Estimates of US GDP growth for 2014's fourth quarter have been rising in recent months, but the current outlook still anticipates a substantial slowdown from Q3's strong advance. The economy is projected to increase 3.6% in Q4 (real seasonally adjusted rate), based on The Capital Spectator's new median point forecast for several econometric estimates. That's a solid rate of growth, but the latest outlook still represents a substantially lesser pace vs. the 5.0% increase previously reported for Q3.

The official Q4 GDP report from Washington is scheduled for release Friday (Jan. 30). In comparison with the consensus view, The Capital Spectator's median 3.6% estimate for the fourth quarter is modestly higher than the crowd's outlook. Econoday.com, for instance, advises that fourth quarter GDP is expected to increase 3.2%, based on a recent survey of economists. Meanwhile, The Wall Street Journal's latest poll anticipates 3.0% growth in Friday's "advance" GDP report from the Bureau of Economic Analysis (BEA). The one common feature that unites most estimates in recent history is the upward bias of late in the revisions. For instance, The Capital Spectator's updated 3.6% forecast for Q4 is notably higher vs. last month's 3.0% projection.

CANADA

Canada’s gross domestic product contracted in November as manufacturing dropped the most since January 2009 and on declines in mining and oil and gas extraction.

Output shrank by 0.2%, the most in 11 months, to an annualized $1.65 trillion, according to Statistics Canada. The median forecast in a Bloomberg economist survey was for output to be little changed.

Manufacturing declined by 1.9% in November, with losses ranging from machinery and equipment to plastics and rubber.

Meanwhile, U.S. economy slowed sharply in the fourth quarter — but consumer spending grew at fastest pace since 2006.

The Canadian dollar hit fresh, multi-year lows after the data was released.

The loonie fell 0.69 of a cent to 78.61 cents US, its lowest level since the mid of March 2009, as gross domestic product in November declined 0.2%, worse than the flat showing that economists had expected.

The Canadian dollar has had another tough week, down almost two cents amid sliding prices for oil, copper and gold and increasing speculation that the Bank of Canada will follow up last week’s surprise quarter-point reduction with another cut in the near future.

The currency has lost about 7 1/2 cents this month.

Canada’s central bank made a surprise interest-rate cut last week saying slumping crude oil prices would slow economic growth in the first half of this year to 1.5%. Business investment and consumer confidence have dropped in the Group of Seven’s largest oil exporter as crude prices plummet toward $40 a barrel from more than $100 last year.

“Any kind of growth paths by developing out new properties and new production would be a challenge right now,” Leonard Van Betuw, chief executive officer of Calgary-based Quattro Exploration and Production Ltd., said in a phone interview before Friday’s report.

Oil and gas investment will probably drop by about 30% this year and be little changed in 2016, according to the Bank of Canada. Growth in Canadian energy exports will slow to 1% from 6% in 2014, and “many projects” in Canada are now unprofitable, the bank said.

Mining and quarrying fell by 2.5%, and oil and gas extraction declined by 0.7%, Statistics Canada said.

ASIA

CHINA

China's 2015 GDP growth forecast has been maintained at 6.8 percent, as further policy support and export recovery is expected to help bolster the sluggish economy, according to UBS.

"December and Q4's better than expected data will unlikely trigger any immediate significant new easing measures for now, but the first rate cut may happen (around) March or April, when even lower CPI (consumer price index) and PPI (producer price index) are reported," said Wang Tao, chief China economist with UBS, said in a research note.

Wang added that policy support will intensify in 2015 with accelerated pro-growth measures in areas such as price, social safety net and hukou (household registration) reform, and more infrastructure projects.

Further monetary easing via liquidity provisions, including required reserve ratio cuts, is expected to offset slower foreign exchange reserve accumulation and benchmark rate cuts of at least 50 basis points are also expected to prevent real rates from rising, according to UBS.

UBS forecast Q1 2015 gross domestic product (GDP) growth would weaken further sequentially, weighed down by the ongoing weakness of property construction and infrastructure related funding issues.

The economy is expected to pick up in Q2 as funding issues are resolved and policy uncertainties are reduced when the National People's Congress (NPC) meets in March to release key polices related to the issue.

China's economy is likely to stop falling and begin to stabilize with a predicted 7.2% GDP growth in 2015, according to latest forecast report released by the Chinese Academy of Sciences.

