Ekonomiska utsikter augusti 2011
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- Risk aversion is high, weighing on growth as investors remain cautious after the financial crisis. A recession in the US cannot be ruled out. Rising unemployment is causing the Riksbank to lower interest rates. - The Nordic economies are still relatively strong, but they are small, open economies that will be affected by weaker international demand. - Growth forecasts for the US and Europe have been revised down significantly. Several highly indebted Eurozone countries may enter recession in the coming quarters. Fiscal consolidation efforts have been stepped up.
Ekonomiska utsikter augusti 2011
- 1. ■ Innehåll EKONOMISKA UTSIKTER AUGUSTI 2011 I krisens tecken Toppen nådd för Norden ■ De nordiska ekonomierna gynnas av sunda statsfinanser men tillväxtmotorerna tappar fart. Tydlig global inbromsning ■ Allt färre ljuspunkter. Den ekonomiska aktiviteten har bromsat in kraftigt i både USA och euroområdet medan de allt viktigare tillväxtländerna går starkt. ÖVERSIKT 04 I KRISENS TECKEN. SVERIGE 08 INGA TRÄD VÄXER TILL HIMLEN EURO AREA 18 FLIRTING WITH RECESSION RUSSIA 25 COMFORTABLE CONSUMERS OIL 34 LONG TERM PRICES STILL TRENDING UP RISK SCENARIO 37 RISK OF RECESSION IN THE US AND EURO AREA 2 EKONOMISKA UTSIKTER│AUGUSTI 2011 NORDEA MARKETS
- 2. ■ Innehåll Tabellsamling ÖVERSIKT I krisens tecken ........................................................................................... 04 Nyckeltal ................................. 6 Räntor och valutor ............... 7 Norden SVERIGE Inga träd växer till himlen ............................................................................. 08 NORWAY Redaktör Norway will be hit, but only modestly so ....................................................... 10 Annika Winsth Chefekonom DENMARK The long tough haul ..................................................................................... 12 [email protected] Tel +46 8 614 8608 FINLAND Problems in the global economy is slowing down the recovery ..................... 14 Större industriländer Gått till tryck USA 26 Augusti 2011 No summer – new winter on the way already? ..............................................16 EURO AREA Flirting with recession ................................................................................. 18 UK Besök oss på: Restoration keeps growth on short leash...................................................... 20 www.nordea.se/analys JAPAN Recovering from earthquake but new challenges ahead ................................ 21 SWITZERLAND Strong currency threatens growth ................................................................ 22 Källor: Reuters EcoWin och officiell nat- Övriga länder ionell statistik om inget annat anges. POLAND Elections coming up .................................................................................... 23 RUSSIA Comfortable consumers ............................................................................... 25 ESTONIA Recovery exceeds expectations ................................................................... 27 LATVIA Upward trend still intact ............................................................................... 28 LITHUANIA Growth continues despite global uncertainties ............................................. 29 CHINA Ready to send in the cavalry ........................................................................ 30 INDIA Authorities in straitjacket ............................................................................. 32 BRAZIL Better foreign financing mix ......................................................................... 33 Råvaror OIL Long term oil prices still trending up – blury short-term outlook .................... 34 OIL Slowdown can push oil prices below USD 85/barrel threshold ....................... 35 METALS Metal prices to reflect subdued economic growth ......................................... 36 SPECIAL THEME Gauging the risk of recession in the US and the Euro area ............................ 37 3 EKONOMISKA UTSIKTER│AUGUSTI 2011 NORDEA MARKETS
- 3. ■ Översikt I krisens tecken • Hög riskaversion slår mot tillväxten att vi får se euroobligationer i närtid. En avgörande skill- nad är att i stabilitetsfonden är länderna ansvariga för en • Recession i USA går inte att utesluta viss andel av det totala värdet, medan det i euroobligat- • Stigande arbetslöshet får Riksbanken att sänka räntan ioner inte finns något tak för enskilda länders ansvarsta- gande. Oavsett vilket blir det allt mer centralt med ge- Ingen vill fånga en fallande kniv och riskaversionen är mensamma finanspolitiska regelverk med uppföljning påtaglig i skrivande stund. Att återskapa förtroendet är och kontroll, vilket har fått Tysklands förbundskansler därmed a och o. Investerare runt om i världen har i färskt Angela Merkel och Frankrikes president Nicolas Sarkozy minne vad som hände under förra finanskrisen och agerar att tala om en ekonomisk regering för euroområdet. därefter. Turbulensen på de finansiella marknaderna och behovet av finanspolitisk konsolidering sätter tydliga Vårt huvudscenario är att eurosamarbetet håller i närtid, spår i konjunkturutsikterna såväl globalt som i Sverige. men att ländernas stora konsolideringsbehov tynger till- växten under kommande år. Redan under andra kvartalet Prognosen för tillväxten i USA har reviderats ned kraftigt dämpades tillväxten påtagligt i såväl Tyskland som och det går inte att utesluta att USA går in i recession Frankrike och det är inte uteslutet att flera av de mest igen. Om detta sker är vår bedömning emellertid att den skuldsatta länderna går in i recession de närmaste kvarta- blir mild, betydligt mildare än sist. Prognosen för tillväx- len. Tidigare har vi räknat med finanspolitiska åtstram- ten i Europa och i Norden har också revideras ned. De ningar runt 0,5 procent av BNP per år, men det tycks nu nordiska länderna står än så länge relativt starka, men de bli mer. Italien, Frankrike med flera har höjt ambitions- är små, öppna ekonomier som påverkas av en svagare in- nivån och dessutom tidigarelagt en hel del besparingar. ternationell efterfrågan. Globalt räknar vi med en tillväxt mellan 3-4 procent per år under de kommande två åren. Den privata konsumtionen kommer att utvecklas svagt och risken finns att även fallande börskurser påverkar BNP, procentuell förändring årstakt hushållens konsumtionsvilja negativt. Samtidigt har till- 2009 2010 2011E 2012E 2013E verkningsindustrin redan bromsat in tydligt och vi räknar Världen -0.9 