GDP
UPDATE
McIlvaine Company
June 2006
INDUSTRY ANALYSIS
1. AMERICAS
U.S.
The U.S. economy probably grew at a much healthier pace in the first quarter than initially thought, boosted by gains across a wide array of sectors such as construction, retail, and manufacturing inventories. Economists polled by Reuters expect growth in the first quarter to be revised upwards to a robust 5.7 percent from an initial estimate of 4.8 percent released in late April by the U.S. Commerce Department.
Monthly U.S. construction data surprised on the upside, economists said, with robust spending in March along with higher revised figures for February and January. "Construction likely added three-tenths to GDP growth," said Ethan Harris, chief U.S. economist at Lehman Brothers.
Analysts also expect a significant part of GDP revisions to come from higher-than-forecast inventory accumulation. Lehman Brothers noted that the advance GDP estimate, based on a forecast for March, calculated inventory growth at $22 billion for the first three months of the year. But actual March stockpiles increased by more than estimated, and February was revised up, which meant inventory growth of closer to $37 billion.
Analysts say revisions of this magnitude suggested that the U.S. economy began the second quarter with more momentum than previously thought, which could increase the pressure on the Federal Reserve to tighten monetary policy again. Aside from domestic factors, a narrower-than-expected March trade deficit of $62 billion along with downward revisions in the February shortfall should also boost GDP growth, economists say. Lehman Bothers' Harris said the trade component alone should enhance GDP growth by about three-tenths.
That said, most economists still expect a further widening in the trade gap in 2006, despite increasing signs that U.S. exports have been strengthening. "Since the U.S. imports roughly twice as much as it exports (in terms of goods), exports would have to grow twice as fast as imports to keep the trade deficit stable, and that is not likely to happen this year," said Kathleen Stephansen, director for global economics at Credit Suisse in New York.
Credit Suisse's 2006 forecast calls for net exports to subtract 0.5 percentage point from GDP growth. Overall, most economists expect U.S. economic growth to slow in the second half. "Our story remains that a gradual slowdown is in prospect," said Global Insight U.S. economists Nigel Gault and Patrick Newport in a research note. They said factors pointing to a second-half slowdown, mainly cutbacks in residential construction and overstretched consumer budgets, are already in place, although business fixed investment and exports are strongly supporting growth. "As usual at times of transition, uncertainty is high and the U.S. economy's landing may prove bumpier than we anticipate," said the Global Insight economists.
BRAZIL
Brazil's Gross Domestic Product (GDP) — the sum of all goods and services produced in the country — increased by 1.4 percent in the first semester of 2006, in comparison to the last quarter in 2005. The positive result was influenced by the growth of industry (1.7 percent), agriculture and livestock (1.1 percent) and of services (0.8 percent). In relation to the first quarter in 2005, the increase was of 3.4 percent.
The information is part of the Report of Quarterly National Accounts released by the Brazilian Institute for Geography and Statistics (IBGE).
CANADA
Canada's economy powered ahead by a stronger-than-expected 3.8 percent on an annualized basis in the first quarter, thanks to a rebound in housing investment and perky consumer spending, Statistics Canada said.
The growth rate, up from 2.5 percent in the fourth quarter of 2005, beat the average forecast of 3.0 percent in a Reuters poll.
"It's certainly stronger than expected, showing pretty good momentum in the economy," said Sal Guatieri, senior economist at BMO Nesbitt Burns. "It raises the risk of the Bank of Canada extending its tightening cycle. But I think a lot will come down to second-quarter numbers."
Statscan said the domestic economy grew 0.9 percent in January-March compared with the previous quarter as the strong investment offset stalling exports. In March, gross domestic product expanded 0.1 percent, down from 0.3 percent in February, the agency said.
Investment in residential structures rebounded in the first quarter after stalling in the fourth quarter. "This 3.4 percent first-quarter increase was the strongest quarterly advance in more than two years," Statscan said.
Economy-wide prices as measured by the implicit price index for GDP, fell 0.7 percent in the quarter due to declining energy prices. The index had risen in at least the previous five quarters.
