World Economy Review - February 2019
Annual global economic growth is forecast to decelerate to 3.5 per cent in 2019 and 2020, down from 3.7 per cent in 2018, said London-based Euromonitor International, a global market research company in a new report.
This deterioration in its global outlook has primarily been a result of downgrades to the advanced economies, including the US and the Eurozone, but also to some emerging economies such as Mexico and Russia, according to the report titled “Global Economic Forecasts Q1 2019”.
The real GDP in advanced economies is estimated to grow by 2.0 per cent in 2019 and 1.7 per cent in 2020, a decline from 2.3 per cent growth in 2018. Emerging economies are anticipated to see a steadier real GDP growth of 4.6 per cent in 2019 and 4.7 per cent in 2020, which is similar to a pace of 4.6 per cent in 2018.
The world trade growth is likely to weaken in 2019 as a result of a pullback in globalisation and increasing political risks, the report said.
The recent decline in financial asset prices also suggests a risk of recession in 2019. Major global risks are stemming from remaining trade war uncertainty, tightening financial conditions and risks of a worse-than-expected Chinese economic slowdown.
The Eurozone outlook is also clouded by a possibility of a no-deal Brexit and Italian fiscal policy. Lower oil prices and the emergence of populist leaders in Latin America could further weigh on the outlook of emerging economies.
Worsening trade and political uncertainty along with a more transitory impact of tax cuts has led Euromonitor International to reduce the US real GDP growth forecast to 2.4 per cent in 2019 and 1.7 per cent in 2020, it said in the report.
Negative readings at the end of 2018 have led to downgrades in the Eurozone outlook, with the economy slowing close to long-term trend growth. Real GDP is to grow by 1.7 per cent in 2019 and 1.6 per cent in 2020.
The UK outlook remains under severe Brexit uncertainty. “We have kept our baseline real GDP growth at 1.5 per cent in 2019 and 1.4 per cent in 2020. However, the baseline is just one of several possible scenarios,” Euromonitor International said.
Slowing global demand and the China-US trade war continue to take a toll on Japan’s economy, GDP growth declined in Q3. Euromonitor International has reduced real GDP growth to 0.6 per cent in 2019 and 0.6 per cent again in 2020.
China is facing growing concerns about a domestic demand slowdown and the impact from the US-China trade war. “We have for now kept GDP growth forecasts at 6.1 per cent in 2019 and 5.9 per cent in 2020,” the report said.
Brazil’s business confidence has jumped on the new president’s reform agenda. While waiting for the government’s actions, Euromonitor’s real GDP growth forecast is unchanged at 2.2 per cent in 2019, 2.4 per cent in 2020.
Russia’s economic growth will be weighed down by slowing exports, weak domestic demand and decreasing oil prices. Euromonitor International has cut the real GDP growth forecast to 1.3–1.4 per cent in 2019-2020.
India’s economy decelerated slightly in Q3 2018, dragged down by private consumption and net exports. Euromonitor International has reduced real GDP growth forecasts to 7.4 per cent in 2019 and 7.5 per cent in 2020.
Economy of the United States
The U.S. economy cooled by less than expected last quarter as business investment picked up, suggesting growth could be stronger for longer as the Federal Reserve takes a patient approach to interest rates.
The 2.6 percent annualized rate of gains in gross domestic product from October to December compared with the 2.2 percent median estimate of economists surveyed by Bloomberg. It followed a 3.4 percent advance in the prior three months, according to a Commerce Department report that was delayed a month by the government shutdown.
Consumption, which accounts for the majority of the economy, grew 2.8 percent, slightly below forecasts, while nonresidential business investment accelerated to a 6.2 percent gain on equipment, software and research spending. Government spending slowed, trade was a minor drag and inventories gave GDP a small boost.