4.4 3.2 3.3 3.8 USA -3.5 3.0 1.3 1.6 2.7 med att en fortsatt svag global efterfrågan. Det ger en Euroområdet -4.1 1.7 1.6 0.6 1.8 måttlig tillväxt kring 2,5 procent i Tyskland och strax Japan -6.3 4.0 -0.2 2.5 1.2 under 2 procent i Frankrike som tillsammans utgör 48 Kina 9.2 10.3 9.1 8.5 8.1 procent av euroområdets BNP. ECB väntas därmed av- vakta med att höja räntan till början av 2013 och möjlig- Brist på förtroende en betydande risk en finns det även behov av ytterligare åtgärder för att Riskerna är stora för den internationella ekonomin och hålla dagslåneräntan under styrräntan. kan påverka den ekonomiska utvecklingen både på kort och på lång sikt. Mest akut är att skapa trovärdiga lös- USA farligt nära recession ningar som undanröjer farhågan för en ny finanskris. Här I USA är riskerna både politiska och konjunkturella. I spelar centralbankerna en viktig roll även om de inte sit- närtid är det framför allt de svaga konjunkturutsikterna ter på en långsiktig lösning. På lite längre sikt handlar det som oroar och det är svårt att se vad som ska få den ne- om strukturella reformer och att implementera dem tidigt gativa utvecklingen att vända. De senaste veckornas tur- vilket i första hand politikerna har ansvar för. Utgångslä- bulens syns ännu inte fullt ut i statistiken och data kan get är dock komplext och osäkerheten om utfallet bety- därmed komma att försämras ytterligare framöver. Vår dande. bedömning är att risken för recession är nära 50 procent och BNP kan därmed mycket väl komma att falla de Förra krisen handlade i första hand om likviditetsbrist närmaste kvartalen. Studier från Fed indikerar att en till- och förlusttyngda banker runt om i världen utgjorde det växt under 2 procent i 70 procent av fallen resulterat i att största hotet. Idag är det inte likviditeten som är proble- USA har gått in i recession inom ett år. Utfallet för de met utan problem med statskulder i ett flertal länder. Det senaste kvartalen har reviderats ned och USA är än så största och allvarligaste hotet ser vi fortsatt från euroom- länge inte tillbaka på BNP-nivån före krisen 2008. rådet. De strukturella problem som länderna står inför kommer att bromsa tillväxten under många år. På kort Hushållssektorn är en nyckel i utvecklingen och även om sikt handlar det om att undvika att de stora länderna som sparandet har kommit upp sedan förra krisen och skul- Italien och Spanien får betalningsproblem. De 440 mil- derna har minskat något så är risken stor att hushållen jarder euro som stabilitetsfonden EFSF ska innehålla blir fortsatt återhållsamma. Än så länge har börserna i räcker inte för att stödja de stora länderna om det skulle USA fallit betydligt mindre än i Sverige, Dow Jones är behövas. Det spekuleras därför i både ytterligare kapital ned med runt 4 procent sedan början av 2011. Mot en re- till EFSF-fonden, men också införandet av euroobligat- cession talar bland annat att företagen står väl rustade, att ioner. Nordeas bedömning är att det i närtid är troligare det är gott om likviditet, att balansräkningar generellt ser att fonden tillförs nytt kapital om det skulle behövas än 4 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 4. ■ Översikt bättre ut och att penningpolitiken är fortsatt mycket ex- tagit fart och en svagare global utveckling gör att arbets- pansiv. Energi- och bensinpriset har också kommit ned, marknaden bromsar in igen. Norge drabbas mindre än vilket historiskt har haft stor betydelse för konsumtionen. övriga nordiska länder då oljeindustrin väntas investera Fed avvaktar med att höja räntan till 2013 och det kan kraftigt under prognosperioden. Norges Bank höjer också mycket väl bli aktuellt med ytterligare stimulanspaket räntan mindre än tidigare väntat, vilket stimulerar privat under prognosperioden. konsumtion. Makrodata väntas bromsa in kraftfullt BNP, procentuell förändring årstakt 2009 2010 2011E 2012E 2013E Danmark -5.2 1.7 1.0 1.3 1.5 Finland -8.2 3.6 3.4 1.6 2.7 Norge, fastlandet -1.8 2.1 2.6 2.5 3.0 Sverige -5.3 5.7 4.2 0.8 2.5 Tydlig avmattning av svensk tillväxt Än så länge har svensk ekonomi utvecklats positivt, men vi räknar med att konjunkturindikatorerna fortsätter ned mer markant även i Sverige och risken är uppenbar att tillväxten stannar av helt. Sverige är starkt beroende av den globala utvecklingen och även om vi är väl förbe- redda, bättre än sist, är det troligt att ekonomin bromsar in på bred front. Prognosen för svensk tillväxt har revide- Tillväxtländerna fortsätter att vara en viktig motor för rats ned relativt mycket, till måttliga 1,2 procent kalen- världskonjunkturen, men även dessa har påverkats av en derkorrigerat nästa år (0,8 procent i faktisk tillväxt). dämpad global efterfrågan och tillväxten har bromsat in. Kina väntas trots det växa med 8-9 procent om året under Exporten har redan dämpats och även om tillväxtländer- prognosperioden, men räddar inte ensam världen från en na går fortsatt bra så tillhör USA, Tyskland och Storbri- nedgång i global tillväxt. Om det krävs räknar vi med att tannien tillsammans med Norge våra största exportmark- Kina stimulerar ekonomin via finanspolitiken, men inte nader. Bortfallet från dem kan inte vägas upp fullt ut av lika kraftfullt som under finanskrisen 2008. en gynnsam utveckling i framför allt Asien. Kronan har än så länge stått emot turbulensen väl. Den försvagas un- Under prognosperioden byter Kina ledning och femte der prognosperioden och väntas därmed ge ett visst stöd generationen tar över. Än så länge vet vi inte mycket om till exportindustrin. vad det kan komma att betyda, men den senaste femårs- planen indikerar bland annat fortsatt inriktning på att öka Fluktuationerna i investeringarna i upp- och nedgångar är konsumtionen som andel av BNP. Japan drabbades ofta kraftiga. Vi räknar med en relativt stor avmattning mycket hårt av jordbävningskatastrofen, men är på väg av investeringstillväxten på grund av, dels minskad risk- tillbaka. Utvecklingen tycks bli V-formad, dvs en kraftig vilja, dels sämre konjunkturutsikter för såväl export- som inbromsning följs av en snabb återhämtning och tillväx- hushållssektorn. ten väntas bli 2,5 procent nästa år. Det kraftiga börsfallet tillsammans med en svagare ut- En mer dämpad global efterfrågan borde sätta avtryck i veckling av arbetsmarknaden gör hushållen mer försik- oljepriset. Men än så länge har priset legat kvar på höga tiga. De disponibla inkomsterna utvecklas också svagare nivåer. I skrivande stund ligger Brentolja runt 110 dollar då regeringen beslutat att vara mer återhållsam med fi- per fat, vilket är klart över de 85 dollar