Source: DECPG Commodities Group.
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![Page 1: Source: DECPG Commodities Group.](https://reader036.fdocuments.in/reader036/viewer/2022062719/5681321c550346895d987da4/html5/thumbnails/1.jpg)
The External Environment for Developing Countries
September 2008The World Bank
Development EconomicsProspects Group
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Commodities retrace a part of gainson falling demand and rising supply...
commodity price indices, January 2006=100
80
100
120
140
160
180
200
220
240
260
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
Source: DECPG Commodities Group.
Energy
Non-Energy
Grains
Metals / Minerals
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70
75
80
85
90
95
100
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08
Source: Thomson/Datastream.
... while equity markets see a steeper economic downturn ahead
DJI, DAX, TOPIX, and MSCI-Dev, indexes Jan 1-08 =100
Dow Jones
DAX
MSCI-EM
Topix
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Industrial countries
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-0.2
0.9
3.3
-3
-2
-1
0
1
2
3
4
5
Q4-2007 Q1-2008 Q2-2008P
Source: Department of Commerce and DECPG calculations.
U.S. Q2-GDP grows 3.3% poweredby external trade and the consumer
growth of real GDP, and contributions to growth in percentage points
Net X
Invest
PCE
Gvt
dStok
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U.S. loses jobs for an eighthconsecutive month in August change in non-farm payroll
employment, ‘000
-100
-50
0
50
100
150
200
250
300
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
Source: U.S. Department of Labor.
monthly change
3mma change
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U.S. inflation will increase for a timeafter commodity prices retreat
Headline and Core, CPI and PPI indexes, ch% saar
-5
0
5
10
15
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
Source: Thomson/Datastream, DECPG.
PPI Headline
PPI Core
CPI Headline
CPI Core
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2.4
3.2
-2.4
-3
-2
-1
0
1
2
3
4
Q4-2007 Q1-2008 Q2-2008 P
Source: Cabinet Office and DECPG calculations.
Japan Q2-GDP falls sharply on consumer and dissapointing exports
growth of real GDP, and contributions to growth in percentage points
Net X
Invest
PCE
dStok
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Japan’s housholds and businesssee darker times ahead
Tokyo consumer confidence [L], Tankan business conditions* [R]
32.5
35.0
37.5
40.0
42.5
45.0
47.5
50.0
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08
-14
-12
-10
-8
-6
-4
-2
0
2
4
6
Source: Cabinet Office and Bank of Japan.
Consumer confidence [L]
Tankan [R]
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Japan’s export markets turn sluggish contribution to growth of Japan’s export
volumes (%)
-5
0
5
10
15
20
25
30
35
2006-Q1 2006-Q3 2007-Q1 2007-Q3 2008-Q1
Other
Other Asia
China
Europe
USA
Source: Bank of Japan, DECPG calculations
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1.4
2.7
-0.8
-2
-1
0
1
2
3
4
Q4-2007 Q1-2008 Q2-2008 P
Source: EuroStat and DECPG calculations.
Euro Area Q2 GDP falls 0.8% on drop in investment, weak exports growth of real GDP, and contributions to
growth in percentage points
Change in StocksGovernment Net Exports
ConsumptionInvestment
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European purchasing power hit hard by energy prices
Retail sales volume, ch% y/y [R], HICP-energy, ch% y/y [L]
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
-5.0
-2.5
0.0
2.5
5.0
Source: Eurostat through Thomson/Datastream.
HICP-Energy [L]
France [R]
Germany [R]
Italy [R]
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German exports continue decline in July-- in step with export orders export volumes and overseas factory
orders, ch% 3mma
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
15.0
17.5
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
Source: Bundesbank-- Thomson/Datastream.
Export volume
Export orders
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Industrial production
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Eurozone IP plummets on weaker internal and external demand
real IP, ch% (6m/6m, saar)
-2
0
2
4
6
8
Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08
France
Germany
Eurozone
Source: Thomson/Datastream, DECPG.
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Industrial production weakening in developing countries outside China
real IP, ch% (3m/3m saar)
-4
-2
0
2
4
6
8
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-085
10
15
20
25
30
Developing countriesexcluding China [left scale] China [right scale]
Source: Thomson/Datastream, DECPG.
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Export growth and fiscal stimuluscushion U.S. output from deeper decline
real IP ch% (saar)
-4
-2
0
2
4
6
8
Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08
IP 3m/3mIP 6m/6m
Source: Thomson/Datastream, DECPG.
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International trade
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OECD import volumes contract in the second quarter
import volumes, ch% (y/y) [left], ch% saar [right]
-5
0
5
10
15
-10
-5
0
5
10
15
20
25
Source: NL CPB and Thomson/Datastream.
3m/3m saar [R]
12m/12m annual [L]
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China’s exports ease gradually into 2008
export volumes, ch% (y/y) [left], ch% saar [right]
0
10
20
30
40
-40
-20
0
20
40
60
80
Source: NL CPB and Thomson/Datastream.
3m/3m saar [R]
12m/12m annual [L]
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LAC exports follow U.S. imports annual volume growth ch% (12m/12m)
-8
-5
-3
0
3
5
8
10
13
15
U.S. imports
LAC exports
Source: NL CPB and Thomson/Datastream.
