World Economy Review - March 2014
Real gross domestic product (GDP) growth rate in the Organization for Economic Cooperation and Development (OECD) area slowed to 0.5 percent in the fourth quarter of 2013 from 0.7 percent the previous quarter as the buildup in inventories in Europe seen in the third quarter unwound.
“Destocking reduced GDP growth by 0.1 percentage point in the fourth quarter. The contribution from private consumption picked up to 0.4 percentage point, with rebounding net exports contributing a further 0.2 percentage point,” the OECD said. “The contribution from gross fixed capital formation fell marginally to 0.1 percentage point from 0.2 percentage point in the previous quarter.”
In all major European economies, destocking weighed down on growth, in part unwinding large buildups seen in the previous quarter.
In the United Kingdom, the main contributor to its GDP growth of 0.7 percent was a rebound in net exports, which stood at 1.0 percentage point. Investment and private consumption also provided positive contributions of 0.3 and 0.2 percentage points, respectively. However, significant unwinding of the stocks buildup in the previous quarter dragged down overall GDP growth by minus 0.8 percentage point.
In Japan, investment continued to be the main driver of its GDP growth of 0.3 percent, contributing 0.3 percentage point to the growth. Private consumption and government consumption followed, contributing 0.2 and 0.1 percentage points to the growth, respectively. “Net exports continued to offset these positive contributions, reducing them by 0.5 percentage point, the same rate as in the previous quarter.”
In the United States, the main contributor to overall GDP growth of 0.7 percent was private consumption with 0.6 percentage point, followed by net exports with 0.2 percentage point. “A slowdown in government consumption, which contributed minus 0.2 percentage point, partially reduced the country`s GDP growth.”
In Germany "a rebound in the contribution from net exports (of 1.1 percentage points) was the main driver of overall GDP growth of 0.4 per cent" but destocking was a significant drag to the extent of 0.8 percentage points. In France, private consumption and net exports contributed to growth of 0.3 per cent, but destocking reduced growth by 0.3 percentage points.
Economy of the United States
The economy grew more briskly than the government previously estimated in the fourth quarter on stronger consumer spending, among other factors. The nation`s gross domestic product in the last three months of 2013 increased at a 2.6% annual rate, up from the previous estimate of 2.4%, the Commerce Department said. That`s the government`s third and final estimate of fourth-quarter growth. Economists had estimated that today`s revision would show 2.7% growth. For all of 2013, the economy grew at a 2.6% rate, slightly more than the 2.5% previously estimated.
Consumer spending increased at a 3.3% annual pace, partly on stronger health care outlays, up from the previous 2.6% estimate. Also, state and local government spending and exports rose more rapidly than initially thought. Business equipment expenditures -- a key gauge of companies` appetite for capital spending -- also picked up more than previously estimated.
Industrial production increased 0.6 percent in February after having declined 0.2 percent in January. In February, manufacturing output rose 0.8 percent and nearly reversed its decline of 0.9 percent in January, which resulted, in part, from extreme weather. The gain in factory production in February was the largest since last August. The output of utilities edged down 0.2 percent following a jump of 3.8 percent in January, and the production at mines moved up 0.3 percent. At 101.6 percent of its 2007 average, total industrial production in February was 2.8 percent above its level of a year earlier. The capacity utilization rate for total industry increased in February to 78.8 percent, a rate that is 1.3 percentage points below its long-run (1972–2013) average.
The US trade deficit increased sharply in February as imports rose and exports tumbled amid signs of slowing growth in China and Europe`s tepid recovery, the Commerce Department said. The nation`s trade gap in goods and services with the rest of the world widened to a seasonally-adjusted US$42.3 billion, from an upwardly revised US$39.3 billion in January. The shortfall has increased for three months in a row. Analysts on average had expected a smaller increase to US$39.3 billion. The January trade deficit was previously reported at US$39.1 billion.
In February, imports increased by US$1.0 billion from January to US$232.7 billion. The increase was led by imports of services, including payments for the rights to broadcast the 2014 Winter Olympics Games. Exports fell by US$2.0 billion to US$190.4 billion, mostly due to a fall in goods exports, including industrial supplies and capital goods. The US trade deficit for the first two months of 2014 declined 4.4 percent from a year ago.
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in February on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported. Over the last 12 months, the all items index increased 1.1 percent before seasonal adjustment.
