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December 2019
ECONOMIC AND FINANCIAL OUTLOOKAnton Brender and Florence Pisani
December 2019
1. EMERGING ECONOMIESGrowth has continued to weaken…
0.0
0.1
0.2
0.3
0.4
0.5
Contributions to world GDP growth acceleration between 2019 and 2020
(%)
In October, the IMF has again revised its growth perspectives downwards… mainly for 2019
3 Décembre 2019Source : IMF
IMF GDP growth forecasts(% annual rate)
3.0
3.5
4.0
2016 2017 2018 2019 2020
World
Oct. 18
July 19
Oct. 19
1.5
2.0
2.5
2016 2017 2018 2019 2020
Advanced economies
Oct. 18
July 19
4.0
4.5
5.0
2016 2017 2018 2019 2020
Emerging economies
Oct. 18
July 19
Oct. 19
Oct. 19
Iran
India
Venezuela
Turkey
Brazil
Saudi Arabia
Russia
Mexico
Argentina
Libya
Malaysia
Azerbaijan
Belarus
Rom
ania
Bangladesh
Ghana
Hungary
Pakistan
Poland
China
Global growth should now stabilize
4 December 2019
48
50
52
54
56
14 15 16 17 18 19
48
50
52
54
56
14 15 16 17 18 19
Services
Manufacturing
Developed countries PMIs
Services
Manufacturing
Emerging countries PMIs
Sources: Bloomberg, Refinitiv Datastream
-5
0
5
10
15
10 11 12 13 14 15 16 17 18 192.5
3.0
3.5
4.0
4.5
5.0
5.5
Trade and world growth(% year on year)
World trade (volume)
World GDP growth [R.H.S.]
World composite PMI & GDP growth
49
50
51
52
53
54
55
56
57
14 15 16 17 18 192.5
3.0
3.5
4.0
4.5
World composite PMI
World GDP (% year on year) [R.H.S.]
The manufacturing sector is showing some signs of bottoming
5 December 2019Source: Bloomberg
China
Taiwan
46
48
50
52
54
56
58
13 14 15 16 17 18 19
Manufacturing PMI indices in some emerging countries
Mexico
Brazil
42
46
50
54
58
13 14 15 16 17 18 19
Czech Republic
Poland
42
46
50
54
58
62
13 14 15 16 17 18 19
Turkey
Russia
42
46
50
54
58
13 14 15 16 17 18 19
December 2019
2. TRADE WAR: Towards a truce?
The trade war has slowed world growth… and China has been particularly affected
7 December 2019Source: IMF
IMF estimated impact of trade tensions on real GDP (% deviation from control)
(*) Tariffs implemented until May 2019(i.e. tariffs on aluminum and steel + 25% on $50 billion in imports from China+ 25% on an additional $200 billion with China’s retaliation)
United States
-2.0
-1.5
-1.0
-0.5
0.0
17 18 19 20 21
Reference*
China
-2.0
-1.5
-1.0
-0.5
0.0
17 18 19 20 21
Reference*
(**) Takes into account all the announced tariffs increases until mid-November(i.e. 15% on roughly $300 billion + 5% on $250 billion already tariffed with Chinese retaliation).
Final phase + confidence effects**
Final phase + confidence effects**
The pain inflicted by the contraction of global trade
has hurt more widely opened, manufacturing-oriented economies
8 December 2019Sources: Refinitiv Datastream, Candriam
0
10
20
30
AUS
GBR
CAN
FRA
USA
ESP
ITA
CHE
JPN
DEU
BRA
MEX
RUS
TUR
POL
ROU
HUN
CZE
IND
IDN
CHN
KOR
TWN
Share of manufacturing in value added(%, 2014)
0
20
40
60
80
100
USA
JPN
AUS
GBR
FRA
ITA
CAN
ESP
DEU
CHE
BRA
MEX
TUR
RUS
ROU
POL
CZE
HUN
CHN
IND
IDN
KOR
TW
Share of exports in GDP(%, 2018)
0
20
40
60
80
100
0 5 10 15 20 25 30 35
Share of manufacturing in value added(%, 2014)
Share of exports in GDP
(%, 2018)
Manufacturing and exports weights
Widely opened
economies
Less opened
economies
Manufacturing-oriented economiesService-oriented economies
IND
TURITARUS
AUS
USABRA JPN
IDN
ESP MEX ROUDEU
POL
CHE
CHN
KOR
TWN
CZE
HUN
FRA
CANGBR
A few (relatively small) economies have been badly affected by the curb in manufacturing exports
9 December 2019
-5
0
5
10
15
20
25
30
35
GBR
ESP
FRA
ITA
CHE
USA
CAN
MEX
RUS
ROU
POL
TUR
BRA
IND
AUS
JPN
IDN
CHN
Domestic value added exported by the manufacturing sector (% of each country’s GDP, 2014)
KOR
TWN
HUN
CZE
DEU
Foreign inputs
Dom. inputs,
non manuf.
Dom. inputs, manuf.
Intermediate use of domestic output
Final use of
domestic output
Exports of interm. goods
Exports of final goods
Output
Inputs
Value added
Sources and uses of manufacturing output
Sources: World Input Output Database, Candriam
Domestic value added exported
=
Exports of final and intermediate
manufactured goods
–
Foreign inputs
Chinese authorities have firmly – although discretely! – reacted to US pressures
10 December 2019
WeakerYuan
StrongerYuan
July 6Phase of June 15 tariffs go into effect
April 3US threatens tariffs
June 15Announce of 25% tariffs on $50 bn
July 10USTR announces 10% tariffs on$200 bn
September 17 10% tariffs on $200 bnand 25% announced on January 1
December 1US China tariff truce
February 24Tariff increase on $200 bndelayed (previously scheduled to go into effect on March 1, 2019)
May 5Trump renews tariff threats
May 1025% on $200 bn
August 110% on $300 bn
Sources : Bloomberg, Candriam
6.2
6.4
6.6
6.8
7.0
7.2
Jan Mar May Jul Sep Nov Jan Mar May Jul Sep Nov
Yuan dollar exchange rate since 2018
2018 2019
0
20
40
60
80ChinaAsia ex China
Share of Asia
Trade integration within the three main manufacturing hubs*
Philippines
Share of Europe
0
20
40
60
80
Euro area UK
Germany
Switzerland
Italy
France
Spain
Emerging Europe
Euro areaOther developed Europe
(*) Weights of each region in the BIS real effective exchange rates in 2014-16 in %.
0
10
20
30
40
50
US Euro area Germany
JapanOther AsiaChina
94 15Memo: Share of Asia in 1994 and 2015
A significant depreciation of the RMB would put pressure on other Asian currencies
and destabilize the current exchange rate’s structure
11 December 2019Sources: BIS, Candriam
Spain
Italy
France
Germany
Switzerland UK
Euro area
Canada
Mexico
United States
Rom
ania
Czech Rep
Hungary
Poland
Turkey
Russia
Saudi Arabia
Brazil
Colom
bia
Peru
Chile
China
India
Japan
Australia
Korea
New Zealand
Malaysia
Singapore
Taiwan
Hong Kong
Thailand
Indonesia
Turkey
Poland
Hungary
Czech Rep
Rom
ania
Australia
Thailand
Singapore
India
Mexico
Canada
United States
Saudi Arabia
Russia
Peru
Colom
bia
Chile
Brazil
Philippines
Taiwan
Indonesia
Malaysia
Japan
Hong Kong
Korea
New Zealand
China
Spain
France
Italy
Germany
Switzerland UK
Euro area
Rom
ania
Poland
Czech Rep
Hungary
Turkey
Russia
Saudi Arabia
Chile
Brazil
Peru
Colom
bia
Hong Kong
Indonesia
Singapore
Thailand
New Zealand
Philippines
Taiwan
Malaysia
Australia
India
Korea
Japan
China
United States
Mexico
Canada
Share of North America
0
20
40
60Mexico
United StatesCanada
December 2019
3. CHINAStrong headwinds… a cautious response!
13 December 2019Sources: Refinitiv Datastream, Candriam
While the slowdown in headline GDP growth has been from impressive,
the slowdown in the manufacturing sector has been more pronounced
Industrial production(% year on year)
14 15 16 17 18 19 204
6
8
10Smoothed over 2 months
4.7% in October
02 04 06 08 10 12 14 16 18 200
2
4
6
8
10
12
14
16
Real GDP growth(% year on year)
6.0
GDP
4.2
Momentum index(also known as Li Keqiang index)
PMI indices
14 15 16 17 18 1949
50
51
52
53
54
55
56
Manufacturing
Non manufacturing
Manufacturing PMI
14 15 16 17 18 1944
46
48
50
52
54
56New orders
Export orders
14 December 2019Sources: Refinitiv Datastream, Bloomberg, Candriam
With a weakening labor market, household income growth could be affected
Surveyed unemployment rate in urban areas
(%)
4.5
4.8
5.1
5.4
5.7
16 17 18 19
46
48
50
52
54
08 10 12 14 16 18
46
48
50
52
54
08 10 12 14 16 18
PMI employment
Manufacturing sector
Non manufacturing sector
Composite PMI employment
Per capita income and employment
(smoothed over 1 year)
08 10 12 14 16 184
6
8
10
12
14
16
46
48
50
52
54
Urban per capita income(% year on year) [R.H.S.]
