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                      DECPG Daily
        Economics and Financial Market Commentary
                      July 24, 2009
 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.


U.S. sentiment surprises to the downside The Michigan/Reuters Consumer
Sentiment Index shifted down in July, the first decline in some five months. Survey
readings dropped sharply to an index level of 66 for July from a ten-month peak of 70.8
in June [see Daily Chart at http://gem or http://www.worldbank.org/gem]]. Increasing
unemployment, which registered 9.5% of the labor force in June, appears to be the key
element souring household expectations. This reading coincides with that of the
Conference Board published this week, and highlights the importance of continued
(albeit more moderate) job losses and negative effects on incomes and spending.
Falloff in Euro-Area manufacturing eases. Contraction in the factory sector in Europe
eased further in July as measured by Markit Purchasing Managers Index (PMI), which
increased fairly sharply to 46 this month from 42.6 in June. Germany’s PMI index
jumped four points to 48.9, surprising markets to the upside, and nearing positive
activity rates after a full year of contraction. When combined with a pickup in German
export orders, there appears to be increasing hopes for a broader revival in trade and
output in coming months.

Among emerging markets...In East Asia and the Pacific, Korea’s GDP advanced 2.3%
in the second quarter (q/q) (a sharp 9.5% on an annualized basis), marking the fastest
expansion in almost six years. A weaker currency and worldwide stimulus measures of
some $2.2 trillion helped to boost demand for Korean goods, with Samsung, Hyundai
Motors and LG Electronics all reporting a surge in second quarter profits. Exports
increased 14.7% (m/m) the strongest growth in almost six years. Activity in East Asia
appears to be perking higher and likely to lead the path to global recovery in the second
half of 2009.
In Latin America and the Caribbean, Brazil’s consumer prices rose 0.22% in the month
through mid-July, after having increased 0.37% a month earlier. Prices were expected
to rise by 0.37% according to the median forecast of 31 economists surveyed by
Bloomberg.
In Central and Eastern Europe, Serbia’s Finance Minister Diana Dragutinovic expects
the economy to contract by more than initially thought, as sharper decline in demand
from key markets takes a toll on manufacturing. The FM expects contraction in GDP of
between 3% and 4% in 2009. GDP fell 3.5% in the first quarter, the first decline in seven
years.


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In Sub-Saharan Africa, De Beers’ diamond sales plunged 57% in the first half of the
year to $1.4 billion (y/y), the largest drop in sales of unpolished and uncut gems since
1974, as demand for diamonds was hurt by global recession. It is expected that
production will fall by half in 2009 relative to the 48.1 million carats mined in 2008..




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The Daily Brief is a summary of economic news items for Bank staff whose responsibilities require that
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