World Economy Review - November 2017
The global economy improved in 2017 and will reach an eight-year high next year according to the Organization for Economic Co-operation and Development. But needs private investment to sustain growth into 2019.
The organization nudged up its estimate to 3.6 percent for this year from 3.5 percent in its last forecast to reach 3.7 percent in 2018.
Catherine Mann, OECD Chief Economist, says several factors contributed to the improved economy.
“First there has been a continued monetary policy accommodation,” she explains. “But perhaps some people don`t know that actually there is quite a bit of fiscal stimulus in the system and that is added to the growth. The third element is that trade has recovered and it`s moving along quite smartly right now.”
With its strongest growth in a decade, the euro area was also seen outpacing other major developed economies this year and was up on previous forecasts. The OECD forecasts growth of 2.4 percent for 2017 dropping to 2.1 percent in 2018.
“There is no question that 2017 is a much better year for the euro area,” says Mann. “What we would like to do is to ensure that the momentum that is in place right now continues through 2018 and 2019.”
But Brexit means Britain is missing out on global growth. The OECD`s 2017 growth forecast of 1.5 percent makes Britain the weakest economy in the G7.
`Well there is uncertainty and there is a timetable for resolution of those uncertainties,” says Mann. “What we need to do is get to the position of a close economic relationship between the UK and the EU, that is better for both of them.”
UK Banks though seem to be ready for the worst case scenario. For the first time since the financial crisis, all of the UK`s biggest lenders have passed the Bank of England stress tests.
“Informed by the stress tests at our own risk analysis, the Financial Policy Committee also judges that the banking system can continue to support the real economy even in the unlikely event of a disorderly Brexit,” said Bank of England governor, Mark Carney.
But the OECD says high consumer debt coupled with stagnant household income is still a major financial stability risk in the UK.
Economy of the United States
The US economy grew more than initially estimated in the third quarter, according to data released by the Commerce Department. Gross domestic product increased at an annual rate of 3.3%, according to a second estimate. This is up from 3.1% in the second quarter and the initial estimate of 3.0%, and ahead of consensus expectations for an upward revision to 3.2%. It also marks the best reading since the third quarter of 2014.
The upward revision was thanks in part to a stronger contribution from business investment and a smaller drag from State and local government expenditure. Excluding inventory investment, the economy grew at a 2.5% rate.
U.S. industrial production jumped a solid 0.9 percent in October as factory activity recovered from the impact of Hurricanes Harvey and Irma. The Federal Reserve says that manufacturing activity surged 1.3 percent last month. Many of the gains came from a sharp increase in the production of chemical and petroleum and coal products. Motor vehicles and metals also posted decent gains.
Mining activity slipped 1.3 percent in October as Hurricane Nate caused a brief decline in oil and gas drilling. Production at utilities rose 2 percent. Over the past year, industrial production has increased 2.9 percent.
The U.S. trade deficit increased more than expected in October, hitting a nine-month high as rising oil prices helped to boost the import bill, suggesting that trade could be a drag on growth in the fourth quarter.
The Commerce Department said the trade gap widened 8.6 percent to $48.7 billion. That was the highest level since January and followed an upwardly revised $44.9 billion shortfall in September. Economists polled by Reuters had forecast the trade deficit widening to $47.5 billion in October after a previously reported $43.5 billion deficit the prior month.
The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported.
The shelter index increased 0.3 percent and was the main factor in the seasonally adjusted all items increase. The energy index fell, as a decline in the gasoline index outweighed increases in other energy component indexes. The food index was unchanged over the month.
The index for all items less food and energy increased 0.2 percent in October. In addition to the shelter index, the indexes for medical care, used cars and trucks, tobacco, education, motor vehicle insurance, and personal care were among those that increased. The indexes for new vehicles, recreation, and apparel all declined.
The all items index rose 2.0 percent for the 12 months ending October, a smaller increase than the 2.2-percent increase for the period ending September. The index for all items less food and energy rose 1.8 percent over the past year, a slightly larger increase compared to the 1.7-percent increase for the 12 months ending September.
The U.S. added more jobs than forecast in November and the unemployment rate held at an almost 17-year low, though below-forecast wage gains suggested the labor market still has slack to absorb.
Payrolls rose 228,000, above the median economist estimate of 195,000, after a downwardly revised 244,000 advance, Labor Department figures showed. Average hourly earnings increased 2.5 percent from a year earlier, less than the 2.7 percent projection, and October`s figures were revised lower.
