EUROPEAN EXPORT INDEX Q1 2018

Transcription

1 EUROPEAN EXPORT INDEX Q1 2018

2 BDO EXPORT INDEX KEY FIGURES The BDO Export Indices are composite indicators which provide snapshots of the export markets in Europe s five largest economies Germany, UK, France, Italy & Spain together accounting for around 70% of EU GDP, as well as the EU as a whole. Using data from a range of European surveys over the past quarter, the headline figures in this edition refer to the export outlook for the first quarter (January - March) of Summary and key findings EU Export Growth Index EU Export Inflation Index in Q from in Q Current Reading in Q from in Q Current Reading Recent quarterly trend: Recent quarterly trend: KEY: = above 100; = above 100 and (joint) highest in 12 months = below 100; = below 100 and (joint) lowest in 12 months = upward quarterly movement = downward quarterly movement 2

3 BDO EXPORT INDEX KEY NATIONAL FIGURES Index Country Movement in quarter Index level Export Growth Index Export Inflation Index EU UK Germany France Spain Italy EU UK Germany France Spain Italy in Q in Q in Q in Q in Q in Q in Q in Q in Q in Q in Q in Q1 KEY: = rise from previous quarter = fall from previous quarter 3

4 EUROPEAN EXPORT INDEX Key Findings The BDO EU Export Growth Index picked up to in Q1 suggesting that export growth is set to accelerate in the 28-country block. In Q4, the EU Export Growth index climbed above 100 indicating growth in the volume of exports was higher than the long term average. This quarter the reading continues to rise pointing to faster export growth figures in the current quarter. In the first three months of the year, Spain and Germany are expected to have the fastest export growth. Spanish exports, which have grown at a rate of 8% for the past three quarters, are expected to grow even faster in Q Meanwhile, the UK is expected to see export growth fall to just below its long-run average level after exports grew by 6% year-on-year at the end of The BDO Export Inflation Indices, which look at the rates of annual export price growth in the EU as a whole and in the five largest European economies, showed export inflation is expected to continue to slow across the EU in Q1. The slowing of export price growth is in line with the broader disinflationary trend seen in Europe. The only exception is the UK in which export price growth is expected to rise after the index climbed 5.7 points to in Q In this quarter s In Focus section, we examine the threat that the US increasingly protectionist stance poses to the global trade outlook. 4

5 EU EXPORT GROWTH TO STRENGTHEN IN Q The BDO Export Growth Indices chart annual growth in total exports of Europe s five largest economies and the EU. The BDO EU Export growth index stood at in Q1 2018, up 2.7 points on the registered in Q and substantially above long-run average growth. The Index suggests that export growth will remain robust at the start of the year. GDP growth in the European Union remains healthy, supported by a cyclical upswing in global trade as well as strengthening domestic demand in member states. Most measures indicate that the 28-country bloc is on course to record impressive GDP growth in the first quarter of 2018, with this quarter s index reading suggesting that export growth will be an important contributor to this. BDO EXPORT GROWTH INDEX 100 = long-run average growth for EU exports. Greater than 95 = positive growth EU UK Germany France Spain Italy Source: OECD, European Commission, DG ECFIN Confidence Indicators, IFO Economic Situation Surveys, Eurostat 5

6 SPANISH EXPORTERS SET TO GROW FASTEST In Q1, Spain and Germany are expected to the be the top performing exporters among the EU s five largest economies. France, Italy and the EU as a whole are expected to see above-average export growth in the first quarter, each registering index scores higher than 100. In the UK, export growth is set to be just below the long-run average in Q The BDO UK Export Growth Index stands at 99.9, 0.7 points down on the previous quarter s reading, when UK exports grew at an annual rate of 6%. Spain, whose largest net exports include vehicles, fruits, vegetables and meat, recorded the highest index score in Q Its exports increased at a rate of 8% year-on-year for the past three quarters. The BDO Spain Export Growth Index climbed 2.2 points to in Q1, indicating even faster growth is expected. The next best performing nation is anticipated to be Germany. German exporters, which are already amongst Europe top performers, are set to see faster growth in Q1. The BDO German Export Index climbed to in Q1, 1.7 points above the registered in the final quarter of Across the EU, export growth is set to accelerate. As well as the improving economic health of member states, strong US growth is set to drive export demand. However, US trade protectionism represents a considerable downside risk - particularly in future quarters. This is explored in this edition s In Focus section. BDO EXPORT GROWTH INDEX (NATIONAL) 100 = long-run average growth for EU exports. Greater than 95 = positive growth EU UK Germany France Spain Italy Q Q Q Q Source: OECD, European Commission, DG ECFIN Confidence Indicators, IFO Economic Situation Surveys, Eurostat 6

