The World Did Not End in Q1Forex reserves of $3.6trn •Gov’t debt of 17% GDP • External debt of...
Transcript of The World Did Not End in Q1Forex reserves of $3.6trn •Gov’t debt of 17% GDP • External debt of...
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The World Did Not End in Q1
Sam Wilkin
Senior Advisor, Business Research
Blog: www.samwilkin.com
06.2015
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Exports to Russia: 10% of Finnish
exports; 4% of Finnish GDP
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1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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Global Economic Growth Heat Map – 1993
Source: IMF
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Global Economic Growth Heat Map – 2004
Source: IMF
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Global Economic Growth Heat Map – 2009
Source: IMF
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Global Economic Growth Heat Map – 2010
Source: IMF
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Global Economic Growth Heat Map – 2014
Source: IMF
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Global Economic Growth Heat Map – 2015
Source: IMF
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Next up:
Europe Outlook
What happens if Greece exits?
China Outlook
US Outlook
Russia/Ukraine Outlook
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1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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-6
-3
0
3
6
9
12
15
18
2000 2002 2004 2006 2008 2010 2012 2014
Source: Haver Analytics
% year
Eurozone: Lending to non-financial corporations
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-5
-4
-3
-2
-1
0
1
2
3
4
5
-40
-35
-30
-25
-20
-15
-10
-5
0
5
1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: Haver Analytics
% balance % year
Retail sales* (RHS)
Consumer confidence
(LHS)
Eurozone: Consumer confidence & retail sales
*3 month moving average
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22
-25
-20
-15
-10
-5
0
5
10
15
20
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Oxford Economics
% year
Eurozone: Industrial new orders
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5
7
9
11
13
15
17
19
21
23
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Cash holdings of non-financial corporations
% of GDP
Source : Oxford Economics/Haver Analytics
France
Germany
UK
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-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2002 2004 2006 2008 2010 2012 2014 2016 2018
% quarter
Source: Oxford Economics
Forecast
Eurozone: GDP
% quarter-on-quarter (LHS)
% year-on-year (RHS)
% year
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RAPPORTO DEBITI/PIL FAMIGLIE
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
20
40
60
80
100
StatiUniti
Zona euro
Regno Unito
RAPPORTO DEBITI/PIL FAMIGLIE
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
20
40
60
80
100
Italia
FranciaGermania
Spagna
Household Debt (%GDP) Household Debt (%GDP)
Source: Oxford Economics
UK
US
EurozoneGermany
Spain
France
Italy
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RAPPORTO DEBITI/PIL AZIENDE*
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
50
100
150
200
Stati Uniti
Zona euro
RegnoUnito
* Settore non-finanziario
RAPPORTO DEBITI/PIL AZIENDE*
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
50
100
150
200
Francia
Germania
Spagna
* Settore non-finanziario.
Italia
Corporate Debt (%GDP) Corporate Debt (%GDP)
Source: Oxford Economics
Germany
Spain
France
Italy
Eurozone
UK
US
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-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
-3.0
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
2002 2004 2006 2008 2010 2012 2014 2016 2018
% quarter
Source: Oxford Economics
Forecast
Eurozone: GDP
% quarter-on-quarter (LHS)
% year-on-year (RHS)
% year
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80
90
100
110
120
130
140
150
160
2000 2002 2004 2006 2008 2010 2012 2014
2000=100
Source: Oxford Economics
Unit labour costs
France
Germany
Italy
Greece
Spain
Forecast
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-10 -5 0 5 10 15
Italy
Finland
Greece
Austria
Germany
Beligum
Eurozone
Neth
France
Portugal
Spain
Slovakia
Ireland
Productivity growth
2008-14,%Source : Oxford Economics/Haver Analytics
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-1 0 1 2 3 4
CyprusGreeceFinland
ItalyAustria
BelgiumFrance
EuroZonePortugal
NetherlandsGermanySloveniaEstonia
LuxembourgMalta
SpainSlovakia
Ireland
GDP growth forecast for 2015
% yearSource: Oxford Economics
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1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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Germany and other AAA
countries
Eurozone periphery
states
2009-
2012
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0
5
10
15
20
25
30
35
40
45
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Greece Spain
Portugal Ireland
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
2012
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0
1
2
3
4
5
6
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Italy
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
2012
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0
5
10
15
20
25
30
35
40
45
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Greece Spain
Portugal Ireland
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
26.7.12: Draghi's
"Whatever it takes"
2014
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0
1
2
3
4
5
6
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Italy
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
26.7.12: Draghi's
"Whatever it takes"
2014
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Now!
