|Retail sales growth slowed in the United States and in several large developing countries, but has strengthened in Japan and the Euro Area. Inflationary pressures in both high-income and developing countries taken as a whole have eased, but there are signs of pressure in the Middle-East & North Africa, South Asia and parts of East Asia & the Pacific. High-income country stock markets have outperformed developing countries so far in 2013, perhaps reflecting reduced concern on the part of investors about prospects in the high-income world. |
|Retail sales growth slowed in the United States and in several large developing countries, but has strengthened in Japan and the Euro Area. US retail sales growth slowed to a 4.1% annualized rate in the first quarter of 2013 from 5.6% in Q4 2012, partly reflecting higher taxes. But in Japan, retail sales growth accelerated to a 4.4% annualized pace in the three months ending in February (3m/3m, saar) from -0.4% in Q4 2012, and in the Euro Area, sales growth became less negative (-1.3% compared with -6.0% in Q4 2012). In China, notwithstanding strengthening industrial activity, retail sales growth slowed to a 6.8% annualized pace in Q1 from 12.9% in Q4 2012, partly due to government policies to curb wasteful public spending. Retail sales growth also moderated in Brazil, Russia and Mexico—in line with slower industrial production growth in these countries. But in Indonesia, despite slowing industrial output growth, retail sales picked up strongly, reflecting supportive policies.|
|In aggregate, inflationary pressures eased in both high income and developing economies, but pressures are building in selected regions. Quarterly inflation in the Euro Area eased to a 0.5% annualized rate in Q1 2013, from 2.1% in Q4 2012, partly reflecting declining energy prices. US inflation also fell to an annualized 1.5% from 2.7% in Q4. Japan continues to experience deflation, but expansionary policies caused inflation to edge up to a 0.5% annualized pace in the three months to February (3m/3m, saar). Inflation also ticked down in developing countries taken as a whole. China’s inflation eased to a 3.3% annualized pace in Q1 from 3.6% in Q4, partly due to curbs on spending. Inflation also moderated in Brazil and Russia as a result of weak demand and lower commodity prices. But quarterly inflation accelerated in other developing countries in Q1 2013 due to country-specific factors—including capacity constraints in Indonesia, Turkey, and India, and currency depreciation in Egypt .|
|High-income country stock markets have outperformed developing countries so far in 2013. The high-income country equity market index has risen 9.5% year-to-date, with strong gains in Japan’s Nikkei (21%) and the US’s S&P 500 (10%). This is in stark contrast with a 3.6% loss for developing country stocks so far this year. Stock markets in Brazil (-9.9%), Russia (-5%), India (-3.8%) and China (-2%) all saw declines. The better performance of high-income countries may reflect a reduction in investor concerns about risk in these markets – in line with improvements in other high-income financial risk indicators since July 2012. Such deterioration in relative risk perceptions may also explain why yields on developing country debt are rising, even though capital flows to developing markets have strengthened and credit-rating upgrades outnumber downgrades.|
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