Eleven of the less prosperous members of the European Union – Bulgaria, Croatia1, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, the Slovak Republic, and Slovenia (EU11)—have remained attractive destinations for Foreign Direct Investment (FDI). The Czech Republic, Estonia, and Slovakia witnessed FDI levels in 2012 similar to pre-crisis levels. Poland and Bulgaria also experienced large gains in FDI in 2012.
Financial Markets…U.S. Treasuries slid for the first time in four days, with the benchmark note yields 3 basis points to 1.62%, as a government report showed U.S. employers added more than forecasted jobs in November. U.S government bonds have advanced 2.8% this year as of yesterday, after gaining 9.8% in 2011 and 5.9% in 2010.
The Eonia swap rate (an estimate of compounded overnight borrowing costs in euros over the next three months) fell to 4.5 basis points on Friday, the lowest level since July, as investors speculated the European Central Bank is open to cut interest rates further. And the 3-month euro interbank offered rate (or Euribor), bank-to-bank lending rate, fell at a record low of 0.187%.
The dollar strengthened against the yen and euro following encouraging U.S. jobs data, climbing 0.3% to 82.66 yen and 0.4% to $1.2913, respectively. Meanwhile, Canadian dollar rallied versus its U.S. counterpart, climbing 0.3% to 98.82 cents per U.S. dollar, as the country’s unemployment rate fell to 7.2% from 7.4% last month.
High-income Economies…U.S. nonfarm payroll employment rose by 146,000 in November, suggesting that the impact of Hurricane Sandy on overall U.S. employment had been limited. But the rate remains well below the 200,000-250,000 monthly gains needed for a sustained improvement in the labor market as employers remain reluctant to hire amid U.S. “fiscal cliff” risks. The unemployment rate, however, edged down by 0.2 percentage points to a four-year low of 7.7%, mostly because of people dropping out of the labor force.
Reflecting uncertainties relating to impending tax increases and spending cuts, the outlook of U.S. consumers deteriorated sharply in December, with the Thomson Reuters/University of Michigan consumer sentiment index falling to 74.5 in December, the lowest since August, from 82.7 in November.
German industrial production fell 2.6% (m/m) in October, a faster pace of decline compared with a 1.3% drop in September, suggesting that the Euro Area debt crisis is taking a toll on Europe’s largest economy. Earlier data had shown that industrial orders were supported by strengthening foreign demand (partly from developing countries), but domestic demand has continued to weaken.
U.K. industrial production fell 0.8% (m/m) in October, a slower pace of decline than the 2.1% monthly fall in September. On a year-on-year basis, industrial output was 3% (y/y) lower in October, compared with -3.2% (y/y) in September.
Revised data showed that Greek GDP shrank a slightly smaller 6.9% (y/y) in the third quarter, compared with a 7.2% decline reported earlier.
The pace of economic contraction in Czech Republic accelerated in the third quarter to an annualized pace of about 1.2% (q/q) from 0.8% recorded in the second quarter. On a year-on-year basis, Czech Republic’s GDP contracted by 1.3% (y/y) in the third quarter of 2012, compared with 1% (y/y) decline in the second quarter.
Hungary’s GDP continued to contract in the third quarter at an annualized pace of about 0.8% (q/q). On a year-on-year basis, Hungary’s GDP contracted by 1.5% (y/y) in the third quarter of 2012, compared with 1.2% (y/y) declined in the second quarter.
Developing Economies…The Central Bank of Egypt held its benchmark overnight deposit rate steady at 9.25%. Headline inflation rose to 6.7% in October from 6.22% in September on a sharp rise in the prices of butane gas cylinders, partly due to bottlenecks in distribution channels, despite moderating food prices.
Brazil’s inflation accelerated insignificantly in November to 5.53% (y/y) from 5.45% in October with the prices of all key components in consumer basket showing insignificant rise.
Chile’s inflation moderated to 2.1% (y/y) in November from 2.9% in October.
Mexico’s inflation moderated to 4.18% in November from 4.6% in October on easing of food prices following a temporary spike related to adverse weather and the outbreak of avian flu in western Mexico.
Peru's central bank held its policy rate unchanged at 4.25%. Peru's inflation rate slowed to 2.66% in November under the central bank’s 3% inflation target from 3.25% in October on moderating food prices.