COLOMBIA
In the first quarter of 2006, retail sales grew 11.49 percent, compared with 2005. This supports official estimates showing a growing GDP of 5.37 percent for the quarter. The retail sector added 8.2 percent to Colombia's GDP. In March 2006, sales of office furniture rose 110.1 percent compared with 2005, while cars and motorcycle sales rose by 54.8 percent.
2.
ASIA
AUSTRALIA
New figures from the Australian Bureau of Statistics (ABS) released on June 5, 2006, showed company gross operating profits rose a seasonally adjusted 0.1 percent in the March quarter and 16.4 percent annually. This was well below economists' expectations of a quarterly rise of 2.5 percent.
"The company profit figures reflect the two-speed nature of economic growth," Westpac senior economist Andrew Hanlan said.
While the mining sector enjoyed continued strength from the commodity-price boom, results in non-mining sectors were less robust as were those of small businesses.
"The risk is that profits remain patchy during 2006," Mr Hanlan said. "While the housing sector and retailing were on the improve early in the year, the interest rate rise of May and the additional jump in petrol prices will crimp spending and delay the housing recovery."
Most economists now expect the slowdown in profits to detract slightly from gross domestic product (GDP) growth in the quarter. "Taking account of a near flat contribution to growth from inventories in the quarter and a slowdown in the growth of wages and salaries, the report’s profit data imply downside risk to our 0.9 percentforecast for GDP growth in the March quarter," Citigroup managing director Paul Brennan said.
"We understand that profits of larger companies were more resilient than the headline data, but even so these data highlight that profit growth has clearly slowed from the double digit pace that previously had underpinned the share market."
The ABS released March quarter GDP numbers on Wednesday, June 7.
CHINA
China's economy will grow by about 10 percent this year, the central bank said, adding that investment is growing too quickly, threatening to stoke inflation.
The central bank's growth forecast is higher than estimates by the International Monetary Fund and the World Bank. China's economy expanded 9.9 percent last year, the most among the world's 20 largest economies.
INDIA
The gross domestic product growth numbers have been very encouraging with the economy growing by 9.3 percent during January to March 2006 — just a percentage point below China’s 10.3 percent. Growth has been broad-based with manufacturing growing by 8.9 percent while agricultural growth was a much-better-than-expected 5.5 percent. The construction industry — together with hotels, trade, transport and communications — logged a growth of over 12 percent. Moreover, there has been an acceleration, with growth in the fourth quarter of 2005-06 being the highest in any quarter during the year. Nor is the improvement because of agriculture alone — manufacturing has got over the deceleration in growth rate seen during the second and third quarters, while the momentum in the services sector too has improved. The laggards have been the mining sector, which grew at a mere 3 percent during January to March, and, to some extent, the power sector. These are vital infrastructure sectors and their relatively tepid performance underlines the importance of carrying forward the reforms process in these areas.
Do the GDP estimates show that the bloodbath in the markets is completely unconnected to the underlying performance of the economy? The numbers undoubtedly prove that the fundamentals of the economy are sound. The sell-off in the market has more to do with worries about liquidity in global markets and the overvaluation of Indian stocks than with any concerns about the Indian economy. That said, if foreign fund flows continue to be negative, then that could have adverse repercussions not only for the market but for the real economy as well. In fact, short-term capital inflows have become rather critical to the Indian economy over the last few years. These inflows have led to lots of liquidity; they have resulted in low interest rates and their beneficial effect on the stock market has also led to a wealth effect and improved business sentiment. The upshot has been a debt-fuelled consumption boom on the one hand and rising corporate profitability on the other.
True, there are other underlying factors, such as outsourcing or capital expenditure, that also provide a solid basis to the current economic boom. At the same time, unlike our east Asian neighbors, we run a current account deficit and our economy is based more on domestic consumption than on exports. Our economy is comparatively more vulnerable to a reversal in liquidity flows. In the circumstances, while the GDP numbers look very rosy at the moment, the government would do well to keep a wary eye on the markets.
JAPAN
A quarterly government survey showed that spending on building factories and upgrading production facilities rose at its fastest pace in nearly one and a half years in the three months to March, 2006, which could result in an upward revision of GDP data for the period, analysts said. However, some analysts warned that while corporate capital spending is enjoying solid growth for now, a slowdown in profit growth, which was also confirmed in today's survey, could jeopardize the future trend of capital investments.
