highlights. second - quarter gdp growth slows in u. s. and japan… surges in euro zone growth at...
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Highlights
Second-quarter GDP growth slows in U.S. and Japan… surges in Euro Zone
growth at seasonally-adjusted annualized rates
United States Japan Euro Area0
2
4
6
Q4-2009
Source: National Agencies through Datastream.
Domestic demand growth was robust in the United States
and Europe in Q2-10domestic demand, growth at seasonally adjusted annualized
rates
United States Japan Euro Area-2
-1
0
1
2
3
4
5Q4-2009 Q1-2010 Q2-2010
Source: World Bank, DEC Prospects Group.
OECD Developments
Second-quarter GDP growth slows in U.S. and Japan… surges in Euro Zone
growth at seasonally-adjusted annualized rates
United States Japan Euro Area0
2
4
6
Q4-2009
Source: National Agencies through Datastream.
Domestic demand growth
United States
Japan Euro Area
-2
-1
0
1
2
3
4
5
6Q4-2009Q1-2010Q2-2010
Foreign contribution to GDP
United States
Japan Euro Area
-4
-3
-2
-1
0
1
2
3
4
Domestic demand in U.S. and Europe… offset and amplified by external tradegrowth at seasonally-adjusted annualized rates contributions to growth a annualized rates
Source: World Bank, DEC Prospects Group.
Second-quarter surge in trade unlikely to be sustained
U.S real imports of goods and services; German real exports of goods and services
Q1 2008
Q2 2008
Q3 2008
Q4 2008
Q1 2009
Q2 2009
Q3-2009
Q4-2009
Q1 2010
Q2-2010
-40
-30
-20
-10
0
10
20
30
40
U.S. importsGerman exports
Source: Thomson/Datastream and DEC Prospects Group
U.S. retail up monthly in July & Augustbut momentum has faded as savings rise
retail ex autos and real-PCE, ch% (saar) [L]; personal saving rate (%) right
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10-30
-25
-20
-15
-10
-5
0
5
10
4
5
6
7
8
Retail excluding autos (left scale)
Source: U.S. Department of Commerce.
U.S. factory output easing with I/S in better balance and orders down
manufacturing production, ch% (saar) [Left]; capital goods orders, ch% (saar) [Right]
Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10-25
-20
-15
-10
-5
0
5
10
15
-60
-40
-20
0
20
40
60
Capital goods orders, [right scale]
Source: Thomson/Datastream and DECPG calculations.
Mfgr production [left scale]
U.S. employment growth stagnant while hourly
earnings drop to 1.7% growth (y/y)
change in non-farm employment (‘000), [Left]; hourly earnings (ch%, year/year)
Jan-08 May-08 Sep-08 Jan-09 May-09 Sep-09 Jan-10 May-10-1000
-800
-600
-400
-200
0
200
400
600
1.5
2.0
2.5
3.0
3.5
4.0
Source: U.S. Department of Labor.
Hourly earnings, [right scale]
Change in employment [left scale]
Japan’s 2nd quarter growth falters on weaker net exports
and consumer spending
Q4-2009 Q1-2010 Q2-2010-2
0
2
4
6
3.4
5.0
1.5
Prv Consumption Gvt ConsumptionFixed Investment change in Stocks
Source: Japan Cabinet Office, MITI.
growth of real GDP, and contributions to growth in percentage points
Japan’s export volumes fall to negative ground on weaker Asian demand and stronger
yengoods export volumes, ch% (saar) [Left]; yen per U.S. dollar [right]
Jan-09 May-09 Sep-09 Jan-10 May-10 Sep-10-75
-50
-25
0
25
50
75
84
86
88
90
92
94
96
98
100Export volumes [left scale]
Yen per U.S. dollar [right scale]
Source: Thomson/Datastream and DECPG calculations.