7 EU EXPORT INFLATION WEAKENS DESPITE ECONOMIC UPTICK BDO EXPORT INFLATION INDEX The BDO Export Inflation Indices show the rate of year-on-year growth in export prices across the EU and its five largest economies. The BDO EU Export Inflation Index stands at in the first quarter of 2018, down 0.4 points on the previous quarter. Having accelerated in the final quarter of 2016, EU export price growth has been decelerating since the start of Export Inflation is still expected to remain above trend though at the start of Export prices increased by 1% at the end of 2017 with inflation expected to decelerate slightly at the start of The EU economy grew by 2.4% over 2017, up from the 2.0% in Despite the relatively strong growth seen over 2017, inflation has remained stubbornly low. The latest estimate of Eurozone inflation show that prices in the currency bloc rose by 1.3% year-on-year in January. Core inflation, which excludes volatile food and energy prices, remained unchanged at 1.0% in January. 100 = average trend growth. Greater than 95 = positive growth EU UK Germany France Spain Italy Source: OECD, European Commission, DG ECFIN Confidence Indicators, IFO Economic Situation Surveys, Eurostat 7

8 INFLATIONARY PRESSURES IN THE UK INCREASE WHILE EUROPEAN PRICE GROWTH SLOW All indices, aside from the UK Export Inflation Index, declined in the first quarter, pointing to slower price growth. The Indices remain above the longterm trend though. The German Export Inflation Index fell from to in Q1, while in France, the index declined from to The Eurozone has struggled with low inflation for numerous years as excess slack in the labour market has weighed on inflationary pressures. External forces have also contributed to the disinflation the fall of oil prices was one such factor. Oil prices climbed in 2017, rising from an average price of $52 per barrel of Brent crude in Q3 to $61 per barrel in Q4, and $67 thus far in 2018, meaning energy prices no longer act as a drag on inflation. Still, despite the efforts of the European Central Bank, Eurozone inflation has been falling since November. BDO EXPORT INFLATION INDEX (NATIONAL) 100 = average trend growth (national). Greater than 95 = positive growth In the UK, inflationary pressures remain high and the BDO Export Price Index indicates that the UK is set to see accelerating export price growth at the start of the year. The index climbed above the long-run average to in Q EU UK Germany France Spain Italy Q Q Q Q Source: OECD, European Commission, DG ECFIN Confidence Indicators, IFO Economic Situation Surveys, Eurostat 8

9 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10 Jun-11 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 IN FOCUS: THE RISING THREAT OF PROTECTIONISM The global economy is estimated to have grown 3.3% in 2017, the strongest result in six years. This finding is supported by data from International Air Transport Association (IATA), which show that 2017 was the strongest year for air freight demand growth since 2010, at 9%. Similarly, world trade figures show volumes grew by 4.5% year-on-year in 2017, with annual trade growth peaking at 5.6% in May the highest rate of growth recorded since April % 15% 10% 5% 0% Figure 1 Annual trade growth, % China and the US both performed more strongly than they have in recent years, but the resurgence of the Eurozone was perhaps the most striking aspect of the 2017 global growth story. Though much slack remains, an improvement in the labour market and the continued support of expansionary monetary policy drove domestic demand in 2017 in the Eurozone. Early indicators suggest that the global economy continues to perform strongly this year, though some warning signs have started to emerge. The US Federal Reserve is likely to rise rates faster than expected, as tax cuts stoke growth. This would push up rates globally as other central banks respond. However, the largest threat to global growth comes from the eruption of trade tensions. In January, President Donald Trump raised tariffs on imported washing machines and solar cells. At the start of March he announced import tariffs of 25% and 10% on steel and aluminium, respectively. World leaders have indicated that they are willing to respond in kind if the protectionist policies go ahead. EU leaders have drawn up a list of goods they could target with counter tariffs in response. UK steel workers are understandably concerned, with 7% of steel exports worth 360m going to the US each year. -5% -10% -15% -20% Source: CPB trade monitor The move from the Trump White House is unlikely to protect the American worker as intended but instead looks likely to drive up inequities by privileging certain sectors at the expense of the majority of workers in downstream industries and elsewhere. For now, the scale of the tariffs announced falls well short of the wave of protectionism announced by the Reagan administration in the 1980s and this did little to damage growth, so current threats should not be overstated. Still, the worry is that this is just the first domino to fall in a series of events which could severely impair global trade. A recent estimate of an extreme end scenario, where the U.S. implements a 10% levy on imports and the rest of the world retaliates, says the global economy would be 0.5 percent smaller by 2020 than it would have been without tariffs. Higher tariffs would inflate prices globally and leave central banks with a tough interest rate call, when balancing inflation against growth. Although such an extreme case is unlikely, it is no longer implausible. 9

