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Prospects Daily: ​The US dollar depreciates over prospect of standoff on debt ceiling and weak jobs report, Australia’s trade deficit improves, Brazil’s industrial production falls

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Financial Markets… The dollar depreciated to a 5-week low of 97.32 against the Japanese yen in early Wednesday trading as the prospect of another standoff over raising the debt ceiling and an unexpectedly weak U.S. private-sector jobs report added to worries about the economic impact of a U.S. government shutdown. Both the euro and the British pound also gained against the greenback, rising to 8-month highs and 9-month high, respectively. Meanwhile, stronger yen pushed the Japanese shares lower, with the benchmark Nikkei 225 index faltering 2.2%, the steepest one-day drop in 6 weeks.
 
U.S. Treasuries advanced on Wednesday, with the benchmark 10-year bond yield sliding to as low as 2.6%, as renewed risk-aversion among investors following disappointing private-sector jobs data for September bolstered the demand for safe-haven government securities. Treasuries fell yesterday as investors speculated the government shutdown will be short-lived and have limited impact on the economy.
 
High Income Economies…According to payroll processor ADP, the U.S. nonfarm private sector created 166,000 jobs in September compared to a downwardly revised increase of 159,000 jobs in August.  Driven by employment increases in the trade / transportation / utilities industries (54,000 jobs), and professional / business services industries (27,000 jobs), the service sector added 147,000 jobs in September compared to 152,000 jobs in August.  Meanwhile, the manufacturing and construction industries added 19,000 jobs in September.  In terms of business size, employment at small businesses rose the most by 74,000 jobs, while large businesses added 64,000 jobs and medium-size businesses added 28,000 jobs.
 
Australia posted a seasonally adjusted merchandise trade deficit of A$815 million in August, marking a 41% (m/m sa) gain from July’s revised deficit of A$1.375 billion. Driven by a strong rebound in gold exports, total exports added 3.0% (m/m sa) to A$27.116 billion from A$26.306 billion in July, while imports grew 1.0% to A$27.931 billion from A$27.680 billion, led by a rise in consumer imports.
 
Noting that any tightening will be premature and would dampen early signs of recovery in the region, the European Central Bank left the main refinancing rate unchanged at a record low 0.50% for the fifth month.  The bank held the marginal lending facility rate at 1% and the deposit rate was also left unchanged at zero.
 
The number of registered jobless in Spain rose for the first time in seven months as the tourist sector laid off workers after the summer season.  Unemployment in September rose by 0.5% (m/m), or 25,572, to 4.7 million, with the service sector shedding 52,000 jobs.  However, employment is recovering in agriculture and fisheries, construction and Industry.
 
Developing Economies…East Asia and Pacific: Romania’s producer price index rose 0.6% (y/y) in August, slower pace than the 1.7% increase recorded in July. This slowdown was driven mainly by a 3% decline in the prices of intermediate goods. Prices of goods for the domestic market grew 2.3% (y/y), whereas export market prices fell 2.7% (y/y). Month-on-month, the producer price index fell 0.2% (m/m sa) in August, from a 0.3% increase in July.
 
Latin America and the Caribbean: Brazil’s industrial production fell 1.2% (y/y) in August, more than consensus expectations, ending four months of consecutive increases.  Driving this negative outturn were a 2.8% decrease in consumer goods production, and a 2 % fall in intermediate goods production. Mitigating the decline in consumer and intermediate goods production, capital goods production rose 11.8% (y/y). In the eight-month period ending in August, industrial production grew by 1.6% from the same period last year. 
 
Sub-Saharan Africa: Kenya’s GDP slowed in the second quarter of 2013, growing at 4.3% (y/y) from 5.2% in the first quarter.  Growth was strongest in the electricity and water supply sector, which grew by 12% (y/y) from 3.9% in the previous quarter, boosted by the production of hydro and geothermal power; followed by financial activities which advanced by 10.2% (y/y) from 3.9% in the first quarter, and construction which expanded by 6.7% (y/y) owing to improved production of cement. In contrast, hotels and restaurants contracted by 11.4% (y/y), and agriculture grew by 5% (y/y) down from 8.1% in the previous quarter.