Global Economic Prospects 2014

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Prospects Daily: US GDP growth picks up to 2% in Q3 and consumer sentiment hits 5-year high…

Financial Markets…European and U.S. equities advanced as a government report showed the U.S. economy grew more than expected in the third quarter. Europe’s Stoxx 600 climbed 0.2%, while the S&P 500 rose 0.2% in morning trade. Nevertheless, both indices have still declined 1.2% and 1.3%, respectively, thus far this week.
By contrast, Asian shares declined on Friday, with the benchmark MSCI Asia Pacific Index sliding 1.1%, on weaker-than-expected corporate earnings in the region. The regional index is gearing for a 1.8% loss for the week, its sharpest decline since August. Notably, the Chinese benchmark stock index slumped the most in five weeks.
The Euro weakened against the dollar, with the single currency sliding 0.3% to $1.2893, amid concerns over Greece. The 17-nation currency also fell against the yen, falling 1% to 102.75 yen, the lowest level in 10 days. The euro has been struggling this week as a series of grim regional economic news damped investor sentiment.
High-income Economies…US GDP growth accelerated to an annualized pace of 2% (q/q) in the third quarter from 1.3% in the second quarter, reflecting increases in consumer and federal government spending and gains in residential construction. The Thomson-Reuters/University of Michigan consumer sentiment index for the US hit a five-year high in October, rising to 82.6 from 78.3 in September.   
Spain’s unemployment rate rose further to a record high of 25% in the third quarter from 24.6% in the second quarter, as cutbacks to government spending and tax increases amid an economic contraction continues to put pressure on the labor market 
Japan’s consumer prices fell for the fifth straight month in September, declining 0.1% (y/y) following a 0.3% fall in August. Deflationary pressures amid domestic economic weakness and falling exports are likely to put pressure on the central bank to ease monetary policy further to achieve its 1% inflation target. After excluding food and energy costs, consumer prices fell 0.6% (y/y).
Sweden’s trade surplus narrowed to SEK7.5bn in September from SEK9.5bn in September 2011, as a 13% (y/y) fall in exports outweighed a 12% fall in imports. The trade surplus, however, was higher compared to SEK5bn in the previous month.
South Korea’s GDP growth slowed to 1.6% (y/y) in the third quarter from 2.3% in the second quarter. On a quarter-on-quarter basis, GDP expanded at a slightly weaker pace of 0.2% (q/q) compared to 0.3% in Q2 as a sharp 4.3% drop in facilities investment weighed on output, even as private consumption and exports picked up helped by government stimulus and a nascent recovery in China.

Developing Economies…Mexico's central bank held its benchmark interest rate unchanged at 4.50%, suggesting that inflation has peaked and warned that it would quickly raise interest rates if there was another spike in inflationary pressure, even if it were temporary. Mexico's inflation rate eased slightly in early October to an annual rate of 4.6% after hitting a rate of 4.8% in September, still above the central bank’s targeted inflation rate of 3% +/- 1%.
South Africa's producer price inflation slowed for the third consecutive month in September with the headline producer price index for domestic output rising by 4.2% (y/y) compared to a 5.1% increase in August led by decline of producer prices for exported commodities
Industrial Production in Thailand continued to weaken for the fourth consecutive month decreasing 13.7% (y/y) in September after a 11.2% decline in August partly due to weak external demand for Thailand's key export products, including traditional electronics, in contrast to global demand for mobile devices which picked up in recent months.