For more information, visit http://www.worldbank.org/prospects July 28, 2017 Taking Stock U.S. GDP growth picked up in Q2; Federal Reserve kept interest rates unchanged. The first reading of U.S. Q2 GDP growth came in at 2.6 percent (q/q, saar), below market expectations but higher than the 1.2 percent recorded in Q1 (Figure 1). The pickup in GDP growth in Q2 reflected a solid expansion in personal consumption expenditures, nonresidential fixed investment, net exports, and federal government spending. Meanwhile, the U.S. Federal Reserve kept the target range of the federal funds rate at 1 to 1¼ percent, in line with market expectations. In its policy statement, the Fed signaled it will begin implementation of its balance sheet normalization program soon, if the economy evolves as anticipated. Euro Area composite PMI declined to a six-month low in July. The Euro Area’s flash composite Purchasing Managers’ Index (PMI) fell from 56.3 in June to 55.8 in July, below market expectations. This was the lowest reading since January, suggesting a moderation in the pace of economic activity at the start of Q3 (a reading above 50 indicates expansion). While service sector PMI remained unchanged at 55.4, manufacturing PMI fell more than expected, from 57.8 in June to a six- month low of 56.8 in July. Japan consumer price inflation held steady in June; manufacturing PMI softened to an 8-month low in July. Japan’s core consumer price index (CPI)—which excludes the cost of fresh food—rose 0.4 percent (y/y) in June, in line with expectations and at the same pace as in May. The headline CPI also rose 0.4 percent (y/y) in June, as it did in the previous month. Separately, the flash manufacturing PMI edged down from 52.4 in June to 52.2 in July, its weakest level since November 2016, reflecting a stagnation in exports orders amid softening demand from South East markets. Crude oil price ticked higher. Crude oil prices edged up, buoyed by Saudi Arabia’s pledge to deepen its export cuts and a sharp fall in U.S. crude oil inventories (Figure 2). Data released by the U.S. Energy Information Administration showed U.S. crude oil inventories fell by 7.2 million barrels in the week ending July 21, more than expected and above the 4.7 million drop registered the previous week. Crude oil prices extended their gains on Thursday. Brent crude, the global oil benchmark rose 1.0 percent to $51.49 a barrel. West Texas Intermediate, the U.S. crude benchmark, went up 0.6 percent to $49.04 a barrel. Ghana