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                      DECPG Daily
        Economics and Financial Market Commentary
                    November 8, 2010
  Mick Riordan (x31289), Cristina Savescu (x80812), Nadia Islam Spivak (x80504)
    Eung Ju Kim (x85804), Shane Streifel (x33867), Annette De Kleine (x34710)
  You’ll find recent issues of this Daily and lots of other current analysis and high-frequency data at our
              intranet website: http://gem or for external users http://www.worldbank.org/gem.

Credit-default swaps on Ireland surge to record. Credit-default swap (CDS)
contracts on Ireland and its banks widened to record highs on Monday as investors
worried about the cost of the bank bailouts. Sovereign CDS spreads on Irish
government bonds increased 28 basis points (bps) to a record 606 bps, while contracts
on Allied Irish Banks and Bank of Ireland Plc rose by 43.5 bps and 37.5 bps,
respectively. Moreover, the risk premium investors demand to hold Irish 10-year
government bonds over comparable German benchmark debt rose 10 bps to 531 bps,
near the record 534 bps reached at the end of last week.

German industrial production hits a speed bump in September. Industrial output fell
0.8% (m/m) in September, after posting a 1.5% (m/m) increase in production for August
[see Chart at http://gem or http://www.worldbank.org/gem]. Output of manufactured
goods was down 0.6%, with increased energy output (1.2%) and construction activity
(0.4%) supporting the overall production index for the month. While demand for German
manufactured goods is expected to remain positive for the remainder of the year, the
dynamic growth seen in the first half of this year is not likely to be sustained. Increasing
fiscal tightening by European governments taken along with a strong euro and
weakening world trade growth are slowing demand for German manufactured goods.
Indeed, momentum growth in industrial output (3m/3m seasonally adjusted annualized
rates) cooled to 6.5% in September after averaging 20% in the previous four months.
Factory orders for September fell 4% (m/m) in last week’s report from the Economy
Ministry, led by a slump in European demand for investment goods, pointing to slower
demand for German industrial goods over the next few months.

Among emerging markets…In Central and Eastern Europe and the CIS, Romania's
adjusted industrial production rose 1% (m/m) in September on the back of a sharp 6.8%
increase in the output of capital goods. The production of consumer goods fell 0.1%
over the same period.

Turkey's industrial output fell a modest 0.4% (m/m) in September on a seasonally
adjusted basis, due to a decrease in energy output. Manufacturing output rose 0.2%
over the month, while year-over-year industrial output was up 10.4% from last
September.

Recent issues and other current analysis are also available on the Prospects blog.
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The Daily Brief is a summary of economic news items for Bank staff whose responsibilities require that
they stay abreast of changes in global markets. The views expressed here are those of the various
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authors and do not necessarily reflect those of the World Bank Group's Executive Directors or the
countries they represent. The content is subject to copyright and is not for quotation outside of the World
Bank. The Prospects Group of the World Bank is pleased to share this content with GEM subscribers,
under the terms and conditions of use agreed upon login (at www.worldbank.org/gem) to the extranet
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