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World Economy Review - May 2013

In its twice-yearly Economic Outlook, the Organization for Economic Cooperation and Development forecast the world economy would grow 3.1 percent this year before accelerating to 4 percent in 2014. The estimates marked a slightly more pessimistic view after in November the Paris-based think tank forecast global growth of 3.4 percent this year and 4.2 percent next year.
The United States was seen driving global growth with the world`s biggest economy projected to expand 1.9 percent this year and then accelerating to 2.8 percent in 2014, which would be the country`s best rate since 2005.
In contrast, the euro zone was estimated to remain in recession for a second year. The OECD sees its economy contracting 0.6 percent in 2013 and then returning to growth next year with a rate of 1.1 percent. However, the outlook diverged widely within the 17-nation bloc with regional powerhouse Germany seen achieving growth of 0.4 percent and rebounding to a rate of 1.9 percent in 2014.
After years of debt crisis testing the euro zone`s capacity to hold together, OECD chief economist Pier Paolo Padoan said that risks to the economic outlook have finally begun to recede. However, he warned that the easing in the euro zone`s debt crisis may lead to reform fatigue. "As far as Europe is considered, we are concerned that complacency could set in," Padoan told Reuters. "That is a new risk that is coming up in Europe."
Unlike the United States in the 2008-09 financial crisis, the euro zone still needed to tackle problems in its financial sector holding back the flow of credit, he said.
Lifting its estimate for Japan, the OECD said that the central bank`s pledge to ramp up its monetary stimulus aggressively would help its economy grow 1.6 percent this year. The OECD took a more pessimistic view on China, forecasting that its economy would grow 7.8 percent this year, down from a previous estimate of 8.5 percent.
With economies in most countries still in recovery mode, the OECD said central banks should keep monetary policies easy while the European Central Bank should even dramatically step up its efforts to get credit flowing to the economy.
The OECD called on the ECB to make banks pay for holding deposits with it and urged it to buy assets such as securitized loans from credit-starved small and medium-sized firms, two options ECB policymakers say they are currently considering. In the case of the U.S. Federal Reserve, the OECD said it may soon be justified to begin curbing its purchases of government bonds and mortgage-backed securities. However, it warned that a slower pace of purchases would have to be carefully flagged to markets in order to avoid an abrupt sell-off by other investors that might cause yields to spike dangerously higher.
The OECD not only gave its blessing to the Bank of Japan`s dramatic increase in monetary surplus but said further moves could be used to boost the economy. It noted improvement in Britain`s pace of fiscal consolidation in both 2013 and 2014, but repeated the concern mentioned by the International Monetary Fund last week that a Help to Buy program might end up pushing house prices up.