04 06 08 10 12 14 16 18 200
1000
2000
3000
15 December 2019Sources: Refinitiv Datastream, Candriam
Higher food prices are eroding purchasing power
Contribution to inflation(% year on year)
-1
0
1
2
3
4
13 14 15 16 17 18 19
OtherResidence
Recreation & education
Transportation & communication
Health CareHousehold facilities Clothing
Food
Food prices
Meat pork [R.H.S.]
Food inflation(% year on year)
Retail sales(% year on year, volume)
Sept 2015 :Car sales tax cut
2009 : Various incentives to boost sales
Car sales(thousands, monthly rate)
Car loans from P2P lenders areestimated to have contributed toroughly 10% percent of new carsales in China in 2017.Many peer to peer lendingplatforms have now been closed.
13 14 15 16 17 18 194
6
8
10
12
14
Even if all US pork exports were to go to China,3.0mn tons in pork imports would still be a smallpercentage (~6%) of China’s annual 49mn tonspork consumption and a small share of China’s14.5mn tons pork shortage!12 13 14 15 16 17 18 19
-40
0
40
80
-5
0
5
10
15
16 December 2019Sources: Refinitiv Datastream, Candriam
Up to now, infrastructure investment growth has ticked up only modestly
but it could gradually accelerate
0
5
10
15
20
Total Manuf.Real
estateInfrastructure
17Q3
18Q3
19Q3
Fixed asset investment(% year on year)
Infrastructure investment growth has ticked upmodestly… while real estate investment growthremains robust
The known quantity of onshore bonds thatfinancing vehicles must repay between thisyear and 2021 was RMB 3.5 trillions (i.e. 3.6GDP points).
LGFVs maturing debt(Yuan trillions)
0.0
0.5
1.0
1.5
2.0
18 19 20 21 22 23 240
1
2
3
4
5
15 16 17 18 192
3
4
5
6
As local governments are more and morefiscally responsible, many become reluctantto incur additional debt liabilities to fund localinfrastructure projects.
Official target deficit [R.H.S.]
Special bond quota
Yuan trillions
% of G
DP
Central government deficit + special bond quota[R.H.S.]
Budget deficit target and special bond issuance quota
Central govt debt
Total credit flow to the economy(% of GDP, annual rate)
Total
0
10
20
30
40
02 04 06 08 10 12 14 16 18
17 December 2019Sources: Refinitiv Datastream, Candriam
The curbing of shadow banking has been policy driven
Depository corporations claims on…(annual flows, % of GDP)
Households
Non financial corporations
Government
Other financial corporationsOther claims
Total
Depository corporations
-10
0
10
20
30
40
50
60
09 11 13 15 17 19
Bank loans
Corporate bonds & local government special bonds
Local government special bonds
Corporate bonds
-4
-2
0
2
4
6
09 10 11 12 13 14 15 16 17 18 19
Shadow banking
Entrust loans
Trust loans
-4
-2
0
2
4
6
09 10 11 12 13 14 15 16 17 18 19
Bank's acceptance bill
18 December 2019Sources: Refinitiv Datastream, Candriam
Providing more credit to SMEs remains however a key challenge for authorities
Credit easing- In August 2019, with the Loan Prime Rate reform, PBoC
announced efforts will be made to lower the comprehensivefinancing costs for enterprises. Credit rate and charges will bemade more open and transparent and intermediaries will beurged to cut fees and bring more benefits to the businesses.
- This comes on top of already announced measures:- Increase in re-discount and re-lending facilities for loans
to small and micro enterprises in particular.- Credit enhancement facility to promote corporate bond
financing for private enterprises.- Set up of a new monetary policy tool (TargetedMedium-term Lending Facility) to provide stablefunding to banks, at a slightly lower interest rate…provided they increase their lending to small and privateenterprises.
- To help banks raise their capital ratios, banks’ perpetualbonds are now eligible to PBoC refinancing operationsand can be swapped against PBoC bonds.
- More public guarantees to support credit to SMEs.
The NDRC announced that it has developed a credit rating
system for SMEs recently, opening the door to the introduction
of newly qualified issuers (possibly including real estate
developers).
Small firms
Loan demand climate index(survey, %)
Large firms
12 13 14 15 16 17 18 1950
55
60
65
70
75
80
85
Loan approval index(survey, %)
12 13 14 15 16 17 18 1940
42
44
46
48
50
52
54
Corporate bonds net issuance(billions of Yuan, 12mma)
12 13 14 15 16 17 18 190
1000
2000
3000
4000
Sources: Refinitiv Datastream, IMF, Candriam
Finding creditworthy borrowers is becoming more and more challenging!
December 201919
No effort
50
70
90
110
130
15 16 17 18 19 20 21 22 23 24 25 26
Government debt trajectories(% of GDP)
Gradual reduction in government deficit (0.9 GDP point annual improvement)
Household debt(% of disposable income)
06 08 10 12 14 16 1810
30
50
70
90
Non financial corporations
Private non financial sector debt(% of GDP)
06 08 10 12 14 16 1880
100
120
140
160
180
200
220Private non financial
December 2019
4. UNITED STATESSoft landing… despite turbulences!
The current business cycle is now the longest… since 1854*!
55 60 65 70 75 80 85 90 95 00 05 10 15 20-4
-2
0
2
4
6
8
10
1990 - 2000 2009 - ?
US business cycles(GDP year on year growth rate in %)
21 December 2019Source: Refinitiv Datastream
(*) 1854 is the first year for which the NBER started to date cycles.
Given the length of this recovery, some are still fearing a coming recession
Duration of US recoveries(trough to peak, since 1946)
0
20
40
60
80
100
120
140
The length of US business cycles
Max (1991-2001)
40 quarters
Min(1980-1981)
4 quarters
Average
20 quarters
US business cycles(real GDP cumulated change since peak)
Quarters from peak
% change from
peak
1960
1981
1990
1973
2001
1957
1969
1953
-10
0
10
20
30
40
50
0 4 8 12 16 20 24 28 32 36 40 44
Current
41 quarters
22 December 2019Sources: Federal reserve bank of Minneapolis, Candriam
Current
23 December 2019Sources: Refinitiv Datastream, Candriam
The yield curve inversion in particular has triggered a recession scare!
12-month ahead recession probability(%)
0
20
40
60
80
100
60 65 70 75 80 85 90 95 00 05 10 15 20
With yield curve slope (10 year minus Fed funds)
With fed funds minus potential GDP
- 5
- 4
- 3
- 2
- 1
0
1
2
3
60 65 70 75 80 85 90 95 00 05 10 15 20
Fed funds less 10 year
Two measures of yield curve slope (%)
(*) Fed funds rate minus potential GDP growth
Tightness of monetary policy*
24 December 2019Sources: Refinitiv Datastream, Candriam
Growth continues to be supported by consumption,
while equipment investment and exports have significantly decelerated
GDP growth(%)
Year on year
Quarter on quarter, annual rate
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
Contributions to GDP growth(% year on year)
Government expenditures
Residentialinvestment
Consumption
GDP
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
GDP
Change in inventories
Equipmentinvestment
Structures
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
Exports
GDP
Imports Net exports
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
Monthly indicators are pointing to modest growth
25 December 2019Sources : Refinitiv Datastream, Candriam
06 08 10 12 14 16 18 20-20
-10
0
10
20
30
-20
-15
-10
-5
0
5
10
15
06 08 10 12 14 16 18 2030
35
40
45
50
55
-1.5
-1.0
-0.5
0.0
0.5
1.0
12 13 14 15 16 17 18 19 20-3
0
3
6
9
12
00 02 04 06 08 10 12 14 16 18 200
500
1000
1500
2000
2500
0
20
40
60
80
100
06 08 10 12 14 16 1835
40
45
50
55
60
65
-20
-10
0
10
20
20(*) including intellectual property rights
06 08 10 12 14 16 18 2040
45
50
55
60
65
-2
-1
0
1
2
3
4
5
Equipment investment*(% year on year)
Phila Fed (3mma) [R.H.S.]
Phila Fed survey
Change in inventories(% of GDP)
ISM inventories (3mma) [R.H.S.]
Change in inventories
Consumption
Consumption(% change over 3 months, annual rate, nominal)
Core retail sales
NAHB survey and housing startsNAHB survey(current situation)
Housing starts(thousands, -6M, annual rate) [R.H.S.]
Export orders
Exports(% year on year, -3M, volume)
ISM export orders[R.H.S.]
GDP(% change over 2 quarters, annual rate)
ISM composite & GDPISM new orders
[R.H.S.]
26 December 2019 Sources: Refinitiv Datastream, BEA, Candriam
The August revision in national accounts changed significantly the distribution between wages
and profits, making the gap between NIPA profits and S&P companies earnings even wider!
National income
-300
-200
-100
0
100
200
300
14 15 16 17 18 19
National income revision in level($ billion)
Net interest Proprietors' income
Rental income
Corporate profits
Compensation of employees
-300
-200
-100
0
100
200
300
14 15 16 17 18 19
… and a lower profit share !
