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Prospects Daily: Commodity prices drop, US consumer and homebuilder confidence eases, China’s growth slows

Global Macroeconomics Team's picture

Financial Markets…Spanish government bonds fell for a third day, with the benchmark 10-year yields sliding 4 basis points to 4.73%, as concerns over slowing China growth reduced the investor appetite for high-yielding assets. Meanwhile, Spanish Treasury is planning to sell new debt maturing between 2016 and 2023 on April 18.

Commodity prices tumbled on Monday, led by gold and silver, after weaker-than-expected China’s growth data. Sliver tumbled as much as 11.5% today, extending last Friday’s decline of 6%, and gold dropped as much as 6.6% to $1,385.55, the least since March 2011. Oil traded near $101 a barrel, and copper slid 3% to the lowest level since 2011.
 
Developing-country stocks weakened, led by commodity exporters as the Chinese shares fell to the lowest level this year. The benchmark MSCI Emerging Market Index dropped 1% to the lowest closing since April 8. China’s Shanghai Composite Index sank 1.1%, while Brazil’s Bovespa index dropped 1% to a near 9-month low. Benchmark stock indices in Russia, Poland, and South Africa slid at least 1.4%.

High-income Economies
US consumer confidence deteriorated in April, with preliminary readings from the University of Michigan consumer sentiment index falling to 72.3 from 78.6 in March. This was the lowest reading since July 2012 and was led by a sharp drop in consumer expectations of future economic conditions.

Separately, US homebuilders confidence fell for the third month in a row in April to 42 from 44 in March, its lowest level since October last year, on concerns that demand is cooling and difficulties in obtaining construction credit and tight mortgage lending. Meanwhile, manufacturing in the New York region expanded at a slower pace in April as orders eased and sales stagnated, with the New York Fed’s general economic index dropping to 3.1 from 9.2 in March. (A reading above zero indicates expansion).

Euro Area
merchandise exports ticked up by 0.1% (m/m sa) in February following a 1.9% gain in January, as rising exports from Germany and France offset weakness in Italy and the Netherlands. Imports meanwhile decreased 2.1% in February but not enough to offset a 2.9% gain in January. Correspondingly, the pace of decline in exports improved to -2.5% (3m/3m saar) from -5.2% in January and for imports to -5.9% (3m/3m saar) from -8.3%. 

Developing EconomiesEast Asia and Pacific: China’s growth eased in the Q1 2013 to 7.7% (y/y), down from 7.9% (y/y) in the previous quarter. On q/q basis, the slowdown was more pronounced, down to 6.6% (saar), from 8.2% (saar) in the Q4 2012. At the same time, industrial production eased to 8.9% (y/y) in March, down from 9.9% in the previous month while retail sales picked up to 12.6% (y/y), up from 12.2% in February.

Europe and Central Asia:
Russia’s industrial production accelerated to 2.6% (y/y) in March, up from a contraction of 2.1% (y/y) in the previous month. This is the first expansion this year and the fastest pace in eight months, led by gains in manufacturing.

Latin America and the Caribbean:
Argentina’s inflation eased to 10.6% (y/y) in March, down from 10.8% (y/y) in February and 11.1% (y/y) in January. The government ordered supermarkets and electronics retailers to freeze prices for two months starting in early February which were later extended another two months through the end of May.

South Asia: India’s wholesale price inflation slowed in March to 6% (y/y) from 6.8% (y/y) in February, which is the lowest level in 3 years. However, food and fuel prices were still rising due to higher wheat (up 19.9% y/y), rice (up 17.9% y/y) as well as fuel costs (up 10.2% y/y). At the same time consumer price inflation – combined urban and rural –  decelerated marginally to 10.4% (y/y) in March from 10.9% (y/y) in February in March.