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World Economy Review - January 2011

The World Bank has again revised its 2010 growth estimate for the global GDP saying that it has expanded by 3.9 per cent in 2010, driven mainly by strong domestic demand in developing countries. The report contended that East Asia and Pacific region, with GDP growth estimated at 9.3 percent for 2010, led the global recovery. This was on the back of an estimated 10 per cent increase in Chinese GDP and a 35 per cent increase in its imports.
However, the bank in its Global Economic Prospects 2010, said the global growth is expected to be lower at 3.3 per cent in 2011, before picking up to 3.6 per cent in 2012. These predictions are based on easing of restructuring activities in developed countries. ``The world economy is entering into a new phase of recovery,`` Justin Yifu Lin, the World Bank`s chief economist and senior vice president of development economics, told reporters.
``On the upside, strong developing-country domestic demand growth is leading the world economy, yet persistent financial sector problems in some high-income countries are still a threat to growth and require urgent policy actions,`` said Lin.
The developed countries would be showing a recovery of 2.8 per cent in 2010 after a negative growth of 3.4 per cent in 2009. However, growth will be subdued at 2.4 per cent in 2011 with marginally higher growth of 2.7 per cent in 2012.
The Chinese GDP growth rate will slow to 8.7 percent this year from 10 percent in 2010, and a key challenge in 2011 will be to ensure that anti-inflationary measures do not "significantly" reduce growth, the World Bank said.
Amid credit-tightening measures to combat inflation and surging property prices, China`s growth is expected to ease to 8.4 percent in 2012, the bank said.
Despite the slowdown, China will spearhead Asia`s economic expansion. According to the bank`s forecast, the overall growth rate for developing Asian economies will ease to 8 percent from last year`s 9.3 percent as governments rein in credit to cool inflationary pressures.
The economic recovery in developing Europe and Central Asian countries will slow this year, weighed down by high unemployment and flagging exports, the World Bank said in a report published. Economic growth in the regions will slow to 4% in 2011 from 4.7% in 2010, the organization`s Global Economic Prospects report said. The World Bank said growth for developing Europe and Central Asia will firm to 4.2% in 2012.

Economy of the United States

The US economy accelerated in the fourth quarter of 2010 as consumer spending climbed by the most in more than four years. Gross domestic product grew at a 3.2 per cent annual rate, Commerce Department figures showed, falling short of the 3.5 per cent median forecast of 85 economists surveyed by Bloomberg News because of a slowdown in inventories. Excluding stockpiles, the economy rose at a 7.1 per cent pace, the most since 1984. For all of 2010, the world`s largest economy expanded 2.9 per cent, the most in five years, after shrinking 2.6 per cent in 2009. The volume of all goods and services produced rose to $13.38 trillion, for the first time surpassing the pre-recession peak reached in the fourth quarter of 2007.
US industrial production sharply rebounded 5.8 percent in 2010 from a slump the prior year, with December output jumping 0.8 percent, double expectations, official data showed Friday. The December increase followed a 0.3 percent rise in the industrial production index in November, the Federal Reserve reported. The full-year advance of 5.8 percent in industrial production marked a turnaround but not a complete recovery from the 9.3 percent plunge in 2009 as the economy struggled to exit recession. The Fed`s 2010 index figure still was 5.0 percent below its level before the 2008-2009 recession.
In December, output was boosted by a 4.3 percent rise in energy production "as unusually cold weather boosted the demand for heating," the central bank said.
The U.S. trade deficit narrowed for a fourth straight month in November, confounding economists who had expected a rebound, government data showed. The nation`s trade deficit contracted a slight 0.3% to $38.3 billion from a revised $38.4 billion in October, the Commerce Department said.
This marked the smallest trade gap since January. Analysts surveyed by MarketWatch had expected the deficit to widen to $40.3 billion. Read full calendar of U.S. economic indicators. The trade deficit shrank 13.9% in October.
In November, exports rose 0.8% to $159.6 billion - the highest level since August 2008, just before the collapse of Lehman Brothers helped send the global economy reeling. Imports rose 0.6% to $198.0 billion. Imports of goods alone rose 0.9% to $164.7 billion, with the gain coming from industrial supplies, principally crude oil.
U.S. Consumer Prices increased in December for a sixth straight month as rising gasoline prices boosted the index higher, according to a report released today by the U.S. Department of Labor. The Consumer Price Index, a key measurement of inflation, increased by 0.5 percent in December following an increase of 0.1 percent in November. Data surpassed economic forecasts that were expecting a 0.4 percent increase.
The annual rate of consumer prices rose by 1.5 percent when compared to December 2009 following an annual increase in November by 1.1 percent.
Rising gasoline prices contributed to 80 percent of the increased inflation for the month as the report showed that gasoline prices rose by 8.5 percent. Gasoline prices had increased by just 0.7 percent in November.
The core inflation reading, excluding volatile food and energy prices, edged higher by 0.1 percent for the month and matched the market forecasts. The annual rate of core inflation increased by 0.8 percent for December following an increase of 0.8 percent in November. Food prices increased by 0.1 percent for the month while overall energy prices rose by 4.6 percent after an increase of just 0.2 percent in November.
U.S. unemployment declined sharply last month to 9 percent, its lowest level in almost two years. But the economy gained far fewer jobs than expected. In its monthly report on employment, the Labor Department said the U.S. economy gained only a net total of about 36,000 jobs.
Experts say severe snowstorms in January may have contributed to the disappointing jobs report. The construction sector lost more than 30,000 jobs, and layoffs in transportation and warehousing added 40,000 more. As a result, employment gains were only a fraction of the more than 160,000 jobs economists were expecting.

