The Lastest Macroeconomic News
17.06.2014 14:32 IMF Cuts U.S. 2014 Growth Forecast to 2%
The International Monetary Fund, forecasting that U.S. inflation will sit below the Federal Reserve`s 2% target through 2017, said the central bank should keep its policy rate near zero even longer than investors now expect. In its annual review of the U.S. economy, the IMF cut its forecast for U.S. economic growth this year by 0.8 percentage point to 2%, citing a harsh winter, a struggling housing market and weak international demand for the country`s products. The fund maintained its 3% growth outlook for next year, saying a meaningful economic rebound is under way. Still, the IMF said significant slack remains in the economy and U.S. officials must do more to stimulate growth in the near term. At the same time, the U.S. must cut spending and raise revenue in the long term to avoid public debt overwhelming the country`s finances, the fund said. Even if inflation were to temporarily rise above the central bank`s target, the IMF said the Fed should be willing to accommodate higher price increases with the economy still well short of full employment. The fund warned that markets don`t seem to be adequately factoring in "substantive ambiguities" in the economic outlook that could force the Fed to adjust its monetary policies. "This sets up the risk, even with a successful and well-communicated increase in interest rates, for significant swings in market flows and prices in the months ahead," the IMF said. As part of its review of the U.S. economy, the IMF also weighed in on a host of other controversial topics. Among its recommendations, fund economists said the U.S. should hike the minimum wage to help cut poverty levels and "significantly increase" gasoline taxes to bulk up federal revenues.
14.06.2014 15:05 Euro zone robust April output boosts second-quarter GDP growth hopes
Euro zone industrial output rebounded with a twice-as-strong as expected monthly rise in April thanks to energy and non-durable goods production, official data showed, pointing to an acceleration of economic growth in the second quarter. Output in the 18 countries sharing the euro rose 0.8 percent on the month in April after a downwardly revised -0.4 percent drop in March. Economists had expected a 0.4 percent rise. Compared with the same period of 2013, production grew by a much stronger than expected 1.4 percent, against an upwardly revised 0.2 percent rise in March, previously reported as a 0.1 percent drop. Economists had expected 0.9 percent annual growth. The monthly production rise, strongest in five months, was mainly driven by a 2.5 percent rise in energy output, followed by a 2.1 percent increase in non-durable consumer goods output. Production of capital goods was the only sector showing a monthly decline, with a 0.1 percent drop. Output in Germany, the euro zone`s growth engine, edged up by a smaller-than-expected 0.2 percent on the month as the spring rebound turned out weaker than usual due to a mild winter, German economy ministry data showed. Outside the euro zone, Britain enjoyed its strongest annual growth in over three years in April, showing that the country`s economic expansion was becoming less reliant on consumer demand and the recovery was broadening.
08.06.2014 14:22 Now Joined to Russia, Crimea`s Economy Is Sliding Downhill
The geopolitical crisis touched off by Vladimir Putin`s annexation of Crimea seems to be easing. But for the 2 million residents of Crimea, another crisis is just beginning. Despite the peninsula`s cultural and historical ties with Russia, Ukraine has been its economic lifeline, supplying everything from food and banking services to Ukrainian vacationers, who accounted for 70 percent of Crimean tourism. As those connections have frayed or broken, Crimea faces deepening economic woes. The tourism industry has fallen off a cliff, the banking system is in turmoil, and prices are rising as Russia curbs shipments from Ukraine. Even McDonald`s has fled, closing its three restaurants on the peninsula. Russia has promised aid - including plans for a Las Vegas-style gambling zone in Crimea - but that won`t come quickly enough to avoid what Crimean Prime Minister Sergey Aksyonov has described as “temporary economic difficulties.” The blow to tourism has been especially severe. Hotels that normally would have been fully booked in May were barely breaking 10 percent occupancy, a Crimean tour-agency director said at a tourism trade show in Moscow last month, according to the Moscow Times. Crimea`s tourism ministry estimates that half the peninsula`s population draws some income from tourism. “We`ve lost a lot because of the unstable situation,” says Mikhail Buzhenkov, director of the Porto Mare hotel in the Black Sea coastal town of Alushta. Like other Crimean hoteliers, Buzhenkov hopes to lure back some Ukrainian visitors while attracting more guests from Russia. “People are starting to come,” he says, “but there`s a lot more work to be done.”