U.S. industrial production rose a slight 0.1 percent in February, as an increase in utilities and mining offset the second straight monthly drop in manufacturing. The Federal Reserve said that the manufacturing component of the index fell 0.4 percent last month, after having fallen an upwardly revised 0.5 percent in January. Factory production has slipped 1 percent during the past 12 months.
In the Fed's industrial production report, motor vehicles and parts suffered a 0.1 percent slip in output. Machinery fell 1.9 percent. Furniture products declined 1.5 percent. Non-metallic minerals and apparel also declined. Utility output climbed 3.7 percent as more people used electricity. Mining rose 0.3 percent.
Overall, industrial production has risen 3.5 percent from a year ago. But there may be a slowdown coming as capacity utilization has fallen to 78.2 percent, from 78.8 percent in November.
The U.S. trade deficit widened to USD 59.8 billion in December of 2018 from an upwardly revised USD 50.3 billion in the previous month and compared with market expectations of a USD 57.9 billion gap. It is the largest deficit since October of 2008 as exports declined for the third month and imports recovered. In 2018, the country's trade gap widened to a 10-year high, with the goods gap with China jumping to a record high despite tariffs on USD 250 billion worth of Chinese imports.
Total exports fell 1.9 percent month-over-month to USD 205.1 billion, following a 0.7 percent drop in November. Exports of goods decreased USD 3.9 billion to USD 135.6 billion, mainly dragged down by industrial supplies and materials (USD -2.1 billion); other petroleum products (USD -0.9 billion); crude oil (USD-0.5 billion); fuel oil (USD -0.4 billion); capital goods (USD -1.7 billion); and civilian aircraft (USD -1 billion). Exports of services dropped less than USD 0.1 billion to USD 69.5 billion, mainly due to transport (USD -0.2 billion) while sales of financial services increased USD 0.1 billion.
Total imports rose 2.1 percent to USD 264.9 billion, following a 2.8 percent plunge in November. Imports of goods increased USD 5.1 billion to USD 217.2 billion, driven by capital goods (USD 2.7 billion); computer accessories (USD 0.7 billion); computers (USD 0.7 billion); consumer goods (USD 2.4 billion); household and kitchen appliances (USD 0.7 billion); cell phones and other household goods (USD 0.6 billion). Imports of services went up USD 0.5 billion to USD 47.7 billion, mainly due to transport (USD 0.4 billion).
U.S. consumer prices rose for the first time in four months in February, but the pace of the increase was modest, resulting in the smallest annual gain in nearly 2-1/2 years.
The Labor Department said its Consumer Price Index increased 0.2 percent, lifted by gains in the costs of food, gasoline and rents. The CPI had been unchanged for three straight months. In the 12 months through February, the CPI rose 1.5 percent, the smallest gain since September 2016. The CPI increased 1.6 percent on a year-on-year basis in January.
Excluding the volatile food and energy components, the CPI edged up 0.1 percent, the smallest increase since August 2018. The so-called core CPI had increased by 0.2 percent for five straight months. In the 12 months through February, the core CPI rose 2.1 percent. The core CPI had increased by 2.2 percent for three consecutive months on an annual basis. Economists polled by Reuters had forecast the CPI and the core CPI edging up 0.2 percent in February.
The US unemployment rate fell to 3.8 percent in February 2019 from 4 percent in the previous month and below market expectations of 3.9 percent. The number of unemployed persons decreased by 300,000 to 6.2 million.
Among the unemployed, the number of job losers and persons who completed temporary jobs (including people on temporary layoff) declined by 225,000. This decline reflects, in part, the return of federal workers who were furloughed in January due to the partial government shutdown.
Among the major worker groups, the unemployment rates for adult men (3.5 percent), Whites (3.3 percent), and Hispanics (4.3 percent) decreased in February. The jobless rates for adult women (3.4 percent), teenagers (13.4 percent), Blacks (7.0 percent), and Asians (3.1 percent) showed little or no change over the month.
In February, the number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.3 million and accounted for 20.4 percent of the unemployed.
