For more information, visit http://www.worldbank.org/prospects January 26, 2018 Taking Stock U.S. GDP growth slowed in Q4; PCE price inflation accelerated. The first reading of U.S. GDP growth in Q4 came in at 2.6 percent (q/q, saar), less than expected, after reaching 3.2 percent in Q3 and 3.1 percent in Q2 (Figure 1). GDP growth in Q4 reflected solid increases in consumer and business investment spending that were partly offset by a decline in net exports, as imports surged. For 2017 as a whole, the U.S. economy grew 2.3 percent (y/y), up from 1.5 percent in 2016. The U.S. personal consumption expenditures (PCE) price index—a broad measure of inflation— rose 2.8 percent (q/q, saar) in Q4 from 1.5 percent in Q3. Excluding food and energy, the PCE price index rose 1.9 percent (q/q, saar) in Q4, compared with an increase of 1.3 percent in Q3. Euro Area composite PMI rose in January; ECB kept interest rates unchanged. The preliminary estimate of the Euro Area composite purchasing managers’ index (PMI) for January came in at 58.6, its highest level since June 2006, supported by an increase in activity in the service sector that more than offset a slowdown in manufacturing (Figure 2; a reading above 50 indicates expansion). As expected, at its January meeting, the European Central Bank (ECB) reaffirmed its monetary stance and maintained the policy interest rates at their current levels. The main refinancing rate was kept at zero percent, and the interest rates on the lending and deposit facilities at 0.25 percent and minus 0.4 percent, respectively. The asset purchase program will continue at a new monthly pace of €30 billion until at least the end of September 2018. Japan flash manufacturing PMI rose in January; central bank kept interest rates on hold. Japan’s manufacturing PMI increased from 54 in December to 54.4 in January (a reading above 50 indicates expansion). New business orders continued to rise, supporting manufacturing output and employment. At its January meeting, the Bank of Japan kept its policy rate at minus 0.1 percent, and the target yield on 10-year Japanese government bonds at around zero percent, in line with expectations. China’s industrial profit growth rose to a 6-year high in 2017. The profits of China’s large industrial firms rose 21 percent in 2017, its fastest pace since 2011, following an 8.5 percent increase in 2016, as strong domestic and external demand boosted corporate earnings. Profit growth moderated to 10.8 percent (y/y) in December, after November’s 14.9 percent increase, reflecting a decline in producer