World Economy Review - September 2017
The International Monetary Fund (IMF) is more optimistic about global recovery than in July, while urged countries to take the upswing to carry out reforms to support inclusive and sustainable growth, China`s Xinhua news agency reported.
The long-awaited global recovery is taking root, said IMF Managing Director Christine Lagarde in a speech ahead of the IMF/World Bank annual meetings.
In July, the IMF expected the global economy to grow 3.5 per cent this year and 3.6 per cent in 2018. Lagarde said that nearly 75 per cent of the world is experiencing an upswing the broadest-based acceleration since the start of the decade.
Besides the acceleration in global growth, financial stability is improving as the banking system is more stable and market confidence increases, said Lagarde.
We are seeing some sun break through - but it is not a clear sky, said Lagarde, citing high levels of debt, excessive risk-taking in financial markets, and heightened geopolitical tensions as threats to the global recovery.
Lagarde called on countries to take advantage of the upswing to undertake reforms, such as investing in education, research and development, as well as infrastructure in order to boost productivity and foster inclusive growth.
The IMF research warned that weather impacts may have lasting effects on economies. The report, released at the end of September, points back to the unprecedented rise in global temperatures over the last 40 years and warns that the increasing global temperatures may end up lowering output, particularly in countries with warm climates.
It`s impossible to blame climate change for any individual storm, and much scientific modeling forecasts the effects of climate change to evolve over many years. The weather`s effect on the economy will vary from year to year and quarter to quarter.
But the IMF research predicts that warmer temperatures will eventually lead to agricultural output declines and a reduction in productivity. It also spells out how climate scientists are predicting more intense and destructive storms as the sea surface temperature continues to rise with their analysis suggesting that "the average country would suffer an additional 0.1 percent of per capita output loss every time it is hit by an average tropical cyclone, with smaller states experiencing 0.2 percent greater damage."
Tropical cyclones and hurricanes are one of the most destructive forces of nature, and have cumulatively caused damage of $548 billion worldwide during 2000 to 2014, according to the International Disasters Database.
Economy of the United States
The U.S. economy grew a bit faster than previously estimated in the second quarter, recording its quickest pace in more than two years, but the momentum probably slowed in the third quarter as Hurricanes Harvey and Irma temporarily curbed activity.
Gross domestic product increased at a 3.1 percent annual rate in the April-June period, the Commerce Department said in its third estimate on Thursday. The upward revision from the 3.0 percent rate of growth reported last month reflected a slightly faster pace of inventory investment.
Growth last quarter was the quickest since the first quarter of 2015 and followed a 1.2 percent pace in the January-March period. Economists had expected that the second-quarter GDP growth rate would be unrevised at 3.0 percent.
U.S. industrial output fell in August for the first time since January as Hurricane Harvey battered oil, gas and chemical plants along the Gulf Coast and a cool summer sapped utility demand in the east, the Federal Reserve said. Overall, industrial production fell 0.9 percent over the month after a July increase revised upward to 0.4 percent.
Economists polled by Reuters had still expected a 0.1 percent increase in industrial output. The U.S. central bank`s measure of the industrial sector comprises manufacturing, mining, and electric and gas utilities. Though Harvey was a major force in the decline, helping push down mining output by 0.8 percent. Manufacturing production fell 0.3 percent last month, though the Fed said that without the hurricane, it would have increased roughly 0.5 percent.
The output of consumer goods fell 0.7 percent as a rise in production of consumer durables was offset by declines in nondurables and consumer energy products. Production of motor vehicles and auto parts rose 2.2 percent.
Utilization of factory capacity fell 0.8 percentage point to 76.1 percent, compared to a revised upward figure of 76.9 percent in July, nearly 4 percentage points below the long run average.
Rising exports and falling imports cut the U.S. trade deficit to $42.4 billion in August, the lowest in 11 months. The Commerce Department said that the trade gap - the difference between exports and imports - fell in August from $43.6 billion in July.
Exports came in at $195.3 billion, up from $194.5 billion in July and most since December 2014, on higher shipments of cars, telecommunications equipment and pharmaceuticals. Imports slid to $237.7 billion from July`s $238.1 billion.
U.S. consumer prices accelerated in August amid a jump in the cost of gasoline and rents, signs of firming inflation that could allow further monetary policy tightening from the Federal Reserve this year.