The Ministry of Finance polled 24,444 companies with capital exceeding 10 million yen and received replies from 19,254 firms. The survey found that combined corporate capital spending rose 13.9 percent year-on-year in January-March, up for a 12th straight quarter. The rise was the fastest since July-September 2004 when investments rose 14.4 percent.
Combined capital investments in the past quarter also rose 6.2 percent from the previous three-month period on a seasonally-adjusted basis, reversing a 0.1 percent decline in the final quarter of 2005.
The government uses the results of the quarterly corporate survey to fine-tune the non-residential investment and private sector inventory data used to compute GDP. Non-residential investment is nearly equivalent to corporate capital spending. In its preliminary estimate released last month, the government said the Japanese economy in the three months to March grew 0.5 percent from the previous quarter, or at an annualized rate of 1.9 percent.
Seiji Shiraishi, chief market economist at Daiwa Securities SMBC, expects GDP to be revised up to show quarter-on-quarter growth of 1.0 percent and an annualized rate of 4.0 percent, as a result of the robust capital investment data. 'The stronger-than-expected capital investment will result in a upward revision in real GDP growth to around 1.0 percent because capital investments account for nearly 15 percent of overall GDP,' Shiraishi said.
NLI Research Institute senior economist Taro Saito is looking at quarter-on-quarter GDP growth being amended to around 0.7 percent, with annualized growth of some 2.8-3.0 percent, as local firms beefed up their fixed asset investment. 'However the robust investment seen in the January-March quarter is a result of rapid-paced profits growth in the past, and I would say that corporate capital spending is exposed to the risk of a slowdown ahead in line with an deceleration in corporate profit growth,' Saito cautioned.
The survey showed that the combined current profit of non-financial companies at the parent level in the three months to March increased 4.1 percent year-on-year, registering its consecutive quarter of growth. However the rise was the weakest since the April-June quarter of 2002 when combined current profits fell 16.8 percent from a year earlier.
'A strategic shift to making more value-added and new products, rising procurement costs such as oils, and growing personnel costs are apparently eating into profit margins,' Societe Generale Asset Management economist Akio Yoshino said.
The MoF survey showed that combined personnel costs climbed 2.0 percent in the quarter from a year earlier, up for a seventh consecutive quarter.
As a result of costlier crude oil, overall production cost rose 5.0 percent in the first three months of 2006, although it was slightly slower than the 5.5 percent rise in the previous quarter.
Daiwa Institute of Research senior economist Junichi Makino said he is concerned about a possible slowdown in corporate activity ahead. 'As Japanese companies can no longer absorb the entire negative impact of rising basic materials prices, the corporate profit trend will slow down further going forward,' he said, adding this may also cause the expansion in capital investment to ease.
SG's Yoshino however takes an opposite view on corporate capital investment. 'While the momentum of profit growth is slowing, Japanese companies, which have gone through sweeping structural reforms in recent years, have sufficient financial strength to fund capital investment going forward,' Yoshino said.
'In addition, Japanese firms, in order to compete in the global market, need to continue to spend heavily on new and environmentally-friendly products and this will continue to underpin the growth of capital spending ahead.'
On the implications of the data for monetary policy, economists said it would have little affect, though some thought that with the economic recovery still moving at a modest pace the Bank of Japan may be inclined to persist with its zero interest rate policy for longer than previously thought. 'Recent economic data does not provide strong evidence that the BoJ should hurry in lifting the zero interest rate policy,' said Izuru Kato, chief economist at Totan Research Institute.
MALAYSIA
Malaysia's gross domestic product (GDP) growth target for this year remains at 6 percent, says Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz. "Right now we are still optimistic about the outlook because the external environment still remains favorable," she told reporters. The central bank governor was responding to a question on whether Malaysia was concerned over the weaker-than-expected export figures for April and the impact on the country's GDP growth. Exports in April increased 6.3 percent to RM46.3 billion from last year.
"We don't look at month-to-month movements in figures like exports. The economy is very diversified, so sometimes when one experiences slightly lower growth, there are other parts of the economy that experience better performance," Zeti said.
The country chalked up a 5.3 percent GDP growth for the first quarter of 2006. "We are not revising the outlook at this point at this time. We will wait for further information on what the development will be until the second half of the year," she said.
