|Gross capital flows to developing countries were robust in Q1 2013 bolstered by improved financial market conditions. Global industrial output expanded at a very robust pace during the same period. Meanwhile prices of internationally traded maize and wheat fell sharply in recent days, following good crops in the Southern Hemisphere and US growers’ intention to increase planted areas this season and higher than expected US stocks. |
|Gross capital flows to developing countries rebounded in the first quarter of 2013 reflecting restored investor confidence and less bank deleveraging. At $160 billion, gross flows were up 37% from a year before. Bank loans and equity flows almost doubled, reflecting less intense deleveraging in the case of bank loans and a number of public offerings in China and other East Asian countries. Bond flows were broadly stable (down only 2% from a year before), but the mix of bonds issued changed markedly. The share of non-investment grade issues in the total issuance rose to 51% in 2013Q1, up from only 26% -- reflecting both investors’ search for yield, and increased access to bond markets. Honduras, for example, issued its first-ever international bond in March, while Papua New Guinea and Rwanda are planning to follow suit.|
|Global industrial production (IP) growth rebounded in Q1 2013 to an above-trend, close-to 5% annualized pace. Output strengthened in much of the world in the first quarter. Developing industrial output rose at close to an 8% annualized pace, while outside of the Euro Area high-income country output also accelerated sharply – reaching 5%. In the Euro area industrial production continues to decline -- especially among the high-spread economies that are enduring the harshest fiscal consolidations. Forward-looking indicators like purchasing manager’s indexes suggest a slower pace of activity for the second quarter, as fiscal tightening in the US cuts into activity there and capacity constraints in many developing economies serve to moderate growth – which should nevertheless continue to expand broadly in line with underlying potential.|
|Global food prices fell further in late March, early April following good crops in the Southern hemisphere and upward revisions to U.S. stock estimates and planting intentions. The gradual decline in global grain prices since last summer’s peaks reflects good harvests in the Southern hemisphere and generally positive news over the past few months. Most recently, maize and wheat prices declined sharply (13% and 9% since March 27th), in the wake of two favorable USDA reports. Perhaps the most important of these was the quarterly Grain Stocks report (based on an actual crop holdings), which reported US maize stocks that were almost 10% higher than previously thought (stock-to-use ratios have improved, but remain low). Price expectations were further dampened by the USDA's annual Prospective Plantings survey, which indicated that maize growers in the United States intend to plant 97.3 million acres in 2013, the highest planted acreage since 1936 (up slightly from 2012). Planned wheat planted acreage is also up 1%. Meanwhile the global rice market remains well-supplied, with exports reaching a record high during 2012, driven mostly by China.|
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