Quarterly report on the global and Spanish economy Q Círculo de Empresarios Madrid, July 2017

Transcription

1 Quarterly report on the global and Spanish economy Q Círculo de Empresarios Madrid, July 2017

2

3 GDP growth outlook Global Annual change Forecast Source: Círculo de Empresarios based on IMF,

4 The world economic centre of gravity is shifting east Asia-Pacific leads global economic growth Share of global GDP of Asia- Pacifc % % GDP growth (Asia-Pacific) % Source: Círculo de Empresarios based on IMF,

5 2017 Key messages Strengths Risks Global growth is accelerating World trade recovery U.S. Monetary Policy normalization Trade barriers High indebtedness levels Political uncertainty Source: Círculo de Empresarios,

6 Policy uncertainty is diminishing The results of UK and French elections reduce the level of political uncertainty Economic Policy Uncertainty Index 1997= Financial crisis Donald Trump Brexit Market expectations of a Soft Brexit Macron won the French election Source: Círculo de Empresarios based on Policy Uncertainty,

7 Growth momentum is likely to strengthen further The short-term outlook for 2017 has improved Share of countries with increasing growth (by areas) % East Asia and Pacific Europe and Central Asia Latin America and the Caribean Middle East and North Africa South Asia Sub-Saharan Africa Moderate increases in commodity prices helped emerging economies to recover Source: Círculo de Empresarios based on World Bank,

8 Population growth 2030 projections Global population is rising at a pace of 83 million people annually World population will reach 8.5 billion by 2030 (+500 million) Although... World population Million people , , , ,200 Advanced-economy population is declining Source: Círculo de Empresarios based on UN, 2017

9 The demograpahic change is obvious By areas % 9.83% 59.66% 4.6% 8.65% 57.85% 8.55% 16.64% 0.54% 8.4% 19.92% 0.56% By 2030, half of the population growth will take place in Africa Europe s share of global population is declining * +447 million people between Source: Círculo de Empresarios based on United Nations, 2017

10 World trade is recovering After two years of trade weakness, global trade is gaining momentum World trade growth Annual change ,2 0,7 3,6 5,7 11 7,9 9,4 7,7 2,9 12,5 7,5 2,9 3,3 4,1 2,7 2,5 4 Real GDP growth, emerging commodity exporters (% annual) 2,2 1,8 2, ,3 0,3 0, Source: Círculo de Empresarios based on World Bank,

11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 China s external sector Since the second half of 2016, the external sector has been supported by strong invesment and industrial activity China's external sector % Annual change China's currency reserves Trillion $ 20,0 15,0 10,0 Exports Imports 4,1 3,9 3,7 Lower drop 5,0 0,0-5,0-10,0 3,5 3,3 3,1 2,9 Source: Círculo de Empresarios based on Banco Mundial, Reuters,

12 Higher optimism in China China s growth model continues shifting from manufacturing to services, but at a moderate pace Contributions to GDP growth by components Percentage points 6,0 5,0 4,0 3,0 2,0 1,0 0,0-1,0 Consumption Investment Net exports Q1 Lower pressures on exchange rates due to capital controls and foreign direct investment attraction Source: Círculo de Empresarios based on World Bank,

13 Asian corporate sector Fortune 500 list distribution Asia surpassed Europe and the US in the Global list: Fortune 500 The power of Asia in the Fortune 500 list US Europe China Japan Rest of Asia Source: Círculo de Empresarios based on Fortune. Natixis, Spanish companies in the Fortune 500 list 2016 Banco Santander Telefónica BBVA Iberdrola Repsol ACS Gas Natural Fenosa Mapfre Inditex 13

14 China s new Silk Road will transform the world... China s new Silk Road Infrastructure projects throughout Eurasia and the Pacific which involves 63% of world population and 29% of global economy Source: Círculo de Empresarios based on Merics, Natixis,

15 EU: the recovery extended among other european countries Focos de incertidumbre política Uncertainty signals After the UK and France elections, political uncertainty has reduced... EU risks EU-UK negotiations Elections in Germany and Italy Italian financial system 2017 GDP projections (%) Source: Círculo de Empresarios based on Caixabank Research,

16 Jan-06 Jun-06 Nov-06 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Feb-13 Jul-13 Dec-13 May-14 Oct-14 Mar-15 Aug-15 Jan-16 Jun-16 Nov-16 Apr-17 Brexit Theresa s May narrow victory over Corbyn suggests a Soft Brexit... GBP/USD 1,55 Although the positive effect of the pound on exports... Higher inflation moderates gdp growth due to its negative impact on real incomes 1,5 1,45 1,4 1,35 1,3 1,25 1,2 1,15 Monthly inflation rate % annual change Source: Círculo de Empresarios based on Bloomberg, ONS,

