Jumat, 30 Oktober 2015

India economic growth forecast for 2016

 India economic growth forecast for 2016 : The World Bank has retained its India growth forecast for 2015-16 saying it will continue to grow, but the catch is the acceleration year-on-year will be gradual.

"The latest India Development Update expects India's economic growth to be at 7.5% in 2015-16, followed by a further acceleration to 7.8% in 2016-17 and 7.9% in 2017-18," the multilateral lending agency said in a report released here.

"However, acceleration in growth is conditional on the growth rate of investment picking up to 8.8% during FY16 to FY18," it added.

Speaking at the launch of the report, World Bank India's Senior Country Economist Frederico Gil Sander said India has taken advantage of the sharp decline in global oil and commodity prices to eliminate petrol and diesel subsidies and increase excise taxes.

"Resources from lower subsidies and higher taxes have been well utilised in lowering deficits and increasing capital expenditure."

The most significant risks to the outlook, he further said, stem from the banking sector and financing requirements of infrastructure companies.

"Public sector banks, which account for three-fourths of domestic credit, are under stress, with a rising share of non-performing assets," Gil Sander noted.

The senior economist felt that India is relatively well-positioned to weather global volatility in the short term.

The report dwelt at length on states, which are now responsible for 57% of spending and account for 16% of GDP. Of this, nearly 74% of the funds are untied compared with an average 57% during the 13th Finance Commission period, getting more flexibility to states.

It suggested that the government need to collect more direct taxes to boost revenues.

"India's direct tax collection is among the lowest in the world. Direct taxes account for a mere 5.7% of GDP in India compared with 11.4% in OECD countries," the report said.

Making a special mention of the government's efforts for successfully bringing current account deficit (CAD) down to 1.4% in 2015-16, it said CAD is likely to inch up to 1.7% in 2016-17 and 2% in 2017-18.

Stressing on the need to increase export-oriented growth, the report said, "Although India may be able to achieve a fast GDP expansion without export growth for a short period, sustaining high GDP rates over a longer period will require a recovery of exports."

Russia economy outlook 2016

forex trading outlook - Russia economy outlook 2016 : Russia's economy will slump by almost 4 percent this year and barely grow in 2016, a Reuters poll predicted on Thursday, with forecasters expecting the country's recession to persist as oil prices remain depressed.

The poll predicted that gross domestic product would end up shrinking 3.9 percent this and grow by 0.3 percent next year, only slightly better than a previous Reuters poll in September that predicted a 4 percent decline in 2015 and a 0.2 percent rise in 2016.

Russia's economy has been hit by falling global commodity prices and is coming under stress from sanctions imposed on it by mainly Western nations angry over what they see as Russia's aggressive policy towards Ukraine.

Recovery prospects have been dimmed by signs that a global glut of oil will continue for the foreseeable future, keeping the price of Russia's main export depressed at around $50 per barrel.

"This (recession) is probably going to last for a couple of quarters more than the government is saying officially," said Christopher Shiells, senior emerging markets analyst at Informa Global Markets. "And that is purely because the outlook for oil is remaining very soft for at least the next couple of years. I'm of the view that oil will remain roughly where it is now."

The poll predicted that quarterly GDP would turn positive in year-on-year terms only in the third quarter of next year, when 0.3 percent growth is expected compared with a 4 percent decline in the fourth quarter of 2015.

The outlook for inflation was more pessimistic than last month's poll. Forecasters now expect it to end 2015 at 13 percent, compared with 12.8 percent predicted in September, falling to 8 percent by the end of 2016.

The poll predicted that the central bank would leave its main lending rate on hold at 11 percent at a meeting on Friday, in line with a Reuters poll on Monday that also predicted no change this month.

A majority of analysts expected the central bank would cut the rate by the end of 2015, with the median forecast predicting a 0.75 percentage point cut. The rate is seen falling further to 8 percent by the end of 2016, bringing it into line with inflation.

Forecasts for the rouble have also become more bearish. Economists now see it at 65.75 in twelve months' time, compared with last month's 12-month forecast of 65.00 and today's value of around 64.4.

Bank of Japan issued the following statement on monetary policy

forex trading outlook today - Bank of Japan issued the following statement on monetary policy : The Bank of Japan (BOJ) maintained its target for boosting the country’s monetary base by an annual 80 trillion but lowered its forecast for economic growth and inflation due to a flattening of exports from slower growth in emerging market economies and sluggish private consumption.

