Global Economic Outlook Brittle Strength

Transcription

1 Global Economic Outlook Brittle Strength RISI North American Conference October 2017 Lasse Sinikallas Director Macroeconomics

2 Agenda 1. Global Snapshot Steady 2. North America Performing 3. China In Transition 4. Europe In Progress 2

3 Three Common Themes 1. Growth 2. Inflation 3. Uncertainty 3

4 Global Economic Growth Shows Moderate Acceleration Annual Real GDP Growth Euro Area USA 2.0% 1.8% 1.9% 1.7% 2.6% 1.6% 2.1% 2.7% Latin America China 6.9% 6.7% 6.3% 5.9% % 1.2% 1.3% 2.4% Source: IMF, RISI 4

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

6 Inflation Remains at a Low Level 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 6

7 Oil Prices Picking Up US Dollars per Barrel $160 $140 $120 WTI Brent $100 $80 $60 $40 $20 $ Source: Energy Information Administration, RISI 7

8 US Economy Maintains Pace Uncertainty associated with Trump policies Change to a solution seeking mode Many reforms not yet realized Concerns about trade and immigration policies Positive: Deregulation stepped up Domestic growth remains healthy Employment and wage growth Housing market Dollar lost some of the strength it had Tightening labor supply 8

9 Job Openings at a 15 Year High 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 9

10 Job Growth Slowing Down Monthly Employment Change, Total Non Farm, Thousands , Source: Bureau of Labor Statistics 10

11 Inflation Pressure Building Up Unemployment vs. Average Hourly Salary Change Year over Year; 10 Year Sample 4.0% 3.5% Salary Change 3.0% 2.5% 2.0% September August July 2Q17 1.5% 1.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Unemployment Source: Bureau of Labor Statistics 11

12 US Labor Productivity Growth Slow Non farm, Percentage Change Quarter over Quarter, Annualized 2.0% 1.0% 0.0% 1.0% 12

13 Consumption Growth in Services Annualized Percentage Change in Real Personal Consumption Expenditure, Unemployment 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% Durable Goods Nondurable Goods Services Unemployment Source: Bureau of Economic Analysis 13

14 Fed Rate Hikes Impact Credit Growth Consumer Credit, Year over Year Percentage Change; Fed Rates 15% 10% 5% 0% 5% 10% Revolving Nonrevolving Fed Funds Rate (Eff.) (R) Fed Upper Limit (R) 7% 6% 5% 4% 3% 2% 1% 0% Source: Federal Reserve 14

15 Housing Recovery Slow, Sales Down 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

16 Dollar Returning from 10 Year Highs Trade Weighted US Dollar Index: Broad, January 1997 = Source: Federal Reserve 16

17 Dollar Supports Manufacturing Index of Industrial Production, Jan 2012 = 1.00; PMI Industrial Production PMI Source: Federal Reserve, Institute for Supply Management

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

19 Oil and US Economy Boost Canada Real GDP Growth, Annualized Percentage Change 8.0% 6.0% 4.0% 2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% Source: Statscan 19

20 Canadian Dollar Moving Up from a Weaker Level 1.1 USD/CAD Source: Fed, RISI 20

21 China in Transition Economy going through restructuring Investment led growth to consumer based growth Growth resizing to lower levels Some financial liberalization Fiscal and monetary stimulus seems to have worked Continuing concerns about debt levels Increased volatility for renminbi 21

22 Industrial Side of Economy Settling Fixed Asset Investment, Year over Year Percentage Change; Industrial Production, Year over 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%

23 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 2,500 1, Aggregate Financing New Bank Loans Money Supply M % 30% 25% 20% 15% 10% 5% 0% Source: CEIC 23

24 Trade Recovered to Growth 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 24

25 Industrial Imports Continue to Climb Three Month Average of Imports by Quantity, Index 2005 = Iron Ore Crude Oil Copper Source: CEIC 25

26 Renminbi Volatility Increased CNY/USD Source: Fed 26

27 Chinese Economy Slows Modestly Real GDP Growth, Annual Percentage Change 14% 12% 10% 8% 6% 4% 2% 0% Source: NBS, RISI 27

28 Europe Positive Momentum? The Positives Growth positive and steady, even picking up speed Bank lending improving The Negatives Still some risk of deflation Unemployment remains high The Risks Lack of policy coordination Geopolitics 28

29 Unemployment Improving, but Still High Outside of Germany Harmonized Unemployment Rate 30% 28% 26% 24% 22% 20% 18% 16% 14% 12% 10% 8% 6% 4% 2% 0% Eurozone Germany Greece Spain France Italy Portugal Source: Eurostat 29

30 Inflation on the Rise, but Still Weak CPI, Core CPI; Year over Year Percentage Change 5.0% 4.0% CPI Core CPI ECB Target 3.0% 2.0% 1.0% 0.0% % Source: Eurostat 30

31 Euro Recovered from French and Dutch Elections to a Stronger Level $1.60 $1.50 $1.40 $1.30 $1.20 $1.10 $1.00 $0.90 $ Source: Fed, RISI 31

32 Eurozone Economy Growing at a Steady Pace Annual Real GDP Growth Germany France Italy UK Eurozone Source: IMF, RISI 32

33 Conclusions World economy expected to accelerate modestly in , 2019 US economy projected to perform well New 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 33

34 Conclusions Europe is predicted to post steady growth Unemployment improving Government policies tend to stifle economy Emerging economies doing well Continue to benefit from Chinese growth Helped by good growth in developed world 34

35 Uncertainties Make Global Economy Brittle US economic policy Geopolitical tensions China: Pace of GDP growth deceleration Productivity growth Eurozone problems Low inflation Populism 35

36 Thank you! For more information: Monthly Economic Commentary 36