ECONOMIC REPORT OF THE PRESIDENT

Figure 3-vii
World Industrial Production and Commodity Prices, 2006–2015
12-Month Percent Change
12-Month Percent Change
60
15
40
World Industrial
Production
(right axis)
10
20
Nov-2015
5
0
0
-20
-40
Commodity Prices
(left axis)
-5
-10
-60
-15
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Source: Netherlands Bureau of Economic Policy Analysis; Bloomberg Professional Service.
since at least 1980. Out of the 20 G-20 economies, 8 (including 6 of the
7 G-7 countries) had four-quarter inflation rates below 1 percent in the
third quarter of 2015, and three of them with rates below zero. All of the
world’s major advanced economies had rates below their target. While
advanced economies are confronting the challenge of very low, or even
negative, inflation, some major commodity exporters, like Brazil and
Russia, have faced rapid currency depreciation and high inflation rates;
in part, because currency depreciation makes imported goods more
expensive to domestic consumers. Other emerging markets, like Mexico
and South Africa, where commodity exports are 6 and 11 percent of
GDP, respectively, have also experienced currency depreciation but
lower inflation rates, ranging between 2 and 6 percent, still above those
of a number of European countries, Japan, and the United States.
2015, the cumulative depreciation in the spot rate was 4.6 percent against the
dollar. Since August, the authorities have sold foreign exchange to support
the RMB, as the market was surprised by the sudden depreciation, exchange
rate expectations reset, and private capital outflows continued. The end
of 2015 and start of 2016 has also seen renewed discussion of the value of
the RMB versus a basket of currencies—not just the U.S. dollar—as well as
greater volatility in the exchange rate. Clear communication by China of
its policies and actions to the market as it makes an orderly transition to a
market-determined exchange rate will help guide market expectations.
The Global Macroeconomic Situation | 143