Global Economic Outlook and Risks Global Finance Conference, Hofstra University Matthew Higgins, Vice President, Research & Statistics Group May 5, 2017 The views expressed here are those of the author, and do not necessarily reflect those of the Federal Reserve Bank of New York or the Federal Reserve System.
Roadmap Global economic performance since the financial crisis Recent signs of stronger global growth Temporary rebound or return to stronger trend? Advanced economies struggle to escape lowflation China s rebalancing challenge Implications of potential U.S. trade restrictions
16 14 12 10 8 6 4 2 0-2 -4-6 Advanced and EM Economies: GDP Growth Percent change from year-ago quarter China Other EMEs Advanced Economies 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Sources: National authorities, authors calculations. Individual economies growth rates weighted by lagged U.S. dollar GDP. 16 14 12 10 8 6 4 2 0-2 -4-6
140 130 120 Global Economy ex. China: Real GDP Performance Index, 2008:Q1 = 100 ( GDP-weighted average ) Pre-crisis trend 110 100 90 Note: Trend measured by growth over 1998-2005 Real GDP 80 70 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Sources: National authorities, authors calculations. GDP for individual economies weighted by lagged U.S. dollar GDP.
4 Evolution of Global Market Growth Forecasts Percent, CY/CY 4 2012 2013 2014 2015 2016 3 2017 2018 3 2 Sources: Blue Chip Economics, Consensus Economics. Figures are GDP-weighted averages for five AEs (with the euro area counting as one) and 25 EMEs. 11 12 13 14 15 16 17
60 Citigroup Economic Surprise Indexes Percent positive or negative* 40 20 Emerging Economies Advanced Economies 0-20 -40 01-15 04-15 07-15 10-15 01-16 04-16 07-16 10-16 01-17 04-17 07-17 *Weighted by series historical FX impact
Global GDP Growth and Composite PMI 8 Percent SAAR Diffusion Index 65 6 Correlation = 0.84 60 4 2 0-2 -4-6 GDP Growth Composite PMI Sources: Eurostat, Markit Economics April 53.4 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 55 50 45 40 35
Global Manufacturing PMI 57.5 Diffusion Index 55.0 52.5 Average 2004 2008:Q1 = 53.7 Average 2012 2016:Q3 = 50.9 52.8 April 50.0 47.5 45.0 42.5 Source: Markit Economics. 40.0 04 05 06 07 08 09 10 11 12 13 14 15 16 17
12.5 Global Industrial Production Growth Percent SAAR, rolling 3-mo. basis 10.0 7.5 Average 2005 2008:Q1 = 4.8 5.0 Average 2011 2016:Q3 = 2.2 2.5 0.0 Feb. 3.7-2.5-5.0-7.5-10.0-12.5 Source: CPB World Trade Monitor. Data exclude construction. 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Global trade far outpaced production until recently Global Industrial Production and Export Volumes Global Industrial Production and Export Volumes 350 1992:Q1 = 100, 3mma 120 2011:Q1 = 100, 3mma 300 250 200 Exports 115 110 Production 150 105 100 50 Production 100 Exports 0 92 94 96 98 00 02 04 06 08 10 12 14 16 Source: CPB World Trade Monitor. 95 11 12 13 14 15 16 17 Source: CPB World Trade Monitor.
Manufacturing Inventories, Asia ex. China 15 Percent change, annualized 6-mo. basis 10 5 0-5 March -4.8-10 10 11 12 13 14 15 16 17 Sources: METI, KOSTAT, MOEA, Haver Analytics. Data are in real terms, and are a weighted average for Japan, Korea and Taiwan.
Global Commodity Prices 120 Indexes, 2015:01 = 100 $U.S./bl. 120 100 Softs (LHS) 100 80 80 60 Metals (LHS) 60 40 Brent crude (RHS) 40 20 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 20
2400 U.S. Baker-Hughes Oil and Gas Rig Count Raw rig count 2200 2000 1800 1600 1400 1200 1000 800 600 400 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 Source: Oil and Gas Journal Weekly.
Advanced Economy Real GDP 115 Indexes, 2008:Q1 = 100 110 105 United States Japan 100 95 Euro area 90 08 09 10 12 12 13 14 15 16 17
G-3: Unemployment Rates Percent change from year ago 12.0 Official NAIRU estimates 10.0 8.0 Euro Area United States 6.0 4.0 Japan 2.0 07 08 09 10 11 12 13 14 15 16 17 Sources: BLS, Eurostat, Ministry of Health, Labor and Welfare. NAIRU estimates from Congressional Budget Office, European Commission and Bank of Japan.
12 11 EC Natural Rate Estimates and Projections Percent 2013 10 2014 9 2016 8 7 6 2007 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 10 21 22 Source: European Commission. All figures are from the Autumn forecast round.
