Inflation in the eurozone increased from 2.7% in March to 2.8% in April, with prices driven higher by soaring commodity costs.
Overall, the European Union (EU) member states with the lowest annual inflation rates were Ireland, Sweden and the Czech Republic, while the highest were to be found in Romania, Estonia, Bulgaria and Hungary.
Having kept interest rates in the eurozone at 1% for almost two years, the European Central Bank (ECB) increased rates in the region to 1.25% in order to combat inflationary pressures. The ECB is the first of the world’s major central banks to increase interest rates in the wake of the global financial crisis and the move is likely to intensify pressure on debt-laden countries within the eurozone.
The region’s sovereign debt crisis continued to grab the headlines with the news that Portugal had requested financial aid from the European Union and the International Monetary Fund (IMF). Meanwhile, Greece announced a plan to sell €50bn-worth (£44bn) of government-owned assets in order to help satisfy the conditions of its bailout package. Elsewhere, Ireland’s progress on the reduction of its deficit received the backing of the European Commission, the ECB and the IMF.
The IMF also warned that many of Europe’s banks require more substantial capital reserves in order to reduce risks to the global financial system – in particular highlighting certain German, Italian, Portuguese and Spanish banks as potential hazards. During the month, a referendum in Iceland rejected a proposed plan to repay to the UK and Dutch governments money that was lost when Iceland’s banking system collapsed.
The IMF expects the eurozone’s economy to grow by 1.6% during 2011, although it remained downbeat on prospects for debt-ridden countries within the region such as Portugal, Greece and Ireland. The IMF increased its forecast for GDP growth in Germany during 2011 from 2.2% to 2.5%. The eurozone’s trade deficit widened slightly during March, having narrowed unexpectedly during February.
The rate of unemployment in the eurozone remained unchanged at 9.9% during March compared with February. The Netherlands and Austria had the lowest individual rates of unemployment at 4.2% and 4.3% respectively, whereas Spain remained the country with the highest level of unemployment, registering a rate of 20.7%.
During April, the MSCI Europe excluding UK index rose 2.9% while in Germany the DAX index was up by 6.7% and in France the CAC 40 index increased 3%.
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Friday, 22 July 2011
Friday, 15 July 2011
Emerging markets in danger of overheating
June saw the International Monetary Fund (IMF) highlighting the increasing risks that face the global economy, including the continuing debt crisis in Greece, a lack of consensus in the US Congress with regard to tackling the country’s budget deficit and the danger some emerging economies – particularly in Asia – might overheat.
The IMF also cautioned against inflationary pressures that are building in developing economies, warning: “Too much capital may be moving too quickly to emerging markets.” Meanwhile, according to the most recent statistics from the Investment Management Association, funds within the Global Emerging Markets sector were among the most popular in the equity arena during May.
The Reserve Bank of India increased interest rates yet again in its struggle against mounting inflationary pressures, raising them to 7.5% during the month. Boosted by soaring commodity prices, India’s wholesale price index ran at a rate of 9.06% during May, compared with a rate of 8.66% during April. The central bank warned domestic inflation remains a significant problem, despite evidence commodity prices are easing and economic growth is showing signs of slowing down.
US Treasury Secretary Timothy Geithner provided evidence of the US’s increasingly close links with India during the month, reaffirming the country’s support for the latter’s rise as an economic power, while commenting: “India’s growth is good for us, just as our growth is good for India.” At present, US companies face high barriers to entry in certain sectors of the Indian economy, but the US has called for these barriers to be lowered and for India to become one of its top-10 trading partners.
In a similar vein, June also saw China and Germany sign new bilateral trade deals and voice the intention to increase trade between the two countries to €200bn (£179bn) over the next five years. Meanwhile, China’s annualised rate of inflation hit 5.5% during the month, fuelled by soaring costs for food.
Nevertheless, in an article written for the Financial Times, China’s premier Wen Jiabao asserted the country will be able to “rein in inflation and sustain its rapid development”, adding “the overall price level is within a controllable range and is expected to drop steadily.”
China’s central bank raised the reserve requirement for the nation’s banks once again during June while ratings agency Standard & Poor’s downgraded its outlook for China’s property market from “stable” to “negative”, citing the country’s increasingly restrictive credit environment.
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The IMF also cautioned against inflationary pressures that are building in developing economies, warning: “Too much capital may be moving too quickly to emerging markets.” Meanwhile, according to the most recent statistics from the Investment Management Association, funds within the Global Emerging Markets sector were among the most popular in the equity arena during May.
The Reserve Bank of India increased interest rates yet again in its struggle against mounting inflationary pressures, raising them to 7.5% during the month. Boosted by soaring commodity prices, India’s wholesale price index ran at a rate of 9.06% during May, compared with a rate of 8.66% during April. The central bank warned domestic inflation remains a significant problem, despite evidence commodity prices are easing and economic growth is showing signs of slowing down.
