|Global industrial activity continues to strengthen after its slump in the second half of 2012. The incipient recovery has been led by developing countries, in particular in the East Asia region, but also reflects a gradual improvement in high income countries. Business sentiment in the services sector suggests accelerating activity in the United States, but weaker growth in large developing countries. Equity markets have almost regained record levels in the United States, but remain well below previous highs in Europe and in emerging market countries. |
|Global industrial activity shows signs of recovery after its slump in the second half of 2012, reaching an annualized 4.1% growth pace during the three months ending in January 2013 (vs. 1.6% in Q4 2012). Developing countries are leading the way with industrial output expanding at a 7.1% annualized pace. Output growth in East Asia was particularly strong (13.6%), it improved in Europe and Central Asia (5.0%) and South Asia (5.4%), but it continued to decline in Latin America (-2.0%). Among high income countries, the pace of contraction in the Euro Area eased to an annualized 5.6% pace during the three months ending in January. Output growth in Japan turned positive at 0.9% after a 7.2% drop in Q4, and in the US industrial production rose at a 6.3% annualized pace, despite a tightening of fiscal policy. Manufacturing orders in the US and Japan rose strongly in January, suggesting further recovery in industrial output. However, orders contracted in Germany as continued weakness in other Euro Area countries curbed foreign demand for German industrial goods. |
|Business sentiment in the services sector suggests accelerating activity in the United States, but a slowing pace of expansion in large developing countries. The services sector accounts for close to four-fifths of GDP in the United States, more than 70% in the Euro Area and Japan, and 55% in developing countries. The services Purchasing Managers Index (PMI) for the US rose to a 12-month high of 56 in February buoyed by strengthening housing and labor markets. In Japan it stayed above the 50 mark that signals expansion for the fifth consecutive month. In the Euro Area, where PMIs remain below 50, February readings suggest a partial reversal of the improvements of the preceding three months. Services PMI dipped in Brazil (-2.3 points), China (-1.9 points), India (-3.3 points) and Russia (-0.3 points), but remain in the 52-55 range indicating expansion in the services sector.|
|Equity markets have almost regained record levels in the United States, but remain well below previous highs in Europe and in emerging markets. The benchmark S&P 500 index for the US approached its historic high (reached in 2007), perhaps reflecting a series of robust economic data suggesting the US economy is gaining momentum. Japan’s Nikkei index has boomed over the past 4 months, rising 40% since October 2012. However, this follows years of weakness and it remains almost 30% lower than its pre-crisis peaks. European indexes have also been rising of late, but they too remain well off (24%) pre-crisis highs. Stock market indexes in Indonesia, Malaysia, Philippines, Thailand, and Vietnam reached record highs in 2013, partly because of strong foreign private capital inflows. Nevertheless, shares in developing-country stock markets as a whole have underperformed high-income markets over the past 12 months (up 4% vs. 13% for high-income countries) and remain 14% below pre-crisis highs.|
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