Global Economic Outlook

Transcription

1 Global Economic Outlook Will growth continue and at what pace? North American Conference San Francisco October 2018 Lasse Sinikallas Director, Macroeconomics Copyright 2018 RISI, Inc. Proprietary Information

2 Agenda 1. Global Snapshot Steady Growth 2. North America Growth and Stimulus 3. China Transition Continues 4. Europe Growth, but Losing Momentum? 2

3 1 Steady growth Global Snapshot Global economy maintains pace Oil prices move higher Copyright 2018 RISI, Inc. Proprietary Information 3

4 Global Economy Growing Moderately, with Heightened Risks Annual Real GDP Growth USA 1.6% 2.3% 1.6% 2.6% 2.2% 1.8% 2.9% 2.8% Latin America 0.9% 1.1% 2.0% 2.6% Euro Area China 6.7% 6.9% 6.4% 5.9% Source: IMF, RISI. 4

5 Both Developed and Developing Economies Doing Better Than in the Past Few Years Global Real GDP* Growth Advanced Emerging World Source: IMF, RISI. *Measured at purchasing power parity exchange rates. 5

6 Annual GDP Growth in Emerging Markets Has Slowed Brazil China India Russia South Africa Source: IMF, RISI

7 Inflation Remains Low Globally CPI Year over Year Percentage Change 10% 8% 6% 4% Canada Euro Area United States Advanced Economies Emerging and Developing Countries World 2% 0% 2% 4% Source: IMF. 7

8 Oil Prices at Highest Levels in Four Years US Dollars per Barrel WTI Brent Source: Energy Information Administration, RISI. 8

9 Economic Policy Uncertainty Is Elevated Economic Policy Uncertainty Index; US, Global US Baseline Overall Index Global (current) US News Based Index Source: Measuring Economic Policy Uncertainty by Scott Baker, Nicholas Bloom and Steven J. Davis at 9

10 2 Growth and stimulus North America Continued uncertainty associated with Trump policies Domestic growth remains healthy Copyright 2018 RISI, Inc. Proprietary Information 10

11 US Economy: Growth and Stimulus Continued uncertainty associated with Trump policies Tax reform provides stimulus in growth market Trade policy a serious concern Ability to function? Positive: Deregulation stepped up Domestic growth remains healthy Employment and wage growth Housing market has potential Dollar gave support, now stronger Tightening labor supply promotes inflation 11

12 Job Openings at a Very High Level Job Openings and Labor Turnover, Thousands 6,500 Job Openings Hires Quits 5,500 4,500 3,500 2,500 1, Source: Bureau of Labor Statistics. Copyright 2017 RISI, Inc. All rights reserved. 12

13 Job Growth Continues Monthly Employment Change, Total Non Farm, Thousands; Six Month Moving Average ,000 Employment Change 6 per. Mov. Avg. (Employment Change) Source: Bureau of Labor Statistics. 13

14 Inflation Pressure Building, but Slowly Unemployment vs. Average Hourly Salary Change Year over Year; 10 Year Sample Salary Change 4.0 % 3.5 % 3.0 % 2.5 % % 1Q % 2Q2018 3Q % 2.0 % 3.0 % 4.0 % 5.0 % 6.0 % 7.0 % 8.0 % 9.0 % 10.0 % 11.0 % Unemployment Source: Bureau of Labor Statistics. Copyright 2017 RISI, Inc. All rights reserved. 14

15 US Labor Prodcutivity Growth Slow Non farm, Percentage Change Quarter over Quarter, Annualized 20.0% 15.0% 10.0% 5.0% 0.0% 5.0% 10.0% Copyright 2017 RISI, Inc. All rights reserved. 15

16 Consumption Growth Strongest in Services Annualized Percentage Change in Real Personal Consumption Expenditure, Unemployment 12% 10% 8% 6% 4% 2% 0% 2% 4% 6% Durable Goods Nondurable Goods Services Unemployment Source: Bureau of Economic Analysis. 16

17 Fed Rate Hikes Impact Credit Growth Consumer Credit, Year over Year Percentage Change, Not Seasonally Adjusted; Fed Rates 20% 15% 10% 5% 0% 5% 10% Revolving Non revolving Fed Funds Rate (Eff.) (R) Fed Upper Limit (R) 6% 5% 4% 3% 2% 1% 15% Source: Federal Reserve. 0% 17

18 Amount of Consumer Credit Has Grown Significantly Consumer Credit, PCE; Indexed 2Q2007 = Real Personal Consumption Expenditures Total Revolving Credit Owned and Securitized, Outstanding Total Nonrevolving Credit owned and Securitized, Outstanding Volume of nonrevolving consumer credit 7/2018: $2.88 trillion Volume of revolving consumer credit 7/2018: $1.04 trillion

19 Housing Starts and Sales Stall Existing and New Home Sales and Housing Starts, Millions of Units Existing Home Sales (L) Housing Starts (R) New Home Sales (R) Source: National Association of Realtors, US Census Bureau

20 Housing Sales and Mortgage Rates Connected Existing and New Home Sales, Millions of Units; Average Mortgage Rates 8.00 Inverse Scale 0.0 % Existing Home Sales (L) New Home Sales (L) 15 Year Fixed Rate Mortgage Average (R) 30 Year Fixed Rate Mortgage Average (R) 1.0 % 2.0 % 3.0 % 4.0 % 5.0 % 6.0 % 7.0 % Source: National Association of Realtors, US Census Bureau, Federal Reserve. 8.0 % 20

