法国兴业银行-全球-宏观策略-全球宏观经济与行业研究-20190619-32页 (2).pdf

N35 JUNE 2019 SCENARIOECO Economic and Sector Studies LATE CYCLE TENSIONS Despite a welcome bounce back on the 1Q19 GDP figures in many of the advanced economies,most signals still point to a slowdown of the global economy ahead,amidst heightened tariff tensions between the United States and China,on-going Brexit uncertainty and various country-specific headwinds.Against a backdrop of low inflation and signs of slowing growth,central banks have shifted to a more accommodative tone in their forward guidance.We expect the start of a rate cut cycle in the United States around the turn of the year,while additional monetary stimulus is on the cards in the euro area.The fiscal stance is set to turn less favourable in the US heading into 2020 but should remain supportive in China.Within the euro area,the fiscal policy varies by member state,but in aggregate we expect a moderately positive impulse.Financial markets have become more focused on the political risks amidst concerns that these are now biting into the growth outlook.Low yield levels and flat yield curves on the major markets signal low inflation and growth expectations.Further downside shocks to growth would weigh heavily notably on highly indebted corporates and emerging market assets.Rising unit labour costs in Europe and tighter labour markets in the US could still lead to inflationary surprises.A near-term correction on bond yields could prove a source of volatility.SCENARIOECO|N35 JUNE 2019 2 Outlook Summary.3 Pending inflation.4 Economic Forecasts.6 Euro Area.7 Germany.8 France.9 Italy.10 Spain.11 United Kingdom.12 United States.13 Japan.14 China.15 India.16 Brazil.17 Russia.18 Africa.19 Latin America.20 Emerging Asia.21 Gulf States.22 Central and Eastern Europe.23 Economic Data.24 Structural Data.27 Cyclical Data.28 Financial Data.29 Document completed on 19 June 2019 SCENARIOECO|N35 JUNE 2019 3 Outlook Summary GLOBAL ECONOMY The world economy is losing momentum amidst heightened tariff tensions between the United States and China.Temporary,Brexit uncertainty and various country-specific factors headwinds.Global GDP growth projected at 3.5%in 2019 and in 2020,below the 3.7%mark of 2018.The fiscal stance is set to turn less favourable in the US heading into 2020 but should remain supportive in China.Within the euro area,the fiscal policy varies by member state,but in aggregate we expect a moderately positive impulse.The oil market remains highly volatile.Despite oil supply being hit by a combination of OPEC+production cuts,US sanctions on Iran and Venezuela,and a halt to Russias Druzhba pipeline,the Brent has lost ground since its peak of$75/b in mid-April amidst a sizeable slowdown in global demand.ADVANCED ECONOMIES US GDP posted a strong 1Q19 print at 3.2%,but we have doubts about the durability of such performance.The fading of fiscal stimulus as of mid-2019 and lower corporate earnings as margins deteriorate with higher import tariffs and rising labour costs will weaken the economy going forward.We expect the US economy to decelerate from 2.9%in 2018 to 2.3%in 2019 and 1.5%in 2020.Economic activity in the euro area is underpinned by firm domestic consumption and strong labour markets,but growth is set to decelerate towards 1.2%and 1.1%in 2019 and 2020,from 2.5%in 2017 and 1.9%in 2018 amidst weakening exports and lower investment.Political headwinds present downside risks as the hardening of US position regarding trade tariffs may hit European interests,whilst the Italys plan to ease fiscal policy may further accentuate divergences on sovereign yield spreads.The UK economy has lost significant momentum on the back of Brexit uncertainty.The Brexit date has been delayed until October 31,but a no-deal Brexit remains the default option.The longer the uncertainty persists,the greater the economic cost.We forecast UK GDP growth at 0.9%in 2019 and 0.8%in 2020.Japans economic growth accelerated in 1Q19(2.1%annualized)but private consumption and capital expenditure are now contracting.We expect GDP growth to lose momentum to an average of 0.8%in 2019 and to 0.6%in 2020 as external demand will be hit by Chinas slowdown and the Sino-US trade tensions.EMERGING MARKETS Faced with the risk of a sharp slowdown,China has engaged policy easing using a mix of fiscal and monetary measures.Trade tensions have undermined the RMB,which now seems set to the seven-per-dollar mark.Growth prospects are uneven among emerging markets.Despite the headwinds coming from weakening trade,the expansion is set to remain firm in emerging Asia(notably in India)and in emerging Europe(excluding Russia and Turkey).We expect modest gains in economic growth in Latin America and Sub-Saharan Africa in 2019-2020.While financial conditions remain benign,especially following the pullback in US hike rates expectations,emerging markets face large corporate debt repayments in 2019-2021 and are still vulnerable to changing market sentiment.CENTRAL BANKS The Fed