M Global Economic Review April 2015 UNITED STATES Gross domestic product US real gross domestic product in 2015 s first quarter grew 0.2% (quarter over quarter, annualized), slowing from growth of 2.2% in 2014 s final quarter. Federal Reserve policy The Federal Open Market Committee (FOMC) said that economic growth slowed during the winter months, in part reflecting transitory factors. Labor underutilization was little changed, business fixed investment softened, and [g]rowth in household spending declined. Inflation continued to run below the [FOMC s] longerrun objective, as the stronger dollar effectively lowered import prices. Conditions that would trigger a first hike in the fed funds rate were unchanged further improvement in the labor market and reasonable confidence that inflation will move back to 2% over the medium term. Prices and productivity The headline Personal Consumption Expenditures (PCE) price index increased 0.2% in March (month over month). The core PCE price index, excluding food and energy, rose 0.1% The headline Consumer Price Index (CPI) ticked up 0.2% month over month in March; the core CPI (excluding food and energy) likewise rose 0.2%. The Producer Price Index (PPI) increased 0.2% in March; the core PPI (excluding food and energy) also rose 0.2%. The employment cost index rose 0.7% quarter over quarter in 2015 s first quarter. Import prices in March fell 0.3% month over month and 10.5% year over year. Housing and construction The National Association of Home Builders housing market index rose to 56 in April from a downwardly revised 52 in March. Housing starts increased 2.0% in March. Building permits dropped 5.7%. The S&P/Case-Shiller 20-City Index of existing home prices in February rose 0.9% month over month and 5.0% year over year. According to the Federal Housing Finance Agency s house price index, US home prices in February rose 0.7% month over month and 5.4% year over year. New home sales in March dropped 11.4% from an upwardly revised base. Existing home sales rose 6.1% from an upwardly revised base. Pending home sales rose 1.1% from an upwardly revised base. Construction spending dipped 0.1% in February. Consumer Consumer spending in March increased 0.4%. Personal income was flat. Retail sales rose 0.9% in March from an upwardly revised base. Core/control retail sales, which the Commerce Department uses to estimate consumer spending in the GDP report, improved 0.3%. The Conference Board s Consumer Confidence Index declined from an upwardly revised 101.4 in March to 95.2 in April. Business The Institute for Supply Management (ISM) manufacturing index fell to 51.5 in March from 52.9 in February.
Industrial production declined 0.6% in March. Capacity utilization dipped to 78.4% from 78.9%. Durable goods orders climbed 4.0% month over month in March. Core capital goods orders (nondefense capital goods excluding aircraft) a key indicator for future business equipment spending fell 0.5%. The ISM nonmanufacturing index edged down to 56.5 in March from 56.9 in February. Wholesale inventories in February increased 0.3% from an upwardly revised base. Business inventories also rose 0.3%. The Conference Board s index of leading indicators rose 0.2% in March from a downwardly revised base. The National Federation of Independent Business s small business optimism index fell to 95.2 in March from 98.0 in February. Employment Nonfarm payrolls increased by 126,000 in March, from a downwardly revised base. The unemployment rate remained 5.5%. Average hourly earnings increased 0.3% month over month. Trade/currency/commodities The nominal US trade deficit narrowed to $35.4 billion in February from a revised -$42.7 billion in January. Exports fell 1.6%, while imports dropped 4.4%. The value of the US dollar declined against the euro (to $1 = 0.89 at the end of April from $1 = 0.93 at the end of March) and the yen (to $1 = 119.4 at the end of April from $1 = 120.0 at the end of March). The price of West Texas Intermediate crude oil rose to $59.63 per barrel at the end of April from $47.60 per barrel at the end of March. EUROPE/AFRICA 2 Gross domestic product United Kingdom GDP growth in the UK slowed to +0.3% in the first quarter of 2015 from +0.6% in the final quarter of 2014 (quarter over quarter). Central bank/fiscal policy Euro area The European Central Bank s (ECB) March monetary policy meeting ended with general acknowledgment that the economic situation in the euro area is improving. The ECB s expanded asset purchase program is having significant impact on euro area financial markets, leading to lower sovereign yields and money market rates. Although there are grounds for prudent optimism, it is necessary to remain firm, implementing the measures adopted without hesitation until the objectives [are] reached. The Central Bank of cut its key rate 150 basis points to 12.5%. United Kingdom The Bank of England s Monetary Policy Committee made no change to its existing asset purchase program ( 375 billion) or official interest rate (0.5%). Prices and productivity Headline inflation in rose 16.9% year over year in March, accelerating from 16.7% in February.