21 Dollar Gaining Strength Again Trade Weighted US Dollar Index: Broad, January 1997 = Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18 Source: Federal Reserve. 21

22 Policy Now Supporting Manufacturing? Index of Industrial Production, January 2012 = 1.00; PMI Industrial Production PMI Source: Federal Reserve, Institute for Supply Management. 22

23 US Economy Maintains Growth Real GDP Growth, Annualized Percentage Change 10% 8% 6% 4% 2% 0% 2% 4% 6% 8% 10%

24 Oil and US Economy Boost Canada Real GDP Growth, Annualized Percent Change 8.0 % 6.0 % 4.0 % 2.0 % 0.0 % 2.0 % 4.0 % 6.0 % 8.0 % 10.0 % Source: Statscan. Copyright 2017 RISI, Inc. All rights reserved. 24

25 Canadian Dollar Expected to Weaken Slightly from Current Level USD/CAD Source: Fed, RISI. 25

26 Mexican Economy to Maintain Pace Year over Year Percentage Change in Exports and Industrial Production, Three Month Moving Averages; Mexican Peso / USD; Real GDP Growth 60% 10% 40% 5% 20% 0% 0% 5% 20% Exports (L) Industrial Production (R) 10% 40% 15% % 20 MXN/USD 4.0 % % 0.0 % % % Real GDP Growth % Source: IMF, CEIC, RISI. 26

27 3 Transition continues China Economy going through restructuring Continuing concerns about debt levels Trade war an additional risk Copyright 2018 RISI, Inc. Proprietary Information 27

28 China: The Transition Continues Economy going through restructuring Investment led growth transitioning to consumer based growth Growth resizing to lower levels Global economy boosted growth Continuing concerns about debt levels Trade war an additional risk 28

29 Industrial Side of Economy Settling Fixed Asset Investment, Year over Year Percentage Change; Industrial Production, Yearover Year Percentage Change 50.0% 40.0% 30.0% Industrial Production Growth, Y/Y Fixed Asset Investment Growth, Y/Y 20.0% 10.0% 0.0% 10.0%

30 High Lending Increases Debt Risks New Bank Loans, Aggregate Financing, Billion Renminbi; Money Supply, Year over Year Percentage Change 5,500 4,500 3,500 Aggregate Financing New Bank Loans Money Supply M2 35% 30% 25% 20% 2,500 1, Source: CEIC. 15% 10% 5% 0% 30

31 Trade Recovered to Higher Level in 2017 Exports and Imports, Year over Year Percentage Change 100% 80% 60% Import Export 40% 20% 0% 20% 40% 60% Source: China National Bureau of Statistics, CEIC. 31

32 Chinese Economy Decelerating Modestly Real GDP Growth, Annual Percentage Change 14% 12% 10% 8% 6% 4% 2% 0% Source: NBS, RISI. 32

33 4 Growth, but losing momentum? Europe Growth, but slowing down Inflation remains a challenge Loss of momentum? Copyright 2018 RISI, Inc. Proprietary Information 33

34 Europe: Growth, but Losing Momentum? The Positives Growth, but slowing down Unemployment at pre crisis levels or below The Negatives Inflation remains a challenge Loss of momentum? The Risks Lack of policy coordination, politics Geopolitics 34

35 Unemployment Improves, but Differences Remain Harmonized Unemployment Rate, Seasonally Adjusted 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Eurozone Germany Greece Spain France Italy Portugal Czech Republic Poland

36 Inflation Continues to Struggle CPI, Core CPI; Year over Year Percentage Change, ECB Policy Rate; Brent Euros per Barrel 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.0% Source: Eurostat. CPI Core CPI ECB Target ECB Policy Rate Brent, Euros per Barrel (R) 36

37 Loss of Momentum in Euro Area? Euro Area GDP Growth Q/Q (R) 20 Euro Area Composite PMI (L) Economic Sentiment Indicator ( 50) 10 Industrial Confidence Indicator (+50) Consumer Confidence Indicator (+50) % 0.8 % 0.6 % 0.4 % 0.2 % 0.0 % 0.2 % 0.4 % 0.6 % 0.8 % 1.0 % Source: IHS Markit, Eurostat. 37

38 Euro Recovering from Lower Levels $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $

39 Eurozone Economy Growing at a Steady Pace Annual Real GDP Growth Germany France 4.0 Italy 5.0 UK 6.0 Eurozone 7.0 Source: IMF, RISI 39

40 Conclusions World economy expected to remain similar to 2018 in 2019 US economy projected to perform well Trump administration policies? Housing market still presents upside risk Manufacturing side of economy improving China moving toward consumer led growth Slowdown will continue, hard landing unlikely High debt is a risk, trade war as well 40

41 Conclusions Europe is predicted to post growth Unemployment improving Government policies tend to stifle economy Loss of momentum? 41

42 Increased Uncertainties, Elevated Risks US economic policy Trade War China: Pace of GDP growth deceleration Geopolitical tensions Eurozone problems Low inflation Political uncertainty 42

43 Thank you! For more information: Monthly Economic Commentary 43