Economy of the United States

A drop in government spending dragged more on the U.S. economy than initially thought in the first three months of the year, a sign of increasing pain from Washington`s austerity drive. The U.S. economy expanded at a 2.4 percent annual rate during the period, down a tenth of a point from an initial estimate, according to revised figures from the Commerce Department released. Analysts had forecast a 2.5 percent gain.
Growth was held back as government spending fell across all levels of government and as businesses outside the farm sector stocked their shelves at a slower pace. Washington has been tightening its belt for several years but ramped up austerity measures in 2013, hiking taxes in January and slashing the federal budget in March. Still, economic growth has been surprisingly resilient, supported by the Federal Reserve`s low interest rate policies. Most economists expect growth will slow mid-year as budget cuts come into effect.
Government spending fell even more sharply in the fourth quarter, and economists speculate that government agencies pulled back in anticipation of budget cuts initially due to begin in January but which took effect in March. In the first quarter, government spending dropped at a 4.9 percent annual rate, faster than the 4.1 percent rate initially estimated. Spending fell at federal, state and local government offices, though the majority of the downward revision in Thursday` report came at the county and city level.
The drag from government and inventories was partially offset by an upward revision to consumer spending, which rose at a 3.4 percent annual rate, up two tenths of a point from the government`s previous estimate. However, a cloud hung over that category, as most of the upward revision was due to higher sales of gasoline. Higher prices at the pump are a burden on consumers, leaving them less money to spend on other things. Consumer spending accounts for more than two-thirds of U.S. economic activity.
After-tax corporate profits fell at a 1.9 percent annual rate in the quarter, the first decline in a year. Total imports grew at a slower pace in the first quarter than initially estimated, moderating the drag on growth from net trade. Excluding the volatile inventories component, GDP rose at an upwardly revised 1.8 percent rate, slightly higher than analysts had forecast.
Industrial production decreased 0.5 percent in April after having increased 0.3 percent in March and 0.9 percent in February. Manufacturing output moved down 0.4 percent in April after a decline of 0.3 percent in March. The index for utilities decreased 3.7 percent in April, as heating demand fell back to a more typical seasonal level after having been elevated in March because of unusually cold weather. The output of mines increased 0.9 percent in April. At 98.7 percent of its 2007 average, total industrial production was 1.9 percent above its year-earlier level. The rate of capacity utilization for total industry decreased 0.5 percentage point to 77.8 percent, a rate 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972--2012) average.
The U.S. trade deficit widened in April, as demand for foreign cars, cell phones and other imported goods outpaced growth in U.S. exports. The Commerce Department said that the trade gap rose 8.5% in April from March to $40.3 billion.
Exports increased 1.2% to $187.4 billion, the second-highest level on record. Companies sold more telecommunications equipment, industrial machinery and airplane parts, while U.S.-made autos and auto parts also rose to an all-time high of $12.8 billion. But imports grew an even faster 2.4% to $227.7 billion. Sales of foreign cars increased to $25.5 billion. Americans also bought more consumer goods, led by big gain in foreign-made cell phones.
The report showed a weaker global economy continues to reduce demand for U.S. exports. That`s likely to weigh on growth in the April-June quarter. A wider trade gap can restrain growth because it means U.S. consumers and businesses are spending more on foreign goods than U.S. companies are taking in from overseas sales.
The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.4 percent in April on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.
As was the case in March, a sharp decrease in the gasoline index was the primary cause of the decline in the seasonally adjusted all items index. The fuel oil index also declined while the electricity and natural gas indexes increased; the net result was a 4.3 percent decrease in the energy index. The food index, unchanged in March, rose 0.2 percent in April.
The index for all items less food and energy increased 0.1 percent in April, the same increase as in March. The indexes for shelter, used cars and trucks, new vehicles, and tobacco all increased in April. These increases were partially offset by declines in the indexes for apparel, airline fares, and recreation.
The all items index increased 1.1 percent over the last 12 months, the smallest 12-month increase since November 2010. The index for all items less food and energy increased 1.7 percent over the span; this was its smallest 12-month increase since June 2011. The food index rose 1.5 percent while the energy index declined 4.3 percent.

