World Economy Review - December 2018
The World Bank has revised its global GDP growth outlook for 2019 0.1 percentage point downward.
In its semi-annual “Global Economic Prospects” report, the World Bank says global economic growth is projected to soften from a downwardly revised 3 percent in 2018 to 2.9 percent in 2019 amid rising downside risks to the outlook.
In 2020 and 2021, the global economic growth has been forecast at 2.8 per cent each year, 0.1 percentage point lower than earlier projections.
“International trade and manufacturing activity have softened, trade tensions remain elevated, and some large emerging markets have experienced substantial financial market pressures," the WB says.
Worries over trade war, weak global growth and financial stress in the developing economies are likely to weigh on global growth outlook, bank said.
The World Bank left the 2019 growth forecast for developed economies and for the United States unchanged at 2 percent and 2.5 percent, respectively. The 2019 forecast for the euro area was lowered by 0.1 percentage points to 1.6 percent.
The World Bank downed its US GDP growth outlook for 2020 by 0.3 percentage points to 1.7 percent.
Chinese GDP growth forecast was downed by 0.1 percentage points to 6.2 percent in 2019 and left unchanged at the same 6.2 percent in 2020.
The bank kept its December forecast for Russia`s GDP for 2019 and 2020 at 1.5 percent and 1.8 percent, respectively. After two years of decline brought by Western sanctions and a collapse in global oil prices, Russia`s economy returned to a growth rate of 1.5 percent in 2017.
“In Russia, growth has been resilient, supported by private consumption and exports,” the World Bank writes in a report. “However, momentum has slowed, reflecting policy uncertainty, recent oil price declines, and renewed pressures on currency and asset prices.”
India`s GDP is expected to grow at 7.3 per cent in the fiscal year 2018-19, and 7.5 per cent in the following two years, the World Bank has forecast, attributing it to an upswing in consumption and investment. The bank said India will continue to be the fastest growing major economy in the world.
Economy of the United States
The U.S. economy grew at an annual 3.4% pace in the third quarter instead of 3.5%, revised government data show. Slightly weaker consumer spending mostly accounted for the downward revision, the Commerce Department said. Consumer spending, the main engine of U.S. growth, rose 3.5% vs. an earlier 3.6% estimate. This was offset partly by higher inventory growth as businesses boosted stockpiles ahead of threatened trade tariffs. The data confirm there were large but offsetting swings in inventories, which added 2.3 percentage points to growth, and the trade balance, which subtracted 2 percentage points. Looking ahead, economists surveyed by MarketWatch predict gross domestic product will slow to a 2.6% annual rate in the fourth quarter, the slowest pace since the first three months of the year.
Industrial production rose 0.3% in December, the Federal Reserve reported. The gain was in line with Wall Street expectations. This follows a 0.4% gain in November, revised down from the prior reading of a 0.6% increase. For the fourth quarter as a whole, production moved up at a 3.8% annual rate, down from a 4.7% rate in the third quarter.
Manufacturing production rose 1.1%, the biggest gain in ten months as the volatile motor vehicle and part production jumped 4.7%. But ex-auto production was also strong.
Capacity utilization rose to 78.7% in December, the highest rate in almost four years. The capacity utilization rate reflects the limits to operating the nation`s factories, mines and utilities. It`s still below pre-recession levels, above 80%, that could fan production costs and prices.
U.S. consumer prices fell for the first time in nine months in December amid a plunge in the cost of gasoline, but underlying inflation pressures remained firm as rental housing and healthcare costs rose steadily.
The Labor Department said its Consumer Price Index dipped 0.1 percent last month, the first drop and weakest reading since March. The CPI was unchanged in November. In the 12 months through December, the CPI rose 1.9 percent after increasing 2.2 percent in November.
Excluding the volatile food and energy components, the CPI increased 0.2 percent, advancing by the same margin for a third straight month. In the 12 months through December, the so-called core CPI rose 2.2 percent, matching November`s increase.
