World Economy Review - November 2019
The OECD trimmed its 2020 global economic growth forecast and said it did not see a strong rebound in 2021 owing to risks stemming from trade tensions.
The Paris-based Organization for Economic Co-operation and Development now estimates that business activity around the world will expand by 2.9 per cent next year, a decline of 0.1 percentage points from a previous forecast issued in September.
In 2021, the OECD, which groups the world`s wealthiest nations, sees global economic growth edging back up to 3.0 per cent, according to its November 2019 Economic Outlook.
OECD chief economist Laurence Boone noted that "for the past two years, global growth outcomes and prospects have steadily deteriorated, amidst persistent policy uncertainty and weak trade and investment flows."
She said that while central banks had taken decisive and timely monetary decisions that partly offset negative effects of trade tensions, most governments had not done so on a fiscal level, for example by investing in long-term projects to improve infrastructure, advance digitalization of their economies and limit climate change.
Owing to "persistent policy uncertainty and weak trade and investment flows," she said the OECD now saw the global economy expanding at "the weakest rate since the global financial crisis" erupted in 2007.
The US economy, the world`s biggest, "is expected to slow to 2.0 percent by 2021, while growth in Japan and the euro area is expected to be around 0.7 and 1.2 percent respectively."
In China, the second biggest economy worldwide, growth was forecast to "continue to edge down, to around 5.5 percent by 2021," Boone said. Other emerging-market economies are expected to recover "only modestly," she added.
Economy of the United States
The US economy grew faster than initially expected in the third quarter, revised GDP estimates from the Bureau of Labor Statistics showed. The economy expanded by 2.1% between July and September, more than the initial reading of 1.9%, and more than the 2% growth rate in the second quarter. The last time it grew at a pace of less than 2% in the final quarter of 2018. America kicked off the year with buoyant growth of 3.1% in the first quarter, but then slowed down. Capital Economics lifted its GDP growth forecast for the fourth quarter to 1.5%, from 1% before.
U.S. manufacturing output rebounded more than expected in November, as the end of an almost six-week strike at General Motors plants boosted auto production. The Federal Reserve said that manufacturing production rose 1.1% last month after a downwardly revised 0.7% fall in October. Industrial output also rose 1.1% in November after a downwardly revised drop of 0.9% in October. Excluding motor vehicles and parts, overall industrial production and manufacturing output in November rose 0.5% and 0.3% respectively.
Economists polled by Reuters had forecast overall manufacturing output would rise 0.7% and industrial output would increase 0.8% in November. Production at factories still fell 0.8% in November on a year-on-year basis. There was a 12.4% jump in the production of motor vehicles and parts in November. Overall, production rose 2.1% for consumer goods and 1.7% for business equipment, the Fed said. Utilities output increased 2.9% compared to a decline of 2.4% in the previous month.
With overall industrial output rising, capacity utilization, a measure of how fully firms are using their resources, increased 0.7 percentage point to 77.3% in November from a downwardly revised 76.6% in October.
The nation`s trade deficit dropped almost 8% in October to a 16-month low, largely because of lower imports from China tied to the ongoing U.S. trade dispute with the Asian giant. The deficit slid to $47.2 billion from a revised $51.1 billion in the prior month, the government said. If it persists through December, the smaller gap could give a boost to gross domestic product in the fourth quarter. Economists polled by MarketWatch had forecast a $48.5 billion gap.
Imports fell 1.7% to $254.3 billion. The U.S. imported fewer drugs, cell phones, electronics, clothing and toys and other goods, much of it from China. Imports of Chinese goods shrank by $1.8 billion to $35.3 billion. Exports dipped a smaller 0.2% to $207.1 billion. Shipments of drugs, airplane engines and autos all decreased.
U.S. consumer prices rose more than expected in November, which could further support the Federal Reserve`s intention not to cut interest rates again in the near term after reducing borrowing costs three times this year. The Labor Department said its consumer price index increased 0.3% last month as households paid more for gasoline. The CPI advanced 0.4% in October. In the 12 months through November, the CPI rose 2.1% after gaining 1.8% in October. Economists polled by Reuters had forecast the CPI climbing 0.2% in November and rising 2.0% on a year-on-year basis.
Excluding the volatile food and energy components, the CPI rose by 0.2%, matching October`s increase. The so-called core CPI was up by an unrounded 0.2298% last month compared to 0.1572% in October. It was lifted by gains in healthcare and prices of used cars and trucks, recreation and hotel and motel accommodation. In the 12 months through November, the core CPI increased 2.3% after a similar gain in October.
The unemployment rate in US decreased to 3.5 percent in November 2019 from 3.6 percent in the previous month while markets had expected it to be unchanged at 3.6 percent. The number matched the September figure which was the lowest since 1969. Over the month, the number of unemployed persons decreased by 44,000. The labor force participation rate edged down to 63.2 percent from 63.3 percent in October.
