Sydney - Tuesday - December 16: (RWE Aust Business News) - The minutes of the Reserve Bank's December board meeting: International Economic Conditions Board members commenced their discussion of the world economy by noting that national accounts data up to the September quarter and a range of more timely indicators suggested that most of the major industrial economies were now contracting. Conditions had changed abruptly in a very short period. While growth was still positive in the emerging economies, it had been slowing significantly, notably in China. Members noted that the latest IMF forecasts released during November had again reduced the forecast for world economic growth in 2009. The three major economies were now forecast to contract and growth for the world as a whole had been revised down to 2.2 per cent, from 3.9 per cent forecast only a few months earlier. Members discussed the significant measures by several governments to provide a large fiscal stimulus to their economies in the year ahead. Turning to individual economies, recent indicators suggested that economic conditions in the United States had deteriorated further in the past few months. The labour market had continued to weaken. Housing starts were still falling and the current level of starts was well below 1 million. The very low level of activity meant that the stock of unsold houses was being wound back; however, house prices were still falling. Consumer spending in the United States had fallen in real terms in each of the five months to October. Although real disposable income had been boosted by the package of tax rebates in the June quarter, this had had only a small effect in slowing the downward trend in spending. As a result of the economic slowdown and falls in commodity prices, US consumer prices, having reached a peak growth rate of 5.5 per cent on a year-ended basis, were now falling. The core measure of inflation, which excluded the direct effects of higher oil and food prices, was now at 2.2 per cent. In Japan, GDP had fallen slightly in the September quarter, following a fall of almost 1 per cent in the previous quarter. More recent information suggested that activity had since deteriorated, but members observed that lower prices of oil and other commodities would help to cushion the slowdown. Industrial production in China had weakened further. The current year-ended growth rate of 8 per cent was similar to rates that had been typical a number of years ago, but well down from the 15-20 per cent pace seen over the past five years. Declines in production were occurring in some areas, notably steel and electricity. In other parts of east Asia there had been a similar slowing in activity, compounded by weaker external demand. No growth in aggregate output had been recorded in the third quarter, and year-ended growth had fallen to 3.5 per cent, which was down from over 6 per cent in the second half of 2007. Economic growth in the euro area had been negative in both the second and third quarters. Sentiment indicators for consumers and businesses were still falling, to be at their lowest levels since the early 1990s.
