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Prospects Daily: Japanese Yen weakens further…German exports pick up…Mexican industrial production contracts sharply

Global Macroeconomics Team's picture
Financial Markets…G3 government bonds declined on Friday, as signs that their economies is improving amid monetary stimulus damped demand for the safe-haven debt. U.S. 10-year Treasury yield rose as much as 6 basis points to a five-week high of 1.87%, while comparable yields on German and Japanese bonds climbed 3 bps and 10 bps to 1.3% and 0.69%, respectively.

The yen slumped 1% against the dollar to 101.59, depreciating beyond 101 per dollar for the first time since April 2009, as a government reported showed Japanese investors increased their holdings of foreign bonds in recent weeks. Japan’s currency fell 0.5% versus the euro to 131.98 after touching 132.26 earlier, the weakest since January 2010.

Pakistan shares are extending their record-rally as robust corporate earnings and the prospects of a successful regime change helped fueled demand from oversea investors. The country’s KSE 100 index has surged 18% thus far this year as record earnings growth in Asia in the past 12 months has attracted $190 million of stock buying from foreign investors since the end of 2012.

High-income EconomiesItalian industrial production contracted by 0.8% (m/m, sa) in March and is down by 1.4% (q/q saar) in 2013Q1. Even though growth of industrial output is still negative, it is an improvement over a 2012Q4 contraction of 8.9% (q/q, saar)

German exports picked up in March to 0.5% (m/m, sa) and are 1.8% (q/q saar) up for the 2013Q1, significant improvement over 8.1% contraction in 2012Q4. Imports are down in 2013Q1 by 5.3% (q/q saar), further contraction from 3.3% decline in the previous quarter suggesting that net exports are a strong contributor to Q1 GDP growth.

UK’s construction output measured by volume dropped in March by 2.4% (q/q, sa) from the previous quarter. This is its lowest since the fourth quarter of 1998 as work on new building projects declined across the industry.

Developing Economies…East Asia and the Pacific: Vietnam's central bank cut its benchmark interest rates by 100 bps – the refinancing rate from 8 to 7% and the discount rate from 6 to 5%. The bank has cut the rate eight times since March 2012 to stimulate economic growth and they are now at the lowest level since late 2009.

Latin America and the Caribbean: Mexico’s industrial production contraction deepened in March as industrial output declined by 4.9% (y/y), down from contraction of 1.4% (y/y) in the previous month. This was the biggest decline since the end of the 2009 recession as manufacturing contracted 5.8% (y/y) and construction fell 5.2% (y/y).

Middle East and North Africa: Egypt’s sovereign credit rating was cut again as S&P lowered Egypt’s long-term credit rating from B- to CCC+, and its short-term rating from B to C on worries about the country’s ability to meet its fiscal and external financing needs.

South Asia: India’s industrial production picked up in March by growing 2.5% (y/y), up from revised 0.5% (y/y) in the previous month. Industrial output was boosted by an upswing in capital (up 6.9% y/y) and basic (up 2.6% y/y) goods segments while production of intermediate goods was down (0.2% y/y).

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