prices. Bank of Ghana and Central Bank of Kenya left their monetary policy stance unchanged in January. The Bank of Ghana kept its policy rate at 20 percent, as inflation edged up in December. The Central Bank of Kenya maintained its benchmark interest rate at 10 percent amid slowing inflation, noting that there is room for accommodative monetary policy in the near term. Figure 1 U.S. GDP growth slowed to 2.6 percent in Q4. Figure 2 Euro Area PMI readings remained solid in January. U.S. GDP, annualized quarterly change Euro Area PMI Percent, saar Index, SA, 50+=Expansion 6 62 Composite 5 60 Manufacturing 4 58 Services 56 3 54 2 52 1 50 0 48 -1 46 2013Q2 2015Q1 2015Q2 2017Q1 2017Q2 2017Q3 2013Q3 2013Q4 2014Q1 2014Q2 2014Q3 2014Q4 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q4 Sep-13 Sep-16 Sep-14 Sep-15 Sep-17 Jan-13 May-13 Jan-14 May-14 Jan-15 Jan-16 May-15 May-16 Jan-17 May-17 Jan-18 Source: Bureau of Economic Analysis. Sources: IHS Markit. Produced by DECPG. Number 374 | January 26, 2018 Major Data Releases (Percent change y-o-y) (Percent change y-o-y) Recent releases: Friday, 19 January - Thursday, 25 January 2018 Upcoming releases: Friday, 26 January - Thursday, 1 February 2018 Country Date Indicator Period Actual Previous Country Date Indicator Period Previous Estonia 1/22/18 PPI DEC 2.7% 3.3% Belgium 1/29/18 GDP Q4 1.7% Latvia 1/22/18 PPI DEC 3.1% 3.3% Iceland 1/29/18 CPI JAN 1.9% Ireland 1/22/18 PPI DEC -3.6% -3.6% Malaysia 1/29/18 PPI DEC 4.7% Singapore 1/23/18 CPI DEC 0.4% 0.6% France 1/30/18 GDP Q4 2.3% New Zealand 1/24/18 CPI Q4 1.6% 1.9% Spain 1/30/18 GDP Q4 3.1% Korea, Rep. 1/24/18 GDP Q4 3.0% 3.8% Brazil 1/30/18 PPI DEC 3.7% Activity and Inflation (Percent change y-o-y, except quarterly data on industrial production, which are percent change q-o-q, annualized) 2016 2017 2016 2017 2015 2016 Q4 Q1 Q2 Q3 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov 1 Industrial Production, sa World 1.8 2.0 4.9 3.7 5.1 3.3 3.6 3.0 3.3 3.9 3.8 4.4 4.0 4.2 4.3 4.3 4.3 3.9 Advanced Economies 0.2 0.2 3.9 1.6 4.5 2.3 2.6 1.1 2.2 2.4 2.5 3.2 3.0 3.0 3.2 3.0 3.4 3.1 Emerging Market and Developing Economies 3.5 4.0 5.9 5.9 5.7 4.2 4.6 5.0 4.4 5.6 5.1 5.6 5.1 5.4 5.4 5.5 5.1 4.8 Commodity-exporting EMDE -1.2 0.0 1.1 2.4 5.0 3.1 2.2 2.0 1.1 1.7 2.5 4.0 1.1 2.3 3.3 3.0 3.1 1.9 Other EMDE 5.1 5.1 7.3 6.9 5.9 4.5 5.3 5.8 5.3 6.7 5.9 6.0 6.2 6.3 6.0 6.2 5.7 5.6 East Asia and Pacific 5.8 5.9 6.2 7.2 6.4 4.6 6.0 6.2 6.1 7.4 6.3 6.4 6.6 6.0 5.8 6.5 5.9 5.7 East Asia excl. China 3.6 4.6 3.8 4.8 2.4 8.0 6.2 4.6 5.1 6.0 4.8 5.6 0.9 3.6 4.7 5.9 3.5 