G-3: Core Consumer Price Inflation 2.5 Percent change from year ago 2.0 1.5 1.0 0.5 0.0-0.5-1.0 United States Euro Area Japan 12 13 14 15 16 17 Sources: BEA, Eurostat, BoJ. U.S. inflation measured using the PCE index. 1.6 0.7-0.1
AE Core Inflation Performance with Negative Policy Rates Country Date Adopted Initial Core Inflation Current Core Inflation Japan January 2016 1.1-0.1 Sweden February 2015 1.0 1.0 Switzerland December 2014 0.4 0.1 Denmark September 2014 0.7 0.5 Euro Area June 2014 0.8 0.7 Sources: National sources, OECD. Policy rates are as follows: Japan, marginal current account balances; Sweden, repo rate; Switzerland, 3 - mo. LIBOR target; Denmark, CD rate; Euro Area, deposit rate.
110 Credit to Private Nonfinancial Sector ( % GDP ) 220 100 90 Advanced China 200 180 80 160 70 60 Other EMEs 140 120 50 100 40 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 80 Sources: BIS, IMF. Credit is from all sources, and measured at market value. Countries weighted by GDP at PPP.
China and other EMEs: Capital Spending as a Share of GDP 50 Percent 45 40 China 35 30 25 Other EMEs 20 15 10 Source: WEO database. 90 92 94 96 98 00 02 04 06 08 10 12 14 16
China: Non-financial Credit by Source $U.S. trillions, as of end-march 2017 Corporate & muni bonds, $3.7 Foreign bonds/loans, $0.3 Shadow finance*, $6.5 Domestic bank loans, $16.6 Source: CEIC, PBOC, BIS, staff estimates * Includes estimates for additional trust credit and bank claims on non-bank financial institutions. Muni bonds have been recently swapped for corporate bank loans
U.S. Merchandise Trade by Partner ( $U.S. bn. ) Country or Region Exports Imports Balance World 1,455 2,189-734 Canada 266 278-12 Mexico 231 294-64 Euro area 200 326-126 Asia ex. China, Japan 194 280-86 South America 137 108 29 China 116 463-347 OPEC* 69 67 2 Japan 63 132-69 Europe ex. EMU, UK 63 103-40 United Kingdom 55 54 1 Miscellaneous 66 84-18 Source: U.S. Census Bureau. Figures are for the 12 months through December 2016. * Excluding Venezuela.
U.S. Merchandise Trade with Canada ( values for 2016, $U.S. bn. ) Exports Imports Total 266 278 Capital Goods ex Autos 69 33 Motor Vehicles and Parts 58 65 Passenger Cars 14 45 Auto Parts and Trucks 44 19 Industrial Supplies 77 120 Consumer Goods 35 18 Food and Beverages 23 24 Other 10 19 Source: U.S. Census Bureau.
U.S. Merchandise Trade with Mexico ( values for 2016, $U.S. bn. ) Exports Imports Total 231 294 Capital Goods ex Autos 81 86 Motor Vehicles and Parts 33 107 Passenger Cars 4 24 Auto Parts and Trucks 30 84 Industrial Supplies 78 31 Consumer Goods 14 37 Food and Beverages 16 24 Other 8 8 Source: U.S. Census Bureau.
Current and Hypothetical MFN Tariffs Rates on U.S. Imports from Mexico ( percent ) NAFTA MFN* Total 0.1 3.3 Capital Goods ex. Autos 0.1 0.8 Motor Vehicles and Parts 0.1 6.0 Passenger Cars 0.0 2.6 Auto Parts and Trucks 0.1 6.9 Industrial Supplies 0.1 1.4 Consumer Goods 0.2 3.2 Food and Beverages 0.0 3.9 Other 0.1 0.1 Source: U.S. Census Bureau; United States International Trade Commission. * Implied MFN tariff rate is derived from duties actually paid in 2016 on U.S. imports from Brazil, China, Japan, and the EU, weighted to reflect the commodity composition of imports from Mexico.
U.S. Trade Balance with Mexico USD Bn 80 60 40 Manufacturing Balance At Value Added High Estimate USD Bn 80 60 40 20 20 0-20 Low Estimate 0-20 -40-60 Manufacturing Trade Balance 2002 2004 2006 2008 2010 2012 2014 2016-40 -60 Source: Census Bureau; OECD; Koopman et al. The upper and lower bounds of the adjusted manufacturing balance are derived using estimates of the share of U.S. value-added in bilateral Mexican imports from Koopman, Powers, Wang, and Wei (2010) and the OECD TiVA database, respectively.
2500 U.S. Corporate Profits by Source $U.S. billions, annual rate 2000 1500 Domestic plus foreign profits Q4: $690 billion 1000 500 Domestic profits (net) 0 80 84 88 92 96 00 04 08 12 16 Source: BEA. Domestic profits are net of payments to foreign equity holders.