som är snittpro- nanspolitiken samtidigt som antalet arbetade timmar duktionskostnaden. Vi räknar dock inte med att priset ska minskar. Sparandet väntas stiga något på grund av det falla tillbaka lika mycket som under finanskrisen utan osäkra läget. Vi ser inte någon större korrigering av bo- stanna runt 115 dollar per fat under prognosperioden. stadspriserna, men hushållens konsumtionsvilja påverkas Tillväxtländerna står för en allt större andel av efterfrå- tydligt av en dämpad utveckling på bostadsmarknaden. gan på olja. I dessa länder stiger levnadsstandarden och befolkning ökar, vilket håller uppe efterfrågan. Samtidigt Tillväxten faller tillbaka så mycket att arbetslösheten är reservkapaciteten relativt begränsad. börjar stiga. Historiskt har Riksbanken sänkt räntan när väl arbetslösheten stiger och vi menar att det kommer att Starkt utgångsläge för Norden ske även denna gång. Den globala turbulensen får Riks- Små öppna ekonomier som de nordiska påverkas normalt banken att avstå från räntehöjningar i närtid samtidigt mer av det globala läget och det är vår bedömning även som lägre råvarupriser dämpar inflationen. denna gång. Finland och Sverige är de länder som har mest likartad näringslivsstruktur, men vi räknar dock inte Annika Winsth med att finsk arbetslöshet stiger igen. I Danmark är bo- [email protected] +46 8 614 8608 stadskrisen ännu inte över och hushållen väntas vara fort- satt försiktiga. Hittills har inte hemmamarknaden riktigt 5 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 5. ■ Översikt Growth, % Inflation, % 2009 2010 2011E 2012E 2013E 2009 2010 2011E 2012E 2013E World1) -0.9 4.4 3.2 3.3 3.8 World1) 0.8 2.7 3.7 2.8 2.8 USA -3.5 3.0 1.3 1.6 2.7 USA -0.3 1.6 3.0 2.0 2.2 Euro area -4.1 1.7 1.6 0.6 1.8 Euro area 0.3 1.6 2.6 1.8 1.8 China 9.2 10.3 9.1 8.5 8.1 China -0.7 3.3 5.3 4.3 4.2 Japan -6.3 4.0 -0.2 2.5 1.2 Japan -1.3 -0.7 -0.2 0.3 0.8 Denmark -5.2 1.7 1.0 1.3 1.5 Denmark 1.3 2.3 2.8 2.0 2.0 Norway -1.8 2.1 2.6 2.5 3.0 Norway 2.2 2.4 1.4 1.7 2.3 Sweden -5.3 5.7 4.2 0.8 2.5 Sweden -0.5 1.2 3.0 1.8 2.2 UK -3.4 0.0 1.2 2.1 2.6 UK 2.2 3.3 4.5 2.5 2.0 Switzerland -1.9 2.6 2.1 1.8 2.3 Switzerland -0.5 0.7 0.2 0.4 0.7 Germany -4.7 3.6 2.9 1.2 2.1 Germany 0.3 1.2 2.5 1.7 1.7 France -2.6 1.6 1.5 1.0 1.8 France 0.1 1.7 2.7 1.8 1.7 Italy -5.2 1.3 0.7 0.2 0.9 Italy 0.6 1.6 2.7 2.0 1.8 Spain -3.7 -0.1 0.8 0.2 1.5 Spain -0.2 2.0 3.0 1.8 1.6 Netherlands -3.9 1.8 1.8 0.9 2.3 Netherlands 1.0 0.9 2.5 2.0 1.7 Austria -3.9 2.0 2.1 1.1 1.9 Austria 0.4 1.7 3.5 2.1 2.0 Portugal -2.5 1.3 -2.2 -1.8 0.8 Portugal -0.9 1.4 3.4 1.6 1.6 Greece -2.0 -4.5 -4.9 -1.0 0.5 Greece 1.3 4.7 2.8 0.8 1.0 Finland -8.2 3.6 3.4 1.6 2.7 Finland 0.0 1.2 3.3 2.0 2.0 Ireland -7.6 -1.0 0.6 0.5 1.8 Ireland -1.7 -1.6 1.1 0.9 1.0 Estonia 1.7 0.0 7.5 3.6 4.8 Estonia -0.1 3.0 5.0 3.0 3.9 Poland 1.7 3.8 3.3 3.4 4.0 Poland 3.8 2.5 4.2 2.4 2.6 Russia -7.6 4.0 4.9 5.3 5.6 Russia 11.8 6.9 8.5 7.5 7.0 Lithuania -14.7 1.3 6.0 3.7 4.8 Lithuania 4.2 1.3 4.3 3.5 3.8 Latvia -18.0 -0.3 4.6 3.6 4.9 Latvia 3.5 -2.5 4.5 3.3 3.8 Czech Republic -4.1 2.3 2.3 2.0 2.9 Czech Republic 1.0 1.5 2.1 1.7 2.2 Hungary -6.7 1.2 2.2 2.0 3.0 Hungary 4.2 4.9 3.5 3.0 3.0 Kazakhstan 1.2 7.0 6.0 6.5 6.3 Kazakhstan 7.3 7.8 8.2 7.5 6.8 Romania -7.1 -1.3 1.6 3.1 3.8 Romania 5.6 6.1 5.1 4.0 3.6 Turkey -4.8 8.9 5.5 3.5 4.0 Turkey 6.3 8.6 6.0 6.2 5.9 South Africa -1.7 2.8 3.5 3.5 3.9 South Africa 7.2 4.3 5.0 5.5 4.8 India 9.1 8.8 7.7 8.0 8.2 India 2.4 9.6 8.3 5.5 6.0 Brazil -0.7 7.6 3.9 4.1 4.2 Brazil 4.9 5.0 6.4 5.2 4.7 Mexico -6.3 5.4 4.1 3.9 4.0 Mexico 5.3 4.2 3.8 3.6 3.3 Public finances, % of GDP Current account, % of GDP 2009 2010 2011E 2012E 2013E 2009 2010 2011E 2012E 2013E USA -10.3 -8.8 -9.3 -7.1 -4.9 USA -2.9 -3.2 -3.5 -3.7 -3.5 Euro area -6.3 -6.0 -4.5 -3.6 -2.5 Euro area -0.6 -0.5 -0.7 -0.8 -0.8 China -2.1 -1.6 -2.2 -1.9 -2.0 China 5.9 5.2 4.1 3.6 3.2 Japan -7.1 -7.7 -10.0 -8.0 -7.0 Japan 1.9 3.6 2.3 2.9 3.2 Denmark -2.8 -2.8 -3.8 -4.7 -3.0 Denmark 3.6 5.4 5.1 4.7 4.1 Norway 10.5 10.6 15.0 16.4 15.5 Norway 13.8 12.9 14.7 14.8 14.9 Sweden -0.9 -0.2 0.1 0.4 0.9 Sweden 6.8 6.2 5.6 6.5 6.8 UK -2.7 -10.4 -8.5 -6.5 -4.5 UK -1.3 -2.5 -2.0 -1.5 -1.5 Switzerland 0.8 0.2 0.2 0.6 0.7 Switzerland 8.3 14.2 13.0 11.0 9.0 Germany -3.0 -3.3 -1.5 -1.8 -1.5 Germany 5.0 5.1 4.8 4.6 4.9 France -7.5 -7.0 -5.8 -4.8 -3.0 France -2.9 -3.5 -3.9 -4.1 -3.8 Italy -5.4 -4.6 -3.9 -2.0 -0.8 Italy -3.0 -4.1 -3.8 -3.6 -3.3 Finland -2.6 -2.5 -2.0 -1.5 -0.6 Finland 1.3 1.9 1.2 1.2 1.3 Estonia -1.7 0.1 -0.3 -1.5 0.0 Estonia 4.5 2.8 0.1 -0.5 -1.2 Poland -7.3 -7.9 -6.0 -4.5 -3.0 Poland -3.9 -4.5 -2.9 -3.3 -3.7 Russia 6.4 -4.0 -0.7 -0.5 0.0 Russia 4.0 4.8 4.0 3.5 3.2 Lithuania -9.2 -7.8 -5.0 -2.8 -2.4 Lithuania 2.6 1.3 -1.2 -1.8 -2.0 Latvia -9.7 -7.7 -4.8 -2.6 -2.3 Latvia 8.6 3.6 0.2 -0.2 -1.0 Czech Republic -5.9 -4.7 -4.4 -3.5 -3.0 Czech Republic -3.2 -3.8 -3.5 -3.5 -4.0 Hungary -4.5 -4.2 1.8 -3.0 -3.0 Hungary 0.4 2.4 1.5 1.0 -1.5 Kazakhstan -3.0 -4.1 -2.0 -1.2 -1.2 Kazakhstan 4.9 4.0 3.7 3.5 2.8 Romania -8.5 -6.4 -4.4 -3.5 -3.0 Romania -4.3 -4.0 -4.5 -4.8 -5.0 Turkey -5.5 -3.6 -2.3 -2.1 -1.5 Turkey -2.3 -6.5 -9.5 -7.5 -6.5 South Africa -5.8 -5.3 -5.3 -4.2 -3.8 South Africa -4.0 -2.7 -4.2 -5.0 -5.3 India -6.1 -5.0 -5.5 -5.0 -4.5 India -1.9 -3.0 -3.0 -2.5 -3.5 Brazil -3.2 -2.7 -2.5 -2.8 -2.8 Brazil -1.5 -2.5 -3.0 -2.8 -2.8 Mexico -2.3 -2.9 -2.2 -1.8 0.5 Mexico -0.7 -0.5 -0.7 -0.9 -1.5 1) Weighted average of countries in this table. Accounts for 76 .5% of world GDP. Weights calculated using PPP adjusted GDP levels for 2008 according to the IMF's World Economic Outlook 6 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 6. ■ Översikt Monetary policy rates Monetary policy rate spreads vs Euro area 26.8.11 3M 6M 12M 24M 26.8.11 3M 6M 12M 24M US 0.25 0.25 0.25 0.25 0.75 US -1.25 -1.25 -1.25 -1.25 -1.25 1 Japan 0.10 0.10 0.10 0.10 0.10 Japan -0.15 -0.15 -0.15 -0.15 -0.65 Euro area 1.50 1.50 1.50 1.50 2.00 Euro area - - - - - Denmark 1.55 1.55 1.55 1.60 2.15 Denmark 0.05 0.05 0.05 0.10 0.15 Sweden 2.00 2.00 2.00 1.50 2.00 Sweden 0.50 0.50 0.50 0.00 0.00 Norway 2.25 2.25 2.25 2.50 3.25 Norway 0.75 0.75 0.75 1.00 1.25 UK 0.50 0.50 0.50 0.50 1.25 UK -1.00 -1.00 -1.00 -1.00 -0.75 Switzerland 0.25 0.25 0.25 0.25 1.00 Switzerland -1.25 -1.25 -1.25 -1.25 -1.00 Poland 4.50 4.50 4.50 4.75 5.00 Poland 3.00 3.00 3.00 3.25 3.00 Czech Rep. 0.75 0.75 0.75 1.00 2.00 Czech Rep. -0.75 -0.75 -0.75 -0.50 0.00 Hungary 6.00 6.00 5.50 5.50 5.50 Hungary 4.50 4.50 4.00 4.00 3.50 Romania 6.25 6.25 6.25 5.75 5.75 Romania 4.75 4.75 4.75 4.25 3.75 Turkey 5.75 5.75 5.75 6.75 8.25 Turkey 