Euro zone growth mixed across countries
GDP growth
IRL DEU SWE FIN BEL NLD FRA ITA PRT ESP NOR GRC-10
-5
0
5
10
15
Ger-many
Investor expectations of future economic conditions on downward path in Germany
Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10-10
0
10
20
30
40
50
60Industrial production, ch% (3m/3m saar)
Source: World Bank, DEC Prospects Group
Planned budget cuts in Europe (%GDP) in 2010-2015
Source: CESIFO
Country Budget cuts (% of GDP) Austria 0.90%
Belgium 5.30%
France 4.50%
Germany 3.00%
Greece 10.70%
Hungary 1.60%
Ireland 3.20%
Italy 1.60%
Netherlands 2.10%
Portugal 6.60%
Spain 8.20%
U.S. LIBOR easing on expectations of continued
loose policy on part of the Fed
Jan-
10
Jan-
10
Jan-
10
Feb-
10
Feb-
10
Mar
-10
Mar
-10
Apr-1
0
Apr-1
0
May
-10
May
-10
Jun-
10
Jun-
10
Jul-1
0
Jul-1
0
Jul-1
0
Aug-
10
Aug-
10
Sep-
100.25
0.40
0.55
0.70
0.85
1.00
1.15
1.30EURIBOR 6M
USD LIBOR 6M
Source: Thomson/Datastream.
Industrial Production
Industrial growth momentum slows down across regions (3mm, saar)
Nov-09
Dec-09
Jan-10 Feb-10
Mar-10
Apr-10 May-10
Jun-10 Jul-100.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
20.0BRCHIY
In contrast with other economies, industrial
production firms up in the US (3mm, saar)
Nov-09
Dec-09
Jan-10 Feb-10 Mar-10
Apr-10 May-10
Jun-10 Jul-10-10
-5
0
5
10
15
20
25
30
35
CHN
Global PMI for manufacturing output continues downslide
Dec-09
Jan-10 Feb-10 Mar-10
Apr-10 May-10
Jun-10 Jul-10 Aug-10
51
52
53
54
55
56
57
58
59
International Trade
World trade growth has recovered to pre-crisis levels
0
200
400
600
800
1000
1200
-60
-50
-40
-30
-20
-10
0
10
20
30
40Export volume $ billion (left scale)
US and Japan import demand gaining momentum
-80.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
100.0
-80.0
-60.0
-40.0
-20.0
0.0
20.0
40.0
60.0
80.0
BRICsEuro AreaJapanUS
Import volume growth, saar, %, June 2008—August 2010
An unabated accumulation of trade distorting measures
G20 May G20 August0
100
200
300
400
500
600
700Measures that are discrimina-tory
Source: National Agencies through Datastream.
Commondity Prices
Daily oil prices
3653036538365463655636564365723658036588365983660636614366223663036640366483665636664366723668236690366983670636714367243673236740367483675636766367743678236790367983680836816368243683236840368503685836866368743688236892369003690836916369243693436942369503695836966369763698436992370003700837018370263703437042370503706037068370763708437092371023711037118371263713437144371523716037168371763718637194372023721037218372283723637244372523726037270372783728637294373023731237320373283733637344373543736237370373783738637396374043741237420374283743837446374543746237470374803748837496375043751237522375303753837546375543756437572375803758837596376063761437622376303763837648376563766437672376803769037698377063771437722377323774037748377563776437774377823779037798378063781637824378323784037848378583786637874378823789037900379083791637924379323794237950379583796637974379843799238000380083801638026380343804238050380583806838076380843809238100381103811838126381343814238152381603816838176381843819438202382103821838226382363824438252382603826838278382863829438302383103832038328383363834438352383623837038378383863839438404384123842038428384363844638454384623847038478384883849638504385123852038530385383854638554385623857238580385883859638604386143862238630386383864638656386643867238680386883869838706387143872238730387403874838756387643877238782387903879838806388143882438832388403884838856388663887438882388903889838908389163892438932389403895038958389663897438982389923900039008390163902439034390423905039058390663907639084390923910039108391183912639134391423915039160391683917639184391923920239210392183922639234392443925239260392683927639286392943930239310393183932839336393443935239360393703937839386393943940239412394203942839436394443945439462394703947839486394963950439512395203952839538395463955439562395703958039588395963960439612396223963039638396463965439664396723968039688396963970639714397223973039738397483975639764397723978039790397983980639814398223983239840398483985639864398743988239890398983990639916399243993239940399483995839966399743998239990400004000840016400244003240042400504005840066400744008440092401004010840116401264013440142401504015840168401764018440192402004021040218402264023440242402524026040268402764028440294403024031040318403264033640344403524036040368403784038640394404024041040420404280
