NOVEMBER Overview

Transcription

1 Overview Another disappointing year for the global economy. Global growth in 2014 is currently estimated at about 2.6 percent, almost unchanged from the slow pace seen in 2012 and The recovery in advanced economies has been uneven while growth in the faster-growing emerging economies has slowed. The latest downward revision to global growth is associated with disappointing outcomes in the Euro Area, Japan, parts of Latin America and emerging Europe, but confirms a pattern of repeated forecast downgrades over the last three years (Figure 1), pointing toward a persistent underestimation of both cyclical and structural headwinds. Declining oil prices keep a lid on global inflation. Oil prices have declined from a peak of $115/barrel in June to less than $80/barrel in mid-november (Figure 2). Numerous factors contributed to recent developments. These included the strengthening of the U.S. dollar against major currencies, a faster-than-expected rebound in supplies from Libya and Iraq despite rebel insurgencies, weakening growth prospects in emerging economies (where most growth in oil demand takes place), anemic growth in the euro area and strong supplies by the U.S. and some OPEC member countries. Metal and agricultural prices have also fallen back, due to weakening imports from China and robust supplies, respectively. This low commodity price environment is expected to carry over into 2015, putting inflation in both high-income and developing countries on a downward path, while implying significant shifts in income from commodity-exporting to commodity-importing economies. The net effect on the global economy is expected to remain mildly positive. Increasingly disparate trends across high-income countries. In the Euro Area, especially in core countries, growth has been stagnant and showed only marginal signs of improvement in the third quarter. Confidence remains low, partly as a result of increased tensions with Russia. While a depreciating euro could provide a lift to exports and help reduce deflationary risks, growth is expected to remain sluggish and prone to setbacks. Japan continued to struggle with the impact of the April sales tax hike, with third quarter data showing an unexpected contraction in real GDP, driven by weak investment, companies destocking and stagnant consumption. Exports picked-up but around a weak trend, despite a depreciating yen. Signs of persistent stagnation led the government to announce an 18-month delay in its plan for a second sales tax increase (from October 2015 to April 2017), while calling snap elections in December to bolster support for its policy agenda and reform drive. In contrast, third-quarter GDP data in the United States confirmed a broad-based pick-up in demand, while further improvements in labor market conditions and declining energy costs point to strengthening consumer spending ahead. Growth should remain above trend well into 2015 (Figure 3). Developing Trends was prepared by the Development Economics Prospects Group (DECPG) of the World Bank. This note reflects the views of the group, but is not formally cleared by the World Bank. 1

2 Financing conditions still favorable, but the likelihood of higher volatility rising. Disappointing global growth together with the recent decline in inflation expectations across major economies continued to keep global interest rates low. Policy rate expectations were revised further down in recent months particularly in the Euro Area and Japan, as the ECB committed to a specific target for the expansion of its balance sheet over the next two years while the Bank of Japan unexpectedly eased policy with a significant increase in its bond purchase program. In the U.S. and U.K., inflation expectations have fallen in recent months (Figure 4), implying that the first interest rate hike could be slightly delayed, or proceed at a more modest pace once it begins. Expectations of divergent policies across major central banks have triggered a broad-based appreciation of the U.S. dollar (6.2% on a nominal effective exchange rate basis since early-june), a weakening Euro and Yen, and renewed pressure on some developing-country currencies, particularly in Eastern Europe (Hungary, Romania, Bulgaria) and some commodity exporting economies (Brazil, Colombia Mexico). Portfolio flows into developing-country equity funds have recently declined, but the appetite for emerging market bonds has remained moderate but steady (Figure 5). Bond spreads increased only modestly and some 15 developing countries (including China, Kazakhstan, Romania, Turkey, Colombia, Mexico, India and Nigeria) were able to raise capital on international bond markets in September and October. Several large emerging countries have seen growth decelerate in This reflected weak external demand, but also increased geopolitical tensions, domestic policy uncertainty and rising supply-side constraints. In China, stimulus measures and rising exports are expected to bring growth close to but slightly below the authorities target of 7.5 percent for the year (Figure 6). Brazil is currently facing severe headwinds, with growing fiscal imbalances and above-target inflation accentuating a loss of business and consumer confidence. In Russia, despite stronger than expected growth in Q2 and Q3, activity is expected to weaken further, with sanctions, a declining ruble and capital outflows putting upward pressure on borrowing costs. In South Africa, activity has been held back by mining strikes earlier in 2014 and should gradually recover in In contrast, growth has picked up in India this year, with a reform-minded government boosting investors sentiment and inflation declining. Risks on the downside. The prospect of asynchronous monetary policies across major economies carries the risk of further bouts of volatility. Following the end of its QE program in October, The U.S. Fed is projected to start raising policy rates around mid By contrast, the ECB announced a series of new easing measures since September which will be expanded with new initiatives should inflation expectations continue to deteriorate, or current measures prove insufficient Further bank balance sheet repair could continue to affect the supply of credit, but the successful completion of the ECB s Asset Quality Review and Stress tests could spur confidence and potentially increase the effectiveness of ongoing stimulus policies. In Japan, loose monetary policy will continue as the Bank of Japan is committed to an expanded asset purchase program. Developing countries remain vulnerable to sudden capital outflows or rising risk aversion should geopolitical tensions (e.g., in Russia or Iraq/Syria) or health concerns (e.g., from the Ebola virus in West Africa) escalate. Investor sentiment could also suffer if a rapid unwinding of Chinese debt leads to a sharp slowdown or financial stability concerns. 2

