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Global Economic Outlook: Key Insights and Trends for Future Growth

This presentation by Paul Ashworth analyzes the current global economic landscape, exploring challenges such as sluggish growth, unemployment, and implications of fiscal policies. It highlights key factors driving recovery, including housing, oil and gas, and a manufacturing revival. Attention is given to regional dynamics, particularly in Europe, China, and Japan, with insights into potential risks and opportunities ahead. Data from Thomson Datastream and other sources provide a comprehensive overview of GDP, employment rates, and more, helping stakeholders navigate the complexities of the global economy.

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Global Economic Outlook: Key Insights and Trends for Future Growth

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  1. The Global Economic Outlook By Paul Ashworth

  2. Real GDP (%y/y) Source: Thomson Datastream

  3. 2. Unemployment Rate (%) Source: Thomson Datastream

  4. 3. Change in Private Payroll Employment (000s) Source: Thomson Datastream

  5. 4. ISM Activity Indices Source: Thomson Datastream

  6. 5. Agenda • What is holding the US back? • Sluggish global growth. • Fiscal consolidation. • Where will stronger growth come from? • Housing. • Oil & gas. • Manufacturing renaissance.

  7. 6. Real Exports (%y/y) Source: Thomson Datastream

  8. 7. US Exports (As a % of 2012 Total) Source: BEA

  9. 8. The Global Outlook • Europe – Crisis likely to reignite. • China – Slower growth here to stay. • Japan – Confidence in “Abenomics” will probably fade.

  10. 9. Euro-zone Sentiment Indicator & GDP Growth Sources: EC, Thomson Datastream

  11. 10. Italian & Spanish 10 Yr Govt. Bond Yields (%) Source: Bloomberg

  12. 11. Current Account Positions (As a % of GDP) Source: Thomson Datastream

  13. 12. General Govt. Budget Balance (As a % of GDP) Source: Thomson Datastream

  14. 13. Whole Economy Unit Wage Costs Source: Thomson Datastream

  15. 14. Unemployment Rates (%) Source: Thomson Datastream

  16. 15. Why might the crisis flare back up? • Cyprus. • Other small economies e.g. Slovenia. • Italian political & economic uncertainty. • Further downturn in France. • Clash over austerity, widening policy divisions. • German elections.

  17. 16. Euro-zone Outlook • The ECB’s OMT plan has helped to buy time. But it cannot address the region’s fundamental problems. • The troubled peripheral countries have made some progress, but are hamstrung by a lack of growth. • Further moves towards fiscal & banking union will be difficult and slow. • The crisis is not over.

  18. 17. Official China GDP & CE Proxy (%y/y) Sources: CEIC, Thomson Datastream & Capital Economics

  19. 18. China Fixed Investment (Nominal, %y/y) Sources: CEIC, Thomson Datastream & Capital Economics

  20. 19. China Investment (As a % of GDP) Sources: World Bank & Capital Economics

  21. 20. Maximum Investment Share of GDP Reachedin Last 50 Years (%) Source: CEIC, Thomson Datastream & Capital Economics

  22. 21. China Unsold Residential Property (Million Units) Sources: CEIC & Capital Economics

  23. 22. China Total Credit (As a % of GDP) Sources: CEIC & Capital Economics

  24. 23. Nominal GDP (1990 = 100) Sources: Thomson Datastream & Capital Economics

  25. 24. Japan – Exchange Rate & Stock Index Sources: Thomson Datastream

  26. 25. What is “Abenomics”? • “Three arrow” policy named after PM Abe: • More credible fiscal plans. • Aggressive monetary easing. • Growth strategy based on structural reform. • Cooperation between government, central bank and corporate sector.

  27. 26. “Quantitative and Qualitative Monetary Easing” • New inflation target of 2% to be achieved “as soon as possible”, with a time horizon of “around two years”. • Planned doubling of size of monetary base by end-2014 ... • ... mainly by increased purchases of JGBs. • Significant lengthening of maturity of assets to be purchased.

  28. 27. Japan Monetary Aggregates & CPI (Mar. 2001 = 100) Source: Thomson Datastream

  29. 28. Japan Change in Cyclically-Adjusted Budget Balance (As a % of GDP) Source: IMF

  30. 29. US GDP (%q/q Annualised) Source: Thomson Datastream

  31. 30. Real Government Expenditure (%y/y) Source: Thomson Datastream

  32. 31. Federal Budget Balance (As a % of GDP) Source: CBO

  33. 32. Federal Spending & Outlays (As a % of GDP) Sources: CBO

  34. 33. Housing Starts & NAHB Homebuilders’ Index Source: Thomson Datastream

  35. 34. House Prices & Months’ Supply of Homes For Sale Source: Thomson Datastream

  36. 35. Housing Fair Value (Based on House Price To Disposable Income Per Capita Ratio) Source: Capital Economics

  37. 36. Oil & Natural Gas Production Source: EIA

  38. 37. Oil Imports Source: Thomson Datastream

  39. 38. Hourly Compensation Costs in Manufacturing (As a % of US Level) Source: BLS

  40. 39. Manufacturing Employment (Millions) Source: Thomson Datastream

  41. 40. GDP Growth (%q/q Annualised) Source: Thomson Datastream

  42. 41. Capital Economics’ US Macro Forecasts (% y/y) – Year Average

  43. 42. Treasury Yields (%) Source: Thomson Datastream

  44. 42. Treasury Yields (%) Source: Thomson Datastream

  45. 43. PCE Inflation (%) Source: Thomson Datastream

  46. 44. Money (Jan. 2008 = 100) Source: Thomson Datastream

  47. 45. S&P 500 Index Source: Thomson Datastream

  48. 46. S&P 500 Index Source: Thomson Datastream

  49. 47. S&P 500 Cyclically Adjusted P/E Ratios Source: Robert Shiller, Capital Economics

  50. 48. S&P 500 Index & Nominal GDP (1970 = 100) Source: Capital Economics

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