Gloomy Report from IMF
October 9, 2012
A new World Economic Outlook with downwardly revised growth forecasts was released by the IMF. Projected global growth in 2012 and 2013 was revised to 3.3% and 3.6% from estimates made in July of 3.5% and 3.9%. The euro area will contract 0.4% in 2012 and rebound just 0.2% in 2013 (the latter being trimmed from a forecast in July of +0.7%). Chinese growth is to average just 8.0% per annum over the two years. U.S. GDP will rise by 2.2% in 2012 and 2.1% next year. Brazilian GDP growth in 2012 was cut to 1.5% from 2.5%, and growth in 2013 is now put at 4.0%, down from an earlier call of 4.7%. Japanese GDP is seen rising 2.2% but slowing to a pace of just 1.2% in 2013. Indian GDP growth this year was sliced to 4.9% from 6.1% projected in July; the growth rate of 6.0% in 2013 is 0.7 percentage points less than assumed before. The IMF report talks of greater downside growth risks as well as a lower baseline scenario.
Chinese share prices jumped 2.2%, but other markets have been far less stellar. Equities rose 0.5% in Australia, India, and Hong Kong but fell by 1.1% in Japan and 0.4% in New Zealand and Singapore. Stocks in Spain have fallen 1.0%, and the German Dax and British Ftse are 0.5% and 0.3% lower.
The dollar is unchanged against the yuan, loonie, and sterling. The greenback firmed 0.4% relative to the Swiss franc and 0.3% against the euro but has eased by 0.2% against the Australia dollar and 0.1% each versus the yen and kiwi.
The ten-year German bund and British gilt yields increased two and one basis points, and 10-year Spanish sovereign debt yields climbed back above 6.0%. The 10-year Japanese JGB has dipped a basis point to 0.77%.
Oil prices rose 0.3% to $89.62 per barrel. In contrast, gold is off 0.1% at $1773.80 per ounce.
Moody’s downgraded the credit rating of Cyprus by three notches to B3 from Ba3 in yet another reminder of the fragility of efforts to resolve the European debt crisis. France reported a EUR 97.7 billion year-to-date fiscal deficit in August and a wider EUR 5.3 billion trade shortfall after a gap of EUR 4.1 billion in July.
Japan’s economy watchers index worsened to 41.2 in September from 43.6 in August, 44.2 in July, 43.8 in June and 47.2 in May. Not since April’s 50.9 reading has such been above the break-even level.
Japan and Britain reported trade figures for August.
- Japan experienced a seasonally adjusted current account surplus of JPY 722 billion, almost twice as big as in July. The merchandise trade deficit equaled JPY 236 billion in seasonally adjusted terms versus a deficit of JPY 477 billion in July, while the unadjusted trade deficit of JPY 645 was 6.5% narrower than the August 2011 deficit as exports (off 5.3%) and imports (down 5.4%) contracted at a similar on-year pace. Direct and portfolio investment combined to post a net capital outflow of JPY 1.07 trillion in August, more than twice as much as the current account surplus. Stock and bond transactions in September, moreover, generated a net outflow of 1.655 trillion yen.
- Britain’s merchandise trade deficit increased 34.2% to GBP 9.844 billion in August, as exports fell 2.4% on month and imports climbed by 3.4%. There was a GBP 1.659 billion deficit in the oil trade balance. The U.K. goods and services trade deficit widened 144% on month to GBP 4.17 billion, easily surpassing expectations of a GBP 2.4 billion shortfall.
U.K. industrial production declined 0.5% in August, matching expectations. Production in June-August was 0.1% less than in the previous three-month period and 1.9% lower than a year earlier. Factory output dropped 1.1% in the latest month, exceeding street forecasts of a decline of around 0.7%.
According to the British Retail Consortium, same store sales posted their largest on-year increase, albeit just 1.5% in September. The Royal Institute of Chartered Surveyors’ house price balance gauge improved to -15% in September from -18% in August.
Italian GDP growth in 2Q was reconfirmed as negative 0.8% from 1Q and a fall of 2.6% from the second quarter of 2011. Dutch industrial production slid 0.1% in August and was 0.7% lower than a year earlier. Turkish industrial output recorded monthly and yearly declines of 2.3% and 1.5% in August, reversing gains of 1.7% and 3.4% in July.
Greek consumer prices rose 2.5% last month after declines of 1.4% in July and 1.0% in August, but the 12-month rate of increase was almost halved to 0.9%, a three-year low. Czech CPI inflation of 3.4% in September was as expected and similar to 12-month increases of 3.3% in August, 3.1% in July, and 3.5% in June. Hungary’s trade surplus widened 33% to EUR 575 million in August. Denmark posted a DKK 14.27 billion current account surplus in August following DKK 13.12 billion in July and DKK 15.6 billion in June.
Australian business conditions returned to a negative 3 reading in September after rising three points to zero in August. Business confidence, in contrast, improved three points to zero after slumping by 7 points to minus 3 in August. Business sentiment in New Zealand advanced a dozen points to +8 in the second quarter, marking the first rise in a year.
Scheduled U.S. data this day include the IBD/TIPP optimism index and the NIFB small business sentiment index. The monthly budget will be reported. In neighboring Canada, housing starts get released, and Mexico reports consumer and producer prices. In Europe, the leaders of Greece (Samaras) and Germany (Merkel) will be holding talks.
Copyright 2012, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: British trade, foreign exchange, IMF World Economic Outlook, Japanese current account