4.25 4.25 4.25 5.25 6.25 Russia 8.25 8.25 8.50 9.00 9.00 Russia 6.75 6.75 7.00 7.50 6.85 Kazakhstan 7.50 7.50 8.00 8.00 8.50 Kazakhstan 6.00 6.00 6.50 6.50 6.50 South Africa 5.50 5.50 5.50 6.00 7.00 South Africa 4.00 4.00 4.00 4.50 3.75 China 6.56 6.56 6.56 6.56 6.56 China 5.06 5.06 5.06 5.06 4.56 India 8.00 8.00 8.00 8.00 8.00 India 6.50 6.50 6.50 6.50 6.00 Brazil 12.50 12.50 12.50 12.00 10.00 Brazil 11.00 11.00 11.00 10.50 8.00 Mexico 4.50 4.50 4.50 4.50 5.50 Mexico 3.00 3.00 3.00 3.00 3.35 3-month rates 3-month spreads vs Euro area 26.8.11 3M 6M 12M 24M 26.8.11 3M 6M 12M 24M US 0.31 0.30 0.30 0.30 1.10 US -1.22 -1.15 -1.30 -1.30 -1.00 Euro area 1.54 1.45 1.60 1.60 2.10 Euro area - - - - - Denmark 1.56 1.60 1.75 1.80 2.30 Denmark 0.02 0.15 0.15 0.20 0.20 Sweden 2.58 2.55 2.55 2.05 2.55 Sweden 1.04 1.10 0.95 0.45 0.45 Norway 3.09 3.07 3.02 3.10 3.79 Norway 1.55 1.62 1.42 1.50 1.69 UK 0.88 0.90 0.90 0.90 1.75 UK -0.66 -0.55 -0.70 -0.70 -0.35 Poland 4.72 4.70 4.75 5.00 5.25 Poland 3.18 3.25 3.15 3.40 3.15 Czech Republic 1.18 1.10 1.05 1.30 2.30 Czech Republic -0.36 -0.35 -0.55 -0.30 0.20 Hungary 6.09 6.10 5.95 5.75 5.75 Hungary 4.55 4.65 4.35 4.15 3.65 Russia 4.79 4.80 5.00 5.40 6.00 Russia 3.25 3.35 3.40 3.80 3.90 Latvia 0.85 0.95 1.40 1.70 2.20 Latvia -0.69 -0.50 -0.20 0.10 0.10 Lithuania 1.85 1.90 2.00 2.10 2.40 Lithuania 0.31 0.45 0.40 0.50 0.30 10-year government benchmark yields 10-year yield spreads vs Euro area 26.8.11 3M 6M 12M 24M 26.8.11 3M 6M 12M 24M US 2.27 2.20 2.50 3.30 3.85 US 0.06 0.00 -0.30 0.05 0.30 Euro area 2.21 2.20 2.80 3.25 3.55 Euro area - - - - - Denmark 2.44 2.45 3.00 3.35 3.65 Denmark 0.23 0.25 0.20 0.10 0.10 Sweden 2.11 2.20 3.00 3.35 3.70 Sweden -0.09 0.00 0.20 0.10 0.15 Norway 2.63 3.02 3.51 3.83 4.18 Norway 0.42 0.82 0.71 0.58 0.63 UK 2.52 2.40 3.00 3.35 3.80 UK 0.31 0.20 0.20 0.10 0.25 Poland 5.65 5.60 5.60 5.70 5.80 Poland 3.44 3.40 2.80 2.45 2.25 Czech Rep. 3.08 3.35 3.75 4.00 4.25 Czech Rep. 0.87 1.15 0.95 0.75 0.70 Hungary 7.20 7.00 7.00 7.25 7.50 Hungary 4.99 4.80 4.20 4.00 3.95 Exchange rates vs SEK Exchange rates vs EUR and USD 26.8.11 3M 6M 12M 24M 26.8.11 3M 6M 12M 24M EUR/SEK 9.10 9.15 9.25 9.35 9.40 EUR/USD 1.44 1.40 1.35 1.30 1.25 USD/SEK 6.31 6.54 6.85 7.19 7.52 EUR/JPY1) 6.3 6.5 6.9 7.2 7.5 JPY/SEK1) 8.17 8.17 8.56 8.99 7.92 EUR/GBP 0.88 0.87 0.87 0.84 0.83 DKK/SEK 1.22 1.23 1.24 1.25 1.26 EUR/CHF 1.15 1.15 1.15 1.20 1.30 NOK/SEK 1.17 1.16 1.22 1.23 1.24 EUR/SEK 9.10 9.15 9.25 9.35 9.40 GBP/SEK 10.33 10.52 10.63 11.13 11.33 EUR/NOK 7.79 7.90 7.60 7.60 7.60 CHF/SEK 7.94 7.96 8.04 7.79 7.23 EUR/PLN 4.15 4.00 4.10 4.00 3.90 PLN/SEK 2.19 2.29 2.26 2.34 2.41 EUR/RON 4.25 4.25 4.20 4.10 4.00 CZK/SEK 0.38 0.38 0.39 0.39 0.40 USD/JPY 77.2 80.0 80.0 80.0 95.0 HUF/SEK 0.03 0.03 0.03 0.03 0.03 USD/GBP 1.64 1.61 1.55 1.55 1.51 RUB/SEK 0.22 0.23 0.25 0.28 0.29 USD/TRY 1.76 1.80 1.66 1.59 1.52 TRY/SEK 3.59 3.63 4.12 4.51 4.93 USD/CHF 0.79 0.82 0.85 0.92 1.04 LVL/SEK 12.83 12.92 13.06 13.26 13.33 USD/SEK 6.31 6.54 6.85 7.19 7.52 LTL/SEK 2.64 2.65 2.68 2.71 2.72 USD/NOK 5.40 5.64 5.63 5.85 6.08 CNY/SEK 0.99 1.03 1.10 1.19 1.32 USD/PLN 2.88 2.86 3.04 3.08 3.12 INR/SEK 0.14 0.15 0.15 0.16 0.17 USD/CNY 6.39 6.34 6.25 6.06 5.71 BRL/SEK 3.91 4.22 4.42 4.96 5.37 USD/INR 46.02 45.00 45.00 44.50 44.00 KZT/SEK 0.04 0.05 0.05 0.05 0.06 USD/BRL 1.61 1.55 1.55 1.45 1.40 RON/SEK 2.14 2.15 2.20 2.28 2.35 USD/KZT 146.4 144.5 143.0 140.0 135.0 MXN/SEK 0.51 0.55 0.59 0.63 0.72 USD/MXN 12.43 11.80 11.70 11.50 10.50 ZAR/SEK 0.88 0.95 0.99 0.99 1.07 USD/ZAR 7.21 6.90 6.90 7.30 7.00 1) Pr. 100 enheter 7 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 7. ■ Sverige Inga träd växer till himlen • Tillväxten stannar av Börsutvecklingen tynger inhemsk efterfrågan Hushållens konsumtion har upprätthållits väl hittills i år. • Sysselsättningen faller och arbetslösheten stiger Trots kraftigt höjda lånekostnader och dyrare energi har • Riksbanken sänker räntan nästa år konsumtionen rullat på, om än i långsammare takt än tidigare. Den senaste tidens nedgång på • Kronan tappar mark Stockholmsbörsen är dock ytterligare en börda att bära för hushållen. Från årsskiftet fram till mitten av augusti i De försämrade utsikterna för den globala ekonomin år har börsen fallit med drygt 20 procent. Enligt en kommer att få tydliga konsekvenser för den svenska preliminär bedömning har det urholkat hushållens ekonomin. Efterfrågan på svensk export dämpas och finansiella förmögenhet med upp emot 350 miljarder börsfallet slår mot hushåll och företag. BNP-tillväxten kronor. Det motsvarar 10 procent av hushållens stannar av redan under andra halvåret i år, vilket finansiella tillgångar och 20 procent av hushållens efterhand kommer att ge avtryck på arbetsmarknaden i disponibla inkomster. Utsikterna för inkomsterna ändras form av minskad sysselsättning och stigande också med en väntad försvagning av arbetsmarknaden arbetslöshet. Utsikterna för de offentliga finanserna och uteblivna skattesänkningar. De reala disponibla försämras därmed också. En mer expansiv penningpolitik inkomsterna stiger i genomsnitt med endast ca 1 procent stöttar dock ekonomin. Utgångsläget är också gynnsamt. per år 2012 och 2013. Ekonomin har återhämtat sig väl och det finansiella läget är överlag stabilt, vilket sammantaget mildrar de negativa Det finns en risk att de negativa faktorerna förstärker effekterna. Det är ändå en väsentligt svagare varandra och kan orsaka ett fall i konsumtionen. Till konjunkturbild än vad prognoserna har pekat på tidigare. exempel kan en urholkad finansiell förmögenhet och en Osäkerheten i bedömningen bör understrykas. försvagad arbetsmarknad leda till en mer markerad sättning på bostadsmarknaden, vilken ofta har stor Exporten stannar av betydelse för hushållens konsumtions- och sparbeteende. Efter närmare två år med stark återhämtning ser det nu ut som att BNP planar ut. En viktig orsak är att exporten, Fallhöjden i hushållens efterfrågan bedöms dock vara som tidigare har varit en viktig motor, stannar av. Expor- begränsad. För detta talar bland annat att hushållens ten slutade att öka redan under andra kvartalet i år samti- finansiella sparande är relativt högt och på betydligt digt som orderingången har varit svag och läget på flera högre nivåer än innan de tidigare lågkonjunkturåren 2001 viktiga avsättningsmarknader är bekymmersamt. Expor- och 2009 då konsumtionen föll eller tillväxten stannade ten avtar därmed som drivkraft. Detta trots en mer gynn- av. De ändrade ränteutsikterna ger också stöd för såväl sam regional diversifiering till förmån för tillväxtländer