Perspectives Pictet

Modest wage pressures and low inflation expectations mean we see no reason to change our forecast of a single Fed rate increase this year, probably in December The US Employment Cost Index increased by 0.6% quarter-on-quarter and by 2.3% year-on-year in the second quarter, in line with expectations.Potential domestic wage pressures in the US remain hard to analyse. The unemployment rate has fallen sharply, and most other labour market indicators have improved. Although there is much...

Disappointing GDP growth in the second quarter and downward revisions for the previous two quarters mean we are revising our GDP forecast for the US. US GDP grew by a surprisingly soft 1.2% (quarter on quarter, q-o-q, annualised) in Q2, well below consensus expectations of 2.5%. Moreover, growth in Q4 2015 and Q1 2016 was revised noticeably lower. Year-on-year growth in Q1 was revised down from 2.1% to 1.6%. In Q2, consumer spending grew by a strong 4.2% and final demand by a healthy 2.0%....

Growth in the euro area fell to 0.3% in the second quarter from 0.6% in the first. Nevertheless, leading indicators point to post-Brexit resilience and we are leaving our full-year forecast unchanged Euro area real GDP expanded by 0.3% quarter-on-quarter (q-o-q) in the second quarter (1.2% q-o-q annualised, 1.6% year-on-year), in line with expectations and our forecast. This compares with GDP growth of 0.6% q-o-q in the first quarter.According to preliminary estimates by country, growth in...

Macroview Further action may come once the BOJ has fully reviewed the effectiveness of existing policies, but for now the focus is turning to the latest fiscal package On 29 July, the Bank of Japan (BOJ) announced that it would keep the current pace of monetary base expansion unchanged at JPY80 trillion per year and left the policy interest rate unchanged at -0.1%.Although the central bank did announce a doubling of its purchases of exchange-traded funds (ETFs) and an expansion of its...

Macroview The German 10-year Bund yield should rise only slightly from its current negative level. Peripheral bond spreads over Bunds should remain volatile. The financial markets’ reaction to the UK's Brexit referendum, together with the change in our economic scenarios as a result of UK voters’ decision to leave the European Union, are leading us to change our forecast for euro area bonds, particularly our forecasts for the German 10-year Bund and for yield spreads over Bunds for...

The flash PMI for the euro area was better than expected in July, although some sub-indexes pointed ahead to a deceleration in the rate of expansion. PMI data indicate a contraction of activity in the UK. Today’s flash PMI surveys for the euro area were more resilient than expected. The euro area composite PMI index eased only marginally in July, from 53.1 to 52.9, according to Markit’s flash estimates. However, some forward-looking indicators point to weaker developments ahead. In the...

Macroview Further policy stimulus and adjustments to its bond-buying programme remain on the agenda as the ECB strives to measure the impact of current uncertainties The ECB remained on hold at its 21 July policy meeting. The main conclusion to be drawn from the meeting was that more stimulus is on the table for September, when new staff forecasts will be available.The only unexpected bit of news was ECB chairman’s Mario Draghi’s apparent support for the idea of a public backstop for banks...

Macroview Upbeat consumer spending figures and other data mean we maintain our forecast of 2.5% GDP growth for the US in the second quarter. Core retail sales in the US increased by 0.5% month-on-month in June, above consensus expectations. Moreover, April and May numbers were revised up by a cumulative 0.1%. The result was that core retail sales grew by a very strong rate of 7.4% quarter-on-quarter (q-o-q) annualised in Q2 2016, much higher than the 2.8% rise seen in Q1.Together with auto...

Chinese GDP slightly above expectations in Q2. We maintain our forecast of 6.5% growth this year. China’s GDP growth came in at 6.7% year-on-year in Q2 2016, unchanged from Q1 and slightly better than expectations. A detailed breakdown of the GDP number released on 15 July is still unavailable, but we can gain a better understanding of the state of the Chinese economy by looking at some other indicators that have been published recently.First, household consumption is becoming ever more...

Brexit should not lead to a repeat of the financial crisis of 2007-2008. So argue Pictet analysts and economists in the July issue of Perspectives. Central banks are better prepared and banks are less leveraged. In the last resort, the European Central Bank can be expected to step in again should financial stress noticeably increase […]