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World Economy Review - February 2013

The International Monetary Fund (IMF) slightly lowered its forecast for global economic growth in 2013 to 3.5% (versus 3.6% forecast in October), and in 2014 to 4.1% (vs. 4.2% in October). The growth rate in 2012 stood at approximately 3.2%. In reference to the expected moderate growth in the next year, said the chief economist of the IMF: “It`s clear that financial markets are ahead of the real economy. The question is whether they are too much ahead or not… What we know is that it always takes some time for financial markets` optimism to feed to the real economy and at this stage there are still obstacles to it”.
The IMF economists estimate that the Eurozone`s economy will contract in 2013 by 0.2%, compared to the previous forecast (October) of a 0.2% growth. The IMF warned that the Eurozone still poses a major risk to global economy. Nonetheless, they predict that the economic situation will improve and that in 2014 the Eurozone`s economy will grow by 1%.
The IMF economists slightly cut their forecast for the U.S. economic growth in 2013 to 2% (vs. 2.1% forecast in October), but, at the same time also raised their economic growth forecast for 2014 to 3% (vs. 2.9% forecast in October). The fund said: “U.S. politicians have to insure that the country gets through the debates regarding raising the debt ceiling without severe fiscal restraints. Politicians must agree on a credible medium-term fiscal consolidation plan, focused on entitlement and tax reform.
The IMF did not change their estimates regarding the Chinese economy – a growth of 8.2% this year and 8.5% in 2014. The fund`s chief economist said that “It`s not the rates that we saw before the crisis, but these rates are long gone”, but added that things are generally fine.
To summarize the global economic situation we note the phrase that the IMF managing director, Christine Lagarde, has coined: “We stopped the collapse, we should avoid the relapse, and it`s not time to relax”.

Economy of the United States

The U.S. economy grew at an annual pace of 0.1 percent in the last three months of 2012, the government said. A month ago, the government estimated that the economy shrank at a 0.1percent annual rate in the quarter. The latest revisions added less to fourth-quarter growth than financial markets expected, said Stephen Wood, chief market strategist at Russell Investments. The consensus forecast had been that the economy grew at a 0.5 percent annual clip.
Industrial production dipped 0.1 percent last month after a revised 0.4 percent gain in December, the Federal Reserve said. Economists polled by Reuters had expected industrial output to rise 0.2 percent in January. The report comes on the heels of data this week showing retail sales growth slowed in January as households adjusted to higher taxes.
Output last month was pushed down by a 0.4 percent drop in manufacturing production, which reflected a 3.2 percent decline in motor vehicle assembly. Manufacturing output had increased 1.1 percent in December. Production at the nation`s mines fell 1.0 percent.
With industrial output weak, the amount of capacity in use fell to 79.1 percent from 79.3 percent in December. Industrial capacity utilization - a measure of how fully firms are using their resources - was 1.1 percentage points below its long-run average.
The country`s trade deficit narrowed to $38.5 billion in December, its lowest reading in nearly three years, Commerce Department data showed. The decrease was driven by a drop in oil imports and a surge in exports. The overall trade gap was far smaller than analysts polled by Reuters had expected.
American exports increased by $8.6 billion in December over the year-ago month, lifted by sales of industrial supplies, including a $1.2 billion rise from November in non-monetary gold. Reflecting the country`s current boom in oil and natural gas, petroleum exports rose by nearly $1 billion during the month to a record high. A fall in petroleum purchases led overall imports to decline by $4.6 billion in December from the year-ago period.
For all of 2012, the United States trade gap shrank by 3.5 percent, to $540.4 billion. Running trade deficits means the country loses dollars, which drags on the economy; rising exports reduce that effect. Exports last year rose 4.4 percent.
The Labor Department said its Consumer Price Index was held back by weak gasoline prices and food prices, which were unchanged after rising over the past months. Economists polled by Reuters had expected the CPI to edge up 0.1 percent. In the 12-months through January, consumer prices rose 1.6 percent, the smallest gain since July. They had advanced 1.7 percent in December.
However, consumer prices excluding food and energy rose 0.3 percent - the largest gain since May 2011. The so-called core CPI had increased 0.1 percent in December. In the 12 months through January, core CPI increased 1.9 percent after rising by the same margin in December. That is just below the Fed`s 2 percent goal.