Revised
Before revision
Household Saving rate(%)
3
5
7
9
11
08 10 12 14 16 18
The upward revision inhousehold income translated intoa higher household saving rate…
Revised
Before revision
60 70 80 90 00 10 2012
16
20
24
NFC operating surplus(% of NFC net domestic product)
Corporate profits(1993 = 100)
90
190
290
390
490
590
690
790
93 95 97 99 01 03 05 07 09 11 13 15 17 19
Operating profits per share of S&P companies
Gap = 45%!
Gap = 50%!
Operatingincome(NIPA basis)
98 00 02 04 06 08 10 12 14 16 18 2050
60
70
80
90
100Household
Memo: private sector debt(% of GDP)
+25
Business(corporate and non corporate)
+8
The rise of corporate debt is a matter of concern,
but low interest rates should prevent it from triggering a recession
27 December 2019Sources: Refinitiv Datastream, Federal Reserve, Candriam
10
15
20
25
30
00 02 04 06 08 10 12 14 16 18
Interest expense ratio (% of business income)
Risky firms*
All firms
(*) Speculative grade firms or unrated
Corporate debt / assets (assets are measured at book value)
All firms
Risky firms*
25
30
35
40
45
00 02 04 06 08 10 12 14 16 18
Leverage of public non financial corporations
Debt and interest payments of non financial corporates
(% of net value added)
80 85 90 95 00 05 10 15 202
3
4
5
6
7
8
9
10
50
60
70
80
90
100
110
120
Total debt
Interest payments[R.H.S.]
The outstanding amount of leveraged loans could however become an issue…
during the next recession!
28 December 2019
0
200
400
600
700
95 99 03 07 11 15 19
CDO
CLOs
CLOs and CDOs($ billion)
of which
US CLOs amount to $600 billionsout of $3500 billions of loans andare rather well distributed acrossdomestic holders.
0
1000
2000
3000
4000
5000
6000
Bonds Bank C&I loans Leveragedloans
Banks
Insurance companies
Mutual funds
Foreign investors, pension funds, and other
CLOs
Other loans
Holders of CLOs($ billion)
Corporate debt of non financial corporates
CLOs are thelargest holder ofleveraged loans
Insurance companies131
Holders of corporate debt($ billion)
Mutual funds97
Depository institutions95Pension funds
58
Other financial org. (incl. BHCs)
55
Non financial org. (incl. households)
55
Funds & other investment vehicles
50
Rest of the world76
Sources: Refinitiv Datastream, Federal Reserve, Candriam
80 85 90 95 00 05 10 15 200
10
20
30
40
50
60
70
Other debt securities
Loans($3500 bn)
Corporate bonds($5600 bn)
(% of net value added)
A contraction of firm’s equipment investment could push the economy closer to recession territory…
but the contraction would have to be a deep one!
29 December 2019Sources: Refinitiv Datastream, BEA, Candriam
Intellectual
property
products
45%
Info.
processing
19%
Industrial
equip.
11%Transport
14%Other
equip.
12%
Share in firms’ investment (2019 Q1)
A 10% fall in equipmentinvestment combined withstagnation of IPP investmentwould subtract 0.6% of finaldemand and 1% from US GDPgrowth.
Share of IPPin business investment ex structures
(%)
65 70 75 80 85 90 95 00 05 10 15 2010
20
30
40
50
-30
-20
-10
0
10
20
30
65 70 75 80 85 90 95 00 05 10 15 20
Equipment investment
Equipment and IPP investment(% year on year)
Intellectual property products
30 December 2019Sources: Refinitiv Datastream, Candriam
A sharp deceleration of world growth could also push the US economy into recession
-3
-2
-1
0
1
2
3
12 13 14 15 16 17 18 19 20
-3
-2
-1
0
1
2
3
12 13 14 15 16 17 18 19 20
-3
-2
-1
0
1
2
3
12 13 14 15 16 17 18 19 20
-3
-2
-1
0
1
2
3
12 13 14 15 16 17 18 19 20
Exports(% year on year contribution, nominal)
Canada Euro area
Other Europe
China
Other Asia Japan
LatAm
Mexico
14 15 16 17 18 1995
100
105
110
115
120
125Nominal EER
Real EER(CPI deflated)
Dollar effective exchange rate(2014=100)
-5%
US exports and world growth(% year on year)
US exports
98 02 06 10 14 18
0
2
4
6
-15
-10
-5
0
5
10
15
World growth [R.H.S.]
Export orders
Exports (% year on year, 3mma, -3M, volume)
12 13 14 15 16 17 18 1945
50
55
60
-4
-2
0
2
4
6
8
Export orders (ISM) [R.H.S.]
31 December 2019Sources: Refinitiv Datastream, Candriam
Wages per employee seem to be plateauing
Wages and unemployment rate(1995 - 2019)
ECI wages
(% year on year)
R² = 0.691995-2015
“Non-employment” rate for 25 to 54-year old(%)
2016-2019
19 Q3
0
1
2
3
4
5
3 5 7 9 11Unemployment rate (%)
0
1
2
3
4
5
ECI wages
(% year on year)
Wages and “non-employment” rate(1995 - 2019)
R² = 0.87
1995-2015
2016-2019
19 Q3
18 20 22 24 2606 08 10 12 14 16 181
2
3
4
Total wages
Ex incentive paid
ECI wages - private sector(% year on year)
Unemployment rate
Unemployment and “non-employment” rate(%)
“Non-employment” rate for persons aged
between 25 and 54 [R.H.S.]
18
19
20
21
22
23
24
25
26
94 96 98 00 02 04 06 08 10 12 14 16 18 20
4
5
6
7
8
9
10
32 December 2019Sources: Refinitiv Datastream, Candriam
But as long as employment growth remains around 1%,
household spending will provide a buffer against recessionary pressures
2.5%
A cut in payroll taxes similar tothe Obama one (from 6.2% to4.2%) would add roughly 1% todisposable income, i.e. 0.7 GDPpoints.
Payroll tax (as a share of compensation, %)
08 10 12 14 16 18 2011
12
13Obama payroll cut
Private sector job creationsand wages
Job creations(change / 3 months, thousands, annual rate)
Average weekly hours worked
Hourly wages(% year on year)
06 08 10 12 14 16 18-800
-600
-400
-200
0
200
400
06 08 10 12 14 16 1833.6
34.0
34.4
34.8
06 08 10 12 14 16 181
2
3
4
Job creations since 2016
1% employment growth ~110 000 NFP per month
16 17 18 19100120140160180200220240
Private sector wages(% year on year)
(*) hourly earnings x hours worked x employment
Calculated wages*
08 10 12 14 16 18-6
-4
-2
0
2
4
6
Consumption deflator
33 December 2019
70%
73% 68%
9%
6% 9%
3%
5%11%
9%
7%
6%
9%
9%6%
0
2
4
6
8
10
12
14
2003 2008 2019 Q2
0
4
8
12
16
03 05 07 09 11 13 15 17 19
Credit cards Student loans
Mortgage loans
Auto loans
Delinquency rate(90 or more days delinquent, %)
Memo : Household debt by type($ trillion)
Mortgage loans
Student loansAuto loans
Credit cardsOther
-80
-40
0
40
80
120
95979901030507091113151719-200
-100
0
100
200
300
01 03 05 07 09 11 13 15 17 19
Credit unionsDepository institutions
Consumer credit by lenders(annual flows, $ billion)
Pools of securitized assets
Finance companies
Total
Government & Sallie Mae
Auto loans(annual flows, $ billion)
Sources: Refinitiv Datastream, FRBNY, Candriam
Household financial health is far from worrying
80 85 90 95 00 05 10 15 2060
80
100
120
140
Household debt(% of disposable income)
80 85 90 95 00 05 10 15 2014.5
15.5
16.5
17.5
18.5
Household financial obligation ratio(% of disposable income)
34 December 2019Sources: Refinitiv Datastream, Candriam
Moreover, the household saving rate is elevated
Net wealth(% of disposable income)
Saving rate
(% of disposable income)
Household wealth and saving rate(1976-2019)
0
2
4
6
8
10
12
14
450 500 550 600 650 700
12 Q1 19 Q2
07 Q4
Household wealth and saving rate(% of disposable income)
Saving rate
60 65 70 75 80 85 90 95 00 05 10 15 20
400
500
600
700
0
2
4
6
8
10
12
14
16Net wealth [R.H.S.]
15 16 17 18 191800
2000
2200
2400
2600
2800
3000
12
14
16
18
20Value of equities held by households($ trillion)
S&P 500 [R.H.S.]
19 Q2
Corporate equities held by households and S&P 500
Sources: Federal Reserve, Candriam
Memo: the concentration of wealth may partly explain this elevated saving rate
Annual increase in financial assets since 2010
(%)
-4
-2
0
2
4
6
8
10
12
Bottom 20 80-99 Top 120-40 40-60 60-80
Average inflation
Percentile
35 December 2019
Share in assets by percentile of income(%)
25
30
35
40
45
89 92 95 98 01 04 07 10 13 16 19
Bottom 80% earners
Financial assets
35
40
45
50
55
89 92 95 98 01 04 07 10 13 16 19
80 to 99% top earners
10
15
20
25
30
89 92 95 98 01 04 07 10 13 16 19
Top 1% earners
Total assets
04 06 08 10 12 14 16 18 2020
40
60
80
100
120
04 06 08 10 12 14 16 18 20-30
-20
-10
0
10
20
30
04 06 08 10 12 14 16 18 2070
80
90
100
110
120
130
00 02 04 06 08 10 12 14 16 18 200
500
1000
1500
2000
2500
0
20
40
60
80
100
12 13 14 15 16 17 18 19 20-20
-10
0
10
20
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
36 December 2019Sources: Refinitiv Datastream, Candriam
Falling interest rates have provided only a moderate support to residential investment…
NAHB survey and housing starts
NAHB survey(current situation)
Housing starts(thousands, -6M, annual rate) [R.H.S.]
