Euro & talous 1/2011. Monetary policy and the global economy Finland s economic outlook

Transcription

1 Euro & talous 1/211 Monetary policy and the global economy Finland s economic outlook Governor Erkki Liikanen 24 March 211 1

2 Topics Topical issues Global economic forecast Finland s economic outlook

3 Topical issues 3

4 Global economy picked up at turn of the year Output Trade Global purchasing managers' index: manufacturing Global purchasing managers' index: services Global manufacturing output Imports globally Imports in emerging economies Imports in advanced economies 65 Balance % 3 24 Index, 2 = Sources: Bloomberg and Bank of Finland's own calculations. 2414@global_pmi2 (en) Source: CPB Netherlands. 2414@cpb (en) 4

5 Major differences between countries in growth GDP Industrial confidence 6 USA Euro area Japan China Finland Quarterly change, % 65 China USA Euro area Japan Balance Sources: Bloomberg, CEIC and calculations by BOFIT @Chart1(2FI) (en) Source: Bloomberg @PMI-teollisuus(2)e Erkki Liikanen 5

6 inflationary pressures Underlying inflation Unemployment 5 % Euro area USA Japan China Finland 12 % Euro area USA Japan Finland Sources: Eurostat, BLS and Bloomberg @Pohjainflaatio (EN) Sources: BLS, Eurostat, Bloomberg and Statistics Finland @Työttömyys% (EN) 6

7 and inflation expectations Consumer price inflation Inflation expectations Euro area USA Japan China Finland Euro area USA 1 % change from previous year 4. % Sources: Eurostat, BLS and Bloomberg @Inflaatio (EN) Source: Bloomberg. Derived from inflation swaps. 3-day moving averages @eur_us_5_5 (en) 7

8 Recent weeks have moderated market optimism Share prices and real interest rates Commodities 5 USA - real interest on approx. 2-yr bond Euro area - real interest on approx. 2-yr bond USA - S&P5 (right-hand scale) Euro area - DJ euro broad (right-hand scale) % 3 Jan 25 = Crude oil (Brent, left-hand scale) Foodstuffs Total index Base metals USD/barrel 2 Jan 26 = Source: Bloomberg @Chart1 (2) (en) Sources: Bloomberg and HWWI. All data measured in dollars @Chart5 (en) 6 8

9 but interest rate expectations close to early march levels Euro area United States 2.25 Percent Percent /11 5/11 6/11 7/11 8/11 9/11 1/11 11/11 12/11 1/12 2/12 Source: Bloomberg. Based on Eonia futures quotations. 3/11 4/11 5/11 6/11 7/11 8/11 9/11 1/11 11/11 12/11 1/12 2/12 Source: Bloomberg. Based on Fed funds futures quotations. 9

10 Bank of Finland s global economic forecast 1

11 What has changed since last autumn? Major trends unchanged Role of emerging economies continues to grow Progress slow in unravelling debt Overheated sectors recovering slowly But some changes Commodity price rises stronger than expected Economic impact of catastrophe in Japan 11

12 Economic impact of catastrophe in Japan Situation constantly changing Uncertainty too great for a final answer Milder alternative Japan enters recession, but not a prolonged depression Impact of catastrophe is primarily local Means of assessment: direct damage and lost output Gloomier alternative A serious nuclear accident Current information insufficient to make an assessment 12

13 Share of emerging economies continues to grow Advanced economies forecast GDP, USD billion at 25 prices Emerging economies forecast Sources: IMF and Bank of Finland forecast. 2445@Chart19 (en) 13

14 Growth differences also reflected in government debt Advanced economies forecast Emerging economies forecast 12 % share of GDP Source: IMF WEO, October @Chart2 (en) 14

15 Oil price: role of supply and demand factors 22 Mar Mar Feb Nov USD/barrel Brent oil futures prices Source: Bloomberg @Chart3 (en) 15

16 Energy prices reflected in euro area inflation Services Processed foods Energy Impact on inflation, % points Non-energy industrial goods Unprocessed foods HICP inflation Source: Eurostat. 16

17 Finland s economic outlook

18 Finnish economy has recovered strongly % change on previous year (right-hand scale) At reference year (2) prices (left-hand scale) 18 EUR billion % Sources: Statistics Finland and Bank of Finland Erkki Liikanen 18

19 Share of consumption has increased GDP Public consumption Gross fixed investment Index, 2 = 1 Private consumption Exports of goods and services Sources: Statistics Finland and Bank of Finland Erkki Liikanen 19

20 Supply and demand f 212f 213f At current prices EUR billion Volume, % change on previous year Gross domestic product Imports Exports Private consumption , Public consumption Private fixed investment Public investment Erkki Liikanen 2

21 Unemployment falling, but slowly 26 Employed (left-hand scale) Unemployment rate (right-hand scale) 1, persons % Bank of Finland's seasonally adjusted figures Sources: Statistics Finland and Bank of Finland Erkki Liikanen 21

22 Productivity growth slower than before 6 GDP/hour worked GDP/person employed % change on previous year Sources: Statistics Finland and Bank of Finland Erkki Liikanen 22

23 Labour costs rising faster Compensation per employee Unit labour costs Productivity per person employed 8 % change on previous year figures are forecasts. Sources: Statistics Finland and Bank of Finland Erkki Liikanen 23

24 Household savings ratio still high 6 Households' * disposable income, consumption and savings Savings ratio Real disposable household income** Private consumption** % * Households and non-profit institutions serving households ** % change on previous year Sources: Statistics Finland and Bank of Finland Erkki Liikanen 24

25 Investment up, but no return to previous heights 2 Investment ratio Total private investment Housing Private investment excl. housing Public investment % of GDP Investment ratios have been calculated on the basis of nominal figures. Sources: Statistics Finland and Bank of Finland Erkki Liikanen 25

26 Finland s exports growing more slowly than world trade Finland's exports of goods and services Finland's export markets World trade Index, 27 = Sources: Statistics Finland and Bank of Finland Erkki Liikanen 26

27 Energy and food prices driving inflation Energy Processed foods Services Unprocessed foods Non-energy industrial goods Total index 6 Contribution to HICP inflation, % points HICP = Harmonised index of consumer prices Source: Statistic Finland and Bank of Finland Erkki Liikanen 27

28 Inflation in Finland faster than euro area Harmonised index of consumer prices, Finland Harmonised index of consumer prices, euro area 6 % change on previous year Sources: Statistics Finland, Eurostat and Bank of Finland Erkki Liikanen 28

29 Public finances remain in deficit General government balance % of GDP General government Central government Sources: Statistics Finland and Bank of Finland Erkki Liikanen 29

30 Public debt still rising 9 % of GDP General government EMU debt Central and local government debt Sources: Statistics Finland and Bank of Finland Erkki Liikanen 3