Monthly Bulletin July 2009 - Banque de France

ECONOMIC AND MONETARY
DEVELOPMENTS
1 THE EXTERNAL ENVIRONMENT
OF THE EURO AREA
ECONOMIC
AND MONETARY
DEVELOPMENTS
The external
environment
of the euro area
Although the latest indicators point to a slowdown in the pace of the global economic contraction,
there is not as yet any concrete evidence of the start of a fi rm recovery. In parallel, global infl ation
rates have been diminishing rapidly in recent months, on account of rising spare capacity and
negative base effects from last year’s commodity price increases. Global economic prospects
remain subject to high levels of uncertainty, but the risks to global activity are balanced.
1.1 DEVELOPMENTS IN THE WORLD ECONOMY
Although the latest indicators point to a
slowdown in the pace of the global economic
contraction, there is not as yet any concrete
evidence of the start of a firm recovery. In May,
the Global Purchasing Managers’ Index (PMI)
posted its highest reading since last September,
indicating a substantial easing of the rates of
contraction. However, this indicator remains
below the expansion-contraction threshold,
suggesting that firms are continuing to scale back
their activity somewhat. In the manufacturing
sector, some signs of stabilisation in output
emerged in June.
Chart 1 International price developments
(monthly data; annual percentage changes)
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5
4
3
2
OECD consumer prices (all items)
OECD consumer prices (all items excluding food
and energy)
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5
4
3
2
Global inflation rates have been diminishing
rapidly in recent months. This was due both
to rising spare capacity (as a result of the
downturn in global economic activity) and to
negative base effects from last year’s increases
in commodity prices. Headline CPI inflation in
the OECD countries stood at 0.1% for the year up to May 2009, down from 0.6% in the previous
month (see Chart 1). Excluding food and energy, annual CPI inflation was 1.7% in April, which
was slightly lower than in the previous month. As indicated by the Global All-Industry Input
Prices Index, costs fell further in May. In June, manufacturing input price indicators pointed to a
slower decline in costs.
UNITED STATES
In the United States, economic activity remained subdued. According to final estimates, real GDP
contracted by 5.5% in annualised terms in the first quarter of 2009, after 6.3% in the preceding
quarter. Exports and inventories, as well as private fixed investment, continued to be a drag on
the economy in the first quarter of 2009, which was only partly compensated for by lower imports
and relatively robust consumer spending. While financial and economic indicators remain at weak
levels, manufacturing and housing market indicators, as well as consumer confidence and consumer
spending levels, point to a decelerating rate of deterioration. Increased government spending
will support demand further, partly compensating for persistently weak business investment and
exports.
As regards price developments, annual CPI inflation decreased substantially, falling to -1.3% in the
year to May 2009, from -0.7% in April. The decline was driven by base effects linked to energy
prices. The annual rate of inflation excluding food and energy decreased to 1.8% in May, from 1.9%
1
0
1999 2000 2001 2002 2003 2004 2005 2006 2007
Source: OECD.
2008
1
0
ECB
Monthly Bulletin
July 2009
9