06.06.2014 14:30 World Bank: China`s economy to slow down to 7.6 per cent this year
The Chinese economy will grow at 7.6 per cent this year, a notch lower than last year`s 7.7 per cent, and the trend is likely to continue next year as well, a World Bank Economic update said. China`s growth will moderate over the medium term as the economy continues to rebalance gradually, it said. Growth is expected to slow to 7.6 per cent in 2014, and 7.5 per cent in 2015, from 7.7 per cent in 2013, it said. "The rebalancing will be uneven reflecting tensions between structural trends and near term demand management measures," said Chorching Goh, Lead Economist for China. As the slow down continued in the last two years, Chinese leaders are allaying fears of any crisis while they attempted to restructure the economy with a host of reforms to improve domestic consumption in order to reduce dependence on declining exports. "China is still in a significant period of strategic opportunity. We must boost our confidence, adapt to the new normal condition based on the characteristics of China`s economic growth in the current phase and stay cool-minded," Chinese President Xi Jinping had said last month. From the heydays double digit growth the world s second largest economy had declined to 7.7 per cent in both 2012 and 2013, the slowest pace since 1999 largely affected by the world economic crisis and declining exports due to global economic slowdown. China s new leadership headed by Xi ruled out massive stimulus similar to the one in 2008 which amounted to USD 645 billion to tide over the global economic crisis. Instead its focus this time is more on deepening reforms and opening up giving private sector bigger play. The World Bank s update said the slowdown in the first quarter reflected a combination of dissipating effects of earlier measures to support growth, a weak external environment, and tighter credit, especially for real estate, a World Bank press release said.
06.06.2014 14:26 Russian Inflation Fastest Since 2011 on Ruble Drop
Russian inflation accelerated last month to the fastest since August 2011, propelled by the ruble`s weakness and food prices. Consumer prices rose 7.6 percent from a year earlier after advancing 7.3 percent in April, the Federal Statistics Service in Moscow said in an e-mailed statement. That matched the median estimate of 21 economists in a Bloomberg survey. Prices rose 0.9 percent on the month. Runaway inflation has forced the hand of policy makers, leading them to raise interest rates twice since March even with the economy on the brink of recession. Sanctions by the U.S. and its allies over the conflict in Ukraine exacerbated capital flight, leading to the ruble`s decline. “We can see the effect of the ruble weakening that started in February,” Olga Sterina, an analyst at UralSib Capital in Moscow, said by phone before the release. “The central bank won`t lower rates until there is a noticeable inflation deceleration even as economic growth remains very slow.” The central bank, which targets 5 percent inflation, predicts it will be able to stabilize price growth in the second half, Chairman Elvira Nabiullina said in April. The Economy Ministry forecasts inflation of 6 percent by year-end and 5 percent by the end of 2015. The May consumer-price index was also driven by the cost of food products rising 9.5 percent. Pork prices rose after Russia banned imports of the meat from the European Union after an outbreak of swine fever in Lithuania and Poland. Non-food prices increased 5.1 percent.
30.05.2014 13:03 U.S. GDP Dropped 1% In The First Quarter 2014, Down From First Estimate
New data shows the U.S. economy contracted in the first quarter of this year, keeping pace with shifting expectations but down sharply from the prior - already disappointing - estimate. On Thursday, the Bureau of Economic Analysis` second estimate of real gross domestic product showed output produced in the U.S. declined at an annual rate of 1% in the first quarter of 2014. This is relative to fourth quarter 2013, when real GDP increased 2.6%. The estimate is down significantly from BEA`s 0.1% advance estimate released last month and makes Q1 the U.S. economy`s worst quarter in three years. However, economists were anticipating a downward revision and the major stock indices remained in the green immediately after the release indicating investors were also prepared for bad news. The revision, BEA explained in a release, was largely due to a greater than previously estimated decline in private inventories. The 1% decrease in real GDP reflected the negative contribution from private inventory investment as well as declining exports, declines in both residential and nonresidential fixed investment and lower local government spending. The rate was also negatively impacted by an increase in imports but partially offset by an increase in federal government spending (the first in a year and a half). The price index for gross domestic purchases - which measures prices paid by U.S. residents - increased 1.3% versus the 1.4% advance estimate and 1.5% growth in the fourth quarter. Real personal consumption expenditures increased by 3.1%, compared to the 3% advance estimate and an increase of 3.3% in the fourth quarter. BEA - a division of the Department of Commerce - will release its third and final Q1 GDP estimate on June 25.
29.05.2014 13:53 Bank of America raises Russia`s GDP growth forecast for 2015 after gas deal with China
Bank of America Corp. (BAC) has raised Russia`s GDP growth forecast for 2015 from 1.5% to 2.1% amid the gas deal with China, according to the company`s analytical report. The GDP growth forecast for the current year has been left at 0.9%. Meanwhile, Russia`s investments growth forecast has been raised from 0.4% to 4.3%. The 30 years gas deal with China worth $400 billion is so huge that it would likely have a substantial economic effect, the research says. According to BAC estimates, the expected capital expenditures at $55 billion will increase investments into the Russian economy for at least $5-6 billion annually, beginning from 2015. The gas deal may also enforce the ruble, if China pays $25 billion in advance, the report says. According to BAC forecast, by the end of 2014, the dollar rate will make 35.5 rubles, and by the end of 2015 - 36 rubles.