Economy of the European Union
Seasonally adjusted GDP rose by 0.2% in the euro area (EA19) and by 0.3% in the EU28 during the fourth quarter of 2018, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the third quarter of 2018, GDP had grown by 0.1% in the euro area and by 0.3% in the EU28.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.1% in the euro area and by 1.4% in the EU28 in the fourth quarter of 2018, after +1.6% and +1.8% respectively in the previous quarter.
Over the whole year 2018, GDP rose by 1.8% in the euro area and by 1.9% in the EU28. The annual growth rate for 2017 was +2.4% for both the euro area and the EU28.
In January 2019 compared with December 2018, seasonally adjusted industrial production rose by 1.4% in the euro area (EA19) and by 1.0% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In December 2018, industrial production fell by 0.9% in the euro area and by 0.4% in the EU28.
In January 2019 compared with January 2018, industrial production decreased by 1.1% in the euro area and by 0.4% in the EU28.
In the euro area in January 2019, compared with December 2018, production of energy rose by 2.4%, non-durable consumer goods by 2.0%, durable consumer goods by 1.1%, capital goods by 0.9% and intermediate goods by 0.2%.
In the EU28, production of energy rose by 1.4%, durable consumer goods by 1.3%, non-durable consumer goods by 1.0%, capital goods by 0.9% and intermediate goods by 0.3%.
Among Member States for which data are available, the highest increases in industrial production were registered in Ireland (+15.1%), Croatia (+9.6%) and Slovenia (+5.9%). The largest decreases were observed in Denmark (-8.6%), Latvia (-3.6%) and Romania (-1.5%).
In the euro area in January 2019, compared with January 2018, production of capital goods fell by 3.0%, intermediate goods by 1.8% and durable consumer goods by 1.2%, while production of non-durable consumer goods rose by 0.7% and energy by 4.0%.
In the EU28, production of capital goods fell by 2.4%, intermediate goods by 1.2% and durable consumer goods by 0.1%, while production of non-durable consumer goods rose by 1.4% and energy by 2.9%.
Among Member States for which data are available, the largest decreases in industrial production were registered in Ireland (-6.2%), Luxembourg (-4.2%) and Germany (-3.4%). The highest increases were observed in Slovakia (+7.2%), Poland (+6.1%) and Lithuania (+5.9%).
The first estimate for euro area (EA19) exports of goods to the rest of the world in January 2019 was ˆ183.4 billion, an increase of 2.5% compared with January 2018 (ˆ179.0 bn). Imports from the rest of the world stood at ˆ181.8 bn, a rise of 3.4% compared with January 2018 (ˆ175.9 bn). As a result, the euro area recorded a ˆ1.5 bn surplus in trade in goods with the rest of the world in January 2019, compared with +ˆ3.1 bn in January 2018. Intra-euro area trade rose to ˆ164.6 bn in January 2019, up by 2.4% compared with January 2018.
The first estimate for extra-EU28 exports of goods in January 2019 was ˆ153.6 billion, up by 2.1% compared with January 2018 (ˆ150.4 bn). Imports from the rest of the world stood at ˆ178.5 bn, up by 3.9% compared with January 2018 (ˆ171.8 bn). As a result, the EU28 recorded a ˆ24.9 bn deficit in trade in goods with the rest of the world in January 2019, compared with -ˆ21.4 bn in January 2018. Intra-EU28 trade rose to ˆ297.9 bn in January 2019, +2.3% compared with January 2018.
The euro area annual inflation rate was 1.5% in February 2019, up from 1.4% in January 2019. A year earlier, the rate was 1.1%. European Union annual inflation was 1.6% in February 2019, up from 1.5% in January 2019. A year earlier, the rate was 1.4%. These figures are published by Eurostat, the statistical office of the European Union.