Economy of the European Union

GDP fell by 0.2% in the euro area (EA17) and by 0.1% in the EU27 during the first quarter of 2013, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2012, growth rates were -0.6% and -0.5% respectively.
Compared with the same quarter of the previous year, seasonally adjusted GDP fell by 1.0% in the euro area and by 0.7% in the EU27 in the first quarter of 2013, after -0.9% and -0.6% respectively in the previous quarter.
During the first quarter of 2013, GDP in the United States grew by 0.6% compared with the previous quarter (after +0.1% in the fourth quarter of 2012). Compared with the same quarter of the previous year, GDP rose by 1.8% (after +1.7% in the previous quarter).
In March 2013 compared with February 2013, seasonally adjusted industrial production grew by 1.0% in the euro area (EA17) and by 0.9% in the EU27, according to estimates released by Eurostat, the statistical office of the European Union. In February production increased by 0.3% in both zones. In March 2013 compared with March 2012, industrial production decreased by 1.7% in the euro area and by 1.1% in the EU27.
In March 2013 compared with February 2013, production of energy grew by 3.8% in the euro area and by 3.0% in the EU27. Durable consumer goods increased by 1.9% and 2.2% respectively. Capital goods rose by 1.2% in both zones. Intermediate goods fell by 0.1% in the euro area and by 0.2% in the EU27. Non-durable consumer goods dropped by 0.7% and 0.2% respectively.
Among the Member States for which data are available, industrial production rose in sixteen and fell in seven. The highest increases were registered in Portugal (+5.3%), the Netherlands (+4.5%), Luxembourg (+4.0%) and Estonia and Malta (both +3.9%), and the largest decreases in Slovenia (-2.9%), Bulgaria (-2.3%) and Ireland (-2.2%).
In March 2013 compared with March 2012, production of intermediate goods dropped by 4.6% in the euro area and by 4.0% in the EU27. Capital goods decreased by 3.1% and 2.1% respectively. Non-durable consumer goods fell by 3.1% in the euro area and by 1.8% in the EU27. Durable consumer goods declined by 2.2% and 0.7% respectively. Energy increased by 9.2% in the euro area and by 6.7% in the EU27.
Among the Member States for which data are available, industrial production fell in eleven, rose in eleven and remained stable in the United Kingdom. The largest decreases were registered in Luxembourg (-6.9%), Italy (-5.2%), Ireland (-4.1%) and Bulgaria (-3.6%), and the highest increases in the Netherlands (+11.1%), Lithuania (+8.4%), Estonia (+7.1%) and Malta (+6.0%).
The first estimate for the euro area (EA17) trade in goods balance with the rest of the world in March 2013 gave a 22.9 billion euro surplus, compared with +6.9 bn in March 2012. The February 20132 balance was +10.1 bn, compared with +1.2 bn in February 2012. In March 2013 compared with February 2013, seasonally adjusted exports rose by 2.8% while imports fell by 1.0%. These data are released by Eurostat, the statistical office of the European Union.
The first estimate for the March 2013 extra-EU27 trade balance was a 15.8 bn euro surplus, compared with -8.2 bn in March 2012. In February 2013 the balance was +1.7 bn, compared with -13.0 bn in February 2012. In March 2013 compared with February 2013, seasonally adjusted exports rose by 3.4% while imports fell by 1.1%.
Euro area annual inflation is expected to be 1.4% in May 2013, up from 1.2% in April, according to a flash estimate from Eurostat, the statistical office of the European Union.
Looking at the main components of euro area inflation, food, alcohol & tobacco is expected to have the highest annual rate in May (3.3% compared with 2.9% in April), followed by services (1.4% compared with 1.1% in April), non-energy industrial goods (0.9% compared with 0.8% in April) and energy (-0.2% compared with -0.4% in April).
The euro area (EA17) seasonally-adjusted unemployment rate was 12.2% in April 2013, up from 12.1% in March. The EU27 unemployment rate was 11.0%, unchanged compared with the previous month4. In both zones, rates have risen markedly compared with April 2012, when they were 11.2% and 10.3% respectively. These figures are published by Eurostat, the statistical office of the European Union.
Eurostat estimates that 26.588 million men and women in the EU27, of whom 19.375 million were in the euro area, were unemployed in April 2013. Compared with March 2013, the number of persons unemployed increased by 104 000 in the EU27 and by 95 000 in the euro area. Compared with April 2012, unemployment rose by 1.673 million in the EU27 and by 1.644 million in the euro area.

Economy of Japan

Japan`s economy expanded the most in a year last quarter as consumer spending and export gains outweighed the weakest business investment since the wake of the March 2011 earthquake and tsunami. Gross domestic product rose an annualized 3.5 percent, a Cabinet Office release showed. Private consumption, making up 60 percent of GDP, contributed 2.3 percentage points to the jump. Annualized real growth exceeded all but two of 36 estimates in a Bloomberg News survey.
Nominal GDP, which is unadjusted for changes in prices, rose 1.5 percent, also the most in a year. The nominal gain was 0.4 percent from the previous three months, less than the median forecast for a 0.5 percent increase.
Japan`s industrial production rose a seasonally adjusted 1.7 per cent in April from the previous month for the fifth straight month of increase, the government said. The figure, which was above the 0.5-per-cent rise predicted by analysts surveyed by the Nikkei business daily, followed a 1.2-percent increase in March. The Ministry of Economy, Trade and Industry maintained its basic assessment, saying "industrial production shows signs of picking up at a moderate pace."
The index of production at factories and mines stood at 91.9 against a baseline of 100 for 2005, the ministry said. Transport equipment, precision instruments and electronic parts and devices industries contributed to the bulk of the increase in April, the ministry said.
Manufacturers surveyed by the ministry expected industrial output to be unchanged in May and fall 1.4 per cent in June, the ministry said.
Japan`s goods trade deficit expanded to a record 879.9 billion yen for April, marking the 10th straight month of red ink, as the yen`s slide continued to push up the cost of fossil fuel imports, while conversely helping exports recover, the government said. It is the first time Japan`s trade balance has remained in deficit for 10 months since 1979, when the country was hit by the second oil shock, a Finance Ministry official briefing reporters said. The value of imports rose 9.4 percent year on year to 6,657.3 billion yen in April, up for the sixth straight month, as those of liquefied natural gas jumped 17.9 percent, the ministry said in a preliminary report. Amid the weaker yen and growing expectations of a pickup in the world economy, exports, a key driver of Japan`s economic growth, increased for the second month in a row, up 3.8 percent to 5,777.4 billion yen, but still failed to outweigh imports, the report showed. The core consumer price index (CPI), which strips out volatile fresh-food prices, fell 0.4% in April from a year earlier, in line with forecasts from separate Dow Jones Newswires and Reuters surveys, but they rose 0.3% compared to March.
In similar good news for Japanese policy makers, core CPI for the Tokyo metropolitan area - seen as a leading indicator for prices in the nation as a whole - rose 0.2% in May from April. They were up 0.1% from a year earlier. The Dow Jones Newswires survey had tipped a 0.2% year-on-year drop.
As for the broader CPI, nationwide prices rose 0.3% during April, while those in Tokyo edged up 0.1%. The modest rise in prices came in the wake of aggressive, new monetary easing moves launched April 4 by the Bank of Japan. Still, the tiny gains remained well below the central bank`s 2% inflation target, which it hopes to gain over the coming two years.
Japan`s seasonally adjusted unemployment rate remained unchanged at 4.1 percent in April. The number of unemployed persons was 2.91 million, a decrease of 240 thousand or 7.6 % from the previous year. The number of employed persons in April 2013 was 63.12 million, an increase of 370 thousand or 0.6 % from the previous year.
In April, compared to the previous month, the employment rose in Wholesale and retail trade, Transport and postal activities, Scientific Research and professional and technical services, Accommodations, eating and drinking services, Education and Medical, health care and welfare. Job losses were reported in Manufacturing, Agriculture and Forestry, Information and communications, Real estate, Living-related and personal services and in Government services.