Single-family residential investment(2004 = 100)
Single-family residential investment
Single-family housing starts
Brokers' commission and existing home sales
(% year on year)
Home improvements
Building materials, garden equip. & supply stores retail salesMortgage interest rate
(%, change over 1 year)
Pending home sales (% year on year, -3M)[R.H.S.]
Interest rates and pending home sales
?
Brokers’ commissions
Existing home sales
Home improvement(2006 = 100)
37 December 2019Sources: Refinitiv Datastream, Urban Institute, Candriam
… in part because credit availability has remained tight
“easy credit” area
“tight credit” area
Home sales and plans to buy a home
1.0
1.5
2.0
2.5
3.0
3.5
80 85 90 95 00 05 10 15 201
2
3
4
5
6
7Home sales per capita(%)
Plans to buy a home in 6 months (% households) [R.H.S.]
0
5
10
15
20
25
98 00 02 04 06 08 10 12 14 16 18
Housing credit availability index*
0
5
10
15
20
25
98 00 02 04 06 08 10 12 14 16 18
0
5
10
15
20
25
98 00 02 04 06 08 10 12 14 16 18
0
5
10
15
20
25
98 00 02 04 06 08 10 12 14 16 18
GSE
FHA, VA
Private-Label(*) The Housing credit availability index (HCAI) indicates thedifficulty of getting a mortgage by measuring lenders’
tolerance for risk. The HCAI separates borrower risk fromproduct risk.A higher HCAI indicates that lenders are willing to toleratedefaults and are taking more risks, making it easier to get aloan.
Housing credit availability indexBorrower risk Product risk
All mortgages
Housing credit availability index
0.2
0.4
0.6
0.8
1.0
1.2
80 85 90 95 00 05 10 15 2035791113151719
“tight credit” area
“easy credit” area
Home sales / plans to buy
Housing credit availability index [R.H.S.]
38 December 2019
President Donald Trump and U.S. congressional leaders alsoreached a deal on federal spending caps, but Democrats andRepublicans still need to agree on appropriation bills in orderto avoid a new shutdown at the end of this year. Until December20, a continuing resolution will fund the federal budget.
Sources: CBO, Candriam
A continuing resolution has been agreed on to avert a shutdown… at least until December 20
Debt ceiling suspension: under the agreement thissummer, the Treasury Department’s borrowingauthority is extended through July 31, 2021.
Change in federal outlays(% of GDP, calendar years)
-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
2018 2019 2020
Outlays
Discretionary spending caps and effective outlays
($ billion, fiscal years)
1244
Continuing resolution
1000
1100
1200
1300
1400
1500
2017 2018 2019 2020 2021
Proposed outlays
Current budget caps
-$125 bln
Newly proposedbudget caps
39 December 2019Sources: Refinitiv Datastream, Candriam
Barring a confidence shock, growth should gradually decelerate to slightly below 2% in 2020
GDP in the United States
(% annual rate)
Consumption
Investment
- Residential
- Equipment & intellectual property products
- Structures
Change in inventories
(contribution)
Government
External balance
(contribution)
- Exports
- Imports
GDP
2017 2018 2019 2020Q3 19
2.6 3.0 2.6 2.2
4.2 4.9 1.7 1.3
3.5 -1.5 -1.7 1.3
4.3 7.0 4.1 1.6
4.7 4.1 -4.1 -0.2
0.0 0.1 0.1 -0.2
0.7 1.7 2.3 1.8
-0.4 -0.4 -0.3 -0.2
3.5 3.0 0.1 2.8
4.7 4.4 1.6 2.9
2.4 2.9 2.3 1.8
2.9
-1.1
5.1
0.0
-12.0
0.2
1.6
-0.2
0.9
1.5
2.1
Q2 19Q1 19Q4 18
1.4 1.1 4.6
3.4 3.4 -1.0
-4.7 -1.0 -3.0
9.2 4.4 2.0
-9.0 4.0 -11.1
0.1 0.5 -1.0
-0.4 2.9 4.8
-0.4 0.8 -0.8
1.5 4.1 -5.7
3.5 -1.5 0.0
1.1 3.1 2.0
GDP(% year on year)
-6
-4
-2
0
2
4
6
98 00 02 04 06 08 10 12 14 16 18 20
The potential rate of growth of the US economy seems now low
40 December 2019Sources: Refinitiv Datastream, Candriam
96 97 98 99 00 01 02 03 04 050
1
2
3
4
5
6
2.0
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.51996-2005
3.4%
GDP growth (% year on year) [R.H.S.]
GDP growth and change in unemployment rate
1960-1984
60 65 70 75 80-4
-2
0
2
4
6
8
10
4
3
2
1
0
-1
-2
-3
Change in unemployment rate (change over 1Y, %) [Inverted scale]
4%
Implicit potential GDP growth rate
1985-2019
2.3%
Implicit potential GDP growth rate
85 90 95 00 05 10 15
-4
-2
0
2
4
6
4
2
0
-2
2005-2019
~1.5%
06 07 08 09 10 11 12 13 14 15 16 17 18-4-3
-2
-10
12
3
4
4
2
0
-2
19
Demographic effect
The growth of the labor force is more and more constrained
41 December 2019Sources: Refinitiv Datastream, Candriam
Participation rate(%)
62
64
66
68
90 95 00 05 10 15 20
3.4
Participation rate by age(%, 2019)
16-19 20-24 25-54 55-64 65-740
20
40
60
80
100
>75
Contribution to population growth (% year on year, 2019)
16-19 20-24 25-54 55-64 65-74 >75-0.2
-0.1
0.0
0.1
0.2
0.3
0.4
0.5Annual rate of population growth
(%)
0.0
0.5
1.0
1.5
2.0
55 65 75 85 95 05 15 25 35
15 to 64-year old
-1
0
1
2
3
4
5
55 65 75 85 95 05 15 25 35
65 to 74-year old
3.5%
0.2%96 00 04 08 12 16 20
2
6
10
14
18
Unemployment rate measures(%)
Official unemployment rate (U-3)
+ all marginally attached+ involuntary part time (U-6)
55 60 65 70 75 80 85 90 95 00 05 10 15 202
3
4
5
6
7
2.7
Involuntary part time
of which
Sustaining 1% employment growth in 2020 and 2021 will get harder and harder!
42 December 2019Sources: Refinitiv Datastream, Candriam
Employment growth(% year on year)
No change in participation rates
-1
0
1
2
14 15 16 17 18 19 20 21
Unemployment rate falling to 3.3%
80
81
82
83
84
85
90 95 00 05 10 15 2030
35
40
45
50
55
90 95 00 05 10 15 2070
72
74
76
78
80
90 95 00 05 10 15 20
Participation rate by age(%)
16-19 20-24 25-54
50
55
60
65
70
10
14
18
2255-64 >64
90 95 00 05 10 15 20 90 95 00 05 10 15 202
3
4
5
6
7
8
90 95 00 05 10 15 20
Unemployment rate (%)
Rising participation
73
74
75
76
77
78
88
89
90
91
92
93Women [R.H.S.]
95 00 05 10 15 20
Men
Unless there is a pick-up in productivity,
the US potential rate of growth will remain below 2% in the coming years
43 December 2019Sources: Refinitiv Datastream, Candriam
Output per hour & business cycle(%)
06 08 10 12 14 16 18 20
-4
-2
0
2
4
6
8
10
-2
0
2
4
6
1-Y GDP acceleration (%) [R.H.S.]
Output per hour(% year on year)
Productivity(output per hour, 1990=100)
90 95 00 05 10 15 20100
120
140
160
180
200
220
240
Nonfarm business
Manufacturing
Annual productivity gains(nonfarm business output per hour, % )
96 00 04 08 12 160
1
2
3
4
5
Over 5 years
Over 2 years
Labor force: +0.4%
Medium term potential rate of growth
GDP per employee: +1.3%
GDP: +1.7%
Productivity and hiring constraints
85 90 95 00 05 10 15 205
10
15
20
25
30
35
40
0
1
2
3
4
Productivity gains (over 3 years, -14Q)
NFIB – jobs hard to fill (6-month moving average) [R.H.S.]
44 December 2019Sources: Refinitiv Datastream, Candriam
The Federal reserve should now stay pat for an extended period of time
“‘Who is our bigger enemy,’ Fed Chairman Powell or ChinesePresident Xi?” Donald Trump.