20
40
60
80
100
120
140
160$/bbl
WB average
OPEC production and spare capacity
3652636557365863661736647366783670836739367703680036831368613689236923369513698237012370433707337104371353716537196372263725737288373163734737377374083743837469375003753037561375913762237653376813771237742377733780337834378653789537926379563798738018380473807838108381393816938200382313826138292383223835338384384123844338473385043853438565385963862638657386873871838749387773880838838388693889938930389613899139022390523908339114391423917339203392343926439295393263935639387394173944839479395083953939569396003963039661396923972239753397833981439845398733990439934399653999540026400574008740118401484017940210402384026940299403304036040391404224045240483405134054424
25
26
27
28
29
30
31
32
0
1
2
3
4
5
6
7
8
9
Spare capacity (right scale)
OPEC crude oil production (left scale)
OECD oil stocks
365263655736586366173664736678367083673936770368003683136861368923692336951369823701237043370733710437135371653719637226372573728837316373473737737408374383746937500375303756137591376223765337681377123774237773378033783437865378953792637956379873801838047380783810838139381693820038231382613829238322383533838438412384433847338504385343856538596386263865738687387183874938777388083883838869388993893038961389913902239052390833911439142391733920339234392643929539326393563938739417394483947939508395393956939600396303966139692397223975339783398143984539873399043993439965399954002640057400874011840148401794021040238402694029940330403604039140422404524048340513405442,300
2,400
2,500
2,600
2,700
2,800
million bbl
Agriculture Prices
38353
38384
38412
38443
38473
38504
38534
38565
38596
38626
38657
38687
38718
38749
38777
38808
38838
38869
38899
38930
38961
38991
39022
39052
39083
39114
39142
39173
39203
39234
39264
39295
39326
39356
39387
39417
39448
39479
39508
39539
39569
39600
39630
39661
39692
39722
39753
39783
39814
39845
39873
39904
39934
39965
39995
40026
40057
40087
40118
40148
40179
40210
40238
40269
40299
40330
40360
40391
40422
40452
40483
40513
40544
100
150
200
250
300
350
Food
Raw Materials
Beverages
2000=100
Nickel price and LME stocks
3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 3 4 4 4 4 4 4 00
2,000
4,000
6,000
8,000
10,000
0
10000
20000
30000
40000
50000
60000$/ton
Copper
Aluminum
Nickel [RHS]
$/ton
World Copper Consumption
39083
39114
39142
39173
39203
39234
39264
39295
39326
39356
39387
39417
39448
39479
39508
39539
39569
39600
39630
39661
39692
39722
39753
39783
39814
39845
39873
39904
39934
39965
39995
40026
40057
40087
40118
40148
40179
40210
40238
40269
40299
40330
40360
40391
40422
40452
40483
40513
40544
0
200
400
600
800
1,000
1,200
Other
China
'000 tons
International Finance
Capital flows to emerging markets slowed in August
$ billion 2008
Total H1 Total Jan-Aug H1 Jun Jul Aug YTD
Total 390 110 353 167 196 27 52 21 268 Bonds 65 36 115 56 86 6 23 9 118 Banks 257 43 129 63 54 10 13 10 77 Equity 68 32 109 48 56 11 15 3 74
Lat. America 90 37 137 55 64 11 11 6 80 Bonds 20 15 62 22 36 4 10 5 51
E. Europe 157 22 72 39 51 9 13 4 69 Bonds 35 13 33 23 31 2 9 1 41
Asia 98 44 122 62 66 6 24 10 99 Bonds 7 6 16 8 14 0.4 2.7 3 20
Others 45 7 22 11 15 1 3 1 20
2009 2010
Source: DECPG
Bank lending has failed to recover to pre-crisis levels
2005 2006 2007 2008 2009 2010e0
40
80
120
160
200
240
280
320
Bond issuance
Bank lending
$ billion
Source: Bloomberg and DECPG staff calculations.
