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                      DECPG Daily
        Economics and Financial Market Commentary
                       July 8, 2013
                            Damir Cosic, Eung Ju Kim, Tehmina Khan

  You’ll find recent issues of this Daily and lots of other current analysis and high -frequency data at our
                                    website: http://www.worldbank.org/gem


Japan sold record US treasures in May…German IP, export and factory orders
data weaken…Turkey’s IP growth slows
Financial Markets…Japan unloaded record amounts of U.S. Treasuries in May amid
the steepest monthly loss for the securities in more than three years. Japanese
investors reduced a net 3 trillion yen ($30 billion) of their holdings of U.S. government
bonds in a fifth consecutive monthly of overall sales that were the biggest on record.
Meanwhile, the country’s investors were also net sellers of foreign debt at a record
volume of 2.96 trillion yen, pushing year-to-date total to 10.6 trillion yen.
The Dollar Index, which tracks the greenback against the basket of major currencies,
reached a three-year high on Monday, hitting 84.588 in earlier trading, amid growing
speculation positive U.S. economic data could encourage the country’s central bank to
start scaling back its stimulus.
India’s rupee fell to a record low against the dollar on concerns that reduced monetary
stimulus by the U.S. Federal Reserve could prompt capital outflows from the country.
The rupee hit a low of 61.16 per dollar on Monday, surpassing the previous record of
60.7650 reached on June 26.
High-income Economies…Greece, currently in its sixth year of recession, agreed new
economic and deficit reduction steps with the IMF-ECB-EU troika needed to unlock the
next €8.1 billion tranche of bailout funds, part of which a re needed to redeem bonds
maturing in August. EU officials have said ministers may only agree to release the
money in stages once interim targets are hit. Since 2010, Greece’s bailout packages
have included, first, a 3-year, €110-billion IMF Stand-By Arrangement in 2010, and then
a €173-billion package, under the IMF’s Extended Fund Facility in March 2012, with
both jointly funded with euro area members.
Germany's industrial production and exports dropped more than expected in May, with
output down 1% (m/m sa), the first fall since January and following a 2% gain in April,
led by falling construction and investment goods output. On a 3m/3m saar basis, output
was up 9.1%. Exports were down 2.4% (m/m) on the month in May, and overall
momentum on a three-month basis slowed to 1.4% (3m/3m saar) from 3.0% in April.
Separately in Germany the rate of growth of factory orders, a gauge of future
investment, slowed to 5.6% (3m/3m saar) in May from 9.3% in April, reflecting two
consecutive months of declines, led by weak domestic and overseas orders.

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Developing Economies…Europe and Central Asia: Turkey’s industrial production
growth slowed to 1% (y/y) in May, following a 3.5% (y/y) growth in April. Production rose
for the fifth month in a row, but the pace of growth was the slowest since October last
year. Manufacturing output was up 1.4% (y/y), while output in the utility sector rose
1.6% (y/y). Mining and quarrying output shrunk 6% (y/y), after witnessing growth in
April.
Middle East and North Africa: Egypt's foreign reserves fell from $16bn in May to
$14.9bn at the end of June. In February, Egypt's foreign reserves dropped to the lowest
level of $13.5bn dollars, but thanks to loans from Qatar, Turkey and Libya, the reserves
recovered. Egypt's foreign reserves stood at about $36bn dollars in January 2011,
before the protests that ousted former President Hosni Mubarak, and have been on a
decline since then.
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DECPG Daily is an informal briefing for Bank staff whose responsibilities require that they stay abreast of
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