    But Japan’s central bank, which had been expected by many economists to expand its quantitative easing, maintained a relatively optimistic outlook for domestic demand as the corporate sector is continuing to invest on the back of historically high profits and private consumption remains resilient due to a steady improvement in employment and income.

    “Looking ahed, domestic demand is likely to follow an uptrend, with a virtuous cycle from income to spending being maintained in both the household and corporate sectors, and exports are expected to start increasing moderately on the back of emerging economies moving out of their declaration phase,” the BOJ said.

    In its semi-annual economic outlook, the BOJ cut its forecast for economic growth in the current fiscal 2015 year, which began on April 1, to an average of 1.2 percent from 1.7 percent that was forecast in April.
    In fiscal 2016 Japan’s economy is expected to continue growing above its potential, expanding by 1.4 percent, slightly down from the previous forecast of 1.5 percent.

    But for fiscal 2017, growth is expected to be hit by the impact of a planned hike in sales tax on April 1, 2017 to 10 percent from 8 percent and a cyclical deceleration. The growth forecast for fiscal 2017 was trimmed to 0.3 percent from a previous 0.2 percent.

    In April 2014 Japan’s government took the first step in raising sales taxes to 8 percent from 5 percent to curb mounting debt, and the economy quickly nosedived, with the economy shrinking for four consecutive quarters on an annual basis. In the second quarter of this year the economy finally started to expand again as Gross Domestic Product rose by an annual 0.8 percent.

    Although the BOJ lowered its forecast for inflation, it maintained that the underlying trend in inflation is steadily rising and as the impact of the fall in oil prices dissipates, inflation will accelerate toward its target of 2.0 percent.

    But the BOJ once again pushed back its expectation for when inflation will reach 2.0 percent, saying this would be around the second half of fiscal 2016, assuming that crude oil prices rise moderately from the current level.

    In its April policy report the BOJ pushed back its estimate for reaching its inflation target to the first half of fiscal 2016 from this year.

   The BOJ now forecast inflation of only 0.1 percent this fiscal year, down from its previous forecast of 0.7 percent, and inflation of 1.4 percent for fiscal 2016, down from its April forecast of 1.9 percent.
    For fiscal 207 inflation is expected to jump by 1.3 percentage points due to the sales tax hike, with consumer price inflation seen at 3.1 percent, unchanged from April’s outlook. Excluding the higher sales tax, inflation was seen at an unchanged 1.8 percent.

    Headline inflation in Japan was flat in September, down from 0.2 percent in July and August.
    The BOJ launched its massive Quantitative and Qualitative Easing (QQE) campaign in April 2013 in an effort to rid the country of 15 years of deflation. As interest rates were already at zero, the BOJ began purchasing assets, mainly Japanese government bonds but also exchange-traded funds and real statement investment trusts.

    While the fall in crude oil prices last year has dealt the BOJ a setback in its attempt to boost inflation, it said medium-to long-term inflation expectations appear to be rising and in response the wage and price-setting stance of firms “has clearly changed,” with the increase in wages largely than last year at many firms, indicating a steady increase in inflation accompanied by higher wages.

    The Bank of Japan issued the following statement on monetary policy:

    At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided, by an 8-1 majority vote, to set the following guideline for money market operations for the intermeeting period:[Note]
    The Bank of Japan will conduct money market operations so that the monetary base will increase at an annual pace of about 80 trillion yen.

    With regard to the asset purchases, the Bank decided, by an 8-1 majority vote, to continue with the following guidelines:[Note]

        a)  The Bank will purchase Japanese government bonds (JGBs) so that their amount outstanding will increase at an annual pace of about 80 trillion yen. With a view to encouraging a decline in interest rates across the entire yield curve, the Bank will conduct purchases in a flexible manner in accordance with financial market conditions. The average remaining maturity of the Bank’s JGB purchases will be about 7-10 years.
        b)  The Bank will purchase exchange-traded funds (ETFs) and Japan real estate investment trusts (J-REITs) so that their amounts outstanding will increase at annual paces of about 3 trillion yen and about 90 billion yen respectively.
        c)  As for CP and corporate bonds, the Bank will maintain their amounts outstanding at about 2.2 trillion yen and about 3.2 trillion yen respectively.

