global macroeconomic outlook, 2019 - fastmarkets risi...global macroeconomic outlook, 2019...

Global Macroeconomic Outlook, 2019

Fastmarkets RISI

North American Conference 2019

Lasse Sinikallas, Director of Macroeconomics

2019 | Fastmarkets | Macroeconomic Outlook 2019

Global economy growing moderately, risks heightened


1.6 %

2.3 %2.9 %

2.2 %

1.3 %1.8 %

2016 2017 2018 2019 2020 2021

USA

1.9 %

2.5 %

1.8 %

1.2 %0.9 %

1.4 %

2016 2017 2018 2019 2020 2021

Europe

6.7 %6.9 %

6.6 %

6.2 %

5.8 %6.0 %

2016 2017 2018 2019 2020 2021

China

-0.9 %

1.1 % 0.9 %

0.1 %

1.3 %

2.7 %

2016 2017 2018 2019 2020 2021

Latin America

Annual real GDP growth

2

Oil prices are volatile and remain relatively low

3

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

WTI Brent


Elevated global economic policy uncertainty

4

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

US three component index US daily news-based index Global index (current)


Source: Measuring Economic Policy Uncertainty by Scott Baker, Nicholas Bloom and Steven J. Davis at www.PolicyUncertainty.com.

US: Good performance, slowdown ahead?

2019 | Fastmarkets | Macroeconomic Outlook 2019 5

US job growth continues

-800

-600

-400

-200

0

200

400

600

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Employment change Six-month moving average (employment change) 24-month moving average (employment change)


Monthly employment change, total non-farm, thousands; six-month moving average; 24-month moving average

Job openings remain high, but growth stalling

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Hires Openings Quits


Job openings and labor turnover, thousands, seasonally adjusted

Consumption growth driven by services

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Durable goods Nondurable goods Services Unemployment


Contributions to percentage change in real personal consumption expenditures, unemployment rate

US housing starts and sales stall

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

0

500

1,000

1,500

2,000

2,500

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Starts (L) New sales (L) Existing sales (R)

9

Existing and new home sales and housing starts, millions of units

2019 | Fastmarkets | Macroeconomic Outlook

Initial Fed interest

rate hike

Second Fed

interest rate hike Last Fed interest

rate hike

First Fed interest

rate cut

US housing sales and mortgage rate connection

0%

1%

2%

3%

4%

5%

6%

7%

8%

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

New sales (L) Existing sales (L) 15-year fixed rate mortgage average (R) 30-year fixed rate mortgage average (R)

10

Existing and new home sales and housing starts, millions of units

2019 | Fastmarkets | Macroeconomic Outlook

Initial Fed interest

rate hike

Second Fed

interest rate hike Last Fed interest

rate hike

First Fed interest

rate cut

Fed rate hikes had an impact on credit growth

0%

1%

2%

3%

4%

5%

6%

7%

-15%

-10%

-5%

0%

5%

10%

15%

20%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Total revolving credit owned and securitized, outstanding Total nonrevolving credit owned and securitized, outstanding

Federal funds target range, upper limit (R) Effective federal funds rate (R)


Year-over-year growth of credit, Fed funds rates

Industrial production now supported by policy?

25

30

35

40

45

50

55

60

65

70

75

0.85

0.90

0.95

1.00

1.05

1.10

1.15

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Industrial production (L) PMI (R)


Index of industrial production, January 2012 = 1.00; PMI

Dollar regained strength in 2018, remains strong

80

90

100

110

120

130

140

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

13

Trade-weighted US dollar index: broad, goods, 1997=100


Investment growth slowing down

80

90

100

110

120

130

140

-40%

-30%

-20%

-10%

0%

10%

20%

30%

98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Private residential fixed investment Private nonresidential fixed investment Trade-weighted US dollar index: Broad, goods (R)


Fixed investment, percent change year-over-year, seasonally adjusted annual rate, US dollar index

US GDP growth expected to slow

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

15

Real GDP growth, annualized percentage change


Canadian growth slow

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

16

Real GDP growth, annualized percentage change


Canadian dollar to remain relatively weak

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.95

1.00

1.05

1.10

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20


Mexican exports supported by US consumption, production growth negative

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Industrial production year-over-year growth (R) Exports year-over-year growth (L)


Europe: Loss of momentum


Euro area momentum low

-0.4%

-0.2%

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

0

10

20

30

40

50

60

70

12 13 14 15 16 17 18 19

Euro area GDP growth Q/Q (R) Euro Area Composite PMI® (L) Economic sentiment indicator (-50)

Industrial confidence indicator (+50) Consumer confidence indicator (+50) Euro Area Manufacturing PMI®

20

Sentiment indicators; euro area real GDP growth, quarter-over-quarter


European industrial production hit the brakes in 2018

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

EU-27 EU-28 Euro area (19 countries) Germany France United Kingdom

21

Volume index of production, year-over-year percentage change, calendar adjusted


Euro has lost some of the strength of early 2018

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

USD/EUR


Euro area GDP growth slower

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Germany France Italy UK Eurozone

23

Real GDP growth, annual percentage change


China: Trade war dampening the economy


Chinese industrial sector has cooled down

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Fixed asset investment Industrial production PMI (R)

25

Year-over-year growth in industrial production, fixed asset investment; Purchasing Managers Index


Volatility in Chinese trade growth and renminbi strength

¥5.0

¥5.5

¥6.0

¥6.5

¥7.0

¥7.5

¥8.0

¥8.5

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Exports Imports RMB/USD

26

Exports and imports, year-over-year percentage change, RMB/USD


High lending, increased debt risk

0%

5%

10%

15%

20%

25%

30%

35%

-¥800

¥200

¥1,200

¥2,200

¥3,200

¥4,200

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Aggregate financing (L) New loans (L) M2 (R)

27

New bank loans, aggregate financing, billion renminbi; money supply, year-over-year percentage change


Chinese GDP trending lower, 2019 a slowdown

0%

2%

4%

6%

8%

10%

12%

14%

16%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

28

Real GDP growth, annual percentage change


Conclusions


Conclusions

• World economy expected to decelerate in 2019, 2020

• US economy projected to slow down

Still healthy domestic economy

• Europe’s momentum slower, still growth

Unemployment low, policy uncertainty

• China moving toward consumer-led growth

Trade war, continued slowdown, debt a major risk


Risks

• Trade policy issues and trade war

Uncertainty slows growth

• Central banks’ ability to continue stimulus

• Pace of GDP growth deceleration in China

• Low inflation

• Overall political uncertainty

• Geopolitical tensions


global macroeconomic outlook, 2019 - fastmarkets risi...global macroeconomic outlook, 2019...

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