hushållens konsumtion som för bostadsmarknaden. såsom de sk BRIC-länderna. Under loppet av nästa år bedöms exporten öka igen i takt med att tillväxten i om- Med en svag utveckling av hushållens konsumtion och världen repar sig något. export följer också ett minskat behov av att investera. Sverige: Makroekonomiska nyckeltal (årlig tillväxt i procent om inget annat anges) 2008 (SEKbn) 2009 2010 2011E 2012E 2013E Privat konsumtion 1,505 -0.4 3.4 1.7 1.0 2.1 Offentlig konsumtion 835 1.7 2.5 1.0 0.4 0.3 Fasta bruttoinvesteringar 642 -16.3 7.1 7.1 1.3 3.6 - industri 46 -22.2 -7.5 12.4 -0.9 6.9 - bostadsinvesteringar 112 -23.3 20.0 14.2 3.8 3.6 Lagerinvesteringar* 6 -1.5 2.1 0.8 -1.2 0.0 Export 1,715 -13.4 11.0 7.8 4.1 5.4 Import 1,499 -13.7 12.8 6.4 2.0 4.6 BNP -5.3 5.7 4.2 0.8 2.5 BNP, kalenderkorrigerad -5.2 5.4 4.3 1.2 2.5 Nominell BNP (mdr SEK) 3,204 3,089 3,306 3,476 3,582 3,740 Arbetslöshet (% av arbetskraften) 8.3 8.4 7.5 7.8 7.7 Sysselsättning -2.1 1.0 2.1 -0.3 0.3 Konsumentpriser (årsgenomsnitt KPI) -0.5 1.2 3.0 1.8 2.2 Underliggande inflation (årsgenomsnitt KPIF) 1.7 2.0 1.5 1.8 2.1 Timlöner (nationalräkenskaper) 3.0 0.9 3.6 3.9 3.6 Bytesbalans (mdr SEK) 209 205 195 234 254 - % av BNP 6.8 6.2 5.6 6.5 6.8 Handelsbalans (% av BNP) 3.2 2.4 2.8 3.6 4.0 Offentligt finansiellt sparande (mdr SEK) -29 -7 4 16 33 - % av BNP -0.9 -0.2 0.1 0.4 0.9 Offentlig bruttoskuld, % av BNP 42.8 39.7 36.9 35.4 33.4 * Bidrag till BNP-utvecklingen, procentenheter 8 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 8. ■ Sverige Tillsammans med ett kraftigt lageromslag kommer där- Dämpad marknadstillväxt med den inhemska efterfrågan att utvecklas svagt under 20 % y/y Marknads- Export av % y/y 20 det kommande året. Den stärks igen mot slutet av pro- 15 tillväxt varor 15 gnosperioden med stöd av lägre räntor och en bättre om- 10 10 världsbild. 5 5 Arbetslösheten stiger 0 0 I år har antalet sysselsatta nått rekordnivåer och -5 -5 sysselsättningen väntas öka ytterligare under andra -10 -10 halvåret i år, fast i långsammare takt. I spåren av en svag -15 -15 BNP-utveckling bedöms dock sysselsättningen falla och Prognos arbetslösheten öka nästa år. Således bryts den två år -20 -20 00 01 02 03 04 05 06 07 08 09 10 11 12 13 långa uppgången i sysselsättningen och resursutnyttjandet sjunker något. Källa: Nordea Markets och Reuters Ecowin Hushållens sparande högt Förutsättningarna inför den kommande avtalsrörelsen har 15.0 15.0 ändrats med de försämrade tillväxtutsikterna. Avtalen lär % % 12.5 12.5 dock ändå landa på högre nivåer än vid den förra 10.0 Totalt sparande, 10.0 avtalsrundan som skedde mitt under brinnande säsongrensat finanskris. Riskerna för att löneökningar ska hamna på 7.5 7.5 nivåer som är ohållbara ur penningpolitiskt perspektiv 5.0 5.0 Eget finansiellt sparande, har emellertid minskat. 2.5 säsongrensat 2.5 0.0 0.0 Den underliggande inflationen enligt Riksbankens favo- -2.5 -2.5 ritmått KPIF har legat en bit under 2-procentsmålet hit- -5.0 -5.0 tills i år. Med ett lägre pris på olja och andra råvaror Note: Sparande av disponibel inkomst -7.5 -7.5 dämpas inflationen. Importpriserna, som tidigare har fal- 94 96 98 00 02 04 06 08 10 lit kraftigt i spåren av de senaste årens kronförstärkning, Källa: Nordea Markets och Reuters Ecowin bedöms dock stabiliseras framöver. Tillsammans med en normalisering av den inhemska inflationen bidrar det till Arbetslösheten central för penningpolitiken att inflationen kommer att ligga i linje med inflationsmå- let nästa år. Riksbanken sänker räntan nästa år För Riksbankens del skiftar fokus från inflationsrisker till risken för att ekonomin ska tappa för mycket fart. Den rådande turbulensen på de finansiella marknaderna och försämrade konjunkturutsikter talar för att Riksbanken inte höjer reporäntan mer i år. Vår bedömning är att nästa ränteförändring är en sänkning under 2012. En stigande arbetslöshet kommer att påverka inflationsutsikterna och medföra att Riksbanken sänker räntan, trots att inflationen då ligger nära målet. Så småningom återgår Riksbanken till en höjningscykel i takt med att konjunkturläget stärks igen. Underliggande inflation i linje med målet 5 5 % y/y KPI % y/y Kronan har försvagats något under sommarens turbulens 4 4 på de finansiella marknaderna. Försvagningen är dock 3 3 begränsad och kronan får anses ha klarat stormen väl. KPIF Stabiliteten i den svenska ekonomin och liten direkt ex- 2 2 ponering mot de främsta oroshärdarna i Europa talar för 1 1 en fortsatt stark krona. Då Riksbanken lägger om pen- ningpolitiken och sänker räntan bedöms dock kronan för- 0 0 svagas något. -1 -1 Prognos -2 -2 Torbjörn Isaksson 96 98 00 02 04 06 08 10 12 [email protected] +46 8 614 8859 Källa: Nordea Markets och Reuters Ecowin 9 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 9. ■ Norway Norway will be hit, but only modestly so • Slightly lower growth, but no setback Private demand growing at a healthy clip Consumption growth appears to have picked up before • Low interest rates and high oil investment supportive the summer after a weak start to the year. The increased • Norges Bank to moderate its pace of rate hiking ... uncertainty will likely put a damper on consumer spending growth in the autumn, but with benign real • ... but will act ahead of other central banks wage growth, good employment growth and sustained low interest rates we see relatively strong consumption The much weaker global growth outlook and substantial growth in 2012 and 2013. financial turmoil have changed the outlook for the Norwegian economy. Especially exporters outside the oil Based on an expected relatively sharp increase in interest sector should be hit. It is highly uncertain how the rates in 2011 and 2012 we thought that home prices financial unrest will evolve and what the effect on the would flatten in 2012. But with prospects of much lower Norwegian corporate sector will be. But the funding interest rates going forward there is now every reason to costs of some investment projects look set to rise. expect the uptrend in home prices to last longer as the lower interest rates will probably more than offset any Still, we expect Norway to be hit far less than many other effects of the increased economic uncertainty. So now we countries. The oil companies are sharply stepping up do not expect home prices to flatten until around the end investment in both Norway and internationally, which of 2013. With a sustained rise in home prices, residential will contribute to softening the effect on the manufac- construction should grow more than previously assumed. turing