The lowest annual rates were registered in Ireland (0.7%), Greece, Croatia and Cyprus (all 0.8%). The highest annual rates were recorded in Romania (4.0%), Hungary (3.2%) and Latvia (2.8%). Compared with January 2019, annual inflation fell in seven Member States, remained stable in one and rose in nineteen.
In February 2019, the highest contribution to the annual euro area inflation rate came from services (+0.61 percentage points, pp), followed by food, alcohol & tobacco (+0.44 pp), energy (+0.35 pp) and non-energy industrial goods (+0.09 pp).
The euro area (EA19) seasonally-adjusted unemployment rate was 7.8% in January 2019, stable compared with December 2018 and down from 8.6% in January 2018. This remains the lowest rate recorded in the euro area since October 2008. The EU28 unemployment rate was 6.5% in January 2019, down from 6.6% in December 2018 and from 7.2% in January 2018. This is 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, the statistical office of the European Union.
Eurostat estimates that 16.222 million men and women in the EU28, of whom 12.848 million in the euro area, were unemployed in January 2019. Compared with December 2018, the number of persons unemployed decreased by 56 000 in the EU28 and by 23 000 in the euro area. Compared with January 2018, unemployment fell by 1.536 million in the EU28 and by 1.233 million in the euro area.
Economy of Japan
Japan's gross domestic product for the October-December period expanded at an annualized rate of 1.9%, faster than initially reported, according to revised data released by the Cabinet Office. The reading was slightly above the median estimate from economists polled by Reuters, who had expected an upward revision to 1.8% growth. Preliminary data released in mid-February showed growth of 1.4%.
The upward revision resulted partly from private sector investment that grew more than initially estimated. However, household consumption was revised down. Overall, economic activity recovered from a sharp contraction in the July-September quarter, during which a string of natural disasters weighed on investment by businesses.
Industrial production in Japan fell 3.4 percent month-on-month in January 2019, less than the preliminary figure of a 3.7 percent drop but much faster than a 0.1 percent decline in December. This was the third straight month of fall in industrial output and the steepest since January 2018. Production shrank further for: fabricated metals (-4 pct vs -0.6 pct in December); production machinery (-9.6 pct vs -3.5 pct); business oriented machinery (-5.5 pct vs -0.3 pct); electronic parts (-7.8 pct vs -2.6 pct); and chemicals (-1.8 pct vs -1.2 pct). In addition, output slumped for: iron & steel (-4.8 pct vs 0.1 pct); general-purposes machinery (-7.1 pct vs 6.5 pct); electrical machinery (-10.5 pct vs 3.2 pct); transport equipment (-6.4 pct vs 0.6 pct); and motor vehicles (-8.6 pct vs 1.1 pct).
Meanwhile, output of petroleum and coal products (0.6 pct vs -2.5 pct). On an annual basis, industrial output rose 0.3 percent in January, following a 1.9 percent fall in December
Japan posted a trade surplus of JPY 339 billion in February 2019, compared with a JPY 14 billion deficit in the same month a year earlier and market expectations of a JPY 310 billion surplus.
Exports declined 1.2 percent from a year earlier to JPY 6.38 trillion in February, worse than market consensus of a 0.9 percent drop and after an 8.4 percent plunge in January. It was the third straight month of falls in shipments, amid weakening global demand and the US-China trade dispute.
Imports slumped 6.7 percent to JPY 6.05 trillion, far more than market expectations of a 5.8 percent fall and following a revised 0.8 percent decline in the previous month. It was the biggest drop since November 2016, as purchases of mineral fuels plunged 6.3 percent on petroleum (-11.2 percent), petroleum products (-27.9 percent) and coal (-2.3 percent).
Japan's consumer price inflation inched lower to 0.2 percent year-on-year in January 2019 from 0.3 percent in the previous month and in line with market expectations. It was the lowest inflation rate since October 2017, amid further decreases in prices of food, transport and housing.
Prices of food dropped by 1.5 percent year-on-year in January, after a 1.1 percent fall in December and marking the second straight month of declines.
