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Prospects Daily: German investors’ sentiment rises…Turkey’s current account deficit narrows, Tajikistan becomes the 158th member of the WTO

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Financial Markets… European stock markets rose for a seven straight day, with the benchmark Stoxx Europe 600 Index advancing 0.3% for its longest streak of gains in 17 months, as German investor confidence jumped to a seven-month high in December. Speculation on further stimulus measures from the Federal Reserve also weighed positively on the region’s shares.

Oil prices bounced back from the lowest level in nearly a month in today’s New York trading, with West Texas Intermediate crude for January settlement rising as much as 81 cents to $86.37 a barrel, amid improving German investor confidence data. Brent for January delivery also advanced, up 86 cents at $108.19 a barrel in London trading.

Colombian government bonds tumbled on Tuesday, pushing the benchmark yields up 10 basis points to 5.95%, after congress trimmed down the government’s tax reduction plan for foreign investment in the local bond market to 25% from the government’s proposed 14% (compared with the current 33%).

In today's assessment for the 2012/13 global grain outlook, the US Department of Agriculture announced marginally better production prospects for maize (up 1.1% compared to the November assessment) and wheat (0.6% up), but left largely unchanged rice prospects. Yet, the global maize market (and less so wheat) remains tight as the stock-to-use ratio is at historical low levels at 13.6%, down from last season's 14.9%.

High-income EconomiesGermany’s ZEW economic sentiment index, a forward looking indicator of investors’ outlook for the next six months, rose sharply by 22.6 points to 6.9 in December (A level above zero indicates optimism). This marks the first time that the index is in positive territory since May and suggests increasing expectations that economic growth will gain momentum in the first half of 2013.
 
Germany’s
wholesale price index fell 0.7% (m/m) in November following a 0.6% decline in October mainly due to lower food and energy costs. The year-on-year rate of increase in wholesale prices moderated to 3.2% (y/y) from 4.2% in October.

The ZEW sentiment index for the Euro Area also rose, by 10.2 points to 7.6 in December, suggesting increased expectations that activity in the Eurozone will recover in the first half of 2013, but the indicator for the current economic situation was broadly unchanged at -79.9.

Revised data showed that Japan’s economy contracted at an annualized 0.1% (q/q) pace in the second quarter. Together with the annualized 3.5% (q/q) output decline in the second quarter, the two consecutive quarters of falling output imply that Japan was in a technical recession.

France’s
payroll employment fell 0.3% (q/q) in the third quarter, a steeper pace of decline compared with a 0.1% drop in the second quarter.  

The US trade deficit rose to $42.2 billion in October from $40.3 billion in September, as exports of goods and services fell 3.6% (m/m) (+1% y/y), compared with a 2.1% (m/m) decline in imports (-0.8% y/y)—in signs that the weak global economy and weak domestic demand could act as a drag on US growth in the fourth quarter.

Hungary’s consumer price inflation slowed to a 11-month low of 5.2% in November, from 6.0% in October (-0.1% m/m), partly due to base effects.

Developing EconomiesIndia's exports in November contracted by 4.2% (y/y) to $22.2 billion on continued slow demand from the US and Europe. Imports grew on strong petroleum shipments by 6.4% to $41.5 billion in November.

Indonesia's
central bank held its benchmark reference rate steady at 5.75% stating that the rate was consistent with its forecast for low inflation and positive growth outlook. Indonesia's inflation rate eased to 4.3% in November, from 4.6% in October. The central bank forecasts inflation will remain within the bank's target range of 4.5% (+/- one percentage point) in 2013 and 2014.

Malaysia's industrial output rose by 5.8 (y/y) in October, up from 5% increase in September.

The Philippines’ export growth was 6.1% (y/y) in October following a strong 22.8% growth achieved in September. Japan emerged as the top export destination in October, accounting for 16.6% of total exports with Hong Kong and the United States next two top markets of Philippine products.

Romania's inflation moderated to 4.56% (y/y) in November from 4.96% in October, but remaining above the central bank’s annual inflation target (3% +/- 1).

Turkey’s
current account deficit declined to $1.96 billion in October from $2.6 billion in September and was less than half of a $4.5 billion deficit recorded in October of the last year.

South Africa’s
retail sales growth slowed to 1% (y/y) in October from 4.7% in September - the slowest pace in nearly three years.

The General Council approved Tajikistan’s WTO accession package concluding 11 years of negotiation and making Tajikistan the 158th member of the WTO and the second Central Asian country to join the organization.