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Prospects Daily: U.S. Treasuries fall on strong jobs data, U.S. private sector monthly job growth at 20-month high, Brazil’s industrial production falls again in May

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Financial Markets

U.S.Treasuries prices dropped for a second day on Wednesday after a private report showed stronger-than-expected private-sector jobs figures in June. Robust U.S. private-sector employment report increased expectations for tomorrow’s nonfarm payrolls report from the U.S. government. The benchmark 10-year yield climbed 5 basis points (bps) to 2.61%, the highest level since June 24, while the 30-year bond yield traded flat at 3.44%.

Indonesia is issuing its first euro-denominated global bonds to take advantage of lower borrowing costs following the European Central Bank’s move to ease monetary policy. The country is selling €1 billion of 7-year securities, expected to be priced at 195 basis points over the euro mid-swap rate. Indonesia is seeking to raise about $30 billion from international and domestic debt markets this year to finance a fiscal deficit targeted at 2.4% of gross domestic product, which was increased from 1.69% last month.

High Income Economies

Beating economists’ forecasts of an increase of 205,000 jobs, U.S. private sector employment surged by 281,000 jobs in June following an increase of 179,000 jobs in May, according to payroll processor ADP. The latest increase reflected the biggest monthly increase in employment since November 2012, and was partly due to a jump in employment in the service sector, which added 230,000 jobs in June, following an increase of 148,000 jobs in May. The professional/business services industry added 77,000 jobs, while employment in the trade/transportation/utilities industry grew by 50,000 jobs. Additionally, employment in the goods-producing sector increased by 51,000 jobs, and the construction industry added 36,000 jobs.

Eurozone producer prices declined 1.0% (y/y) in May, slower than April's 1.2% decline, in line with economists' expectations. In March, prices fell 1.7%. Producer prices in the energy sector declined 2.8%, consumer goods rose by 0.3% and 0.8%, respectively in May. On a monthly basis and marking the fifth consecutive month of decline, producer prices dropped 0.1% (m/m) in May, unchanged from April. Economists had forecast prices to remain flat during the month.

Australia posted a merchandise trade deficit of A$1.9 bn in May, marking an increase of A$1.1 bn or 145% on the April deficit. The headline figure was well shy of forecasts for a deficit of A$200 m, following the downwardly revised A$780 m deficit in April (originally -A$122 m). Exports were down A$1.30 bn or 5.0% (m/m) to A$26.7 bn. Imports eased A$169 m or 1.0% (m/m) to A$28.6 bn.

Developing Economies

Europe and Central Asia

Romania’s final GDP growth figure for the first quarter of 2014 came in at a non-seasonally adjusted 3.9% (y/y), slightly higher than the earlier estimate of 3.8%, but slower than the 5.4% growth recorded in the fourth quarter of 2013. On a seasonally adjusted basis, GDP grew 4.0% (y/y) in 2014Q1 compared with 5.1% (y/y) in 2013Q4. Quarter-on-quarter GDP rose 0.2% slightly faster than the earlier estimate of 0.1% (q/q) expansion.

Latin America and Caribbean

Brazil’s industrial production fell for the third consecutive month in May but at a slower pace, decreasing 3.2% (y/y) following a 5.8% (y/y) contraction in April. On a monthly basis, industrial production fell 0.6% in line with expectations, decreasing further from a 0.3% (m/m) decline in April. Year-to-date Brazil’s industrial production decreased 1.6%.

Sub-Saharan Africa

South Africa’s consumer confidence increased in the second quarter of 2014, supported by decreasing petrol prices, stable interest rates and the firming rand. The Consumer confidence index rose from negative 6 in Q1 to 4 in Q2, its highest reading in two-and-a-half year, beating economists’ forecasts for a further decline. All three sub-indices measuring, respectively, households’ expectations about economic performance over the next 12 months, households’ expectations of their financial position in the next 12 months, and households’ ratings of the appropriateness of the present time to buy durable goods showed improvements in the second quarter.

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