        [Note] Voting for the action: Mr. H. Kuroda, Mr. K. Iwata, Mr. H. Nakaso, Ms. S. Shirai, Mr. K. Ishida, Mr. T. Sato, Mr. Y. Harada, and Mr. Y. Funo. Voting against the action: Mr. T. Kiuchi. Mr. T. Kiuchi proposed that the Bank will conduct money market operations and asset purchases so that the monetary base and the amount outstanding of its JGB holdings will increase at an annual pace of about 45 trillion yen, respectively. The proposal was defeated by a majority vote.”

Senin, 31 Agustus 2015

US Dollar Down vs Yen on Asian trade Tuesday September 1 2015

Forex trading outlook today - US Dollar Down vs Yen on Asian trade Tuesday September 1 2015 : The dollar was lower against the yen in Asian trade Tuesday, as a fresh bout of weakness in stock markets across the region sent investors scurrying to the perceived safety of the Japanese currency. Around 0450 GMT, the greenback was at Y120.79 compared with Y121.22 late Monday in New York. The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.34% at 88.10.

Investors are still keeping their eyes on the stock market, the head of the foreign-exchange and money-market sales department at Societe Generale in Tokyo.

But given the relatively moderate reaction to a key China economic indicator and gyrations in oil prices, investors will likely shift their attention back to the U.S. inflation and labor conditions to shape their views on whether the Federal Reserve is coming closer to raising short-term rates,

The Caixin China manufacturing purchasing managers' index, a gauge of nationwide manufacturing activity, in August hit its lowest point in more than six years.

The resource-related, risk-sensitive Australian dollar gained traction before stabilizing after the country's central bank left its interest rates unchanged, as expected.

The Australian dollar was at $0.7134 from $0.7112, while the currency, nicknamed Aussie was at Y86.16 from and Y86.22. The Reserve Bank of Australia kept the cash-rate target at 2.0%, where it has been since May.

The euro was higher against the dollar and the yen, even after eurozone inflation data suggested continued pressure on the European Central Bank to consider additional stimulus measures to bring inflation closer to its target near 2%.

The common currency gained to $1.1269 midday from $1.1209 and was at Y136.11 from Y135.97.

The European Union's statistics agency Monday said consumer prices in August were 0.2% higher from a year earlier, a rate of inflation that was unchanged from June and July.

Italian Consumer Inflation Outlook August 2015

Italian consumer inflation outlook august 2015 : Italy’s preliminary annualized consumer inflation probably ticked down to 0.1% in August, according to expectations, from a final rate of 0.2% in July, as reported on August 11th. If so, it would be the lowest annual inflation rate since May, when a level of 0.1% was reported.

In July the largest downward pressures, causing an impact on annual inflation rate, were reported for communication (down 3.2% year-on-year) and transportation (down 1.8%). The largest upward pressures during the month came from alcoholic beverages and tobacco (up 3% year-on-year), education (up 1.9%), accommodation (up 1.4%), recreation and culture (up 1.2%), food (up 0.8%), healthcare (up 0.6%), furniture, and household services (up 0.4%) and clothing and footwear (up 0.4%).

Key categories, included in Italy’s Consumer Price Index, are food and non-alcoholic beverages (accounting for 16% of total weight), transport (15%), restaurants and hotels (11%) and housing, water, electricity and other fuels (10%). Other categories are clothing and footwear (9%), furnishing and household equipment (8%), recreation and culture (8%) and health (also 8%). Communication, education, alcoholic beverages, tobacco and other goods and services comprise the remaining 15% of the index.

The nation’s preliminary annualized CPI, evaluated in accordance with the harmonized methodology, probably rose 0.3% in August, according to market expectations. If so, it would match the annual rate of increase in July, according to final data. The latter has been the highest annual core inflation since November 2014, when a rate of 0.3% was reported. A slowdown in the general CPI would have a limited bearish effect on the single currency. The National Institute of Statistics (Istat) is to release the official CPI report at 9:00 GMT.

Italian retail sales areport ugust 2015
At 8:00 GMT the National Institute of Statistics (Istat) is to report on retail sales regarding June. In May annualized retail sales rose 0.3%, after remaining flat in April. In monthly terms, retail sales with a seasonal adjustment dropped 0.1% in May, following a 0.7% surge in April. The latter has been the sharpest monthly increase since February 2012, when sales climbed 0.9%. This indicator reflects the change in the total value of inflation-adjusted sales by retailers in the country and provides key information regarding the consumer spending trend, while the latter is a key driving force behind economic growth. An increase in the monthly retail sales index usually has a limited bullish effect on the euro and vice versa.