Economy of the European Union
Seasonally adjusted GDP rose by 0.6% in both the euro area (EA19) and the EU28 during the third quarter of 2017, compared with the previous quarter, according to a flash estimate published by Eurostat, the statistical office of the European Union. In the second quarter of 2017, GDP grew by 0.7% in both zones.
Compared with the same quarter of the previous year, seasonally adjusted GDP rose by 2.5% in both the euro area and the EU28 in the third quarter of 2017, after +2.3% and +2.4% respectively in the previous quarter.
In September 2017 compared with August 2017, seasonally adjusted industrial production fell by 0.6% in the euro area (EA19) and by 0.5% in the EU28, according to estimates from Eurostat, the statistical office of the European Union. In August 2017, industrial production rose by 1.4% in the euro area and by 1.7% in the EU28.
In September 2017 compared with September 2016, industrial production increased by 3.3% in the euro area and by 3.6% in the EU28.
The first estimate for euro area (EA19) exports of goods to the rest of the world in September 2017 was ˆ187.1 billion, an increase of 5.6% compared with September 2016 (ˆ177.2 bn). Imports from the rest of the world stood at ˆ160.7 bn, a rise of 5.1% compared with September 2016 (ˆ152.9 bn). As a result, the euro area recorded a ˆ26.4 bn surplus in trade in goods with the rest of the world in September 2017, compared with +ˆ24.3 bn in September 2016. Intra-euro area trade rose to ˆ157.6 bn in September 2017, up by 4.9% compared with September 2016. These data are released by Eurostat, the statistical office of the European Union.
The first estimate for extra-EU28 exports of goods in September 2017 was ˆ156.8 billion, up by 6.3% compared with September 2016 (ˆ147.4 bn). Imports from the rest of the world stood at ˆ153.7 bn, up by 3.2% compared with September 2016 (ˆ149.0 bn). As a result, the EU28 recorded a ˆ3.1 bn surplus in trade in goods with the rest of the world in September 2017, compared with a deficit of ˆ1.6 bn in September 2016. Intra-EU28 trade rose to ˆ287.8 bn in September 2017, +4.9% compared with September 2016.
Euro area annual inflation is expected to be 1.5% in November 2017, up from 1.4% in October 2017, according to a flash estimate from Eurostat, the statistical office of the European Union. Looking at the main components of euro area inflation, energy is expected to have the highest annual rate in November (4.7%, compared with 3.0% in October), followed by food, alcohol & tobacco (2.2%, compared with 2.3% in October), services (1.2%, stable compared with October) and non-energy industrial goods (0.4%, stable compared with October).
The euro area (EA19) seasonally-adjusted unemployment rate was 8.8% in October 2017, down from 8.9% in September 2017 and from 9.8% in October 2016. This is the lowest rate recorded in the euro area since January 2009. The EU28 unemployment rate was 7.4% in October 2017, down from 7.5% in September 2017 and from 8.3% in October 2016. This is the lowest rate recorded in the EU28 since November 2008. These figures are published by Eurostat, the statistical office of the European Union.
Eurostat estimates that 18.243 million men and women in the EU28, of whom 14.344 million in the euro area, were unemployed in October 2017. Compared with September 2017, the number of persons unemployed decreased by 111 000 in the EU28 and by 88 000 in the euro area. Compared with October 2016, unemployment fell by 2.074 million in the EU28 and by 1.473 million in the euro area.
Economy of Japan
Japan`s economy grew at a solid pace in the three months through September, according to an initial estimate, notching a seventh consecutive quarter of growth as exports helped compensate for underwhelming domestic demand.
A preliminary reading on gross domestic product from Japan`s Cabinet Office reported annualized growth of 1.4 per cent in the third quarter, down from a revised pace of 2.6 per cent in the second quarter (previously 2.5 per cent) but coming in just above a median forecast of 1.3 per cent from economists polled by Reuters.
Quarter-on-quarter GDP rose 0.3 per cent per cent, slowing from a 0.6 per cent rise in the quarter ended June.
Japan`s real gross domestic product in October inched up 0.2% from the month before, driven mainly by healthy exports, the Japan Center for Economic Research said.
Japan`s industrial production in October rose 0.5 percent from a month earlier, the Ministry of Economy, Trade and Industry said. The seasonally adjusted index of output at factories and mines stood at 103.0 against the base of 100 for 2010, the ministry said in a preliminary report.