December`s inflation readings were in line with economists` expectations. The Federal Reserve, which has a 2 percent inflation target, tracks a different measure, the core personal consumption expenditures (PCE) price index, for monetary policy.
The core PCE increased 1.9 percent year-on-year in November after rising 1.8 percent in October. It hit 2 percent in March for the first time since April 2012.
The U.S. economy added 312,000 in December, and the unemployment rate rose to 3.9%, according to a report from the U.S. Bureau of Labor Statistics. Job gains occurred in health care, food services and drinking places, construction, manufacturing and retail trade.
The unemployment rate rose by 0.2 percentage points to 3.9% in December, and the number of unemployed persons increased by 276,000 to 6.3 million. A year earlier, the jobless rate was 4.1%, and the number of unemployed persons was 6.6 million.
Among the major worker groups, the unemployment rates for adult men (3.6%) and Blacks (6.6%) increased in December. The jobless rates for adult women (3.5%), teenagers (12.5%), Whites (3.4%), Asians (3.3%), and Hispanics (4.4%) showed little or no change over the month.
Economy of the European Union
In November 2018 compared with October 2018, seasonally adjusted industrial production fell by 1.7% in the euro area (EA19) and by 1.3% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In October 2018, industrial production increased by 0.1% in both the euro area and in the EU28. In November 2018 compared with November 2017, industrial production fell by 3.3% in the euro area and by 2.2% in the EU28.
In the euro area in November 2018, compared with October 2018, the production of capital goods fell by 2.3%, durable consumer goods by 1.7%, intermediate goods by 1.2%, non-durable consumer goods by 1.0% and energy by 0.6%. In the EU28, the production of capital goods fell by 1.6%, intermediate goods by 1.1%, durable consumer goods by 1.0%, non-durable consumer goods by 0.6% and energy by 0.5%.
Among Member States for which data are available, the largest decreases in industrial production were observed in Ireland (-7.5%), Portugal (-2.5%), Germany and Lithuania (both -1.9%).The highest increases were registered in Estonia (+4.5%), Greece (+3.1%) and Malta (+2.6%).
In the euro area in November 2018, compared with November 2017, the production of energy fell by 5.2%, capital goods by 4.5%, durable consumer goods by 3.5%, intermediate goods by 3.0% and non-durable consumer goods by 0.1%. In the EU28, the production of energy fell by 4.3%, capital goods by 3.0%, intermediate goods by 2.2% and durable consumer goods by 1.4%, while the production of non-durable consumer goods rose by 0.7%.
Among Member States for which data are available, the largest decreases in industrial production were observed in Ireland (-9.1%), Germany (-5.1%), Portugal (-2.9%) and Spain (-2.8%). The highest increases were registered in Estonia (+7.9%), Poland (+5.3%) and Hungary (+3.5%).
The first estimate for euro area (EA19) exports of goods to the rest of the world in November 2018 was ˆ203.0 billion, an increase of 1.9% compared with November 2017 (ˆ199.2 bn). Imports from the rest of the world stood at ˆ184.0 bn, a rise of 4.7% compared with November 2017 (ˆ175.7 bn). As a result, the euro area recorded a ˆ19.0 bn surplus in trade in goods with the rest of the world in November 2018, compared with +ˆ23.4 bn in November 2017. Intra-euro area trade rose to ˆ170.5 bn in November 2018, up by 1.5% compared with November 2017.
The first estimate for extra-EU28 exports of goods in November 2018 was ˆ172.7 billion, up by 2.6% compared with November 2017 (ˆ168.4 bn). Imports from the rest of the world stood at ˆ175.9 bn, up by 7.6% compared with November 2017 (ˆ163.4 bn). As a result, the EU28 recorded a ˆ3.2 bn deficit in trade in goods with the rest of the world in November 2018, compared with a surplus of ˆ4.9 bn in November 2017. Intra-EU28 trade rose to ˆ313.1 bn in November 2018, +2.5% compared with November 2017.