indicated in June 2019 that it was open to cutting rates if global trade tensions start to bite.The tightening cycle ended with the 25bp rate hike of Dec-2018.We expect the Fed to lower rates in Dec-2019 from the current range of 2.25-2.50%,kicking off an easing cycle that will continue throughout 2020-2021.Given low inflationary pressures and downside risks to the economic outlook,the forward guidance of the ECB has moved to a more accommodative tone.Contrary to its previous plan to hike rate in late 2019,the ECB announced that rates would be kept unchanged until June 2020 We expect the ECB to hold rates at record-low levels for longer and to introduce additional monetary stimulus,with the possibility of a reactivation of its asset purchase programme.FINANCIAL MARKETS Equity markets have become focused on the twists and turns in the trade negotiations.A sharp correction in April with the worsening in US-China trade relationship was followed by a rebound in June when the US announced the suspension of the tariff threat on Mexico.The more accommodative tone of the major central banks forward guidance also helped.The major fixed-income markets are pricing weak growth and low inflation.Rising unit labour costs in Europe and tighter labour markets in the US could,nonetheless,lead to upside surprises on inflation and a correction in long term rates causing new market volatility spikes.SCENARIOECO|N35 JUNE 2019 4 Pending inflation The traditional late cycle signs are showing up,with one notable exception:inflation Employment is improving across the board,but the price/wage relationship remains weak There are risks of being surprised by an inflation spike at the wrong time Growth without spiralling inflation Global economic activity has slowed over the last few months in the wake of robust growth from 2016 to 2018.This prior period saw an acceleration in global trade as business investment picked up in major developed economies,setting the stage for the strongest global growth since 2012.Until very recently,forecasts pointed to the normalisation of US and euro area monetary policies,predominantly based on an analysis of the continuously improving job market accompanied by record-low unemployment(US,Germany)or significantly better unemployment(France,Spain,Italy,UK,etc.).Just a year ago,financial markets expected the Fed to raise its rates four times between 2019 and 2020.Todays forecasts for the same period are the opposite(four rate cuts expected by end-2020).Similarly,central banks on both sides of the Atlantic have reversed their stance since the end of 2018.The escalation of trade tensions between the US and China,growing risks of a no-deal Brexit,and uncertainties surrounding the Italian budget have weighed on growth and inflation forecasts.Market projections have also made their way down.The 5-year/5-year inflation rate swap,one of the market indicators tracked by the ECB,is at an all-time low.As it stands,however,the bulk of the advanced economies have seen output gaps close and even turn positive.After all,the US job market and corporate profits remain firm.In the euro area,growth has recently weakened,largely due to the slowdown in exports,but domestic demand is proving resilient,buoyed by continuous improvement of the labour market.Despite these signs of tension in the economic cycle,prices are mysteriously low.This situation raises two concerns for central banks.First,the lack of inflation has meant that central banks have found less room to normalise their policies.Second,that inflation could raise its head,just as the economy is slowing,wrong-footing bond markets and impeding monetary policy transmission at a bad time.“Too much”moderation Indeed,the obvious missing piece from the economic cycle puzzle is inflation.Monetary policies are traditionally pegged to the observation of the relationship between unemployment and inflation,more commonly referred to as the“Philips curve”,from the name of the economist who highlighted this long-term empirical relationship in the UK during the 1950s.The tighter the conditions on the labour market,the more pressure placed is on wages,initially squeezing corporate margins before spilling over to prices as corporates pass on the costs to consumers.Inflationary pressures in turn drive the central banks to raise tighten policy,thus putting the brakes on demand.This relationship,which has long served as a benchmark for central bankers,appears to have weakened considerably in the last 20 years,with the main determining factors behind inflation now found outside the labour markets.Moreover,inflation rates have been on a downtrend for several years now.The downward trajectory of inflation,coupled with weak price reactions to job market fluctuations,continues to puzzle economists.Theories abound.Without coming down on one side or the other of the debate,explanations include the following elements:SCENARIOECO|N 35-JUNE 2019 5 Technical progress has helped bring down the cost of consumer