Economy of the European Union

In November 2010 compared with October 2010, seasonally adjusted industrial production1 rose by 1.2% in the euro area (EA16) and by 1.4% in the EU27. In October production grew by 0.7% and 0.4% respectively. In November 2010 compared with November 2009, industrial production increased by 7.4% in the euro area and by 7.8% in the EU27.
In November 2010 compared with October 2010, production of intermediate goods grew by 1.6% in the euro area and by 1.5% in the EU27. Production of energy gained 1.5% and 2.1% respectively. Capital goods rose by 1.4% in the euro area and by 2.1% in the EU27. Durable consumer goods increased by 0.1% in the euro area, but fell by 1.2% in the EU27. Non-durable consumer goods remained stable in both zones.
Among the Member States for which data are available, industrial production rose in ten and fell in eight. The highest increases were registered in Sweden (+2.6%), France (+2.3%) and the Czech Republic (+2.0%), and the largest decreases in Malta (-3.2%), Lithuania (-2.0%) and Greece (-1.5%).
In November 2010 compared with November 2009, production of capital goods grew by 12.0% in the euro area and by 12.4% in the EU27. Intermediate goods increased by 7.9% and 8.6% respectively. Production of energy rose by 4.9% in the euro area and by 4.5% in the EU27. Non-durable consumer goods gained 2.7% and 3.0% respectively. Durable consumer goods fell by 0.1% in the euro area, but grew by 0.8% in the EU27.
Industrial production rose in all the Member States for which data are available, except Greece (-8.0%) and Malta (-2.7%). The highest increases were registered in Estonia (+35.0%), Lithuania (+17.2%) and Ireland (+14.2%), and the smallest in Portugal (+0.7%) and Spain (+2.3%).
The first estimate for the euro area (EA16) trade balance with the rest of the world in November 2010 gave a 0.4 bn euro deficit, compared with +3.1 bn in November 2009. The October 20102 balance was +4.7 bn, compared with +4.8 bn in October 2009. In November 2010 compared with October 2010, seasonally adjusted exports rose by 0.2% and imports by 4.4%.
The first estimate for the November 2010 extra-EU27 trade balance was a 14.7 bn euro deficit, compared with -7.3 bn in November 2009. In October 2010 the balance was -7.9 bn, compared with -6.4 bn in October 2009. In November 2010 compared with October 2010, seasonally adjusted exports rose by 0.3% and imports by 6.1%.
Euro area annual inflation is expected to be 2.4% in January 2011 according to a flash estimate issued by Eurostat, the statistical office of the European Union. Euro area1 annual inflation was 2.2% in December 20102, up from 1.9% in November. A year earlier the rate was 0.9%. Monthly inflation was 0.6% in December 2010. EU3 annual inflation was 2.6% in December 2010, up from 2.3% in November. A year earlier the rate was 1.5%. Monthly inflation was 0.6% in December 2010.
The euro area (EA16) seasonally-adjusted unemployment rate was 10.0% in December 2010, unchanged compared with November. It was 9.9% in December 2009. The EU27 unemployment rate was 9.6% in December 2010, unchanged compared with November. It was 9.5% in December 2009.
Eurostat estimates that 23.179 million men and women in the EU27, of whom 15.775 million were in the euro area, were unemployed in December 2010. Compared with November, the number of persons unemployed fell by 19 000 in the EU27 and by 73 000 in the euro area. Compared with December 2009, unemployment rose by 434 000 in the EU27 and by 178 000 in the euro area. These figures are published by Eurostat, the statistical office of the European Union.

