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World Economy Review - November 2009

Global business confidence has surged across virtually all geographies and industries and in particular in the US and the BRIC countries, according to the latest Business Outlook survey from KPMG International. The latest figures - - which reflect confidence in expected performance over the next 12 months - - suggest that recent signs of economic improvement are no flash in the pan and that a global recovery could now be well under way.
The survey findings, compiled by research firm Markit Economics on behalf of Big 4 accounting firm KPMG International, show confidence in future business activity running at +42.9 in manufacturing and +46.5 in services. For the US and the BRIC economies (Brazil, Russia, India and China) those figures rise to +54 and +54.1 respectively in manufacturing and +65.6 and +51.9 respectively in services. Similar numbers are posted for confidence around future new orders and business revenues. Despite all the cost pressures, even confidence around improved profits stands at +32.1 globally for manufacturing and +36.2 for services.
Prospects for increased employment in 12 months` time are slightly less rosy - - at +7.8 for manufacturing and +16.9 for services - - suggesting that the recovery has some way still to run before all companies start thinking about full recruitment once more.
Commenting on the results, Alan Buckle, Global Head of Advisory at KPMG, said: “The latest Business Outlook numbers clearly demonstrate that almost all of us have turned the corner in terms of economic recovery. In nearly all sectors and geographies, business leaders are expecting improvements in their earnings and their business environment. A strong majority sees business being better in 12 months time than now; something which is consistent with GDP forecasts.” “This represents a quite remarkable turnaround in business confidence; well above what we might have hoped for, especially in the U.S. Many people may find the extent of the optimism exhibited here somewhat surprising. However, it is also clear that problems still remain to be addressed in parts of Europe and in Japan.”
Across some of the key survey variables such as revenues, new orders, activity, profits and employment, the European countries within the survey under perform the global average by between eight and twenty points. Across both manufacturing and services sectors, Italy and the UK tend to be the best performers, with the latter almost certainly benefiting from currency issues over its Eurozone neighbors. In both Europe and Japan, manufacturers expect to continue shedding jobs over the next 12 months. Greece was the only country in which manufacturers expected activity to contract in the next 12 months.
The Japanese numbers are far less robust - - with half of their variables still in negative / pessimistic territory. Yet it could be argued that even this represents a minor triumph for a country still struggling with deflationary pressures.
KPMG says before the developed markets get too carried away with talk of their own revival, it is worth remembering that different economies have started this bounce back from very different points on the confidence scale. As the survey`s historic data shows, many Western companies which rather limped through the past few years were already some way behind their emerging market competitors whose spirits held up more robustly during the depths of the downturn - - and who now appear even more confident about the upturn.
According to Alan Buckle, this may well have major ramifications for the East versus West challenge which characterized the run-up to the credit crisis. He explained: “Before the recession, Western companies were facing an increasing competitive threat from the emerging economies. Two years later, their competitors already have their eyes firmly set on a growth agenda while Western businesses are only just beginning to recover. Therefore, the challenge of dealing with the competitive threat of the East has not gone away. In fact, it has been exacerbated.”
“The developing markets appear to hold the aces; robust local demand, strong business and government balance sheets and of course the cost advantages. So while in isolation, these results are comforting to businesses globally, it is clear that the threat to the West`s business supremacy has increased as a result of the last two traumatic years.”
The Business Outlook Survey is produced by Markit Economics on behalf of KPMG and is based on a survey of around 11,000 manufacturers and service providers that are asked to give their thoughts on future business conditions. The reports are produced on a tri-annual basis, with data collected in February, June and October. The current report is based on responses from around 6,200 companies.