3 November 2014 Figure 1. Another disappointing year Figure 2. Oil prices sharply lower since June Percent 4 June (previous year) June January January (next year) $/Barrel Brent West Texas Intermediate Source: World Bank. Note: Latest available update for 2014 and Source: World Bank. Figure 3. Growth: high-income countries 4 GDP growth, percent Figure 4. US inflation expectations Percent Y Ahead Inflation Expectations-US Inflation Target -1 High-Income US UK Euro Area Japan Source: World Bank. Figure 5. Portfolio flows to emerging markets $ million (6-week moving average) 6,000 EM equity funds EM bond funds 4,000 2, Source: World Bank, Federal Reserve Bank of St. Louis Note: 10-Year Breakeven Inflation Rate Figure 6. Growth: EM and developing countries GDP Growth, Percent , , Developing China India Brazil Russia South Africa Source: World Bank, EPFR Source: World Bank. 3

4 November 2014 Economic Calendar Major Data Releases 29 Oct Thu, 20 Nov 2014 Upcoming releases: 21 Nov Thu, 18 Dec 2014 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Previous Spain 10/29/2014 Retail Sales (Y/Y) SEP Belgium 10/29/2014 GDP (Y/Y) Q3 Spain 10/30/2014 GDP (Y/Y) Q3 United States 10/30/2014 GDP (Y/Y) Q3 Germany 10/30/2014 CPI (Y/Y) OCT Italy 10/31/2014 Unemployment Rate SEP Eurozone 10/31/2014 Unemployment Rate SEP Canada 10/31/2014 GDP (M-o-M) AUG China 11/2/2014 PMI Manufacturing OCT India 11/3/2014 PMI Manufacturing OCT Thailand 11/3/2014 CPI (Y/Y) OCT Turkey 11/3/2014 CPI (Y/Y) OCT Eurozone 11/3/2014 PMI Manufacturing NOV Brazil 11/3/2014 PMI Manufacturing OCT Indonesia 11/3/2014 CPI (Y/Y) OCT Brazil 11/4/2014 Industrial Production (Y/Y) SEP Philippines 11/4/2014 CPI (Y/Y) OCT Indonesia 11/5/2014 GDP (Y/Y) Q3 Eurozone 11/5/2014 Retail Sales (Y/Y) SEP Spain 11/7/2014 Industrial Production (y/y) SEP Brazil 11/7/2014 CPI (Y/Y) OCT United States 11/7/2014 Unemployment Rate OCT China 11/9/2014 CPI (Y/Y) OCT Turkey 11/10/2014 Industrial Production (Y/Y) SEP Italy 11/10/2014 Industrial Production (Y/Y) SEP Malaysia 11/10/2014 Industrial Production (Y/Y) SEP Mexico 11/11/2014 Industrial Production (Y/Y) SEP India 11/12/2014 Industrial Production (Y/Y) SEP South Africa 11/12/2014 Retail Sales (y/y) SEP China 11/13/2014 Industrial Production (y/y) OCT Malaysia 11/14/2014 GDP (Y/Y) Q3 Poland 11/14/2014 GDP (Y/Y) Q3 Italy 11/14/2014 GDP (Y/Y) Q3 Eurozone 11/14/2014 GDP (Y/Y) Q3 Brazil 11/14/2014 Retail Sales (Y/Y) SEP Japan 11/16/2014 GDP (Y/Y) Q3 Thailand 11/16/2014 GDP (Y/Y) Q3 Turkey 11/17/2014 Unemployment Rate AUG United States 11/17/2014 Industrial Production (Y/Y) OCT 1.1% 0.5 % 0.4 % 0.8% 0.8% 1.0% 1.6% 1.6% 1.2% 2.3% 2.3% 2.6% 0.8% 0.9% 0.8% 12.6% 12.4% 12.5% 11.5% 11.5% 11.5% -0.1% 0.0% 0.0% % 1.65 % 1.8 % 8.96 % 8.83 % 8.86 % % 4.5% 4.5% -2.1 % -1.1 % -5.4 % 4.3 % 4.3 % 4.4 % 5.0% 5.0% 5.1% 0.6 % 0.3 % 1.9 % 1.0% 0.8% 0.3% 6.6% 6.7% 6.8% 5.8% 5.9% 5.9% 1.6% 1.53 % 1.6 % 2.2 % 4.2 % 5.2 % % -0.4 % -0.4% 5.4 % 5.5 % 6.5 % 3.0 % 3.7 % 1.1% 2.5 % 0.5% 2.3 % 2.8 % 2.0% 7.7% 8.0% 8.0% 5.6% 5.3% 6.4% 3.4% 2.5% 3.3% -0.4% -0.4% -0.2% 0.8% 0.7% 0.7% 0.5% -0.7% -1.1% -1.6% -0.1% -7.1% 0.6% 1.0% 0.4% 10.4% 10.4% 4.0% 4.3% United Kingdom 11/18/2014 CPI (Y/Y) OCT 1.3% 1.3% 1.2% Japan 11/19/2014 Interest Rate Decision % % Norway 11/20/2014 GDP (Q-o-Q) Q3 0.4% 0.1% 1.2% United Kingdom 11/20/2014 Retail Sales (Y/Y) OCT 4.3% 3.8% 2.3% Germany 11/24/2014 Germany IFO NOV Belgium 11/24/2014 Business Sentiment NOV Mexico 11/24/2014 Unemployment Rate OCT 4.8% Malaysia 11/25/2014 Unemployment Rate SEP 2.7% South Africa 11/25/2014 GDP (Y/Y) Q3 1.0% United States 11/25/2014 GDP (Y/Y) Q3 2.3% UK 11/26/2014 GDP (Y/Y) Q3 3.2% Philippines 11/26/2014 GDP (Y/Y) Q3 6.4% Switzerland 11/27/2014 GDP (Y/Y) Q3 0.6% Germany 11/27/2014 Unemployment Rate OCT 5.0% Brazil 11/27/2014 PPI (Y/Y) OCT 2.9% Germany 11/28/2014 Retail Sales (Y/Y) OCT 2.3% Czech Republic 11/28/2014 GDP (Y/Y) Q3 2.5% Poland 11/28/2014 GDP (Y/Y) Q3 3.3% Eurozone 11/28/2014 Unemployment Rate OCT 11.5% India 11/28/2014 GDP (Y/Y) Q2 5.7% Brazil 11/28/2014 GDP (Y/Y) Q3-0.9% Argentina 11/28/2014 Industrial Production (Y/Y) OCT -1.8% Indonesia 11/30/2014 CPI (Y/Y) NOV 4.8% Italy 12/1/2014 GDP (Y/Y) Q3-0.2% Eurozone 12/2/2014 PPI (Y/Y) OCT -1.4% Australia 12/2/2014 GDP (Y/Y) Q3 3.1% Turkey 12/3/2014 CPI (Y/Y) NOV 9.0% Eurozone 12/3/2014 Retail Sales (Y/Y) OCT 0.6% Philippines 12/4/2014 CPI (Y/Y) NOV 4.3% Finland 12/5/2014 GDP (Y/Y) Q3-0.1% Czech Republic 12/5/2014 Retail Sales (Y/Y) OCT 4.5% Iceland 12/5/2014 GDP (Y/Y) Q3 2.2% Brazil 12/5/2014 CPI (Y/Y) NOV 6.6% Canada 12/5/2014 Unemployment Rate NOV 6.5% Germany 12/8/2014 Industrial Production (M-o-MOCT 1.4% Czech Republic 12/8/2014 Unemployment Rate NOV 7.1% Turkey 12/8/2014 Industrial Production (Y/Y) OCT 2.2% Czech Republic 12/9/2014 CPI (Y/Y) NOV 0.7% Mexico 12/9/2014 CPI (Y/Y) NOV 4.3% South Korea 12/9/2014 Unemployment Rate NOV 3.5% Philippines 12/10/2014 Unemployment Rate Q3 6.7% France 12/10/2014 Industrial Production (Y/Y) OCT -0.3% Turkey 12/10/2014 GDP (Y/Y) Q3 2.4% Slovenia 12/10/2014 Industrial Production (Y/Y) OCT South Africa Eurozone Mexico 3.6% 12/10/2014 Retail Sales (Y/Y) OCT 2.3% 12/12/2014 Industrial Production (Y/Y) OCT 0.6% 12/12/2014 Industrial Production (Y/Y) OCT 3.0% United States 11/20/2014 CPI (Y/Y) OCT 1.7% 1.6% 1.7% Germany 12/17/2014 Wholesale Price Index (Y/Y)NOV -0.7% Mexico 11/20/2014 Retail Sales (Y/Y) SEP 4.5% 4.8% 4.4% UK 12/17/2014 ILO Unemployment Rate OCT 6.0% 4