28.05.2014 14:05 In need of new oomph or How to make the rich world`s recovery stronger and safer
Economists expected 2014 to be the year in which the global expansion stepped up a gear. Instead, nearly five years into its recovery from a deep recession, the rich world`s economy still looks disappointingly weak. America`s GDP grew at an annualised rate of only 0.1% in the first quarter. Euro-area growth, at 0.8%, was only half the expected pace. Some of the weakness is temporary (bad weather did not help in America), and it is not ubiquitous: in Britain and Germany, for example, growth has accelerated, and Japan has put on a brief spurt. Most forecasters still expect the recovery to gain momentum during the year. But there are reasons to worry. The stagnation in several big European countries, notably Italy and France, is becoming more entrenched. Thanks to a rise in its consumption tax in April, Japan`s growth rate is set to tumble, at least temporarily. America`s housing rebound has stalled. Given that American expansions tend to be about five years long, the United States could find itself going into the next downturn without having had a decent upturn at all. What should be done to forestall that outcome? The standard answer is that central banks need to loosen monetary conditions further and keep them loose for longer. But if loose monetary conditions are a prerequisite for a more vigorous recovery, it is increasingly clear that on their own they are not enough. One way to address this risk is for central bankers to use regulatory tools to counter the build-up of asset-price excesses. Such a strategy would have two elements. One is to boost public investment in infrastructure. A second element ought to be a blitz of supply-side reforms. In addition to the obvious benefits of freer trade, every rich country has plenty of opportunities for reforms at home, from overhauling the regulations that inhibit house-building in Britain to revamping America`s ineffective system of worker training. Progress on these fronts would lead to stronger, stabler growth and would reduce the odds that the next recession begins with interest rates close to zero (making it particularly hard to fight).
24.05.2014 13:30 World Cup won`t lift Brazil`s economy
Hosting the World Cup might provide a small boost to Brazil, but it won`t be enough to snap the country`s economy out of its current funk. Once tipped as one of the brightest emerging economies, Brazil has seen growth fall off a cliff in recent quarters as long-term problems bubbled to the surface. Its workers are unproductive, infrastructure spending lags and protectionism remains in vogue. Elevated inflation has forced the central bank to hike rates several times, and the country`s credit rating was cut by Standard & Poor`s to one notch above junk in March. Brazil`s Bovespa stock market index has dropped more than 7% in the past year, falling faster than emerging market benchmarks. Enter the World Cup, the world`s biggest sporting event complete with millions of tourists and mega corporate sponsors. To capitalize on the spotlight, Brazil is spending an estimated $11.5 billion on new stadiums, transportation and airports. Seeking to justify the extravagance, politicians promised that the event would bring huge economic benefits and improved infrastructure. Many Brazilians are skeptical about these claims. Thousands took part in street protests and riots during last year`s Confederations Cup, the top soccer tournament in the Americas. Some said they were upset with lavish spending on sports events at the expense of the social safety net in a country beset with gross inequality. Brazilians are right to doubt the economic benefits of hosting the World Cup, according to a report by Moody`s Investors Service. The credit rating agency argues that new infrastructure spending associated with the event is small for the $2 trillion economy, and benefits to businesses will be fleeting. "We see little impact on Brazil considering the limited duration of the World Cup and the size of the country`s economy," Moody`s said.
23.05.2014 14:44 Russia`s industrial output rose by 2.4 percent in April
Russia`s industrial output rose by 2.4 percent in April, nearly triple the expected rate, surprising analysts after signs that Western sanctions imposed over the annexation of Crimea were weighing on the economy. The rise was spurred mainly by production of goods usually targeted at the domestic market, such as foodstuffs and textiles. Output of Russia`s main exports, such as oil and gas, was weaker, with oil production rising 1.3 percent and natural gas production falling 6.7 percent, compared to a year ago, data released by the State Statistics Service showed. Overall extraction of natural resources rose 1.1 percent, however, improving from 0.6 percent growth in March. Manufacturing output was up 3.9 percent and utilities down 1.9 percent. Production of some foods, such as butter, rose by nearly a third, while output of jackets was up by nearly two-thirds. Steel manufacturing rose modestly, with iron production up 1.5 percent in annual terms. But the auto industry saw mainly declines, with passenger car production falling 0.2 percent and down 28.2 percent for buses. The overall industrial output figure for April far outstripped the 0.9 percent growth expected by analysts polled by Reuters and a manufacturing poll done by HSBC, which saw manufacturing activity shrinking for the sixth month in a row.