global macro outlook · apr-99 apr-01 apr-03 apr-05 apr-07 apr-09 apr-11 apr-13 apr-15 apr-17 ......
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2
Global macro outlook
- Global economy: as good as it gets?
- The return of inflation?
- Finally higher interest rates?
- Is a global trade war a serious risk?
- Where is the eurodollar heading?
May 2018
3
Return to normal or something worse?
4
Some weakness in Q1
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q3 2013 Q1 2014 Q3 2014 Q1 2015 Q3 2015 Q1 2016 Q3 2016 Q1 2017 Q3 2017 Q1 2018
Economic activity in US and Eurozone
Average of quarterly growth US-Eurozone
May 2018
5
Leading indicators still looking fine
-4
-3
-2
-1
0
1
2
Jun-99 Jun-01 Jun-03 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17
Business confidence in US and Eurozone
Standard deviation of LT-average
May 2018
6
Eurozone: confidence boost for capex
70
75
80
85
90
95
100
105
110
115
120
-20
-15
-10
-5
0
5
10
15
Q1 2000 Q1 2003 Q1 2006 Q1 2009 Q1 2012 Q1 2015 Q1 2018
Eurozone capex
Investment (annual change) Economic sentiment (rhs)
May 2018
7
Eurozone: upbeat consumers
-35
-30
-25
-20
-15
-10
-5
0
5
-2
-1
0
1
2
3
4
Q1 1999 Q1 2002 Q1 2005 Q1 2008 Q1 2011 Q1 2014 Q1 2017
Eurozone consumer spending
Consumer spending (annual change) Consumer confidence (rhs)
May 2018
8
US curve flattest since 2007
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
May-88 May-91 May-94 May-97 May-00 May-03 May-06 May-09 May-12 May-15 May-18
US yield curve
Recession Curve 10-2
May 2018
9
What could possibly go wrong?
-3
-2
-1
0
1
2
3
4
5
6
7
8
Q1 1970 Q1 1975 Q1 1980 Q1 1985 Q1 1990 Q1 1995 Q1 2000 Q1 2005 Q1 2010 Q1 2015
World economy
May 2018
Real GDP (annual change in %)
Oil
Oil + FedUS housing +
Savings&Loans Asian crisis
Tech bubble
Housing
10
Bottlenecks in the economy
11
Increasing capacity utilization in the Eurozone
65
70
75
80
85
90
Q1 1985 Q1 1989 Q1 1993 Q1 1997 Q1 2001 Q1 2005 Q1 2009 Q1 2013 Q1 2017
Capacity utilization in the Eurozone
In %
May 2018
12
Unemployment rates hit multi-decade lows
0
2
4
6
8
10
12
May-58 May-63 May-68 May-73 May-78 May-83 May-88 May-93 May-98 May-03 May-08 May-13
Unemployment rates
US Germany Japan
May 2018
13
Increasing tightness in the Belgian labour market
0
2
4
6
8
10
12
14
Q1 1995 Q1 1997 Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017
Belgian labour market
Difficulties in finding skilled labour (NBB, rhs, inverted)
May 2018
14
Signs of increasing wage growth in the US
0
5
10
15
20
25
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
Q2 1994 Q2 1998 Q2 2002 Q2 2006 Q2 2010 Q2 2014 Q2 2018
US wages
Private sector wages (ECI, annual change in %)
SME plans to raise compensation (3Q earlier, rhs)
May 2018
15
And in the Eurozone
7
8
9
10
11
12
130.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
Q1 1999 Q1 2001 Q1 2003 Q1 2005 Q1 2007 Q1 2009 Q1 2011 Q1 2013 Q1 2015 Q1 2017
Eurozone wage growth
Earnings per employee (annual change in %) Unemployment rate (lhs, inverted)
May 2018
16
The end of free money
17
US inflation set to pick up
20
30
40
50
60
70
80
90
-3.0
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
5.0
6.0
Apr-99 Apr-01 Apr-03 Apr-05 Apr-07 Apr-09 Apr-11 Apr-13 Apr-15 Apr-17
Surveys suggest rising inflation risk
Headline inflation ISM prices paid
Annual change in %
May 2018
18
The end of free money...
