Global Economy –Return of Growth? · 2018. 3. 2. · Annual GDP Growth in Emerging Markets Has...

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Global Economy – Return of Growth?Strength still brittle

Lasse SinikallasDirector, Macroeconomics

European Conference March 2018

Agenda

1. Global Snapshot – Global Growth

2. Europe – Growing with Challenges

3. North America – Growth and Stimulus

4. China – Transition Continues

2© Copyright 2018 RISI, Inc. | Proprietary Information

Source: IMF, RISI

2.6%1.6%2.3%3.0%2.7%

15 16 17 18 19

USA 2.0% 1.8% 2.5% 2.2%1.8%

15 16 17 18 19

Euro Area

‐0.1%‐1.2% 1.3%2.3% 2.7%

15 16 17 18 19

Latin America

6.9% 6.7% 6.9% 6.5% 6.3%

15 16 17 18 19

China


Global Economy Growing Moderately, with Heightened RisksAnnual Real GDP Growth

‐6

‐4

‐2

0

2

4

6

8

10AdvancedEmergingWorld


Both Developed and Developing Economies Doing BetterGlobal Real GDP* Growth

*Measured at purchasing power parity exchange rates Source: IMF, RISI

4

5

Annual GDP Growth in Emerging Markets Has Slowed

‐10

‐5

0

5

10

15

20

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Brazil China India Russia South Africa

Source: IMF



‐4%

‐2%

0%

2%

4%

6%

8%

10%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

CanadaEuro AreaUnited StatesAdvanced EconomiesEmerging and Developing CountriesWorld

Inflation Remains LowCPI Year‐over‐Year Percentage Change

Source: IMF

6


$0

$20

$40

$60

$80

$100

$120

$140

$160

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

WTI

Brent

Oil Prices Picked Up in 2017 US Dollars per Barrel

Source: Energy Information Administration, RISI

7


• The Positives Growth positive and steady, even picking up speed Unemployment improving

• The Negatives Inflation remains a challenge Unemployment still high

• The Risks Lack of policy coordination Geopolitics

Europe – Growing with Challenges

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0%2%4%6%8%

10%12%14%16%18%20%22%24%26%28%30%

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Eurozone Germany GreeceSpain France ItalyPortugal Czech Republic Poland

Unemployment Improves, but Differences RemainHarmonized Unemployment Rate

Large Regional Differences in Unemployment

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8.5 ‐0.2

6.5 ‐0.3

4.3 ‐0.46.1 ‐1.3

9.0 ‐0.7

3.6 ‐0.34.5 ‐0.8

2.4 ‐1.07.5 ‐1.2

5.5 ‐0.3

16.3 ‐2.111.1 ‐0.6

3.8 ‐0.5

4.6 ‐0.5

5.9 ‐0.79.8 ‐2.4

20.9 ‐2.47.9 ‐2.2

4.2 ‐0.9

6.6 ‐1.1

5.5 ‐0.7

8.3 ‐1.1

7.3 ‐0.5

5.9 ‐1.7

5.3 ‐0.7

5.2 ‐0.9

UnemploymentJanuary 2018(or latest)

Year‐over‐year change in unemployment(%‐points)

Source: Eurostat

3.5 ‐0.7

9.8 ‐2.8

Malta

Cyprus

0% ‐ 4% 4% ‐ 6% 6% ‐ 10% > 10%Level of Unemployment

Change of Uneployment Y‐o‐Y> ‐1% ‐1% to ‐0.5% < ‐0.5%

‐1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

CPICore CPIECB TargetECB Policy Rate


Source: Eurostat

Inflation Continues to StruggleCPI, Core CPI; Year‐over‐Year Percentage Change, ECB Policy Rate


‐1%

0%

1%

2%

3%

4%

5%

0 €

10 €

20 €

30 €

40 €

50 €

60 €

70 €

80 €

90 €

100 €Brent, Euros per Barrel

CPI, Year‐over‐Year

Headline CPI Recently Detached from Oil Prices


Euro Recovering from Lower Levels

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18


Eurozone Economy Growing at a Steady Pace Annual Real GDP Growth

Source: IMF, RISI‐7.0‐6.0‐5.0‐4.0‐3.0‐2.0‐1.00.01.02.03.04.05.0

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

GermanyFranceItalyUKEurozone

14


• Uncertainty associated with Trump policies Tax reform provides stimulus in growth market Other reforms not yet realized Concerns about trade and immigration policies Positive: Deregulation stepped up

• Domestic growth remains healthy• Employment and wage growth• Housing market has potential• Dollar lost some of the strength it had• Tightening labor supply promotes inflation

US Economy – Growth and Stimulus

16

Job Growth Good, but Gradually Slowing DownMonthly Employment Change, Total Non‐Farm, Thousands

‐1,000

‐800

‐600

‐400

‐200

0

200

400

600

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18Source: Bureau of Labor Statistics



0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Unemployment (L)

Salary Growth, Year‐over‐Year (R)

