The Global Economy Heightened Risks

Transcription

1 The Global Economy Heightened Risks RISI North American Conference 5 October, 2016 David Katsnelson Director, Macroeconomics

2 Agenda 1. Global Snapshot 2. USA Steady Growth 3. Europe Growing Slowly 4. China Slowing, Not Crashing 2

3 Global Economy Growing Moderately, with Heightened Risks Annual Real GDP Growth Euro Area USA 0.9% 1.5% 1.6% 1.2% 2.4% 2.6% 1.6% 2.4% Latin America China 7.3% 6.9% 6.4% 6.1% % 0.2% 0.7% 1.7% Source: IMF, RISI 3

4 Developed Economies Supporting Global Growth Global Real GDP* Growth *Measured at purchasing power parity exchange rates Source: IMF, RISI Advanced Emerging World 4

5 While Emerging Markets Have Slowed Annual Real GDP Growth 20% 15% Brazil India South Africa Russia China 10% 5% 0% -5% -10% Source: IMF, RISI 5

6 Oil Prices Staying Low on Oversupply West Texas Intermediate, Brent North Sea Crude Oil, Price per Barrel WTI Brent Copyright 2014 RISI, Inc. All rights reserved. Source: Energy Information Administration, RISI 6

7 The USA and Canada USA Moderate Improvement Partially decoupling from the rest of the world Domestic based growth is healthy Employment and wage growth Cheap energy Housing Non domestic side of economy struggling Manufacturing Exports Canada Modest Growth 7

8 Job Growth Remains Healthy in 2016 Change in US Total Payroll Employment, Millions Annualized Source: Bureau of Labor Statistics 8

9 Job Openings at All Time High Job Openings and Labor Turnover, Thousands 6,000 5,500 5,000 Job Openings Hires Quits 4,500 4,000 3,500 3,000 2,500 2,000 1,

10 Wage Growth Accelerating Average Hourly Earnings, All Employees, Year over Year Percent Change 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Source: Bureau of Labor Statistics 10

11 Productivity Growth Worryingly Low Non farm Real Output Per Hour, Year over Year Percent Change 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% 1.0% 2.0% 3.0% Productivity Five Year Average

12 Consumption Growth Driving US Economy Real Consumption Expenditure, Annualized Percentage Change; Unemployment Rate 11% 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% 1% 2% 3% 4% 5% 6% Consumption Unemployment Rate Source: Bureau of Economic Analysis, RISI 12

13 Revolving Credit Growth Continues to Show Increased Credit Card Usage Consumer Credit, Year over Year Percentage Change 15% 10% 5% 0% % -10% Revolving Credit Non-Revolving Credit 13

14 Housing Recovery Progressing Existing and New Home Sales and Housing Starts, Millions of Units Existing Home Sales (Left) Housing Starts (Right) New Home Sales (Right)

15 Strong Dollar, Weak External Environment, Oil Pressuring Manufacturing Index of Industrial Production, January 2000 = 1.00; PMI Industrial Production PMI Source: Federal Reserve, Institute for Supply Management 15

16 Dollar Strong on Decent Growth and Potential for Tighter Monetary Policy Trade Weighted US Dollar Index: Broad, March 1973 = Source: Federal Reserve 16

17 Low Natural Gas Prices Helping US Manufacturers Landed Prices of LNG June 2016, Dollars per MMBtu $6 $5 $ $3 $ $1 $0 Source: Federal Energy Regulatory Commission 17

18 US Economy Growing, but Growth Is Unimpressive Real GDP Growth, Annualized Percent Change 9% 8% 7% 6% 5% 4% 3% 2% -1% 0% 1% -2% -3% -4% -5% -6% -7% -8% -9% Source: Bureau of Economic Analysis, RISI 18

19 Canada Benefiting from Improving US Economy and Weaker Currency Real GDP Growth, Real Private Fixed Investment, Annualized Percent Change 9% 8% 7% 6% 5% 4% 3% 2% -1% 0% 1% -2% -3% -4% -5% -6% -7% -8% -9%