3.2 Europe and Central Asia 1.5 2.0 9.8 5.0 7.8 2.2 2.8 4.3 1.4 4.3 4.4 6.4 4.9 6.6 6.0 6.0 5.6 4.6 Latin America and Caribbean -2.8 -2.5 -0.5 0.8 0.8 1.9 1.2 0.1 0.4 -0.7 -0.2 1.0 0.1 0.5 1.4 0.3 1.7 1.1 Middle East and North Africa -3.3 -7.0 22.7 22.6 22.3 19.1 10.3 13.1 17.2 4.7 21.1 20.4 23.3 30.7 15.4 19.4 18.7 21.6 South Asia 3.5 5.3 6.4 5.2 1.7 6.4 3.0 4.4 2.1 5.5 4.6 4.1 0.1 3.9 6.2 4.7 2.5 - Sub-Saharan Africa -0.3 0.9 -2.8 -4.4 3.0 4.2 -0.9 0.1 -2.5 -2.2 -0.5 -2.0 -2.7 -0.5 1.1 -0.8 1.3 2.1 Inflation, sa 2 World 1.4 1.5 1.7 2.6 2.2 2.3 2.0 2.3 2.5 2.7 2.4 2.2 2.0 2.2 2.2 2.2 2.3 2.5 Advanced Economies 0.1 0.3 0.8 1.6 1.4 1.5 1.1 1.5 1.8 1.5 1.9 1.5 1.2 1.4 1.5 1.5 1.4 1.5 Emerging Market and Developing Economies 2.4 2.7 2.7 3.3 3.2 3.0 2.7 3.0 3.3 3.4 3.5 3.1 2.8 2.9 3.2 3.2 3.5 3.3 Commodity-exporting EMDE 3.7 3.5 3.3 3.4 3.4 3.3 3.2 3.5 3.5 3.5 3.7 3.5 3.1 3.1 3.4 3.1 3.5 3.4 Other EMDE 1.0 1.1 1.7 3.1 3.0 2.9 1.8 2.6 3.1 3.4 3.2 2.9 2.3 2.5 3.0 3.4 3.4 3.3 East Asia and Pacific 1.2 2.0 2.4 2.6 2.9 2.4 2.5 2.7 3.4 3.5 3.2 2.9 2.4 2.3 2.6 3.0 3.0 3.0 Europe and Central Asia 1.9 0.4 1.0 2.4 2.4 2.7 1.6 2.3 2.5 2.7 2.6 2.7 2.2 2.4 2.6 2.8 2.6 2.9 Latin America and Caribbean 2.7 2.4 2.8 3.0 2.7 3.2 2.7 2.7 3.0 3.0 3.1 2.9 2.2 2.9 3.3 3.6 3.3 4.1 Middle East and North Africa 1.8 2.7 2.0 2.6 1.5 1.1 1.8 2.3 2.3 2.9 1.7 1.9 1.0 1.1 1.1 1.6 2.3 2.3 South Asia 4.5 4.4 4.7 4.3 4.5 3.4 3.8 3.7 4.1 4.9 4.8 4.9 3.9 3.0 3.4 3.9 3.8 4.9 Sub-Saharan Africa 3.6 5.2 5.7 5.7 5.1 4.8 5.6 5.8 5.7 4.9 4.5 5.4 5.4 5.4 5.3 3.8 5.0 4.7 Sources: World Bank, Haver Analytics, and IMF International Financial Statistics. 1 Industrial production is total production (may exclude construction). When data are unavailable, "industral production, manufacturing" is used as a proxy. 2 Median inflation rate for each grouping. Trade and Finance (Percent change y-o-y, except quarterly trade data, which are percent change q-o-q, annualized, and international reserves data, which are percent change over the previous period) 2016 2017 2016 2017 2015 2016 Q4 Q1 Q2 Q3 Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Exports, Nominal, US$, sa World -11.6 -3.0 9.2 18.9 2.8 12.5 4.0 11.0 7.7 12.9 3.9 11.2 7.6 10.3 10.9 10.9 12.3 12.6 Advanced Economies -11.4 -0.8 6.3 18.3 1.4 17.1 5.6 10.1 8.1 10.7 1.3 10.3 6.5 10.1 10.7 10.9 11.9 12.5 Emerging Market and Developing Economies -11.9 -6.5 14.7 20.0 5.5 4.5 1.5 12.6 6.8 17.1 8.9 12.9 9.7 10.8 11.2 11.0 13.0 12.7 Commodity-exporting EMDE -24.2 -9.1 29.9 38.9 -12.1 15.6 8.0 26.6 19.1 23.2 13.4 19.5 9.8 16.7 16.7 15.7 20.5 - Other EMDE -3.7 -4.6 9.2 13.0 13.6 0.7 -0.6 7.5 2.2 14.8 7.1 10.3 9.6 8.6 9.1 9.3 10.3 13.2 East Asia and Pacific -3.5 -6.1 10.0 14.1 15.3 -0.6 -2.4 8.8 2.2 15.7 9.1 11.4 9.4 10.5 8.2 9.9 10.4 12.8 Europe and Central Asia -20.7 -6.1 19.7 35.4 -4.1 16.1 7.6 22.5 12.4 20.9 5.7 19.5 11.0 11.1 19.9 16.4 21.6 - Latin America and Caribbean -11.8 -2.3 14.8 26.1 -2.7 5.6 10.9 14.6 12.0 17.2 9.5 11.4 12.3 10.2 11.1 10.0 15.2 8.5 Middle East and North Africa -27.1 - - - - - - - - - - - - - - - - - South Asia -4.0 0.7 27.6 12.1 -10.9 11.0 2.1 3.1 0.0 11.3 6.5 -1.7 -3.0 12.0 10.3 5.2 -4.1 6.7 Sub-Saharan Africa -26.9 -14.7 27.9 45.9 -14.3 8.2 3.4 22.6 25.8 19.8 9.0 14.0 12.9 14.8 19.4 10.2 - - Imports, Nominal, US$, sa World -6.9 -5.2 22.8 22.4 16.1 -2.4 -1.7 11.4 5.4 10.3 -6.2 25.4 7.2 21.2 16.0 5.8 17.8 12.8 Advanced Economies -12.7 -3.2 2.3 21.1 2.3 14.0 1.4 9.6 3.4 9.2 1.9 10.3 5.1 10.7 9.2 9.2 13.9 13.1 Emerging Market and Developing Economies -3.3 -6.3 37.1 23.1 24.7 -10.6 -3.4 12.5 6.6 11.0 -10.4 34.6 8.5 27.7 20.4 3.7 20.1 12.6 Commodity-exporting EMDE -1.0 -7.2 42.8 18.4 34.5 -16.0 -5.5 11.8 2.1 8.8 -15.4 39.7 7.2 31.5 22.4 -0.5 21.2 - Other EMDE -11.4 -3.1 19.6 40.4 -3.3 10.2 4.3 14.9 22.8 18.8 11.1 17.5 12.6 15.5 14.1 17.5 16.2 17.6 East Asia and Pacific -13.1 -3.6 20.8 50.9 -11.2 12.4 5.7 17.1 33.8 20.5 12.6 17.9 13.5 15.7 13.9 18.9 17.9 18.6 Europe and Central Asia -20.8 -1.2 11.9 42.6 13.1 18.0 8.4 20.6 9.9 14.7 7.8 22.9 13.6 26.5 16.8 19.6 19.5 - Latin America and Caribbean -9.9 -7.4 4.5 26.3 -9.4 10.5 3.6 11.0 5.1 13.3 -1.3 12.3 6.1 7.5 9.3 4.9 15.9 8.8 Middle East and North Africa 1.4 - - - - - - - - - - - - - - - - - South Asia -13.2 -5.4 54.7 35.0 11.9 -14.6 2.8 14.9 21.6 40.5 42.1 31.2 13.6 19.6 19.5 17.7 10.0 18.2 Sub-Saharan Africa -7.7 -13.9 -7.9 - - - -12.2 - - - - - - - - - - - 1 International Reserves, US$ World -5.7 -2.0 -2.7 1.7 2.1 1.7 -0.5 0.7 0.3 0.7 0.8 0.9 0.4 0.8 0.5 0.3 0.0 0.5 Advanced Economies 2.2 3.2 -1.1 3.5 2.9 1.7 0.0 1.6 0.4 1.4 1.2 1.1 0.5 0.9 0.5 0.2 -0.3 0.6 Emerging Market and Developing Economies -10.7 -5.2 -3.7 0.5 1.5 1.7 -0.8 0.1 0.3 0.2 0.4 0.7 0.4 0.7 0.6 0.4 0.2 0.4 Commodity-exporting EMDE -11.1 -4.5 -2.5 0.5 0.5 0.7 0.0 0.0 0.3 0.1 0.1 0.2 0.2 0.3 0.2 0.1 - - Other EMDE -10.3 -5.7 -4.3 0.5 2.0 2.2 -1.2 0.1 0.3 0.2 0.5 0.9 0.6 0.9 0.8 0.5 0.1 0.4 East Asia and Pacific -12.4 -7.3 -4.7 0.5 1.7 2.1 -1.2 0.0 0.4 0.1 0.8 0.8 0.1 1.0 0.6 0.5 0.0 0.4 Europe and Central Asia -6.8 3.4 -4.2 2.9 3.2 3.1 -1.6 1.9 0.6 0.3 -0.2 1.3 2.0 1.1 1.6 0.3 0.2 1.1 Latin America and Caribbean -5.3 1.4 -1.0 0.5 1.7 1.0 0.2 