Economy of Russia

According to the flash estimate published by the Federal State Statistics Service (Rosstat) on 15 May, Russia`s GDP grew 1.6% in the first quarter over the same period last year. The result represents a deterioration compared to the 2.1% expansion recorded in Q4 2012 and came in well below market expectations that had the economy growing 2.9%. However, the result marks an improvement compared to the estimate published by the Ministry of Economic Development on 22 April, which had the economy expanding 1.1% in Q1.
Russian industrial-output growth slowed as a stalling economy and weakening exports hurt demand. Production at manufacturers, mines and utilities grew 2.3 percent in April from a year earlier after a 2.6 percent increase in March, Rosstat said. The median estimate of 21 economists in a Bloomberg survey was for a 2 percent increase.
Russian manufacturing advanced 1.2 percent from a year earlier in April, down from 3.4 percent the previous month, according to the statement. Mining grew 2.6 percent while production at utilities increased 2.8 percent.
Russian inflation accelerated in April after slowing a month earlier, strengthening arguments to delay easing monetary policy. Consumer prices rose 7.2 percent from a year earlier after a 7 percent advance in March, Rosstat said. That matches the median estimate of 24 economists in a Bloomberg survey. Prices increased 0.5 percent in the month, also in line with economist forecasts.
In April, Russia unemployment rate was recorded at 5.6 percent, down 0.1 percentage points from 5.7 percent reported in March. In the same period, the number of unemployed decreased to 4.18 million from 4.25 million in March of 2013 and from 4.20 million in April of 2012. The number of economically active population aged 15-72 years (employed + unemployed) in April 2013. amounted to 75.3 million people , or about 53% of the total population of the country.
Among the economically active population, 71.1 million people were classified as engaged in economic activity and 4.2 million people as unemployed using the ILO criteria (i.e., had no job or gainful employment, looking for work and were ready to start surveyed in week). Compared with March, the number of employed people in April 2013 increased by 154 thousand persons or 0.2%, the number of unemployed decreased by 71 thousand or 1.7%. Compared with April 2012 number of people employed increased by 100 thousand or 0.1%, the number of unemployed fell by 24 thousand or 0.6%.
The total number of unemployed was 3.9 times higher than the number of unemployed registered at public employment services. In late April 2013, in public employment services, 1061 thousand people were registered as unemployed which is 2.1% less than in March and 15.4% - compared with April 2012. 70% of the unemployed were looking for a job on their own, without the assistance of employment services.
The government expects the economy to grow 2.4% in 2013 and 3.7% in 2014. Focus Economics Consensus Forecast panelists expect GDP to grow 3.1% in 2013, which is down 0.2 percentage points from last month`s forecast. Next year, the panel sees the economy growing 3.5%.

www.ereport.ru - 04.06.2013 22:01