четверг, 20 сентября 2012 г.

Review of the world economy


In May 2012, the growth rates of the world economy slowed down. The state of economies of Euro area countries continued to deteriorate; the economic growth of the BRIC countries slowed down. The weak labor market continued to affect the inflation dynamics. Besides, there was observed a fall in energy resources prices on world goods markets.
In May 2012, the world economy continued to grow. A certain deceleration in the growth rates of industry was compensated by a faster increase in the growth rates of services sphere. In May, the global composite index JPMorgan PMI* made up 52.1 as compared to 52.3 in March. The speeding-up growth rates of the U.S. economy affected the development of the world economy. In May, production volumes of both industry and services showed an increase. The growth in economies of Russia, China, and India continued. At the same time, the world economy development was restrained by slowing down economic growth rates of Euro area countries and Brazil.
In May 2012, an increase in world industrial production was accompanied by a decrease in inflation pressure. The global employment rate increased in the countries whose economic dynamics were positive.

In May, the year on year growth rates of U.S. industrial production made up 4.7%, being 0.5 p.p. as little as in the previous month and 1.0 p.p. as much as the average increment of industrial production for the last 12 months. The increase was at the expense of a growth in production of industrial equipment (by 11.3%). In the reporting month, an increment of consumer goods production was almost 5 times as little, making up 2.3%.
In comparison to May 2011, the consumer inflation rate continued to slow down (the deceleration was observed since October 2011). In May 2012, consumer prices grew by 1.7% versus May 2011 and by 2.3% on April 2012. A reduction of prices increment was caused by a 3.9% fall in energy carrier prices (in particular, prices for oil products declined by 3.7%). The decrease in prices for oil products was observed for the first time since October 2009. Core inflation (without changes in prices for energy carriers and food products) remained at the level of the previous month (2.3%).
The unemployment rate almost did not change, making up 8.2% (12.7 million unemployed). In May on the previous month, the number of new jobs made up 69 thousand (in April, 77 thousand). In the first quarter of 2012, the average number of new jobs made up 226 thousand. The number of employed increased in the private sector, particularly, in health protection establishments and at enterprises of transport and wholesale trade.
In May, the Federal Open Market Committee decided to remain prime interest rates ranging within 0 – 0.25% p.a.
The latest macroeconomic statistical data showed that business activity in Euro area countries decreased. The year on year decrease in industrial production speeded up. In April, industrial production fell by 2.3% (in March, by 2.2%). A trade balance surplus reduced to EUR 5.2 billion (in March, EUR 7.5 billion). Imports and exports declined by 3.0% and 1.3%, respectively.

In comparison to the previous month, the consumer inflation rate dropped by 0.2 p.p. to 2.4%. The difficult situation on the labor market entailed a downward inflation trend. The unemployment rate remained at a rather high level (11.0%, 17.4 million unemployed).
Taking into consideration the latest macroeconomic trends and certain deterioration of economic forecast, the Governing Council of the ECB remained prime interest rates unchanged.
In May, the year on year growth in industrial production of China grew to 9.6%. In particular, the growth rates of iron ore production and automobile industry were high, making up 23.9% and 16.4%, respectively. An inflow of investment remained sizable. Thus, within the fist five months of the year, investments in real estate totaled CNY 2.2 trillion, having increased by 18.5% on the respective month of the previous year; nevertheless, they were practically twice as little as in May 2011 (34.6%). Almost 70% of all investment in real estate was channeled to housing construction. Export remained one of components supporting an increase in China`s economy. In May, exports totaled 39.7% of GDP. A trade surplus came to USD 17.8 billion (the average surplus for the period from 1984 to 2012 equals USD 5.9 billion). In May, the consumer inflation rate reduced to its lowest level since July 2010, making up 3.0%. Foodstuff prices remained the movers of inflations processes.
Slowing down economic development against the backdrop of decreasing inflation rate allowed the People`s Bank of China to soften its monetary policy. From 18 May, the compulsory reserve ratio was decreased by 0.5 p.p., while from 7 June, prime interest rates on loans and deposits with original maturity up to 1 year were decreased by 0.25 p.p.
In May 2012, the dynamics of chief national measures showed that the dynamics of Russia`s economic development remained upward. As compared to the respective month of the previous year, industrial production grew by 3.6% (in April, by 1.7%). Manufacturing enterprises made the largest contribution to the increase. In Russia, for the first time since October 2011, production of mineral products reduced due to a fall in world oil prices. The year on year inflation continued to slow down: the growth rates of consumer prices declined to 3.7%, while core inflation decreased to 5.1%


Taking into account current macroeconomic trends, the Central Bank of Russia remained the refinancing rate and interest rates on operations of the Bank of Russia unchanged. At the same time, in the context of substantial pressure of negative factors on the exchange rate of Russian ruble, the Central bank of Russia announced that it was ready to sell foreign currencies from its international reserves to maintain the stability of the exchange rate of Russian ruble. In May, the international reserves of the Russian Federation declined by USD 13.9 billion, totaling USD 510.4 billion.

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