Global Headwinds? Tailwinds From China? be A Hurricane Too! Comments Prepared For Project Link New York Meetings, ober,
Global Presentation Chart Book, ober vvvvv World trade collapsing, and world industrial growth is pretty slow. Global GDP is stalling. Commodity price declines mean that producing economies lose income and import less from importing countries, and the income losses are reflected. First round losses are concentrated in emerging economies. In the end, all suffer. An historic slowdown or drop in world GDP is possible! - IMF Measure Of World Trade Value Global Exports In U.S. Dollars, Percent Change Year Ago (Right Axis, To e ) Red Line Is Year-Over-Year Growth Of World GDP (Left Axis, Yearly To ) - - 7 9 7 7 7 77 79 8 8 87 89 9 9 9 99 7 9 - IMF Measure Of World Trade Value Vs GDP Growth 7 World Exports In U.S. Dollars, Percent Change Year Ago, Right Axis World GDP, Percent Change Year Ago, Left Axis - - 8 7 7 7 7 78 8 8 8 8 88 9 9 9 9 98 8 - - IMF Measure Of World Trade Value, Billions Of U.S. Dollars Developed Economy Industrial Production Index, = Monthly Data Through e 8 Data Through ust Using GDP Weights 9 99 9 99 9 99 9 98 989 99 999 9 G-7 + Euro Zone G-7 + Euro Zone Ex-USA 7 8 9 9 8 Page
Global Presentation Chart Book, ober vthe commodity price windfall that is restraining CPI in importing economies will disappear by uary, adding at least -/ percentage points to CPI-based inflation metrics. Inflation perceptions and expectations will rise. Bond prices are at risk as yields should rise and yield curves steepen with higher perceived inflation. Un-Disinflation In Key Economies: Headline CPI Trends Nov f Nov f f f f...... -. Percent Change From Same Month A Year Ago -. Germany France Euro Zone United Kingdom Canada Euro Zone: CPI, Percent Change Year Ago Un-Disinflation In Key Economies: Core CPI Trends Nov f Nov f f f f...... Percent Change From Same Month A Year Ago -. Germany France Euro Zone United Kingdom Canada Government Bond Yield Curves ober, Blue Bars Are CPI, Green Line Is Core CPI, Red Line Is Core Trend Since 8 ober To tember Are HFE Forecasts 7 7 8 8 9 9 f......... -. -. f -Day -Day 9-Day -Year -Year -Year -Year -Year -Year........ -. U.S. France U.K. Japan Australia Canada Germany Italy Page
Global Presentation Chart Book, ober vvv China s economy is growing a less than its demonstrated potential rate of % per year. However, it continues to expand at 7%. China adds more to world GDP growth than any other economy. This cyclical slowdown is not longer or deeper than those that came before. Demograhics drives potential growth. Exports are not helping, but national income is boosted by a widening trade surplus. China: Yearly Economic Growth Rate, Percent China: Industrial Production Vs Exports Yearly GDP Growth -Year Average (Demonstrated Potential) GDP Growth 8 77 79 8 8 87 89 9 9 9 99 7 9 f - - - - Industrial Production %chya (Right Axis) 7 8 9 Exports %chya (Left Axis) China: Yearly Changes In Urban And Rural Population Millions Of Persons, Yellow Line Is Rural Population, Blue Line Is Urban Population Red Lines Are Ten-Year Moving Averages - - - - 9 98 989 99 999 9 China: Trade Balance, Seasonally Adjusted, RMB Billions Black Line Is -Month Moving Average 7 7 8 8 9 9 - - Page
Global Presentation Chart Book, ober China seems to be managing its exchange rate to depreciate within a very well-defined trading range. The downtrend started after President Xi gained total control of the government. International reserves are falling at a $ trillion per year pace! Money is going abroad to fund China s trade-development projects like Silk Routes and AIIB. Yuan Per Per U.S. U.S. Dollar Dollar Daily Data Through ober tember 9,,......... Nov Nov Nov Yuan Per U.S. Dollar Rotterdam Venice China: The New Silk Road Trade Routes Nairobi Moscow Dushanbe Piraeus Calcutta Colombo Xian Jakarta Monthly Change China: FX Reserves, Billions Of U.S. Dollars Fuzhou Land Route itime Route Daily Data Through ober tember 9,,. 7.. 7.. 7...8....... Nov Nov Nov 8 8 8 9 9 9 8 9 9 Page