Chinese economy will likely recover

Chinese economy will likely recover, : One of the benefits of the massive inequality in the distribution of wealth is that the vast majority of us can sit back and enjoy the show when stock markets go into a worldwide panic, as they have been doing for the last couple of weeks. Despite what you hear in the media, fluctuations in the stock market generally have little direct or indirect impact on the economy.

This means that if you don’t have a lot of money in the stock market, you don’t have much to lose. And, according to the most recent data from the Federal Reserve Board, three quarters of U.S. households had less than $36,000 in the stock market, including their 401(k)s, in 2013. 

But the markets have been putting on quite a show, so it’s worth asking what is going on. At a basic level, it seems evident that China’s market had a very serious bubble. Its main index increased by more than 150 percent from June 2014 to its peak this June. While it’s possible that China’s market was hugely undervalued in 2014, it seems more likely that this rise was bubble-driven. This means that people were buying into the market because they saw it going up, not because they had done an assessment of the future profit prospects for Chinese companies and decided that they were worth two and half times as much as they had been worth a year earlier.

Bubbles inevitably burst. At some point there are no longer people willing to pay too much for stock, houses, tulips or whatever. That appears to have been the story in China, where many new investors bought into the market on credit. At some point they have trouble borrowing further and the upward spiral goes into reverse. The clumsy efforts of China’s government to stop this correction proved largely futile.

The next question: Why did the fun spill over to Europe, the United States and the rest of the world’s stock markets? Most of these markets are high by historic standards, but they are not obviously experiencing bubbles. To use one common metric, Robert Shiller’s calculation of the ratio of the price of the S&P 500 stock to corporate earnings hit a high of just over 27 to 1 in June. This is higher than the long-term average of 17 to 1, but well below the peak of 44 to 1 in the late 1990s bubble. Most other major markets have a similar story.

Furthermore, in the late 1990s there was an obvious investment alternative. Ten-year U.S. Treasury bonds paid a nominal interest rate of more than 5 percent, which translated into roughly a 2.5 percent real rate at the time. Currently 10-year Treasury bonds are paying just over 2 percent interest (or, a real interest rate of roughly 0.5 percent). Without a more appealing investment alternative, there is no reason to expect sharp declines in the U.S. and other major markets, though they could dip 5 to 10 percent below current levels.

But there are some real economic stories that do go along with the stock market turbulence. First, China is going through a transition from growth led by investment and exports to growth led by domestic consumption. The stock market run-up helped this transition as people increased their consumption based on bubble-generated wealth. The plunge in prices will hurt this process, but note that stock prices are still almost double their level of last summer.

While predictions of a collapse of the Chinese economy will almost certainly be proven wrong, it is likely to be on a slower growth path going forward. This is a major factor in the falloff in commodity prices, most notably that of oil, which has dropped below $40 a barrel. This drop in oil prices will exacerbate the economic troubles of major oil exporters like Russia and Venezuela.

The drop in commodity prices could have further-reaching effects. The economies of Canada and Australia have been driven to an important extent by booming commodity exports. These economies recovered much more rapidly from the 2008 crash than most other wealthy countries, in part because house prices in both countries quickly returned to bubble levels.

The price of a typical home in Canada is 13 percent higher than in the U.S., despite the fact that its per capita income is more than 20 percent lower. In Australia, with an average income that is 93 percent of the U.S. level, the median house price is almost twice the U.S. level. Market fundamentals don’t explain this gap; it’s hard to believe that people in Canada and Australia value housing so much that they are willing to pay a much larger share of their income for it.

If the plunge in commodity prices alerts potential homebuyers to the bubbles in their markets, we may see the unraveling of these bubbles, and that will not be a pretty picture.

Unlike stock, middle-income people do have a real stake in the value of their houses. If prices in these countries were to fall to U.S. levels, it would imply a massive loss of wealth. This will almost certainly lead to a large drop in consumption and in all probability a serious recession.

That is not a good story, but perhaps one day we will get people in policy positions who take bubbles seriously. After all, the only way to prevent serious damage from a housing bubble such as the ones these countries are now experiencing, or the one the United States experienced in the last decade, is to keep it from happening in the first place.