巴黎银行-全球-宏观策略-欧洲与美国的通胀：没有更高的期望-20190614-23页 (2).pdf

|DEEP DIVE 14/06/2019 1 Eurozone and US inflation Not such great expectations KEY MESSAGES Sluggish inflation is not a uniquely European phenomenon.The US is not much better than the eurozone in this respect,in our view,with the differences between their core rates due mostly to methodology.We expect weak inflation persisting in Q3,combined with softening growth and doubts about central banks toolkits,to keep weighing on inflation expectations.We see some upside to core inflation in Q4,thanks to higher wage growth and several temporary headwinds washing out of the data.Any pickup later this year and going into next year is likely to be limited,however,as firms pricing powers remain held back by weak growth and structural factors such as globalisation,digitalisation and demographics.MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET DEEP DIVE GLOBAL CONTENTS Introduction.2 Outlook.3 Cyclical factors and temporary headwinds.6 Structural factors.8 Measurement differences.10 Central bank toolkit.12 Import tariffs.13 Labour costs and profit margins.14 Authors.17 Legal notice.18 For more,see our Global Outlook Q3 2019:Late-cycle carry,published 21 May BNP Paribas inflation forecasts Headline inflation Core inflation 2018 2019 2020 2018 2019 2020 US CPI 2.4 1.7 1.8 2.1 2.1 2.3 Eurozone HICP 1.8 1.2 1.2 1.0 1.1 1.3*Average of period;Sources:BEA,Eurostat,BNP Paribas forecasts for 2019 and 2020 TRADE IDEAS EUR 5y5y/15y15y swap BEI flattener BNPP end-of-cycle long/short equity basket Please refer to important information at the end of this report|DEEP DIVE 14/06/2019 2 Inflation markets trading at a sharp discount to central bank target MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET Shahid Ladha,Head of Strategy for G10 Rates Americas|BNP Paribas Securities Corp.Agne Stengeryte,Europe Rates Strategist|Stefan Ubovic,Senior Macro Quantitative Strategist|BNP Paribas London Branch INTRODUCTION Structural entrenchment of low inflation expectations in US and eurozone:Positive inflation risk premia were crushed in the second half of 2014 and remain close to or below zero(see top chart).In the US,5y5y inflation forward is around 2.00%(or 30bp versus an implied inflation target of 2.30%=2%Fed PCE target+30bp spread).In the 10 years up to mid-2014,the premium averaged+60bp and has been close to flat since then.In the eurozone,the 5y5y EUR inflation forward is at record lows(1.12%)and 80bp below an implied ECB HICP target of 1.90%(ex-tobacco).Since 2014,EUR inflation risk premium has averaged 26bp versus+43bp in the previous 10 years.Inflation term structure flat in US but steep in eurozone:The US inflation curve is relatively flat(bottom chart).The kink around 10y is the only point where 1y forwards are around the Feds target.In contrast,EUR inflation expectations are extremely low at the front end(below 1%)and rise towards the ECBs inflation target,although they do not reach the target within a 30-year horizon.Weak growth and stubbornly low core inflation key drivers of market pricing:A worsening in the global growth outlook has created a two-fold challenge to inflation:it has increased the risk of a recession and the accompanying sharp decline in inflation which typically follows;and it has reduced firms ability to pass higher costs to consumers,thereby capping potential upside from higher wage growth.Similarly,the recent unresponsiveness of core inflation to the pickup in wage growth has led some market participants to conclude that the cost-push model has completely broken down,with business likely to absorb the bulk of cost increases into their profit margins.We think inflation expectations are also being weighed down by increasing market concerns about central banks ability to bolster growth in the next slowdown.Reduced scope for central-bank action puts both eurozone and the US at risk of falling into a Japanese-style deflationary trap,in our view.Inflation expectations are below levels consistent with central banks targets in both the eurozone and the US.The breakeven inflation term structure is flat in the US but steep in the eurozone.Sources:Bloomberg,Macrobond,BNP Paribas Sources:Bloomberg,BNP Paribas Grey shaded area indicates inflation risk premium trading range which broke down in 2014 For more,please see our Deep Dive:Eurozone Diagnosis Japanisation?,published 30 April.