BofAML: El temor a un crecimiento moderado (Global Economic Weekly)

Redacción - Domingo, 02 de Agosto

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Global Economic Weekly: A tame growth scare • Global markets are going through a moderate growth scare. • The global activity pace seems to be holding up in July.• Downside risks have increased but we continue to expect global growth to hold up above 3% this year.

Global: a tame growth scare 

Markets seem to be going through a moderate growth scare, but global activity appears to be broadly on track. 

United States: Fedophobia 

Fears of the Fed are overdone. Because monetary policy works with long lags, growth tends to accelerate early in tightening cycles. We believe the Fed's unprecedented period of near-zero rates is likely to be followed by an equally unprecedented slow hiking cycle. Unless inflation picks up, forcing faster rate hikes, we think the economy and markets should do fine as the Fed hikes. 

Europe: growth support from the labor market 

Okun's law, the relationship between GDP growth and changes in the unemployment rate, remains intact in the Euro area: the unemployment rate has declined and employment is growing. However, low productivity growth suggests that wage growth will remain protracted for some time. France's labor market is bucking the trend with a lagged recovery. 

Japan: major pullback in April-June real GDP growth 

We estimate April-June quarter-over-quarter growth was negative 0.3% (-1.2% annualized). For April-June GDP, changes in external demand and inventories are dictating Japan's growth rate because the consumption recovery lacked strength. On the other hand, we expect growth to recover to an annual rate of 1.5-2.0% from July-September onward, supported by a rising capex trend, exports recovery and consumption. 

Emerging Asia: this time is different 

The Fed is due to start raising policy rates in coming months. This is a major regime shift, but Asia is not in a good place. Unlike past Fed rate hike cycles, Asia's growth and exports are faltering. Central bank policies will likely be out of sync. Divergent Asia-US growth and monetary policy is persisting and Asian policy makers will likely face tougher times ahead. 

Emerging EMEA: a Chinese vase half full 

The bruising price action in EEMEA markets seems to suggest that the impact of the China shock for Emerging EMEA is squarely negative. We do not dispute that there are several adverse spillovers. However, we should not forget the positive effects either. 

Latin America: CNY matters for LatAm 

A weaker CNY would continue adding downward pressures on Latin American FX, exports, investment and growth. In Mexico, the transmission mechanism of a weaker CNY is through competition in the US market. However, Mexico has a significant competitive cost advantage over China. 

UK: rate hikes are coming, but not until next year 

This is the message we expect from the Bank of England next Thursday (6 August) when it simultaneously publishes its interest rate decision, policy meeting minutes and new forecasts. We preview those releases. The Bank of England will likely cut its near-term inflation forecasts on oil/sterling, but leave end-2017 inflation unchanged at 2.1%. 

Australia: RBA on hold in August and then some 

The Reserve Bank of Australia will likely leave rates on hold in August and retain its soft easing bias in its post-meeting press release. The Statement on Monetary Policy later in the week should provide an update to the RBA's forecasts, but we think the potential for material revision is minimal. And this supports our forecast that rates will remain unchanged for an extended period. 

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