|Rising business sentiment in developing countries suggest that the recent uptick in developing country industrial production will continue into Q4, this contrasts with persistently weak sentiment in the Euro Area and Japan (US sentiment rose in November). The pickup in developing country activity is also reflected in rising developing-country imports, which should provide some additional support to the recovery in high-income countries. In 2012, credit ratings upgrades outnumbered downgrades among developing countries, in contrast to the deterioration among high-income countries. |
|The revival of industrial production remains uneven across economies.Supported by earlier policy rate cuts, the cyclical uptick in developing country economic activity is gaining momentum. Import demand and industrial production rose at 7.2 and 5.4 percent annualized rates respectively, in the third quarter of 2012. And, in November, business sentiment indicators rose to an eighteen month high. The pick-up in developing country activity is reflected in the recent rise in metal prices. In contrast, Japan’s industrial production contracted at a 15.9 percent annualized pace in October and business sentiment fell in November. Euro Area activity remains weak with output in Germany, the region’s power house, contracting 2.6 percent (m/m) in October and business sentiment stuck at low levels. Impacted by “Hurricane Sandy” US industrial output contracted in October (-0.4, m/m), but strengthening housing market, business sentiment (5-month high in November), and a decline in unemployment signal an underlying recovery . |
The contraction in global trade that commenced in Q2 is showing tentative signs of a recovery.Available data for Q4 shows that imports and exports in large developing economies (Brazil, China, India and Russia) were up at an annualized pace of 13.5 and 9.0 percent respectively in the three months ending November. So far, this recovery in trade has not translated into increased exports of high-income countries – except in the United States, where export orders picked up in November. Export orders continued to fall for both Japan and the Euro Area. Some hope may be found in the tendency for high-income country exports to lag behind developing countries imports, suggesting the possibility that rich-country exports could pick up in coming months.
|With 26 upgrades and 17 downgrades market assessments of the credit quality of developing countries improved in 2012. Most of the upgrades took place in Latin America, including Bolivia, Ecuador, Grenada, Panama, Paraguay, Peru, Suriname, and Uruguay. However Argentina, Belize, and El Salvador experienced downgrades. Outside Latin America, Indonesia, Turkey, and Latvia were upgraded to investment grade, while notable downgrades occurred for Belarus, Egypt, Serbia, South Africa, Tunisia, Ukraine, and Vietnam with most downgrades occurring since September. In contrast, high-income countries’ creditworthiness continued to deteriorate in 2012 amid the lingering European debt crisis, with Greece, Italy, Portugal, and Spain suffering multiple downgrades. Overall, high-income sovereigns experienced a total of 20 downgrades, with no upgrades in 2012.|
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