20 Canadian Dollar Remains Weak $1.10 $1.00 $0.90 USD/CAD $0.80 $0.70 $

21 Europe Slow and Steady The Positives Growth positive and steady Oil prices and the euro Bank lending improving The Negatives Risk of deflation Unemployment remains high Reforms have stalled The Risks Russia Quantitative Easing Migration crisis Brexit fallout 21

22 Eurozone Economy Growing, but Weakly Annual Real GDP Growth Germany France Italy UK Eurozone Source: IMF, RISI 22

23 Consumer Leading the Recovery Real Consumption Expenditures, Year over Year Percent Change 5% 4% 3% 2% 1% 0% -1% -2% -3% -4% -5% -6% Germany UK France Italy Spain Source: Eurostat 23

24 Unemployment Improving, but Still High Outside of Germany Harmonized Unemployment Rate 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% Eurozone Germany Greece Spain France Italy Portugal Source: Eurostat 24

25 Industrial Production Growth Tepid Industrial Production Indices, 2010= Euro Area Germany 0.80 France Italy Source: Eurostat 25

26 Deflation Still a Risk CPI, Core CPI; Year over Year Percentage Change 5.0% 4.0% 3.0% CPI Core CPI ECB Target 2.0% 1.0% 0.0% % Source: Eurostat 26

27 Bank Lending Supporting Growth Bank Loans to Households and Non Financial Corporations, M3, Year over Year Percent Change 20% 15% Non-Financial Corporations Households Money Supply 10% 5% 0% -5% Source: ECB Copyright 2016 RISI, Inc. Proprietary Information 27

28 Euro Remains Relatively Weak USD/EUR $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $ Source: Fed, RISI 28

29 China in Transition Economy undergoing major restructuring Investment led growth to consumer based growth Days of 9 10% growth in the past Some financial liberalization Fiscal stimulus waning Increase in infrastructure spending New mechanisms for financing But how effective will it be? Debt has become a serious issue, and it is still rising Bank non performing loans near 20% Increased volatility for renminbi 29

30 Industrial Side of Economy Slowing Fixed Asset Investment, Year over Year Percent Change; Industrial Production, Year over Year Percent Change 50% 40% Industrial Production Growth Y/Y Fixed-Asset Investment Growth Y/Y 30% 20% 10% 0% -10% Source: PBC, CEIC 30

31 But Services Side of Economy Performing Better Purchasing Managers Index Manufacturing, Services PMI Manufacturing PMI Services Source: PBC, CEIC 31

32 Lending Slowing in Past Few Months New Bank Loans, Aggregate Financing, Billion Renminbi; Money Supply, Year over Year Percent Change 4,500 4,000 3,500 3,000 2,500 2,000 1,500 1, Bank Loans Aggregate Financing Money Supply (R) % 35% 30% 25% 20% 15% 10% 5% 0% Source: NBS, Dragonomics 32

33 Trade Improving Exports and Imports, Year over Year Percent Change 100% 80% Exports Imports 60% 40% 20% 0% -20% % -60% Source: China National Bureau of Statistics, CEIC 33

34 Industrial Imports Near All-Time Highs Three-Month Average of Imports by Quantity, Index 2005 = Iron Ore Copper Crude Oil Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Source: CEIC 34

35 China s Economy Continues to Slow Real GDP Growth, Annual Percent Change 14% 12% 10% 8% 6% 4% 2% 0% Source: NBS, RISI 35

36 Increasing Volatility for the Renminbi RMB/USD Source: Fed, RISI 36

37 Conclusions US economy growing moderately Improving employment should support increased spending Housing market still presents upside risk Manufacturing side of the economy struggling Europe growing, but slowly Potential growth rate is lower QE helping somewhat Threat of deflation present, but low Risks around the world have increased 37

38 Conclusions Slower growth for emerging markets, with the exception of India China s growth will be an important driver for other emerging economies Slowdown will continue, but no hard landing Increasing risks for emerging markets from the strong US dollar 38

39 Thank you for your attention! For more information: Monthly Economic Commentary 39