Among the major worker groups, the unemployment rates for adult men (3.2 percent), adult women (3.2 percent), teenagers (12.0 percent), Whites (3.2 percent), Blacks (5.5 percent), Asians (2.6 percent), and Hispanics (4.2 percent) showed little or no change in November.
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 third quarter of 2019, compared with the previous quarter, according to an estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2019, GDP had grown by 0.2% in both zones.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 1.2% in the euro area and by 1.4% in the EU28 in the third quarter of 2019, after also +1.2% and +1.4% respectively in the previous quarter.
In October 2019 compared with September 2019, seasonally adjusted industrial production fell by 0.5% in the euro area (EA19) and by 0.4% in the EU28, according to estimates from Eurostat. In September 2019, industrial production fell by 0.1% in the euro area and rose by 0.1% in the EU28. In October 2019 compared with October 2018, industrial production decreased by 2.2% in the euro area and by 1.7% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in October 2019 was 217.9 billion, an increase of 4.1% compared with October 2018 (209.3 bn). Imports from the rest of the world stood at 189.9 bn, a fall of 3.2% compared with October 2018 (196.1 bn). As a result, the euro area recorded a 28 bn surplus in trade in goods with the rest of the world in October 2019, compared with +13.2 bn in October 2018. Intra-euro area trade fell to 174.9 bn in October 2019, down by 1.4% compared with October 2018.
The first estimate for extra-EU28 exports of goods in October 2019 was 190.1 billion, up by 5.6% compared with October 2018 (180.0 bn). Imports from the rest of the world stood at 187.8 bn, down by 0.1% compared with October 2018 (188.0 bn). As a result, the EU28 recorded a 2.2 bn surplus in trade in goods with the rest of the world in October 2019, compared with a deficit of 8 bn in October 2018. Intra-EU28 trade fell to 322.0 bn in October 2019, -0.7% compared with October 2018.
The euro area annual inflation rate was 1.0% in November 2019, up from 0.7% in October. A year earlier, the rate was 1.9%. European Union annual inflation was 1.3% in November 2019, up from 1.1% in October. A year earlier, the rate was 2.0%. These figures are published by Eurostat.
The lowest annual rates were registered in Italy, Portugal (both 0.2%) and Belgium (0.4%). The highest annual rates were recorded in Romania (3.8%), Hungary (3.4%), Slovakia (3.2%) and Czechia (3.0%). Compared with October, annual inflation fell in five Member States, remained stable in two and rose in twenty. In November, the highest contribution to the annual euro area inflation rate came from services (+0.82 percentage points, pp), followed by food, alcohol & tobacco (+0.37 pp), non-energy industrial goods (+0.10 pp) and energy (-0.33 pp).
The euro area (EA19) seasonally-adjusted unemployment rate was 7.5% in October 2019, down from 7.6% in September 2019 and from 8.0% in October 2018. This is the lowest rate recorded in the euro area since July 2008. The EU28 unemployment rate was 6.3% in October 2019, stable compared with September 2019 and down from 6.7% in October 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, the statistical office of the European Union.
Eurostat estimates that 15.583 million men and women in the EU28, of whom 12.334 million in the euro area, were unemployed in October 2019. Compared with September 2019, the number of persons unemployed decreased by 29 000 in the EU28 and by 31 000 in the euro area. Compared with October 2018, unemployment fell by 939 000 in the EU28 and by 761 000 in the euro area.
Economy of Japan
Japan`s economy grew an annualized 1.8% in July-September, much more than the initial estimate of a 0.2% expansion, revised data from the Cabinet Office showed. The revised figure for gross domestic product beat economists` median forecast for a 0.7% rise in a Reuters poll. On a quarter-on-quarter basis GDP expanded 0.4%, compared with a 0.1% growth in the initial reading and a median forecast of 0.2% growth.
Industrial production in Japan declined by 4.5 percent month-over-month in October, compared to a preliminary reading of a 4.2 percent fall and after a 1.7 percent gain in the previous month.
That was the steepest decline in industrial activity since March 2011, as output fell for general-purpose machinery (-14.5 percent vs 11.4 percent in September); motor vehicles (-7.9 percent vs -1.3 percent): business-oriented machinery (-6.8 percent vs 3.7 percent); production machinery (-6.4 percent vs 8 percent) and electrical machinery (-5.5 percent vs 5.5 percent). In contrast, production grew for both electronic parts and devices (0.9 percent vs -1.8 percent), and petroleum and coal products (1.8 percent vs -0.8 percent).
On an annual basis, industrial output shrank 7.7 percent in October, after a 1.3 percent advance in September.