The Labor Department said its Consumer Price index rose 0.4 percent last month after edging up 0.1 percent in July. August`s gain as the largest in seven months and lifted the year-on-year increase in the CPI to 1.9 percent from 1.7 percent in July. Economists polled by Reuters had forecast the CPI rising 0.3 percent in August and climbing 1.8 percent year-on-year.
Stripping out the volatile food and energy components, consumer prices increased 0.2 percent in August. That followed four straight monthly increases of 0.1 percent. In the 12 months through August, the so-called core CPI increased 1.7 percent. The year-on-year core CPI has now increased by the same margin for four straight months.
Hurricanes Harvey and Irma damaged not only Texas and Florida but also the U.S. jobs picture, as payrolls fell by 33,000 in September. That drop came even as the unemployment rate fell to a 16-year low of 4.2 percent, the Bureau of Labor Statistics reported.
The jobs loss was the first monthly decline in seven years, when the economy was still pulling out of the Great Recession. Even with the surprise jobs number, the closely watched hourly wages figure jumped higher, to an annualized rate of 2.9 percent.
Economists surveyed by Reuters expected payroll growth of 90,000 in September, compared with 169,000 in August. The unemployment rate was expected to hold steady at 4.4 percent. It declined even as the labor-force participation rate rose to 63.1 percent, its highest level all year and the best reading since March 2014.
Economy of the European Union
Seasonally adjusted GDP rose by 0.6% in the euro area (EA19) and by 0.7% in the EU28 during the second quarter of 2017, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the first quarter of 2017, GDP grew by 0.5% in both areas.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.3% in the euro area and by 2.4% in the EU28 in the second quarter of 2017, after +2.0% and +2.1% respectively in the previous quarter.
In July 2017 compared with June 2017, seasonally adjusted industrial production rose by 0.1% in the euro area (EA19), while it decreased by 0.3% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In June 2017, industrial production fell by 0.6% in both zones. In July 2017 compared with July 2016, industrial production increased by 3.2% in the euro area and by 3.1% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in July 2017 was 177.7 billion, an increase of 6.1% compared with July 2016 (167.6 bn). Imports from the rest of the world stood at 154.6 bn, a rise of 8.2% compared with July 2016 (142.8 bn). As a result, the euro area recorded a 23.2 bn surplus in trade in goods with the rest of the world in July 2017, compared with +24.8 bn in July 2016. Intra-euro area trade rose to 145.6 bn in July 2017, up by 5.6% compared with July 2016. These data are released by Eurostat, the statistical office of the European Union.
The first estimate for extra-EU28 exports of goods in July 2017 was 155.8 billion, up by 9.7% compared with July2016 (142.1 bn). Imports from the rest of the world stood at 146.9 bn, up by 5.6% compared with July 2016 (139.1 bn). As a result, the EU28 recorded a 8.8 bn surplus in trade in goods with the rest of the world in July 2017, compared with +3.0 bn in July 2016. Intra-EU28 trade rose to 260.3 bn in July 2017, +5.3% compared with July 2016.
Euro area annual inflation is expected to be 1.5% in September 2017, stable compared to August 2017, according to a flash estimate from Eurostat, the statistical office of the European Union. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in September (3.9%, compared with 4.0% in August), followed by food, alcohol & tobacco (1.9%, compared with 1.4% in August), services (1.5%, compared with 1.6% in August) and non-energy industrial goods (0.5%, stable compared with August).
The euro area (EA19) seasonally-adjusted unemployment rate was 9.1% in August 2017, stable compared to July 2017 and down from 9.9% in August 2016. This remains the lowest rate recorded in the euro area since February 2009. The EU28 unemployment rate was 7.6% in August 2017, down from 7.7% in July 2017 and from 8.5% in August 2016. This is the lowest rate recorded in the EU28 since November 2008. These figures are published by Eurostat.
Eurostat estimates that 18.747 million men and women in the EU28, of whom 14.751 million in the euro area, were unemployed in August 2017. Compared with July 2017, the number of persons unemployed decreased by 104 000 in the EU28 and by 42 000 in the euro area. Compared with August 2016, unemployment fell by 1.923 million in the EU28 and by 1.319 million in the euro area.
Economy of Japan
Japan`s economy grew at a slower pace than originally estimated in the three months to the end of June as the contribution from business investment came in lower than previously thought.
Gross domestic product grew by an annualised 2.5 per cent in the three months ending June, down from a preliminary estimate of 4 per cent but still notching the fastest rate of growth in more than two years. This figure was below a median forecast of 2.9 per cent from economists surveyed by Reuters.
