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ECONOMIC DATA ANALYSIS - PROSPECTS FOR GLOBAL GROWTH
ECONOMIC DATA ANALYSIS FRIDAY 12 - 18 APRIL 2013
PROSPECTS FOR GLOBAL GROWTH
• World Bank/IMF Spring meetings and IMF global growth forecasts focus
• First of Q2’s business surveys watched for persistence of March’s data fade
• UK MPC minutes colour policy debate with other data adding to bearish growth outlook
Weather to be worried ? ... The yields of ‘core’ government bonds indicate elevated concerns for global growth. Beyond euro area developments, weaker forward-looking surveys have questioned an H2 recovery and the impact of US fiscal tightening. Yet we are wary of extrapolating this recent weakness. Both regions suffered poor weather in March: widespread snow is likely to have contributed to euro area weakness, particularly in France, while the US weather pattern appears to fit the direction of economic surprises in Q1. As such, April could lead to an improvement. But that is not to deny the more fundamental concerns about the brecovery. With these questions uppermost in nmarket minds, the IMF’s latest global forecasts, Chinese Q1 GDP and the first of April’s business surveys will be the coming week’s focus.
IMF spells out global growth outlook ... The IMF meetings and associated speakers will be the focus for the week, particularly the publication of the World Economic Outlook on Tuesday. Draftb growth forecasts show an upgrade to thenJapanese growth outlook - reflecting a positive IMF assessment of the BoJ’s latest actions. Euro area growth has been left unchanged, which seems optimistic to us, while the US forecast has been revised lower for 2013. Global growth is bseen a touch lower at 3.4%, suggesting broader global growth trends have not significantly changed. Discussion will focus on the appropriate policy responses, particularly with the G20 finance ministers’ meeting ahead of the World Bank/IMFSpring meetings on Friday. We will also watch the monetary policy discussion, including from IMF’s LaGarde and Fed’s Yellen. The institutions they represent have both raised concerns about financial stability due to prolonged easy policy. We will watch to see if this is likely to become a theme in policy debates going forwards..
China growth accelerating? ... Monday’s Chinese GDP estimates will kick-off the week’s global assessment. We forecast another 2.0% quarterly expansion in Q1 (8.0% yoy). Yet the accompanying retail sales and industrial output details could question how quickly the Chinese economy can rebalance. We maintain our forecast of growth of 8.0% for 2013 (7.4% last year). But bFitch’s recent sovereign rating downgrade and the IMF’s Financial Stability Report warnings underscore the broader risks. Any precautionary response by the PBoC to these developments, would augment our expectations for a softer H2. April’s survey evidence begins ... If our suspicions about the temporary aspect to the recent data fade are correct, forward-looking surveys should improve in April. We pencil in modestly firmer Empire State and Philadelphia Fed surveys, but note that neither proved good indicators for the more important ISMs, due at the start of May. Similarly, upcoming European evidence is limited to the German ZEW survey, which was resilient in March, unlike other indicators. As such, we are minded to defer judgement until we see additional surveys in the following week.
MPC policy debate in focus ... The UK focus will resonate with broader global policy discussions, with markets awaiting April ’s MPC meeting minutes. With a more cautious outlook for UK activity - not least the threat of a ‘triple dip’ recession - it is possible that one of the MPC doves voted for a greater Ł50bn QE boost - consistent with David Miles’ call for “very, very expansionary” policy. Market reaction is more likely to depend on any hints that the next meeting could see others follow. Weak retail sales and some slowing in labour market activity could add to this case. The expected pick-up in March’s inflation is likely to be disregarded. Governor designate Carney also speaks this week.
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