|DEEP DIVE 14/06/2019 3 Cost-push pressures down but not out MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET Stefan Ubovic,Senior Macro Quantitative Strategist|BNP Paribas London Branch|Andrew Schneider,US Economist|Shahid Ladha,Head of Strategy for G10 Rates Americas|BNP Paribas Securities Corp.OUTLOOK The global growth outlook and firms ability to pass on cost increases to consumers are likely to remain the key factors driving inflation markets over the next 12 months,in our view.In our latest Global Outlook,we marked down our GDP forecasts for most regions,including advanced and emerging market economies.Our base case remains for below-trend growth and not a recession.But we think the risk of a global growth recession is high at about 25%and will continue to weigh on confidence and expectations.In addition to weak growth,we think the debate about the impact of wage growth on inflation will continue to feature prominently in market pricing.Our view on this topic which we explore in detail in this note is that the pass-through from wages to prices is being held back by a combination of temporary and structural factors.Temporary factors:Euro appreciation,administered price cuts and a telecoms entrant have weighed on eurozone inflation.Similarly,soft healthcare and miscellaneous services prices have partly offset cyclical pressures in the US.Structural factors:Trends such as globalisation,digitalisation,income inequality and demographics are likely to continue to exert downward pressure on inflation.In addition,official data are likely to reflect online prices more going forward.Conversely,we think some core inflation upside may be on the cards towards year-end as some temporary factors filter out of the data.Still,we expect only a modest increase in both eurozone and US core inflation as structural factors and weak global growth continue to limit the pass-through.Innovation in the central bank toolkit and the impact of trade tariffs on inflation are two additional themes we are closely monitoring.The Fed is undertaking a review of its inflation targeting framework,to be concluded in 2020.Similarly,the ECB is looking into expanding its toolbox with new policies such as interest rate tiering.An acceleration in the debate on expanding the central bank tool box would be likely to help inflation expectations,in our view.Meanwhile,higher tariffs are likely to nudge up near-term inflation in countries imposing them while leading to disinflationary pressures elsewhere as tariffed goods get diverted,likely at a discount.Over the medium term we view the trade war as mildly disinflationary,owing to its negative impact on GDP growth across regions.Both US and eurozone wage growth rates are back to their pre-crisis averages.but core inflation remains subdued in both regions due to a mix of structural and temporary factors.Sources:Eurostat,BEA,Macrobond,BNP Paribas Sources:Eurostat,BEA,BNP Paribas 14/06/2019 4 MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET HICPxT (%y/y)HICP (%y/y)Core HICP (%y/y)Jan 2019 1.3 1.4 1.1 Feb 2019 1.4 1.5 1.0 Mar 2019 1.3 1.4 0.8 Apr 2019 1.7 1.7 1.3 May 2019(f)1.2 1.2 0.8 Jun 2019(f)1.0 1.1 1.1 Jul 2019(f)0.9 1.0 1.0 Aug 2019(f)1.0 1.1 1.1 Sep 2019(f)0.8 0.9 1.2 Oct 2019(f)0.6 0.7 1.2 Nov 2019(f)0.7 0.8 1.4 Dec 2019(f)1.1 1.2 1.3 Q1 2020(f)Q2 2020(f)Q3 2020(f)Q4 2020(f)1.2 1.1 1.1 1.3 1.2 1.1 1.2 1.3 1.3 1.3 1.3 1.3 EUR 5y5y/15y15y swap BEI flattener.Long-dated EUR inflation swap forwards remain high and,given the weak growth outlook,the market remains sceptical regarding the likelihood of inflation rising to the ECBs 2%HICP target.We expect the European inflation curve to flatten whether breakevens rise(as the front-end has most potential to rise)or move structurally lower(as the long end could fall further).Entry:53bp.Target:35bp.Stop:65bp.Current:42.5bp.Carry:+0bp/month.TRADE IDEA(f)BNP Paribas forecasts;Sources:Eurostat,BNP Paribas Eurozone:Core inflation to remain weak in Q3 and firm slightly in Q4 OUTLOOK Stefan Ubovic,Senior Macro Quantitative Strategist|Agne Stengeryte,Europe Rates Strategist|BNP Paribas London Branch|DEEP DIVE Watch out for the Easter effect:The recent volatility in eurozone core inflation was largely driven by Easter-related seasonal distortions,which weighed on March and May inflation rates and boosted April inflation.We expect the Easter effect should largely filter out of the data in June,with core inflation returning to its recent trend rate of around 1%over the summer.In our view,the combination of weak activity data and stubbornly low core inflation risks further challenging inflation expectations in the near term.Building cost pressures point to a mild increase in core inflation:Leading inflation indicators such as wage growth and domestic PPIs suggest pipeline price pressures have continued to build despite the slowdown in GDP growth.Structural headwinds to inflation,however,suggest the pass-through of cost increases to prices is likely to be markedly lower than in previous cycles.That said,we do not think the cost-push model has completely broken down,and we expect a small rise in core inflation,to about 1.3%towards the end of the year.BALANCE OF RISKS Downside risks markedly outweigh upside risks:In a typical downturn,eurozone core inflation tends to decline by about 1pp.This suggest high risk of Japanese-style deflation should the economy slip into a growth recession before core inflation breaks away from its recent