industry of lower growth in Norway’s traditional export markets. We also think that the effect of increased The outlook for business investment is far more economic uncertainty and the stock market slide on uncertain. Experience from 2008 tells us that financial consumers’ propensity to spend will be limited. In the turmoil and tighter credit standards affect businesses’ May issue of Economic Outlook we projected that borrowing costs more than consumers’. It can prove Norges Bank would hike rates sharply. But with weaker more costly to get funding for high-risk projects at a time growth and prospects of low interest rates globally we when lower economic growth makes such projects less now expect Norges Bank to proceed more cautiously. profitable. We have therefore revised down our forecast The borrowing costs of consumers/home buyers and for business investment in mainland Norway. robust businesses will thus be lower than we said in May. For oil investment the opposite is true. We are now far As a result of the expected less aggressive rate hikes we more comfortable with our forecast of very favourable have revised down our 2012 growth forecast only times ahead for the supply industry. Capacity constraints moderately. For 2013, now for the first time included in and cost increases could turn out to be the biggest our forecast period, we foresee slightly rising growth obstacles to oil investment going forward. mainly due to a better outlook for the global economy. Norway: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (NOKbn) 2009 2010 2011E 2012E 2013E Private consumption 989 0.1 3.7 2.4 2.5 3.0 Government consumption 447 4.8 2.2 1.5 2.0 2.0 Fixed investment 504 -6.8 -7.4 10.8 6.8 4.8 - gross investment, mainland 376 -10.9 -3.1 10.0 6.0 4.6 - gross investment, oil 113 10.0 -18.3 15.0 10.0 6.0 Stockbuilding* 7 -3.2 3.2 0.0 0.0 0.0 Exports 1,218 -3.8 -1.7 -0.8 0.2 1.5 - crude oil and natural gas 616 -0.9 -7.4 -6.0 -0.6 0.0 - other goods 323 -8.0 4.9 3.0 1.0 3.0 Imports 743 -11.7 9.0 6.7 3.7 3.5 GDP 2,511 -1.7 0.3 1.1 1.9 2.4 GDP, mainland 1,812 -1.8 2.1 2.6 2.5 3.0 Unemployment rate, % 3.2 3.6 3.4 3.6 3.6 Consumer prices, % y/y 2.1 2.5 1.4 1.7 2.3 Core inflation, % y/y 2.6 1.4 1.2 1.9 2.3 Annual wages (incl. pension costs), % y/y 4.2 3.6 4.0 4.0 4.3 Current account (NOKbn) 274.9 310.0 401.8 429.8 461.7 - % of GDP 11.5 12.4 14.7 14.8 14.9 Trade balance, % of GDP 13.3 13.3 14.8 14.8 14.9 General govt budget balance (NOKbn) 249.6 265.7 410.0 475.0 480.0 - % of GDP 10.5 10.6 15.0 16.4 15.5 * Contribution to GDP growth (% points) 10 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 10. ■ Norway Sustained labour market balance Retail sales moving north Domestic demand will hold up quite well, which is one 124 Index Retail sales Index 124 of the reasons why we still expect fairly strong growth in 122 2005=100 2005=100 122 Norway. But lower growth in traditional exports will 120 120 dampen GDP growth relative to our May forecast 118 118 Trend, 4M mov. avg. Thanks to the benign growth trend, unemployment will 116 116 stay largely unchanged despite high labour migration. In some areas, eg engineering, the shortage of labour may, 114 114 however, increase. 112 112 With weak export market growth and a strong NOK, 110 110 07 08 09 10 11 demands at next year’s pay talks will probably be fairly modest. But the still relatively tight labour market will Source: Nordea Markets and Reuters Ecowin likely ensure pay rises above 4% over the coming years. Rebound in investment 200 Investment 200 Core inflation has risen less than we expected in May. Index 190 Jan 2001=100 Index mainland Jan 2001=100 190 With lower price pressure from abroad and lower wage 180 180 growth, inflation should also be below our May forecast. 170 Firms 170 The very low inflation is probably largely the result of 160 160 150 150 temporary factors, eg margin pressure in the retail sector. 140 140 We therefore see inflation rising, but core inflation will 130 130 remain below the inflation target over the forecast period. 120 120 110 Dwellings 110 Difficult for Norges Bank 100 100 90 90 Before the financial turmoil accelerated in the summer, 80 80 Norges Bank clearly wanted interest rates to go up. Alt- 01 02 03 04 05 06 07 08 09 10 hough the economic environment has changed a lot lately Source: Nordea Markets and Reuters Ecowin with international interest rates now looking set to be on hold at least until end-2012, we think Norges Bank will Low unemployment want to hike rates in Norway for domestic reasons. So we 11 % Unemployment rate % 11 expect slightly higher interest rates in 2012 and a further 10 10 pick-up in 2013. 9 Euro area 9 8 8 The risk of excessive NOK appreciation will, however, Sweden 7 7 put a lid on rate hikes. The downward revision to our 6 6 growth and inflation forecasts also suggests that the need USA 5 5 for higher rates in the domestic economy will be lower. But sustained strong growth in home prices will pull in 4 4 the opposite direction. The weight assigned by Norges 3 Norway 3 Bank to the risk of imbalances (eg high indebtedness and 2 2 home price growth) remains to be seen. Should the bank 04 05 06 07 08 09 10 11 assign a stronger weight to such factors than we assume, Source: Nordea Markets and Reuters Ecowin rates may be hiked and the NOK appreciate more than we have factored into our forecasts. Strong NOK driven by interest rate differentials Strong NOK Interest rate differentials and the market turbulence have underpinned the NOK. We expect the NOK to stay strong in the years ahead, supported by Norges Bank hik- ing rates before the central banks of Norway’s key trad- ing partners. Should the NOK weaken, Norges Bank will likely act more aggressively, which reduces the risk of persistent NOK weakening. But in the event of a major financial crisis and sharply declining risk appetite, the NOK will be hit as in 2008. In this crisis scenario Norges Bank is not likely to hike rates. Erik Bruce [email protected] +47 2248 4449 11 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 11. ■ Denmark The long tough haul • Tailwind from export markets The improvement in industrial production has led to a rise in capacity utilisation and the investment climate is • Cautious households supported by low interest rates. But business investment • Labour market loses momentum is expected to make a negative contribution this year, as the export of an oil drilling rig in Q1 made a very • House prices pointing south significant negative contribution. With prospects of a moderate economic