cut interest rates, while Nigeria kept rates on hold. The Bank of Ghana cut its main policy rate further—the third time this year—by 150 basis points to 21 percent, citing the ongoing slowdown in consumer price inflation. Meanwhile, the Central Bank of Nigeria left the policy rate unchanged at 14 percent for the sixth consecutive meeting, in line with expectations, as it sought to safeguard the stability achieved in the foreign exchange market. Figure 1. U.S. GDP expanded 2.6 percent in the second quarter. Figure 2. Crude oil prices rose as U.S. inventories fell. Annualized quarterly change in U.S. GDP Crude oil prices and U.S. crude inventories Percent US$/bbl Brent Million barrels 6 59 WTI 1,240 U.S. crude oil inventory (RHS) 4 1,220 2 55 1,200 0 -2 51 1,180 -4 1,160 -6 47 1,140 -8 43 1,120 -10 Dec-16 Jan-17 Apr-17 Apr-17 May-17 Jun-17 Jun-17 Feb-17 Feb-17 Mar-17 Jul-17 Q2-08 Q1-09 Q4-09 Q3-10 Q2-11 Q1-12 Q4-12 Q3-13 Q2-14 Q1-15 Q4-15 Q3-16 Q2-17 Source: Haver Analytics. Source: Bloomberg; U.S. Energy Information Administration. Produced by DECPG. Number 357 | July 28, 2017 Major Data Releases (Percent change y-o-y) (Percent change y-o-y) Recent releases: Friday, 21 July - Thursday, 27 July 2017 Upcoming releases: Friday, 28 July - Thursday, 3 August 2017 Country Date Indicator Period Actual Forecast Previous Country Date Indicator Period Previous Canada 7/21/17 CPI JUN 1.0 % 1.0 % 1.3 % Lithuania 7/31/17 GDP Q2 3.9 % Australia 7/25/17 CPI Q2 1.9 % 2.1 % 2.1 % Latvia 7/31/17 GDP Q1 4.0 % UK 7/26/17 GDP Q2 1.7 % 1.8% 2.0 % Belgium 7/31/17 GDP Q2 1.6 % South Korea 7/26/17 GDP Q2 2.7 % 2.6% 2.7 % Mexico 7/31/17 GDP Q2 SA 2.7 % Austria 7/27/17 GDP Q2 2.2 % 2.0 % Eurozone 8/1/17 GDP Q2 1.7 % United States 7/28/17 GDP Q2 2.1 % 2.1 % Philippines 8/3/17 CPI JUL 2.8 % 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 Q2 Q3 Q4 Q1 June July Aug Sep Oct Nov Dec Jan Feb Mar Apr May 1 Industrial Production, sa World 1.8 2.2 2.3 2.9 5.4 3.8 2.0 1.8 2.4 2.1 2.2 3.3 3.8 3.2 3.5 4.1 3.9 4.3 Advanced Economies 0.2 0.2 0.4 1.7 3.9 1.4 -0.2 -0.4 0.6 0.3 0.2 1.9 2.5 1.1 2.2 2.3 2.3 2.9 Emerging Market and Developing Economies 3.5 4.2 4.2 4.1 6.9 6.3 4.3 4.1 4.3 3.9 4.2 4.7 5.0 5.3 4.8 6.0 5.5 5.7 Commodity-exporting EMDE 0.2 1.3 0.7 3.0 5.3 3.8 1.7 2.1 1.4 1.1 1.4 2.5 3.6 3.3 2.7 3.6 4.9 5.4 Other EMDE 5.0 5.3 5.6 4.4 7.6 6.7 5.4 4.8 5.4 4.9 5.2 5.6 5.6 6.1 5.6 6.6 5.6 5.7 East Asia and Pacific 5.8 5.8 7.2 5.6 5.9 7.3 6.1 6.1 6.3 5.5 5.6 5.9 5.9 6.1 6.1 7.3 6.3 6.2 East Asia excl. China 