United Kingdom Consumer The UK s headline CPI was flat year over year in March. Core CPI (excluding energy, food, alcohol, and tobacco) was up 1.0%. France Consumer confidence in France improved from 93 in March to 94 in April, its highest level since January 2010. Business Retail sales in in March dropped 8.7% year over year. Euro area The euro area s composite Purchasing Managers Index (PMI) improved to 54.0 in March from 53.3 in February. The manufacturing PMI rose to 52.2 from 51.0, while the services PMI increased to 54.2 from 53.7. Industrial production in February improved 1.1% month over month (from a downwardly revised base) and 1.6% year over year. France Industrial production in France in February was flat month over month and up 0.6% year over year. Germany Industrial production in Germany in February rose 0.2% month over month from a downwardly revised base. Factory orders in February fell 0.9% month over month. The ifo business climate index advanced to 108.6 in April from 107.9 in March. Italy Industrial production in Italy in February rose 0.6% month over month but fell 0.2% year over year. Business confidence declined to 102.1 in April from 103.0 in March. s industrial production in March contracted 0.6% year over year. United Kingdom The UK s composite PMI climbed to 58.8 in March from 56.7 in February. The manufacturing PMI rose to 54.4 from 54.1, while the services PMI increased to 58.9 from 56.7. Industrial production in February ticked up 0.1% both month over month and year over year. Employment Euro area The euro area s unemployment rate held steady at 11.3% in March. Germany Germany s unemployment rate remained 6.4% in April. s unemployment rate rose to 5.9% in March from 5.8% in February. Real average wages fell 9.3% year over year. 3
United Kingdom The UK s unemployment rate fell to 5.6% in the three-month period ended in February from 5.7% in the threemonth period ended in January. Average earnings rose 1.7% year over year. ASIA/PACIFIC Gross domestic product s GDP in 2015 s first quarter grew 7.0% year over year, decelerating from +7.3% in the fourth quarter of 2014. South Korea South Korea s GDP growth accelerated to +0.8% in first-quarter 2015 from+0.3% in fourth-quarter 2014 (quarter over quarter, seasonally adjusted). Central bank/fiscal policy The Reserve Bank of left its cash rate unchanged at 2.25%. The People s Bank of lowered the reserve requirement ratio for all financial institutions by 100 basis points, effective April 20. An additional 100-basis-point cut has been applied to rural credit cooperative and village banks, and an additional 200-basis-point cut has been applied to Agricultural Development Bank of. Banks with sufficient lending exposure to the agricultural sector and state-managed enterprises will see their requirement ratio lowered an additional 50 basis points. The Politburo of the Chinese Communist Party, which includes the country s 25 most-senior officials, said that significant downward pressures on Chinese growth, including a domestic economy that is transitioning and external demand that is contracting, demand a high level of attention. It said that development is its top priority. Fiscal policy should include increasing public expenditures and reducing taxes and fees. Monetary policy should more efficiently support the real economy. The government should continue to push fiscal, financial, and investment reforms to support key infrastructure projects; support consumption; and promote the healthy development of the property market. India The Reserve Bank of India left its repo rate at 7.50%. Indonesia Bank Indonesia left its benchmark policy rate unchanged at 7.50%. Japan The Bank of Japan (BOJ) kept its monetary policy unchanged. 4 South Korea The Bank of Korea left its policy rate unchanged at 1.75%. Thailand The Bank of Thailand cut its policy rate another 25 basis points to 1.50%.
Prices and productivity s CPI in March dipped 1.0% month over month (annualized, seasonally adjusted) but rose 1.4% year over year. The PPI fell 2.5% sequentially and 4.6% year over year. India India s headline CPI decelerated to 5.2% year over year in March from 5.4% in February. Core CPI (excluding food and fuel) ticked up to 4.2% from 4.1%. Indonesia Consumer Indonesia s headline CPI ticked up to 6.4% year over year in March from 6.3% in February. Core CPI (excluding food and fuel) held steady at 5.0% year over year. Nominal retail sales in rose 0.7% month over month in February. Sales excluding food increased 0.4%. Consumer sentiment fell 3.2% month over month to 96.2 in April. Real retail sales in in March increased 19.4% month over month (seasonally adjusted, annualized) and 10.2% year over year (down from +11.0% year over year in February). Japan Business Japan s cash wages rose 0.5% year over year in February, decelerating from +0.6% in January. Basic wages rose 0.5%, accelerating from a downwardly revised +0.2% in January. Retail sales in March fell 1.9% month over month. The National Bank business confidence survey rose to +3 in March from 0 in February. Business conditions improved to +6 from +2. s fixed asset investment increased 13.2% year over year in March, down from +13.9% year over year in February. Industrial production March increased 6.8% month over month (seasonally adjusted, annualized) and 5.6% year over year (down from +6.8% year over year in February). India India s industrial production in February advanced 0.1% month over month (seasonally adjusted) and 5.0% year over year. Japan Industrial production in March slipped 0.3% month over month. Machinery orders declined 0.4% in February. South Korea South Korea s industrial production fell 0.4% (month over month, seasonally adjusted) in March. 5