Unemployment Very Low, Wages Started to RiseUnemployment, Average Hourly Salary Change Year‐over‐Year


‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Durable GoodsNondurable GoodsServicesUnemployment

Consumption Growth in ServicesAnnualized Percentage Change in Real Personal Consumption Expenditure, Unemployment

Source: Bureau of Economic Analysis


0%

1%

2%

3%

4%

5%

6%

‐15%

‐10%

‐5%

0%

5%

10%

15%

20%

05 06 07 08 09 10 11 12 13 14 15 16 17 18

RevolvingNonrevolvingFed Funds Rate (Eff.) (R)Fed Upper Limit (R)

Fed Rate Hikes Impact Credit GrowthConsumer Credit, Year‐over‐Year Percentage Change, Not Seasonally Adjusted; Fed Rates

Source: Federal Reserve


0.00.20.40.60.81.01.21.41.61.82.02.22.4

0

1

2

3

4

5

6

7

8

05 06 07 08 09 10 11 12 13 14 15 16 17

Existing Home Sales (L)

Housing Starts (R)

New Home Sales (R)

Housing Recovery Slow, Sales DownExisting and New Home Sales and Housing Starts, Millions of Units

Source: National Association of Realtors, US Census Bureau


80

85

90

95

100

105

110

115

120

125

130

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Dollar Returning from 10‐Year Highs Trade Weighted US Dollar Index: Broad, January 1997 = 100

Source: Federal Reserve


20

25

30

35

40

45

50

55

60

65

70

0.6

0.7

0.8

0.9

1.0

1.1

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Industrial Production PMI

Dollar Supporting ManufacturingIndex of Industrial Production, Jan 2012 = 1.00; PMI

Source: Federal Reserve, Institute for Supply Management


0

20

40

60

80

100

120

140

‐$80,000

‐$70,000

‐$60,000

‐$50,000

‐$40,000

‐$30,000

‐$20,000

‐$10,000

$0

92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Trade Balance, Goods and Services (L)

Trade Weighted Dollar (R)

US Trade Deficit GrowsTrade Balance, Goods and Services, Millions of US DollarsTrade Weighted US Dollar Index: Broad, January 1997 = 100


‐10%

‐8%

‐6%

‐4%

‐2%

0%

2%

4%

6%

8%

10%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

US Economy Maintains Growth Real GDP Growth, Annualized Percentage Change


‐10.0%

‐8.0%

‐6.0%

‐4.0%

‐2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Oil and US Economy Boost CanadaReal GDP Growth, Annualized Percentage Change

Source: Statscan


0.6

0.7

0.8

0.9

1.0

1.1

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

USD/CAD, Historical

USD/CAD, Forecast

Canadian Dollar Moving Up from a Weaker Level

Source: Fed, RISI


• Economy going through restructuring Investment‐led growth to consumer‐based growth Growth resizing to lower levels Some financial liberalization

• Fiscal and monetary stimulus seems to have worked• Continuing concerns about debt levels

China Transition Continues


‐10.0%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

5 6 7 8 9 10 11 12 13 14 15 16 17

Industrial Production Growth, Y/Y

Fixed‐Asset Investment Growth, Y/Y

Industrial Side of Economy SettlingFixed Asset Investment, Year‐over‐Year Percentage Change; Industrial Production, Year‐over‐Year Percentage Change


0%

5%

10%

15%

20%

25%

30%

35%

‐500

500

1,500

2,500

3,500

4,500

5,500

02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Aggregate Financing

New Bank Loans

Money Supply M2

High Lending Increases Debt RisksNew Bank Loans, Aggregate Financing, Billion Renminbi; Money Supply, Year‐over‐Year Percentage Change

Source: CEIC


‐60%

‐40%

‐20%

0%

20%

40%

60%

80%

100%

07 08 09 10 11 12 13 14 15 16 17 18

Import

Export

Trade RecoveredExports and Imports, Year‐over‐Year Percentage Change

Source: China National Bureau of Statistics, CEIC


0%

2%

4%

6%

8%

10%

12%

14%

90 92 94 96 98 00 02 04 06 08 10 12 14 16 18

Chinese Economy Slowing ModestlyReal GDP Growth, Annual Percentage Change

Source: NBS, RISI


• World economy expected to accelerate modestly in 2018, 2019 • US economy projected to perform well New administration policies? Housing market still presents upside risk Manufacturing side of economy improving

• Europe is predicted to post steady growth Unemployment improving Government policies tend to stifle economy

Conclusions


• China moving toward consumer‐led growth Slowdown will continue, hard landing unlikely High debt is a risk

Conclusions

Uncertainties Are Making Global Economy Brittle

• US economic policy• Geopolitical tensions• China: Pace of GDP growth deceleration

• Productivity growth• Eurozone problems• Low inflation• Populism


Monthly Economic Commentarywww.risi.com/mec


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Global Economy –Return of Growth? · 2018. 3. 2. · Annual GDP Growth in Emerging Markets Has...

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