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Prospects Daily: Bulgaria issues its first sovereign bond in two years, U.K. GDP increases in Q1,Turkey’s consumer confidence falls again in June

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Financial Markets

Investors are returning to developing-country exchange traded funds (ETFs) as emerging market assets are among the main beneficiaries of a renewed rush for riskier assets. Asset managers have put nearly $11 billion into developing-nation ETFs listed in the U.S. in Q2 after pulling $31 billion from them in the first quarter amid the end of easing U.S. monetary policy and global risk aversion.

Bulgaria returned to the international bond market after a two-year absence yesterday, selling €1.5 billion of the 10-year sovereign bond with a yield of 3.06%. Demand for a new bond was strong with bids worth €3.8 billion put in by prospective investors. The new offering came a time of significant upheaval in the country. The central bank took control of the country’s fourth-biggest bank, Corporate Commercial Bank (Corpbank), last week in an attempt to avoid a bankruptcy, prompting concerns over the risk of contagion.

High Income Economies

The Thomson Reuters and the University of Michigan consumer sentiment index for the U.S. came in at 82.5 in June, higher than the preliminary reading of 81.2 and the May reading of 81.9. The improvement came as the sub-index of current economic conditions rose to 96.6 in June from 94.5 in May. On the other hand, the gauge of consumer expectations slipped to 73.5 in June from 73.7.

Driven by business investment, U.K. GDP grew 0.8% (q/q) percent in Q1, unrevised from the second estimate released earlier. At the same time, annual growth was revised down to 3.0% (y/y) from 3.1%. Contributing to the increase, gross fixed capital formation increased by 2.4% (q/q) in Q1 2014, higher than Q4’s 1.3% increase. Within gross fixed capital formation, business investment jumped 5.0% in Q1, higher than Q4’s 1.5% increase. Additionally, private consumption increased, and government expenditure remained unchanged from Q4, while exports and imports both declined in Q1.

Providing fresh concerns the East Asian export powerhouse's economic recovery is stalling, South Korean industrial output plunged 2.7% (m/m sa) in May, greater than the 2.1 decline forecast by economists, following the 0.1 percent increase in April. On a yearly basis, industrial output tumbled 2.1% (y/y) - well shy of forecasts for an increase of 3.0% following the 2.4% increase April. The Korean economy is battling multiple headwinds, including sluggish domestic demand and weak corporate investment.

Developing Economies

Europe and Central Asia

Consumer confidence in Turkey fell for the second consecutive month in June, decreasing to 73.7 from 76 in May. Among its components, the sub-index assessing the general view on economic conditions in the next 12 months fell to 98.7 from 102.7; while the index measuring households’ expectations about their future financial situation decreased to 90.9 from 93.1. Households also expected unemployment to rise further in the coming months, with the corresponding index falling to 81.2 from 81.6.

Latin America and Caribbean

Colombia’s trade deficit jumped to US$1.2bn (y/y) in April, up from US$0.2bn in the previous year as exports fell sharply while imports rose. Year-on-year, exports fell 13.1% in April on account of a large decline in manufacturing shipments; while imports rose 5.6% (y/y), led by a sharp increase in diesel imports.

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