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Prospects Daily: Euro Area industrial production falls in October, India’s industrial production accelerates

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Financial MarketsGreek 10-year bond yields dropped 42 basis points to 12.79% on Wednesday, after sliding to as low as 12.46%, after the country said it has successfully completed a bond buyback program that started last Monday. According to Greece’s Public Debt Management Agency, investors tendered Greek government bonds with a face value of €31.9 billion, and the weighted-average repurchase price was set at 33.8% of face amount.

Italy
sold €6.5 billion ($8.46 billion) of one-year Treasury bills today at average yield of 1.456%, the lowest borrowing costs since March 13 and down from 1.762% at the previous auction last month. Investor demand was strong as the prospect of the European Central Bank’s bond-buying program more than offset growing political uncertainty in Italy following Prime Minister Mario Monti’s announcement to resign.

Indian
equities slid for a fourth day on Wednesday, with the benchmark Sensitive Index falling 0.2%, amid growing concern that the country’s central bank may hold off monetary easing for the time being. The Reserve Bank of India has signaled it may cut interest rates next quarter (instead of next week) if inflation eases.

High-income Economies…Industrial production in the Euro Area fell 1.4% (m/m) in October, following a larger 2.3% (m/m) drop in September. Industrial output in the two largest Eurozone economies, Germany and France fell 2.4% (m/m) and 0.6% (m/m), respectively, offsetting increases in Spain and Portugal of 1.2% and 4.8%. Eurozone industrial output has continued to decline amid weak consumption demand, high unemployment, and fiscal austerity.  

Germany’s EU-harmonized consumer price inflation edged down to 1.9% (y/y) in November from 2.1% in October, slipping below the ECB’s 2% inflation target for the Eurozone. Consumer prices fell 0.1% (m/m) in November due to lower heating oil, diesel and petrol costs.

France’s EU-harmonized consumer price inflation moderated to the lowest in two years in November, with the inflation rate falling to 1.6% (y/y) from 2.1% in October. Prices fell 0.2% (m/m) in November owing mainly to a decline in fuel prices, and transportation and telecommunication costs.

Unemployment in the UK fell by 82,000 in the three months to October, the largest quarterly drop since 2001, to 2.51 million, as an increase in private sector employment offset a decline in public sector employment. The unemployment rate fell 0.2 percentage points to 7.8% from the previous three months.

Developing Economies
India’s industrial production increased by 8.2% (y/y) in October,  the fastest pace in more than a year and reversing a 0.7% (y/y) fall observed in September, helped by strong growth in manufacturing and electricity output. Year-on-year industrial output growth benefited from a low base in October 2011, but output rose about 2.5% (m/m) on a seasonally adjusted basis.

India’s consumer price inflation accelerated to 9.9% (y/y) in November from 9.75% in October, but wholesale price inflation slowed to a nine-month low of 7.45% in October from September's 7.81% on cooling food prices.

Mexico’s industrial output fell by 0.9% (m/m) in October from September. On an annual basis, however, Mexico’s industrial production grew by 3.6% (y/y), faster than the 2.3% growth recorded in September.

South Africa's inflation rate remained at 5.6% in November, similar to its October reading. The annual headline inflation is still below the central bank's 6% target ceiling, but price pressures remain elevated.

The Central Bank of Sri Lanka cut its benchmark repurchase rate by 25 basis points to 7.5% (following earlier monetary tightening) in anticipation of moderation in inflation expectations. Sri Lanka's inflation rate rose to 9.5% (y/y) in November from 8.9% in October due to increases in administered prices, tariff adjustments and temporary weather related food price hikes.

The Central Bank of West African States (BCEAO), which implements the monetary policy of the West African Monetary Union (Senegal, Burkina Faso, Guinea Bissau, Ivory Coast, Mali, Niger, Togo and Benin) left its benchmark marginal lending rate unchanged at 4.0% stating that the economic activity in the West African Monetary Union (WAMU) continues to improve and inflation is expected to slow down to 2.5% by the end of December from 2.7% in September on a better supply of grain and pass through of earlier upward adjustment in fuel prices and cereal prices.