Global Economics Weekly：Downside risk to global growth in Q2

Economics Research 11 July 2014 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 46 Global Forecasts 2 Global Synthesis 3 Global Rates and Inflation 5 United Sta tes Outlook 6 GDP Tracking: US Q2 GDP tracking 2.7% 8 Data Review & Preview 9 Euro Area Outlook 11 Data Review & Preview 13 United Kingdom Outlook 15 Data Review & Preview 17 Japan Outlook 18 Data Review & Preview 20 Emerging Asia Asia Outlook 21 Data Review & Preview 23 EEMENA Outlook 25 Data Preview & Review 27 Sub-Saharan Africa Outlook 29 Data Preview & Review 31 Latin America Outlook 39 Data Preview & Review 34 Country Snapshots 35 Global Weekly Calendar 41 Global Economics Weekly Downside risk to global growth in Q2 • Significant data revisions in the euro area and Japan over the past week prompted us to revise our Q2 GDP growth expectation from 3.4% saar to 3.1% saar. • Chinese trade data for June also disappointed, failing to show a significant rebound in exports, particularly to North Asia, adding to global downside risk. • In the US, the focus was on June’s FOMC minutes, which gave more detail on the framework for exit from QE. The extent of economic slack remains a major issue. • Latin American inflation trends support our view that the central banks of Brazil and Mexico will stay on hold, while Chile should have room to cut rates. Developed Economies United States: U-6 unemployment may not reach “normal” 6 The U-6 unemployment rate remains elevated because of the number of part-time workers, and some of this appears to be a structural shift. Euro area: Industrial activity slows sharply 11 May industrial output fell sharply in several of the euro area’s large member states, leading us to lower our Q2 GDP growth estimates for Germany, France and Italy. UK: A slight monthly setback does not change overall picture 15 May’s industrial and manufacturing production data were weaker than expected, but annual growth remains strong. Japan: BoJ to keep CPI outlook and policy as GDP cools 18 We expect the BoJ to cut its FY14 GDP projection, but to keep its CPI outlook at the 14-15 July MPM. We retain our baseline view of no further easing in 2014. Emerging Markets Emerging Asia: Jokowi wins the “quick count” 21 According to unofficial, ‘quick count’ estimates, Jokowi won Indonesia’s presidential election, but Prabowo refuses to concede before the official results. EEMENA: Turkey to continue cutting 25 Next week, CBT will likely cut the repo rate by 50bp, as inflation has started to decline. Sub-Saharan Africa: Monetary policy in focus 29 The monetary policy mix in the region is becoming more heterogeneous. This week, Ghana hiked a further 100bp, while Kenya kept rates unchanged. Latin America: Elementary, my dear – Rates follow CPI trends 32 Brazil inflation has been marked by tourism-related pressures in the past month, but these should be short-lived and not alter the BCB’s plan to keep rates steady. Barclays | Global Economics Weekly 11 July 2014 2 GLOBAL FORECASTS Note: *Annual GDP numbers India reported for Fiscal Year. Arrows appear next to numbers if current forecasts differ from that of the pr evious w eek by 0.5pp or more for quarterly annualized GDP, by 0.2pp or more for annual GDP and by 0.2pp or more for Inflation. Weights used for real GDP are based on IMF PPP-based GDP (2008). Weights used for consumer prices are based on IMF nominal GDP (2008). Source: Barclays Resear ch Weight*4Q131Q142Q143Q144Q142013201420151Q142Q143Q144Q14201320142015Global100.03.41.73.13.94.13.03.13.72.63.03.03.22.63.02.9Advanced50.91.90.21.5↓2.32.31.21.62.21.21.71.81.91.31.71.7Emerging49.15.03.34.75.65.94.84.75.24.95.25.25.44.85.14.8BRIC31.36.03.95.46.26.55.85.55.73.74.04.14.44.24.04.1Americas33.42.2-1.63.22.52.72.11.72.73.34.04.34.43.14.03.7United States22.52.6-2.94.02.52.51.91.62.71.42.12.42.71.52.12.2Canada2.02.92.02.02.52.52.02.42.51.21.61.61.71.01.51.9Latin America8.90.90.91.42.73.32.51.72.910.411.011.411.19.011.09.2Argentina1.0-1.7-2.0-5.00.04.03.0-0.84.230.231.831.731.726.931.431.0Brazil3.21.80.7-0.80.41.22.50.71.05.86.46.76.66.26.46.3Chile0.4-0.43.03.26.13.64.13.03.73.24.64.64.20.93.83.2Colombia0.73.79.72.94.04.04.75.34.72.32.93.03.32.02.93.2Mexico2.50.51.16.04.74.51.13.03.84.23.64.03.83.83.93.4Peru0.54.2-0.67.810.09.15.85.15.73.43.12.32.52.82.52.5Venezuela0.5-2.6-5.3-3.61.72.71.3-2.92.057.661.763.862.840.661.743.1Asia/Pacific40.65.44.94.2↓6.46.55.25.35.52.53.13.03.32.43.03.2Japan6.30.36.7-7.3↓3.1↑2.51.51.2↓1.31.33.33.23.20.42.82.4Australia1.33.24.51.72.32.92.43.13.52.93.32.62.32.42.82.7Emerging Asia33.16.44.66.47.27.36.16.16.32.93.03.03.43.23.13.5China17.97.55.87.48.58.57.77.46.92.32.22.63.32.62.63.0Hong Kong0.53.71.03.63.93.92.92.92.94.23.83.53.64.33.83.5India6.85.34.85.35.66.64.55.16.55.45.95.04.66.35.25.6Indonesia1.76.23.54.96.67.05.85.35.67.87.14.35.76.46.26.7South Korea2.23.63.83.2↓4.93.63.03.9↓4.0