5 Table A. 1 Global industrial production growth (constant prices; percent; seasonally adjusted annual rates except monthly figures which are in percent change over Weigh ts Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep World High - income countries Industrial countries United States Japan Euro Area United Kingdom Other high income Singapore Taiwan (China) Developing countries East Asia and Pacific China Indonesia Thailand Malaysia Europe and Central Asia Russian Federation Turkey Poland Czech Republic Latin America and Caribbean Brazil Mexico Argentina Colombia Middle East and North Africa Saudi Arabia Egypt Algeria Sou th As ia India Pakistan Bangladesh Sri Lanka Su b- Sah aran Africa South Africa Memo: OECD Developing excl. China Developing oil exporters Dev. non-oil exporters a In general, series refer to industrial production excluding construction (e.g. manufacturing, mining and utilitites). Where this is not available the closest proxy is used, often manufacturing output or oil output, if the country is a major oil producer. 5

6 Table A. 2 Demand conditions in high-income countries (US dollar values unless otherwise indicated; percent change; seasonally adjusted annual rates except monthly figures, which are m/m change) Real GDP Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct High - income countries Industrial countries United States Japan Euro Area United Kingdom Other high income Hong Kong (China) Singapore Taiwan (China) Real merch an dis e imports High - income countries Industrial countries United States Japan Euro Area United Kingdom Other high income Hong Kong (China) Singapore Taiwan (China) I mport Prices High - income countries Industrial countries United States Japan Euro Area United Kingdom Other high income Hong Kong (China) Singapore Taiwan (China) Real effectiv e ex ch an ge rates a Euro Area United States Japan United Kingdom Canada Hong Kong (China) Korea, Rep Singapore Taiwan (China) Switzerland a/ JP Morgan Trade Weighted Indices (Real, Broad basis). Data are averages of monthly data for the period in 6

7 Table A. 3 Global credit conditions (percent unless otherwise indicated a/) Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct Policy Rates High -income countries United States Japan Euro Area United Kingdom Ten year bond United States Japan Euro Area United Kingdom JPMorgan EMBI I n dex b Developing countries East Asia and Pacific China Indonesia Phillippines Malaysia Europe and Central Asia Russian Federation Turkey Poland Ukraine Latin America and Caribbean Brazil Mexico Argentina Peru Middle East and North Africa Egypt Iraq Jordan Lebanon Sou th As ia d India Pakistan Bangladesh Sri Lanka Su b-sah aran Africa South Africa Nigeria Ghana Gros s in flow s e Developing countries East Asia and Pacific Europe and Central Asia Latin America and Carribean Middle East and North Africa South Asia Sub-Saharan Africa a/monthly figures are simple averages of daily figures. Quarterly and Annual figures are simple averages of monthly figures. b/aggregates as defined by JP Morgan. d/east Asia and Pacific including South Asian countries. e/in billions of US dollars. 7

8 Table A.4 Commodity price indices Q2 Q3 Q4 Q1 Q2 Q3 M ay Jun Jul A ug Sep Oct Energy Coal, Australia Crude oil, average Natural gas, Europe N o n-energy A griculture B everages Cocoa Coffee, arabica Coffee, robusta Food F ats and o ils Palm oil Soybean meal Soybeans Grains M aize Rice, Thailand, 5% Wheat, US, HRW Other fo o d Bananas, US Sugar, world R aw materials Cotton ("A" Index) Rubber, Singapore Sawnwood, M alaysia F ertilizers Triple superphosphate M etals and minerals Aluminum Copper Gold Nickel M emo: C rude Oil (US$ ) a/ The World Bank primary commodity price indices are computed from export values in US dollars for lowand middle-income economies, rebased to b/ Energy and gold prices are not included in the index. 8

