Securities and exchange board of india

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The United Kingdom:

    1. As per the "preliminary" estimate of real GDP, release by the Office for National Statistics, U.K., the real GDP during third quarter of 2014 increased by 0.7 per cent (Q-o-Q) against 0.9 per cent in previous quarter. Compared to third quarter of 2013, the real GDP grew by 3.0 per cent (Y-o-Y) during Q3 2014. During the third quarter of 2014, output increased by 0.7 per cent in services, 0.8 per cent in construction, 0.5 per cent in production and by 0.3 per cent in agriculture sector. During October 2014, growth of output in manufacturing sector in U.K. picked up and the Markit UK Manufacturing PMI grew to 53.2 from 51.5 in previous month. On the contrary, growth in service sector slowed down during the month, with UK Services PMI pointing at 56.2 as compared to 58.7 in previous month.

    1. As regards the price situation, annual CPI inflation grew to 1.3 per cent in October 2014 from 1.2 per cent in previous month. The growth in annual inflation rate during the month was mainly due to lesser decline in prices of transportation, fuels and air fares etc., as compared to a year ago. The Bank of England’s Monetary Policy Committee at its meeting on November 06, 2014, maintained the official Bank Rate paid on commercial bank reserves unchanged at 0.5 per cent and decided to continue the stock of asset purchases, financed by the issuance of central bank reserves at £375 billion. The unemployment rate of the economically active population for period July 2014 to September 2014 stood at 6.0 per cent, unchanged from the period June 2014 to August 2014.

    1. Observations: United Kingdom economy expanded for seventh consecutive quarter ending September 2014. However, the overall growth rate eased down during the period due to slower growth in services sector, which drives the overall economic growth in UK. Besides, slowdown in Euro Area - the major trading partner of U.K. may pose a threat to economic recovery in U.K. in the next quarter.


    1. According to the "first" preliminary estimate of GDP, released by the Cabinet Office of Japan, the real GDP of Japan contracted by 1.6 per cent in annualised terms during the third quarter of 2014, compared to a decline of 7.3 per cent in second quarter of 2014. The world's third largest economy contracted by 0.4 per cent (Q-o-Q) during Q3 2014, against a contraction of 1.9 per cent in previous quarter. Compared to the third quarter of 2013, real GDP fell by 1.2 per cent (Y-o-Y) in Q3 2014, against a decline of 0.2 per cent in Q2 2014. Continued downfall in private consumption (-1.6 per cent) and private residential investment (-0.4 per cent) during the third quarter led the contraction in real GDP during the third quarter of 2014.

    1. During October 2014, output in manufacturing sector grew to seven-month high. Seasonally adjusted Markit Japan Manufacturing PMI grew to 52.4 in October 2014, against 51.7 in previous month, indicating expansion in business activity (PMI above 50 mark indicates an expansion in business activity). On the contrary, service sector witnessed strong downturn in business activity during October 2014, with Markit Japanese Services PMI pointing at 48.7 in October 2014 from 52.5 in previous month.

    1. According to the estimates by Statistics Bureau and the Director-General for Policy Planning of Japan, the annual CPI inflation decreased further to 3.2 per cent in September 2014 from 3.3 per cent in previous month. The consumer price index for Japan grew by 0.2 per cent (M-o-M) during September 2014. During the month, annual food inflation grew by 5.1 per cent. In its Monetary Policy meeting held on October 31, 2014, Bank of Japan accelerated the pace of increase in monetary policy and decided to conduct money market operations so that the monetary base will increase at an annual pace of about around 80 trillion yen (earlier 60-70 trillion yen). The unemployment rate in Japan increased to 3.6 per cent in September 2014 from 3.5 per cent in previous month.

    1. Observations: Raising sales tax since April 2014, weighted heavily on economic growth in Japan. The tax plan intended to reduce the government debt, led the steep decline in consumer spending during the second and the third quarter of 2014 and pushed the Japan into the technical recession. With a view to increase the money supply and revive the contracting economy, Japanese central bank scaled up its monetary stimulus package at the end of October 2014.

The Euro Area:

    1. As per the "flash" estimate by the Eurostat, the statistical office of the European Union, the real GDP grew by 0.2 per cent in Euro Area (EA18) and by 0.3 per cent (Q-o-Q) in EU28 during the third quarter of 2014. During the second quarter of 2014, the real GDP (Q-o-Q) grew by 0.1 per cent in Euro Area (EA18) and by 0.2 per cent in EU28. Compared with the same quarter of the previous year, seasonally adjusted real GDP grew by 0.8 per cent (Y-o-Y) in the Euro Area and increased by 1.3 per cent (Y-o-Y) in EU28 in the third quarter of 2014. The (Year-on-Year) GDP growth in Q2 2014, for Euro area and EU28 were 0.8 per cent and 1.3 per cent, respectively. During the third quarter of 2014, growth in real GDP was recorded in Germany (0.1 per cent), France (0.3 per cent) and Spain (0.5 per cent); while Italy continued to witnessed contraction (-0.1 per cent Q-o-Q) for the second consecutive quarter.

    1. Growth in Euro Area manufacturing sector marginally picked up during October 2014. Markit Euro Area Manufacturing PMI grew to 50.6 in October 2014, against 50.3 in previous month. Among major Euro Area economies, Ireland, Netherland, Spain, Germany, recorded growth in manufacturing business, while Italy, Greece, France and Austria recorded contraction. On the other hand, Eurozone service sector business activity marginally slowed down during October 2014.

    1. As per the estimate released by Eurostat, annual inflation in Euro Area and European Union increased (both by 0.1 percentage point) to 0.4 per cent and 0.5 per cent respectively in October 2014. During the month, negative annual inflation were reported in Greece (-1.8 per cent), Bulgaria (-1.5 per cent), Hungary and Poland (both -0.3 per cent) and Spain (-0.2 per cent). The highest annual inflation rates were recorded in Romania (1.8 per cent), Austria (1.4 per cent) and Finland (1.2 per cent). Compared with September 2014, annual inflation fell in eight member countries, remained stable in three and rose in sixteen member countries of EU28.

    1. During September 2014, unemployment rate in Euro Area and EU28 remained unchanged at 11.5 per cent and 10.1 per cent respectively. The highest unemployment rate was recorded in Greece (26.4 per cent in July 2014) and Spain (24.0 per cent in September 2014). The European Central Bank (ECB) in its meeting on November 06, 2014, decided that the interest rate on the main refinancing operations, the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.05 per cent, 0.30 per cent and -0.20 per cent respectively.

    2. Observations: Economic growth in Euro Area showed sign of slight improvement in the third quarter of 2014, as its largest economy - Germany, marginally escaped from the technical recession. France, which witnessed stagnation in Q2 2014, also registered pick-up in economic growth in quarter ending September 2014. However, the GDP growth data from Italy remained disappointing, showing Italy fell back into the recession. With lacklustre consumer demand, external trade, domestic spending and investments, Euro Area is still struggling to revive strong economic growth.
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