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Prospects Daily: Developing-country stocks advance, U.S. first-time jobless claims tumble to a 3-month low, Malaysian central bank holds policy rate at 3%

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Financial Markets…Developing-country stocks advanced on Thursday, with the benchmark index heading toward a six-week high, as diplomatic efforts to moderate the crisis in Ukraine continued, reducing investor’s worries over immediate military confrontation. The MSCI Emerging Markets Index gained 0.8%, approaching the highest level since January 23, with India’s benchmark stock index climbing to a record high. Meanwhile, Russian shares tumbled 2.4% after Crimea’s parliament voted in favor of becoming part of Russia. The developing-country shares have declined 3.6% thus far this year, compared with a 1.4% gain for developed-nation stocks.

High Income Economies…In the week ended March 1st, U.S. first-time jobless claims fell to 323,000, a decrease of 26,000 from the previous week's revised figure of 349,000. With the larger than expected decrease, jobless claims fell to their lowest level since hitting 305,000 in the last week of November. The less volatile four-week moving average edged down to 336,500, a decrease of 2,000 from the previous week's revised average of 338,500. Continuing claims, a reading on the number of people receiving ongoing unemployment assistance, fell to 2.91 million in the week ended February 22nd from the preceding week's revised level of 2.92 million.

The European Central Bank kept its key interest rate unchanged at a record low of 0.25%, the marginal lending facility rate at 0.75% and the deposit facility rate at zero, where it has remained since July 2012. In addition, acknowledging that the recovery is strengthening, the Bank raised its Eurozone growth forecast to 1.2% for 2014, from the earlier estimate of 1.1%. The Bank also trimmed its inflation forecast for this year, to 1.0% from 1.1%, but said that inflation will rise steadily to 1.7% by Q4 2016.

Australia posted a much-larger-than-expected merchandise trade surplus of A$1.4 billion in January, an increase of 142% (m/m) on the surplus of A$591 million in December. Exports climbed A$1.1 billion or 4.0% to A$29.8 billion, while imports added A$226 million or 1.0% to A$28.3 billion.

Developing Economies… East Asia and Pacific: In line with expectations, the Malaysian central bank kept the benchmark overnight policy rate unchanged at 3.0%, amid rising inflation, to support economic growth and domestic consumption. Noting that inflation is expected to be affected by higher domestic costs, the bank reiterated that subdued external price pressures and moderate domestic demand will help contain the impact of these costs on the underlying inflation.

Thailand’s consumer confidence index fell for the 11th consecutive month to a 12-year low in February, dropping to 69.9 from 71.5 in January as political uncertainty continued to weigh on economic activity. Last month, Moody’s Investor Service maintained Thailand’s rating noting that the economy’s credit fundamentals had withstood the political turbulence.

South Asia: India’s HSBC purchasing managers’ index for the services sector improved moderately in February, coming in at 48.8 up from 48.3 in January, but remained below the no-change 50 mark, which denotes contraction, for the eighth consecutive month as demand remained weak. New business received by service providers fell for the eighth consecutive month but at the weakest pace. Producers increased output prices in February on account of higher input prices, though cost inflation moderated from January. The composite output index, which measures the performance of the services and manufacturing sectors combined, rose above the no-change 50 mark to 50.3 in February from 49.6 in January indicating a moderate improvement in overall business conditions.