Global Economic Weekly The liquidity rotation

BofA Merrill Lynch Global Research  - Viernes, 19 de Septiembre

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Global: the liquidity rotation The long-awaited rotation from liquidity-driven to growth-driven markets is only happening in the US. United States: for richer or poorer The widening gap in income has a much bigger impact on the composition of consumer spending than on the growth of overall spending. 

China: housing watch - home price decline accelerates 

Decline in new home prices of 70 medium-to-large sized Chinese cities accelerated further in August. Home sales remained sluggish in August with both property FAI and new starts declining. We expect home sales to pick up in 2H14 as local governments introduce more supportive measures and mortgage condition ease. 

Euro area: hope springs eternal - the risk of deflation 

Inflation remains low and stable globally, with continued downside risks in Europe. 

Japan: the structural extent of the trade deficit 

We estimate ¥5-6tn of the ¥8-10tn deterioration in the non-oil-related trade balance since 2010 is probably attributable to structural changes such as Japanese companies' offshoring of production. 

Emerging Asia: will Asia repeat tantrums? 

We cut China's GDP growth to 7.3% in 2014 on weak August data, and expect more stimulus measures. Bank Negara Malaysia stays on hold; we no longer expect a rate hike in 2014. Asia will not likely repeat the taper tantrums of last year, on prospects of earlier US rate hike cycle. 

Emerging EMEA: CE3 - sitting on the fence 

Industrial order expectations imply weakening momentum. FX swings are associated with 10-13% opposite movement in export volumes in the CE3; Hungary exhibits the longest lag (12m). BoP dynamics continue to signal broad stability of exchange rates as long as bond inflows do not reverse significantly. 

Latin America: Mexico - Core inflation moving up with activity 

Core inflation benefited last year from the deceleration in economic activity. As activity recovers, core inflation may be pressured upwards. We also see trend services inflation starting to show an uptrend, possibly due to the easy monetary policy.  

UK: by the time you read this… 

If Scotland votes for Independence, the BoE and the government may try to make some reassuring statements on Friday morning. 

Australia: a lower A$ would bring the RBA into play 

The decline in the A$ over recent weeks has highlighted the potential for a sustained depreciation of the exchange rate to occur sooner than we currently expect. If this were the case, we would likely bring forward our current forecast for the RBA to begin tightening policy in early 2016.  

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