Tag Archives: Macroview

The minor concessions continued in the revised plan presented to the European Commission are unlikely to dissuade Brussels from launching sanctions. In a letter to the European Commission on 13 November, the Italian government confirmed that it would aim for a budget deficit at 2.4% of GDP in 2019 and reasserted its real growth forecast of 1.5% for next year. Rome made only minor concessions to Brussels’ demand that it...

The CIO office’s view of the week ahead.One-time Remain advocate, Jo Johnson (brother of leading Leave campaigner Boris), resigned from his position as minister of transport in protest at Theresa May’s handling of Brexit negotiations. Johnson’s departure signals an increased risk of no deal or a second referendum in our view, with a high level of uncertainty around the outcome persisting. Sterling’s subsequent fall reinforces our play on GBP volatility, which we maintain as the best strategy...

SUMMARY The Euro area’s fiscal stance will turn expansionary in 2019. Among the five biggest economies, this shift mainly reflects significant fiscal loosening in Germany, Italy and the Netherlands. France and Spain plan modest fiscal tightening, but less that what the European Commission (EC) demanded. In Italy, the government budget plan represents a significant deviation from the EU’s fiscal rules. The outcome of arm...

Modest fiscal easing could help counter mounting external risks and slowing growth indicators.Euro area member states have all submitted their 2019 Draft Budgetary Plans (DBP) to the European Commission (EC) by now. These show that, collectively and based on EU Commission’s autumn forecasts, the euro area’s fiscal stance1 will turn supportive in 2019, although it varies significantly from one country to the next.Germany, Italy and the Netherlands are planning fiscal expansions, but Spain,...

More political scrutiny of drug and treatment prices is likely following the midterm elections.Healthcare policy was a key theme in the midterm elections and it seems that Democrats capitalised on this popular anxiety better than Republicans (they gained enough seats in the House of Representatives to secure a majority). Indeed, one of President Trump’s key failures over the past two years has been around healthcare policy. The Congressional vote to partly repeal Obama’s healthcare reform...

Structural changes may lead to the first current account deficit in over two decades this year.Over the first three quarters of this year, China ran a current account deficit of USD12.8 billion. It looks likely that China will see its first full-year current account deficit in over two decades in 2018.We believe that China’s current account position is going through structural change, driven by two trends. The first is the decline in China’s merchandise trade surplus. Indeed, since reaching...

SUMMARY Japan’s services PMI surged by 2.2 points to 52.4 in October after a notable drop in September. The manufacturing PMI rose modestly to 52.9 in October from 52.4 in September. The strength in services PMI may suggest momentum in Japan’s domestic economy remains solid. Consumption recovery and expansion of corporate capex are driving growth. However, headwinds are building on the external fronts. Elevated trade...

The gridlock produced the midterm elections complicates legislation, but our central scenario for the US economy remains unchanged.As predicted, Democrats gained enough seats in the House to form a majority (their first since Barack Obama’s first term). As also expected by polls, they lost seats in the Senate, where they remain a minority. With a Congress that will likely be gridlocked, legislation, including tax legislation, is likely to be meagre, leaving the US economy to continue to...

The domestic economy is retaining its momentum, but external headwinds are building.The Japanese services purchasing managers index (PMI) rose sharply in October, surging by 2.2 points to 52.4, after a notable drop in September. The manufacturing PMI rose as well, but more moderately, reaching 52.9 in October from 52.4 in September. The rise in services PMI suggests domestic demand remains solid. On the one hand, household consumption is recovering. Retail sales have undergoing an expansion...

Latest data indicates the US business cycle is in good shape and sets the stage for rate hike next month.US employment grew by 250,000 in October (+1.7% y-o-y); the 3-month average is now a solid 218,000/month, and strong October payroll results were strong, which bodes well for US GDP growth in Q4. It appears therefore that the US’ heated rhetoric towards China is having little effect so far on the US economy.The mere fact that the US economy continues to generate such job growth is an...