pick-up both globally and in the The Danish economy is still feeling the aftermath of the Danish economy in 2012 and 2013, business investment housing market downturn and the Great Recession. Since looks set to rise slightly in coming years. the global outlook turned for the better in 2009, the economy has made good headway, but not without Cautious households and public consolidation bumps along the road. Unusually many factors of The weak trend in retail sales, overall private consump- uncertainty are at play. We face a situation where tion and home sales should be seen in light of falling real domestic demand has not really shifted up in gear while wages, a period of rising interest rates and the dragging trends in the global economy are very uncertain. out of any real labour market reversal. Consumers have chosen to increase their savings ratio during the crisis Tailwind from export markets and have kept it at this higher level after growth returned. Export growth has been crucial for the recovery of the Danish economy. Sales in the manufacturing industry are The Danes are facing parliamentary elections this year. largely driven by exports markets, whereas the domestic Policymakers have indicated a final adoption of the re- market is more sluggish. tirement reform after the elections: It will phase out the popular early retirement scheme. This is a sacred cow be- Generally, domestic demand paints a mixed and sluggish ing slayed, which has triggered uncertainty about the picture. In volume terms retail sales have shown a slight- possible slaying of other sacred cows such as the freeze ly waning trend for an extended period, construction ac- on property value tax. Generally, there is much uncer- tivity is very low, business investment has been under tainty associated with the future composition of the tax pressure and home sales are at a low level. But car sales base, which contributes to put a damper on consumer are going well, underpinned by low interest rates and spending. high leasing activity. In addition, the propensity to consume has been curbed During 2011 confidence indicators for both the manufac- by international unrest such as the European sovereign turing and the service sectors have mainly been positive. debt crisis and the economic downturn in the US as well But they could dip in H2 following the recent decline in as the ensuing stock market slide. Just now consumer global confidence indicators. confidence is in negative territory and only moderate in- creases in consumer spending seem to be in store this Denmark: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (DKKbn) 2009 2010 2011E 2012E 2013E Private consumption 840 -4.5 2.3 0.4 2.0 1.9 Government consumption 465 3.1 0.7 0.1 0.3 0.3 Fixed investment 365 -14.3 -3.2 -4.0 1.4 2.3 - government investment 33 4.6 6.9 8.0 -4.0 2.1 - residential investment 98 -16.9 -9.0 8.9 1.7 1.7 - business fixed investment 234 -15.8 -2.8 -11.9 2.6 2.7 Stockbuilding* 15 -2.0 0.9 0.3 0.0 0.0 Exports 959 -9.7 3.8 5.3 3.3 4.8 Imports 904 -12.5 3.9 4.0 3.7 5.1 GDP -5.2 1.7 1.0 1.3 1.5 Nominal GDP (DKKbn) 1,741 1,656 1,743 1,775 1,806 1,826 Unemployment rate, % 3.5 4.2 4.0 4.0 3.7 Unemployment level, '000 persons 96.2 114.1 108.6 108.3 102.3 Gross unemployment level, '000 persons 129.0 164.9 162.6 162.1 153.4 Consumer prices, % y/y 1.3 2.3 2.8 2.0 2.0 Hourly earnings, % y/y 2.9 2.5 2.0 2.5 2.5 Nominal house prices, one-family, % y/y -12.0 2.8 -3.0 -1.0 2.0 Current account (DKKbn) 59.0 94.0 90.0 84.0 75.0 - % of GDP 3.6 5.4 5.1 4.7 4.1 General govt. budget balance (DKKbn) -46.5 -48.3 -68.2 -84.4 -54.8 - % of GDP -2.8 -2.8 -3.8 -4.7 -3.0 Gross public debt, % of GDP 41.8 43.7 43.9 45.6 46.2 * Contribution to GDP growth (% points) 12 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 12. ■ Denmark year. But prospects of political clarification and sustained Sluggish domestic demand low interest rates suggest higher consumer spending 110 Index Turnover, manufacturing Index 110 growth in both 2012 and 2013. 105 2008=100 2008=100 105 100 100 Also government spending has shown a downward trend 95 95 lately. After budgets worsened significantly during the crisis, the purse strings have now been tightened. Going 90 90 Domestic forward growth will likely only be moderate, as long- 85 85 term fiscal policy sustainability must be ensured, but 80 Exports 80 government spending is expected to make a positive con- 75 75 tribution next year. Moreover, a string of public invest- Note: 12M mov. avg. ment projects have been launched. 70 70 02 03 04 05 06 07 08 09 10 11 Labour market losing momentum Sources: Statistics Denmark, Nordea Markets and Reuters Ecowin The labour market has turned in response to the waning Waning retail sales, while car sales flourish momentum in the economy. Unemployment is on an up- 110 180 trend again, while companies scale back their hiring Index ('000) Passenger cars 2000=100 170 plans and the number of vacancies remain at a very low 106 Retail sales, constant prices level. We do not look for more sustainable employment 160 102 growth until the pace in economic growth again outstrips 150 productivity. This is not likely to happen until in 2012. 98 140 94 130 House prices pointing south Car sales, rhs 120 90 According to the latest housing market statistics available 110 to us, house prices fell this year and turnover is low. A 86 100 record number of homes are on the market and for long Note: 12M mov. avg. 82 90 periods and buyers get sizable price reductions. The 02 03 04 05 06 07 08 09 10 11 housing market has still not received support from the Sources: Statistics Denmark, Nordea Markets and Reuters Ecowin labour market. Mortgage rates have fallen lately, which will underpin the market. But as labour market Home sellers have returned, but buyers hesitate conditions do not look set to turn around in the near 75 ('000) Houses 75 ('000) Houses future, prices are likely to continue falling. If 73 One-family houses put up for sale 73 policymakers’ proposals to temporarily suspend stamp 70 70 duty and housing taxes on newly bought homes are 68 68 adopted, this will boost sales in the forecast period and 65 65 prices should decline less steeply. 