Japan`s trade deficit narrowed sharply to JPY 82 billion in November 2019, from JPY 739 billion a year earlier and compared to market expectations of JPY 369 billion. Imports decreased by the most in nearly three years as consumption weakened after October`s sales tax hike, while exports dropped for the 12th consecutive month, amid declining shipments to China and the US.
Exports declined 7.9 percent from a year earlier to JPY 6.38 trillion, marking the longest run of declines in exports since a 14-month stretch to November 2016 and compared to market consensus of 8.6 percent drop. Imports fell 15.7 percent to JPY 6.46 trillion, their biggest decline since October 2016, and compared to market forecasts of a 12.7 percent decrease.
Japan`s annual core consumer inflation ticked up only marginally in October despite the boost from a sales tax hike during the month, suggesting weak household sentiment is keeping companies from passing on the higher costs.
The nationwide core consumer price index (CPI), which includes oil costs but excludes volatile fresh food prices, rose 0.4% in October from a year earlier, government data showed. That matched a median market forecast and followed a 0.3% increase in September.
Excluding the impact of the sales tax hike rolled out in October and the introduction of free child-care, annual core consumer inflation was 0.2% in October, slowing from 0.3% in September.
Japan`s unemployment rate in October was unchanged from a month earlier amid the nation`s demographic crisis comprising a rapidly aging and shrinking population, the government said. According to the Ministry of Internal Affairs and Communications, the unemployment rate in the recording period stood at 2.4 percent, with the figure hovering close to a 26-year low of 2.2 percent logged earlier this year.
In the recording period, according to the ministry, people in work hit a fresh record at 67.87 million, with the numbers of females in work also marking a new record at 30.37 million. The figures were the highest since comparable data became available in 1953, the statistic bureau said. As for the job availability ratio, the Ministry of Health, Labor and Welfare said separately it was unchanged from September in the recording period at 1.57. This equates to their being 157 job openings for every 100 people seeking employment.
Economy of Russia
Russia`s economic growth picked up in the third quarter and slightly exceeded market expectations thanks to a boost from an increase in gas exports, the Federal Statistics Service said. The statistics service Rosstat said gross domestic product grew by 1.7% in the third quarter of 2019 in year-on-year terms, up from 0.9% in the second quarter. Analysts polled by Reuters had on average expected GDP to grow by 1.6%, while the central bank had forecast it at 0.8%-1.3%.
Russia`s industrial production growth slowed sharply to 0.3 percent year-on-year in November 2019, the weakest since December 2017, from 2.6 percent in the previous month and well below market forecasts of 2.6 percent. Manufacturing output edged up 0.1 percent (vs 3.7 percent in October) and production and distribution of electricity, gas was unchanged (vs 2.5 percent in October), while distribution of water, sewage slumped 8.9 percent (vs -6.7 percent in October). Meanwhile, extraction of raw materials grew 1.4 percent, faster than 0.9 percent in the previous period. On a monthly basis, industrial output was down 2.5 percent.
Russia`s trade surplus shrank to USD 12.42 billion in October 2019 from USD 12.42 billion a year earlier, slightly above market expectations of USD 19.81 billion. Exports fell for the sixth straight month by 12.6 percent to USD 36.10 billion, due to lower shipments to both non-CIS countries (-12.3 percent) while those to CIS countries edged up (-14.3 percent). Meanwhile, imports jumped 10.2 percent to USD 23.68 billion, boosted by purchases from non-CIS countries (+11.4 percent).
Russia`s annual inflation fell further to 3.5 percent in November 2019 from 3.8 percent in the previous month and below market expectations of 3.6 percent. That was the lowest inflation rate since October 2018, due to lower prices of both food and non-food products.
Food prices increased 3.7 percent in November, compared to 4.2 percent in October, with upward pressure coming from fruits and vegetables (2.8 percent), bread and bakery products (7 percent), meat and poultry (1.3 percent), fish and seafood (5.4 percent), and milk and dairy products (6.4 percent). Also, non-food products cost rose 3.1 percent (vs 3.2 percent in October) while services prices advanced 3.9 percent (vs 3.8 percent in October).
Annual core inflation rate eased to 3.5 percent in November, the lowest since November 2018. On a monthly basis, consumer prices edged up 0.3 percent, following a 0.1 percent gain in October. Food prices advanced faster (0.5 percent vs 0.2 percent) and services cost rebounded (0.1 percent vs -0.2 percent) while non-food products prices slowed (0.2 percent vs 0.3 percent).
Russian unemployment rate increased to 4.6 percent in October 2019 from 4.5 percent in the previous month and in line with market expectations. It was the highest jobless rate since April, as the number of unemployed rose by 110 thousand to 3.48 million from 3.37 million in the previous month. Compared with the previous year, unemployment decreased by 130 thousand from 3.61 million. Meantime, registered unemployment came in at 0.645 million, lower than September`s 0.666 million but above last year`s 0.631 million.