“The USA should always be paying the lowest rate. NoInflation! It is only the naïveté of Jay Powell and the FederalReserve that doesn’t allow us to do what other countries arealready doing. A once in a lifetime opportunity that we aremissing because of “Boneheads.” Donald Trump
2019 2020 2021 Longer run1.0
1.5
2.0
2.5
3.0
3.5
2022
Fed funds rate expectations of FOMC members(%, September 2019)
Median
December 52019 End of 2020
(III)
(II)(I)
1.8%
1.6%1.6%
2.0%
2.3%
1.9%2.2%
2.5%
US 10-year interest rate forecasts (Treasuries)
2-year interest rate
5-year interest rate in 5 years
3-year interest rate in 2 years
10-year interest rate
Fed funds rate and market expectations(%)
Dec. 19
June 20Dec. 20
Fed funds
Dec Mar Jun Sep Dec Mar Jun Sep Dec1.0
1.5
2.0
2.5
3.0
Current Fed Funds future
45Sources: Refinitiv Datastream, Candriam
Tensions on the money market have led the Fed to start expanding again its balance sheet
December 2019
0
1000
2000
3000
4000
5000
03 05 07 09 11 13 15 17 190
1000
2000
3000
4000
5000
03 05 07 09 11 13 15 17 19
T-Bills
Federal Reserve balance sheet($ billion)
Agencies
Treasuries
Total debt securities
MBS
Liabilities
Currency in circulation
Reserves
Treasury deposit& reverse repos
Repos
Assets
0
100
200
300
400
500
12 13 14 15 16 17 18 19 20
Reverse repos with dealers
0
100
200
300
400
500
12 13 14 15 16 17 18 19 20
Reverse repos with foreign officials and international accounts
0
100
200
300
400
500
12 13 14 15 16 17 18 19 20
U.S. Treasury general account
100
150
200
250
300
JanFebMar AprMayJun Jul AugSep OctNovDec
693!
Structure of money market interest rates(basis points)
ON RRPIOEREFFR
ON GC REPO
Even if the Fed revises its policy framework,
pushing (and keeping!) the PCE deflator above 2% will be challenging
46 December 2019
06 08 10 12 14 16 18 20-1
0
1
2
3
4
5Shelter
Owners’ equivalent rent
Rents
06 08 10 12 14 16 18 200.5
1.0
1.5
2.0
2.5
3.0
Three measures of core inflation(% year on year)
CPI
PCE deflator*
Trimmed mean CPI
(*) Core market based PCE deflator Memo: PCE weights
Core CPI weights(%)
0 5 10 15 20 25 30 35 40
Alcoholic beverages Apparel
Other goods and services Recreation
Education and communication Medical care
Transportation Housing
Cyclical components
Non cyclical components
Sources: Refinitiv Datastream, Candriam
-1
0
1
2
3
4
06 08 10 12 14 16 18
Core goods
20
Output gap(-12 months)[R.H.S.]
0
1
2
3
4
5
99 01 03 05 07 09 11 13 15 17 19-6
-3
0
3
Core CPI components(% year on year)
Cyclical components
Non cyclical components
CPI
06 08 10 12 14 16 18 200
2
4
6
PCE
Two measures of medical care services prices
Non cyclical components
0
2
4
6
15 20 25 30 35 40 45
47
Leisure
Transport
Other
Manufacturing
Education & health
Utilities
Mining
Information
Wholesale trade
Construction
Financial
Professional & bus. serv.
Share in total employment(%)
Low
Middle
High
Job creations(thousands, year on year)
200
400
600
800
1000
1200
13 14 15 16 17 18 19
0
2
4
6
08 10 12 14 16 18
0
2
4
6
08 10 12 14 16 18
0
2
4
6
08 10 12 14 16 18
LowHigh
Hourly earnings(% year on year, 3mma)
Hourly earnings(% year on year, 3mma)
Manufacturing
Education & health
Leisure & hospitality
Retail trade
Financial activities
Professional & business serv.
Middle
0
1
2
3
4
5
08 09 10 11 12 13 14 15 16 17 18 19
Hourly earnings(dollars, August 2019)
Information
Utilities
Construction
Financial activities
Professional & business serv.
Leisure & hospitality
Retail trade
Wholesale
Growth in hourly earnings
(% year on year, August 2019)
Hourly earnings by sector
Bubbles’ size are proportional to shares in private employment
Sources: Refinitiv Datastream, Candriam
Memo: wage increases are concentrated at the lower and upper ends of the pay scale
Transportation& warehousing
OtherEducation & health
Manuf.
December 2019
Retail trade
0
5
10
15
20 Low(< $20)
High(> $30)
Middle
December 2019
5a. EURO AREAStuck in low gear…
49 December 2019Sources: Refinitiv Datastream, Candriam
Growth has markedly slowed… especially in Italy and Germany
-2
-1
0
1
2
3
4
10 11 12 13 14 15 16 17 18 19
Euro area real GDP growth (%)
Year on year
Quarter on quarter, annual rate
-1
0
1
2
3
IT DEEuroarea FR AT BE NL PT ES FI GR IE
Real GDP growth by country(% year on year)
Memo : 2017 Q4 / 2016 Q4
2019 Q3 / 2018 Q3
50 December 2019Sources: Refinitiv Datastream, Candriam
Foreign trade has been a key factor in the recent GDP slowdown
Equipment investment
-2
-1
0
1
2
3
10 11 12 13 14 15 16 17 18 19
GDP
Change in inventories
Structures
-2
-1
0
1
2
3
10 11 12 13 14 15 16 17 18 19
GDP
Net exports
-2.5%
Euro area ex Ireland
Euro area ex Ireland
-2
-1
0
1
2
3
17 18 19
-2
-1
0
1
2
3
17 18 19
-0.6%
-1.8%
GDP
-2
-1
0
1
2
3
10 11 12 13 14 15 16 17 18 19
Contribution to euro area GDP growth(% year on year)
Government consumptionResidential investmentPrivate consumption
Contribution to country’s GDP growth(% year on year)
Germany
17 18 19-2
-1
0
1
2
3
51 December 2019Sources: Refinitiv Datastream, Candriam
The foreign trade contraction has mainly affected Germany,
while an inventory correction has weighed heavily on Italian growth
-2
-1
0
1
2
3
17 18 19
-2
-1
0
1
2
3
17 18 19
France
-2
-1
0
1
2
3
17 18 19
-2
-1
0
1
2
3
17 18 19
Spain
Domestic demand
Change in inventories
GDP
-2%
Net exports
GDP
Exports
Imports-2
-1
0
1
2
3
18 1917-2
-1
0
1
2
3
17 18 19
-2
-1
0
1
2
3
17 18 19
Italy
The growth in domestic demand has supported activities not directly related to manufacturing
December 2019Sources: Refinitiv Datastream, Candriam
52
Professional, scientific and technical, administrativeand support
Trade, transportation, accommodation & food serv.
-0.5
0.0
0.5
1.0
05 07 09 11 13 15 17 19
Correlation with manufacturing(%, 5 year rolling correlations, euro area)
Information and communication
Construction
Real estate
-0.5
0.0
0.5
1.0
05 07 09 11 13 15 17 19
Arts, entertainment
Financial and insurance activities-0.5
0.0
0.5
1.0
05 07 09 11 13 15 17 19
GDP
-4
-2
0
2
4
00 03 06 09 12 15 18
GDP
-4
-2
0
2
4
00 03 06 09 12 15 18
Value added by sector for the euro area(% year on year)
GDP
-4
-2
0
2
4
00 03 06 09 12 15 18
GDP
-4
-2
0
2
4
00 03 06 09 12 15 18-15
-10
-5
0
5
10
Public administration, defense, education,health and social activities
Trade, transport and professional
services
Industry [R.H.S.]
Other private services
Despite some softening, the services sector has proved resilient
53 December 2019Source: Bloomberg
Services sector
40
45
50
55
60
07 09 11 13 15 17 19
PMI indices
Euro area
Manufacturing sector
40
45
50
55
60
15 16 17 18 19
Services sector
Manufacturing sector
Germany
40
45
50
55
60
15 16 17 18 19
40
45
50
55
60
15 16 17 18 1940
45
50
55
60
15 16 17 18 19
Services sector
Manufacturing sector
France
Services sector
Manufacturing sector
Italy
Services sector
Manufacturing sector
Spain
54 December 2019
The contraction of German foreign trade has now clearly stopped…
but for exports to significantly support growth, a pick up in world trade is needed!
Sources: Refinitiv Datastream, Candriam
-1.0
-0.5
0.0
0.5
1.0
18 19
Asia
Middle East& Africa
Non Europe
America
-0.3
0.0
0.3
0.6
18 19
Other Asia
China
Japan
Asia
-0.6
-0.3
0.0
0.3
18 19
United Kingdom
Denmark
SwedenEastern Europe
EU ex euro area
Other Europe
EU ex euro area
Euro area
-1.0
-0.5
0.0
0.5
1.0
18 19
Europe
Total Europe
-2
-1
0
1
2
14 15 16 17 18 19
Net trade contribution to German growth by region or countries(% of GDP, 3-month moving average, nominal)
Europe
America
Asia
Total
Middle East & Africa
World German trade(% year on year, nominal)
06 08 10 12 14 16 18 20-10
0
10
20
Exports
Imports
04 06 08 10 12 14 16 18 20
-10
0
10
20
30
-10
-5
0
5
10
15
20
55 December 2019
German growth seems to stabilize… with fiscal policy providing only a limited support
Sources: Refinitiv Datastream, Candriam
0
1
2
2019 2020
SpringAutumn
Council of economic experts growth forecast
(%)
Ifo and real GDP growth(% year on year)
06 08 10 12 14 16 18 2085
90
95
100
105
110
115
-2
0
2
4
6GDP growth(% year on year)
IFO expectations in 6 months (+3m) [R.H.S.]