PAKISTAN
Pakistan's recent economic growth is likely to be sustained in the medium to long term if there are no further internal or external shocks to the economy, a senior government official said Sunday.
Salman Shah, adviser to the Prime Minister on Finance and Economic Affairs, told a news conference that the country's Gross Domestic Product is expected to grow 6.6 percent in the fiscal year that ends June 30.
"This year also the economy has shown a solid growth in spite of major setbacks during the year," Shah said, referring to a devastating October 8 earthquake and high oil prices.
He said the country's economy has grown at an average rate of almost 7 percent per year during the past four years and over 7.5 percent in the past three years, thus enabling it to join the "exclusive club" of the fastest growing economies of the Asian region. This growth is supported by strong gains in services, industry, investment and robust consumer spending, he added.
PHILIPPINES
The Philippines is targeting a 7 percent gross domestic product (GDP) by 2010 for the ordinary people to feel the impact. President Gloria Macapagal-Arroyo said she will give more focus in managing the economy, particularly in the creation of jobs and stability of the peso to sustain the growth.
For the first quarter of 2006, the country's GDP registered a modest 5.5 percent GDP, compared to the 4.2 percent during the same period in 2005. The President said the 5.5 percent GDP is a decent growth compared to other countries. But the Chief Executive stressed the need to attain a 7 percent GDP for ordinary citizens to feel the impact of economic growth.
The President cited the factors that attributed to the recent economic growth. These are the creation of some 200,000 jobs in the call centers, an additional 200,000 jobs created from the different sectors since she assumed presidency, the arrival of some three million tourists this year, and the P1,000 cost -of-living allowance increase for government workers. The President said that though the result of the economic growth cannot be felt immediately, the government is exerting all efforts to utilize the gains from the value-added tax in the field of health, education and infrastructure.
SOUTH KOREA
Growth in the IT and related manufacturing industries stalled in the first quarter of the year, producing the first contraction in the sector in three years, the Bank of Korea said. The gross domestic product (GDP) by the semiconductor, communications, PC, Internet and software industries decreased by 8 billion won from the previous quarter, to remain at around 26.1 trillion won, according to a report from the central bank. It is the first time since the first quarter of 2003 for the GDP to decrease in the IT and related industries, which have been the main engine of the South Korean economy.
The IT sector posted over 5 percent of growth in the third quarter of 2005, and 6.5 percent in the fourth quarter. However, the situation worsened this year as electronics companies suffered a fall in semiconductor prices and sluggish exports of digital appliances. On the other hand, the GDP for the non-IT sectors expanded by 1.3 percent in the first quarter. Accordingly, the portion of the IT sector in the national GDP has decreased from 15.9 percent to 15.7 percent.
The central bank said the situation is not as bad as it looks on paper. ``Though the GDP in the IT sector seems to have decreased compared with the previous quarter, it is still up about 15 percent from the same period of last year,’’ according to an unnamed official of the bank quoted by the Yonhap News Agency. ``The zero growth rate is because of the base effect, since the industry saw significant growth in the second half of last year.’’
The term IT is an acronym of information technology. It usually refers to industries related to computer systems, software, games and the Internet. However, the term is used for a broader category in the Bank of Korea’s statistics, including some electronics manufacturing industries such as semiconductors and mobile phones.
THAILAND
The Thai economy in the first quarter of this year expanded 6 per cent and is projected to grow 4.6 per cent for the whole year, according to the National Economic and Social Development Board (NESDB).
NESDB’s Secretary General Ampon Kitti-ampon said that the country's gross domestic product (GDP) in the first quarter grew 6 percent, up from 3.2 percent from the same quarter of the previous year and 4.7 percent in the fourth quarter of last year.
The impressive growth stemmed from an increase in exports by 14.1 percent in volume, 3.3 percent in prices and 17.9 percent in value, an expansion of the farm sector by 7.1 percent from a contraction of 2.4 percent in the same quarter of last year and a rise in the number of tourists by 21.7 percent. Although the inflation rate in the first quarter rose up to 5.7 percent and fuel prices surged by 40.9 percent, the Thai economy expanded satisfactorily because the GDP in the same quarter of last year grew only 3.2 percent.