Economy of The United States

US GDP grew by 2.8% in the third quarter of 2009, a sharp downward revision from the 3.5% rise the Commerce Department first reported. The 0.7 percentage point lower reading reflected an upward revision to imports and downward revisions to personal consumption expenditures and to nonresidential fixed investment, which were partly offset by an upward revision to exports. Economists were expecting third quarter GDP to be revised down to 2.9%.
Imports rose by 20.8% in the third quarter, more than the 16.4% first estimated. Consequently, imports ate 2.53 percentage points from total GDP, more than a half a percentage point more than in the first estimate. Consumer spending was sharply revised from a 3.4% rise to a 2.9% increase, adding .29 fewer percentage points to total GDP than first reported. Much of this revision was due to a downward revision to motor vehicle output.
Meanwhile, non-residential fixed investment fell 4.1%, much more than the 2.5% drop-off first reported. This factor subtracted .4 percentage points from total GDP, almost double what was first reported. Partly offsetting these downward factors was an upward revision to exports, from a 14.7% rise to a 17.0% rise, now the largest quarterly increase since 2007. Exports contributed 1.71 percentage points to total GDP, .22 pp more than what was first reported. The core Personal Consumption Expenditures (PCE) price index -- important to Federal Reserve policymaking because it strips out volatile food and energy prices -- rose 1.3% compared to the 1.4% first reported.
US industrial production rose for the fourth consecutive month in October, by 0.1%, less than the 0.4% economists were expecting, the Federal Reserve reported. The Fed also made a slight downward revision to September`s output gain, from 0.7% to 0.6%. Output, which now stands at a level of 98.6, is down 7.1% over the year. October`s increased output was due to a meager 0.3% increase in non-durable output, led entirely by gains in non-energy goods like chemicals. After three consecutive months of gains, durable output fell 1.4% in October, carried by a 2.0% decline in auto output. Within major industry groups, manufacturing output fell 0.1%, mining output fell 0.2%, while utilities jumped 1.6%. Capacity use in US factories rose to 70.7% in October, marking the fourth consecutive monthly increase. Economists were expecting capacity use to rise to 70.8% from the 70.5% unrevised rate reported for September.
The U.S. trade deficit widened in September by an unexpectedly large 18.2 percent, the most in more than 10 years, as oil prices rose for the seventh straight month and imports from China bounded higher, a U.S. government report showed.
The monthly trade gap grew to $36.5 billion, from a slightly revised estimate of $30.8 billion in August. Wall Street analyst had expected the shortfall to grow modestly in September to around $31.65 billion. * Both U.S. exports and imports had their best month since December 2008. But in a sign of renewed U.S. economic growth, imports grew 5.8 percent in September, the biggest monthly gain since March 1993, while exports rose 2.9 percent. * Imports of industrial supplies and materials showed the biggest gain, suggesting that U.S. manufacturers are ramping up for production.
The US unemployment rate fell in November to 10% from 10.2% in October, Labor Department figures show. Employers in November cut the lowest number of jobs since the recession began in December 2007. In all, 11,000 jobs went over the month. That was far fewer than the 130,000 expected by most analysts.
Consumer inflation rose nearly in line with economists` expectations by 0.3% in October, the Labor Department reported. Helped by energy price gains, CPI rose above the 0.2% expected, but consumer prices are still down an unadjusted 0.2% over the year.
Energy prices rose 1.5% in October, after increasing 0.6% last month. Within the energy component, fuel prices rose 6.3%, the largest monthly increase since June 2008. Meanwhile, food prices rose 0.1% with price gains in dairy products (1.0%) outweighing price declines in meats (-0.2%), fruits and vegetables (-0.7%) and nonalcoholic beverages (-0.2%).
In October, core inflation, which strips out volatile food and energy prices, rose 0.2% for the second month, above the 0.1% economists were expecting. Most of the gains were due to increases in transportation indices with new vehicle prices rising 1.6% and used vehicle prices rising 3.4%, it`s third month of consecutive substantial increases. Over the year, core inflation has risen an unadjusted 1.7%. Both real average weekly earnings and average hourly earnings fell 0.1% from September to October.

Economy of The European Union

GDP increased by 0.4% in the euro area (EA16) and by 0.2% in the EU27 during the third quarter of 2009, compared with the previous quarter, according to flash estimates published by Eurostat, the Statistical Office of the European Communities. In the second quarter of 2009, growth rates were -0.2% in the euro area and -0.3% in the EU27. Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 4.1% in the euro area and by 4.3% in the EU27 in the third quarter of 2009, after -4.8% and -4.9% respectively in the previous quarter.
In September 2009 compared with August 2009, seasonally adjusted industrial production grew by 0.3% in the euro area (EA16) and by 0.2% in the EU27. In August production increased by 1.2% and 0.8% respectively. In September 2009 compared with September 2008, industrial production declined by 12.9% in the euro area and by 12.1% in the EU27.
The first estimate for the euro area (EA16) trade balance with the rest of the world in September 2009 gave a 3.7 bn euro surplus, compared with -6.0 bn in September 2008. The August 20092 balance was -2.3 bn, compared with -10.8 bn in August 2008. In September 2009 compared with August 2009, seasonally adjusted exports rose by 5.5% and imports by 1.1%.
The first estimate for the September 2009 extra-EU27 trade balance was a 11.2 bn euro deficit, compared with -24.5 bn in September 2008. In August 20092 the balance was -12.0 bn, compared with -28.5 bn in August 2008. In September 2009 compared with August 2009, seasonally adjusted exports rose by 3.4% and imports by 2.2%.
Euro area annual inflation is expected to be 0.6% in November 2009 according to a flash estimate issued by Eurostat, the Statistical Office of the European Communities. It was -0.1% in October.
The euro area (EA16) seasonally-adjusted unemployment rate was 9.8% in October 2009, the same as in September. It was 7.9% in October 2008. The EU27 unemployment rate was 9.3% in October 2009, compared with 9.2% in September4. It was 7.3% in October 2008.
Eurostat estimates that 22.510 million men and women in the EU27, of whom 15.567 million were in the euro area, were unemployed in October 2009. Compared with September, the number of persons unemployed increased by 258 000 in the EU27 and by 134 000 in the euro area. Compared with October 2008, unemployment went up by 5.002 million in the EU27 and by 3.149 million in the euro area.