9 Table A.5 Developing countries' merchandise export growth (US dollar values unless otherwise indicated; percent change; seasonally adjusted annual rates except monthly figures, which are m/m change /a) Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct Export values Developing countries East Asia and Pacific China Indonesia Thailand Europe and Central Asia Russian Federation Turkey Poland Latin America and Caribbean Brazil Mexico Argentina Middle East and North Africa Saudi Arabia Iran Egypt Sou th As ia India Pakistan Bangladesh Su b-sah aran Africa South Africa Nigeria Ex port prices b,c Developing countries East Asia and Pacific China Indonesia Thailand Europe and Central Asia Russian Federation Turkey Poland Latin America and Caribbean Brazil Mexico Argentina Middle East and North Africa Saudi Arabia Iran Egypt Sou th As ia India Pakistan Bangladesh Su b-sah aran Africa South Africa Nigeria /a Merchandise export (F.O.B), customs basis. /b Implicit export unit values, U.S. Dollar basis. /c In many cases countries are very late in reporting trade prices. To estimate more timely figures individual trade prices were updated using the median (mean) regional trade price for developing (developed) countries whenever 9

10 Table A.6 Developing countries' merchandise import growth (US dollar values unless otherwise indicated; percent change; seasonally adjusted annual Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct Import values Developing countries East Asia and Pacific China Indonesia Thailand Europe and Central Asia Russian Federation Turkey Poland Latin America and Caribbean Brazil Mexico Argentina Middle East and North Africa Saudi Arabia Iran Egypt Sou th As ia India Pakistan Bangladesh Su b-sah aran Africa South Africa Nigeria I mport prices b,c Developing countries East Asia and Pacific China Indonesia Thailand Europe and Central Asia Russian Federation Turkey Poland Latin America and Caribbean Brazil Mexico Argentina Middle East and North Africa Saudi Arabia Iran Egypt Sou th As ia India Pakistan Bangladesh Su b-sah aran Africa South Africa Nigeria /a Merchandise import (C.I.F.), customs basis. /b Implicit import unit values, U.S. Dollar basis. /c In many cases countries are very late in reporting trade prices. To estimate more timely figures individual trade prices were updated using the median (mean) regional trade price for developing (developed) countries whenever 60% or more of reporters by trade weight reported. 10

11 Table A.7 Merchandise trade balances (Billion US dollars; annual rates) Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct World High -in come cou n tries a Industrial countries United States Japan Euro Area United Kingdom Other high income Hong Kong (China) Singapore Taiwan (China) Developing countries East Asia and Pacific China Indonesia Thailand Malaysia Europe and Central Asia Russian Federation Turkey Poland Czech Republic Latin America and Caribbean Brazil Mexico Argentina Colombia Middle East and North Africa Saudi Arabia Iran Egypt Algeria Sou th As ia India Pakistan Bangladesh Sri Lanka Su b-sah aran Africa South Africa Nigeria Memo: OECD Developing excl. China Developing oil exporters Developing non-oil exporters Asian high tech exporters a/ Seasonally adjusted 11

12 Table A.8 Exchange Rates (USD/LCU) (annual percent change except monthly data which is change over previous month a/) Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct World High - income countries Industrial countries United States (SDR/USD) Japan Euro Area United Kingdom Other high income Hong Kong (China) Singapore Taiwan (China) Developing countries East Asia and Pacific China Indonesia Thailand Malaysia Europe and Central Asia Russian Federation Turkey Poland Czech Republic Latin America and Caribbean Brazil Mexico Argentina Colombia Middle East and North Africa Saudi Arabia Iran Egypt Algeria Sou th As ia India Pakistan Bangladesh Sri Lanka Su b- Sah aran Africa South Africa Nigeria Memo: OECD

13 Table A.9 Global Inflation (annual percent change; seasonally adjusted a/) Q3 Q4 Q1 Q2 Q3 May Ju n Ju l Au g Sep Oct World High - in come cou n tries Industrial countries United States Japan Euro Area United Kindgom Other high income Hong Kong (China) Singapore Taiwan (China) Dev elopin g cou n tries Eas t As ia an d Pacific China Indonesia Thailand Malaysia Eu rope an d Cen tral As ia Russian Federation Turkey Poland Czech Republic L atin America an d Caribbean Brazil Mexico Colombia Middle Eas t an d North Africa Saudi Arabia Iran Egypt Algeria Sou th As ia India Pakistan Bangladesh Sri Lanka Su b-sah aran Africa South Africa Nigeria Memo: OECD Developing excl. China Developing oil exporters Developing non-oil exporters a/ The CPI aggregates are the medians of the growth rates. 13