Spanish and Italian government bonds extended their gains on Wednesday amid signs the economic outlook of both countries is improving. Spain’s 5-year note yields fell as much as 8 basis points (bps) to an 8-year low of 2.52%, while Italian 5-year note yields dropped as much as 5 bps to 2.55%. Spain’s government securities gained 12% this year through yesterday, while Italian securities returned 7.6%.
Chinese shares posted the steepest decline in a month as investors speculated the government may cut its 2014 economic growth target. The benchmark Shanghai Composite Index fell 1.5%, its biggest drop since November 13, while the CSI 300 index sank 1.7% with financial stocks leading the decline. The Shanghai gauge has advanced 3.2% since the Chinese government announced its most sweeping economic and social reforms in two decades on November 15.
High Income Economies…U.S. wholesale inventories rose 1.4% (m/m sa) in October, following an upwardly revised 0.5% increase in September. The larger than expected increase was partly due to notable growth in inventories of non-durable goods, which surged up by 3.0% in October after rising by 1.4% in September. Inventories of durable goods rose by 0.4% after coming in unchanged in September. On a three-monthly annualized basis, inventories increased by 6.9% (3m/3m saar) in October compared to September’s 2.2% increase.
At the same time, U.S. wholesales sales increased by 1.0% (m/m sa) in October after rising by an upwardly revised 0.8% in September. Sales of non-durable goods rebounded by 1.8% after falling by 0.3% in September, while sales of durable goods were unchanged after jumping by 2.1%. On a three-monthly annualized basis, inventories increased by 5.9% (3m/3m saar) compared to the 5.5% increase observed in September.
Denmark's central bank raised the growth projection for this year from 0.3% (y/y) to 0.4%, while cutting the outlook for 2014 to 1.5% from 1.6%, and for 2015 to 1.6% from 1.7%. Recent growth mainly reflects rising exports and public spending, while private consumption has not picked up so far. Going forward, the central bank expects growth to be driven by private-sector demand and increased private consumption.
The Greek unemployment rate edged up from 27.3% in August to 27.4% in September, which is also 1.4 percentage points up on the 26.0% unemployment rate from September 2012. The number of employed persons decreased by 54,128 compared with September 2012 (-1.5% y/y) and increased by 5,397 persons compared with August 2013 (+0.1% m/m). At the same time, the unemployed increased by 77,161 persons (+5.9%) compared with September 2012, and by 14,023 persons compared with August 2013 (+1.0%).
Developing Economies…East Asia and Pacific: Malaysia’s industrial production strengthened in October, rising 1.7% (y/y) after increasing 1.0% (y/y) in September. Supporting the October increase in industrial production, manufacturing production rose 3.3% (y/y), and electricity output increased 4.8% (y/y); while mining output fell 3.6% (y/y). Month-on-month, industrial production expanded at the seasonally adjusted pace of 1.9%, supported by increases in manufacturing (+0.8%, sa) and mining (+4.4%, sa); while electricity output fell (-0.9%, sa).
Europe and Central Asia: Turkey’s economy slowed slightly in the third quarter of 2013, with GDP expanding at the annualized pace of 4.5%, marginally down from the revised 4.4% growth recorded in the second quarter. Contributing to the third quarter growth, gross fixed capital formation rose 6% (y/y), household consumption increased by 5.1% (y/y), and government consumption advanced 0.6% (y/y). Exports of goods and services fell by 2.2% (y/y), while imports rose 6% (y/y). On a quarterly basis, Turkey’s GDP growth slowed to a seasonally and calendar-adjusted rate of 0.9% in the third quarter, down from 2.0% in the second quarter. For the year to September, Turkey’s GDP increased by 9.7% compared with the same period a year ago.
Meanwhile, Turkey’s current account deficit narrowed in October, falling to US$2.89bn from US$3.36bn in September. Contributing to this improvement, the merchandise trade deficit decreased to US$5.6bn from US$6.0bn in September and the deficit on the income account fell to US$742 million from US$785 million in September. In addition, the services account recorded a surplus of US$3.35bn slightly higher than the US$3.33bn surplus recorded in September and current transfers increased to US$107 million from US$ 101 million.
Hungary’s annual headline inflation, measured by the consumer price index, was unchanged in November, rising 0.9% the same as in October, remaining well below the central bank’s target of 3% for 2013. Underlying the November inflation figure, prices of electricity, natural gas and other fuels fell 10.3% (y/y), cost of water charges, sewerage disposal and refuse disposal decreased 11% (y/y), and prices of durable goods, and clothing and footwear fell 1.8% (y/y) and 1.2% (y/y) respectively. Upward pressures came from food prices, which rose 0.4% (y/y), and cost of local transport which increased 4.9% (y/y). Month-on-month prices fell 0.1% in November owing to lower prices of food, electricity, gas and water. Annual core inflation was measured at 3.5% in November.
Meanwhile, Romania’s annual headline inflation eased slightly to 1.83% in November, down from 1.88% in October, remaining below the central bank's target of 2.5% +/-1 percentage point for 2013. Contributing to the November inflation reading, food prices fell 1.77% (y/y); while non-food prices rose 4.38% (y/y) and service costs moved up 3.0%. Month-on-month, prices were broadly unchanged in November.
Middle East and North Africa: Egypt’s annual headline inflation, measured by the consumer price index, accelerated to 13.0% in November, its highest level in almost five years, up from 10.4% in October, driven by rising food prices, which jumped 19.34% (y/y). Also contributing to the increase in the CPI, costs of restaurants and hotels rose 22.6% (y/y); cost of recreation and culture increased 17.3% (y/y); prices of furnishings and household equipment went up 13.2% (y/y); cost of medical are and transport rose 9.7% (y/y) and 7.4% (y/y) respectively; and cost of housing, water, electricity and gas increased 6.1% (y/y). Month-on-month, inflation eased to 0.95%. Core inflation, which excludes subsidized food and volatile items such as food and vegetable, eased to 0.46% (m/m) in November from 1.2% in October; but increased to 11.95% from 11.15% in October, year-on-year.
Sub-Saharan Africa: South Africa’s annual consumer price inflation decreased for the third consecutive month in November, easing to 5.3% from 5.5% in October, thereby moving further below the upper limit of the central bank’s target range of 3-6% for 2013. Driving this improvement, prices of food and non-alcoholic beverages decelerated to 3.8% (y/y) in November from 4.3% in October and transport cost slowed to 5.8% (y/y) from 6.2% in October, aided by a decrease in the price of petrol. Month-on-month, prices slowed to 0.1% from 0.2% in October.
South Africa’s retail sales strengthened in October, rising 1.3% (y/y) in constant prices, following a 0.1% increase in September. The growth in October retail sales was driven by a 7.6% (y/y) rise in clothing and foot wear sales, and a 2% (y/y) increase in the sales of pharmaceutical and medical products, and cosmetics. Mitigating these gains, sales of food, beverages and tobacco fell 1.2% (y/y) and sales at general dealers decreased 0.4% (y/y). Month-on-month retail sales recorded a seasonally adjusted 0.4% decrease in October after contracting by 0.8% in September. In the three-month period ended October, retail sales fell 0.1% (q/q) from the previous quarter.