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TRANSCRIPT
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
-6
-4
-2
0
2
4
6
8
10
12
14
16
-6
-4
-2
0
2
4
6
8
10
12
14
16
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Percent change from year-ago quarter
China
Advanced and EM Economies: GDP Growth
Other EMEs
Advanced Economies
Sources: National authorities, authors’ calculations. Individual economies’ growth rates weighted
by lagged U.S. dollar GDP.
70
80
90
100
110
120
130
140
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Global Economy ex. China: Real GDP Performance
Index, 2008:Q1 = 100 ( GDP-weighted average )
Real GDP
Pre-crisis trend
Note: Trend measured by growth over 1998 - 2005
Sources: National authorities, authors’ calculations. GDP for individual economies weighted
by lagged U.S. dollar GDP.
2
3
3
4
4
11 12 13 14 15 16 17
Percent, CY/CY
Evolution of Global Market Growth Forecasts
2014 2013
2015
2012
Sources: Blue Chip Economics, Consensus Economics. Figures are GDP-weighted averages for five AEs (with the euro area counting as one) and 25 EMEs.
2016
2017 2018
-40
-20
0
20
40
60
01-15 04-15 07-15 10-15 01-16 04-16 07-16 10-16 01-17 04-17 07-17
Percent positive or negative*
Citigroup Economic Surprise Indexes
Advanced Economies
Emerging Economies
*Weighted by series’ historical FX impact
35
40
45
50
55
60
65
-6
-4
-2
0
2
4
6
8
99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Percent SAAR
Global GDP Growth and Composite PMI
GDP Growth
Composite PMI
Correlation = 0.84
Sources: Eurostat, Markit Economics
April
53.4
Diffusion Index
40.0
42.5
45.0
47.5
50.0
52.5
55.0
57.5
04 05 06 07 08 09 10 11 12 13 14 15 16 17
Diffusion Index
Global Manufacturing PMI
Source: Markit Economics.
Average 2004 – 2008:Q1 = 53.7
Average 2012 – 2016:Q3 = 50.9
52.8 April
-12.5
-10.0
-7.5
-5.0
-2.5
0.0
2.5
5.0
7.5
10.0
12.5
04 05 06 07 08 09 10 11 12 13 14 15 16 17
Percent SAAR, rolling 3-mo. basis
Global Industrial Production Growth
Source: CPB World Trade Monitor. Data exclude construction.
Average 2005 – 2008:Q1 = 4.8
Average 2011 – 2016:Q3 = 2.2
Feb. 3.7
0
50
100
150
200
250
300
350
92 94 96 98 00 02 04 06 08 10 12 14 16
1992:Q1 = 100, 3mma
Global Industrial Production and Export Volumes
Source: CPB World Trade Monitor.
Production
Exports
95
100
105
110
115
120
11 12 13 14 15 16 17
2011:Q1 = 100, 3mma
Global Industrial Production and Export Volumes
Source: CPB World Trade Monitor.
Production
Exports
Global trade far outpaced production…until recently
-10
-5
0
5
10
15
10 11 12 13 14 15 16 17
Percent change, annualized 6-mo. basis
Manufacturing Inventories, Asia ex. China
Sources: METI, KOSTAT, MOEA, Haver Analytics. Data are in real terms, and are a weighted average for Japan, Korea and Taiwan.
March -4.8
20
40
60
80
100
120
20
40
60
80
100
120
Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17
$U.S./bl.
Global Commodity Prices
Indexes, 2015:01 = 100
Brent crude (RHS)
Metals (LHS)
Softs (LHS)
400
600
800
1000
1200
1400
1600
1800
2000
2200
2400
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Raw rig count
U.S. Baker-Hughes Oil and Gas Rig Count
Source: Oil and Gas Journal Weekly.
90
95
100
105
110
115
08 09 10 12 12 13 14 15 16 17
Advanced Economy Real GDP
Japan
United States
Euro area
Indexes, 2008:Q1 = 100
2.0
4.0
6.0
8.0
10.0
12.0
07 08 09 10 11 12 13 14 15 16 17
Percent change from year ago
G-3: Unemployment Rates
Japan
United States
Euro Area
Sources: BLS, Eurostat, Ministry of Health, Labor and Welfare. NAIRU estimates from Congressional Budget Office, European Commission and Bank of Japan.
Official NAIRU estimates
6
7
8
9
10
11
12
05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 10 21 22
Percent
EC Natural Rate Estimates and Projections
2013
2016
2007
2014
Source: European Commission. All figures are from the Autumn forecast round.
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
12 13 14 15 16 17
Percent change from year ago
G-3: Core Consumer Price Inflation
Japan
United States
Euro Area
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.
80
100
120
140
160
180
200
220
40
50
60
70
80
90
100
110
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
Credit to Private Nonfinancial Sector ( % GDP )
Advanced China
Other EMEs
Sources: BIS, IMF. Credit is from all sources, and measured at market value. Countries weighted by GDP at PPP.
10
15
20
25
30
35
40
45
50
90 92 94 96 98 00 02 04 06 08 10 12 14 16
China and other EMEs: Capital Spending as a Share of GDP
China
Other EMEs
Percent
Source: WEO database.
Domestic bank
loans, $16.6
Shadow
finance*, $6.5
Corporate &
muni bonds,
$3.7
Foreign
bonds/loans,
$0.3
China: Non-financial Credit by Source
$U.S. trillions, as of end-March 2017
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.
( 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
U.S. Merchandise Trade with Canada
Source: U.S. Census Bureau.
( 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
U.S. Merchandise Trade with Mexico
Source: U.S. Census Bureau.
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
Current and Hypothetical MFN Tariffs Rates
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.
-60
-40
-20
0
20
40
60
80
-60
-40
-20
0
20
40
60
80
2002 2004 2006 2008 2010 2012 2014 2016
U.S. Trade Balance with Mexico
USD Bn USD Bn
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.
Manufacturing
Trade Balance
Manufacturing
Balance At
Value Added
High Estimate
Low Estimate
0
500
1000
1500
2000
2500
80 84 88 92 96 00 04 08 12 16
Domestic plus foreign profits
Domestic profits (net)
Q4: $690 billion
Source: BEA. Domestic profits are net of payments to foreign equity holders.
U.S. Corporate Profits by Source $U.S. billions, annual rate