The smaller-than-expected rise in factory output in the recording period comes on the heels of a revised 1.0 percent decline in September, the ministry said. Earlier polls by the ministry showed that manufacturers expected the output to rise 2.8 percent in November and 3.5 percent in December.
The index of industrial shipments, meanwhile, fell by 0.5 percent to 98.8 and that of inventories was up by 3.1 percent to 110.6, the ministry`s data showed for the recording period.
Japan`s export growth held steady in October, suggesting that brisk global demand for Japanese cars and electronics will likely carry its economic recovery into the current quarter. Ministry of Finance data showed that exports rose 14.0 percent year-on-year in October, led by shipments of cars to Australia and liquid-crystal device production equipment and raw materials for plastics to China. That compares with a 15.8 percent annual gain expected by economists following a 14.1 percent increase in September.
Japan`s imports rose 18.9 percent in the year to October, versus the median estimate for a 20.2 percent annual increase. It was the fastest annual increase since January 2014, pushed up by a weak yen and imports of crude oil, oil products and coal.
The resulting trade balance was a surplus of 285.4 billion yen in October versus the median estimate for a positive balance of 330.0 billion yen, a fifth straight surplus month.
Japan`s inflation rate increased in October for the 10th consecutive month, but still remained far below the Bank of Japan`s (BOJ) 2 percent inflation target, a government report showed.
According to the Ministry of Internal Affairs and Communications, the core consumer price index, which excludes fresh food prices because of their volatility, gained 0.8 percent on year in October. Stripping away the effect of fresh food and energy, consumer prices rose 0.2 percent in October from a year ago.
The latest increase comes on the heels of a 0.7 percent rise in the previous month, the statistics bureau said, marking the 10th successive monthly rise for the index.
The unemployment rate in Japan came in at a seasonally adjusted 2.8% in October, the Ministry of Internal Affairs and Communications said on Friday - unchanged from the September reading and in line with expectations.
The job-to-applicant ratio jumped to 1.55 - beating forecasts for 1.52, which would have been unchanged. The number of employed persons in October was 65.81 million, an increase of 610,000 or 0.9% on year.
The number of unemployed persons in October was 1.81 million, a decrease of 140,000 or 7.2% on year.
Economy of Russia
Russia`s gross domestic product (GDP) grew 1.8 percent in the third quarter this year, the country`s official statistic service Rosstat said, citing preliminary data. The figure marked a decline from 2.5 percent in the second quarter and a 0.2-percent drop from the same period last year, but it is still higher that the 0.5-percent growth rate in the first quarter.
Russia`s central bank currently puts the country`s GDP growth at 1.7-2.2 percent for the full year of 2017, while the Russian Economy Ministry expects it to be 2.1 percent.
Russia`s industrial production was unchanged year-on-year in October, following a 0.9 percent increase in the previous month and missing market expectations of a 1.1 percent gain. It was the lowest reading since February when industrial activity contracted 2.7 percent. Output slowed significantly for manufacturing (0.1 percent vs 1.1 percent in September) while declined for extraction of raw materials (-0.1 percent, the same pace as in September); electricity and gas (-2.1 percent vs -0.1 percent) and distribution of water, sewage (-1 percent vs -3.6 percent). On a monthly basis, industrial production surged 5.7 percent compared to a 1 percent increase in September.
Russia`s trade surplus widened by 37.1 percent to USD 10.22 billion in September 2017 from USD 7.46 billion in the same month a year earlier and way above market expectations of a USD 9.0 billion surplus. Exports jumped 20.7 percent to USD 30.65 billion while imports rose at a slower 13.9 percent to USD 20.43 billion. In January to September, the trade surplus widened sharply to USD 80.41 billion from USD 62.98 billion in the same period of 2016.
Russia`s consumer price inflation declined to 2.7 percent year-on-year in October 2017 from 3 percent in the previous month and below market expectations of 2.8 percent. It was the lowest inflation rate since the series began in 1991, as prices rose at softer pace for food, housing and clothing. Annual core inflation rate dropped to 2.5 percent from 2.8 percent in the previous month. On a monthly basis, consumer prices rose 0.2 percent after a 0.1 percent fall in September, while markets were expecting a 0.3 percent gain.
Russian unemployment rate fell to 5.1 percent in October of 2017 from 5.4 percent in the same month of the previous year, matching market expectations. In the previous month, the unemployment was slightly lower at 5 percent.
11.12.2017 17:43:43