He said the investment sector grew slowly at 7.2 percent, compared with 11.3 percent in the same quarter the year before since the investment in the construction sector and machinery declined. Household spending in the first quarter stayed almost unchanged at 4.1 percent when compared with the previous quarter.
Mr. Ampon said NESCB forecast that the Thai economy this year would grow 4.2-4.9 percent under an assumption that the inflation rate stays at 4.5-4.7 percent.
The national think tank projected that the country's current account balance would be in deficit of US$1 billion or 0.5 percent of the GDP, as surging fuel prices would remain a key negative factor to Thailand's economic growth in addition to the global economic slowdown. Thai exports are likely to expand 13-15 percent, missing a growth of 17.5 percent targeted earlier by the government.
To boost the Thai economy in the rest of the year, Mr. Ampon said the government needs to accelerate a disbursement of investment budget on a part of state agencies and state enterprises to ensure 93 percent of the total budget is set aside as targeted. The government must also give an importance to promoting processed farm products for exports such as chickens and shrimps, as well as such economic crops as rice and fruits in place of electronics products which had been affected by the world economic slowdown. As well, it must step up efforts to restore confidence among local and foreign investors, promote tourism, facilitate the Board of Investment of Thailand (BOI)’s investment promotional plans to attract foreign investment and boost an energy conservation drive to reduce oil imports.
3. EUROPE / AFRICA / MIDDLE EAST
BULGARIA
Bulgaria's 2007 draft budget calls for the GDP to increase by 5.8 percent on the year to BGN51 billion (approx. EUR26 billion, US$34 billion) and annual inflation of 3.1 percent, the Prime Minister said. Sergei Stanishev made his remarks after a meeting of the leaders of the three-party ruling coalition that his Socialists lead.
Next year, Bulgaria has to contribute 1.2 percent of its gross domestic product (GDP) to the European Union budget, or about BGN624 million (EUR 318 million; US$412 million), Stanisheva added.
CYPRUS
Cyprus' gross domestic product grew 3.3 percent on the year in the first quarter and 0.4 percent from the fourth quarter of 2005, the Cyprus Statistics Service said, citing initial estimates. The CCS cited the positive performance of financial services, the retail trade sector and electricity production. However, revenue from the key tourism sector fell 9.4 percent on the year and tourist arrivals were 15.1 percent lower. Cypriot GDP averaged 3.8 percent in 2005 compared with a 2005 budget target of 4.1 percent. Cyprus is targeting 2006 GDP growth of around 4 percent.
GERMANY
The German government's 'wise men' panel of independent economic advisors sees GDP growth of 1.5 percent this year, a panel member said in a newspaper interview. 'We currently expect 1-1/2 percent growth,' Beatrice Weder di Mauro, the only female member of the panel, told Die Welt.
In their last annual report issued in autumn 2005, the panel had forecast a growth rate of only 1.0 percent, the paper said. But the estimate remains below that of Germany's six leading economic research institutes, which have predicted a GDP growth rate of 1.8 percent for 2006. 'We rely less on sentiment indicators and don't see yet a strong upswing backed up by hard facts,' Weder di Mauro told the newspaper.
GREECE
The Greek economy advanced in Q1 with the GDP growth rate standing at 4.1 percent from 3.7 percent in Q4:05. On a quarterly basis, GDP growth advanced by 2.8 percent. The 4.1 percent increase of GDP is attributed to the rise of the final demand of economy by 3.9 percent.
In Q1:06, the final consumption spending rose by 3.4 percent as compared to the respective period last year. The increase in this sector contributed by 2.2 percent in the increase of the final demand of economy.
Investments rose by 6.9 percent as compared to the same period in 2005 contributing to the increase of the final economy demand by 1.4 percent.
ISRAEL
Israel's gross domestic product (GDP) grew 6.6 percent in the first quarter of 2006, led by surges in consumer spending and investment in fixed assets, the Central Bureau of Statistics said, citing preliminary estimates in annualized terms. Though the "surprising" figure was the highest in more than five years, surpassing the 5.4 percent growth rate in the fourth quarter of 2005 and 4 percent rate in the third, IBI chief economist Ayelet Nir stressed that it was boosted by one-time occurrences, such as a rush of car purchases in response to tax cuts.