Economy of Japan and China

Japan`s gross domestic product in October-December is expected to have posted the first contraction in five quarters, down a real 0.5% on quarter, or an annualized 1.9%, hit by sluggish consumption and exports, according to the median forecast of economists surveyed by Market News International. But the survey also showed that the economy will grow at an annualized 1.5% in January-March, overcoming what appears to be a temporary dip.
Japan`s industrial production increased a seasonally adjusted 3.1 percent in December from a month earlier, marking the second consecutive month of growth, the Ministry of Economy, Trade and Industry said in a preliminary report. December`s rise follows a 1.0 percent increase logged in November and beat the median market forecast of a 2.9 percent increase. The index of output at factories and mines rose 15.9 percent from a year earlier in the month of December and industrial shipments increased 1.1 percent from the previous month. Meanwhile inventories were up 1.4 percent, the ministry said.
The Japanese economy released its merchandise trade balance which rose to 727.7 billion yen in December, compared with the previous reading of 162.8 billion yen in November, revised to 161.1 billion yen, while analyst`s expectations referred to 465.0 billion yen.
Japan`s adjusted merchandise trade balance inclined to 707.3 billion yen in December, compared with a prior reading of 162.8 billion yen during November, and the actual reading came higher than analyst`s expectations of 523.9 billion yen.
Furthermore, Japan`s merchandise trade exports (YoY) jumped 13.0 during the month of December, compared with 9.1 a year earlier, while expectations were 9.3. Also, Japan`s merchandise trade imports (YoY) came at 10.6 in December, compared with the prior reading of 14.2, whereas anticipations referred to 12.0.
Japan`s consumer price index retreated 0.4 percent in December last year from a year earlier, the Ministry of Internal Affairs and Communications said. According to the ministry, the fall in the price index marks the 22nd straight month of decline in Japan, although the fall was less than the 0.5 percent drop expected on average by analysts. For 2010, if volatile prices for perishable items like food are included, the index fell 0.7 percent in the year, the ministry said. The unemployment rate in Japan came in at a seasonally adjusted 4.9 percent in December, the Ministry of Internal Affairs and Communications said - beating forecasts for an unchanged rate of 5.1 percent.
The number of employed persons in December was 62.28 million, an increase of 50 thousand or 0.1 percent from the previous year. The number of unemployed persons in December was 2.98 million, a decrease of 190 thousand or 6.0 percent from the previous year.
The job-to-applicant ratio was 0.57 - unchanged from the previous month but just shy of expectations for 0.58. For all of 2010, the unemployment rate was 5.1 percent.
China said that its economy grew 10.3 percent in 2010, marking the fastest annual pace since the onset of the financial crisis and underlining the country`s growing might.
Gross domestic product in China rose by 9.8 percent in the fourth quarter, accelerating from the previous quarter and exceeding analyst expectations, while consumer inflation eased in December as Beijing moved to rein in prices.
The 2010 GDP figure, up from a revised 9.2 percent growth in 2009, highlighted China`s powerful performance in a year when it overtook Japan to become the world`s second-largest economy behind the United States. The result is slightly better than the forecast of the World Bank, which has predicted 10 percent annual growth.

Economy of Russia

Russia`s gross domestic product (GDP) grew by 4% last year to 44.5 trillion rubles ($1.5tn; Ј938bn), according to official estimates. The growth, slightly higher than forecasts, followed a revised 7.8% fall in GDP in 2009 when the economy was in recession. The Russian government expects the economy to grow 4.2% in 2011.
Russia`s industrial production increased 4.3% month-on-month in December following the 0.1% rise in November, the Federal Statistics Service said. On an annual basis, industrial output rose 6.3% in December, slightly slower than the 6.7% gain seen in the preceding month. In 2010 as a whole, industrial production climbed 8.2%, reversing a 9.3% decline in 2009.
The government estimates that January`s monthly inflation rate could exceed 2%. Consumer prices rose 8.8% last year. - 06.02.2011 13:27