goods.New entrants to the service markets(hotels,individual transportation,etc.)have also steered prices downward in these sectors.The ageing of the population is thought to have a deflationary impact on wages,due to the growing percentage of seniors looking for jobs and forced to accept lower-paid positions that have them competing with younger employees.Furthermore,the retirement of baby boomers and consecutive increase in dependence ratios is eating into the share of the population at the end of their career commanding higher wages than employees just starting their career.Globalisation is credited for relaxing supply constraints through business relocations and for breaking up value chains.This shift in the supply curve with demand subject to a slower structural change(rise of middle classes in emerging countries)has resulted in price moderation.Greater credibility afforded to monetary policies by the independence of central banks and their inflation-targeting policies is another often-cited reason.Of course,that raises an interesting question,insofar as central banks have been unable to reach their inflation target despite ultra-accommodative monetary policies.Which in turn raises the question of how the monetary policy is transmitted to prices.Part of the answer may lie in the“structural”transformation of the consumer basket.Recently,ECB Executive Board member Benoit Coeur referred to this transformation as one factor explaining the lag in the transmission of monetary policies to prices.The share of services in the consumer basket has been climbing for more than 20 years due to the change in the relative prices of goods versus services.However,prices in the service sector are much less sensitive to pressures in demand,international competition and exchange rate fluctuations because they naturally change much less frequently than the prices of goods.This is why prices appear not to react to monetary policy measures.Which is not to say that monetary policy is not transmitted at all,but that it takes longer than it did in the decades of industrial society.The central banks are worried about seeing low inflation morph into deflation,in the event of a real shock to the economy.This worry may be sending a signal to the markets,triggering their fear of deflationary risks,as became very apparent in the recent decline in long-term interest rates,which hit a historic low despite the absence of any concrete sign of deflation.Be on the lookout for surprises The markets have bet on an extended run of highly accommodative monetary policies because of deflation fears.What is more,the central bank fear of triggering a financial shock through policy normalisation,which certainly seemed to be the case for the Fed in the wake of the financial turbulence of late 2018,only adds to the markets expectations of long-term monetary support.It is worth bearing in mind,however,that the risk of supply constraints brought on by job market tensions triggering inflation cannot be completely ruled out.Furthermore,with the global policy mix still on the expansionist side,demand-side pressures cannot be ruled out either.Fiscal policy has taken on an expansionist bias in the euro area(France,Italy,Germany),but also in China where the authorities want to avoid a hard landing.Monetary policy is also becoming more expansionist in the US and is staying that way in China and the euro area.Major emerging economies,which had built up munitions on the monetary front,are also launching into a rate reduction cycle(Russia,Asia,etc.).While we expect to see a more pronounced slowdown in the economy over our forecast horizon,the play of demand confronted with supply constraints could sound a wake-up call for inflation with very bad timing.SCENARIOECO|N 35-JUNE 2019 6 Economic Forecasts 2016201720182019(f)2020(f)GDP-2017USDbnPurchasing powerparities1Currentexchange ratesCurrentexchange ratesDeveloped markets1.62.32.21.71.337.356.144 831United States1.62.22.92.31.515.324.319 485Japan0.61.90.80.80.64.36.14 875Euro area1.92.51.91.21.111.515.712 637Germany2.22.51.40.81.13.34.63 693France1.02.41.71.41.22.23.22 591Italy1.21.80.70.10.21.82.41 942Spain3.23.02.62.31.41.41.61 315United Kingdom1.81.81.40.90.82.33.32 631Emerging markets4.44.64.64.54.762.743.934 332Asia6.26.36.05.85.735.825.420 530China6.76.86.66.26.018.315.112 265India8.27.26.86.97.07.53.32 508Sub-Saharan Africa0.92.43.03.74.33.92.31 283Latin America-0.51.51.51.92.77.76.94 089Brazil-3.31.11.11.32.02.62.62 055Eastern Europe(incl.Turkey,ex.Russia)2.65.23.82.43.04.93.25 324Russia0.71.52.31.51.53.21.91 578North Africa and Middle East5.31.92.93.33.77.34.23 107World-Weighted by PPP rates3.33.73.73.53.5100100World-At current exchange rates2.73.33.22.93.379 164Oil price(Brent USD/Barrel)52.554.071.065.070.0United States1.32.12.41.82.0Japan-0.10.51.11.72.1Euro area0.21.51.81.01.3Germany(HICP)0.51.71.91.01.9France(CPI)0.21.01.91.11.3Italy(HICP)-0.11.31.20.40.5Spain(HICP)0.61.61.70.71.0United Kingdom0.00.72.62.62.1Share of worl