Economy of the European Union

GDP fell by 0.6% in the euro area (EA17) and by 0.5% in the EU27 during the fourth quarter of 2012, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the third quarter of 2012, growth rates were -0.1% and +0.1% respectively. Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 0.9% in the euro area and by 0.6% in the EU27 in the fourth quarter of 2012, after -0.6% and -0.4% respectively in the previous quarter. During the fourth quarter of 2012, GDP in the United States was stable compared with the previous quarter (after +0.8% in the third quarter of 2012). Compared with the same quarter of the previous year, GDP rose by 1.5% in the United States (after +2.6% in the previous quarter). Over the whole year 20123, GDP fell by 0.5% in the euro area and by 0.3% in the EU27.
In December 2012 compared with November 2012, seasonally adjusted industrial production grew by 0.7% in the euro area (EA17) and by 0.5% in the EU27, according to estimates released by Eurostat, the statistical office of the European Union. In November production fell by 0.7% and 0.6% respectively. In December 2012 compared with December 2011, industrial production decreased by 2.4% in the euro area and by 2.3% in the EU27. Compared with 2011, the average production index for 2012 dropped by 2.4% in the euro area and by 2.1% in the EU27.
In December 2012 compared with November 2012, production of non-durable consumer goods grew by 2.0% in the euro area and by 1.3% in the EU27. Durable consumer goods increased by 2.0% and 0.4% respectively. Capital goods rose by 1.3% in the euro area and by 1.2% in the EU27. Intermediate goods fell by 0.2% and 0.3% respectively. Production of energy dropped by 1.2% in the euro area and by 0.4% in the EU27. Among the Member States for which data are available, industrial production rose in fourteen, fell in six and remained stable in Spain, France and Romania. The highest increases were registered in Ireland (+8.5%), Latvia and Slovenia (both +2.7%), and the largest decreases in Slovakia (-4.4%) and Denmark (-2.3%).
In December 2012 compared with December 2011, production of intermediate goods fell by 4.6% in both the euro area and the EU27. Durable consumer goods dropped by 3.9% and 4.8% respectively. Capital goods decreased by 2.9% in the euro area and by 2.3% in the EU27. Non-durable consumer goods declined by 1.3% and 1.9% respectively. Production of energy increased by 1.2% in the euro area and by 0.4% in the EU27. Among the Member States for which data are available, industrial production fell in fifteen and rose in eight. The largest decreases were registered in Spain (-6.9%), Italy (-6.6%), the Czech Republic (-5.8%) and Poland (-5.4%), and the highest increases in Latvia (+10.7%), Malta (+10.3%) and Lithuania (+9.1%).
The first estimate for the euro area (EA17) trade in goods balance with the rest of the world in December 2012 gave a 11.7 bn euro surplus, compared with +8.0 bn in December 2011. The November 2012 balance was +13.0 bn, compared with +4.9 bn in November 2011. In December 2012 compared with November 2012, seasonally adjusted exports fell by 1.8% and imports by 3.0%. These data are released by Eurostat, the statistical office of the European Union.
The first estimate for the December 2012 extra-EU27 trade in goods balance was a 0.7 bn euro deficit, compared with -0.2 bn in December 2011. The November 2012 balance was -1.9 bn, compared with -9.3 bn in November 2011. In December 2012 compared with November 2012, seasonally adjusted exports decreased by 1.9% and imports by 1.6%. During 2012, euro area trade in goods recorded a surplus of 81.8 bn euro, compared with -15.7 bn in 2011. The EU27 recorded a deficit of 104.6 bn in 2012, compared with -162.7 bn in 2011.
Euro area annual inflation is expected to be 1.8% in February 2013, down from 2.0% in January, according to a flash estimate4 from Eurostat, the statistical office of the European Union. Looking at the main components of euro area inflation, energy (4.0% compared with 3.9% in January) is expected to have the highest annual rate in February, followed by food, alcohol & tobacco (2.7% compared with 3.2% in January), services (1.6%, stable compared with January) and non-energy industrial goods (0.8%, stable compared with January).
The euro area (EA17) seasonally-adjusted unemployment rate was 11.9% in January 2013, up from 11.8% in December 2012. The EU27 unemployment rate was 10.8%, up from 10.7% in the previous month. In both zones, rates have risen markedly compared with January 2012, when they were 10.8% and 10.1% respectively. These figures are published by Eurostat, the statistical office of the European Union.
Eurostat estimates that 26.217 million men and women in the EU27, of whom 18.998 million were in the euro area, were unemployed in January 2013. Compared with December 2012, the number of persons unemployed increased by 222 000 in the EU27 and by 201 000 in the euro area. Compared with January 2012, unemployment rose by 1.890 million in the EU27 and by 1.909 million in the euro area.
Among the Member States, the lowest unemployment rates were recorded in Austria (4.9%), Germany and Luxembourg (both 5.3%) and the Netherlands (6.0%), and the highest in Greece (27.0% in November 2012), Spain (26.2%) and Portugal (17.6%).