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Oil prices
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Crude oil prices plunge on increasing concerns about demand
50
75
100
125
150
Jan-07Jul-0
7Jan-08
Jul-08
$/bbl
WTI
Brent
Dubai
Source: Datastream and DECPG Commodities Group.
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Growth in U.S. oil demand million barells per day, 3mma (y/y)
-1200
-1000
-800
-600
-400
-200
0
200
400
600
800
1000
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08
Gasoline Distillate Resid Other
mb/d
Source: IEA and DECPG Commodities Group.
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WTI Futures Prices - NYMEX
50
60
70
80
90
100
110
120
130
140
150
Dec-06 Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12 Dec-13
SEP 9 2008
$/bbl
Monthly contract prices to Dec 2013* on select dates in 2007-08
Jan 16
Aug 15
Dec 31
Jul 3 2008
Jul 31 2008
Source: NYMEX and DECPG Commodities Group.
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Non-oil commodity prices
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Corn, soybean, wheat prices decline on improving supply prospects
200
400
600
800
1000
1200
1400
1600
Jan-07Jul-0
7Jan-08
Jul-08
c/bushel
Soybeans
Corn
Wheat
Source: Datastream and DECPG Commodities Group.
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Metals prices fall on increasing concerns about demand
1000
2000
3000
4000
5000
6000
7000
8000
9000
Jan-05Jan-06
Jan-07Jan-08
10000
15000
20000
25000
30000
35000
40000
45000
50000
55000
Cu Zn $/ton Ni $/ton
Zinc
Copper
Nickel
Source: LME and DECPG Commodities Group.
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Gold prices drop on dollar appreciation
400
450
500
550
600
650
700
750
800
850
900
950
1000
1050
Jan-05Jan-06
Jan-07Jan-08
1.15
1.20
1.25
1.30
1.35
1.40
1.45
1.50
1.55
1.60$/toz $/euro
Gold price
$/euro
Source: LME and DECPG Commodities Group.
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International Finance
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Captial flows depressesd over July / August
Source: DECPG Finance Team.
Gross capital flows to emerging markets
$ billion 2006
Total H1 Total Jan-Aug H1 Jun Jul Aug YTD
Total 494 357 683 472 267 58 29 15 312
Bonds 137 107 146 118 58 19 8 2 68
Banks 246 164 343 240 165 36 20 13 198
Equity 111 86 194 114 44 3 1 0 46
Lat. America 116 69 157 110 54 9 5 2 62
Bonds 41 31 45 37 17 1 1 0.4 18
E. Europe 179 156 252 191 104 35 17 6 127
Bonds 64 50 64 55 33 15 6 0.1 39
Asia 153 110 213 130 90 11 4 6 101
Bonds 19 18 23 22 7 3 1 1 9
Others 45 32 60 41 20 2 2 1 22
2007 2008
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Global equities continue decline Mature- and Emerging Market indices, ch
%
-15.0
-12.5
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
Jan Feb Mar Apr May Jun Jul Aug Sep*
Source: Thomson/Datastream.
Emerging Markets
Mature Markets
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120
160
200
240
280
320
360
May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08
10
15
20
25
30
35
Source: Thomson/Datastream.
EM credit spreads widen in step with increasing risk aversion
EMBIG spreads, basis points [L], Equity volatility index [R]
EMBIG spreads [L]
Vix index [R]
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Currencies
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1.390
1.410
1.430
1.450
1.470
1.490
1.510
1.530
1.550
1.570
1.590
1.610
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08
96
98
100
102
104
106
108
110
112
Source: Thomson/Datastream.
yen/USD
USD/Euro (inverse)
Dollar rebounds sharply vis-à-vis the euro
USD per Euro (inverse) [Left] and Yen per USD [right]
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European prospects dim... a key factor in the dollar’s rebound Consensus forecasts for 2008 GDP
growth, by month prepared.
1.0
1.5
2.0
2.5
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08
Source: Consensus Economics Ltd.
Germany
USA
Euro Area
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85
90
95
100
105
110
115
120
125
Jan-08 Feb-08 Mar-08 Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08
Source: Thomson/Datastream.
Dollar broadly higher against emerging market currencies
LCU per USD indexes, Jan1 2008=100 [*increase = weaker LCU]
Turkish lira
Brazilian reis
Indonesian rupiah
Korean won
Philippine peso
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FOCUSSeptember 2008
U.S. takeover of Fannie and Freddie...market implications
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Takeover of Fannie & Freddie followed by drop in mortgage rates...
mortgage spreads in basis points
0
50
100
150
200
250
300
350
400
450
500
08/01/07 11/01/07 02/01/08 05/01/08 08/01/08
Source: Federal Reserve Governors.
30-year fixed mortgage rate – Fed funds rate
30-year fixed mortgage rate – 30-year T-Note rate
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30
40
50
60
70
80
Jan-07 May-07 Sep-07 Jan-08 May-08 Sep-08
Source: Bloomberg Data Service.
... and lower yields on U.S. Agency debt
yield on 30-year Fannie Mae bonds less Treasury bond (basis points)
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...as fiscal outlook deteriorates U.S. federal debt held by the public, % of
GDP
25.0
27.5
30.0
32.5
35.0
37.5
40.0
42.5
2007 2008 2009 2010 2011 2012
09-Sep-08
Aug -07 Projection
Source: Congressional Budget Office.
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The External Environment for Developing Countries
September 2008The World Bank
Development EconomicsProspects Group