The report, the 2015 China Economic Forecast and Outlook, was published by the Center for Forecasting Science under the Chinese Academy of Sciences. The annual report focuses on China's major economic indicators.

According to the report, steady economic growth in 2015 is to be expected, though the GDP growth rate is still predicted to drop by 0.2 percentage points from that of 2014.

China's GDP growth rate has been on continuous decline since 2010, and had dropped to 7.4% in 2014, reaching the lowest record in 24 years, according to the National Bureau of Statistics.

"China is going through an economic transformation period from 2011 to 2015, with the pace of growth adjusting from high-speed to medium-to-high-speed. However, with a series of important reform measures adopted by the government, such as expanding free trade zones and the ‘One Belt and One Road' initiative, the economy this year is likely to run smoothly," said Chen Xikang, an operational research expert who took part in writing the forecast.

The "One Belt and One Road" plan, refers to the Silk Road Economic Belt and the Maritime Silk Road of the 21st Century, was an initiative put forward by President Xi Jinping in 2013 to promote trade and communications in the region.

In 2014, bilateral trade volume between China and countries in the region enjoyed a 7% yearly increase.

"The economic growth rate is unlikely to drop below 6% in the coming one and a half decades," Chen said.

Chen predicts that the average annual GDP growth rate will hover between 6% to 8% till the year 2030, and then further decrease to 4% to 6% over the next 20 years, if not influenced by profound changes in external demand or government intervention.

Zhu Baoliang, director and chief economist of the Economic Forecast Department under the State Information Center, another forecasting research institute, is less optimistic for the year 2015.

"Although I basically agree with the forecasting logic of the Chinese Academy of Sciences, my research results show that this year's GDP growth rate is at best 7%," he said.

"China's excess capacity problem could not just be cyclical. Instead, it is a structural problem. The growth rate will see no improvement until most existing capacity is put to productive use," he said.

Niu Wenyuan, an expert on sustainable development as well as a consultant for the State Council, said that the focus of government should change from GDP growth rate to the quality of GDP.

"The GDP growth rate is going down as China readjusts economic structure, but we can hedge the declining pressure by increasing the quality of GDP," Niu said. "If the growth implies more responsibilities in redistribution and social assistances, it will help us avoid the middle-income trap."

Niu and his team developed a system to evaluate China's GDP quality from its contribution to economic efficiency, social benefit, environment protection, improvement on people's livelihood and sustainability of public management.

The quality report, which was published recently in Beijing, showed that China's GDP quality had increased by 46.5% from 1993 to 2013.

"The GDP quality of China had seen a faster increase since 2013, and I am expecting it to increase by 24.2% to 33.8% till the year 2020," Niu said.

INDIA

India revised up its economic growth to 6.9% from 4.7% in the fiscal year to March 2014 after the government changed the formula to measure the economy, a move that will make it easier for the government to meet fiscal deficit goals.

The new measurement of gross domestic product (GDP) includes under-represented and informal economic sectors as well as items such as smart phones and LED television sets.

The government also revised its GDP for 2012/13 to 5.1% from 4.5% earlier.

New Delhi revises the method of calculating national accounts and other macro data every five years, bringing in a newer base year and adjusting for changes in the economy.

It will now use 2011/12 as the new base year, instead of 2004/05.

JAPAN

Inflation is slowing due to falling oil prices, but Japan is likely to avoid deflation as rising unit labor costs suggest the GDP deflator will rise, private-sector members of the Council of Economic and Fiscal Policy (CEFP) said in a statement recently.

The proposal suggests that Prime Minister Shinzo Abe's government may be relaxed about the recent collapse in oil prices and is unlikely to urge the Bank of Japan to ease policy further to meet its inflation target.

Most of the private-sector advisers on the CEFP are academics and their proposals often form the basis for the government's formal position on policy and the economy.

The GDP deflator, which is used to adjust GDP for changes in prices, is an important indicator because it also reflects wages and corporate profits, the proposal said.

The GDP deflator has been rising since last year, excluding the impact of a sales tax increase in April, which shows good progress in pulling away from 15 years of nagging deflation, the proposal said.

The BOJ is buying government debt and risk assets with the aim of driving inflation to 2% sometime around the next fiscal year starting in April.

The BOJ expanded its debt purchases in October as oil prices fell. However, officials in the government and the BOJ have turned more cautious about easing policy again as this could cause the yen to fall too quickly.

Central bank officials also expect the economy and prices to pick up once companies and households reap the benefits of cheaper oil prices.

