said. In January the fund expected growth of 2.7 percent for 2010 in the world`s largest economy. The euro area is likely to expand 1 percent this year, unchanged from the January projection, and 1.5 percent in 2011, according to the report. The IMF forecast U.K. growth of 1.3 percent this year and 2.5 percent in 2011.
The outlook for Japan`s economy this year was raised to a 1.9 percent expansion, up from 1.7 percent predicted four months ago. The Canadian economy was forecast to increase 3.1 percent this year, from a 2.6 percent growth outlook in January, the IMF said.
China`s growth is forecast to accelerate to 10 percent this year, unchanged from the January projection, after 8.7 percent growth last year. India`s economy will expand by 8.8 percent in 2010, 1.1 points higher than the IMF`s forecast in January.

Economy of the United States

Real gross domestic product (GDP) in the U.S. for first quarter of 2010, measuring the output of goods and services, rose 3.2 percent from the fourth quarter of 2009. As a comparison, one year ago first quarter GDP dropped 6.4 percent. The Bureau of Economic Analysis, which is part of the U.S. Department of Commerce, emphasized that the first-quarter figure was an advance estimate based upon source data that are incomplete and subject to further revisions.
Current-dollar GDP -- the market value of U.S. output of goods and services -- increased 4.1 percent, or by $147.6 billion, in the first quarter to $14.6 trillion. In the fourth quarter, the increase was 6.1 percent.
Real personal consumption expenditures increased 3.6 percent in the first quarter, compared with an increase of 1.6 percent in the fourth quarter. Durable goods increased 11.3 percent, whereas in fourth quarter the figure was flat. Nondurable goods increased 3.9 percent, compared with an increase of 4 percent. Services increased 2.4 percent, compared with an increase of 1 percent. The price index for gross domestic purchases, which measures prices paid by U.S. residents, increased 1.7 percent in the first quarter, compared with an increase of 2 percent in the fourth.
Real exports of goods and services increased 5.8 percent in the first quarter, compared with an increase of 22.8 percent in the fourth. Real imports of goods and services increased 8.9 percent, compared with an increase of 15.8 percent. The change in real private inventories added 1.57 percentage points to the first-quarter change in real GDP after adding 3.79 percentage points to the fourth-quarter change. Private businesses increased inventories $31.1 billion in the first quarter, following decreases of $19.7 billion in the fourth quarter.
Real final sales of domestic product -- GDP less change in private inventories -- increased 1.6 percent in the first quarter, compared with an increase of 1.7 percent in the fourth. Real gross domestic purchases -- purchases by U.S. residents of goods and services wherever produced -- increased 3.8 percent in the first quarter, compared with an increase of 5.2 percent in the fourth.
Current-dollar personal income increased 3.9 percent, disposable personal income increased 1.5 percent and real disposable personal income was unchanged. Personal outlays increased 5 percent by $130.4 billion. Personal saving -- disposable personal income less personal outlays -- was $340.8 billion in the first quarter, compared with $429.3 billion in the fourth. The personal saving rate -- saving as a percentage of disposable personal income -- was 3.1 percent in the first quarter, compared with 3.9 percent in the fourth.
U.S. industrial production inched higher last month as a cutback in utility use after an exceptionally cold February had the effect of dampening expansion, the Federal Reserve reported. Industrial output, measuring overall production at the nation`s factories, mines and utilities, rose 0.1% in March and extended the monthly string of increases to nine, but the increase wasn`t nearly as strong as expected. Economists surveyed by MarketWatch had forecast a 0.8% increase in industrial production. See MarketWatch calendar of major indicators.
Production in February was revised higher by the Fed to an increase of 0.3%, up from the initial estimate of a 0.1% gain. Factory activity alone rebounded in March, recovering after having been held in check by snowstorms in the prior month. Factory production rose 0.9% in March, stepping up from a 0.2% gain in the prior month.
The nation`s industrial sector has been enjoying a rapid recovery: Industrial production increased at a 7.8% annual rate in the first quarter, with the factory sector alone rising at a 6.6% rate. "Manufacturing is doing better than rest of the economy," wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics. Utilities output dropped 6.4% in March as heating demand declined after February`s cold. Capacity utilization for total industry increased 0.2 of a percentage point to stand at 73.2% in March, the Fed`s data showed. This is the highest level since November 2008. In addition, capacity utilization is now 3.7 percentage points above the rate seen a year ago. Production of high-technology goods continued to expand at a solid pace, rising 1.9% in March after a 3.0% gain in the prior month. And motor-vehicle and auto-part production increased 2.2% last month, a reversal after having fallen 3.0% in February.
The U.S. trade deficit widened 7.4% to $39.7 billion in February, the Commerce Department said, as rising imports outpaced rising exports. Economists surveyed by Bloomberg News had expected the trade deficit to edge slightly higher to $39.0 billion in February from a revised $37.0 billion in January. The trade deficit total $39.9 billion deficit in December. In February, exports rose $300 million or by 0.2% to $143.2 billion, while imports rose $3.0 billion or by 1.7% to $182.9 billion.
Inflation was subdued in March, as U.S. consumer prices rose 0.1% on a seasonally adjusted basis due mainly to increased costs for fresh fruits and vegetables, the Labor Department reported. The increase matched expectations of economists surveyed by MarketWatch. The government`s core consumer price index -- measuring the rate of retail-level inflation after excluding food and energy -- was unchanged in March, while analysts had expected a 0.1% increase. In the past year, the CPI has risen 2.3%. The core rate is up 1.1% over the same interval, the smallest gain since early 2004. The last time the year-over-year core increase was smaller was in January 1966, the government said.
The U.S. unemployment rate has increased to 9.9 percent despite reports of an increase of more than a quarter million jobs in April. The U.S. Department of Labor documented a higher percentage of unemployment, which it said likely stems from more Americans looking for work in the month of April. When the unemployed aren`t looking for employment, they aren`t counted in the official unemployment tally. While the unemployment rate rose, Americans also picked up 290,000 jobs, according to a survey of US employers. Many are touting the new jobs, roughly 100,000 more than expected, as good news for the American economy.

