Tag Archives: Macroview

Our model suggests that the Italian government’s strategy for the bad debt problems of the country's banks only will only be credible if economic growth returns Changes in banks’ Non-Performing Loans (NPLs) depend crucially on economic performance, including GDP growth and employment. Put simply, the Italian government’s strategy, or hope, is that even a modest economic recovery leads to a sustained, albeit gradual decline in NPLs and that systemic bank bailouts can be avoided. Moreover,...

The latest data releases from China point to a sluggish start to the second half of 2016, but we are sticking to our 2016 growth forecast of 6.5%. Economic data released by China’s National Bureau of Statistics on 12 August remain largely consistent with our expectation of moderating growth momentum in China. Especially noteworthy has been the drop in fixed asset investment (FAI) growth. Going forward, we expect a further slowdown in property investment to be offset by fiscal support for...

Stagnant growth and banks’ festering non-performing loan problems cast a pall over Italy’s prospects ahead of a referendum that could determine the fate of the prime minister Flat real GDP growth in Italy in the second quarter was below consensus expectations of 0.2% (quarter over quarter) and brought to an end five consecutive quarters of improving expansion. Overall, the outlook for Italy remains challenging. Assuming a pick-up in quarterly growth to 0.2% (the average since Q1 2015), the...

Sterling quickly steadied after a lurch downward following the latest Bank of England (BoE) policy easing. But looming Brexit negotiations and the UK’s twin deficits cast a shadow over the currency On 4 August, the BoE delivered a broad easing package that beat market expectations. Furthermore, the BoE hinted at an additional rate cut later in the year (our scenario is for another 15bp rate cut in Q4 2016). The easing package delivered by the BoE was a more aggressive response to Brexit...

In spite of the Bank of England’s latest monetary stimulus, ambitious fiscal package may be needed to deal with steep drop in growth foreseen for next year On 4 August, the Bank of England (BoE) managed to beat market expectations by announcing a policy package that included a 25 bp rate cut (to 0.25%), a Term Funding Scheme (TFS) “to reinforce the pass-through” of the rate cut, a GBP60 bn increase in the bank’s purchases of government bonds, as well as up to GBP10 bn in corporate bonds...

Solid manufacturing and non-manufacturing numbers plus strong consumer spending mean we expect 2.5% GDP growth in the US in Q3 Although the ISM Manufacturing index in the US dropped back a little to 52.6 in July, it remained well above the low levels recorded at the turn of the year. The Non-manufacturing index moved back down as well but remained at relatively healthy levels.The rebound in the ISM Manufacturing index over the past few months is both encouraging and a bit surprising. The...

The BOJ confounded market expectations by just tinkering with policy on the margins in July. As a result, the yen should hold on to its recent gains. The Bank of Japan (BoJ) did not significantly change monetary policy at its Monetary Policy Meeting held on 28-29 July, contrary to market expectations. While the BOJ did announce an increase in its annual purchases of ETFs (from ¥3.3 trn to ¥6 trn), it kept the annual increase of the monetary base at ¥80 trn and did not cut interest rates...

The slight decline in the official manufacturing PMI does not tally with the Caixan equivalent. We believe the official PMI better reflects a Chinese economy heading towards growth of around 6.5% this year. China’s official manufacturing PMI declined slightly to 49.9 in July, while the Caixin (Markit) PMI rose significantly, to 50.6 from 48.6 in June. The official non-manufacturing PMI extended its rise from last month and increased by 0.2 to 53.9, well above the 50 mark that separates...

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%....