10 EXPORT INDICES BY COUNTRY Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q EU UK BDO Export Growth Index Germany France Spain Italy EU UK BDO Export Inflation Index Germany France Spain Italy

11 APPENDIX: EXPORT GROWTH CONTINUES TO RISE IN Q1 BDO INDICES 100 = average trend growth. Greater than 95 = positive growth BDO EU Export Inflation Index BDO EU Export Growth Index Source: Markit / CIPS PMI, Bank of England, CBI, Eurostat, Office for National Statistics and Cebr analysis 11

12 METHOD NOTES The BDO quarterly European Export Indices are delivered on behalf of BDO LLP by the Centre for Economics and Business Research, a leading independent economics consultancy. Cebr has particular strengths in all forms of macroeconomic and market forecasting for the UK and European economies and in the use of business survey techniques. The indices are calculated by combining a range of up-to-date business surveys and hard economic data, from a European and country-specific sources to nowcast annual growth in the current quarter. Using surveyed data from sources including the European Commission, IFO, CBI, ISTAT & the Bank of England, as well as trade statistics from the UN and national statistical agencies, Cebr forecasts the level of annual growth in both total exports and export prices The surveys and historic hard data are combined and correlated against a time series of trade data, individually for export growth and export price growth. Cebr then calculates the strength of the relationship between these variables and the dependent variable, respectively export growth and export price growth for each of the two indices. The variables are then weighted together based on their correlations and strength of relationship. Using this, Cebr nowcasts the current level of export price growth and total value of exports in the current quarter. While there may be some data from months within the quarter of release, a nowcasting exercise is used to project whole quarter figures. Once a quarterly figure has been calculated, the annual growth rate from the same quarter in the previous year is derived. Finally, the growth rate is scaled into an index with 100 as the average long-term growth trend and 95 as the level dividing expansion from contraction. The process is repeated for all of the five largest economies in Europe, and the combined European Union. Long-term growth, represented by a reading of 100 in the index, is calculated at a EU level for exports and at a national level for export prices. The results are useful not only as snapshots of the current trends in the export markets of Europe s largest economies, but also as indicators of turning points and leading indicators of growth. 12

13 FOR MORE INFORMATION: PETER HEMINGTON +44 (0) This publication has been carefully prepared, but it has been written in general terms and should be seen as broad guidance only. The publication cannot be relied upon to cover specific situations and you should not act, or refrain from acting, upon the information contained therein without obtaining specific professional advice. Please contact BDO LLP to discuss these matters in the context of your particular circumstances. BDO LLP, its partners, employees and agents do not accept or assume any liability or duty of care for any loss arising from any action taken or not taken by anyone in reliance on the information in this publication or for any decision based on it. BDO LLP, a UK limited liability partnership registered in England and Wales under number OC305127, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. A list of members' names is open to inspection at our registered office, 55 Baker Street, London W1U 7EU. BDO LLP is authorised and regulated by the Financial Conduct Authority to conduct investment business. BDO is the brand name of the BDO network and for each of the BDO Member Firms. BDO Northern Ireland, a partnership formed in and under the laws of Northern Ireland, is licensed to operate within the international BDO network of independent member firms BDO LLP. All rights reserved.