An increase in the food index accounted for more than half of the all items increase in February. The food index rose 0.4 percent in February, driven by a 0.5 percent increase in the index for food at home, with four of the six major grocery store food group indexes increasing. The energy index declined, with a decrease in the gasoline index more than offsetting sharp increases in the fuel oil and natural gas indexes.
The index for all items less food and energy also rose 0.1 percent in February. An increase of 0.2 percent in the shelter index was the major contributor to the rise, but the indexes for medical care, airline fares, personal care, recreation, and new vehicles also increased. In contrast, the indexes for household furnishings and operations, apparel, used cars and trucks, and tobacco all declined in February.
The all items index increased 1.1 percent over the last 12 months; this compares to increases of 1.5 percent in December and 1.6 percent in January. The index for all items less food and energy rose 1.6 percent over the last 12 months. The energy index declined 2.5 percent over the same period, while the food index has increased 1.4 percent.
Total nonfarm payroll employment increased by 175,000 in February, and the unemployment rate was little changed at 6.7 percent, the U.S. Bureau of Labor Statistics reported. Employment increased in professional and business services and in wholesale trade but declined in information.
Both the number of unemployed persons (10.5 million) and the unemployment rate (6.7 percent) changed little in February. The jobless rate has shown little movement since December. Over the year, the number of unemployed persons and the unemployment rate were down by 1.6 million and 1.0 percentage point, respectively.
Among the major worker groups, the unemployment rates for adult men (6.4 percent), adult women (5.9 percent), teenagers (21.4 percent), whites (5.8 percent), blacks (12.0 percent), and Hispanics (8.1 percent) showed little or no change in February. The jobless rate for Asians was 6.0 percent (not seasonally adjusted), about unchanged over the year.
Economy of the European Union
GDP rose by 0.3% in the euro area (EA17) and by 0.4% in the EU28 during the fourth quarter of 2013, compared with the previous quarter, according to second estimates published by Eurostat, the statistical office of the European Union. In the third quarter of 2013, GDP grew 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 0.5% in the euro area and by 1.1% in the EU28 in the fourth quarter of 2013, after -0.3% and +0.2% respectively in the previous quarter. Over the whole year 2013, GDP fell by 0.5% in the euro area and rose by 0.1% in the EU28.
In January 2014 compared with December 2013, seasonally adjusted industrial production fell by 0.2% in the euro area (EA18) and rose by 0.1% in the EU28, according to estimates from Eurostat. In December 2013 industrial production decreased by 0.4% in both zones. In January 2014 compared with January 2013, industrial production grew by 2.1% in the euro area and by 2.4% in the EU28.
The first estimate for the euro area (EA18) trade in goods balance with the rest of the world in January 2014 gave a 0.9 billion euro surplus, compared with -5.4 bn in January 2013. The December 2013 balance was +13.8 bn, compared with +9.7 bn in December 2012. These data are released by Eurostat.
The first estimate for the January 2014 extra-EU28 trade balance was a 13.0 bn euro deficit, compared with -17.7 bn in January 2013. In December 2013 the balance was +8.1 bn, compared with -2.4 bn in December 2012. In January 2014 compared with December 2013, seasonally adjusted exports rose by 0.6% and imports by 2.2%.
Euro area annual inflation is expected to be 0.5% in March 2014, down from 0.7% in February, according to a flash estimate from Eurostat. Looking at the main components of euro area inflation, services is expected to have the highest annual rate in March (1.1%, compared with 1.3% in February), followed by food, alcohol & tobacco (1.0%, compared with 1.5% in February), non-energy industrial goods (0.3%, compared with 0.4% in February) and energy (-2.1%, compared with -2.3% in February).
The euro area (EA18) seasonally-adjusted unemployment rate was 11.9% in February 2014, stable since October 2013. It was 12.0% in February 2013. The EU28 unemployment rate was 10.6% in February 2014, down from 10.7% in January 2014. It was 10.9% in February 2013. These figures are published by Eurostat.
Eurostat estimates that 25.920 million men and women in the EU28, of whom 18.965 million were in the euro area, were unemployed in February 2014. Compared with January 2014, the number of persons unemployed decreased by 65 000 in the EU28 and by 35 000 in the euro area. Compared with February 2013, unemployment decreased by 619 000 in the EU28, and by 166 000 in the euro area.
