GLOBAL ECONOMICS WEEKLY：Watch out for the Fed backtracking
ECONOMICS RESEARCH 20 August 2010 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 58 Global Forecasts 2 Global Synthesis 3 Global Rates and Inflation 5 Global Markets Watch 6 United States Outlook 7 Data Review & Preview 9 Euro Area Outlook 11 InFocus: German labour market stays strong13 InFocus: Euro area inflation outlook – Within range 16 Data Review & Preview 19 United Kingdom Outlook 20 InFocus: Catering for food price inflation 22 Data Review & Preview 25 Japan Outlook 26 InFocus: Deflation from changes in corporate governance 28 Data Review & Preview 31 Emerging Asia China Outlook 32 Asia (ex-China) Outlook 34 InFocus: Stage looks set for more KRW strength 36 InFocus: Malaysia – A positive albeit modest step to improve FX spot convertibility 39 Data Review & Preview 41 EMEA Outlook 42 Data Review & Preview 44 Latin America Outlook 42 Data Review & Preview 48 Country Snapshots 50 Global Weekly Calendar 56 GLOBAL ECONOMICS WEEKLY Watch out for the Fed backtracking US jobless claims data were weak, but incoming data suggest a double dip is still unlikely. The US economic slowdown is certainly not due to malfunctioning credit markets. Mortgage yields are at all-time lows, and corporate debt yields are also very low. We believe the data need to turn significantly worse than what we and the consensus expect for the Fed to decide to step up QE; if and when it does, it will need to be overwhelming, probably accompanied by an inflation target. Beyond the US, disinflationary forces appear to be over globally, particularly as there is upward pressure on food prices. In China, we expect authorities to remain on hold to balance risks, but even if they ease policy, we expect them to keep measures aimed at lowering housing prices. Developed Economies US: The sky is not falling 7 Jobless claims were disappointing, but incoming data continue to support a rebound in activity in the third quarter. Euro area: Taking stock of peripheral Europe 11 The recent volatility in peripheral Europe is largely due to global factors and re-assessment of tail risks. We see no significant change in fundamentals for the region. UK: Wait and see 20 July inflation data were in line with our expectations, but we feel that food inflation could push the CPI higher this year, and have revised our forecast to reflect this. Japan: Lower economic growth, higher policy alert 26 Q2 GDP surprised to the downside, but substantial revisions are possible. While the expected path of gyrations is the same, we have lowered our forecasts overall. Emerging Markets China: A step further in the international use of RMB 32 China opens up domestic bond market to eligible overseas RMB funds, to promote the use of RMB in trade settlement and to develop the offshore RMB market. Emerging Asia (ex-China): Shifting sands 34 The US remains a key export destination for the region, but China’s importance is rising. EMEA: Stronger EMEA growth for now 42 GDP growth for Israel and Ukraine were robust, reinforcing the notion that Q2 EMEA growth has been strong. Latin America: Central banks speak up 46 A spree of verbal intervention from the highest ranks of government, especially forceful in Colombia and Chile, dominated LatAm FX markets this week. Barclays Capital | Global Economics Weekly 20 August 2010 2 GLOBAL FORECASTS 4Q091Q102Q103Q104Q101Q112Q112009201020111Q103Q101Q113Q11Global4.95.24.63.53.63.74.1-0.84.74.12.52.52.52.7Developed3.23.02.81.92.21.72.4-3.52.42.31.51.21.31.6Emerging6.87.96.75.55.46.16.32.57.56.44.95.55.35.2BRIC6.59.26.97.46.77.17.35.28.87.84.04.64.34.2America5.54.13.52.53.32.93.3-2.63.63.23.32.62.63.1United States5.03.72.42.53.02.53.0-2.63.02.92.41.21.11.7Canada4.96.12.53.53.53.03.0-2.53.53.01.61.72.22.0Latin America7.04.76.62.43.94.04.2-2.55.44.1
