GLOBAL ECONOMICS WEEKLY：Oil risks on both planets

ECONOMICS RESEARCH 4 March 2011 PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 58 Global Forecasts 2Global Synthesis 3Global Rates and Inflation 5Global Market Watch 6United States Outlook 7Data Preview & Review 9Euro Area Outlook 11InFocus: Preview of 11 March EU exceptional meeting 13InFocus: German chancellor faces political headwinds at home in the run-up to the EU summit 17Data Preview & Review 20United Kingdom Outlook 22Data Preview & Review 24Japan Outlook 25Data Preview & Review 27Emerging Asia China Outlook 28Asia (ex-China) Outlook 30InFocus: India - Government’s FY11 -12 fiscal deficit target looks a stretch 32Data Preview & Review 35EMEA Outlook 36InFocus: Still too many questions to turn positive 38Data Preview & Review 41Latin America Outlook 43InFocus: Mexico: A sweet growth inflation mix? 45Data Preview & Review 48Country Snapshots 50Global Weekly Calendar 56GLOBAL ECONOMICS WEEKLY Oil risks on both planets This updates the report published earlier today, which had an incorrect version of the Emerging Asia Ex-China section „ The policy divide between the ECB and the Fed deepened this week, the former focusing on inflation and the latter on unemployment. „ If large oil exporters are seriously affected by political turmoil, the global economic consequences in terms of growth and inflation could be significant. „ An oil price shock could further divide the ECB and the Fed. There is also limited policy room in advanced economies to cope with additional sizable shocks. „ Oil price risks increase the underlying uncertainty about the policy normalization path, and even extend it to a possible change in direction. Developed Economies United States: The outlier is just beginning to come into line 7 Payroll gains have been weaker in recent months than labor market indicators that are not subject to large revisions. Euro area: ECB tightening ratchets up pressure on EU governments to act 11 We expect the ECB to raise rates by 25bp in April followed by another 25bp hike in July, before embarking upon a pause during the remainder of 2011. UK: Q1 activity could be pivotal for rates 22 The ECB’s shock indication of an imminent rate hike puts renewed focus on the MPC, and the strength of activity in Q1 is likely to be pivotal to the near-term rate outlook. Japan: Still stronger than it is sustainable 25 We continue to look for solid export-driven growth through Q3 on the back of restocking in the US and Asia, but self-sustaining mechanisms have yet to take hold. Emerging Markets China: Upcoming data to show moderation in activity 28 We expect a broad-based slowdown in y/y growth of major activity indicators for January-February, and February PPI to rise to 6.9% y/y while CPI edges lower to 4.8%. Emerging Asia (ex-China): Diverging growth trajectories 30 Bank Indonesia kept the policy rate unchanged as inflation surprised on the downside. EMEA: Assessing the impact of oil 36 PMI and IP readings show continuing strength of the EMEA industrial sector. Latin America: Pax latinoamericana 43 As the Middle East jitters remain in the spotlight, we think the risk of political contagion in any of the market-relevant economies in LatAm is extremely limited. Barclays Capital | Global Economics Weekly 4 March 2011 2 GLOBAL FORECASTS 3Q104Q101Q112Q113Q114Q111Q122010201120124Q102Q114Q112Q12Global4.23.54.63.94.34.44.34.84.34.42.83.53.32.7Developed2.31.53.12.62.82.82.62.52.52.81.52.4↑2.4↑1.6Emerging6.66.06.65.76.26.46.47.76.56.56.06.05.55.3BRIC9.07.17.16.77.57.7↓7.38.87.87.85.45.24.34.6America2.53.13.83.33.63.73.63.73.43.62.63.7↑3.8↑3.0United States2.62.83.53.03.53.53.52.83.03.61.32.7↑2.8↑1.9Canada1.8↑3.3↑3.0↑2.52.52.52.53.1↑2.7↑2.52.32.1↑2.2↑2.2Latin America2.43.94.84.34.24.44.06.24.54.08.18.28.57.9Argentina0.85.56.55.04.55.04.18.95.34.025.226.828.028.0Brazil1.6↓3.0↓5.64.54.45.04.37.54.54.45.96.36.35.6Chile8.12.35.05.05.05.04.55.46.14.52.52.64.03.7Colombia0.93.04.05.05.04.54.03.93.74.32.74.03.93.1Mexico3.25.1↑3.5↑3.03.03.03.05.53.9↑3.04.23.94.23.8Peru7.78.38.38.58.17.77.78.98.37.12.13.03.62.9Venezuela0.80.41.52.93.63.73.8-1.92.43.627.523.724.823.0Asia/Pacific7.55.47.16.46.76.86.77.96.56.62.93.12.42.5Japan3.3-1.22.1↓3.3↑2.61.71.43.91.9↓1.9-0.50.30.0-0.3Australia0.82.91.95.14.04.04.62.73.14.02.73.43.32.8Emerging Asia8.97.28.67.37.98.28.29.27.98.04.94.73.64.0China10.311.59.18.28.29.59.110.39.39.24.74.83.13.8Hong Kong2.82.46.14.95.35.33.26.64.64.03.33.62.52.6India16.31.08.28.211.010.08.98.98.59.08.36.16.46.8Indonesia4.910.64.14.59.19.15.