ECONOMICS RESEARCH 6 August 2010 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 61 Global Forecasts 2Global Synthesis 3Global Rates and Inflation 5Global Markets Watch 6United States Outlook 7InFocus: TIPS market sees only modest deflation risk 9InFocus: Production growth to depend more on consumers 12Data Review & Preview 15Western Europe Euro area: Outlook 17Data Review & Preview 19UK: Outlook 21Data Review & Preview 23InFocus: Norway - On hold for now 24 Japan Outlook 26InFocus: Next CPI rebasing likely to have a smaller impact 28Data Review & Preview 31Emerging Asia China Outlook 32Asia (ex-China) Outlook 34InFocus: India - Eroding rupee fundamentals 37Data Review & Preview 40EMEA Outlook 41Data Review & Preview 43Latin America Outlook 45InFocus: MXN: Running out of good news 47Data Review & Preview 50Country Snapshots 52Global Weekly Calendar 58 GLOBAL ECONOMICS WEEKLY The US sneezes, but germs are contained „ We see recent US data as signaling muted growth, rather than a double-dip recession. „ Data elsewhere provide little evidence of weakness beyond the expected H2 slowdown. „ We do not believe that additional policy stimulus by the Fed is imminent. „ The surge in wheat prices may heighten concerns about inflation expectations in some countries. Developed Economies US: The service sector holds the key 7 We expect the pace of GDP growth and the labor market to be driven by the service sector in the coming months. Euro area: No chance of decoupling 17 While we have raised our projection for euro area Q2 GDP (now up 0.76% q/q versus 0.61% previously), recent survey data show high synchronisation with the US. UK: Clouds cast shadows over MPC’s summer 21 Notwithstanding upside news on Q2 growth and inflation, we expect the August Inflation Report to present another downbeat view of the economic outlook. Japan: Risk in the recovery picture and the BoJ response 26 We revised our GDP forecasts last week, highlighting our expectations for some deceleration and volatility in the upcoming quarters. Emerging Markets China: Slowing growth and a rebound in inflation 32 We expect the July data to show a further moderation in economic activity and a rebound in CPI inflation. Emerging Asia (ex-China): Simmering again 34 Asian policymakers are likely to use administrative measures to address rising food prices, with net food importers inclined to allow more currency appreciation. EMEA: Wheat price inflation and Tobin tax discussions 41 Weather-related crop damage in Russia, Ukraine and Kazakhstan has put pressure on global wheat prices, but the effect is likely to be contained mainly to local inflation. Latin America: Intervention ghouls 45 The strong performance of FX markets in the region has rekindled concerns over potential FX intervention. Barclays Capital | Global Economics Weekly 6 August 2010 2 GLOBAL FORECASTS 4Q091Q102Q103Q104Q101Q112Q112009201020111Q103Q101Q113Q11Global4.95.24.63.63.83.64.1-0.84.74.12.52.52.52.6Developed3.32.93.01.92.51.52.3-3.52.52.31.51.21.31.6Emerging6.98.06.55.65.56.26.32.57.46.44.95.55.35.1BRIC6.59.26.97.46.77.17.35.28.87.84.04.74.34.1America5.54.13.62.63.32.93.3-2.63.63.23.32.72.73.1United States5.03.72.42.53.02.53.0-2.63.02.92.41.21.21.8Canada4.96.14.03.53.53.03.0-2.53.83.11.61.72.22.0Latin America7.04.76.6↑2.4↓3.94.04.2-2.55.44.17.79.09.18.7Argentina5.57.57.56.23.23.33.3-4.06.13.820.025.826.824.1Brazil9.311.44.02.83.54.05.5-0.27.34.45.25.65.75.4Chile6.2-5.920.0↑8.0↑7.06.06.0-1.55.2↑7.0↑-0.32.53.33.9Colombia4.55.35.03.04.54.54.50.84.54.32.02.32.73.3Mexico7.9-1.412.0↑0.0↓3.53.53.0-6.55.03.3↓4.83.83.44.0Peru6.110.15.36.37.17.05.40.97.16.40.82.32.92.8Venezuela-3.7-10.6-8.4-2.94.63.50.9-3.3-5.42.026.133.233.130.1Asia/Pacific6.79.26.45.76.15.76.63.87.76.21.92.32.22.3Japan4.65.03.30.62.9-1.81.2-5.23.40.9-1.2-1.2-1.0-0.3Australia4.42.05.62.83.21.65.11.33.33.52.93.03.13.0Emerging Asia7.310.57.27.17.17.77.96.18.97.63.54.13.83.6China11.09.28.49.39.38.98.99.110.19.02.23.43.73.6Hong Kong10.010.0-1.41.21.25.95.9-2.85.14.01.93.12.32.8India-2.913.48.08.07.08.08.06.78.88.310.29.35.85.5Indonesia6.65.36.67.86.14.96.14.56.36.23.44.65.75.8Korea0.78.86.02.81.44.76.20.26.14.02.72.41.81.4Malaysia13.36.94.72.84.15.57.2-1.77.55.01.31.71.61.9Philippines7.213.22.61.83.17.47.81.16.05.04.44.73.63.7Singapore-1.045.926.0-15.41.75.88.6-1.314.54.01.13.33.11.3Taiwan16.711.30.50.51.46.16.6-1.97.54.01.31.02.21.5Thailand17.016.0-3.63.04.14.54.1-2.28.04.03.73.43.22.3Europe and Africa1.91.33.42.01.61.81.8-4.42.12.62.22.42.42.4Euro area0.50.83.1↑1.31