trend rate of about 1%.14/06/2019 5 MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET CPI NSA(%y/y)Core CPI(%y/y)Core PCE(%y/y)Jan 2019 1.6 2.2 1.8 Feb 2019 1.5 2.1 1.7 Mar 2019 1.9 2.0 1.6 Apr 2019 2.0 2.1 1.6 May 2019 1.8 2.0 1.6 Jun 2019(f)1.8 2.0 1.7 Jul 2019(f)1.6 2.0 1.7 Aug 2019(f)1.7 2.1 1.8 Sep 2019(f)1.8 2.2 1.8 Oct 2019(f)1.3 2.3 1.9 Nov 2019(f)1.7 2.3 1.9 Dec 2019(f)1.9 2.3 1.9 Q1 2020(f)Q2 2020(f)Q3 2020(f)Q4 2020(f)1.9 1.8 1.8 1.7 2.3 2.4 2.4 2.3 1.9 2.1 2.1 2.1 TRADE IDEA(f)BNP Paribas forecasts;Sources:Eurostat,BNP Paribas US:Gentle upward trend in core inflation OUTLOOK Andrew Schneider,US Economist|DEEP DIVE Flat in the near term:Core inflation has seen more idiosyncratic instances of weakness,from methodological changes affecting apparel prices to decelerations in transportation services and healthcare prices.At the same time,we have seen signs of strength,particularly in shelter prices,the largest component of CPI.Given relatively solid prints in the late spring and early summer last year,base effects should help keep year-on-year core inflation effectively flat over the coming months,even as we see some firming in the month-on-month rate.Moderate rise in core inflation as Phillips curve is alive,if subdued:While we expect core goods inflation to remain generally muted on account of structural competition changes and lagged effects of a strong USD,we see core services prices continuing to pick up amid a robust labour market and rising cost pressures.As we move deeper into Q3,base effects should become favourable as well,with the impact of higher import tariffs also kicking in.Still,structural headwinds remain,in our view,and we consequently see a more subdued pass-through of cost pressures to price increases than in the past.BALANCE OF RISKS Risks still lie to the downside:There remain cyclical reasons why inflation should be higher an unemployment rate still well below most estimates of NAIRU and rising wage growth but we think structural factors could continue to pull inflation lower,while further big data methodological changes and a slowing economy could amplify such disinflationary forces.14/06/2019 6 A tighter labour market has pushed up wage growth,which has increased across a range of measures in both eurozone and the US.Structural factors and the recent weakening in the global growth outlook,however,suggest the pass-through of wage growth to price increases is likely to be weaker than in previous cycles.The output gap is about closed in Europe,the US and globally,with the narrowing of slack led by the labour market.Most estimates suggest that the eurozone and US unemployment rate are below the NAIRU.Surveys evidence and alternative measures of labour market slack point to the same conclusion.In the eurozone,the recent pickup in wage growth was largely led by negotiated wages,suggesting it is likely to be relatively sticky.Sources:OECD,Macrobond,BNP Paribas Sources:Eurostat,ECB,Macrobond,BNP Paribas MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET In the US,average hourly earnings(AHE)and employment cost indices(ECI)all show a pickup in wage growth.Sources:BEA,BLS,Macrobond,BNP Paribas Stefan Ubovic,Senior Macro Quantitative Strategist|BNP Paribas London Branch|Andrew Schneider,US Economist|BNP Paribas Securities Corp.|DEEP DIVE Apart from slowing growth,the cyclical backdrop is generally supportive CYCLICAL FACTORS AND TEMPORARY HEADWINDS Sources:Eurostat,BEA,OECD,Macrobond,BNP Paribas 14/06/2019 7 MARKET ECONOMICS|MACRO QUANT&DERIVATIVES|EQUITY&DERIVATIVES|G10 INTEREST RATES|CROSS-ASSET Headwinds from weak healthcare and miscellaneous services prices are unlikely to persist in the long run,in our view.Past EUR appreciation has meant domestic PPIs outpaced the more import-oriented core goods HICP this headwind is now fading.The recent slowdown in core PCE was driven by non-cyclical prices,while cyclical inflation has remained stable.The components of core inflation most sensitive to the cycle are responding to the recent pickup in wage growth.Sources:Federal Reserve,Macrobond,BNP Paribas Sources:Eurostat,Macrobond,BNP Paribas Sources:Eurostat,Macrobond,BNP Paribas Sources:BEA,Macrobond,BNP Paribas Stefan Ubovic,Senior Macro Quantitative Strategist|BNP Paribas London Branch|Andrew Schneider,US Economist|BNP Paribas Securities Corp.|DEEP DIVE Uptick in cyclical inflation offset by soft non-cyclical prices:Despite wages likely weaker pass-through to prices,we do not think the cost-push model has completely broken down.We continue to expect a small rise in inflation on the back of the lagged response to the previous improvement in the economic cycle.Eurozone US CYCLICAL FACTORS AND TEMPORARY HEADWINDS 14/06/2019 8 Structural trends such as globalisation,digitalisation,demographics,income inequality and changing consumer preferences are likely to weigh on the pass-through between wage growth and inflation.Globalisat