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The Global Economic Outlook

The Global Economic Outlook. By Paul Ashworth. Real GDP (%y/y). Source: Thomson Datastream. 2. Unemployment Rate (%). Source: Thomson Datastream. 3. Change in Private Payroll Employment (000s). Source: Thomson Datastream. 4. ISM Activity Indices. Source: Thomson Datastream. 5. Agenda.

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The Global Economic Outlook

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  1. The Global Economic Outlook By Paul Ashworth

  2. Real GDP (%y/y) Source: Thomson Datastream

  3. 2. Unemployment Rate (%) Source: Thomson Datastream

  4. 3. Change in Private Payroll Employment (000s) Source: Thomson Datastream

  5. 4. ISM Activity Indices Source: Thomson Datastream

  6. 5. Agenda • What is holding the US back? • Sluggish global growth. • Fiscal consolidation. • Where will stronger growth come from? • Housing. • Oil & gas. • Manufacturing renaissance.

  7. 6. Real Exports (%y/y) Source: Thomson Datastream

  8. 7. US Exports (As a % of 2012 Total) Source: BEA

  9. 8. The Global Outlook • Europe – Crisis likely to reignite. • China – Slower growth here to stay. • Japan – Confidence in “Abenomics” will probably fade.

  10. 9. Euro-zone Sentiment Indicator & GDP Growth Sources: EC, Thomson Datastream

  11. 10. Italian & Spanish 10 Yr Govt. Bond Yields (%) Source: Bloomberg

  12. 11. Current Account Positions (As a % of GDP) Source: Thomson Datastream

  13. 12. General Govt. Budget Balance (As a % of GDP) Source: Thomson Datastream

  14. 13. Whole Economy Unit Wage Costs Source: Thomson Datastream

  15. 14. Unemployment Rates (%) Source: Thomson Datastream

  16. 15. Why might the crisis flare back up? • Cyprus. • Other small economies e.g. Slovenia. • Italian political & economic uncertainty. • Further downturn in France. • Clash over austerity, widening policy divisions. • German elections.

  17. 16. Euro-zone Outlook • The ECB’s OMT plan has helped to buy time. But it cannot address the region’s fundamental problems. • The troubled peripheral countries have made some progress, but are hamstrung by a lack of growth. • Further moves towards fiscal & banking union will be difficult and slow. • The crisis is not over.

  18. 17. Official China GDP & CE Proxy (%y/y) Sources: CEIC, Thomson Datastream & Capital Economics

  19. 18. China Fixed Investment (Nominal, %y/y) Sources: CEIC, Thomson Datastream & Capital Economics

  20. 19. China Investment (As a % of GDP) Sources: World Bank & Capital Economics

  21. 20. Maximum Investment Share of GDP Reachedin Last 50 Years (%) Source: CEIC, Thomson Datastream & Capital Economics

  22. 21. China Unsold Residential Property (Million Units) Sources: CEIC & Capital Economics

  23. 22. China Total Credit (As a % of GDP) Sources: CEIC & Capital Economics

  24. 23. Nominal GDP (1990 = 100) Sources: Thomson Datastream & Capital Economics

  25. 24. Japan – Exchange Rate & Stock Index Sources: Thomson Datastream

  26. 25. What is “Abenomics”? • “Three arrow” policy named after PM Abe: • More credible fiscal plans. • Aggressive monetary easing. • Growth strategy based on structural reform. • Cooperation between government, central bank and corporate sector.

  27. 26. “Quantitative and Qualitative Monetary Easing” • New inflation target of 2% to be achieved “as soon as possible”, with a time horizon of “around two years”. • Planned doubling of size of monetary base by end-2014 ... • ... mainly by increased purchases of JGBs. • Significant lengthening of maturity of assets to be purchased.

  28. 27. Japan Monetary Aggregates & CPI (Mar. 2001 = 100) Source: Thomson Datastream

  29. 28. Japan Change in Cyclically-Adjusted Budget Balance (As a % of GDP) Source: IMF

  30. 29. US GDP (%q/q Annualised) Source: Thomson Datastream

  31. 30. Real Government Expenditure (%y/y) Source: Thomson Datastream

  32. 31. Federal Budget Balance (As a % of GDP) Source: CBO

  33. 32. Federal Spending & Outlays (As a % of GDP) Sources: CBO

  34. 33. Housing Starts & NAHB Homebuilders’ Index Source: Thomson Datastream

  35. 34. House Prices & Months’ Supply of Homes For Sale Source: Thomson Datastream

  36. 35. Housing Fair Value (Based on House Price To Disposable Income Per Capita Ratio) Source: Capital Economics

  37. 36. Oil & Natural Gas Production Source: EIA

  38. 37. Oil Imports Source: Thomson Datastream

  39. 38. Hourly Compensation Costs in Manufacturing (As a % of US Level) Source: BLS

  40. 39. Manufacturing Employment (Millions) Source: Thomson Datastream

  41. 40. GDP Growth (%q/q Annualised) Source: Thomson Datastream

  42. 41. Capital Economics’ US Macro Forecasts (% y/y) – Year Average

  43. 42. Treasury Yields (%) Source: Thomson Datastream

  44. 42. Treasury Yields (%) Source: Thomson Datastream

  45. 43. PCE Inflation (%) Source: Thomson Datastream

  46. 44. Money (Jan. 2008 = 100) Source: Thomson Datastream

  47. 45. S&P 500 Index Source: Thomson Datastream

  48. 46. S&P 500 Index Source: Thomson Datastream

  49. 47. S&P 500 Cyclically Adjusted P/E Ratios Source: Robert Shiller, Capital Economics

  50. 48. S&P 500 Index & Nominal GDP (1970 = 100) Source: Capital Economics

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