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​In the headlines: 
  • Eurozone: ECB to retain accommodative stance
  • China: Latest data
  • US: Recent indicators
  • Kenya: Election update and prospects


Figure of the week:

USD 109.7

Barrel price of Brent oil


The president of the ECB, Mario Draghi, announced that the institution’s impact on monetary policy will remain accommodative as long as needed. This reflects a significant lowering in inflationary expectations and the fact that economic activity remained weak in early 2013. Projected GDP growth in 2013 was revised downwards moderately (by -0.2pps to -0.5%) and inflation is expected to remain low (at 1.6%). While market confidence has improved recently, financial conditions remain a drag on economic activity. Indeed, market fragmentation within the eurozone is still high, weighing on funding conditions for the corporate sector (-4% y/y for credit to non-financial corporates in January 2013). In this respect, we would expect the ECB to lower its key interest rate (currently at 0.75%) over the coming months and to announce further long-term refinancing operations (LTRO).

China: Latest data

Exports increased strongly in February (+21.8% y/y), but import growth was relatively low. Fixed asset investment growth in Jan- Feb accelerated to +21.2% y/y (+20.6% for the whole of 2012), but industrial output was up +9.9%, after +10.3% in December 2012, although it was still above the April-October 2012. Retail sales eased to +12.3% in Jan-Feb from +15.3% in December and below the rate evident in 2012. Inflation accelerated to 3.2% y/y in February and, although this was probably affected by the New Year, the trend appears upwards. These mixed data are in keeping with a moderate growth recovery this year (+8% from +7.8% in 2012). Inflation and property sector concerns are likely to limit monetary policy options if growth begins to fade, although there are fiscal options and the authorities are unlikely to be too concerned if growth is above, or in line with, the +7.5% target.

US: Recent indicators

Recent data suggest the economy is improving somewhat, despite higher taxes and gasoline prices. In addition to the sharp rebound in housing, a leading indicator of business spending increased +7.2% mo/mo in January, putting its annualised growth rate at a very strong +30% over a three-month period, and the four-week average of jobless claims fell 349,000. However, analysts were overly enthusiastic about the February employment report. Although the rate of unemployment fell from 7.9% to 7.7%, almost half of the improvement was because people left the workforce. Non-farm payroll jobs increased by 236,000, which was more than expected but still less than the 250,000+ needed each month to signal full employment. Moreover, data for the previous two months were revised down 15,000.

Kenya: Election update and prospects

Deputy PM Uhuru Kenyatta was declared president-elect after winning 50.07% of votes cast (50%+ required to avoid a second round of voting). His nearest rival, PM Raila Odinga, received 43.31% in a turnout of 86% of registered voters. The narrow margin by which a second round was avoided encouraged Odinga to challenge the result and seek redress for perceived electoral shortcomings–including the breakdown of a new electronic vote counting system–through the courts. Odinga called for his supporters to respect the law (the Supreme Court will give a ruling) and remain peaceful, although it was post-poll violence after end-2007 elections (not the vote itself) that resulted in around 1,300 deaths and significant economic disruption (GDP growth was +1.5% in 2008, after an average +6% 2004-07). This time, prospects look better for a peaceful transition. Expect GDP growth of +5% this year, but much depends on domestic stability and the international reaction to a president-elect who goes before an ICC tribunal in July for alleged crimes against humanity from the 2008 violence.



  • Mediterranean, Africa & Middle East – Malta: update
  • Americas – Venezuela: presidential elections
  • Asia-Pacific – North and South Korea - rising tensions again
  • Europe – Slovenia: Romania weak 2012 GDP growth