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Prospects Daily: Dollar slumps as equities, bonds, and commodities remains strong, Belgian consumer confidence at 27-Month High, China’s GDP growth strengthens in Q3

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Financial Markets…Equities, bonds, and commodities remained strong on Friday, while the dollar continued to slump as growing expectations of the Federal Reserve to delay tapering its stimulus program and strong China growth data boosted market sentiment. Both Asian and European shares extended their gains, and U.S. equities opened higher in morning session after the S&P 500 reached a new record high yesterday. Developing-countries shares gained for a third consecutive week as government data showed today China’s GDP accelerated in the third quarter. The benchmark U.S. 10-year Treasury yield fell to a 12-week low of 2.54%, and the one-month T-bill rate slide to 0.015% after surging to 0.45% on October 16, the highest level since October 2008. Meanwhile, the dollar index (DXY), which measures the greenback’s value against the six major currencies, fell to 79.478, its lowest level since February. In commodity markets, copper gained 0.6% to 7,273 a ton and Brent oil futures climbed back over $110 a barrel, while gold remained steady after surging nearly 3% yesterday, helped by the weaker dollar.

High Income Economies…Belgium's consumer confidence, as measured by the National Bank of Belgium consumer confidence index moved up to -6 in October from -7 in September. The index has recorded increases every month since March, and the latest score is the highest since July 2011. Driving the improvement were increased households' confidence with regard to their future financial position and lower concerns on rising unemployment. Consumers' expectations regarding their saving capacity remained unchanged, while households were slightly less optimistic about general economic prospects.

South Korea’s leading economic index moved up 0.3% (m/m) to 119.8 in August, after staying unchanged in July, and decreasing 0.9% in June. August's pick up was driven mainly by increased machinery orders, plus positive contributions from real exports, stock prices and private construction orders. The current conditions component of the index, namely the coincident index, rose 0.5% (m/m) to 117.9 in August, faster than the increases of 0.2% and 0.1% seen in July and June, respectively.

U.K. gross mortgage lending, an indicator of the health of the U.K. housing market, reached £49.3bn in Q3, which was a 17.6% (q/q) increase from Q2, and a 32% (y/y) increase from Q3 2012, and the highest amount since Q3 2008. For September, gross mortgage lending was £16.2bn, compared to £16.4bn in August, but 41% (y/y) higher than September 2012. At the same time, the Knight Frank and Markit Economics U.K. House Price Sentiment Index (HPSI) increased from 57.9 in September to 59.1 a new survey high in October, and indicating that households perceived homes values to be raising for the seventh consecutive month

Developing Economies… Europe and Central Asia: Hungary’s gross wage growth accelerated to 4.7% (y/y) in August following a 2.1% growth in July. Driving this acceleration was the salary hike in the health care sector, where wages went up 9.9% (y/y). Gross wages grew 3.8% in the business sector and 7.4% in budgetary institutions in August. In the 8-month period January-August, gross wages grew by 3.4% from the corresponding period last year.

East Asia and Pacific: China’s GDP growth accelerated to 7.8% (y/y) in the third quarter of 2013, faster than the 7.5% (y/y) GDP growth recorded in the second quarter and the 7.7% (y/y) expansion in the first quarter. Quarter-on-quarter, GDP grew 2.2%. The data also show that industrial production slowed in September, growing 10.2% (y/y) compared with 10.4% in August; and retail sales weakened slightly, with a 13.3% growth in September from 13.4% in August. In the year-to-September, fixed asset investment increased 20.2% compared with 20.3% in the corresponding period last year.

Meanwhile, foreign direct investment in China rose 4.9% (y/y) to US$8.8bn in September, notably faster than the 0.6% gain recorded in August. During the 9-month period January to September, FDI inflows increased 6.2% (y/y) to US$88.6bn.

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