Economy of Japan
Japan`s economy grew 0.7 percent on-year in the fourth quarter of 2013, revised down from a preliminary reading of 1 percent due to a slowdown in capital spending and private consumption, Ministry of Economy, Trade and Industry (METI) said.
The revised number was also below forecasts by economists polled by Reuters for annualized growth of 1 percent. The October-December expansion in real gross domestic product, the total value of goods and services produced at home, translated into a 0.2 percent increase from the previous quarter.
The breakdown of the data showed private consumption rose 0.4 percent in the fourth quarter from the previous one, compared with an initial estimate of 0.5 percent. In the third quarter of 2013 Japan`s economy grew 0.9 percent on-year.
Japan`s factory output unexpectedly fell in February at the fastest pace in eight months, leaving the economy in a precarious position as an impending sales tax hike threatens to choke consumption and undermine the government`s revival plan. METI data showed industrial output fell 2.3 percent in February from the previous month, versus a 0.3 percent rise seen by economists in a Reuters poll. That followed a solid 3.8 percent gain in January, which was driven by brisk production of cars and household appliances.
Manufacturers surveyed by the ministry expect output to rise 0.9 percent in March but decrease 0.6 percent in April, the METI said, shrugging off the weak February reading as a one-off factor due to unusually heavy snow that disrupted factory activity.
Japan registered a goods trade deficit of ¥800.3 billion in February, a record for the month and up 3.5 percent from a year before, the government said, amid growing imports of fossil fuels after the Fukushima nuclear crisis. The trade balance posted the 20th straight month of red ink, the longest period since comparable data became available in January 1979, the Finance Ministry said in a preliminary report.
The value of imports rose 9.0 percent to ¥6.6003 trillion, up for the 16th consecutive month, with those of liquefied natural gas soaring 11.4 percent and liquefied petroleum gas 14.8 percent, the ministry said. Exports increased for the 12th month in a row, up 9.8 percent to ¥5.8000 trillion, as the yen dropped versus the U.S. dollar by 12.4 percent on year to ¥102.83 in the reporting month, but still failed to exceed imports.
Japan`s core consumer price index (CPI) rose 1.3 percent in February from a year earlier for the ninth straight month of expansion due to higher prices of energy and certain home appliances, the government said. The increase of core CPI, which excludes volatile fresh foods, followed a 1.3 percent rise in January and December, according to the Ministry of Internal Affairs and Communications. The gain was largely attributed to rising gasoline, electricity and gas prices, the ministry said.
The unemployment rate in Japan came in at a seasonally adjusted 3.6 percent in February, the Ministry of Internal Affairs and Communications said. That beat forecasts for 3.7 percent, which would have been unchanged from the January reading. The job-to-applicant ratio was 1.05, matching expectations and up from 1.04 in the previous month. The participation rate was 58.8 percent, unchanged from the previous month. The number of employed persons in February was 62.83 million, an increase of 410,000 or 0.7 percent on year.
Economy of Russia
The Federal Statistics Agency (Rosstat) reported earlier that GDP had grown by 2% in the fourth quarter of 2013 (1.4% in the previous forecast), by 0.8% in the first quarter of last year (initial projection was 1.6%); by 1% in the second quarter (1.2% projected earlier); and by 1.3% in the third quarter (1.2%). Russia`s GDP in 2013 was $1.9 trillion (66,7 trillion roubles). Rosstat had previously estimated GDP at $ 1.9 trillion (66,6 trillion roubles). Russia`s gross domestic product (GDP) may grow by about 0.8% in the first quarter of this year compared to 0.4% projected earlier, Ministry of Economic Development said.
Industrial Production in Russia increased 2.1 percent in February of 2014 over the same month in the previous year, Rosstat said. In January of 2014 industrial production declined by 0.2% compared with the same period a year earlier and 18.8% from the preceding month. In January-February of 2014 industrial production grew 0.9% from a year earlier compared with -1.5% in January-February of 2013.
The Ministry of Finance of the Russian Federation following the results of 2014 expects the rate of inflation which isn`t exceeding 6 percent, the head of department Anton Siluanov reported. "The factor of weakening of a ruble exchange rate can influence growth of import goods and as a whole inflation growth. As today we see that the ruble is in a corridor zone which is controlled by the Central bank, and there are no reasons to speak about any serious changes in the exchange rate of ruble, to say that inflation will change further under pressure of a change in the exchange rate of ruble, I wouldn`t become", - the minister said in interview.