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World Economy Review - September 2010

The global economy will grow slightly more slowly than previously expected next year, the International Monetary Fund (IMF) has said. It predicted GDP would increase by 4.2% in 2011, down from an earlier forecast of 4.3%. And while economic recovery was likely to continue, it warned that risks were high. There are worries that as governments try to reduce their debt burdens and cut spending, growth may suffer.
The IMF also said that the global financial system remained the weak link in the economic recovery. It predicted a gradual improvement in the financial system, but added that there was a substantial risk of further problems.
The latest report, the IMF`s World Economic Outlook, highlighted the difference in growth expected in the advanced and emerging economies.
In advanced economies - including the US, the UK, Japan and key EU nations - it said that the financial sector was "still vulnerable to shocks", adding that "growth appears to be slowing" as government stimulus efforts began to be withdrawn. This would lead to growth of 2.8% in 2010 and 2.2% next year - from an earlier prediction of 2.4%.
However, economic growth in what it classes as emerging and developing economies - which include Brazil, Russia, India and China - will be 6.4% next year, it said, unchanged from earlier predictions. This year it is expecting growth of 7.1%, slightly better than previously stated.
The IMF forecast was prepared for the annual autumn meeting it holds with the World Bank. It said that while its prediction of 2.6% growth for the US in 2010 was historically weak in the aftermath of a recession, it was a vast improvement on the 2.6% decline in US economic activity in 2009.
And it said growth prospects were weaker in Europe - with the 16 nations in the Eurozone set to see their economies average 1.7% growth this year and 1.5% in 2011.
The report also suggested that there were more than 210 million people across the globe who are unemployed - an increase of more than 30 million since 2007.

Economy of The United States

The United States economy grew only slightly in the second quarter, the Department of Commerce said yesterday, confirming that the pace of the economic recovery had slowed. Gross domestic product rose at an annual rate of 1.7 per cent in the quarter, marking a sharp decline from the first quarter, when growth hit 3.7 per cent.
Still, the second-quarter performance was revised upward by 0.1 percentage point from the government`s earlier estimate, beating analysts` expectations that GDP would be unchanged. U.S. industrial production slowed a bit in August from July but expanded for the 14th straight month, the Federal Reserve reported. U.S. industrial production rose 0.2% in August, a slower pace than the downwardly revised 0.6% in July. Economists surveyed by MarketWatch had forecast a 0.1% increase in August industrial production. See MarketWatch calendar of indicators and forecasts.
Factory activity alone rose 0.2% in August after a 0.7% gain in the prior month. The step-down in activity in August reflected a fallback in auto production, the Fed said. Automobile output had jumped in July as General Motors kept open some plants that typically close for a summer holiday. Motor vehicle assemblies fell 7.9% in August after a 17.2% jump in July. Excluding autos, factory output increased 0.5% in August after a 0.2% rise in July. Utilities output dropped 1.5% in August.
Capacity utilization for total industry increased 0.1 percentage point to 74.7% in August. This is the highest level since September 2008. Capacity utilization is now 4.7 percentage points above its rate of a year ago.
Consumer inflation increased 0.3% for the second month in a row in August, according to a report released Friday, but a lack of core inflation kept alive worries about deflation. The consumer price index increased 0.3% in August, led by higher energy and shelter costs, the Labor Department said Friday. The increase matched expectations.
However, core prices -- which exclude volatile food and energy costs -- were flat, below the 0.1% gain expected by economists surveyed by MarketWatch. See calendar of major U.S. indicators with forecasts.
The core rate was held down by flat shelter costs, falling recreation prices and a 0.1% decline in apparel prices.
Energy prices increased 2.3% in August, marking the second straight month of 2%-plus gains. Food prices rose 0.2%, the largest gain since April.
The national unemployment rate remained at 9.6 percent in September, according to a report released this morning by the U.S. Bureau of Labor Statistics.
While private employers added jobs during the month, it was more than offset by 159,000 positions cut in government employment, for a net loss of 95,00 jobs. The number of people who were working part-time hours because full-time work was not available also rose by 612,000 to 9.5 million.
While the official unemployment rate remained steady, an alternative measure of the national workforce degraded further. The so-called "real unemployment rate" which measures unemployed people who are actively seeking work, those working part-time because a full-time job is unavailable and those people who have given up looking for work rose from 16.7 percent in August to 17.1 percent in September.

