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Prospects Daily: GDP contracts in US, Belgium and Spain in Q4 2012, Russian business confidence strengthens

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Financial Markets…A total of 278 European banks are repaying €137 billion ($182 billion) in 3-year loans to the European Central Bank today, the first opportunity for early returning of crisis funds from the first longer-term refinancing operation in December 2011 and almost two years before they are due. That represents about a quarter of €489 billion the region’s lenders borrowed roughly a year ago, and a sign that they are less dependent on the crisis loans as their access to market funding has improved  in recent months.

Chinese stocks extended their gains on Wednesday, with the benchmark Shanghai Composite Index climbing 1% to its highest level since May 30, as property shares rallied. The Shanghai gauge has risen 22% from a four-year low level reached in early-December on signs of the steady economic recovery and the new government’s pledge to boost urban development.

The Taiwanese government pledged to double the limit on mainland Chinese institutions’ securities investment in the country’s financial markets from $500 million to $1 billion, following a meeting between two countries’ securities regulators. The increased scope for inbound investment from China coincides with Taiwan’s central bank permitting local financial institutions to conduct yuan business and a twofold increase in the quota for mainland visitors by the country’s tourism bureau.

High-income EconomiesUS GDP contracted by an annualized 0.1% (q/q) in the fourth quarter of 2012, following 3.1% growth in the third quarter, mainly due to a 15% decline in federal government expenditure (with a 22% decline in defense spending). However, private consumption grew at a faster 2.2% pace in Q4 2012 compared with a 1.6% increase in Q3; non-residential fixed investment rose 8.4% in contrast with a 1.8% decline in Q3; and residential fixed investment rose at a faster 15.3% pace compared with a 13.5% increase in Q3 – all suggesting that underlying growth remained strong into Q4 2012. For the whole of 2012, US real GDP rose at a faster 2.2% pace compared with 1.8% growth in 2011. 

Spain’s recession worsened in the fourth quarter of 2012, with GDP declining by an annualized 2.8% (q/q) (-1.8% y/y), compared with a 1.2% annualized quarterly decline in Q3, as austerity measures and recession in the Euro Area weighed on the economy. GDP in 2012 was 1.4% lower than in 2011.

Belgium’s
GDP contracted at a 0.4% (q/q) annualized pace in the fourth quarter of 2012, with full year GDP for 2012 0.2% lower than in 2011.

Euro Area
consumer confidence rose to the highest level since June 2012 in January, with the European Commission’s index of executive and consumer sentiment for the Euro Area rising to 89.2 from a revised 87.8 in December.

Retail sales in Japan remained sluggish, rising 0.1% (m/m) in December 2012 following a 0.1% decline the previous month, as consumption demand remained weak after the economy contracted 3.5% in the third quarter of 2012. 

South Korea’s industrial production growth slowed to 1.0% (m/m) in December compared with a 2.6% increase in November. On a yearly basis, industrial production was up 0.8% (y/y) after rising 3.2% in the previous month.

Developing EconomiesBulgaria's producer price inflation edged down to 5.2% (y/y) in December from 5.3% in November. On a monthly basis, the PPI fell by 0.7% in December.

Brazil’s IGP-M inflation index, which is the broadest measure of inflation in wholesale, consumer and construction, edged up to 7.9% (y/y) in December from 7.8% in November on higher consumer food prices. Brazil's producer price inflation also accelerated to 7.2% (y/y) in December from 6.8% in November, led by 14.6% (y/y) increase in food prices.

In Chile, retail sales growth accelerated to 11% (y/y) in December from 10.7% in November. But the manufacturing index decreased 2.5% (y/y) on weaker production of wood, metal and chemicals, but also due to a higher base of comparison and fewer working days. Copper production contracted 1.8% (y/y) in December following 2.6% growth in November.

Russia’s business confidence reported by Rosstat showed an improvement for the first time in four months with the business confidence index at -2 compared to its -5 December reading.

South Africa's broad money supply (M3) growth slowed to 5.2% (y/y) in December from 6.3% in November. The narrow money supply (M1) growth also slowed to 9.3% (y/y) in December from 9.6% in November. Claims on the domestic private sector meanwhile expanded 10.1% (y/y) accelerating from 9.6% increase recorded in November.

Turkey's tourism revenues rose by 1.8% in 2012 to $23.44 billion supported by a 17.2% increase in the fourth quarter. Germany, Russia and Britain accounted for the largest number of visitors in 2012.

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