"We had expected a high figure. The Bank of Israel's survey of companies provided indicators of such, as did the combined index [of the state of the economy], which kept on climbing, and retail figures. They all indicated strong growth, but not 6.6 percent," she said. Nonetheless, "the very fact that there is positive growth is certainly good for investments in the economy," she commented.
The economy grew 4.3 percent in 2004 and 5.2 percent in 2005, and is expected to grow 4.2 percent in 2006.
ITALY
Italy's GDP is forecast to rise by nearly 1.5 percent this year thanks to an upturn in exports and investments, said Bank of Italy governor Mario Draghi at the bank's annual general meeting. Last year, Italy's gross GDP growth was flat.
Turning to 2007, Draghi said that in the light of the current underlying trend the government needs to introduce budgetary adjustments totaling about 2.0 percentage points of GDP to achieve its target of deficit of 2.8 percent of GDP. Draghi added that the government's 'absolute priority' has to be boosting GDP growth.
But, economic growth is hindered by the 'excessive' labor taxes and pension costs, while current budget deficits leave little leeway for their reduction, he added. A cut in labor costs could be financed by an increase in taxes on consumption but this would have to be discussed with employers and unions, Draghi said.
Prime Minister Romano Prodi previously said he could achieve selective cuts in the so-called tax wedge — social security and other levies paid by employers -- currently around 33 percent of wages. There has been speculation that the cut in the tax wedge could be offset by an increase in the value-added tax.
KAZAKHSTAN
Political reforms can be carried out based, first of all, on real economic achievements, said Daniyal Akhmetov at the third session of the State Commission, presenting the draft action plan of the government aimed at deepening political reforms in Kazakhstan during 2006.
According to him, GDP growth for 4 months of 2006 has reached 8 percent, and the increase in basic capital investment for 5 months is within 30 percent. GDP per capita by 2008 will reach USD 5,800 and by 2009, USD 6,600.
MALAWI
Malawi's finance minister said economic growth should pass the 8 percent mark this year after good rains raised the prospect of better crop harvests in a country heavily dependent on agriculture. Goodall Gondwe also told Reuters the annual inflation rate was expected to drop to 10.4 percent in 2006 from over 15 percent last year. He made his brief comments ahead of the unveiling of the 2006/07 budget in parliament.
"In 2006, real GDP (Gross Domestic Product) is expected to grow by 8.4 percent on account of the anticipated bumper harvest due to good rains and the successful fertilizer and maize subsidy introduced last year," Gondwe told Reuters.
Growth last year was a sluggish 2.1 percent in the southern African nation of around 12.5 million which is one of the poorest countries in the world. It was hard hit by a scorching drought that left around 5 million in need of food aid. According to the World Bank, agriculture accounts for 45 percent of Malawi's GDP, so any improvement on that score is bound to translate into faster growth.
The annual inflation rate was 16.1 percent in April and is seen falling because of increased supplies of staple foods such as maize. Gondwe said his budget also aims to reduce expenditure to 28.7 percent of GDP in 2006/07 from 32.2 percent in 2005/06.
The budget is seen as key to increasing donor confidence as the country attempts to qualify for badly needed debt relief.
But it faces big political hurdles after threats from the opposition to torpedo it over a number of political disputes with President Bingu wa Mutharika. The opposition has a majority and so there is no guarantee that the budget will be passed.
NIGERIA
THE Central Bank (CBN) released the 2006 first quarter Economic Report which indicated that Gross Domestic Product growth rate fell in the period under review when compared with the annual performance of the previous year. The report showed that total growth rate in both oil and non-oil sectors declined sharply as they stood at 4.8 percent and 2.7 percent, respectively. Last year's growth rate was between 5 and 7 percent.
"Aggregate output in the economy measured by the Gross Domestic Product (GDP) grew by 2.7 percent during the first quarter of 2006. Non-oil GDP grew by 4.8 percent, while oil GDP declined by 2.5 percent," the bank's report, indicated, casting doubts on the 10 per cent growth target of the present administration.
The banking sector, however, recorded some progress as available data indicated a general decline in deposit and lending rates in the first quarter of 2006, reflecting the liquidity ease in the banking system during the period.