0
200
400
600
800
1000
1200
Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10
Greece
Ireland
Spain
Portugal
5-yearsovereign CDS spreads (bps)
Sovereign debt of some European countries is under pressure again
Market Focus: EM Valuation
Equity Performance(Rebased)
Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-100
50
100
150
200
250
300
MSCI EM
Source: MSCI
Relative equity valuation EM vs DM
Jan-00 Jul-01 Jan-03 Jul-04 Jan-06 Jul-07 Jan-09 Jul-10-0.7
-0.6
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
0.3
Source: Bloomberg, MSCI, CCS Calculations
MexicoArgentina
PeruColombia
ChileBrazil
HungaryCzech Rep
PolandRussiaTurkeyEgypt
MoroccoSouth Africa
IndonesiaThailand
IndiaChina
PhilippinesMalaysia
-0.5 0 0.5 1
Emerging Market Correlations with S&P 500Mar/2010 - Sep/2010 Feb/2008 - Feb/2010 Jan/2001 - Mar/2007
Source: MSCI and CCS Calcu-
lations
Currencies and Inflation
Jan-10 Mar-10 May-10 Jul-10 Sep-101.180
1.220
1.260
1.300
1.340
1.380
1.420
1.46082.50
85.00
87.50
90.00
92.50
95.00
yen/USD
USD/Euro (inverse)
Euro picks up modestly…. Japan weakens yen at 15-year high vs USD
USD per Euro (inverse) [Left] and Yen per USD [right]
Source: Thomson/Datastream and DECPG calculations.
Mixed developments in real effective exchange rates
real effective exchange rates, indexes, January 2009 = 100
85
95
105
115
125 USAGer-manyJapanChinaRussiaBrazil
Source: IMF and DEC Prospects Group.
Headline CPI inflation broadly easingsave for India and China
”Headline” consumer price indexes, ch% (year-on-year)
-5
0
5
10
15
20 USA Germany Japan
China Russia BrazilIndustrial production, ch% (3m/3m, saar)
Source: IMF and DEC Prospects Group.
Focus: Developments in international grain
markets
Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10100
200
300
400
500 Wheat prices, weekly averages, US $/ton
150
180
210
240
270
300Wheat daily prices for 2010, CME Nearby
contract, US$/tonAnnouncement of the export ban by Russia (August 5)
Weather-related problems began unfolding
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-100
200
400
600
800
1,000
Wheat, Maize, and Rice Prices, monthly averages, US$/ton
Wheat Rice Maize
Wheat Global Balance
2007 2008 2009 2010 2011P
Production 596.1 611.2 683.3 680.4 643Consumption 618.3 613.2 635.7 648.6 658Stocks 129.8 124.3 165.1 196 177.8Export 111.8 117.3 143.8 133.8 126Imports 114 113.8 136.9 132.8 122.8
Source: US Department of Agriculture (September 10, 2010 update).
Note: The years refer to marketing years (June-May), i.e., 2011 corresponds to June 2010-May 2011. The 2010 and 2011 figures are estimates and projections, respectively.
Energy and Fertilizer Nominal Price Indices, 2000=100
Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 Jan-09 Jan-100
200
400
600
800
1,000 Energy Fertilizer
50
Countries with the highest dependency on wheat imports relative to their GDP
Tanzania
Jordan
Senegal
Egypt
St. Vincent
Guinea-Bissau
Ethiopia
Gambia
Yemen
Mauritania
0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0%
Source: DECPG estimates
Price changes of key staples: April 08 - July 10
Country Commodity Percent change
Afghanistan Wheat 27%Nigeria Sorghum 20%Rwanda Beans 13%Mongolia Rice 10%Mali Millet 10%Nepal Rice 9%Burundi Beans -18%Zimbabwe Maize -21%
Zambia Maize -22%Tanzania Maize -25%Uganda Maize -25%Kenya Maize -43%
Source: Food Price Watch, September 2010, PREM
Calories derived from wheat as a share of total calorie
intake
Azerbaijan
Tajikistan
Tunisia
Iran (Islamic Republic of)
Georgia
Syrian Arab Republic
- 0.10 0.20 0.30 0.40 0.50 0.60 0.70
Source: FAO
Wheat dependence on selected AFR countries
Country Own-production as % of domestic supplies
Wheat aid, WFP 2009 (tons)
Wheat aid as a share of wheat importsEthiopia 79% 627,624 104%
Burundi 47% 13,261 144%Zimbabwe 37% 109,226 56%Malawi 5% 21,140 22%Mozambique 0% 118,036 33%Mauritania 0% 21,666 7%Togo 0% 24,062 29%
Source: WFP and DECPG staff calculations