BofAML Global Economic Weekly: Ramble on

Redacción - Viernes, 30 de Octubre

• 
• 
• 
• 
• • 
  • 
  • 

Global Economic Weekly: Ramble on

•   The markets are starting to fade the China hard landing story.
•   This "risk on" trade in global markets could persist.
•   This should help steady the global economy and keep the Fed on course to hike.

Global: Ramble on

The markets are starting to fade the China hard landing story. This "risk on" trade in global markets could persist. This should help steady the global economy and keep the Fed on course to hike.

United States: Will the ECB stop Fedexit?

A popular view is that by pushing up the dollar and hurting US growth, monetary easing by the ECB (and other foreign central banks) slows or stops Fed rate hikes. However, in almost all multi-country macro models easing by the ECB stimulates not just Europe, but the US and global economy as well. Unless there is another unusually big move in the dollar, further ECB easing should be a net positive for the US.

Euro Area: The risks of the quick fix

If investment does not pick up soon, the cycle will not ripen and potential growth will be hampered. In our view, the central bank will not stop at delivering a potentially counter-productive quick fix (depo cut). Other NCBs' negative deposit rates are targeted at FX, rich in exemptions, and still show signs of adverse effects on lending.

Japan: Reduced risk of downturn

Production increased 1.0% in September. The risk of a decline, at least in October and November, is limited. In 3Q, production declined more than shipments, leading to an inventory reduction. Given the contrast between domestic and external demand, production confirm that Japan's economy might not be strong, but a downturn will probably be avoided.

Emerging Asia: Headwinds to continue on growth

We expect regional growth to decelerate gradually, but remain resilient, with increasingly challenging macro drop. Softer-than-expected China and US economies will likely weigh on export outlook. Overall growth will likely slow down further without a significant pickup in domestic demand, despite better terms of trade.

EEMEA: South Africa: core CPI benign but food risks build

We review the inflation outlook and revise up our 2016 CPI call by 20bp to 5.9% given building pressures from food prices. We retain our view that core inflation will remain benign over the coming year given a widening output gap. The SARB is likely to accommodate the first-round effects of higher food inflation as long as core inflation is well behaved.

Latin America: You can't always get what you want

The turn in growth dynamics is more of a 2H16 story. The growth-inflation mix continues to deteriorate in LatAm and relative to the rest of EM, and we have adjusted our forecasts accordingly.

UK: Manufacturing hurting, services OK

Softer UK growth in the third quarter is not the start of a prolonged slowdown, in our view. Manufacturing is suffering from the world industrial cycle, but the domestically focused service sector continues to expand solidly. We look for growth to return to 0.6%/07% qoq.

Australia: RBA to hold in a line ball decision

The RBA is not going to be compelled to cut rates on the basis of global or domestic economic concerns, and it is our base case that it will not.

[Volver]