PHILIPPINES

Growth in the Philippines sailed past expectations in the final three months of 2014, accelerating to its fastest pace in five quarters.

The economy grew at an annual pace of 6.9% in the fourth quarter, rebounding from a 5.3% pace in the prior three months. The disappointing third quarter marked the slowest reading since late 2011, on account of declines in infrastructure spending and a decline in agricultural production.

The slowdown was expected to be temporary, but economists had only forecast a 6% pace of growth.

For the year, GDP expanded by 6.1%, down from 7.2% in 2013.

Ahead of the figures, analysts at Moody's Analytics said:

“Business sentiment and investment remain buoyant and should make a solid contribution to growth. Consumer demand accounts for 70% of GDP and will continue to grow at around 5% y/y.”

TAIWAN

Taiwan’s economic growth slowed more than forecast last quarter as a food scandal weighed on demand.

Gross domestic product rose 3.17% from a year earlier in the three months through December, according to preliminary data the statistics bureau released in Taipei. While that missed the 3.25% median estimate in a Bloomberg survey of analysts and declined from 3.63% in the prior quarter, the seasonally adjusted quarterly rate rose to 1.17%, the fastest pace in a year.

Scandals over the use of tainted oil in food weighed on consumption last quarter, while mineral and plastic product shipments shrank as cheaper oil curbed demand. Still, economists are pointing to prospects for faster export growth driven by the electronics industry and a boost to consumer spending in the oil-importing economy from the plunge in crude.

“Any recovery in exports should feed through into strong investment growth,” Gareth Leather, an economist at Capital Economics Ltd. in London, wrote in a note after the release. “Falling oil prices should boost households’ real incomes.”

Taiwan’s exports, which account for about three-quarters of its economy, are mostly driven by an electronics industry that produces parts for brands including Apple Inc. While growth in China, its biggest market, has slowed to the least since 1990, demand from the U.S., its second-biggest one, is picking up.

Brent crude prices have slid 55% over the past year, helping to push down December’s inflation to a 10-month low. Economic growth of 3.51% last year, the statistics bureau said, was the fastest since 2011.

Taiwan began compiling GDP using the United Nations’ System of National Accounts in the third quarter. The system re-classifies research and development expenditures as fixed investments, and uses the chain method to derive real GDP.

EUROPE / AFRICA / MIDDLE EAST

AUSTRIA

The Austrian economy is expected to grow 1.25% on average between 2015 and 2019, the country's main economic forecaster said Wednesday in its five-year outlook.

The Austrian Institute for Economic Research, known by its German acronym WIFO, confirmed its December projections that the Alpine country's gross domestic product would grow 0.4% in 2014 and 0.5% in 2015. Starting in 2016, however, it expects the economy to pick up and grow 1.1%, followed by 1.4% in 2017, 1.6% in 2018 and 1.8% in 2019.

GERMANY

Media reports have claimed the German government has revised its 2015 growth outlook for the national economy in 2015. It said GDP would grow by 1.5 percent this year, up from a previous and more cautious estimate.

According to reports by Reuters and AFP news agencies, the German government sees GDP growth come in at 1.5% this year, up from an earlier estimate of just 1.3% for the whole of 2015.

The figures are part of the government's 2015 Economic Outlook to be presented by Economy Minister Sigmar Gabriel during an official news conference in Berlin.

The draft document says the improved outlook is mainly down to continuously low oil prices and the most recent labor market data.

The German economy is "in good shape," the report says, with more people than ever having a job and the unemployment rate expected to drop further to 6.6% in 2015, down from 6.7% last year. This would leave 2.9 million people out of work in the country in the course of the year.

Berlin says it also predicts a 3.6% rise in exports this year due to the weak euro against the greenback, but warns that the foreign trade environment remains difficult in light of geopolitical tensions over Ukraine and continuously slow growth in fellow eurozone nations.

In its report, the German government pledges to support bigger leeway for more private investments in the country's infrastructure. It adds that more taxpayers' money will go into education, also with a view to getting more skilled workers for the economy.

SPAIN

Spanish GDP grew 2% in the year to Q4 2014, up 0.7% quarter on quarter.

By anyone else's standards that might seem a little on the modest side. But in the eurozone's current circumstances, that's excellent growth. Spain is the star performer of the big four euro economies.

Spain's growth rate now outstrips that of not only Germany, but the UK, where recovery has been much more obvious.

