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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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)
2019 | Fastmarkets | Macroeconomic Outlook 2019
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)
2019 | Fastmarkets | Macroeconomic Outlook 2019 6
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
2019 | Fastmarkets | Macroeconomic Outlook 2019 7
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
2019 | Fastmarkets | Macroeconomic Outlook 2019 8
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)
2019 | Fastmarkets | Macroeconomic Outlook 2019 11
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)
2019 | Fastmarkets | Macroeconomic Outlook 2019 12
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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)
2019 | Fastmarkets | Macroeconomic Outlook 2019 14
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
172019 | Fastmarkets | Macroeconomic Outlook 2019
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)
182019 | Fastmarkets | Macroeconomic Outlook 2019
Europe: Loss of momentum
2019 | Fastmarkets | Macroeconomic Outlook 2019 19
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
222019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
China: Trade war dampening the economy
2019 | Fastmarkets | Macroeconomic Outlook 2019 24
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
Conclusions
2019 | Fastmarkets | Macroeconomic Outlook 2019 29
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
2019 | Fastmarkets | Macroeconomic Outlook 2019
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
2019 | Fastmarkets | Macroeconomic Outlook 2019