3.5 4.5 8.6 3.5 3.1 4.5 6.8 6.8 5.9 2.2 2.5 4.3 6.1 4.7 4.7 5.3 4.7 3.8 Europe and Central Asia 1.5 2.0 0.4 -2.1 9.8 5.9 1.9 0.2 1.7 0.6 1.5 2.8 2.7 4.4 1.5 4.4 4.4 6.6 Latin America and Caribbean -3.1 -2.6 -0.2 1.1 0.2 2.3 -2.3 -2.0 -2.7 -1.6 -2.4 -0.3 1.7 0.9 1.4 0.2 1.2 2.1 Middle East and North Africa 2.8 - -2.9 8.3 - - 2.9 3.7 3.1 4.3 6.5 - - - - - - - South Asia 3.5 5.7 4.8 2.0 4.0 2.7 6.7 5.9 5.4 4.5 5.1 5.7 3.0 3.8 1.5 4.9 4.0 2.9 Sub-Saharan Africa 0.1 0.8 6.2 -6.3 -3.0 -3.0 4.4 1.5 0.1 0.0 -1.1 0.7 -0.8 0.1 -2.7 -2.2 -0.1 -1.6 2 Inflation, sa World 1.4 1.3 1.6 1.3 1.6 2.4 1.6 1.5 1.3 1.4 1.5 1.6 1.8 2.3 2.4 2.6 2.3 2.1 Advanced Economies 0.1 0.4 0.2 0.4 0.8 1.6 0.4 0.4 0.4 0.5 0.6 0.7 1.1 1.5 1.8 1.6 1.9 1.5 Emerging Market and Developing Economies 2.5 2.3 2.9 2.8 2.5 3.4 2.6 2.8 2.7 2.9 2.4 2.4 2.6 2.9 3.4 3.5 3.5 3.4 Commodity-exporting EMDE 3.9 3.5 3.6 3.2 3.2 3.4 3.5 3.5 3.2 3.1 2.9 2.9 3.0 3.3 3.4 3.5 3.7 3.6 Other EMDE 1.0 1.1 2.0 1.7 1.7 3.1 1.8 1.8 1.5 1.6 1.5 1.6 1.8 2.6 3.3 3.5 3.2 3.1 East Asia and Pacific 1.2 1.7 1.9 2.1 2.3 2.7 1.8 2.0 1.9 2.2 2.1 2.2 2.5 2.7 3.2 3.4 3.2 3.2 Europe and Central Asia 1.9 0.4 0.3 0.5 1.0 2.4 0.4 1.2 0.5 0.5 0.9 0.9 1.6 2.3 2.5 2.7 2.6 2.3 Latin America and Caribbean 2.7 2.4 3.5 3.0 3.2 3.4 3.3 2.9 3.1 3.1 3.0 3.2 3.2 3.1 3.3 3.2 3.5 3.0 Middle East and North Africa 1.9 2.2 2.3 2.3 1.9 2.5 2.3 2.3 2.1 2.5 1.9 2.0 1.8 2.2 2.5 2.9 2.0 2.0 South Asia 4.5 4.9 5.3 5.3 3.9 4.3 5.6 5.7 5.2 5.0 4.2 3.7 3.7 3.7 4.2 5.0 4.8 5.0 Sub-Saharan Africa 3.6 5.3 5.0 5.7 5.5 6.7 5.4 4.9 5.9 5.8 5.8 4.9 6.5 6.7 6.7 6.8 6.7 6.5 1 Industrial production is total production (may exclude construction). When data are unavailable, "industral production, manufacturing" and "industrial production, manufacturing, non-durable manufacturing, petroleum and coal products, crude petrolem products" are used as proxies 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 Q2 Q3 Q4 Q1 June Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Exports, Nominal, US$, sa World -11.5 -3.0 14.8 -0.2 7.9 20.6 -4.3 -6.8 2.8 -0.8 -3.1 5.0 4.0 11.0 7.6 12.9 3.7 10.8 Advanced Economies -11.3 -0.8 15.5 -0.2 4.4 19.3 -2.4 -5.5 5.5 1.4 -1.5 6.3 5.6 10.1 8.0 10.4 0.7 9.6 Emerging Market and Developing Economies -12.0 -6.5 13.4 -0.1 14.6 22.9 -7.3 -9.1 -1.7 -4.4 -5.6 3.0 1.5 12.7 7.0 17.6 9.5 13.1 Commodity-exporting EMDE -24.2 -9.3 17.0 5.1 27.4 48.6 -13.5 -15.1 -1.9 -1.7 -5.6 7.7 7.7 26.8 19.7 24.3 13.9 21.1 Other EMDE -3.8 -4.6 12.1 -1.8 10.1 14.3 -3.4 -5.6 -0.9 -4.9 -5.0 1.8 -0.5 7.8 2.5 15.2 7.8 10.2 East Asia and Pacific -3.5 -6.1 12.9 -1.9 11.0 15.7 -5.7 -6.8 -1.6 -6.9 -5.9 1.8 -2.2 9.1 2.5 16.2 9.7 11.7 Europe and Central Asia -20.7 -6.1 21.8 -1.8 20.4 36.4 -4.2 -8.8 0.7 -1.1 -3.5 6.5 7.6 22.5 12.4 20.7 5.7 17.9 Latin America and Caribbean -11.9 -2.4 9.4 6.7 13.5 31.4 -8.1 -7.5 2.6 2.8 -4.4 10.1 10.9 14.7 12.5 17.4 9.7 11.4 Middle East and North Africa -27.1 - - - - - - - - - - - - - - - - - South Asia -4.8 1.6 3.9 -18.2 31.8 7.0 5.0 -4.1 5.8 -3.2 10.6 3.3 0.2 2.9 -0.1 11.3 6.6 -2.2 Sub-Saharan Africa -26.9 -14.8 22.5 -3.9 29.5 47.7 -18.7 -22.5 -12.9 -2.6 -9.6 0.7 3.3 23.3 25.8 18.7 - - Imports, Nominal, US$, sa World -6.8 -5.2 19.0 -19.1 21.8 20.6 -4.4 -10.8 -6.9 -5.6 -9.6 3.6 -1.6 11.5 5.3 10.4 -6.2 25.5 Advanced Economies -12.5 -3.4 8.7 -2.2 2.4 21.4 -4.7 -8.2 1.7 -1.9 -4.9 2.5 1.4 9.5 3.2 9.0 1.7 9.9 Emerging Market and Developing Economies -3.3 -6.2 25.4 -27.7 35.2 20.1 -4.2 -12.3 -11.6 -7.7 -12.0 4.3 -3.2 12.7 6.6 11.3 -10.2 35.1 Commodity-exporting EMDE -0.9 -7.0 28.1 -34.6 40.2 14.3 -3.9 -12.7 -15.4 -9.8 -14.9 4.1 -5.2 12.1 2.2 8.9 -15.3 - Other EMDE -11.5 -3.3 16.2 2.0 19.7 41.5 -5.8 -11.1 3.1 -0.1 -0.3 5.2 4.0 14.9 22.5 19.6 11.6 17.5 East Asia and Pacific -13.1 -3.6 20.7 5.3 21.2 51.9 -7.0 -10.8 5.7 0.0 -0.7 6.0 5.6 17.1 33.5 20.7 12.7 18.0 Europe and Central Asia -20.7 -1.4 12.7 -2.5 8.2 44.2 0.6 -8.7 7.3 1.9 0.8 5.4 7.4 20.3 9.6 13.8 7.6 21.3 Latin America and Caribbean -9.8 -7.4 6.2 3.1 5.3 26.7 -9.2 -15.5 1.5 -3.3 -8.4 1.6 3.9 11.1 5.2 13.6 -1.4 12.6 Middle East and North Africa 1.5 - - - - - - - - - - - - - - - - - South Asia -13.2 -5.3 7.0 7.2 58.9 33.8 -6.5 -14.9 -9.4 0.4 9.4 11.9 2.7 14.8 21.5 40.4 41.3 29.5 Sub-Saharan Africa -7.6 - - - - - - - - - - - - - - - - - International Reserves, US$ 1 World -5.9 -1.2 0.8 0.4 -3.3 1.7 0.9 0.3 -0.1 0.2 -1.1 -1.7 -0.6 0.7 0.3 0.7 0.8 0.9 Advanced Economies 0.6 4.4 1.7 1.4 -2.5 3.4 1.4 0.5 0.1 0.9 -0.7 -1.5 -0.2 1.5 0.4 1.5 1.2 1.1 Emerging Market and Developing Economies -10.0 -4.9 0.2 -0.3 -4.0 0.5 0.5 0.2 -0.2 -0.2 -1.4 -1.8 -1.0 0.1 0.3 0.1 0.5 0.8 Commodity-exporting EMDE -11.1 - -0.7 -0.2 - - 0.0 0.4 -0.5 -0.1 -1.7 -1.1 - - - - - - Other EMDE -9.2 -5.8 0.7 -0.3 -4.5 0.5 0.9 0.0 -0.1 -0.3 -1.2 -2.1 -1.3 0.0 0.3 0.3 0.5 0.9 East Asia and Pacific -11.3 -7.3 0.3 -0.7 -4.9 0.4 0.9 0.0 -0.3 -0.4 -1.3 -2.4 -1.2 -0.1 0.4 0.1 0.8 0.8 Europe and Central Asia -6.8 3.7 3.0 1.1 -4.3 2.9 2.0 0.1 0.9 0.1 -0.9 -1.8 -1.7 1.9 0.7 0.3 -0.1 1.3 Latin America and Caribbean -5.3 1.1 