17 Eurozone: prices General inflation slightly walk away from ECB 2% target HICP* Annual change 2,5 2,0 ECB target General Core HICP forecast (Eurozone) 2017 % 2015=100 1,5 1, ,5 0, ,5-1,0 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Source: Círculo de Empresarios based on Eurostat, ECB,

18 Eurozone: Monetary Policy 10Y treasury german yield rose above 0.50% 10Y yield % 0,7 0,6 0,5 0,4 0,3 0,2 0,1 0-0,1-0,2-0,3 Financial markets anticipate a possible reduction of monetary stimulus at the end of 2017 EUR/USD, ,16 1,14 1,12 1,1 1,08 1,06 1,04 1,02 1 Source: Círculo de Empresarios a based on Bloomberg,

19 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Italy: banking rescue The European Commission approved a 17 billion plan by the Italian government to save Popolare di Vicenza and Veneto Bank (2% of Italian system) Italian banks stocks January 2016= Unicredit Intesa San Paolo UBI More financial stabillity on Italian Banks Confidence in the Italian Banking system will grow up 30 Source: Círculo de Empresarios based on Bloomberg,

20 EU-Japan trade negotiations The EU is negotiating a trade deal with the 4 th largest economy in the world 512 million people EU-Japan trade relations Billions $ EU goods exports EU goods imports Balance Reasons for a trade deal Custom duties reductions Requirements in line with international standards Taking a stand against protectionism 127 million people Note: Japan and the EU accounted 1/3 of global GDP and 8.5% of total population Source: Círculo de Empresarios based on the European Commission,

21 US: economic strenght signals... The positive economic sentiment and the labor market momemtum anticipates a stable GDP growth (2%~) US strenghts Principal uncertainty Trump economic policy Consumer confidence (Conference Board US) Employment levels Manufacturing Activity Interest rates (Monetary Policy normalization) US manufacturing PMI, Institute for Supply Management (ISM) Source: Círculo de Empresarios based on Bloomberg and Caixabank Research,

22 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun Although increase in inflation moderates Recent declines in US prices US inflation % annual change 3,0 General Core US inflation % Annual change ,5 2, ,5 1, ,5 Federal Reserve estimation Source: Círculo de Empresarios based on Federal Reserve,

23 US: the Fed raised interest rates again The Federal Reserve increased interest rates by 25 bp to [1-1.25%] 4 3,75 US interest rates interval % [ ] December 2016 [ ] December 2015 [0.75-1] March 2017 [1-1.25] June 2017 Inflation marks the pace of interest rates hikes [ ] 3,5 3,25 3 2,75 2,5 2,25 2 1,75 1,5 1,25 1 0,75 0,5 0,25 0 Fed dot plot July,% The market expects a new raise at the end of 2017 March 2017 Juy 2017 Source: Círculo de Empresarios based on Federal Reserve,

24 Oil market: doubts about OPEC effectiveness After a 20% price drop between January and June, the Brent barrel raised by 10% on signs of less supply Brent price $ per barrel Extend of the agreement by 9 more months Oil drop reasons January- June 2017 Greater production in US (9.35 mbd) The recovery of the largest oil field in Libya (Sharara) OPEC agreement to cut production The end of military attacks in the Niger Delta A greater drop than expected in petroleum demand in Asia. 42 In July, oil raised greater than 4$ per barrel due to higher demand projections by the end of Summer and the reduction of US oil inventories Source: Círculo de Empresarios based on Bloomberg

25 01/05/ /29/ /21/ /13/ /05/ /29/ /20/ /14/ /05/ /29/ /21/ /13/ /05/ /29/ /20/ /14/ /05/ /27/ /21/ /12/ /05/ /27/2017 Permian Midland Eagle Ford Permian Delaware Niobrara Bakken Oil market: structural oversupply fears Shale oil strenghtness and doubts over the capacity of full members of the OPEC to reduce their production Weekly US production Mbd ,4 Break-even prices for US shale oil regions ($ barrel) Source: Círculo de Empresarios based on EIA

