Highlights

Second - quarter GDP growth slows in U. S. and Japan… surges in Euro Zone growth at seasonally - adjusted annualized rates Source : National Agencies through Datastream.

Domestic demand growth was robust in the United States and Europe in Q 2-10 domestic demand, growth at seasonally adjusted annualized rates Source : World Bank, DEC Prospects Group.

OECD Developments

Second - quarter GDP growth slows in U. S. and Japan… surges in Euro Zone growth at seasonally - adjusted annualized rates Source : National Agencies through Datastream.

Domestic demand growth Foreign contribution to GDP Domestic demand in U. S. and Europe… offset and amplified by external trade growth at seasonally - adjusted annualized rates contributions to growth a annualized rates Source : World Bank, DEC Prospects Group.

Second - quarter surge in trade unlikely to be sustained U. S real imports of goods and services ; German real exports of goods and services Source : Thomson / Datastream and DEC Prospects Group

U. S. retail up monthly in July & August but momentum has faded as savings rise retail ex autos and real - PCE, ch % ( saar ) [ L ]; personal saving rate (%) right Source : U. S. Department of Commerce.

U. S. factory output easing with I / S in better balance and orders down manufacturing production, ch % ( saar ) [ Left ]; capital goods orders, ch % ( saar ) [ Right ] Source : Thomson / Datastream and DECPG calculations. Mfgr production [ left scale ]

U. S. employment growth stagnant while hourly earnings drop to 1.7% growth ( y / y ) change in non - farm employment (‘000), [ Left ]; hourly earnings ( ch %, year / year ) Source : U. S. Department of Labor. Hourly earnings, [ right scale ] Change in employment [ left scale ]

Japan ’ s 2 nd quarter growth falters on weaker net exports and consumer spending Source : Japan Cabinet Office, MITI. growth of real GDP, and contributions to growth in percentage points

Japan ’ s export volumes fall to negative ground on weaker Asian demand and stronger yen goods export volumes, ch % ( saar ) [ Left ]; yen per U. S. dollar [ right ] Export volumes [ left scale ] Yen per U. S. dollar [ right scale ] Source : Thomson / Datastream and DECPG calculations.

Euro zone growth mixed across countries GDP growth

Investor expectations of future economic conditions on downward path in Germany Source : World Bank, DEC Prospects Group

Planned budget cuts in Europe (% GDP ) in Source : CESIFO

U. S. LIBOR easing on expectations of continued loose policy on part of the Fed EURIBOR 6 M USD LIBOR 6 M Source : Thomson / Datastream.

Industrial Production

Industrial growth momentum slows down across regions (3 mm, saar )

In contrast with other economies, industrial production firms up in the US (3 mm, saar )

Global PMI for manufacturing output continues downslide

International Trade

World trade growth has recovered to pre - crisis levels

US and Japan import demand gaining momentum

An unabated accumulation of trade distorting measures Source : National Agencies through Datastream.

Commondity Prices

Daily oil prices

OPEC production and spare capacity

OECD oil stocks

Agriculture Prices

Nickel price and LME stocks

World Copper Consumption

International Finance

Capital flows to emerging markets slowed in August Source : DECPG

Bank lending has failed to recover to pre - crisis levels

Source : Bloomberg and DECPG staff calculations. Sovereign debt of some European countries is under pressure again

Market Focus : EM Valuation

Equity Performance (Rebased) Source : MSCI

Relative equity valuation EM vs DM Source : Bloomberg, MSCI, CCS Calculations

Currencies and Inflation

yen / USDUSD / Euro ( inverse ) Euro picks up modestly…. Japan weakens yen at 15- year high vs USD USD per Euro ( inverse ) [ Left ] and Yen per USD [ right ] Source : Thomson / Datastream and DECPG calculations.

Mixed developments in real effective exchange rates real effective exchange rates, indexes, January 2009 = 100 Source : IMF and DEC Prospects Group.

Headline CPI inflation broadly easing save for India and China ” Headline ” consumer price indexes, ch % ( year - on - year ) Source : IMF and DEC Prospects Group.

Focus : Developments in international grain markets

Announcement of the export ban by Russia (August 5) Weather-related problems began unfolding

Wheat Global Balance Source : US Department of Agriculture ( September 10, 2010 update ). Note : The years refer to marketing years ( June - May ), i. e., 2011 corresponds to June May The 2010 and 2011 figures are estimates and projections, respectively.

Energy and Fertilizer Nominal Price Indices, 2000=100

Countries with the highest dependency on wheat imports relative to their GDP 50 Source : DECPG estimates

Price changes of key staples : April 08 - July 10 Source : Food Price Watch, September 2010, PREM

Calories derived from wheat as a share of total calorie intake Source : FAO

Wheat dependence on selected AFR countries Source : WFP and DECPG staff calculations