GLOBAL ECONOMIC MONITOR

February 2014

Global growth has strengthened in recent months, largely on account of steady economic recovery in the advanced economies. Real GDP in the USA grew by 3.2% in the fourth quarter of 2013 and in Euro area GDP grew by 0.3% during the same period. Easier financial conditions, gradually improving consumer demand and rising business confidence have supported growth in these economies. The other key economies, Germany , Japan and India also reported growth in GDP during the last quarter of 2013.

In terms of industrial growth, USA reported a significant rise as reflected in its manufacturing Purchase Managers’ Index (PMI) which rose to 56.7 and recorded as the highest since May 2010. While, Euro zone’s manufacturing (PMI) declined to 52.7 in February from 52.9 reported during the previous month. Amongst, emerging and developing economies India ’s industrial sector rose to a years’ high manufacturing (PMI) of 52.5. This is due to slight economic recover in India ’s major export destinations – USA and Euro zone. Whereas, China ’s industrial growth is recorded as seven month low at 48.5 in February, which is an indication of contraction.

OECD annual inflation has reported rise to 1.6% during the year 2013 which was 1.5% during the eleven months of the same year. This slight increase in the annual rate of inflation was mainly driven by rise in energy prices by 1.7%. Consumer prices in Japan also rose 1.3% y-o-y and this is recorded as the fastest annual gain in more than five years and a steady progress towards exiting 15 years of deflation. Inflation (CPI) in China and India remained stable in January at 2.5% in China and 8.8% in India .

WTO, in its first Global Trade Monitoring report shows that world trade stagnated between the second quarter of 2012 and the second quarter of 2013, with growth ranging from -3.3% to +1%. The report also pointed that contribution of developing economies remained stronger that that of developed countries to international trade flows 2013. And, without the contribution of developing economies, world trade growth would have been more negative. At the economy level, UK trade deficit reduced to its lowest level since 2012, whereas, Japan reported record high trade deficit at US$27.4bn in January.

On account of unemployment, US unemployment rate fell to 6.6% in January, 2014 from 6.7% in December last year. While, Euro area unemployment rate is hovering at 12% since the last many quarters which is worrying.

Federal Reserve Bank, US issues new capital rules whereby, foreign banks with more than US $50 billion of assets in America will have to form special holding companies in the US . Also, these entities have to hold a minimum level of capital as a financial buffer to absorb potential losses.

GEM for the month of February 2014 is attached.