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Prospects Daily: German factory orders rebound, Romania’s GDP contracts in third quarter

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Financial Markets…Greece’s sovereign credit ratings was cut to ‘SD’ (selective default) from ‘CCC’ by Standard and Poor’s on Wednesday, after the country began a €10 billion ($13 billion) debt buyback plan on Monday. The rating agency said that Greece’s debt-reduction measures as a precondition for the next tranche of bailout aid from international lenders constitutes a distressed debt restructuring, which in the S&P’s rating criteria means default.

Developing-country stocks climbed to a seven-month high on Wednesday, with the benchmark MSCI index gaining 0.2%, as optimism on U.S. budget talks boosted risk appetite. India’s Sensex index advanced for a third day, gaining 0.5%, while Russia’s Micex Index rose 0.3%, climbing for a second day. Meanwhile, Brazil’s Bovespa index lost 0.5%, and Egypt’s EGX 30 Index plummeted 4.9% amid political crisis.

Most international commodity prices declined for a second month in a row in November. The World Bank's energy and non-energy commodity price indices fell by 1.6% and 2.0%, respectively in November. Metals and minerals prices declined by 1.6%, while food prices are down by 1.9% driven mainly by edible oil price declines on news of a better than expected South America oilseed crop.

High-income EconomiesGerman factory orders rose by a strong 3.9% (m/m) in October, more than reversing a 2.4% drop in September, driven mainly by foreign orders. On a three-month moving average basis, the decline in overall orders slowed to an annualized -5.9% pace in the three months to October (3m/3m, saar) from -7.6% in September—mostly due to a slower pace of decline in foreign order to -1.2% from -5.1%, reflecting stronger demand from developing countries and a slowing of the pace of deterioration of Euro Area GDP.

The European Central Bank kept its benchmark policy interest rate for the Euro Area at 0.75%, but cut its growth forecasts. GDP growth in 2013 is projected to be between -0.9% and +0.3% in 2013 (compared with -0.4% and +1.4% earlier). The ECB head Mario Draghi said economic weakness would extend into next year on the back of balance sheet adjustments and economic uncertainty weighing on consumption and investment. 

The Bank of England kept its policy interest rate unchanged at a record low 0.5% and said it would not expand the 375 billion pounds quantitative easing (QE) program, reflecting in part a rise in inflation in October and doubts about the impact of more QE in the current economic environment.

Initial unemployment claims in the US fell by 25,000 to 370,000 in the week ended December 1, as the Northeast region continued to recover from Hurricane Sandy. The four-week moving average, a less volatile measure, rose modestly to 408,000 last week from 405,750.

Consumer price inflation in the Netherlands edged down to 2.8% (y/y) in November from 2.9% in October, reflecting lower petrol prices and – to a lesser extent– telephone fees, according to the Statistics Bureau.

Developing EconomiesBulgaria's GDP growth slowed to an annualized 0.4% (q/q) pace in the third quarter from 1.2% in the second quarter, reflecting slowdown in consumption. However, on an annual basis, Bulgaria’s GDP expanded by 0.5% (y/y) in the third quarter of 2012, the same rate in the second quarter.

Colombia’s inflation eased to 2.77% (y/y) in November from 3.06% in October on moderating food prices.
Romania’s economy contracted at an annualized pace of about 2% (q/q) in the third quarter, compared with 2% growth recorded in the second quarter. On an annual basis, Romania’s GDP contracted by 0.6% (y/y) in the third quarter of 2012, compared with 1.7% (y/y) growth in the second quarter.

South Africa's
current account deficit widened slightly in the third quarter to ZAR 202.537 billion (equivalent of 6.4% of GDP) from ZAR 200 billion in the second quarter and ZAR 121.54 billion in the third quarter last year.