Malaysia's exports fell 3.2% (y/y) in October from 2.6% increase in September on continued weak demand from major trade partners and moderating prices for Malaysia's commodity exports (palm oil and crude rubber).
Financial Markets…Year-to-date global corporate bond sales rose to $3.43 trillion, already surpassing 2011’s full year total of $3.29 trillion, as further stimulus from global central banks pushed yields to record lows. Funding costs for the riskiest to the most creditworthy corporates are plunging as the persistent low-yield environment spurred unprecedented investor demand.
Perceived default risk of US corporate debt climbed for a third consecutive day, with the benchmark Markit CDX North America Investment Grade Index rising 3.6 basis points to 108 bps, amid growing concerns that the so-called US fiscal cliff could push the world largest economy into deep recession.
Ghana’s 3-month borrowing costs, which fell to a five month low last week, are gearing for further decline today after the central bank issued record volume of domestic bonds, lowering its financing needs in near-terms. The 3-month yield on Ghana’s Treasury bills dropped 69 bps to 22.33% last week, but they are still the highest among African countries.
In its November update released earlier today, the US Department of Agriculture reported marginal increases in global grain supplies (compared to the October update) for the 2012/13 crop year ending in May 2013. Yet, stock-to-use ratio for corn—and less so for wheat—remain at historical low levels. The rice market is well-supplied with trade expected to surpass 38 million tons in 2012—a record high.
High-income Economies…France's industrial production posted the biggest monthly drop since December 2009, falling 2.7% (m/m) in September (-2.1% y/y), with both manufacturing production and construction contracting. The Bank of France said the economy may shrink in the fourth quarter.
Italy’s industrial production fell by 1.5% (m/m) in September (-4.8% y/y), the most in five months, suggesting the country remained in recession in the third quarter.
Greece’s industrial production fell 7.3% (y/y) in September, resuming its downward trend after rising temporarily by 2.5% in August.
Sweden’s industrial production fell 5% (y/y) in September, following a 2.7% increase the previous month.
Germany’s annual consumer price inflation on a EU-harmonized basis remained at 2.1% (y/y) in October, the same rate as September (+0.1% m/m). A 5.5% (y/y) increase in domestic gas and diesel prices and increases in some food items prevented inflation from falling.
UK’s goods trade deficit fell to 8.4bn pounds in September from 10bn pounds in August, as exports rose 1.1% (m/m), while imports fell a larger 3.9% (m/m) because of lower imports of fuel and manufactured goods.
US consumer confidence continued to improve for the fourth month in November, with the Thomson Reuters/University of Michigan consumer sentiment index climbing to 84.9 (a five-year high) from 82.6 in October as the labor market showed signs of improvement.
Hungary’s industrial output rose 0.6% (m/m) in September, following 1.8% increase in August. Despite the monthly increases, industrial output in September was 3.8% lower than the same month the previous year.
Developing Economies…China’s retail sales rose 14.5% (y/y) in October slightly faster than 14.2% in September, while consumer price inflation dropped to its weakest level in nearly three years to 1.7% (y/y) in October from 1.9% in September on declining food inflation.
Growth in China's industrial production accelerated to 9.6% (y/y) in October from 9.2% in September China’s producer prices fell at a slower pace of 2.8% (y/y) in October compared to a 3.6% fall in September. China's total fixed asset investments were 20.7% higher during the January-October period compared to the same period last year.
Malaysia's exports grew 2.6% (y/y) in September, recovering from a 4.5% contraction in August on strong demand from ASEAN, the US, India and Taiwan, while exports to the European Union decreased 12.5%. Import growth accelerated to 9.6% (y/y) in September from 2.8% in August.
The central bank of Peru held its benchmark interest steady at 4.25%. Peru's inflation rate fell to 3.25% (y/y) in October from 3.74% in September, but remains above the central bank's targets inflation of 2.0% (+/- 1). An acceleration of inflation in September was related to a weather conditions-related temporary supply side factor.
Russia's central bank held its benchmark refinancing rate steady in October. Inflation declined in October slightly to 6.5% (y/y) from 6.6% in September, but remains above the Bank of Russia's target of 5-6 percent inflation range. The bank noted that inflation is stabilizing due to a moderation in food prices which had experienced a temporary upswing related to a supply shock associated with a bad harvest.
