World Economy Review - May 2019
The World Bank downgraded its forecast for the global economy in light of trade conflicts, financial strains and unexpectedly sharp slowdowns in wealthier countries.
The bank, an anti-poverty agency, expects the world economy to grow 2.6% this year. That would be the slowest calendar-year growth since 2016, and it is down from the 2.9% expansion the agency forecast in January.
The World Bank downgraded every major region of the world, though it kept its 2019 forecast for U.S. growth at 2.5%. In the 19 countries that use the euro currency, growth is forecast to slow to 1.2%, down from 1.8% last year and the 1.6% the World Bank expected in January.
Slowed by the Trump administration`s trade war with China, global trade is expected to expand just 2.6% this year, the weakest pace since the 2008 financial crisis.
The Trump administration and Beijing have imposed tariffs on hundreds of billions of dollars of each other`s imports in a clash over China`s drive to overtake American technological dominance. Their showdown has generated uncertainty for businesses that must decide whether and where to make investments, buy supplies and establish factories.
We are not pushing the panic button yet, said Ayhan Kose, a World Bank economist. But we are sending a message of a possibly deeper slowdown if trade hostilities persist.
This is high time for policymakers to find ways to resolve their differences, Kose said.
China, the world`s second-largest economy after the U.S., is forecast to grow 6.2%, which would be its weakest performance since 1990, when it was enduring the aftermath of a violent crackdown on pro-democracy protesters at Tiananmen Square.
The Japanese economy is predicted to eke out 0.8% growth, same as last year.
The Russian economy will grow by 1.2 percent in 2019, the World Bank said in at least the third downgrade. The Washington-based institution previously downgraded its forecast of Russia`s growth from 1.8 percent to 1.5 percent in early 2019, then again to 1.4 percent in April.
Its latest revision - made in the twice-yearly Global Economic Prospects report - is still more optimistic than Russia`s own projection of 0.8 percent.
Real GDP growth exceeded expectations in 2018, reaching 2.3 percent despite international sanctions. The bank had said the rise was largely due to "one-off effects in [non-residential] construction" and the football World Cup that Russia hosted last summer.
The World Bank still projects the Russian economy to grow by 1.8 percent next year and in 2021.
Economy of the United States
U.S. economic growth accelerated in the first quarter, but inflation pressures were much weaker than initially thought, supporting a recent decision by the Federal Reserve to suspend further rate increases. There are also signs that the export- and inventory-driven momentum faded early in the second quarter. Manufacturing, retail sales, housing and exports dropped in April.
Gross domestic product increased at a 3.1% annualized rate, the government said in its second reading of first-quarter GDP. That was slightly down from the 3.2% pace estimated last month. The economy grew at a 2.2% pace in the October-December period.
US industrial output rebounded in May due to a jump in utilities and recovery in auto production but the trend this year remains sluggish, the Federal Reserve said. Total industrial production rose 0.4 percent compared to prior month, double the gain economists expected, but was nullified by the 0.4 percent drop in April, according to the report.
Although output is up two percent compared to May 2018, it has been slipping the so far this year with a cumulative decline of nearly one percent from January to May.
The manufacturing sector especially is feeling the pain, with the 0.2 percent uptick in May failing to offset the 0.5 percent drop in April, with a decline of 1.5 percent in the first five months of the year.
The U.S. trade deficit decreased to $50.8 billion in April in a reading just before its tariff battle with China escalated, according to government data. The number matched analyst expectations and marked a decline from an upwardly revised $51.9 billion in March.
Overall for the month, exports fell $4.6 billion to $206.8 billion while imports declined $5.7 billion to $257.6 billion.
U.S. consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy could increase pressure on the Federal Reserve to cut interest rates this year.
The consumer price index edged up 0.1% last month as a rebound in the cost of food was offset by cheaper gasoline, the government said. The CPI gained 0.3% in April. In the 12 months through May, the CPI increased 1.8%, slowing from April`s 1.9% gain. Economists polled by Reuters had forecast the CPI would rise 0.1% in May and 1.9% year-on-year.
Excluding the volatile food and energy components, the CPI nudged up 0.1% for the fourth straight month. The so-called core CPI was held down by a sharp decline in the prices of used cars and trucks as well as motor vehicle insurance. In the 12 months through May, the so-called core CPI rose 2.0% after advancing 2.1% in April.