0.7 1.6 -0.9 0.8 0.1 1.6 0.0 -0.1 -0.6 -0.6 0.1 0.5 0.4 0.0 0.9 0.1 Middle East and North Africa -17.1 - -2.6 -2.0 - - -1.3 -0.7 -0.8 -0.5 -2.6 - - - - - - - South Asia 11.6 3.5 2.0 3.3 -2.8 1.7 0.8 1.4 0.6 1.4 -1.0 -0.9 -0.9 -0.1 0.5 1.3 0.6 1.8 Sub-Saharan Africa -12.0 - -1.9 - - - - - - - - - - - - - - - 1 Total reserves excluding gold are used as proxies when total reserves data are unavailable. Produced by DECPG. Number 357 | July 28, 2017 Financial Markets 1 2016 2017 2016 2017 MRV 2015 2016 Q3 Q4 Q1 Q2 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Interest rates and LIBOR (percent) U.S. Fed Funds Effective 0.13 0.40 0.39 0.45 0.70 0.95 0.39 0.40 0.40 0.41 0.41 0.55 0.66 0.66 0.79 0.91 0.90 1.04 1.16 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 0.79 0.92 1.07 1.20 0.70 0.81 0.85 0.88 0.91 0.98 1.03 1.04 1.13 1.16 1.19 1.26 1.31 EURIBOR 3-months -0.02 -0.26 -0.30 -0.31 -0.33 -0.33 -0.29 -0.30 -0.30 -0.31 -0.31 -0.32 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 US 10-yr Treasury yield 2.12 1.84 1.56 2.12 2.44 2.25 1.48 1.56 1.63 1.74 2.12 2.50 2.44 2.42 2.47 2.29 2.29 2.18 2.28 German Bund, 10 yr 0.54 0.14 -0.07 0.18 0.35 0.30 -0.09 -0.07 -0.05 0.03 0.22 0.30 0.34 0.32 0.39 0.25 0.36 0.28 0.56 Spreads (basis points) JP Morgan Emerging Markets 415 410 372 369 340 325 387 367 361 357 380 370 354 338 329 331 320 325 322 Asia 224 221 197 197 175 169 210 190 191 192 201 198 185 173 166 173 167 166 157 Europe 348 302 282 283 261 242 290 282 273 274 294 282 272 258 253 250 237 240 231 Latin America & Caribbean 540 537 477 475 445 427 496 473 463 453 491 481 463 442 431 431 420 430 436 Middle East 456 517 508 467 396 362 540 492 493 487 475 438 416 396 377 350 353 382 370 Africa 415 518 461 436 389 386 494 448 440 441 444 422 401 387 380 400 376 383 375 Stock Indices (end of period) Global (MSCI) 399 424 418 424 449 465 414 417 418 413 413 424 433 445 449 455 464 465 478 Advanced Economies ($ Index) 1663 1761 1726 1761 1854 1916 1713 1720 1726 1697 1712 1761 1792 1839 1854 1878 1912 1916 1964 United States (S&P 500) 2044 2258 2168 2258 2363 2423 2170 2171 2168 2139 2199 2258 2279 2364 2363 2384 2421 2423 2475 Europe (S&P Euro 350) 1474 1475 1388 1475 1547 1534 1376 1390 1388 1377 1388 1475 1463 1501 1547 1564 1576 1534 1545 Japan (Nikkei 225) 18817 19302 16450 19302 18909 20033 16556 16887 16450 17050 18604 19302 19035 19342 18909 19197 19836 20033 20027 Emerging Market and Developing Economies (MSCI) 794 861 903 861 958 1011 879 894 903 908 863 