Maurice Obstfeld Economic Counsellor

Transcription

1 International Monetary Fund September 15, 2016 The Impact of Fall 2016 BPEA Conference Maurice Obstfeld Economic Counsellor

2 Quick equity recovery and lower bond yields Equity markets (index; June 23, 2016 =) FTSE FTSE 350 Change after June 23: +8.0% +7.3% 9/7 80 Jan-16 May-16 Sep-16 Sources: Haver Analytics, and IMF staff estimates year government bond yields (percent) Nominal Real Change after June 23: -72 bps -31 bps 9/7-3 Jan-16 May-16 Sep Corporate bond yields (percent) iboxxbbb 7-10 years iboxx A 7-10 years iboxx AA 5-10 years iboxx AAA 7-10 years Change after June 23: -45 bps -31 bps -20 bps -28 bps 9/7 0.0 Jan-16 May-16 Sep-16 1

3 Sentiment has deteriorated and sterling is down Economic sentiment (index; long-term average=) Manufacturing PMIs (SA, 50+=Expansion) Services Construction UK exchange rates U.S. dollar per U.K. sterling pound NEER (index; Jan. 1, 2010=; rhs) Last obs.: Aug Sources: Haver Analytics, and IMF, Global Data Source Aug /

4 Labor indicators steady and some trade improvement Labor markets (percent) New export orders PMI and real effective exchange rate 9 Temporary employees as a percent of all employees Employment rate: aged 16 and over (rhs) New export orders (SA, 50+ = Expansion) REER (index; Jan. 2000=; rhs) Jun Aug Sources: Haver Analytics and IMF, Global Data Source. 3

5 Bank of America - Merrill Barclays Beacon Econ Forecasting Capital Economics Citigroup Econ Intelligence Unit Economic Perspectives Experian Goldman Sachs HSBC IHS Economics ING Financial Markets ITEM Club JP Morgan Liverpool Macro Research Lombard Street Research NIESR Nomura Oxford Economics RBS Schroders Societe Generale UBS UniCredit Consensus (Mean) Consensus (Median) IMF Bank of America - Merrill Barclays Beacon Econ Forecasting Capital Economics Citigroup Econ Intelligence Unit Economic Perspectives Experian Goldman Sachs HSBC IHS Economics ING Financial Markets ITEM Club JP Morgan Liverpool Macro Research Lombard Street Research NIESR Nomura Oxford Economics RBS Schroders Societe Generale UBS UniCredit Consensus (Mean) Consensus (Median) IMF Current forecast revisions after vote / / Source: Consensus Economics; and IMF, World Economic Outlook.. Note: 1/ Revisions are reflecting the change in forecasts between the pre- vote vintage and the most recently available vintage. 4

6 : Summing up impact How do we interpret the better-than-expected financial market developments? Will they be unwound? No obvious reason, until new negative data emerge Has the exchange rate saved the day? It has helped (exports, UK debt denominated in sterling) House prices? Slowdown in rate of growth; BoE backstop (support to bank lending channel, eased countercyclical buffers, lower interest rates, and QE) Uncertainty effects will be prolonged Can t negotiations quickly dissipate uncertainty? Not likely given French and German electoral calendars, U.K. s lack of preparedness for referendum result U.K. macro policies, including fiscal easing, can be helpful But uncertainty effects will also impact the EU-27, with little policy space 5

7 : Structural factors and political fallout How will structural factors play out? Unclear, supply likely affected What type of deal will be struck with EU? Unclear. EEA unlikely due to lack of migration control. But access to single market crucial for exports How will the financial sector be affected? Other key exporters (e.g. car manufacturers, Airbus suppliers)? Depends on access to single market. U.K. financial passport a very likely casualty, City of London s status in peril Will migration into U.K. slow down sharply? At some point; in the short run, we may see a surge in migrants from EU-27 before restrictions come into play What further political repercussions? Too good a deal for the U.K. would further encourage centrifugal forces in EU Could the U.K. reconsider? Seems difficult given current political disarray. Serious re-think needed on a range of EU, euro area arrangements 6