Employment Trade s unemployment rate ticked down to 6.1% in March from a downwardly revised 6.2% in February. 's trade deficit widened to A$1.26 billion in February from A$1.00 billion in January, as a 1.9% monthover-month increase in imports outpaced a 1.0% month-over-month lift in exports. s trade surplus contracted to US$3.1 billion in March from US$60.6 billion in February. Year over year, exports fell 15.0% while imports declined 12.7%. India India s trade deficit widened to US$11.8 billion in March from US$6.8 billion in February (non-seasonally adjusted). Year over year, exports fell 21.1% while imports declined 13.4%. Indonesia Indonesia s trade surplus expanded to US$1.1 billion in March from US$0.7 billion in February. Year over year, exports fell 9.8% while imports declined 13.4%. Japan Japan s trade balance moved to a 229.3 billion surplus in March from a revised 425.0 billion deficit in February. Export volume declined 2.1% year over year, while import volume increased 4.5%. South Korea South Korea s trade surplus expanded to US$8.4 billion in March from US$7.7 billion in February. Year over year, exports declined 4.2%, while imports fell 15.3%. 6 THE AMERICAS Gross domestic product s GDP in February expanded 0.4% month over month but contracted 3.2% year over year (seasonally adjusted). s GDP grew 2.0% year over year in February. s real GDP in February was flat month over month and up 2.3% year over year (seasonally adjusted). Central bank/fiscal policy s central bank raised the Selic policy rate another 50 basis points, to 13.25%. The Central Bank of left its policy rate at 3.00%. The Central Bank of left its policy rate unchanged at 3.00%.
Prices and productivity Argentina Argentina s headline CPI in March rose 1.3% month over month and 16.5% year over year. s headline inflation, as measured by the Índice Nacional de Preços ao Consumidor Amplo (IPCA), in March was 1.3% month over month and 8.1% year over year. Core inflation was 1.0% month over month, 7.3% year over year. s headline CPI increased 0.6% month over month in March; core CPI rose 0.5%. Consumer Headline inflation in in March rose 0.4% month over month and 3.1% year over year. Core inflation was up 0.3% month over month and 2.5% year over year. Broad retail sales in in February declined 1.1% month over month (seasonally adjusted). Core/control retail sales (excluding autos and building materials) dipped 0.1%. Retail sales in rose 0.4% year over year in March. Business Retail sales in in February expanded 0.5% month over month (seasonally adjusted) and 5.6% year over year. Consumer confidence rose 0.1% month over month (seasonally adjusted) in March. Industrial production in in February declined 0.9% month over month (seasonally adjusted) and 9.1% year over year. Manufacturing PMI in March dropped to 46.2 from 49.6. Business confidence in the industrial sector fell 3.2% in April (month over month, seasonally adjusted). s industrial production in February expanded 0.2% month over month and 1.6% year over year (seasonally adjusted). Business confidence in the manufacturing sector declined 1.2 points to 48.2 in March. Employment s seasonally adjusted unemployment rate rose to 5.9% in March from 5.7% in February. Average real wages declined 3.0% year-over-year. s unemployment rate held steady at a downwardly revised 6.1% in the three months ended in March. 7
Trade s unemployment rate decreased to 3.9% in March from 4.3% in February. On a seasonally adjusted basis, unemployment dropped to 4.2% from 4.5%. Argentina Argentina s monthly trade surplus edged down to US$43 million in March from US$53 million in February. Exports and imports both contracted 4% (year over year). s trade surplus contracted to US$480 million in March 2015 from US$949 million in March 2014. 8 Sources: FactSet, Goldman Sachs, Bloomberg, MarketWatch, The New York Times, The Washington Post, The Wall Street Journal, Reuters, McClatchy, US Department of Commerce, US Treasury Department, Federal Reserve, US Labor Department, US Bureau of Labor Statistics, Institute for Supply Management, National Association of Home Builders/Wells Fargo, Case-Shiller, Standard & Poor s, The Conference Board, National Bureau of Economic Research, Energy Information Administration. The comments, opinions, and estimates contained herein are based on or derived from publicly available information. Investors cannot invest directly in an index. All data included in this economic review were released in April 2015. Information in this review was obtained from sources Jennison believes to be reliable as of the date presented; however, Jennison cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. Jennison has no obligation to update any or all such information nor does it make any express or implied warranties or representations as to the completeness or accuracy. This economic review does not purport to provide any legal, tax, or accounting advice. This material is for informational purposes only, does not constitute investment advice, and should not be used as the basis for any investment decision. Further distribution is prohibited without Jennison s consent.