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Recent
indicators provide ambiguous picture
The latest economic data are mixed.
Consumer confidence fell in October due to rising energy prices and
concerns about the sluggish pace of job growth.
The index of consumer sentiment of the University of Michigan
reached 91.7 in the October 2004 survey, down from 94.2 in September.
Owing to the dismal payroll development, the majority of consumers
expect the unemployment rate to remain largely unchanged at its current
level for the remainder of the year.
Moreover, an increasing number of consumers are concerned about
long-term economic prospects, suggesting that the current job scarcity is
seen as more permanent. On
the positive side, the economy added 337,000 new jobs in October, the
highest number in seven months and well ahead of market expectations.
New jobs were spurred by rebuilding in the hurricane-battered
Southeast, following the four hurricanes that struck the United States in
August and September and brisk hiring in service industries. Service
industries added 272,000 of October's new jobs -- the largest number since
280,000 in April and nearly twice September's total -- while 65,000 new
jobs last month were added in goods-producing industries. In addition, the
number of jobs created in the two prior months was revised upward -- to
139,000 in September (previously 96,000) and to 198,000 for August (previously
128,000). However,
despite the strong additions to payrolls, the unemployment rate edged up
from 5.4% in September to 5.5% in October, as a greater number of people
began searching jobs.
Continued
optimism about Latin American growth prospects
The outlook for Latin America improved once again this month.
The region is now expected to expand 5.0% this year, 0.1 percentage
points above last month’s forecast and more than a full percentage point
above the pace expected at the beginning of the year.
This month’s upward revision was broad-based, as it was prompted
by better projections for five of the seven major economies in the region:
Argentina, Brazil, Chile, Peru and Venezuela with unchanged forecasts for
Colombia and Mexico.
Rising
optimism for Argentina and Brazil boost regional outlook
The
Consensus for Argentine GDP growth in 2004 moved from 7.0% expected last
month to the current 7.1%, as the a slowdown of the cyclical rebound
observed in past months turned out to be less severe than expected.
As a result, the outlook for next year was also lifted an even more
pronounced 0.4 percentage points over last month to 4.3%. The most
important contribution to increased optimism about regional growth
prospects stemmed from Brazil, which represents 33.0% of Latin American
GDP. Consensus Forecast panellists lifted the GDP growth forecast
for Brazil by 0.2 percentage points over last month to the current 4.3%.
The upward revision follows on a 0.4 percentage point upgrade last month
and was motivated by an increasing resilience of the domestic economy,
which has piggy backed on the pickup in global demand. Strong
domestic demand, however, is forcing the Central Bank to tighten
monetary policy to rein in rising inflationary expectations.
Consequently, the pace of economic expansion will decelerate next year to
3.5%.
Chile
benefits from strong commodity prices and booming external demand
The outlook for Chilean economic growth this year increased a notch
over last month to 5.1%, as the economy continues to benefit from robust
external demand and strong commodity prices.
Just like Brazil, the domestic economy is picking up speed spurred
by the external sector, prompting the Central Bank to end its long-lasting
accommodative stance.
Nevertheless, unemployment still resists the development of the
economy and remains stubbornly high.
Peru
seen more optimistically as mining sector resurfaces and Venezuela
benefits from booming oil sector
The outlook for Peruvian GDP growth in 2004 was lifted from 4.2% to
4.3%, following a three-month period of no revisions. The improved
sentiment reflects a recovery in mining that had slumped recently but now
seems to be resuming its role as driving engine for the entire economy.
The strongest upward revision this month was once again applied to the
Venezuelan growth outlook. The economy is profiting from a strong
cyclical rebound, which puts the country at the helm of the region with
12.2% projected growth, up 0.3 percentage points from last month’s
forecast, as the high oil price boosts the country’s all-important oil
sector.
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