- United States
- United Kingdom
- Russian Federation
- Latin America & Caribbean
- Europe and Central Asia
- East Asia and Pacific
- Macroeconomics and Economic Growth
- Financial Sector
- Agriculture and Rural Development
- Industrial Production
- fiscal deficit
- consumer price inflation
- Central Bank policy rates
Freedom of expression and media freedom - most contentious issues not only in autocracies but, seemingly increasingly, also in democracies. It's a fine line between regulating the media and strangling it. Who should be protected by media regulation? The media? The public? Freedom of expression? The government? National security?
Let's start with the media. Does the media need protection? Surely - at least to some extend media systems need to be shielded from being overwhelmed by economic and political interests. If we assume that a free and balanced media is fundamental to a healthy balance between the state and its citizens there need to be safeguards that allow journalists to report without fear of repercussions.
Important developments today:
1. European government bonds climb on speculation Fed may resume debt buyback
2. Euro area industrial orders slump in July
European government bonds climb on speculation Fed may resume debt buyback. European government debts rallied on Wednesday, driving the yield on German 30-year bond to lower than 3% for the first time in a week, amid speculation the Federal Reserve may resume another wave of asset purchases (or so-called quantitative easing) to provide more cash into the economy. The benchmark German 10-year bund yield slid the most in a month to 2.34%, with the yield on the equivalent French bond dropping 10 basis points (bps) to 2.7%. The U.K. 10-year gilt fell 15 bps to 2.97% on speculation the Bank of England would also ease monetary policy, while the yield on 10-year U.S. Treasury slid 4 basis points to 2.54% after falling 14 bps yesterday. Notably, the yield on Portuguese bond fell in line with other European securities, after the country sold €750 million ($ billion) of government debt maturing in 2014 and 2010.
Euro area industrial orders slump in July. New industrial orders across the euro area dropped sharply in July (-2.4%), the largest monthly drop in 19 months. The momentum growth picked up since the beginning of this year now appears to be trending down. Capital good orders, which had helped power the growth in industrial orders, slumped to a fall of 5.1% in July in contrast with the 3.8% rise in June.
These figures lend support to the expected slow down in euro area growth in H2 2010. As the global economy slows down, export orders which had contributed to the rapid recovery in industrial orders among euro area countries, including Germany [see Chart at http://gem or http://www.worldbank.org/gem] is also slowing down. Other euro area specific concerns contributing to this slowdown include lingering concerns on sovereign debts in the euro area, planned cuts in fiscal deficits and high unemployment levels which is holding back purchases of consumer durables. Indeed, orders of durable consumer goods which fell by 3.2% (m/m) is the only order category to have dropped on an annual basis in July, highlighting the difficult spending environment for consumers.
Source: World Bank DEC Prospects Group and Thomson Reuters.
Among emerging markets:
In Central and Eastern Europe and the CIS, Hungary’s retail sales climbed 1.7% y/y in July compared to June’s decline of 4.6% y/y, in a release by the Statistics Office. This is the first time in 41 months that retail sales rose.
In Middle East and North Africa, Kuwait’s Central Bank indicated that the country’s M1 money supply growth reached 12.1% y/y in August from July’s 17.9% y/y whilst M2 money supply growth was 2.3% y/y and 1.2% y/y for the same periods.
In Sub-Saharan Africa, South Africa’s current account deficit decreased from 4.6% of GDP in Q1 to 2.5% in Q2, led by a recovery in the exports of commodities, automobiles and tourism receipts as stated in the Reserve Bank’s Quarterly bulletin. During the 2010 World Cup, retails sales increased 7.9% in July and consumer spending reached an annualized 4.8% growth in Q2.
November 9th is an ambiguous day for Germany. On November 9, 1938, the Nazis killed 400 Jews, arrested about 30,000 more, destroyed over 800 synagogues and thousands of homes and businesses in the Kristallnacht, a pogrom against German and Austrian Jews.
About half a century later, on November 9, 1989, Germans in East and West Berlin stormed the Berlin Wall, the symbol of the Cold War, and brought down the Iron Curtain, literally with their own hands. I lived in East Germany when people started going out into the streets, chanting "We are the people" and demanding more freedom from the communist government. In September 1989 the first so called Monday Demonstration brought people out onto the street in Leipzig, first to pray for peace, then to demand freedom. I remember the exhilarating feeling when those demonstrations spread through other cities and drew more and more people until hundreds of thousands of East Germans protested - peacefully, without violence - for their rights.