Economy of Japan

Japan`s economy unexpectedly shrank last quarter as falling exports and a business investment slump outweighed improved consumption, bolstering Prime Minister Shinzo Abe`s case for more monetary stimulus to end deflation. Gross domestic product contracted an annualized 0.4 percent, following a revised 3.8 percent fall in the previous quarter, the Cabinet Office said in Tokyo today. The median forecast of 32 economists surveyed by Bloomberg News was for 0.4 percent growth. Nominal GDP shrank 0.4 percent on quarter. Net exports contributed 0.2 percentage point to the contraction, the report showed. A 0.4 percent on-quarter rise in private consumption, which accounts for more than half of GDP, was not enough to avert a contraction even as colder-than-usual weather spurred sales of winter clothing and other items. Business investment fell 2.6 percent from the previous quarter, the fourth consecutive drop in capital spending, even as some companies said their earnings outlook is improving due to the weaker yen.
Japan`s industrial production grew 1% during January for its second-straight monthly increase, the Ministry of Economy, Trade and Industry said. The result missed a forecast for a 1.5% rise in separate Dow Jones Newswires and Reuters surveys. Transport equipment, including cars, was the top contributor to the gain, the ministry said. Despite the less-than-expected reading, the average forecast of manufacturers surveyed by the ministry showed industrial output was projected to surge 5.3% for February, up from a forecast 2.3% gain in the January survey.
The data released by the finance ministry showed that Japan`s trade deficit for the month of January was 1.63 trillion yen ($17.4 billion) -- the largest deficit for a single month in its history after a comparable data study commenced in January 1979. The previous highest deficit of 1.48 trillion yen was recorded for the same month last year. Analysts` estimates had predicted that the trade deficit would be 1.303 trillion yen for the month.
In January exports rose 6.4 percent compared with a year earlier to 4.79 trillion yen, the first increase in eight months. The increase was greater than analysts` forecast for a 2.6 percent increase -- and it was due to larger shipments of automobile parts and other items, data showed, than expected. Exports to the United States surged by more than 10 percent, while exports to Europe declined by 4.5 percent, owing to the economic slowdown in the region.
Imports rose 7.3 percent to 6.43 trillion yen, due to the huge import costs of petroleum products, liquefied natural gas and crude oil, all stemming from a depreciated yen. Japan is forced to rely on fuel imports to meet its energy needs as its nuclear reactors have been idle for almost two years now after a disaster at one of its plants following a tsunami.
Consumer prices in Japan have declined for the third straight month in January, indicating persistent challenges to the country`s attempt to tackle deflation that has been hurting the economy for nearly two decades.
Consumer prices, excluding food, fell 0.2 percent in January from a year earlier, according to the statistics bureau. The monthly inflation rate was in line with economists` expectations.
Excluding food and energy, consumer prices declined an annual 0.7 percent, faster than a 0.6 percent decline in the year to December. Core consumer prices in Tokyo declined 0.6 percent in the year to February.
Continued deflation in the country has been hurting domestic demand, as consumers postpone their purchases in hopes of further decline in prices. While supporting aggressive monetary easing, the new government led by Shinzo Abe has been stressing on the importance of consumer price growth for reviving the ailing economy. Japan had a seasonally adjusted unemployment rate of 4.2 percent in January, the Ministry of Communications and Internal Affairs said. That was in line with expectations and down from the revised 4.3 percent in December (originally 4.2 percent). The number of unemployed persons in January was 2.73 million, a decrease of 180 thousand or 6.2 percent from the previous year. The number of employed persons was 62.28 million, an increase of 170 thousand or 0.3 percent on year. The participation rate was unchanged at 58.6 percent.

Economy of Russia

Russia`s seasonally adjusted GDP decreased 0.3 percent month-on-month in January 2013, according to the Ministry of Economic Development. This is the first time Russia has experienced a decline in seasonally adjusted GDP in the last ten months. Russia`s GDP grew 1.6 percent in January 2013 compared with the same month of 2012.
Russian industrial production fell 0.8% from a year earlier in January and was down 11.8% from the previous month, data from the Federal Statistics Service showed Friday, marking a sharp downward swing from December when output rose 1.4% from a year ago and was up 2.4% on the month.
In monthly terms, January`s biggest contraction was seen in the manufacturing sector, where output plunged 19.1%, while mining dropped 3.6% and energy-sector output was down 0.7% on the month. Industrial output usually falls on a monthly basis in January because of Russia`s traditional 10-day long New Year holidays.
Russia`s inflation rate climbed above 7 per cent in January dimming the prospects of an early interest rate reduction despite pressure from the Kremlin for cuts. The consumer price index rose by 7.1 per cent year-on-year, from 6.6 per cent in December, due to increases in food and public transport prices, and in sales taxes.
Russia`s economy will grow less than previously forecast this year as the deteriorating global outlook weighs on demand and inflation hurts domestic consumers. Gross domestic product will expand 3.3 percent in 2013, less than the 3.6 percent expansion forecast in the fall, the World Bank said. Output will begin to recover in 2014, with GDP advancing 3.6 percent. Russia, the world`s largest energy exporter, has limited prospects to bolster growth through traditional channels as oil prices hold near record highs, according to the report. Europe is facing a deepening recession, while consumer-price growth in Russia is curbing the household spending that accounts for about half the economy.

www.ereport.ru - 02.03.2013 18:11