-1000
-500
0
500
1000
1500
2000
2500
3000
Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19
Central bank liquidity
Fed ECB BoJ BoE SNB Total
May 2018
12m change in central bank balance sheets (in bn dollar)
19
Raising interest rates
0
1
2
3
4
5
6
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17
Policy rate in DM
Unweighted average Fed, ECB,
BoJ, BoE, BoC (in %)
May 2018
20
Increasing interest rates in the US
0
1
2
3
4
5
6
7
8
9
10
May-88 May-91 May-94 May-97 May-00 May-03 May-06 May-09 May-12 May-15 May-18
US interest rates
2y 10y Fed
May 2018
21
US government headed for massive deficits
-10.0
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 2012 2016 2020 2024 2028
US public finances
Budget balance Recession
As a % of GDP
22
Waiting for the ECB
-2
0
2
4
6
8
10
12
14
16
18
May-80 May-83 May-86 May-89 May-92 May-95 May-98 May-01 May-04 May-07 May-10 May-13 May-16
German interest rates
German 10y US 10y ECB
May 2018
23
Markets remain very relaxed about interest rates
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3Mo 6Mo 1Yr 2Yr 3Yr 4Yr 5Yr 6Yr 7Yr 8Yr 9Yr 10Yr 15Yr 20Yr 30Yr
Belgian forward curve
Current 2yr forward 5yr forward
May 2018
24
Trade war
25
High impact, low probability risk
60
70
80
90
100
110
120
130
Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10 Jan-12 Jul-13 Jan-15 Jul-16 Jan-18
Global trade
Index (2010 = 100)
May 2018
26
About that Chinese trade surplus...
-8
-6
-4
-2
0
2
4
6
8
10
12
1997 2000 2003 2006 2009 2012 2015 2018
Current account balance
US China
As a % of GDP
May 2018
27
Commodities
28
Rising commodity prices
0
20
40
60
80
100
120
140
160
50
100
150
200
250
300
350
400
May-03 May-05 May-07 May-09 May-11 May-13 May-15 May-17
Commodity prices
Industrial metals Oil (rhs)
May 2018
29
US shale reacts to oil prices
0
20
40
60
80
100
120
140
160
0
200
400
600
800
1000
1200
1400
1600
1800
May-03 May-05 May-07 May-09 May-11 May-13 May-15 May-17
US oil production
US rigs in operation Oil (usd per barrel, rhs)
May 2018
30
Emerging markets
31
Commodity prices are boosting EM
-2.5
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
Q1 2000 Q1 2002 Q1 2004 Q1 2006 Q1 2008 Q1 2010 Q1 2012 Q1 2014 Q1 2016 Q1 2018
Business confidence in EM
Commodity exporters Commodity importers
Standard deviation of LT-average
May 2018
32
Vulnerable EM under pressure
0.0
1.0
2.0
3.0
4.0
5.0
6.0
May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18
Turkey
Turkish lira to euro
May 2018
0
5
10
15
20
25
30
35
May-13 Jan-14 Sep-14 May-15 Jan-16 Sep-16 May-17 Jan-18
Argentina
Argentine peso to euro
33
Eurodollar outlook
34
Eurodollar back at LT-average
0.8
0.9
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Jan-90 Jan-93 Jan-96 Jan-99 Jan-02 Jan-05 Jan-08 Jan-11 Jan-14 Jan-17
Dollar per euro
May 2018
35
Monetary policy pushing in favour of the dollar
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
Jan-95 Jan-97 Jan-99 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
Policy rate
Fed ECB Fed plans ECB plans
May 2018
36
Interest rate differential in favour of the dollar
-2.0
-1.0
0.0
1.0
2.0
3.0
4.0
1
1.1
1.2
1.3
1.4
1.5
1.6
1.7
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18
Dollar and interest rates
Eurodollar Real 2y interest rate differential (rhs)
May 2018
37
Disappointing data in the Eurozone
-150
-100
-50
0
50
100
Jun-14 Dec-14 Jun-15 Dec-15 Jun-16 Dec-16 Jun-17 Dec-17
Economic surprise index
US Eurozone
May 2018
38
90
95
100
105
110
115
120
125
130
135
140
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
Economic activity
Italy Germany
May 2018
Real GDP per capita (index, 1991 = 100)
Italian concerns
39
Global macro outlook
- Decent growth to continue in the near term
- End of free money
- Higher volatility in financial markets
- Geopolitical risks
- Dollar likely to strengthen
May 2018
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