26 Oil market: barrel below 50$ Oil prices will remain below 50$ by the end of the year Implied probability of price variations 100% 81,88% > 55$ > 50$ < 50$ 80% 60% Commodity prices Index 2005= No-energy Food Energy 40% 20% 18,12% % 2,96% Source: Círculo de Empresarios baed on EIA. FMI

27 Currency market Dollar bearish pressures Dollar performance against emerging currencies, January-18 July 2017 US dollar performance against the most traded currencies, January-18 July ,60% -2,20% -2,70% -5,30% -3,87% -5,60% -6% Argentine Peso Brazilian Real -15% Chinese Yuan Indian Rupee Mexican peso -9,50% Japanese Yen Sterling pound Swiss Franc Euro Source: Círculo de Empresarios based on Bloomberg,

28 Financial markets: equity markets Stock market gains in a low volatility environment Equity market January 2017= Global Emerging Lower political uncertainty Consolidated growth in advanced economies 115 Recovery in emerging countries Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 S&P 500 at record highs US economic growth doubts on the long term Brexit Source: Círculo de Empresarios based on MSCI, Caixabank Resarch

29 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 May-17 Jul-17 Financial Markets: Fixed income market US treasury yield curve is flattening due to lower confidence in the US economy in the long term 10Y-2Y US treasuries spread 3,5 3 2,5 2 10Y 2Y Spread Premium risks Eurozone Maximums of 2017 Netherlands 22 Belgium 67 France 81 Ireland 86 Spain 157 Italy 212 Portugal 386 Greece 758 1,5 1 July Netherlands 12 0,5 0 France 26 Belgium 27 Ireland 29 Spain 96 Italy 162 Portugal 248 Greece 469 Source: Círculo de Empresarios based on Bank of Spain,

30

31 Tailwinds Lower macroeconomic imbalances Employment creation Lower private indebtedness Monetary stimulus and better financing conditions Good behaviour of external sector 31

32 Forecasts: the expansión is extended but at a moderate pace 3.2% 3% 2.6% * 2018* In 2017, BBVA and Bankia foresee a GDP growth of 3.3% and the IMF forecasts 3.1% Source: Círculo de Empresarios based on Ministry of Economy, Industry and Competitiveness, July

33 Forecasts 2017: composition of growth 2017 GDP annual change = 3% 2.5 pp growth contribution Domestic demand % annual change Private consumption = 2.6% Public consumption = 0.8% Gross fixed capital formation = 3.9% 0.5 pp External demand Goods and services % anual change Exports = 6.5% Imports = 5.4% growth contribution Source: Círculo de Empresarios based on Ministry of Economy, Industry and Competitiveness, July

34 Current growth GDP (annual change) and contribution of domestic and external demand (pp) Spain keeps the positive spread growth with the OECD and the Eurozone Spain domestic demand Spain external demand Spain GDP Eurozone GDP OECD GDP External demand: 4 th consecutive quarter of positive contribution Source: Círculo de Empresarios based on Bank of Spain, Eurostat and OECD,

35 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 Domestic demand: households Consumer spending maintains its pace and residential investmente slows down House prices increase and house purchases dropped slightly Spending decisions % quarterly cahnge 10 Residential investment House prices and purchases 7 Prices (quarterly change) (left) Private consumption Purchases (right) Source: Círculo de Empresarios based on Bank of Spain,

36 Labour market (I) Unemployment rate EU28, May 2017 % labour force ,7 Unemployment rate in Spain May 2017 = 17.7% of labour force vs. Eurozone average = 9.3% (Eurostat) 10 9,3 7,8 5 0 Source: Círculo de Empresarios based on Eurostat,

37 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Labour market (II) Affiliates to Social Security and unemployed Persons Affiliates SEPE data- June 2017: unemployed 98,317 vs. May Unemployed ,243 vs. June 2016 affiliates 87,692 vs. May 372,835 vs. June 2016 new contracts 2,089,520 in June Source: Círculo de Empresarios based on Ministry of Employment and Social Security, July

38 Prices General and core inflation Annual change 3 June 2017: 2,5 2 1,5 1 0,5 0-0,5-1 Spain CPI Spain core CPI* Eurozone CPI 1,5 1,3 1,2 Annual CPI decreases to 1.5%, after reaching 3% in February, mainly because energy prices evolution Prices are rising above the Eurozone average * W ithout energy and non-processed food Core inflation = 1,2% Source: Círculo de Empresarios based on INE, Eurostat and Bank of Spain,