The euro area annual inflation rate was 1.6% in December 2018, down from 1.9% in November. A year earlier, the rate was 1.4%. European Union annual inflation was 1.7% in December 2018, down from 2.0% in November. A year earlier, the rate was 1.7%. These figures are published by Eurostat.
The lowest annual rates were registered in Greece and Portugal (both 0.6%) and Denmark (0.7%). The highest annual rates were recorded in Estonia (3.3%), Romania (3.0%) and Hungary (2.8%). Compared with November 2018, annual inflation fell in twenty-two Member States, remained stable in three and rose in three.
The euro area (EA19) seasonally-adjusted unemployment rate was 7.9% in November 2018, down from 8.0% in October 2018 and from 8.7% in November 2017. This is the lowest rate recorded in the euro area since October 2008. The EU28 unemployment rate was 6.7% in November 2018, stable compared with October 2018 and down from 7.3% in November 2017. This remains the lowest rate recorded in the EU28 since the start of the EU monthly unemployment series in January 2000. These figures are published by Eurostat.
Eurostat estimates that 16.491 million men and women in the EU28, of whom 13.040 million in the euro area, were unemployed in November 2018. Compared with October 2018, the number of persons unemployed decreased by 107 000 in the EU28 and by 90 000 in the euro area. Compared with November 2017, unemployment fell by 1.489 million in the EU28 and by 1.135 million in the euro area.
Among the Member States, the lowest unemployment rates in November 2018 were recorded in Czechia (1.9%), Germany (3.3%) and the Netherlands (3.5%). The highest unemployment rates were observed in Greece (18.6% in September 2018) and Spain (14.7%).
Compared with a year ago, the unemployment rate fell in all Member States except Estonia where it remained stable. The largest decreases were registered in Croatia (from 10.0% to 7.8%), Greece (from 20.8% to 18.6% between September 2017 and September 2018) and Spain (from 16.5% to 14.7%).
Economy of Japan
Japan`s real gross domestic product declined 0.7% on the month in November, the Japan Center for Economic Research said. This marked a downturn from the October reading of zero. Private-sector capital investment, consumer spending and exports decreased.
Japan`s industrial output in November fell 1.1 percent from the previous month, government data showed. The seasonally adjusted index of production at factories and mines stood at 104.7 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report. The result followed a 2.9 percent gain in October.
Looking ahead, manufacturers polled by the ministry said they expect output to gain 2.2 percent in December and then decrease 0.8 percent in January.
In November, the index of industrial shipments dropped 1.4 percent to 103.1 and that of inventories increased 0.2 percent at 101.5.
Japan trade balance shifted to a deficit of JPY 737.3 billion in November 2018 from a JPY 105.2 billion surplus in the same month a year earlier and worse than market estimates of a JPY 450 billion shortfall. It is the largest trade gap since January, as imports jumped 12.5 percent year-on-year to JPY 7.67 trillion and exports rose at a softer 0.1 percent to JPY 6.93 trillion. Considering the first eleven months of 2018, Japan posted a trade deficit of JPY 1.14 trillion, compared to a surplus of JPY 2.5 trillion in the same period a year earlier.
Japan`s underlying inflation slowed in November from a year earlier as growth in energy costs waned due to falls in global oil prices, government data showed. The nationwide consumer price index, excluding fresh foods because of their volatility, rose 0.9 percent year-on-year to 101.6 against the 2015 base of 100, compared to a 1.0 percent gain in October, according to the data released by the Ministry of Internal Affairs and Communications.
Although the reading is the 23rd straight monthly increase, it still remains far off the Bank of Japan`s 2 percent target.
Japan`s so-called core-core consumer prices, excluding both fresh food and energy costs, rose 0.3 percent from a year earlier.
