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  Daily Economic News – Feb. 19, 2015


AUTHORS                 Derek Chen (x-81602)                      Eung Ju Kim (x-85804)
                        Mizuho Kida (x-31943)



Oil price falls on surging supply data…Germany rejects Greek proposal for a
bailout extension…Russian economic indicators slump in January


Financial Markets

Oil prices fell sharply after data showed U.S. crude inventories surged, adding to concerns about
oversupply. A possible increase in production from the world’s largest oil exporter, Saudi Arabia, also
weighted negatively on the prices. U.S. crude supplies for the week ended February 13th saw a 14.3
million-barrel jump from a week earlier, significantly higher than market expectations of a 3.2 million barrel
increase. Brent crude futures declined $2.35 (or 3.9%) to $58.18 a barrel on the London Exchange, while
West Texas Intermediate (WTI) oil futures fell $2.70 (or 5.2%) to $49.44 a barrel on the New York
Exchange.

The dollar bounced back today from losses that followed the release of Fed’s minutes showing that policy
makers argued for keeping interest rates lower for longer. The dollar appreciated the most in more than a
week against a basket of currencies, including 0.18% against the euro to $1.1381 after Germany rejected
Greece’s proposal for a bailout extension. Despite the initial reaction to the Fed’s minutes, many investors
remain convinced rate increase is likely by year-end with Federal fund futures traded on the Chicago
Exchange showing 77% possibility of a rate hike by December 2015.



High Income Economies

Germany has rejected Greece's application to extend its loan agreement and renegotiate the terms of its
bailout program, despite a significant U-turn by the new Greek government, which, for the first time,
promised to work on completing the economic reform measures required in the existing rescue program.
A spokesman for Germany's finance ministry said that the letter from Athens did not offer a substantial
proposal for a solution, but rather aimed for a bridge financing without meeting the demands of the
program.

The Organization for Economic Cooperation and Development (OECD) raised Italy's economic outlook,

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citing gains from stimulus measures from the European Central Bank (ECB), the fading effect of the
earlier fiscal consolidation and gains in real income due to falling oil prices. The OECD now expects the
economy to expand 0.4% and 1.3% in 2015-2016, compared to its November forecasts of 0.2% and
1.0%. The forecasts, however, remain weaker than those of the central bank and government. The Bank
of Italy earlier this month upgraded its growth forecasts to 0.5% and 1.5% in 2015-16 from 0.4% and
1.2%.

Japan’s leading economic index climbed to 105.6 in December, higher than the flash estimate of 105.2
and November’s reading of 103.7. The coincident index, which reflects the current economic activity, also
rose to 110.7 in December, in line with flash estimate, from 109.2 in November. It was the highest score
since May, when the reading was 111.0. Meanwhile, the lagging index, which measures the past
economic activity, dropped to 119.8 in December from 120.5 in November.



Developing Economies

Turkey’s consumer confidence rose to 68.06 in February, up from 67.71 in January and better than
economists’ expectation of 68. The index measuring probability of saving increased to 25 from 23.69, and
the index measuring expectation for the number of unemployment people in the next twelve months rose
to 69.64 from 67.81. Meanwhile, the index measuring the expectations on the financial situations of
households in the next twelve months fell to 86.75 from 87.84. The general economic situation
expectation index also fell slightly to 90.87 from 91.49.

Russia saw steep declines in key economic activity indicators in January, reinforcing expectation that the
country is heading for recession under the weight of Western sanctions and a sharp decline in oil prices.
Retails sales declined 4.4% (y/y) in January for the first time in more than five years, and after expanding
5.3% in December. Real wages plunged 8%, the sharpest decline since 1999, and following a 4% drop in
the previous month. Meanwhile, fixed capital investments extended their decline to 6.3% (y/y) after a
2.4% fall in the previous month. Unemployment also rose to 5.5% from 5.3%. “Overall, the data has
clearly surprised on the downside in terms of key domestic demand components,” an analyst said. “It is
clear that the squeeze on consumers is intensifying, and the downturn is likely to gather pace over the
coming months.”
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You’ll find recent issues of this Daily and lots of other current analysis and high -frequency data on our
GEM intranet website: http://go.worldbank.org/0TC32BNV30

See also our Prospects blog: http://blogs.worldbank.org/prospects

The Daily Economic News is an informal briefing for Bank staff whose responsibilities require that they
stay abreast of changes in global markets. The views expressed here do not reflect those of the World
Bank Group.
Feedback, and requests to be added to or dropped from the distribution list, may be sent to :
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