Quarter-on-quarter GDP growth was also lower than the preliminary figure after being revised to 0.6 per cent, down from 1 per cent and coming in expectations of 0.7 per cent.
Capital expenditure was revised down to 0.5 per cent quarter on quarter from the previous reading of 2.4 per cent.
Industrial output in Japan advanced a seasonally adjusted 2.1% on month in August, the Ministry of Economy, Trade and Industry said. That beat forecasts for a gain of 1.8% following the 0.8% decline in July.
On a yearly basis, industrial production climbed 5.4% - again topping forecasts for 5.2% and up from 4.7% in the previous month. Upon the release of the data, the METI maintained its assessment of industrial production saying was that it shows signs of picking up.
Shipments were up 1.8% on month and 5.8% on year. Inventories were down 0.6% on month and 3.0% on year. According to the survey of production forecast, industrial output is expected to fall 1.9% in September and climb 3.5% in October.
Japan logged a goods trade surplus of 113.6 billion yen (1.01 billion U.S. dollars) in August, the government said. According to a preliminary report by the Finance Ministry, Japan`s exports rose 18.1 percent on year while its imports increased 15.2 percent from a year earlier, on a customs-cleared basis. The figures came in above median analysts` expectations and are evidence of robust growth in exports this year, they said.
Overall nationwide consumer prices in Japan were up 0.7% on year in August, the Ministry of Internal Affairs and Communications said. That exceeded forecasts for 0.6% and was up from 0.4% in July.
Core CPI, which excludes food prices, also advanced 0.7% - in line with forecasts and up from 0.5% in the previous month. On a monthly basis, overall inflation was up 0.2% and core CPI added 0.1%.
The average of household spending in Japan was up 0.6% on year in August, the Ministry of Internal Affairs and Communications said - coming in at 280,320 yen. That missed forecasts for an increase of 0.9% following the 0.2% decline in July. The average of monthly income per household stood at 485,099 yen, up 0.2% on year. The average of consumption expenditures per household was 301,574 yen, down an annual 0.8%.
. The unemployment rate in Japan came in at a seasonally adjusted 2.8% in August, the Ministry of Internal Affairs and Communications said - in line with expectations and unchanged from the previous month. The job-to-applicant ratio was 1.52 - unchanged but shy of expectations for 1.53.
The number of employed persons in August was 65.73 million, an increase of 840,000 or 1.3% on year. The number of unemployed persons in August was 1.89 million, a decrease of 230,000 or 10.8% on year. The participation rate was 60.9%.
Economy of Russia
Russia`s gross domestic product rose 2.5 percent year on year in the second quarter of 2017, its highest level since the third quarter of 2012, the Federal Statistics Service said, confirming an earlier estimate.
In the first half of the year GDP rose 1.5 percent, the Federal Statistics Service confirmed.
Russia`s industrial production rose by 1.5 percent year-on-year in August 2017, missing market expectations of 1.7 percent and following a 1.1 percent gain in the previous month. Manufacturing production grew 0.7 percent, recovering from a 0.8 percent fall in July, and electricity and gas output rose further by 0.3 percent after an increase of 0.1 percent in the previous month. Meanwhile, mining output advanced at a softer pace (2.9 percent from 4 percent in July) and distribution of water, sewage continued to contract (-3.4 percent from -4 percent).
On the monthly basis, industrial Production in Russia increased 2 percent in August of 2017.
Russia`s trade surplus narrowed by 36.3 percent to USD 3.97 billion in July 2017 from USD 6.24 billion in the same month a year earlier and way below market expectations of a USD 7.2 billion surplus. It was the smallest trade surplus since April 2003, as imports jumped 28.1 percent to USD 20.77 while exports rose at a slower 10.2 percent to USD 24.74 billion.
Consumer prices in Russia increased 3.3 percent year-on-year in August of 2017, below a 3.9 percent rise in July and lower than market expectations of 3.7 percent. It is the smallest inflation rate since at least 1991, mainly due to a slowdown in cost of food and transport. The inflation stayed below the central bank`s 4 percent target for the second month.
The Consumer Price Index in Russia decreased 0.50 percent in August of 2017 over the previous month, the biggest monthly drop since at least 1992.
Russian unemployment rate fell to 4.9 percent in August 2017 from 5.2 percent in the same month of the previous year and below market expectations of 5.1 percent. It was the lowest jobless rate since August 2014, as the number of unemployed people decreased by 245 thousand from the previous year to 3.792 million.
08.10.2017 12:25:09