Global Presentation Chart Book, ober vin the third quarter, China accumulated a trade surplus of $ billion. Add to that about $ billion per month of foreign direct investment flows into China, and also guess that FX reserves earned at least $ billion in coupon income. That total current account inflow of $ billion should have boosted FX reserves. Instead, reserves fell by $7 billion. Where did $8 billion go? Over the last months, current account inflows totaled $77 billion, but FX reserves decreased by $7 billion. Where did $. trillion go? Monthly Change China: FX Reserves, Billions Of U.S. Dollars 8 9 9 Page
Global Presentation Chart Book, ober QE is not working in Euroland. Incremental bank lending has been only 9 billion in exchange for billion in bond purchases. The ECB s balance sheet is growing, buy msinly because banks are holding liquidity created by QE on deposit as excess reservers. ECB: Balance Sheet Deposit Facility, Billions Of Euros Weekly Data To ober,, Line Shows Six-Week Moving Average Nov Euro Zone: M And Credit Growth, Percent Change Year Ago 7 7 8 8 9 9 M M Target Lending To Non-Banks 8 8 8 - - ECB: Total Repos Outstanding, Billions Of Euros Weekly Data Through ober, ECB: Repo Auction Number Of Bidders Weekly Data To ober,, Line Shows Trend Since uary ECB Council Nov Nov 8 Page 7
Global Presentation Chart Book, ober Economic recovery in the Euro Zone is tepid, although some improvement is apparent over the last year. A dearth of credit growth restrains demand. Output is depressed, still at levels last seen years ago never having regained what was lost in the 8-9 crash. Unemployment and slack are abundant: There are no inflation risks here. Euro Zone: GDP & Economic Confidence Index GDP Is Percent Change Year Ago To p Right Axis (Bar) Economic Confidence Index To, Left Axis (Green Line) 9 9 8 7 7 98 7 99 7 8 7 8 9 8 9 9 Euro Zone: Retail Sales, Percent Change Year Ago Green Line Shows Yearly Change Of -Month Moving Average Blue Line Is Percent Change Since Peak - - - - - - - - - - - - -7-8 Euro Zone: Industrial Production Index Seasonally Adjusted, =, Trend Since Drawn 9 Output Depressed At Levels! Well Below 8 Pre-Depression Highs! Still Falling, No Recovery In Sight! 98 99 7 8 9 Euro Zone: Exports, Percent Change Year Ago Yellow Line Shows Five-Month Moving Average 7 8 8 9 9 9 9 - - - Page 8
Global Presentation Chart Book, ober Japan: The economy is doomed by its debt and its demographics. With a shrinking population, GDP will shrink but the national debt will not. Deflation is the companion of a shrinking population. No amount of QE can reverse it. It was obscured by sales tax rate hike and now it is back. The current account will blow out again very quickly unless oil prices fall again. Japan: Population And Labor Force, Percent Change Year Ago Japan: Real GDP Vs HFE Capacity Estimate GDP, Trillions Of Yen To, Red Line Is HFE Estimate Of Capacity GDP 7 89 9 9 9 99 7 Japan: Employment, Percent Change Year Ago 9 Green Line Shows -Month Moving Average, Black Line Is Labor Force Trend 7 8 8 9 9 - -...... -. -. -. -. -. -. -. 9 9 9 9 98 99 7 8 9 Japan: Trade And Current Account Balances, Trillions Of Yen Yellow Line Is Current Account, Blue Line Is Current Account Three-Month Moving Average 99 Record Trade Deficit In uary 7 8 9 - - - f Page 9
Global Presentation Chart Book, ober Japan: With a shrinking population, GDP must decline and prices must fall. Industrial output and GDP show plenty of slack. Investment spending is depressed and slowing. Japan needs people, not monetary easing or fiscal stimulus. Japan: Inventory To Sales Ratio Seasonally Adjusted Monthly Index, = 9 98 99 7 8 9 9 8 p Japan: Industrial Production Index Seasonally Adjusted Monthly Index, = 87 Industrial Output Still Reduced To 988 Levels 89 9 9 9 99 7 9 9 9 8 7 7 p Japan: Tokyo-Area CPI, Percent Change Year Ago Yellow Bars Are CPI Ex-Sales Tax. Japan: Capital Spending, Percent Change Year Ago Green Line Shows Four-Quarter Moving Average, Blue Line Is Percent Change Since Peak Black Line Is -Year Trend 7 8 8 9 9 p... -. -. -. 7 7 77 79 8 8 87 89 9 9 9 99 7 9 - - - - Page