Economy of The European Union

Euro area (EA16) and EU27 GDP increased by 1.0% during the second quarter of 2010, compared with the previous quarter, according to second estimates from Eurostat, the statistical office of the European Union. In the first quarter of 2010, growth rates were +0.3% in the euro area and +0.4% in the EU27.
In comparison with the same quarter of the previous year, seasonally adjusted GDP increased in the second quarter of 2010 by 1.9% in the euro area and by 2.0% in the EU27, after +0.8% and +0.7% respectively in the previous quarter.
In the second quarter of 2010, Lithuania (+3.2%) recorded the highest growth rate compared with the previous quarter, followed by Germany (+2.2%), Estonia, Finland and Sweden (all +1.9%).
In July 2010 compared with June 2010, seasonally adjusted industrial production remained stable in both the euro area (EA16) and the EU272. In June3 production fell by 0.2% in the euro area, but rose by 0.1% in the EU27.
In July 2010 compared with July 2009, industrial production increased by 7.1% in the euro area and by 6.8% in the EU27.
The first estimate for the euro area (EA16) trade balance with the rest of the world in July 2010 gave a 6.7 bn euro surplus, compared with +11.9 bn in July 2009. The June 20102 balance was +2.2 bn, compared with +5.2 bn in June 2009. In July 2010 compared with June 2010, seasonally adjusted exports fell by 0.6% and imports by 1.5%.
The first estimate for the July 2010 extra-EU271 trade balance was a 5.7 bn euro deficit, compared with +0.5 bn in July 2009. In June 20102 the balance was -9.7 bn, compared with -4.1 bn in June 2009. In July 2010 compared with June 2010, seasonally adjusted exports rose by 0.3%, while imports fell by 1.1%.
The euro area (EA16) seasonally-adjusted unemployment rate was 10.1% in August 2010, unchanged compared with July. It was 9.7% in August 2009. The EU271 unemployment rate was 9.6% in August 2010, also unchanged compared with July4. It was 9.2% in August 2009. Eurostat estimates that 23.066 million men and women in the EU27, of whom 15.869 million were in the euro area, were unemployed in August 2010. Compared with July, the number of persons unemployed decreased by 68 000 in the EU27 and by 20 000 in the euro area. Compared with August 2009, unemployment rose by 0.894 million in the EU27 and by 0.569 million in the euro area.
Euro area annual inflation is expected to be 1.8% in September 2010 according to a flash estimate issued by Eurostat, the statistical office of the European Union. It was 1.6% in August.

Economy of Japan

Industrial production in Japan was down a seasonally adjusted 0.3 percent on month in August, the Ministry of Economy, Trade and Industry said, falling for the third consecutive month. The August reading was sharply lower than forecasts for a 1.1 percent gain following the 0.2 percent easing in July.
On an annual basis, industrial production added 15.4 percent - but that also was below expectations, which were for a 16.9 percent increase following the 14.2 percent gain in the previous month.
Industries that contributed to the decline include general machinery, iron and steel and other manufacturing. Commodities that contributed to the decline include reaction vessels, active matrix LCDs and large trucks.
The forecasts for industrial output suggest a 0.1 percent monthly decline in September and a 2.9 percent plunge in October.
Industries that contributed to the decrease in September include transport equipment and electronic parts and devices. Industries that mainly contributed to the decrease in October include transport equipment, information and communication electronics equipment and fabricated metals.
Shipments in August lost 0.5 percent on month, falling for the second consecutive month. They showed an increase of 16.2 percent on year. Industries that contributed to the decrease included transport equipment, general machinery and other manufacturing.
Inventories in August increased 0.7 percent on month, rising for the first time in two months. They showed an increase of 2.5 percent on year. Industries that contributed to the increase include electronic parts and devices, general machinery and information and communication electronics equipment.
The inventory ratio in August decreased 0.9 percent on month, falling for the first time in two months. It showed a decrease of 14.2 percent on year.
As a result of the data, the METI said that industrial output appears to be in a flattening trend, while the outlook is weakening.
Japan`s merchandise trade surplus narrowed to 103.2 billion yen during August, compared with the previous 589.7 billion yen, which revised to 802 billion yen, while the analyst`s expectations referred to 200 billion yen.
Japan`s adjusted merchandise trade balance released recorded 589.7 billion yen in August, narrower than the prior 610.4 billion yen revised to 594.8 billion yen, the balance was slightly higher than expectations for 522.1 billion yen.
Furthermore, Japan`s merchandise exports increased and annualized 15.8 during August, compared with the previous 23.5. As for imports the increased 17.9 in August from a year earlier, compared with the prior reading of 15.7, whereas the anticipations referred to 17.5. Japan`s consumer prices fell in August for the 18th consecutive month, government data showed, suggesting no end in sight for a deflationary trend that has been undermining the broader economy, and providing further impetus for the Bank of Japan to take additional monetary easing measures soon.
The country`s core consumer price index, which excludes volatile fresh food prices, fell 1.0% from the same month a year earlier, the Ministry of Internal Affairs and Communications said. The result was in line with the median forecast in a poll of private economists.
The latest data show that the pace of decline in the core CPI is easing up, with the figure having fallen 1.1% in July and 1.0% in June compared with a recent low of 1.5% in April. This suggests that a mild recovery in the economy is propping up domestic demand and preventing prices from falling further.
Separate data released by the government also showed that the jobless rate improved slightly to 5.1% in August from 5.2% a month earlier, and that overall household spending rose 1.7% on year in real terms during the same period.

Economy of Russia

Russia`s Prime Minister Vladimir Putin and the Economic Development Ministry predicted the country`s gross domestic product (GDP) in 2011 will amount from 4 to 4.4 percent, local media reported. Putin, speaking in International Investments Forum in Sochi, said that Russia`s inflation rate would be 7 percent this year. He reminded that in 2009, Russia`s GDP dropped by 7.9 percent, inflation reached 9 percent. Minister of Economic Development Elvira Nabiullina also forecast the annual GDP growth in 2010 by 4 percent.
Russia`s GDP rose by 3.7 percent for eight months of 2010 and by 2.4 percent in August, according to the minister. August was the first month since May when industrial output in Russia was above zero and reaches 0.1 percent, thus Nabiullina called August "a good month", admitting that in agricultural sector growth was negative by 9.6 percent.

www.ereport.ru - 09.10.2010 16:52:18