Economy of European Union

Euro area (EA16) GDP was stable and EU27 GDP increased by 0.1% during the fourth quarter of 2009, compared with the previous quarter, according to second estimates from Eurostat, the statistical office of the European Union. In the third quarter of 2009, growth rates were +0.4% in the euro area and +0.3% in the EU27. In comparison with the same quarter of the previous year, seasonally adjusted GDP declined in the fourth quarter of 2009 by 2.2% in the euro area and by 2.3% in the EU27, after -4.1% and -4.3% respectively in the previous quarter. In the fourth quarter of 2009, among Member States for which seasonally adjusted GDP data are available, Estonia (+2.5%) recorded the highest growth rate compared with the previous quarter, followed by Slovakia (+2.0%) and Poland (+1.2%).
In February 2010 compared with January 2010, seasonally adjusted industrial production grew by 0.9% in the euro area (EA16) and by 0.7% in the EU272. In January 20103 production increased by 1.6% and 1.7% respectively. In February 2010 compared with February 2009, industrial production increased by 4.1% in the euro area and by 3.5% in the EU27.
In February 2010 compared with January 2010, production of intermediate goods increased by 1.5% in the euro area and by 1.4% in the EU27. Capital goods rose by 0.9% and 0.6% respectively. Non-durable consumer goods fell by 0.2% in the euro area and by 0.6% in the EU27. Production of energy decreased by 0.4% and 1.6% respectively. Durable consumer goods dropped by 0.6% in the euro area and by 0.2% in the EU27.
Among the Member States for which data are available, industrial production rose in seven, fell in thirteen and remained stable in France and Italy. The highest increases were registered in Slovenia (+6.4%), Luxembourg (+3.6%) and Denmark (+1.8%), and the largest falls in Bulgaria (-5.7%), Latvia (-3.0%) and Greece (-2.9%).
In February 2010 compared with February 2009, production of intermediate goods grew by 7.2% in the euro area and by 6.5% in the EU27. Capital goods increased by 3.2% and 3.6% respectively. Production of energy rose by 2.6% in the euro area and by 0.2% in the EU27. Non-durable consumer goods gained 1.5% and 0.6% respectively. Durable consumer goods declined by 0.1% in the euro area, but increased by 3.1% in the EU27.
Among the Member States for which data are available, industrial production rose in fourteen and fell in eight. The highest increases were registered in Luxembourg (+15.9%), Ireland (+11.8%), Malta (+10.7%) and Poland (+10.1%), and the largest decreases in Greece (-10.4%), Bulgaria (-9.8%), Denmark (-6.1%) and Lithuania (-4.8%).
The first estimate for the euro area (EA16) trade balance with the rest of the world in February 2010 gave a 2.6 bn euro surplus, compared with -1.2 bn in February 2009. The January 20102 balance was -9.0 bn, compared with -12.0 bn in January 2009. In February 2010 compared with January 2010, seasonally adjusted exports rose by 2.7% and imports by 1.5%.
The first estimate for the February 2010 extra-EU27 trade balance was a 6.0 bn euro deficit, compared with -10.7 bn in February 2009. In January 20102 the balance was -22.3 bn, compared with -27.8 bn in January 2009. In February 2010 compared with January 2010, seasonally adjusted exports rose by 3.9% and imports by 2.0%.
Euro area annual inflation is expected to be 1.5% in April 2010 according to a flash estimate issued by Eurostat, the statistical office of the European Union. Euro area annual inflation was 1.4% in March 2010, up from 0.9% in February. A year earlier the rate was 0.6%. Monthly inflation was 0.9% in March 2010. EU annual inflation was 1.9% in March 2010, up from 1.5% in February. A year earlier the rate was 1.3%. Monthly inflation was 0.7% in March 2010. The euro area (EA16) seasonally-adjusted unemployment rate was 10.0% in March 2010, the same as in February. It was 9.1% in March 2009. The EU27 unemployment rate was 9.6% in March 2010, unchanged compared with February4. It was 8.5% in March 2009.
Eurostat estimates that 23.130 million men and women in the EU27, of whom 15.808 million were in the euro area, were unemployed in March 2010. Compared with February 2010, the number of persons unemployed increased by 123 000 in the EU27 and by 101 000 in the euro area. Compared with March 2009, unemployment went up by 2.546 million in the EU27 and by 1.389 million in the euro area.