Ifo exports in 3 months [R.H.S.]
Exports(% year on year, volume)
Exports and Ifo export orders
Germany’s fiscal policy is also expansionary and anadditional economic stimulus package is not
necessary. It is instead a matter of allowing theautomatic stabilizers to take effect. The debt brakedoes not rule out new borrowing for this purposeand leaves scope for increasing public investment.Annual Report 2019/20 of the German Council ofEconomic Experts
Equipment investmentand EC survey in Germany
Equipment investment(% year on year)
Perceived demand(EC survey) [R.H.S]
Consumption
Retail sales(3mma) [R.H.S]
Consumption and retail sales(% year on year)
06 08 10 12 14 16 18 20-30
-20
-10
0
10
20
30
-15
-10
-5
0
5
10
15
08 10 12 14 16 18 20-8
-6-4-2
0
24
6
8
-2
-1
0
1
2
3
56 December 2019Sources: Refinitiv Datastream, Candriam
At the euro area level, consumption is not booming… but continues to grow!
06 08 10 12 14 16 18 20-15
-10
-5
0
5
-2
-1
0
1
2
3
Consumption andfinancial situation
Consumption(% year on year, in real terms)
Financial situationnext 12 months[R.H.S.]
06 08 10 12 14 16 18 20
-4
-2
0
2
4
Consumption and retail sales(% year on year, in real terms)
Consumption
Retail sales
Employment
Wages
Wages(% year on year)
Wages per employee
-3
0
3
6
03 05 07 09 11 13 15 17 19
Real income and consumption(% year on year, in real terms)
Consumption
Disposable income
-2
-1
0
1
2
3
03 05 07 09 11 13 15 17 1906 08 10 12 14 16 18 2070
80
90
100
110
120
Car sales(2006 = 100)
Euro area
6mma
57 December 2019Sources: Refinitiv Datastream, Candriam
The deceleration in growth has weighed on employment
14 15 16 17 18 19 20-1
0
1
2Italy % yoy
14 15 16 17 18 19 200.0
0.5
1.0
1.5
2.0
% qoq, ar
% yoy
Belgium
06 08 10 12 14 16 18 20-3
-2
-1
0
1
2
3
Employment(% quarter on quarter annual rate)
14 15 16 17 18 19 200.0
0.5
1.0
1.5
2.0
14 15 16 17 18 19 20-2
0
2
4
Employment growth
Netherlands
% qoq, ar
% yoy
Germany
% qoq, ar
% yoy
06 08 10 12 14 16 18 202
4
6
8
10
12
14
06 08 10 12 14 16 18 200
5
10
15
20
25
30
Unemployment rate(%)
Italy
Belgium
GermanyNetherlands
Spain
Greece
Portugal
Euro area
France
Euro area
58 December 2019Sources: Refinitiv Datastream, Candriam
Household confidence is still solid, but has eroded recently in some countries
-40
-30
-20
-10
0
10
13 14 15 16 17 18 19-40
-30
-20
-10
0
10
13 14 15 16 17 18 19-40
-30
-20
-10
0
10
13 14 15 16 17 18 19
-40
-30
-20
-10
0
10
13 14 15 16 17 18 19-40
-30
-20
-10
0
10
13 14 15 16 17 18 19
Germany France
Italy Spain
Belgium
Consumer confidence
Consumer confidence (next 12 months)
Financial situation
SavingsUnemployment
General economic situation
-30
-20
-10
0
10
13 14 15 16 17 18 19
Euro area
59 December 2019Sources: Refinitiv Datastream, Candriam
The recent rise in the Spanish household saving rate is puzzling
France
Germany
Spain
Italy
Belgium
02 04 06 08 10 12 14 16 18 200
5
10
15
20
Household saving rate(% of disposable income)
Euro area
02 04 06 08 10 12 14 16 18 2011
12
13
14
15
Disposable income and consumption(% year on year)
2015 16 17 18 190
2
4
6
Disposable income
Consumption
Euro area
15 16 17 18 19 200
2
4
6
15 16 17 18 19 200
2
4
6
Consumption
Consumption
Disposable income Disposable income
15 16 17 18 19 200
2
4
6Consumption
15 16 17 18 19 200
2
4
6
Consumption
Disposable income Disposable income
FranceGermany
SpainItaly
With low interest rates, the construction sector is providing some offset to downward pressures
December 2019Sources: Refinitiv Datastream, Candriam
60
0
2
4
6
8
Construction
(Share in GDP, %)
10
12
Residential
5.4
Non
residential
4.9
Equipment
6.5
IPP
4.1
Equipment and IPP
Total investment in the Euro area(public and private investment)
00 02 04 06 08 10 12 14 16 18 20-6
-4
-2
0
2
4
6
-15
-10
-5
0
5
10Total investment
(% year on year)
GDP [R.H.S.]
Construction investment(% year on year)
04 06 08 10 12 14 16 18-40
-30
-20
-10
0
10
-12
-9
-6
-3
0
3
6
9
12
Investmentin construction(% year on year)
EC survey [R.H.S.]
04 06 08 10 12 14 16 18 20-80
-60
-40
-20
0
20
40France Germany
SpainItaly
Construction confidence(3-month moving average)
Belgium
Perceived demand is pointing to some growth in equipment investment
61 December 2019Sources: Refinitiv Datastream, Candriam
(*) Including intellectual property rights
Equipment investment*(% year on year, volume)
Equipment investment and perceived demand
06 08 10 12 14 16 18 20
-30
-20
-10
0
10
20
30
-15
-10
-5
0
5
10
15
Germany
(**) Composite indicator: 0.7 x industry production trend+ 0.3 x services recent evolution in demand
Perceived demand**[R.H.S.]
Equipment investment*(% year on year, volume)
06 08 10 12 14 16 18 20
-40
-30
-20
-10
0
10
20
-10
-5
0
5
10
France, Italy and Spain
Perceived demand**[R.H.S.]
-10
France
06 08 10 12 14 16 18
-40-30-20-1001020
-5
0
5
10 Perceived demand**[R.H.S.]
Equipment investment*(% year on year, volume)
Italy
06 08 10 12 14 16 18
-40
-30
-20
-10
0
10
-15
-10
-5
0
5
10
Spain
06 08 10 12 14 16 18-40
-30
-20
-10
0
10
-15
-10
-5
0
5
10
15
Fiscal impulse in 2020(% of GDP)
0.0
0.2
0.4
0.6
0.8
Fiscal policy will provide a moderate support to growth in 2020
62 December 2019Sources: Refinitiv Datastream, European Commission, Candriam
Government balance targets as announced in SCP(% of GDP)
-12
-10
-8
-6
-4
-2
0
2
09 10 11 12 13 14 15 16 17 18 19 20 21 22
France
EC forecasts
Euro area
DE BE IT ES FRNL
-12
-10
-8
-6
-4
-2
0
2
09 10 11 12 13 14 15 16 17 18 19 20 21 22
Italy
Germany
-12
-10
-8
-6
-4
-2
0
2
09 10 11 12 13 14 15 16 17 18 19 20 21 22
-12
-10
-8
-6
-4
-2
0
2
09 10 11 12 13 14 15 16 17 18 19 20 21 22
Spain
10
1112
13 14 15 1617
1819 2020 draft
SCP (draft)
63 December 2019Sources: Refinitiv Datastream, Candriam
All in all, GDP growth should hover around 1% in 2020
GDP(% year on year)
Unemployment rate(%)
GDP growth in the euro area
(% annual rate) 19Q3 20202016 2017 2018 201919Q218Q4 19Q1
- Exports
- Imports
GDP
Consumption
Investment
- Residential
- Equipment
& property rights
- Structures
Change in inventories
(contribution)
Government
External balance
(contribution)
-6
-4
-2
0
2
4
01 03 05 07 09 11 13 15 17 19
7
9
11
13
01 03 05 07 09 11 13 15 17 19
2.0
1.2
2.3
1.0
0.5
-0.4
1.6
-0.3
1.7
2.6
0.9
1.4
2.2
1.5
3.2
0.6
0.1
1.3
-0.3
2.6
3.5
1.2
3.9 4.3 4.1 3.1
5.0 4.8 4.0 3.4
5.1 4.6 4.9 2.9
0.2 2.9 2.6 3.3
0.1 0.2 0.0 -0.4
1.9 1.3 1.1 1.6
-0.4 0.4 0.1 0.0
2.9 5.8 3.3 2.5
4.1 5.5 3.5 2.8
1.9 2.7 1.9 1.2
1.9 1.8 1.4 1.30.9
2.7
0.4
5.8
-1.7
-0.2
2.0
-0.5
0.6
1.8
0.7
1.5
1.5
5.6
-3.0
7.8
-0.9
1.7
1.2
3.5
1.1
1.8
1.5
6.7
4.2
8.2
5.8
-0.9
1.7
-0.2
3.8
4.7
1.4
The euro area is still far from full employment and inflation will remain low
64 December 2019Sources: Refinitiv Datastream, Eurostat, Candriam
Inflation(%, annual average)
0
1
2
3
12 13 14 15 16 17 18 19 20
1.21.4
70
75
80
85
90
95
00 03 06 09 12 15 18
Spain
Italy
FranceBelgium
Portugal
Employment rate Men 25 to 54-year old
(%)
Germany
78
80
82
84
86
88
90
00 03 06 09 12 15 18
Euro areaex Germany
04 06 08 10 12 14 16 18 20-1
0
1
2
3
Total
Core inflation(% year on year, 3mma)
Goods
Services
-1
0
1
2
3
04 06 08 10 12 14 16 18 20
Germany
Core inflation by country(% year on year, 3mma, ex tax effects)
Italy
Spain
France
Belgium
June
ECB forecasts
Core inflation and ECB forecasts(% year on year)
0.0
0.5
1.0
1.5
2.0
2.5
04 06 08 10 12 14 16 18 20
September
65 December 2019
Against this background, the ECB has turned even more accommodative
Sources: Refinitiv Datastream, ECB, Candriam
MFIs deposits at national central banks
0
500
1 000
1 500
2 000
2 500
06 08 10 12 14 16 18 20
Spain
Germany
Belgium
Italy
France
Euro area
Netherlands
LuxembourgFinland
(% of each country MFIs’ assets)
… with a “tiering” system
0
2
4
6
8
10
12
14
FI LX DENLBEFRAT ES IT PT IE GR
(€ billion)Italian MFIs borrowing from & reserves at the Bank of Italy
(€ billion)
Borrowing
(*) Current account deposits & marginal deposit facility
Reserves*
0
100
200
300
06 08 10 12 14 16 18 20
Negative interest rates for longer…
16 17 18 19-0.6
-0.3
0.0
0.3
0.6
0.9 3 month interest rate expected in December 2020
3-month Euribor
3-month Euribor andshort term rate expectations
(%)
“We expect the key ECB interest rates toremain at their present or lower levels untilwe have seen the inflation outlookrobustly converge to a level sufficientlyclose to, but below, 2%.”ECB introductory statement, October 24
Deposit facility
66 December 2019
New TLTROs and a new APP have been put in place
Sources : ECB, Candriam
Outstanding by country
TLTROsMaturity(€ billion)
% of country’s MFIs liabilities [R.H.S.]