Spain's growth is a contested issue: To critics of eurozone austerity policies, it's a dead cat bounce: A small recovery after a much deeper recession isn't anything to cheer about. Unemployment is above 23%, a Greece-like number. Spanish house prices fell by about a third after the financial crisis, leaving a huge chunk of the country with heavy mortgage debt and little to show for it.

But the country is the star pupil for fans of structural reform. It made significant labor-market reforms in 2012 to try to trim down its rigid employment laws, so it is touted as proof that hard (and painful) changes to inflexible economic systems pay dividends.

On the other hand, figures just out confirmed that Spanish prices fell 1.5% in December, making it one of the countries in Europe most affected by deflation. Retail sales are rising at the fastest pace in 11 years, and some of that boom in consumption might just be down to falling prices.

Here's Jonathan Loynes at Capital Economics on the figures:

The figures confirmed that Spain was one of the fastest growing eurozone economies last year and, with the exception of Ireland, ahead of the other “peripheral” economies. Portugal and Greece probably grew by around 1% in 2014 and Italy may have contracted.

Despite that stronger growth, Spain remains one of the weakest economies in terms of the levels of activity. GDP is still almost 6% below its 2008 peak, pointing to the existence of a very large amount of spare capacity in the economy.

UNITED KINGDOM

Britain’s economic recovery slowed in the fourth quarter of 2014, but annual growth was the fastest since the financial crisis of 2007.

With 100 days until the general election, evidence of a slowdown and continued reliance on consumer spending to drive the recovery will come as blow to George Osborne. But the chancellor seized on news that, at 2.6% in 2014, the UK’s growth was the “fastest of any major economy”. That also marked the strongest growth since 2007.

Official figures showed that in the final three months of 2014, however, GDP growth slowed to a quarterly rate of 0.5%. That was slower than third-quarter growth of 0.7%, and disappointed City analysts, who forecast 0.6%.

Analysis Economy slows down as election nears – not what George Osborne wanted

Reasons to be cheerful for UK GDP in 2015 depend on extraordinary factors such as a plunging oil price and rock bottom interest rates and inflation

Economists said a sharp fall in oil prices should continue to boost household budgets and overall growth this year. But they also highlighted risks from uncertainty around the election in May and renewed troubles in the eurozone, particularly after the anti-austerity party Syriza was voted into government in Greece this week.

Chris Williamson, economist at Markit, which publishes surveys on the UK and other economies, listed several challenges ahead.

“The eurozone is potentially entering a new phase of political uncertainty arising from the anti-austerity Syriza party victory in Greece. The upcoming general election in the UK also poses a threat to stability in the event of an inconclusive outcome. There’s also the possibility of financial market stress if the US starts to hike interest rates later this year, and geopolitical risks such as the escalation of the Russian-Ukraine crisis likewise pose a threat to global stability.”

The Office for National Statistics chief economist Joe Grice said it was “too early to say” if the slowdown evident in the fourth quarter would persist.

The slowest quarterly growth for a year knocked the pound, which weakened against the dollar and against the euro.

Growth in the fourth quarter was reliant on the UK’s dominant services sector, where output grew by 0.8%. In a blow to Osborne’s ambitions to rebalance the economy away from a heavy reliance on consumer spending, construction output shrank by 1.8% and manufacturing fell by 0.1%.

Grice said: “The dominant services sector remains buoyant while the contraction has taken place in industries like construction, mining and energy supply, which can be erratic.”

James Knightley of Global Economics said that although this was the eighth consecutive quarterly expansion, the loss of momentum during the quarter was “disappointing” and that the long-heralded rebalancing story in the UK “has completely stalled”.

The figures showed only the UK’s dominant services sector is back to its pre-crisis strength.

The manufacturers’ organization, EEF, expressed concern about the recent slowdown in some sectors,

“The UK has an enviable performance compared with most other developed economies, but there was some notable weakening, not least in parts of manufacturing, through the second half of 2014,” said Lee Hopley, chief economist at EEF.

“With UK manufacturers entering 2015 in a more cautious mood, given some of the risks in the global outlook, the next 100 days of election campaigning need to shed more light and certainty on the priorities for business growth, investment and job creation.”

Opposition parties also focused on those areas of the economy that struggled in the final months of 2014.

Labor’s shadow chancellor, Ed Balls said: “Construction is down again, business investment under this government is lagging behind our competitors and exports are way off target.”

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