0
5
10
15
20
25
30
35
40
45
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Greece Spain
Portugal Ireland
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
Greek
Elections
26.7.12: Draghi's
"Whatever it takes"
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Now!
0
1
2
3
4
5
6
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15
Italy
Italy
Eurozone: Credit spreads% spread of 10-year bonds over German bunds
Source :Oxford Economics/Haver Analytics
Greek
Elections
26.7.12: Draghi's
"Whatever it takes"
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Germany and other AAA
countries
Greece
Now!
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Implicit views of markets based on bond prices:
1. Greece and EU reach agreement 78%
2. Agreement stays on track 12-18 months 67%
3. Capital controls 48%
4. Greek exit 38%Source: Oxford Economics
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-40
-30
-20
-10
0
10
20
30
40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Spain Greece Ireland
Cyprus Portugal
Retail deposits at Eurozone banks*% annual growth
* Non-MFIs excluding central governmentSource : Oxford Economics/ECB
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Eurozone bank lending to Greece
In 2008: €175bn
In 2014: €42bn(0.5% of German GDP)
(Eurozone gov’t lending to Greece: €250bn)
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Greek exit scenario
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Greek exit scenario
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1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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52
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53
-15
-10
-5
0
5
10
15
20
25
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
US, UK & Eurozone: Corporate loan growth
% year
Source : Oxford Economics/Haver Analytics
US loans inc. commercial real estate
Eurozone loans to PNFCs
UK loans to PNFCs
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54
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55
10
30
50
70
90
110
130
150
1999 2001 2003 2005 2007 2009 2011 2013 2015
1985=100
Consumer confidenceConference Board
Source: Conference Board, University of Michigan/Haver Analytics
US: Consumer attitudes
Consumer sentimentUniversity of Michigan
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56
-3
-2
-1
0
1
2
3
4
5
6
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015
Source: BLS, Oxford Economics
% year
Real
Nominal
US: Real wage rate
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57
70
80
90
100
110
120
130
140
150
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
US: Relative unit labour costs2008=100
Source : Oxford Economics/Haver Analytics
Forecast
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58
50
60
70
80
90
100
110
120
130
2007 2008 2009 2010 2011 2012 2013 2014
Japan UK Germany US
Manufacturing InvestmentIndex: 2007 = 100
Source : Oxford Economics/Haver Analytics
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59
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60
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61
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62
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63
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64
1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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65
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66
-2
0
2
4
6
8
10
12
1989 1994 1999 2004 2009 2014
Excluding China Including China
Source : Oxford Economics/Haver Analytics
World: Broad money
% year
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67
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68
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69
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70
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China’s…
• Forex reserves of $3.6trn
• Gov’t debt of 17% GDP
• External debt of 9% GDP
= bailoutability
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72
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73
Economic Growth Forecast for China (%)
About 10%
About 6%
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74
1. Global Economic Weather Report
2. Economic Outlook
Europe
Grexit
US
China
Russia/Ukraine
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75
Source: nypost.com
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76 Source: abcnews.com
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77 Source: taringa.net
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78 Source: businessinsider.com
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Increase in
income per
person over
the past 30
years in the
world’s major
oil-rich
nations*
* Oil revenues
are more than
10% of
economic
output
* Population of
three million
people or more
Source: World Bank World Development Indicators11
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Increase in
income per
person over
the past 30
years in the
world’s major
oil-rich
nations*
* Oil revenues
are more than
10% of
economic
output
* Population of
three million
people or more
Source: World Bank World Development Indicators12
6th-best performance
out of 163 countries
in the world
153 out of 163
162 out of 163
157 out of 163
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A barrier to manufacturing (especially exports)
A barrier to democracy
A target in war
‘Rental income’: control more valuable than creation
13
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Increase in
income per
person over
the past 30
years in the
world’s major
oil-rich
nations*
* Oil revenues
are more than
10% of
economic
output
* Population of
three million
people or more
Source: World Bank World Development Indicators11
Russia
+$3,600 since 1998
A class by itself?
Or, will the resource curse
return?
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Economic Growth Forecast for Russia (%)
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Conclusion
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OVERALL SUMMARY
Eurozone• Market impacts of brinksmanship ended in 2012
• But people & companies are deleveraging
• Hence ‘new normal growth’, with some bright spots
US• Deleveraging largely complete. Q1 slowdown a one-off
• Hence return to growth; but will it be ‘old normal’?
China• No longer the world’s credit engine. ‘New normal’ is 6%
per annum. And, might crash
Russia• Revenge of the resource curse. ‘New normal’ is uncertain
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The World Did Not End in Q1
Sam Wilkin
Senior Advisor, Business Research
Blog: www.samwilkin.com
06.2015