€ billion
New refinancing operations…
0
200
400
600
800
Nov-19 Nov-20 Nov-21 Nov-22
2.1
2.22.3
2.43.1
0
50
100
150
200
250
IT ES FRDE NLBE PT ATGR FI LX IE0
1
2
3
4
5
6
7
“The Governing Council decided to restart net purchases under its assetpurchase program (APP) at a monthly pace of €20 billion as from 1November… for as long as necessary to reinforce the accommodativeimpact of our policy rates, and to end shortly before we start raising the keyECB interest rates.”Monetary policy decision of September 12 2019
Eurosystem holdings (€ billion)
Eligible assets (€ billion)Eurosystem holdings as a % of eligible assetsEurosystem purchase limitEstimated space
Eurosystem purchase limit
Estimated space (€ billion)
Current
programs
Possible
change
ECB parameters
of its asset purchase program Sovereign Supra.
1 860 230 26 261 177
7 900 515 150 680 950
24% 45% 17% 38% 19%
33% 50% 70% 70% 70%0 28 -- -- --
50% 70%
960 131
PSPPABSPP CBPP3 CSPP
… and a new APP
67Sources: Refinitiv Datastream, Candriam
ECB’s policy is supporting households borrowing…
December 2019
Household debt service(% of disposable income)
00 02 04 06 08 10 12 14 16 18 202
4
6
8
10
12
Italy
Germany Spain
France
Belgium
00 02 04 06 08 10 12 14 16 1820
40
60
80
100
120
140
Household debt(% of disposable income)
Italy
GermanySpain
France
Belgium
04 06 08 10 12 14 16 18 20-5
0
5
10
15
20
France
Germany
Spain
Italy
By country(% year on year, adjusted for securitization)
Belgium
04 06 08 10 12 14 16 18 201
2
3
4
5
6
7
FranceGermany
Spain
Italy
Interest rates on loans for house purchase(%, new loans)
Belgium
Loans to households
04 06 08 10 12 14 16 18 20-2
0
2
4
6
8
10
12Loans
Disposable income
Euro area(% over 3 months, annual rate)
68Sources: Refinitiv Datastream, Candriam
… and to some extent lending to firms
December 2019
Interest rates on loans to nonfinancial corporations(%, floating rate, < €1million, new loans)
04 06 08 10 12 14 16 18 20-5
0
5
10
15
20Loans
GDP
00 02 04 06 08 10 12 14 16 1840
60
80
100
120
140
160
04 06 08 10 12 14 16 18 20-10
0
10
20
30
00 02 04 06 08 10 12 14 16 18 200
20
40
60
80
Loans to non financial corporationsEuro area
(% over 3 months, annual rate)By country
(% year on year, adjusted for securitization)
Non financial corporations debt(% of GDP)
Non financial corporations debt service(% of income)
Italy
Germany
Spain
France
Italy
Germany
Spain
France
10 11 12 13 14 15 16 17 18 191
2
3
4
5
6
FranceGermany
Spain
Italy
Belgium
France
Germany
Spain
Italy
Belgium
Belgium
Belgium
69 December 2019Sources: Refinitiv Datastream, Federal reserve bank of Dallas, Candriam
The ECB policy has however secondary effects… in particular on the housing market
Spain
Italy
France
Belgium
Netherlands
Germany
Residential property prices(2003 = 100, nominal)
80
100
120
140
160
180
200
03 05 07 09 11 13 15 17 19
Residential property prices and income(1991 = 100)
Germany Italy Spain
Belgium Netherlands France
0
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 150
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 150
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 15
0
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 150
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 150
50
100
150
200
250
300
350
75 80 85 90 95 00 05 10 15
Residential property prices Disposable income per household
70 December 2019Sources: Refinitiv Datastream, Candriam
N.B. Gauging the degree of over-valuation is no easy task!
Over-valuation
Under-valuation
(%)Germany
-20
-10
0
10
20
07 08 09 10 11 1213 14 15 16 17 18
France
-10
0
10
20
30
07 08 09 10 11 1213 14 15 16 17 18
Belgium
-10
0
10
20
30
07 08 09 10 11 12 13 14 15 16 17 18
Italy
-20
-10
0
10
20
07 08 09 10 11 1213 14 15 16 17 18
Spain
-20
-10
0
10
20
30
40
50
07 08 09 10 11 1213 14 15 16 17 18
Netherlands
-20
-10
0
10
20
30
07 08 09 10 11 12 13 14 15 16 17 18
ECB residential property prices under / over valuation
Euro area
-10
-5
0
5
10
15
20
07 08 09 10 11 12 13 14 15 16 17 18
Model based over-/under-valuation
71 December 2019Sources: Refinitiv Datastream, Candriam
The ECB policy is also affecting banks’ interest margins
Deposits*
Apparent interest margin on outstanding amounts(%)
0
1
2
3
4
5
6
03 05 07 09 11 13 15 17 19
Loans*
Euro area
(*) Weighted average rates on outstanding amounts.
Italy Spain
Germany France
0
1
2
3
4
5
6
03 05 07 09 11 13 15 17 190
1
2
3
4
5
6
03 05 07 09 11 13 15 17 19
0
1
2
3
4
5
6
03 05 07 09 11 13 15 17 190
1
2
3
4
5
6
03 05 07 09 11 13 15 17 19
Loans* Loans*
Deposits* Deposits*
Loans*
Deposits*
Loans*
Deposits*
Margin
Margin
Margin Margin
Margin (loans minus deposit rates)
72 December 2019
With an ultra accommodative monetary policy, long term rates will remain low…
until there are clear signs of a sustained re-acceleration of activity
Sources: Refinitiv Datastream, Candriam
(III)
(II)
(I)
December 52019
0.1%
-0.3%
-0.1%
0.4%
Euro swap rates forecasts
2-year interest rate
5-year interest rate in 5 years
3-year interest rate in 2 years
10-year interest rate 0.6%
End of 2020
0.0%
0.5%
0.9%
06 08 10 12 14 16 18 20-3
0
3
6
9Portugal
FranceGermany
Spain
Italy
Belgium
10-year sovereign rates(%)
17 18 190
100
200
300
400
500
France
Spain
ItalyPortugal
10-year sovereign spread with Germany(basis points)
Belgium
73 December 2019
Sources : Refinitiv Datastream, Candriam
Memo: bond market equilibrium
Governments
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Net suppliers of debt securities(€ billion, moving average over 4Q, annual rate)
Net buyers of debt securities(€ billion, moving average over 4Q, annual rate)
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Other financial institutions(invest. funds, financial vehicles,…)
Banks
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Banks
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Non financial corp.
