GLOBAL ECONOMICS WEEKLY：Policymakers fight market fears, no holds barred

ECONOMICS RESEARCH 14 May 2010 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 50 Global Forecasts 2Global Synthesis 3Global Rates and Inflation 5Global Markets Watch 6United States Outlook 7Data Review & Preview 9Euro Area Outlook 11InFocus: Germany and the euro rescue package 13InFocus: Consolidating the euro - Austerity measures and budgetary solidarity 16Data Review & Preview 19United Kingdom Outlook 20Data Review & Preview 22Japan Outlook 23Data Review & Preview 25Emerging Asia China Outlook 26Asia (ex-China) Outlook 28Data Review & Preview 30EMEA Outlook 31Data Review & Preview 33Latin America Outlook 35InFocus: Mexico: Searching for industrial spillovers 37Data Review & Preview 40Country Snapshots 42Global Weekly Calendar 48 GLOBAL ECONOMICS WEEKLY Policymakers fight market fears, no holds barred „ Policymakers aggressively targeted a budding financial crisis this week, with EU finance ministers, the ECB, and the IMF announcing a major rescue package. „ We believe this package will succeed in addressing liquidity problems, but that markets will now focus on whether the fiscal austerity measures will succeed in addressing solvency risks. „ The MPC released a dovish inflation report and appears to be inviting the new coalition government to cut the deficit aggressively. „ Amid volatile markets, economic data continue to confirm a strong global recovery. Developed Economies US: Small businesses seeing a crack of daylight 7 The NFIB survey indicates that small businesses are seeing better profit and sales trends and a touch more pricing power. Euro area: Still walking 11 While the financial turmoil and concern about sovereign risk implies downside tail risks to our projections, there are some positive factors still supporting growth. UK: The valetudinarian of Europe? 20 Governor King’s presentation of the May Inflation Report was uncompromisingly downbeat, notwithstanding recent upside surprises on activity and inflation. Japan: Fiscal shift from stimulus to consolidation 23 Improvements in the economy and deterioration in public finances have shifted Japan’s fiscal focus from stimulus to consolidation, which could also affect monetary policy. Emerging Markets China: More balanced growth with rising inflation 26 The April data point to strong economic activity and more balanced growth, with retail sales and exports accelerating and investment growth moderating. Emerging Asia (ex-China): Different perceptions of reality 28 Different perceptions about the impact of the European debt crisis on EM Asia are leading to further idiosyncrasies in monetary policy. EMEA: Standing out in the crowd 31 Amid concerns about southern European debt problems and the impact of fiscal austerity measures on growth, Estonia stands out as a model of fiscal discipline. Latin America: European contagion 35 The EU program brings a large backstop for global financial markets, but disappointments in European growth could influence parts of Latin America. Barclays Capital | Global Economics Weekly 14 May 2010 2 GLOBAL FORECASTS 3Q094Q091Q102Q103Q104Q101Q112009201020114Q092Q104Q102Q11Global4.64.95.14.54.04.14.1-0.84.64.31.62.62.82.6Developed1.33.22.73.02.62.72.3-3.42.52.60.71.41.51.5Emerging8.77.08.16.35.95.86.22.47.16.33.65.35.85.1BRIC10.97.610.47.87.26.77.65.08.57.62.24.44.84.2America3.05.83.74.13.73.62.8-2.43.93.32.43.02.92.9United States2.25.63.24.03.53.52.5-2.43.53.21.41.91.4↓1.8Canada0.95.05.54.03.53.53.0-2.63.63.10.81.52.52.2Latin America5.66.54.44.34.43.93.5-2.35.03.96.57.88.97.7Argentina-2.8-0.23.24.44.64.53.6-2.24.22.714.820.726.623.8Brazil7.08.49.8↑3.84.03.64.0-0.26.5↑4.54.35.15.44.6Chile6.65.9-5.8↓6.8↑16.8↑6.35.0-1.54.0↓6.6↑-1.91.2↑3.6↑3.3Colombia1.74.74.04.05.55.54.50.44.14.82.42.62.82.7Mexico10.48.44.05.33.03.53.5-6.55.53.34.04.65.13.6Peru10.011.510.36.14.95.75.51.16.35.90.21.62.73.0Venezuela-8.1-3.1-3.80.82.01.9-3.6-3.3-1.71.025.127.028.625.2Asia/Pacific8.36.08.56.35.85.96.73.67.46.50.52.12.72.5Japan-0.63.85.22.92.12.72.3-5.23.32.1-1.7-1.4-0.6-0.2Australia0.81.94.72.53.24.04.21.33.33.72.03.13.33.5Emerging Asia10.86.79.57.26.86.77.85.88.67.71.64.04.43.8China9.89.610.88.48.08.09.28.710.19.00.73.14.53.9Hong Kong1.69.21.81.82.72.74.8-2.74.34.01.31.72.22.6India16.2-2.212.09.08.07.08.06.48.48.45.09.25.95.1Indonesia6.26.55.4↓7.8↑7.4↑7.0↑6.1↓4.56.46.32.64.55.86.5Korea13.40.77.55.03.62.35.50.25.74.02.42.42.41.0Malaysia9.713.3↑6.9↓4.7↓2.84.15.5-1.77.55.0-0.21.8↓2.52.4Philippines1.84.45.74.12.44.97.40.94.35.