0.6 0.2 -0.3 0.8 0.2 0.8 0.6 0.3 -0.1 -0.1 -0.2 Middle East and North Africa -17.7 -10.7 -2.4 -2.0 -1.8 - 0.2 -1.6 -0.6 0.2 -1.2 -0.3 -0.3 -1.0 -0.2 - - - South Asia 10.9 3.6 -3.0 2.1 4.5 2.5 -0.3 0.5 0.5 1.0 0.7 2.0 1.7 1.1 1.3 0.1 -0.1 0.2 Sub-Saharan Africa -12.7 -4.7 3.7 3.2 0.8 - 3.8 1.3 2.4 -0.5 3.5 -1.2 -1.6 2.3 -1.8 - - - Sources: World Bank, Haver Analytics, and IMF International Financial Statistics. 1 Total reserves excluding gold are used as proxies when total reserves data are unavailable. Produced by DECPG. Number 374 | January 26, 2018 Financial Markets 2017 2017 MRV 1 2015 2016 Q1 Q2 Q3 Q4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Interest rates and LIBOR (percent) U.S. Fed Funds Effective 0.13 0.39 0.67 0.92 1.13 1.17 0.63 0.63 0.76 0.88 0.88 1.01 1.13 1.13 1.13 1.13 1.13 1.27 1.38 ECB repo 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 US$ LIBOR 3-months 0.32 0.74 1.07 1.20 1.32 1.47 1.02 1.04 1.13 1.16 1.19 1.26 1.31 1.31 1.32 1.36 1.43 1.61 1.71 EURIBOR 3-months -0.02 -0.26 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 US 10-yr Treasury yield 2.14 1.84 2.44 2.26 2.24 2.37 2.43 2.42 2.48 2.30 2.30 2.19 2.32 2.21 2.20 2.36 2.35 2.41 2.54 German Bund, 10 yr 0.54 0.11 0.35 0.31 0.46 0.38 0.31 0.33 0.40 0.26 0.37 0.29 0.54 0.42 0.41 0.43 0.37 0.36 0.46 Spreads (basis points) JP Morgan Emerging Markets 415 410 340 325 322 313 354 338 329 331 320 325 327 325 314 306 320 312 298 Asia 224 221 175 169 161 151 185 173 166 173 167 166 163 163 157 148 153 151 146 Europe 348 302 261 242 234 233 272 258 253 250 237 240 243 234 224 226 244 229 212 Latin America & Caribbean 540 537 445 427 428 416 463 442 431 431 420 430 435 435 416 407 422 419 408 Middle East 456 517 396 362 383 400 416 396 377 350 353 382 382 382 384 381 421 398 356 Africa 415 518 389 386 380 350 401 387 380 400 376 383 394 378 367 360 359 332 304 Stock Indices (end of period) Global (MSCI) 399 424 449 465 487 513 433 445 449 455 464 465 478 478 487 497 505 513 513 Advanced Economies ($ Index) 1663 1761 1854 1916 2001 2103 1792 1839 1854 1878 1912 1916 1961 1960 2001 2037 2077 2103 2103 United States (S&P 500) 2044 2258 2363 2423 2519 2674 2279 2364 2363 2384 2421 2423 2470 2472 2519 2575 2648 2674 2674 Europe (S&P Euro 350) 1474 1475 1547 1534 1571 1573 1463 1501 1547 1564 1576 1534 1526 1512 1571 1600 1563 1573 1573 Japan (Nikkei 225) 18817 19302 18909 20033 20356 22765 19035 19342 18909 19197 19836 20033 19974 19720 20356 22198 22730 22765 22765 Emerging Market and Developing Economies (MSCI) 794 861 958 1011 1082 1158 909 936 958 978 1005 