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                      DECPG Daily
        Economics and Financial Market Commentary
                    November 7, 2012
           Allen Dennis (84812), Eung Ju Kim (85804), Sanket Mohapatra (37721),
                            Ekaterine T. Vashakmadze (36773)
  You’ll find recent issues of this Daily and lots of other current analysis and h igh-frequency data at our
                                    website: http://www.worldbank.org/gem

Financial Markets…The MSCI Asia Pacific Indexclimbed 0.7% as a clear U.S. election
outcome came on the eve of a leadership change in China. The Stoxx Europe 600
Index lost 0.3%, erasing earlier gains, and U.S. equities opened lower, as the initial U.S.
election euphoria faded.
U.S Treasury yield declined the most in two months, with the benchmark 10-year yield
sliding 9 basis points to 1.67%, as the re-election of President Barack Obama fueled
speculation the Federal Reserve will continue its quantitative easing policy. The 2-year
note yield dropped 4 bps to 0.27%, while the 5-year yield slipped 8 bps to 0.68%.
Standard & Poor’s upgraded its long-term sovereign credit rating on Nigeria to ‘BB-’
from ‘B+’ citing sustained reform momentum in several key areas, improving fiscal
management, and high oil prices. At the same time, the rating agency affirmed the
short-term sovereign rating at ‘B’.
High-income Economies…Euro Area retail sales fell 0.2% (m/m) in September,
reversing a 0.2% rise in August, as a steep 7.3% (m/m) decline in Spain offset monthly
increases in France and Germany of 1.5% and 0.8%, respectively. However, sales rose
1.5% on a quarterly annualized basis (3m/3m saar) in September, compared to a 1.1%
increase in August and 0.4% rise in July, suggesting a gradually strengthening, albeit
still very weak, Eurozone consumer demand.
Germany’s industrial production fell a second month in September, declining 1.8%
(m/m) (-1.2% y/y), following a 0.4% drop in August. The decline confirms earlier data on
weaker factory orders even as the Eurozone sovereign debt crisis damped output of
German manufactured products (-2.3% m/m), while capital goods products fell 3.5%
(m/m) as firms cut back on investment plans amid declining business confidence.
Industrial production in Spain dropped for the 13th straight month on an annual basis in
September, falling at a faster 7% (y/y) pace compared to a 2.5% decline in August amid
a deepening recession, fiscal austerity measures, and the higher unemployment rate
(25.8 percent) in more than a decade.
Norway industrial production fell 5% (y/y) in September (-5.6% m/m), as energy
products output was lower by 12.7% (y/y). However, manufacturing production rose
2.4% (y/y) with strong production growth recorded in industries including machinery and
equipment, together with ships, boats and oil platforms.



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Estonia’s consumer price inflation accelerated to 4.1% (y/y) in October from 3.8% in
September (+0.2% m/m), mostly due to an a 6.3% (y/y) increase in food prices, as well
as similar rates of increases in consumer goods and housing costs.
The central bank of Poland cut is benchmark reference rate by 25 basis points to 4.5%
to support economy. The inflation rate remains steady at 3.8% (y/y) in September –
slightly above the central bank’s 2.5% (+/-1%) annual inflation target.
Developing Economies…Brazil's consumer price inflation accelerated in October to
5.45% (y/y) from 5.28% in September, on a faster pace of increase in food prices.
Bulgaria's industrial production declined in September, with the IP index falling 1.3%
(y/y) compared with a 2.6% increase in August, on declining production in
manufacturing sector.
Colombia's consumer price inflation at 3.06% (y/y) in October remains at the midpoint of
the central bank’s 2- 4% annual inflation target.
The central bank of Kenya further cut its Central Bank Rate (CBR) by 200 basis points
to 11% allowed by a continuous decline in inflation to 4.14% in October from
September's 5.32% and well within that central bank's upper inflation band of 7.5% and
stable exchange rate.
Mexico’s gross fixed investment growth slowed to 3.7% in August compared with 6.6%
in July, with investment declining 0.9% (m/m) in August compared with a 0.59
expansion in July.
Russia's inflation rate slowed insignificantly to 6.5% in October from 6.6% in the
previous month, still above the upper limit of the central bank's 5-6% target range.
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