Economy of Asia

Japan`s economy flexed more muscle than expected in the third quarter, as rekindled demand at home and abroad fueled its largest expansion in more than two years. Real gross domestic product grew at an annual pace of 4.8 percent in the July-September period, the government said, beating even the most bullish of predictions. Kyodo news agency had forecast an average annualized increase of 2.6 percent based on its survey of economists.
GDP, or the total value of the nation`s goods and services, has climbed for two straight quarters and recorded its fastest acceleration since a 5.7 percent jump in the first quarter of 2007. In the April-June quarter, GDP rose at a revised annual pace of 2.7 percent.
On a quarterly basis, GDP was up 1.2 percent in July-September from the previous three-month period, according to the Cabinet Office`s preliminary data. A 1.6 percent increase in capital spending by companies accounted for a big chunk of that growth. Massive outlays by governments around the world have spurred demand, particularly in China and the rest of Asia. Exports jumped 6.4 percent from the April-June period, the Cabinet Office said.
Japanese industrial production rose 0.5 per cent in October when compared to the previous month, delivering a result that was much lower than economists had expected. Tokyo said the result marked the eighth month of gains, but the rise was much smaller than the 2.5 per cent increase that had been tipped by economists surveyed by Dow Jones Newswires and the Nikkei. The figure was also lower than the revised 2.1 per cent increase in September, the Ministry of Economy, Trade and Industry said. Manufacturers polled by the ministry said they expected their output to rise 3.3 per cent in November and register an increase of 1 per cent in December. The jobless rate unexpectedly fell to a six-month low of 5.1 percent last month, the statistics bureau said last week. The gauge has been declining since reaching a postwar high of 5.7 percent in July. Consumer prices excluding fresh food tumbled 2.2 percent, an eighth monthly drop.
Japan`s industrial output rose 1.4 percent in September and manufacturers forecast further rises in the following two months, a sign that a recovery in the world economy continues to propel the export-driven Japanese economy.
A recovery in factory production has been a major driving force in turning around the Japanese economy in April-June from its deepest recession in many decades. The rise in September output was smaller than the 1.6 percent increase in August but above the 1.0 percent rise expected by economists, according to the median estimate of a Reuters survey.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect output to rise 3.1 percent in October and increase 1.9 percent in November. Output is growing firmly, supported by the economic expansion in Asia. Recently, export growth is broadening to various products such as machines.
Japan`s consumer prices fell at a near record pace in October, reinforcing the government`s concern that deflation will hamper the economy`s recovery from its worst postwar recession. Prices excluding fresh food slid 2.2 percent from a year earlier after dropping 2.3 percent in September, the statistics bureau said today in Tokyo. That matched the median estimate of 26 economists surveyed by Bloomberg News. Eight months of falling prices may intensify political pressure on the Bank of Japan to take action to combat deflation, which the government last week singled out as a threat to the world`s second-largest economy.
Japan`s unemployment rate in October unexpectedly fell for a third month, a sign that the worst may be over for the labor market. The jobless rate declined to 5.1 percent, the statistics bureau said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was 5.4 percent. The rate has been declining since reaching a postwar high of 5.7 percent in July.

Economy of Russia

Russian GDP fell an estimated 8.9% year-on-year in the third quarter of 2009, the Federal State Statistics Service (Rosstat) said. This is not as severe as the 9.4%-drop forecast by the Russian Economic Development Ministry. The rate of GDP decline slowed from 10.9% in Q2 2009 and 9.8% in Q1 2009. GDP grew 6% in Q3 2008, 7.4% in Q2 2008 and 8.7% in Q1 2008. Rosstat estimates that GDP grew 13.9% on a seasonally adjusted basis in Q3 2009 compared with Q2 2009.
Rosstat did not compare GDP for January-September 2009 with the same period of last year, however the Econ Ministry has estimated the economy shrank 10% year-on-year in the nine months. Given the latest figures, it could be assumed GDP fell 9.8%-9.9% in the nine months. The Econ Ministry has said GDP on a seasonally adjusted basis has been positive since June 2009. Growth slowed to 0.1% on this basis in August but accelerated to 0.5% in September, driven by agriculture and manufacturing. Seasonally adjusted GDP grew 0.6% in Q3 compared with Q2.
The Econ Ministry says in its official forecast that GDP could fall 8.5% this year as a whole, but is not ruling out a drop of 8%. Analysts said in a consensus forecast for Interfax at the end of October that they thought a drop of 7.1% was more likely.

www.ereport.ru - 04.12.2009 21:04:07