1011 1066 1088 1082 1119 1121 1158 1158 EM Asia 404 419 474 512 543 587 443 459 474 484 505 512 538 544 543 571 572 587 587 EM Europe 244 295 301 304 331 346 302 296 301 313 308 304 315 336 331 330 330 346 346 EM Europe & Middle East 211 248 252 251 268 279 253 249 252 259 255 251 261 274 268 268 265 279 279 EM Latin America & Caribbean 1830 2341 2611 2544 2917 2828 2516 2600 2611 2601 2532 2544 2752 2873 2917 2809 2719 2828 2828 Exchange Rates (LCU / USD) Advanced Economies Euro Area 0.90 0.90 0.94 0.91 0.85 0.85 0.94 0.94 0.94 0.93 0.91 0.89 0.87 0.85 0.84 0.85 0.85 0.84 0.84 Japan 121.00 108.80 113.63 111.10 110.96 112.90 115.03 112.96 112.91 110.02 112.36 110.91 112.31 109.78 110.80 112.93 112.81 112.96 112.96 Emerging and Developing Economies Brazil 3.33 3.49 3.14 3.21 3.16 3.25 3.20 3.10 3.13 3.14 3.20 3.30 3.20 3.15 3.13 3.19 3.26 3.29 3.29 China 6.29 6.65 6.89 6.86 6.67 6.61 6.89 6.87 6.90 6.89 6.88 6.81 6.77 6.67 6.57 6.62 6.62 6.59 6.59 Egypt 7.70 10.12 17.82 18.10 17.77 17.71 18.68 17.01 17.76 18.09 18.10 18.11 17.92 17.75 17.65 17.64 17.68 17.80 17.80 India 64.14 67.19 66.97 64.48 64.29 64.72 68.06 67.01 65.83 64.52 64.46 64.45 64.44 63.97 64.46 65.07 64.85 64.24 64.24 Russia 61.34 67.06 58.67 57.17 58.93 58.45 59.76 58.42 57.83 56.53 56.88 58.10 59.72 59.42 57.66 57.76 58.97 58.62 58.62 South Africa 12.77 14.71 13.24 13.21 13.19 13.65 13.60 13.17 12.95 13.46 13.25 12.91 13.15 13.25 13.17 13.71 14.06 13.19 13.19 Memo: U.S. nominal effective rate (index) 114.7 119.7 123.4 120.7 116.6 117.5 124.8 123.0 122.5 121.6 121.0 119.4 117.9 116.4 115.4 117.4 117.6 117.3 117.3 Sources: World Bank, Bloomberg, Haver Analytics, and J.P. Morgan. 1 MRV = Most Recent Value. Commodity Prices 2017 2017 MRV 1 2015 2016 Q1 Q2 Q3 Q4 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Energy 2 65 55 68 64 65 75 69 69 65 67 64 60 62 65 68 71 76 78 78 Non-energy 2 82 80 86 82 84 86 85 87 85 83 83 82 83 84 85 85 86 85 85 Agriculture 2 89 89 91 88 87 87 91 91 89 88 89 87 88 86 87 87 87 87 87 2 Metals and minerals 68 64 78 74 81 84 76 79 79 75 73 72 76 83 84 84 84 85 84 Memo items: Crude oil, average ($/bbl) 51 43 53 50 50 58 54 54 51 52 50 46 48 50 53 55 60 61 61 Gold ($/toz) 1161 1249 1219 1258 1278 1275 1192 1234 1231 1267 1246 1260 1237 1283 1314 1280 1282 1264 1264 Baltic Dry Index 711 676 938 1023 1138 1519 913 760 1142 1229 979 861 906 1144 1363 1484 1455 1619 1547 Sources: World Bank, World Bank Commodities Price Data (The Pink Sheet), and Bloomberg. 1 MRV = Most Recent Value. 2 Indexes, 2010 = 100. Produced by DECPG. Number 374 | January 26, 2018