|
Global
US Fed rate hike - The much expected came to pass, when the US Federal Reserve increased its lending rate by 0.25% at its December meeting. The markets reacted positively and there was none of the volatility experienced earlier, when a mere announcement of an intention to raise rates caused global turmoil. Interest rates too have held steady since the announcement.
Oil prices continue to decline - The woes of oil producers seem to prolonging. At its 168th meeting on 4, December, the organisation decided to continue with the current quotas for production. As a result, prices declined to an 11 year low of about USD 36 per barrel.
North America
US employment - First-time claims for U.S. unemployment benefits declined more than expected in the week ended December 19th, the Labour Department said. The report said initial jobless claims dipped to 267,000, a decrease of 5,000 from the previous week's revised level. (RTT News)
New housing starts - New home sales in the America grew for the second consecutive month in November, the US Commerce Department revealed. The Department said new home sales climbed 4.3 percent to an annual rate of 490,000 in November.
US Economic growth - Reflecting a downward revision to private inventory investment, the Commerce Department released a report on Tuesday showing that U.S. economic activity grew by slightly less than previously estimated in the third quarter.
The US economic growth was revised down a tad on falling investment in private inventories. A Commerce Department report said that GDP increased 2% in the third quarter versus 2.1% growth estimated earlier.
Europe
French November Consumer spending slid to the lowest level in two years - French consumer spending declined in November, for the second month in a row and at the highest rate since the start of 2014.This was caused by lower consumption of energy and lower outlays on textiles by French consumers. Household spending dropped 1.1 percent compared to October, when consumption dipped 0.2%. Analysts had predicted a 0.1% gain.
ECB stimulus will raise inflation immediately; Draghi - The ECB at its meeting on December 3rd, authorized a slew of measures aimed at inflating the EU economy, to its cherished goal of keeping the inflation rate at just under 2%. These included extending the timeline of its asset purchase scheme, reinvesting the principal from expired bonds and reducing the deposit rate. However markets reacted cautiously and the value of the euro climbed.ECB President Draghi, nevertheless struck a confident note. "After the re-calibration of our instruments put in place this month by the Governing Council, we expect inflation will reach our objective without undue delay." Echoing his recent policy statements, he said that "there is no doubt that, if we had to intensify the use of our policy tool to reach our price-stability objective, we would do so." (Bloomberg December 14, 2015)
Asia
Vietnam economic growth at fastest pace in five years - Vietnam's economy expanded at the fastest pace in five years during 2015, thanks to strong growth in industrial production and record high foreign investment.
Gross domestic product grew 6.7% in the current year, more than the government's goal of 6.2%. The economy posted a 6.0 % growth in 2014.
Decrease in Hong Kong exports exceeds expectations - The slowing down of China's economy seems to be having its effect on Hong Kong, a key entrepot centre for Chinese trade. Merchandise exports declined 3.5% on an annual basis in November. This is the seventh straight month of decline in exports. The fall has even exceeded analysts' estimates of a 2.6% dip.
Bank of Japan - Bank of Japan Governor reiterated his country's resolve to achieve and maintain an inflation rate of 2%. "Economic and price trends have turned favourable, thanks to the stimulus efforts, and the coming year is set to see more progress," he said.
South Korea consumer confidence dips in December - Consumer confidence, a key metric to measure the health of an economy, declined in December. The survey by the Bank of Korea revealed the consumer index decreased from 106.0 in November to 103.0 in December. This is the first dip in six months.
Saudi Arabia budget deficit jumps in the current year - The maiden budget of King Salman shows a deficit of a whopping USD 98 billion. Revenues slid 15% to USD 162 billion, while spending grew an unexpected 13% to USD 260 billion. In an effort to bridge the gap the government is contemplating a raft of measures, including raising fuel prices by up to 50%, while electricity and water prices too are set to increase. The regime pointed fingers at the wars and political volatility in its neighbourhood as the primary cause for the increases.
China - The recent crash in the Chinese markets has echoed around the world pulling down valuations across the board, including in the vital US markets. For the past decade, the Chinese economy has driven global growth.
China witnessed the biggest decline in foreign exchange reserves in December, as the People's Bank tried to prop up the Yuan. Reserves were down USD 108 billion to USD 3.33 trillion. China has the largest foreign reserves on the globe and this is just a drop in the ocean as far as currency reserves go. Yet, the fact remains that the Yuan has dipped by more than 6% in the last year.
The greater dangers are the signals that this devaluation sends to investors both in China and elsewhere. Competitors in the emerging markets have felt obliged to allow their currencies to depreciate. This could lead to a currency war. Further, in the absence of sound statistics and corporate practises, more and more people tend to view the Yuan's decline as evidence of a weakening economy.
Compounding this is the poor prospects for the Chinese economy over the next two years. Many analysts fear that thereafter things could get even worse as China stalls on much needed reforms to boost domestic demand, weed out unprofitable public enterprises and bring down national and corporate debt to reasonable levels.
Another worrisome factoid is the steady decline in real estate prices in China. Since many banks are saddled with bad debts directly related to the sector, there is a fear of a crisis erupting in the Chinese financial system.
Indian economy
Manufacturing sector posts decline - Buffeted by the Chennai floods, the manufacturing sectors showed the first decline in over two years in December, 2015.Growth in foreign business failed to mitigate the contraction in production, which was the deepest since 2009, according to Markit Economics. (RTT News, January 4, 2015). The slowdown in December follows the 1.3% annual contraction in the core sector output. The core sector consists of natural gas, coal, refinery products, crude oil, cement, fertilizers, electricity and steel.
New investments - Investments in new capacities plunged 74% in the three months to December on a quarterly basis, to Rs. 1.05 crores according to the Centre of monitoring India economy. The silver lining is that stalled projects too declined 86% to Rs. 16,500 crores.
"Weak sentiment in Indian corporates, high level of private sector debt, weak demand, and excess capacities in the system are not painting a positive picture for corporate investments. Although the government is trying to improve the atmosphere by ease of doing business, the real improvement could come when demand improves, which will take some time." said, Dharmakirti Joshi, chief economist at CRISIL. (Business Standard, January, 5, 2015)
Share this article
|
Current Conversations: Sound Bytes