US Treasury Secretary Timothy Geithner provided evidence of the US’s increasingly close links with India during the month, reaffirming the country’s support for the latter’s rise as an economic power, while commenting: “India’s growth is good for us, just as our growth is good for India.” At present, US companies face high barriers to entry in certain sectors of the Indian economy, but the US has called for these barriers to be lowered and for India to become one of its top-10 trading partners.
In a similar vein, June also saw China and Germany sign new bilateral trade deals and voice the intention to increase trade between the two countries to €200bn (£179bn) over the next five years. Meanwhile, China’s annualised rate of inflation hit 5.5% during the month, fuelled by soaring costs for food.
Nevertheless, in an article written for the Financial Times, China’s premier Wen Jiabao asserted the country will be able to “rein in inflation and sustain its rapid development”, adding “the overall price level is within a controllable range and is expected to drop steadily.”
China’s central bank raised the reserve requirement for the nation’s banks once again during June while ratings agency Standard & Poor’s downgraded its outlook for China’s property market from “stable” to “negative”, citing the country’s increasingly restrictive credit environment.
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Thursday, 7 July 2011
US economy shows signs of slowing
Share prices in the US fell during May, dragged down by confirmation of disappointing economic growth, worries over a sluggish labour market and concerns over the US’s budget deficit.
Looking further afield, investors were also preoccupied by the sovereign debt crisis in Europe and, in particular, by fears Greece might default on its debt. Over the month, the S&P 500 index fell 1.4%, while the Dow Jones Industrial Average index fell 1.9%.
The Commerce Department confirmed the US economy expanded by an annualised 1.8% during the first quarter of 2011, compared with growth of 3.1% in the last quarter of 2010. The slower growth was attributed to a rise in imports, lower government spending and lower corporate profits. The Organisation for Economic Co-operation & Development (OECD) expects the US economy to expand by 2.6% in 2011 and 3.1% in 2012.
The US Federal Reserve believes the country’s economy is recovering at a “moderate pace”, despite the deceleration in growth during the first three months of the year. Although inflationary pressures continue to be driven by higher prices for food and fuel, the Fed expects inflation to stabilise in the longer term.
Policymakers pointed to signs of an improving labour market, although the rate of unemployment rose from 8.8% in March to 9% in April. The OECD believes the rate of unemployment in the US will start to ease, but is calling for a “credible” programme of fiscal consolidation to underpin growth.
Growth in consumer spending slowed to 0.4% during April, compared with growth of 0.5% during March. Nevertheless, profits at jeweller Tiffany rose by more than 25% during the three months to April, the group’s sales in Japan falling during March following the Great East Japan Earthquake, but going on to bounce back in April.
Inflation rose at an annualised rate of 3.2% in April, having increased by 2.7% during March. Pricing pressures have continued to place a heavy burden on consumers as wages fail to keep pace with inflation. However, the monthly rate of inflation decelerated slightly to 0.4% during April compared with 0.5% in March, as prices for food and fuel rose more slowly.
Manufacturing output rose for the 21st consecutive month during April, according to the Institute for Supply Management. Although high costs for raw materials are putting manufacturers under pressure, the weakness of the dollar is at least providing a boost for US exports.
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Looking further afield, investors were also preoccupied by the sovereign debt crisis in Europe and, in particular, by fears Greece might default on its debt. Over the month, the S&P 500 index fell 1.4%, while the Dow Jones Industrial Average index fell 1.9%.
The Commerce Department confirmed the US economy expanded by an annualised 1.8% during the first quarter of 2011, compared with growth of 3.1% in the last quarter of 2010. The slower growth was attributed to a rise in imports, lower government spending and lower corporate profits. The Organisation for Economic Co-operation & Development (OECD) expects the US economy to expand by 2.6% in 2011 and 3.1% in 2012.
The US Federal Reserve believes the country’s economy is recovering at a “moderate pace”, despite the deceleration in growth during the first three months of the year. Although inflationary pressures continue to be driven by higher prices for food and fuel, the Fed expects inflation to stabilise in the longer term.
Policymakers pointed to signs of an improving labour market, although the rate of unemployment rose from 8.8% in March to 9% in April. The OECD believes the rate of unemployment in the US will start to ease, but is calling for a “credible” programme of fiscal consolidation to underpin growth.
Growth in consumer spending slowed to 0.4% during April, compared with growth of 0.5% during March. Nevertheless, profits at jeweller Tiffany rose by more than 25% during the three months to April, the group’s sales in Japan falling during March following the Great East Japan Earthquake, but going on to bounce back in April.
Inflation rose at an annualised rate of 3.2% in April, having increased by 2.7% during March. Pricing pressures have continued to place a heavy burden on consumers as wages fail to keep pace with inflation. However, the monthly rate of inflation decelerated slightly to 0.4% during April compared with 0.5% in March, as prices for food and fuel rose more slowly.
Manufacturing output rose for the 21st consecutive month during April, according to the Institute for Supply Management. Although high costs for raw materials are putting manufacturers under pressure, the weakness of the dollar is at least providing a boost for US exports.
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