Global Economic Data Review for the week ended Friday, 27 May 2011.

Nymex crude traded within a tight range of $ 97 -$100/ barrel for the week. Crude could spike up to $120 if middle east tension moves any higher. Crude oil price rise will harm world economic growth in the near term. Much of the price rise is speculative, hence the negative impact from price rise.

The week witnessed negative economic data from US. The report from the Commerce Department indicated, a bigger than expected drop in durable goods orders by 3.6% in April following an upwardly revised 4.4% increase in March. According to the report, 424,000 Americans filed initial claims for unemployment insurance, an increase of 10,000 from the previous weeks revised figure of 4,14,000.

A separate report released by the US commerce department shows that the pace of US GDP growth in the first quarter came in at 1.8% (annualised) unchanged from last quarter, which also hurt the sentiments.

New home sales rose by 7.3% to an annual rate of 3,23,000 from the revised March rate of 301,000. In addition, a report from the Richmond Federal Reserve indicated that the index of manufacturing activity slipped to -6 in May from a 10 in April, with a negative reading suggesting a contraction in manufacturing activity.

• S&P revised downward its outlook for Italy’s credit rating to negative from stable.
• In addition, Fitch ratings lowered its credit ratings on Greece to B+ from BB+ citing the scale of the country’s challenge in securing solvency.
• In a bold move, not usually shown by S&P or Moodys, China’s sovereign credit rating agency downgraded USA credit rating by one level to express concern about USA’s ability to repay debt due to increasing fiscal deficit.

UK is running with over 10-11% fiscal deficit, more than the average for EU countries.

The economies of India and China continue to hurt under high inflation and high interest rates, slowing down investments needed for sustained growth. The central banks of India and China have made this choice of price control over growth, resulting in all short term capital running away from these markets.