The US unemployment rate stood at 3.6 percent in May 2019, unchanged from the previous month`s 49-year low and matching market expectations. The number of unemployed increased by 64 thousand to 5.9 million while employment rose by 113 thousand to 156.8 million.
Among the major worker groups, the unemployment rates for adult men (3.3 percent), adult women (3.2 percent), teenagers (12.7 percent), Whites (3.3 percent), Blacks (6.2 percent), Asians (2.5 percent), and Hispanics (4.2 percent) showed little or no change in May.
Economy of the European Union
Seasonally adjusted GDP rose by 0.4% in the euro area (EA19) and by 0.5% in the EU28 during the first quarter of 2019, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the fourth quarter of 2018, GDP had grown by 0.2% 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 1.2% in the euro area and by 1.5% in the EU28 in the first quarter of 2019, after +1.2% and +1.5% respectively in the previous quarter.
In April 2019 compared with March 2019, seasonally adjusted industrial production fell by 0.5% in the euro area (EA19) and by 0.7% in the EU28, according to estimates from Eurostat. In March 2019, industrial production fell by 0.4% in the euro area and by 0.2% in the EU28. In April 2019 compared with April 2018, industrial production decreased by 0.4% in the euro area and by 0.1% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in April 2019 was 192.9 billion, an increase of 5.2% compared with April 2018 (183.4 bn). Imports from the rest of the world stood at 177.2 bn, a rise of 6.6% compared with April 2018 (166.3 bn). As a result, the euro area recorded a 15.7 bn surplus in trade in goods with the rest of the world in April 2019, compared with + 17.1 bn in April 2018. Intra-euro area trade rose to 163.7 bn in April 2019, up by 3% compared with April 2018.
The first estimate for extra-EU28 exports of goods in April 2019 was 171.1 billion, up by 10.2% compared with April 2018 (155.3 bn). Imports from the rest of the world stood at 169.7 bn, up by 8.6% compared with April 2018 (156.3 bn). As a result, the EU28 recorded a 1.4 bn surplus in trade in goods with the rest of the world in April 2019, compared with a deficit of 0.9 bn in April 2018. Intra-EU28 trade rose to 291.2 bn in April 2019, +1.5% compared with April 2018.
The euro area annual inflation rate was 1.2% in May 2019, down from 1.7% in April 2019. A year earlier, the rate was 2.0%. European Union annual inflation was 1.6% in May 2019, down from 1.9% in April 2019. A year earlier, the rate was 2.0%. These figures are published by Eurostat.
The lowest annual rates were registered in Cyprus (0.2%), Portugal (0.3%) and Greece (0.6%). The highest annual rates were recorded in Romania (4.4%), Hungary (4.0%) and Latvia (3.5%). Compared with April 2019, annual inflation fell in sixteen Member States, remained stable in five and rose in six.
In May 2019, the highest contribution to the annual euro area inflation rate came from services (+0.47 percentage points, pp), followed by energy (+0.38 pp), food, alcohol & tobacco (+0.29 pp) and non-energy industrial goods (+0.08 pp).
The euro area (EA19) seasonally-adjusted unemployment rate was 7.6% in April 2019, down from 7.7% in March 2019 and from 8.4% in April 2018. This is the lowest rate recorded in the euro area since August 2008. The EU28 unemployment rate was 6.4% in April 2019, stable compared with March 2019 and down from 7.0% in April 2018. 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 15.802 million men and women in the EU28, of whom 12.529 million in the euro area, were unemployed in April 2019. Compared with March 2019, the number of persons unemployed decreased by 108 000 in the EU28 and by 64 000 in the euro area. Compared with April 2018, unemployment fell by 1.394 million in the EU28 and by 1.147 million in the euro area.
Economy of Japan
Japan`s economy grew at an annualized rate of 2.2% in January-March, slightly more than the initial estimate of a 2.1% expansion, revised data from the Cabinet Office showed. The revised figure for gross domestic product compared with economists` median forecast of 2.1% growth in a Reuters poll.
Japan`s industrial output in April rose 0.6 percent from the previous month as firms increased production in the lead-up to the country`s annual Golden Week holiday, government data showed. The seasonally adjusted index of production at factories and mines stood at 102.8 against the 2015 base of 100, the Ministry of Economy, Trade and Industry said in a preliminary report.
The result, which followed a revised 0.6 percent decline in March, led the ministry to upgrade its assessment of production, saying it now "fluctuates indecisively," improving from its earlier label of production being "in a weak tone recently." Production of automobiles and their parts increased, while that of manufacturing equipment was also up.