Economy of Japan

Japanese industrial production rose 0.3% in March from the previous month after falling 0.6% in February, backed by demand for passenger cars and semiconductors, data from the Ministry of Economy, Trade and Industry released showed. In March the seasonally adjusted monthly rise came in slightly weaker than the consensus forecast for a 0.8% rise. Production has continued to improve from the sharp plunge seen from late 2008 through early 2009. It rose a record +4.6% m/m in May last year.
Compared with the year before level, production jumped 30.7% y/y in March, following a 31.3% rise in February, recovering from the record 38.6% drop in February 2009. The 6.4% rise in December 2009 was the first y/y gain in 15 months. The March month-on-month output increase was led by rises in electrical machinery, transport equipment as well as iron and steel.
Output is expected to show fluctuations in the coming two months. METI`s survey of firms` forecasts showed that production will continue rising by 3.7% in April -- a sharp upward revision from the 0.6% rise estimated in last month`s survey -- before falling by a modest 0.3% in May (first estimate).
Based on the latest data and the outlook for the next two months, the Ministry of Economy, Trade and Industry (METI) repeated its assessment adopted in June 2009 that: "Industrial Production continues to show an upward movement."
In January-March, industrial production was up 6.7% from the previous quarter, accelerating from the 5.9% rise in the final quarter of 2009 and the 5.3% gain in the third quarter of 2009. The production in the first quarter of 2010 jumped 27.2% from a year earlier, a reversal from the 4.3% drop in the fourth quarter of 2009 and the 19.4% fall in the third quarter of 2009. For the whole of fiscal 2009 that ended on March 31, output fell 9.0%, the second straight year-on-year drop, after falling 12.7% in fiscal 2008 and rising 2.7% in fiscal 2007.
Japan`s core consumer price index (CPI) fell 1.2 percent in March from a year earlier, marking the 13th straight month of decline, government statistics revealed. The core nationwide CPI stood at 99.5 against the base of 100 for 2005, the Ministry of Internal Affairs and Communications said in a preliminary report. The drop in core prices, which exclude volatile fresh food prices, matched market expectations. The core CPI for Tokyo`s 23 wards, which is seen as a leading indicator of prices across Japan, fell 1.9 percent in April from a year before, the ministry said.
Japan`s unemployment rate rose to 5.0% in March from 4.9% in February, as more people either lost their jobs or retired than in the previous month, data from the Ministry of Internal Affairs and Communications showed. The seasonally adjusted unemployment rate for March was higher than the consensus call for a stable 4.9% reading. The jobless rate was below the record high of 5.6% hit in July 2009, but was still higher than the 4.2% rate seen at the start of 2009. In fiscal 2009 that ended on March 31, the average unemployment rate rose to 5.2% from 4.2% in fiscal 2008, increasing to the second highest level on record, behind the 5.4% marked in fiscal 2002.

Economy of Russia

Russia`s economic development minister said Wednesday that the country`s economy grew 0.6 percent in the first quarter this year, extending the recovery to three consecutive quarters. Elvira Nabiullina also said Russia`s GDP went up by 4.9 percent in March year-on-year, but warned that the recovery is still fragile. "Signs of recovery are evident, but it is still too early to talk about stability yet," she said in comments carried by Russian news agencies. Consumer demand and investment flows remain volatile, she said. Russia started to recover from the downturn last year, but industrial production and other statistics have sent mixed signals on how soon it will emerge from the slump.
In his annual address to parliament, Prime Minister Vladimir Putin warned that although Russia has emerged from recession, "it doesn`t mean that the crisis is over." He called for prudent budget spending and pledged to cut the budget deficit in half by 2012. Russia`s GDP contracted by 7.9 percent last year in the sharpest decline in more than a decade as the country struggled under low energy prices and a flagging demand for its natural resources. Finance Ministry Alexei Kudrin said Tuesday that the government expects the GDP to rise by 4 percent compared to an earlier estimate of 3 percent. Many investment banks and financial institutions predict GDP growth as high as 5 percent.
The inflation rate dropped to the lowest level in 12 years in April, the State Statistics Service said Wednesday, as the ruble`s longest rally since 2006 kept a lid on prices and a weak economic recovery curbed consumer demand. The rate fell to an annual 6 percent last month, the slowest since July 1998, from 6.5 percent in March, the service said. The median estimate in a Bloomberg survey of 14 economists was for 6.2 percent. Prices advanced 0.3 percent on the month.
The Economic Development Ministry estimates that consumer-price growth may be between 6 percent and 7 percent in 2010 and 2011 and average 6.3 percent this year, the slowest since the Soviet Union collapsed in 1991. Price growth in March fell to 6.5 percent from 14 percent in the same month last year, the fifth biggest inflation-rate differential among 78 economies tracked by Bloomberg.