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Rest of the world
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Other financial institutions(invest. funds, financial vehicles…)
Insurance corp. &pension funds
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Non financial agents
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
Rest of the world
ECB
-200
0
200
400
600
00 02 04 06 08 10 12 14 16 18
74 December 2019Sources: Refinitiv Datastream, OECD, Candriam
Italy
Spain
France
Belgium
Share of euro area countries’ GDP used to satisfy
US demand of motor vehicles (%, 2015)
0.0
0.2
0.4
0.6
0.8
Austria
Slovenia
Portugal
Estonia
Netherlands
Finland
Lithuania
Luxembourg
Malta
Latvia
Greece
Ireland
Cyprus
Germany
Since mid-November, the threat of US tariffs on autos has seriously diminished
Slovakia
German value added by sector(% of total value added, 2016)
1.5
1.7
1.7
2.0
3.5
0 1 2 3 4 5
Coke and refined petroleum products
Textiles, wearing apparel, leather and related products
Other transport equipment
Repair and installation of machinery and equipment
Non-metallic mineral products
Basic metals
Furniture; jewellery, toys…
Basic pharmaceutical products
Wood, paper…
Rubber & plastic
Computer & electronics
Electrical equipt
Food & beverage
Chemicals
Fabricated metal prod.
Machinery and equipment
23.4
4.7Motor vehicles, trailers and semi-trailers
Germany
95 98 01 04 07 10 13 16 1910
15
20
25
France
Spain
Italy
Manufacturing share in value added(%)
Belgium
If there are new shocks, fiscal policy could be used…
provided EU members accept to be more complacent with the existing rules!
75 December 2019Sources: Refinitiv Datastream, European Commission, Candriam
Fiscal space(% of country GDP)
-3
-2
-1
0
1
2
3
4
5
DE
Debt brake
FR IT ES BE NL
No more effort
No more effort
(*) Stability and Convergence Program
SCP*
SCP*
1/20 rule
1/20 rule
Debt brake
Debt brake
Germany(% of GDP)
Government primary balance
Government debt
20
40
60
80
100
95 00 05 10 15 20 25 30 35
-6
-4
-2
0
2
4
95 00 05 10 15 20 25 30 35
“We need more expansion, more investment. Europe can’t be the onlyzone not to do so. I think that’s also why the debate about the 3% ofnational budgets and the 1% for the European budget, belongs in thepast century.”Emmanuel Macron, The Economist
04 06 08 10 12 14 16 18-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
France
Germany
Spain
Italy
Government net investment(% of country GDP)
Belgium
Netherlands
76 December 2019Sources: Refinitiv Datastream, Candriam
More euro area integration / risk sharing will only take place in a distant future… at best!
Olaf Scholz just published pre-conditions to an EU bank depositreinsurance
1/ Having common insolvency and resolution proceduresfor banks (we already have common resolution rules for large,systemically relevant banks but smaller banks fall under thedifferent national insolvency laws).2/ Reducing the number of non-performing loans and tacklingthe risks associated with sovereign debt. Sovereign bonds arenot a risk-free investment and should not be treated assuch.3/ In the case of a bank failure, a three-tier mechanism wouldapply. First, the resources of the national deposit guaranteescheme would be used. Second, where national capacities havebeen exhausted, a European deposit insurance fund,administered by the Single Resolution Board, would providelimited additional liquidity through repayable loans. Third, whereadditional financing may be necessary, the relevant memberstate would step in. A limited loss coverage component for the
European deposit insurance fund could be considered, once all
the elements of the banking union have been fully implemented.
4/ Having a uniform taxation of banks in the EU.
98 00 02 04 06 08 10 12 14 16 18 200
2
4
6
8
10
12
14
France
Germany
Spain
Italy
Public debt held by banks(% of banks’ assets)The path towards a banking union is likely to be long!
Not only is the initial size of the euro area budgetary instrument forconvergence and competitiveness (BICC) embryonic*, but the idea of acounter-cyclical mechanism to help a country in crisis is far from initialambitions: at best 20% of this Budget could be used to deal with a country'semergency situation (most will be allocated according to population andGDP per capita)... with a 25% co-financing of the country which couldpossibly be reduced by half in case of "serious economic circumstances".
(*) It is widely expected that the instrument will draw on funds assigned to the Reform Delivery Tool in theCommission proposal for the 2021-2027 EU budgetary package. The RDT should have an envelope of €25billion, of which €17 billion would be allocated to the 19 euro area countries over the period.
The path towards a euro budget is proving difficult!
5b. Higher trend productivity would help meet some of the coming challenges…
December 2019
78 December 2019Sources: Refinitiv Datastream, Candriam
Without a productivity revival, growth perspectives for the euro area look bleak
Long term real GDP growth(change over 10 years in %, annual rate)
Productivity(GDP per person employed)
Population aged 25 to 69-year old-1
0
2
4
6
70 78 86 94 02 10 18 26 34
Euro area
GDP
Average overthe next 10 years
0.5
Italy
-1
0
2
4
6
70 78 86 94 02 10 18 26 34
GDP
FranceGermany
-1
0
2
4
6
70 78 86 94 02 10 18 26 34-1
0
2
4
6
70 78 86 94 02 10 18 26 34
GDPGDP
0.91.3
2019-29
-1
0
2
4
6
70 78 86 94 02 10 18 26 34
Spain
1.2
GDP
GDP Oxford economics forecast
1.1
GDP with no productivity revival
79 December 2019Sources: European Commission, Refinitiv Datastream, Candriam
Higher trend productivity would loosen the constraints
aging imposes on the rise of living standards (I)…
Euro area
ChinaUnited States
10
20
30
40
50
60
50 60 70 80 90 00 10 20 30 40
Euro area countries
Germany
Belgium
France
10
20
30
40
50
60
50 60 70 80 90 00 10 20 30 40
Italy
Spain
0
10
20
30
40
50
60
50 60 70 80 90 00 10 20 30 40
Old-age dependency ratios(%)
JapanSelected countries
��� ������� �� ~
�������������� � ����1 � ��������� ��
Long term GDP per capita growth trends (% annual rate, real)
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
DE FR IT ES BE
2025-35
87-97
09-19
97-07
80 December 2019Sources: Refinitiv Datastream, Candriam
Higher trend productivity would loosen the constraints
aging imposes on the rise of living standards (II)…
Factors contributing to long term GDP per capita growth trends(change over 10 years in %, annual rate)
Productivity(GDP per person employed)
Unemployment rate
Participation rate
Old-age dependencyYoung-age dependency
GDP per capita
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
France Italy Spain
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
-2
-1
0
1
2
3
90 95 00 05 10 15 20 25 30 35
Germany
… and would help stabilize debt to GDP ratios!
81 December 2019Sources: Refinitiv Datastream, European Commission, Candriam
-6
-4
-2
0
2
4
95 00 05 10 15 20 25 30 35-6
-4
-2
0
2
4
95 00 05 10 15 20 25 30 35
Government primary balance(% of GDP)
Germany France
-2
0
2
4
6
8
95 00 05 10 15 20 25 30 35
Italy
Stable balance
-6
-4
-2
0
2
4
95 00 05 10 15 20 25 30 35
Spain
Aging related rise in government expenditures
(% of GDP over 2020-40)
-1
0
1
2
3
4
IT NL BEDE IE ES AT PT FI FRGR
Pension expenditure
Other With aging
40
60
80
100
120
95 00 05 10 15 20 25 30 3520
40
60
80
100
95 00 05 10 15 20 25 30 35
Government debt(% of GDP)
Germany France
70
90
110
130
150
95 00 05 10 15 20 25 30 35
Italy
30
50
70
90
110
95 00 05 10 15 20 25 30 35
Spain
Stable balance
With agingWith aging & 1% higher growth
Higher productivity would also give Europe more margins of maneuver
to meet environmental challenges
82 December 2019
Current status of the control variables for seven of the planetary boundaries
Beyond zone of uncertainty (high risk)
In zone of uncertainty (increasing risk)
Below boundary (safe)
Boundary not yet quantified
This chart was taken from ‘Planetary Boundaries: Guiding Human Development on a Changing Planet’, Science magazine, February 2015.
December 2019
5
6. UNITED KINGDOMNot yet out…
84 December 2019Sources: Refinitiv Datastream, Candriam
Despite more support being provided by public consumption, growth is weakening
(*) Confederation of British Industry
GDP(% year on year)
CBI survey(volume of expected output)[R.H.S.]
Contributions to GDP growth(% year on year)
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
-2
-1
0
1
2
3
4
13 14 15 16 17 18 19-2
-1
0
1
2
3
4
13 14 15 16 17 18 19
Equipmentinvestment
GDP
Net exports
GDP
Change in inventories
Invest. in structures
GDP
Government expenditures
Residentialinvestment
Consumption
GDP growth and CBI survey*
04 06 08 10 12 14 16 18 20-60
-40
-20
0
20
40
-8
-6
-4
-2
0
2
4
6
85 December 2019Sources: Refinitiv Datastream, Candriam
The effect of lingering uncertainty is more and more visible
-20
-10
0
10
13 14 15 16 17 18 19
Consumer confidence
Consumer confidence
Financial situation
SavingsUnemployment
General economic situation
Brexit referendum
Equipment investment and perceived demand
08 10 12 14 16 18-60
-40
-20
0
20
40
-30
-20
-10
0
10
20
Equipment investment(% year on year)
Perceived demand(EC survey)[R.H.S.]
Brexit referendum
08 10 12 14 16 18 20-15
-10
-5
0
5
10
15
-80
-60
-40
-20
0
20
40
60
Export order book(change over 1 year)
Export orders(smoothed over 2 months)
Exports (% year on year, volume)[R.H.S.]
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