The jobless rate in Japan came in at a seasonally adjusted 2.5 percent in November, the Ministry of Internal Affairs and Communications said. That was above expectations for 2.4 percent, which would have been unchanged from the October reading. The job-to-applicant ratio was 1.63, matching forecasts and up from 1.62 in the previous month.
The number of employed persons in November was 67.09 million, an increase of 1.57 million or 2.4 percent on year. The number of unemployed persons in November was 1.68 million, a decrease of 100,000 or 5.6 percent on year.
Economy of Russia
The Russian economy expanded by 1.8 percent in November year on year after growing by 2.8 percent in the previous month, the economy ministry said. Weaker industrial output and a lower harvest both had a negative impact on Russia`s economic performance in November, the ministry said in a monthly report. Previously, the economy ministry said gross domestic product growth was at 2.5 percent in October.
Russia`s economy will see a difficult beginning next year and grow by 1.3 percent for the whole year as expected, Russian Economic Development Minister Maxim Oreshkin said.
Russia`s industrial production increased 2.4 percent year-on-year in November of 2018, easing from a 3.7 percent rise in the previous month and missing market expectations of 3.5 percent. Manufacturing output showed no growth, after a 2.7 percent advance in the previous month while production went up faster for extraction of raw materials (7.8 percent from 7.4 percent) and distribution of water (7 percent from 4.8 percent). Meanwhile, electricity production rebounded 2.4 percent (from -3.2 percent in October). On a monthly basis, industrial output decreased 0.2 percent, down from a 5.8 percent gain in October.
Russia`s trade surplus widened to USD 19.0 billion in November 2018 from USD 11.5 billion in the corresponding month of the previous year. Exports jumped 21.0 percent to USD 40.5 billion, as sales to non-CIS countries climbed 24.8 percent to USD 35.7 billion while those to CIS countries fell 1.6 percent to USD 4.8 billion. Meanwhile, imports declined 1.9 percent to USD 21.5 billion, as purchases from non-CIS countries dropped 2 percent to USD 19.2 billion and those from CIS countries went down 1.6 percent to USD 2.3 billion.
Russia`s consumer price inflation increased to 4.3 percent year-on-year in December 2018 from 3.8 percent in the previous month, slightly above market expectations of 4.2 percent. It was the highest inflation rate since June 2017 on the back of rising prices of food and services while non-food inflation eased.
Within the goods component, food cost advanced 4.7 percent in December, following a 3.5 percent rise in November and prices of non-food products rose 4.1 percent, after a 4.2 percent gain in the previous month. Also, services inflation picked up to 3.9 percent in December from 3.8 percent in November.
Annual core inflation rate climbed to 3.7 percent in December from 3.4 percent in the previous month. It was the highest rate since May 2017.
On a monthly basis, consumer prices increased 0.8 percent in December, compared with a 0.5 percent gain in November and also beating market consensus of 0.7 percent. Upward pressure came from all main categories: food (1.7 percent vs 1 percent): services (0.4 percent vs unchanged); and non-food products (0.2 percent vs 0.4 percent).
Russian unemployment rate rose to 4.8 percent in November 2018 from 4.7 percent in the previous month, and compared to last year`s figure of 5.1 percent. It was the highest jobless rate since April. The number of unemployed increased by 1.2 percent from a month earlier.
The number of unemployed rose by 43 thousand to 3.654 million in November from 3.611 million in the previous month. Compared with the previous year, unemployment fell by 233 thousand from 3.887 million.
Russia`s real wages increased 4.6 percent year-on-year in November of 2018, following an upwardly revised 5.2 percent rise in the previous month and well above market expectations of a 4 percent gain. Average nominal wages jumped 8.6 percent to RUB 42,750 while annual inflation rate rose to 3.8 percent, its highest level since July 2017. Meanwhile, real disposable personal income in Russia decreased 2.9 percent in November, following a 0.3 percent gain in October.