NORWAY
Mainland GDP rose 0.6 pct in the first quarter from the fourth quarter, Statistics Norway said.
RUSSIA
Russia's gross domestic product in 2006 will exceed the level it was at when the Soviet Union collapsed for the first time, the economics minister said Wednesday. "In 2006, the Russian economy will for the first time exceed the 1991 indicators in terms of GDP," German Gref said at a government meeting.
He said that the "quality of the economy and its institutions have an entirely different format at present ... We are starting to build a type of economy that we have never had before." Long-term increases in consumer income are indicative of Russia's stable development, Gref said, adding that the country's development was still hampered by flaws inherited from previous decades.
The Economic Development and Trade Ministry said in its forecast of the country's social and economic development for 2006-2009 that GDP would grow 6.1 percent in 2006, 5.7 percent in 2007, 5.6 percent in 2008 and 5.7 percent in 2009.
SPAIN
Spain's GDP grew 0.8 percent in the first quarter from the fourth and was up 3.5 percent from a year earlier, according to provisional data, the National Statistics Institute (INE) said. In the fourth quarter, GDP expanded at an annual rate of 3.5 percent.
SWEDEN
Sweden’s first quarter GDP rose a preliminary calendar adjusted 4.1 percent year-on-year, the Central Statistical Bureau (SCB) reported. Seasonally adjusted, the economy grew by 1.1 percent compared with the fourth quarter of 2005.
Market expectations were for first quarter GDP growth of 3.9 percent year-on-year and 1.3 percent from the fourth quarter, according to a survey by SME Direkt.
SCB said exports and gross fixed capital formation contributed strongly to the GDP growth. Gross fixed capital formation rose 12 percent year-on-year, while exports were up 14 percent and imports up 9.5 percent.
Household spending rose by 2.8 percent in the first quarter compared with a year earlier, while government spending rose 1.1 percent from a year earlier.
UNITED KINGDOM
The industrial sector grew at its fastest rate in over six years during the first three months of 2006, helping the UK economy grow at its long-run average for the second quarter running, official figures showed.
In its first detailed look at the first quarter, the office for National Statistics revealed that UK GDP growth was left unrevised at a quarterly 0.6 percent for a 2.2 percent from a year ago. Both were in line with forecasts. The statistics office said the year-on-year rise was the biggest since the last three months of 2004 while the quarterly rise was in line with the UK's long run average.
In the final quarter of 2005, GDP rose 0.6 percent from the previous quarter for a 1.8 increase. Though there were no changes to the headline figures, the statistics office did revise some of the components of overall GDP growth.
Industrial production, which accounts for around 20 percent of the UK's GDP, was revised up to show a 0.8 percent rise from the fourth quarter of 2005, compared with 0.7 percent previously. That was the biggest quarterly increase since the third quarter of 1999. The upward revision was driven mainly the manufacturing sector, which saw output rise by 0.7 percent. On a year-on-year basis, industrial output fell 0.9 percent while manufacturing rose 1.0 percent.
Meanwhile, the services sector, which accounts for around 73 percent of the UK economy, rose by 0.6 percent from the previous quarter for a 3.0 percent year-on-year gain. The construction sector, which makes up around 6 percent of UK GDP saw output rise by 0.7 percent over the quarter and 1.0 percent from a year ago.
On the expenditure side of the accounts, the statistics office said household expenditure rose by just 0.2 percent during the quarter, a sharp slowdown from a 0.7 percent increase in the previous quarter. NS said the slowdown was due to largely to lower retail sales — mainly in household goods and services as well as clothing and footwear.
Over the year as a whole, household expenditure was 1.7 percent higher, a pick up from 1.5 percent in the previous quarter. Meanwhile, government expenditure rose by 0.6 percent in the latest quarter for a 4.6 percent annual gain, driven by rises in health and central governments spending.
Elsewhere, the statistics office said gross fixed capital formation, a broad measure of business investment, rose by 1.5 percent during the quarter. This represents a pick up from a fall of 0.5 percent during the last quarter of 2005. Business investment, meanwhile, rose by 1.7 percent from the previous quarter and by 2.8 percent year-on-year.
Finally, it said net trade subtracted 0.4 percentage points to GDP after adding 0.3 percent to growth in the previous quarter.
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