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Prospects Daily: U.S. industrial production to the upside of forecasts

Global Macroeconomics Team's picture

Important developments today:

U.S. Industrial production up sharply in January

Starts on new private housing in the U.S. increases

European exports rise, improving regional trade surplus for 2009


Global equities up on earnings & economic reports. World stock markets pushed higher on Wednesday, following an overnight rally in U.S equities, as investor sentiment improved on easing concerns about Greece’s debt woes, and in the wake of upbeat corporate earnings- and a better-than-expected U.S. housing report. Market sentiment was also underpinned by rising commodity prices. The MSCI world equity index increased 0.9% by mid-day, posting a third day of advances.

European shares climbed the most in two months, led by bank shares, as the benchmark Dow Jones Stoxx-600 Index rose 1.5% today. Meanwhile, the MSCI Asia-Pacific Index advanced 1.8%; the biggest gain since November 30, though markets in China and Taiwan (China) were closed for the Lunar New Year. The Asian gauge slumped 8.2% from a 17-month high on January 15th through Tuesday of this week. And U.S. equities rose in early trading, a day after a triple digit gain for the S&P 500, as better-than-anticipated earnings reports and solid housing data bolstered confidence in the emerging strength of the economy.


Source: Department of Commerce


U.S. industrial production to the upside of forecasts. Output at factories, mines and utilities increased by a greater-than expected 0.9% (m/m) in January 2010 on the heels of a 0.7% advance in December. Manufacturing output jumped 1% over the period, with consumer goods rising 1.1% (m/m); output of business equipment gained 0.9% in response to rising demand. As a result, capacity utilization in factories increased for a fourth month running to 72.6%, slowly climbing toward the pre-crisis average utilization rate of 80%. At the same time, the momentum growth of factory output (rolling quarter annualized, or saar), which had been easing from near term peaks of 9.7% in October, has begun to increase once more, rising from 6.6% in December to 6.8% in the latest month [see chart]. While output still remains below levels observed a year ago, the year-on-year decline moderated to 1.3% in January from 2.2% in the previous month.

In other news from the U.S. Commerce Departmentstarts on new private housing units increased by 2.8% in January (m/m), after recording a 0.7% decline in December, as the housing market began the New Year on more solid footing. Production was ramped up to meet anticipated increases in demand under the government’s extended home-buyers credit program. Housing permits, which signal future construction, fell by 0.8% (m/m), however, after posting a sharp increase of more-than 8% in December. The extension of the federal housing program is expected to support the housing market over the next few months. However, the high rate of foreclosures will continue to put pressure on prices.

European exports gain, improving regional trade balance in 2009. Exports from the Euro Zone grew 3.1% in December (m/m), responding to strong external demand for European merchandise, and outpacing imports for a €7 billion trade surplus, the largest in over five years. However, trade remained well below pre-crisis levels; exports for the region in 2009 were down 18% compared to 2008 while imports fell 21%. Over the last quarter of 2009, Euro Zone exporters benefited from a marked retreat in the euro from a 15-month high of $1.50 per euro to a current value of $1.37.

Among emerging markets:

In Latin America and the Caribbean, Economists surveyed by the central bank of Brazil revised their inflation forecast up to 4.8% for 2010, above the government’s 4.5% target.

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