Annual core consumer inflation, which excludes fresh food, went up to 0.8 percent in January from a seven-month low of 0.7 percent in December and matching market consensus. The figure came in well below the Bank of Japan's target of 2 percent.
On a monthly basis, consumer prices rose by 0.3 percent in January, following a 0.2 percent drop in December and reaching the first monthly increase in three months.
Japan's unemployment rate rose in January from a month earlier, the government said in a report. According to the Ministry of Internal Affairs and Communications, the unemployment rate came in at at 2.5 percent in January, jumping 2.4 percent from December's reading.
Separately, the Ministry of Health, Labor and Welfare said the job availability ratio was flat in December at 1.63 from the previous month. The figure converts to there being 163 job openings for every 100 people seeking employment.
This reflects Japan's increasingly tight labor market as the nation's demographic crisis sees fewer working-aged people amid a rapidly graying population.
Economy of Russia
Industrial production in Russia increased 4.1 percent year-on-year in February of 2019, following a 1.1 percent rise in the previous month and well above market expectations of 1.5 percent. It was the highest gain in industrial activity since December of 2017, when it contracted by 1.7 percent. Output advanced faster for extraction of raw materials (5.1 percent from 4.8 percent in January) and rebounded for manufacturing (4.6 percent from -1 percent) and distribution of water (1.8 percent from -2.8 percent). Meanwhile, production fell for electricity, gas, steam & air conditioning supply (-1.1 percent from 1.3 percent). On a monthly basis, industrial output edged up 0.4 percent, after a 21.5 percent slump in January.
Russia’s trade surplus declined to USD 13.37 billion in January of 2019 from USD 16.92 billion in the corresponding month of the previous year. Exports fell 11.2 percent to USD 29.82 billion, dragged down by shipments to both non-CIS countries (-11.5 percent to USD 26.27 billion) and CIS countries (-9.2 percent to USD 3,56 billion). Meanwhile, imports decreased for the third straight month by 1.3 percent to USD 16,46 billion, as purchases from non-CIS countries edged down 0.9 percent to USD 14,62 billion and those from CIS countries went down 3.8 percent to USD 1,84 billion.
The annual inflation rate in Russia increased to 5.2 percent in February of 2019 from 5 percent in the previous month, in line with market expectations. It was the highest inflation rate since December of 2016, boosted by prices of food, non-food products and services. In January of 2019, the government raised VAT to 20 percent from 18 percent.
Within the goods component, food cost advanced 5.9 percent in February, following a 5.5 percent rise in January and prices of non-food products rose 4.6 percent, after a 4.5 percent gain in the previous month. In addition, services inflation picked up to 5.1 percent in February from 5 percent in January.
Annual core inflation rate climbed to 4.4 percent in February from 4.1 percent in the previous month. It was the highest rate since March of 2017.
On a monthly basis, consumer prices went up 0.4 percent, after a 1 percent rise in prior month and matching market consensus. Upward pressure came from all main categories: food (0.8 percent from 1.3 percent); non-food products (0.3 percent from 0.6 percent); and services (0.2 percent vs 1.1 percent).
Russia Unemployment rate stood at 4.9 percent in February of 2019, unchanged from the previous month, in line with market expectations and compared with last year’s 5.2 percent.
The number of unemployed fell by 12 thousand to 3.655 million in February from 3.667 million in the previous month. Compared with the previous year, unemployment fell by 153 thousand from 3.808 million.
Meanwhile, registered unemployment rose by 65 thousand to 0.798 million from 0.733 million a month earlier. Year-on-year, that number dropped by 1 thousand from 0.799 million.
Russia's real wages increased by 0.7 percent year-on-year in February, following an upwardly revised 1.1 percent advance in the previous month and higher than market expectations of a flat reading. Average nominal wages jumped 6 percent to RUB 43,030 while annual inflation rate rose to 5.2 percent, the highest level since December of 2016.