Global Presentation Chart Book, ober Canada: The oil price shock has loosened up some excess capacity, but utilization rates remain high overall. Rise in core CPI probably is due to currency depreciation, but expectations are affected just the same. Headline and core will converge early next year. Canada: Actual GDP Vs HFE Full Capacity GDP Billions Of Constant C$, Quarterly Data Through Black Line Is HFE Peak-To-Peak Capacity GDP Blue Line Is Actual GDP Q Q Q Q Q Q Q Q Q 7 7 8 8 9 9 Canada: CPI, Percent Change Year Ago 8 7 7 Canada: HFE Vs StatsCan Measures Of Slack, Percent Of GDP HFE Unused Capacity, Right Axis StatsCan Unused Capacity, Left Axis 8 8-9 9 9 9 9 9 9 98 99 7 8 9 Canada: Unused Capacity And Core CPI Increases Yellow Line Shows Core CPI, Blue Line Is Core CPI Trend Since Unused Capacity (Inverted, Right Axis) CPI-X8 Inflation (Left Axis). -... 7 7 8 8 9 9 f -. 7 8 9 9 Page
Global Presentation Chart Book, ober vcanada: Recovery from oil price shock has been slower than expected. Real wages never benefited from oil price drop. Domestic emand remains tepid, unemployment stll way above pre-crash lows. Trade balance and exports charts are still too ugly to draw. Manufacturing is showing only a slow pickup as exports rotate toward non-resource-sector goods and services. Canada: Retail Sales, Percent Change Year Ago Nominal Retail Sales CPI-Adjusted Real Retail Sales Trend In Real Sales 7 7 8 8 9 9 Canada: Unemployment Rate, Percent 8 - - - -8 Canada: Monthly Domestic Product & Manufacturing Output Green Line Is Mfg Production (%chya, Left Axis) Columns Are Monthly GDP (%chya, Right Axis) - - - 7 8 8 9 9 Canada: Real Weekly Earnings, Percent Change Year Ago - - - - - 7 8 9 9 8 7 f Black Line Shows -Month Moving Average 9 98 99 7 8 9 - - - - - Page
Global Presentation Chart Book, ober vcanada: Trade balance is starting to recover, but progresss has been slow. Canada: Merchandise Trade Balance, C$ Billions Seasonally Adjusted, Line Shows -Month Moving Average 7 - - - - 7 7 8 8 9 9 Canada: Exports Vs Manufacturing Output Percent Change Year Ago, Line Is Manufacturing Output, Bars Are Exports 7 7 8 8 9 9 - - - - Canada: Exports, Percent Change Year Ago Blue Line Is Five-Month Trend 7 7 8 8 9 9 Canada: Exports Of Energy Products, Billions Of Dollars Line Shows Natrual Gas Only, Seasonally Adjusted, Balance of Payments Basis 7 7 8 8 9 9 - - - - 8 Page
Global Presentation Chart Book, ober Crude Oil Price And G-7 Industrial Production Oil Price Is Black Line, Daily Data To ober,, U.S. Dollars Per Bbl (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) Red Line Is -Year Trend In Oil Prices 9 9 88 9 88 Gold Price And G-7 Industrial Production Gold Price Is Black Line, Daily Data To ober,, U.S. Dollars/Oz (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) 9 9 88 9 9 9 9 9 9 9 Corn Price And G-7 Industrial Production Corn Price Is Black Line, Daily Data To ober,, U.S. Dollars/Bushel (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) 8 9 8 7 8 8 Coal Price McCloskey Coal Futures, Daily Data To ober,, U.S. Dollars/Ton (Right Axis) Wheat Price Is Black Line, Daily Data To ober,, U.S. Dollars/Bushel (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis). 9 9 88 9 9 Nov Wheat Price And G-7 Industrial Production 7 9. 7..... Iron Ore Price And G-7 Industrial Production Iron Ore Price Is Black Line, Daily Data To,, U.S. Dollars/Dry Tonne (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) 8 99 98 9 9 9 9 9 88 Nickel Price And G-7 Industrial Production Nov Nickel Price Is Black Line, Daily Data To ober,, U.S. Dollars/M Ton (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) 9 9 Copper Price And G-7 Industrial Production Copper Price Is Black Line, Daily Data To ober,, U.S. Dollars/Lb (Right Axis) Production Index Is Yellow Line To, Index = (Left Axis) 9 9 88 9 9 Page 8.......