Based on a poll of manufacturers, the ministry expects output to gain 5.6 percent in May and then fall 4.2 percent in June.
Japan posted a trade deficit of JPY 967 billion in May 2019 compared with a JPY 577 billion shortfall in the same month a year earlier and market expectations of a JPY 979 billion gap. Exports declined for a sixth straight month while imports edged down after climbing in April.
Exports fell 7.8% from a year earlier to JPY 5.84 trillion, compared to market consensus of a 7.7% drop and after a after a 2.4% fall in April. Imports declined 1.5 year-on-year to JPY 6.80 trillion, compared to market expectations of a 0.2 percent increase and following a 6.4 percent rise in the previous month.
Japan`s core consumer prices rose 0.8 percent in May from a year earlier due to higher energy costs, government data showed. The core consumer price index, excluding volatile fresh food prices, increased for the 29th straight month, but slowed from 0.9 percent growth in April, according to the Ministry of Internal Affairs and Communications.
So-called core-core consumer prices, which exclude both fresh food and energy items, gained 0.5 percent, the ministry said.
Japan`s unemployment rate edged down to 2.4 percent in April as workers had success in finding new positions in recent months amid improving labor conditions, government data showed.
The jobless rate fell 0.1 percentage point from March, according to the Ministry of Internal Affairs and Communications. The male unemployment rate declined 0.3 point from the previous month to 2.5 percent. The jobless rate for women rose 0.1 percent to 2.3 percent.
The job availability ratio stood at 1.63, unchanged from March, the Ministry of Health, Labor and Welfare said. The ratio means there were 163 openings for every 100 job seekers.
Economy of Russia
Russian GDP growth slowed to 0.2% in May from a revised rate of 1.7% in the previous month, the Russian Economy Ministry said. The Russian central bank said this month it had lowered its 2019 GDP forecast to 1.0-1.5% from 1.2-1.7%.
Russia`s industrial production growth slowed to 0.9 percent year-on-year in May 2019 from a near two-year high of 4.6 percent in the previous month and below market expectations of 1.5 percent. That was the smallest increase in output since a contraction was seen in December 2017, as manufacturing shrank 1.0 percent (vs 4.7 percent in April). In addition, growth slowed for both extraction of raw materials (2.8 percent vs 4.2 percent) and distribution of water, sewage (0.8 percent vs 7.4 percent). Production and distribution of electricity, gas rose at a faster 1.8 percent in May, compared to 1.0 percent in April.
Russia`s trade surplus narrowed to USD 13.71 billion in April of 2019 from EUR 14.99 billion in the corresponding month of the previous year. Exports decreased for the second straight month by 0.9 percent to USD 35.66 billion, dragged by shipments to non-CIS countries (-1.9 percent) while those to CIS countries went up 6.1 percent. Also, imports rose 4.7 percent to USD 21.95 billion, after falling for five consecutive months, boosted by purchases from both non-CIS countries (4.5 percent) and CIS countries (6 percent).
Inflation in Russia in May 2019 slowed 0.1 percentage points (pp) compared with April and amounted to 5.1% in annual terms, according to the Russian Central Bank.
The slowdown was due to a decline in the growth rate of non-food product prices, primarily due to the high base effect on the motor fuel market, the regulator explained.
At the same time, the monthly growth of consumer prices net of seasonal factors in May accelerated by 0.1 percentage points to 0.4%, due to an increase of the rate of rise in food prices. The growth rates of prices for services decreased, non-food products remained at the lowest level since August last year.
According to the forecast of the Central Bank, the annual inflation in 2019 will be 4.2-4.7%. In the future, it will be near 4%.
Russia unemployment rate fell to 4.5 percent in May 2019 from 4.7 percent in the previous month and below market consensus of 4.6 percent. It was the lowest jobless rate since September last year.
The number of unemployed dropped by 152 thousand to 3.402 million in May from 3.554 in the previous month. Compared with the previous year, unemployment decreased by 206 thousand from 3.608 million.
Meantime, registered unemployment came in at 0.776 million, lower than April`s 0.817 million but slightly above last year`s 0.730 million.
Russia`s real wages increased 2.8 percent from the previous year in May 2019, slowing from an upwardly revised 3.1 percent in the previous month but beating market expectations of a 1.5 percent rise. Average nominal wages advanced 8.1 percent to RUB 48,510.
25.06.2019 19:22:04