861 909 936 958 978 1005 1011 1069 EM Asia 404 419 448 419 474 512 431 442 448 444 426 419 443 459 474 484 505 512 539 EM Europe 244 295 273 295 301 304 264 269 273 274 273 295 302 296 301 313 308 304 316 EM Europe & Middle East 211 248 233 248 252 251 227 232 233 232 230 248 253 249 252 259 255 251 262 EM Latin America & Caribbean 1830 2341 2381 2341 2611 2544 2359 2402 2381 2608 2330 2341 2516 2600 2611 2601 2532 2544 2736 Exchange Rates (LCU / USD) Advanced Economies Euro Area 0.90 0.90 0.90 0.93 0.94 0.91 0.90 0.89 0.89 0.91 0.93 0.95 0.94 0.94 0.94 0.93 0.91 0.89 0.85 Japan 121.00 108.80 102.36 109.63 113.63 111.10 104.09 101.31 101.69 103.72 108.90 116.28 115.03 112.96 112.91 110.02 112.36 110.91 110.97 Emerging and Developing Economies Brazil 3.33 3.49 3.25 3.28 3.14 3.21 3.28 3.21 3.25 3.18 3.33 3.35 3.20 3.10 3.13 3.14 3.20 3.30 3.14 China 6.29 6.65 6.67 6.84 6.89 6.86 6.68 6.65 6.67 6.74 6.85 6.92 6.89 6.87 6.90 6.89 6.88 6.81 6.75 Egypt 7.70 10.12 8.87 14.71 17.82 18.10 8.87 8.87 8.88 9.25 16.34 18.56 18.68 17.01 17.76 18.09 18.10 18.11 17.92 India 64.14 67.19 66.94 67.39 66.97 64.48 67.18 66.91 66.74 66.73 67.60 67.86 68.06 67.01 65.83 64.52 64.46 64.45 64.37 Russia 61.34 67.06 64.61 62.95 58.67 57.17 64.43 64.93 64.48 62.57 64.25 62.03 59.76 58.42 57.83 56.53 56.88 58.10 59.40 South Africa 12.77 14.71 14.07 13.92 13.24 13.21 14.40 13.79 14.01 13.92 13.96 13.88 13.60 13.17 12.95 13.46 13.25 12.91 12.90 Memo: U.S. nominal effective rate (index) 114.7 119.7 118.4 122.5 123.4 120.7 118.9 117.8 118.6 119.7 122.9 124.9 124.8 123.0 122.5 121.6 121.0 119.4 117.1 1 MRV = Most Recent Value. Commodity Prices 1 2016 2017 2016 2017 MRV 2015 2016 Q3 Q4 Q1 Q2 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May June 2 Energy 65 55 57 64 68 64 57 58 58 64 59 68 69 69 65 67 64 60 60 2 Non-energy 82 80 82 83 86 83 82 82 81 81 83 84 85 87 85 83 83 82 82 2 Agriculture 89 89 91 90 91 88 92 91 90 90 90 89 91 91 89 88 89 88 88 Metals and minerals 2 68 64 64 71 78 74 64 65 64 65 73 75 76 79 79 75 73 72 77 Memo items: Crude oil, average ($/bbl) 51 43 45 49 53 50 44 45 45 49 45 53 54 54 51 52 50 46 49 Gold ($/toz) 1161 1249 1334 1221 1219 1258 1337 1340 1327 1267 1238 1157 1192 1234 1231 1267 1246 1260 1260 Baltic Dry Index 711 676 736 994 938 1023 707 675 826 870 1080 1031 913 760 1142 1229 979 861 980 Source: World Bank, World Bank Commodities Price Data (The Pink Sheet), Bloomberg 1 MRV = Most Recent Value. 2 Indexes, 2010 = 100. Produced by DECPG. Number 357 | July 28, 2017