39 Prices Contribution to CPI, by products (pp) 3 Services 2 Processed food Energy Non-energy industrial goods Non-processed food General CPI Contribution to inflation spread Spain - Eurozone (pp) The spread is mainly explained by the energy prices evolution 1,5 1 0,5 Services Processed food Energy Non-energy industrial goods Non-processed food General CPI 0-0,5-1 -1,5 Source: Círculo de Empresarios based on Bank of Spain,

40 May-13 Jul-13 Sep-13 Nov-13 Jan 14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan 15 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan 16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan 17 Mar 17 May 17 Apr 13 Jun-13 Aug 13 Oct-13 Dec 13 Feb-14 Apr 14 Jun-14 Aug 14 Oct-14 Dec 14 Feb-15 Apr 15 Jun-15 Aug 15 Oct-15 Dec 15 Feb-16 Apr 16 Jun-16 Aug 16 Oct-16 Dec 16 Feb 17 Apr 17 Financial conditions Credit increases Credit to households % var. annual Total House purchase Consumption and other Consumption and other 2.9% from May 2016 Credit to business % annual change Total From resident entities Other Total 5 months in positive Note: credit to households and business measured in stock terms Source: Círculo de Empresarios based on Bank of Spain,

41 Private debt keeps going down Households 101.2% (% gross available income)* Companies 83.1% of GDP Households debt and financial burden % gross available income Debt (left) Total financial burden (right) Companies debt and financial burden % GDP Debt (left) ,6 Financial burden due to interests (right) , , Financial burden due to interests (right) 83, Financial burden, mainly due to interests, is shrinking * In % of GDP < 70% Source: Círculo de Empresarios based on Bank of Spain,

42 May-95 Apr-96 Mar-97 Feb-98 Jan-99 Dec-99 Nov-00 Oct-01 Sep-02 Aug-03 Jul-04 Jun-05 May-06 Apr-07 Mar-08 Feb-09 Jan-10 Dec-10 Nov-11 Oct-12 Sep-13 Aug-14 Jul-15 Jun-16 May-17 Public debt Public debt was 1,124,960.8 millions, nearly 100% of GDP in May 2017 Public debt Million % of GDP /- 100% of GDP 2017 Continuous rise in the public debt Source: Círculo de Empresarios based on Bank of Spain,

43 Exports Imports External sector Trade balance, January April 2017 (Annual change ) Exports 9.8% 91,537.7 M Imports 12.4% 99,935.9 M BALANCE Deficit 50.5% -8,398.1 M Millions Exports of goods Imports of goods Balance ,1 Top 3 sectors (% of total) Capital goods Food, beverages and tobacco Automotive industry Capital goods Chemical products Energy , % energy deficit Geographical distribution (%) Exports Exportaciones Importaciones Imports Asia 9,5 America 10,3 Africa 6,2 Other 1,6 Africa 8,4 America 10,8 Asia 19,9 China 7,9 Other 0,3 Europe 72,4 EU 66,6 Europe 60,6 EU 54,7 Source: Círculo de Empresarios based on Ministry of Economy, July

44 Interest rates and risk premiums The risk premium stands at just under 100 bp for the firts time after October 2016 Ten years bond yield Spain and Germany (%) Risk premium (bp) 700,0 7,5 6,5 5,5 Spain Germany Risk premium (right) 600,0 500,0 4,5 400,0 3,5 2,5 1,5 300,0 200,0 0,5 100,0-0,5 0,0 Source: Círculo de Empresarios based on Bank of Spain and national Central Banks,

45 Spain s position in international rankings The Global Competitiveness Report (138 countries) The Global Innovation Index 2017 (127 countries) Logistics Performance Index 2016 (160 countries) 1 Switzerland 1 Switzerland 1 Germany 2 Singapore 2 Sweden 2 Luxembourg 3 USA 1 Netherlands 32 SPAIN SPAIN (vs. 2016) 28 = (vs. 2016) Sweden SPAIN 5 (vs. 2014) Source: WEF, 2017 Source: INSEAD, 2017 Source: World Bank, COUNTRY REPTRAK Countries with best reputation in the world (55 countries) 1 Canada The Human Freedom Index 2016 (159 countries) 1 Hong Kong Gender Progress Index (122 countries) 1 Norway 2 Switzerland 2 Switzerland 2 Sweden 3 Australia 3 New Zealand 3 Netherlands 13 SPAIN 4 (vs. 2016) 36 SPAIN 1 (vs ) 21 SPAIN 1 st edition Source: Reputation Institute, 2017 Source: Cato and Fraser Institutes, 2016 Source: INSEAD,

46