63 63 60 60 Denmark as a safe haven 58 58 During the latest turmoil in financial markets, Denmark 55 One-family houses removed from sale 55 has been one of an exclusive club of “safe-haven 53 53 countries”. This is for example reflected in Danish 50 Note: 12M mov. avg. 50 government yields trading relatively close to their 04 05 06 07 08 09 10 11 German equivalents, and the DKK firming versus the Sources: Association of Danish Mortgage Banks, Nordea Markets and Reuters Ecowin EUR. The reason why Denmark despite low economic activity has managed to hold on to its safe-haven status is Record-large currency reserves and strong DKK sound balances in the form of a record-large current 7.465 EUR/DKK DKKbn 500 account surplus, a small public budget deficit, a low Foreign exchange reserves, rhs 450 7.460 gross general government debt and historically large Central parity 400 currency reserves. But at the same time we believe that 7.455 350 the political parties’ will to implement the necessary long-term consolidation of public finances plays an 7.450 300 important role for the international community’s 250 7.445 confidence in the Danish economy. 200 7.440 150 Troels Theill Eriksen EUR/DKK [email protected] +45 3333 2448 7.435 100 07 08 09 10 11 Sources: Danmarks Nationalbank, Nordea Markets and Reuters Ecowin Jan Størup Nielsen [email protected] +45 3333 3171 13 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 13. ■ Finland Problems in the global economy is slowing down the recovery • Growth will decelerate markedly in 2012 consumption in general. • Good employment trend is in danger of stagnating Due to the sharply weakened outlook, we have almost • Inflation will decrease towards the end of 2011 halved our GDP growth forecast for 2012 from 3% to 1.6%. We estimate that growth will be slowest in Q4 • Balancing public finances will become difficult 2011 and Q1 2012. Thereafter activity should pick up again. H1 was a smooth ride The Finnish economy continued to recover in H1 2011 Export and investment growth is slowing down much faster than the euro area on average. Total On the basis of the trend in global trade, it became clear production increased a good 5% in Q1 year-on-year and, already before the summer that growth of Finnish goods according to Statistics Finland's monthly GDP indicator, export will slow down towards the end of this year. continued to grow at a pace of little less than 3.5% in Q2. Nevertheless, exports will increase somewhat, as the This trend was boosted by both foreign trade and value of new orders has still grown at a two-digit rate. domestic demand. Wage and salary growth was stronger Demand is expected to remain weak for the most of than expected, which supported retail sales and private 2012, restricting growth of goods exports to about 3%. consumption. Moreover, employment improved and the On a more positive note, 2013 is expected to be markedly increase in the number of working hours more than offset better. the rather moderate rise in earnings. Investment was on the rise with construction in particular remaining active. The uncertainty over the economic direction curbs Machinery and equipment investment also increased. investment growth to around 2% in 2012 with distinct slowdown of growth in both construction and machinery Outlook turned upside down and equipment investment compared to this year. In the spring we were able to count much on the demand Residential construction is hampered by the weakened of Finland's major trading partners, which were consumer confidence and the current high construction performing strongly. However, the sharp rise has now volumes. slowed down in Germany, Swedish growth forecasts are being cut heavily and it is difficult to find a growth driver No momentum in private consumption from the US. The ground for private consumption growth is crumbling. Because of slow growth, employment will in The uncertainty of the export outlook forces companies practice stop improving. The unemployment rate, to be cautious and possibly to consider postponing excluding seasonal effects, is estimated to fall to 7.5% planned investments until later. On the private towards the end of the year and to remain at that consumption side, the drop in consumer confidence throughout 2012. Purchasing power will mainly be indicates extra caution in financially significant supported by higher earnings growth and slower growth purchases. This will weaken residential construction, in consumer prices. The uncertain outlook encourages housing market and car trade as well as private Finland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011E 2012E 2013E Private consumption 95 -3.1 2.7 2.8 2.0 2.5 Government consumption 42 0.9 0.6 0.7 0.7 0.4 Fixed investment 40 -13.5 2.8 5.2 2.1 3.9 Stockbuilding* 2 0.2 0.6 0.1 0.0 0.0 Exports 87 -21.5 8.6 6.4 2.9 5.7 Imports 80 -16.1 7.4 5.4 3.1 5.1 GDP -8.2 3.6 3.5 1.6 2.7 Nominal GDP (EURbn) 186 173.3 180.3 189.7 197.0 206.2 Unemployment rate, % 8.2 8.4 7.7 7.5 7.1 Industrial production, % y/y -22 10 6 3 5 Consumer prices, % y/y 0.0 1.2 3.3 2.0 2.0 Hourly wages, % y/y 4.0 2.6 2.4 2.8 3.0 Current account (EURbn) 3.7 3.4 2.3 2.3 2.7 - % of GDP 2.1 1.9 1.2 1.2 1.3 Trade balance (EURbn) 3.0 2.8 2.1 2.5 2.9 - % of GDP 1.7 1.6 1.1 1.3 1.4 General govt budget balance (EURbn) -4.3 -4.6 -3.8 -3.0 -1.2 - % of GDP -2.5 -2.6 -2.0 -1.5 -0.6 Gross public debt (EURbn) 75.0 87.2 95.0 102.1 107.6 - % of GDP 43 48 50 52 52 * Contribution to GDP growth (% points) 14 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 14. ■ Finland consumers to be prepared, so saving is not likely to Fall in sentiment suggests weaker growth decrease very much. Consequently, private consumption 120 Index % y/y 10.0 is estimated to increase only 2% in 2012. 115 7.5 110 5.0 Marked decrease in inflation in the coming months 105 2.5 Consumer price inflation accelerated to 4% in July, as 100 expected, despite the fact that the prices have hardly 95 0.0 increased after April. Thus the reason for high inflation is -2.5 90 that the prices rose exceptionally fast in late 2010 when Economic sentiment -5.0 85 higher energy and raw material prices raised the costs of 80 -7.5 housing, food and transport. During that period, food GDP, rhs prices rose more than 8%. 75 -10.0 00 01 02 03 04 05 06 07 08 09 10 11 We expect inflation to decrease to clearly below 3% in Source: Nordea Markets and Reuters Ecowin late 2011 and to 2% on average in 2012. Crude oil prices Export growth to slow down soon are expected to fall when the slowing growth in the 40 40 industrial countries decreases the demand. This will % y/y % y/y 30 World trade volume 30 stabilise the costs of both housing and transport even though the euro is expected to weaken. Other factors 20 20 curbing growth in housing costs are continued low 10 10 interest rates and the probable stabilisation of housing 0 0 prices. However, food prices are expected to keep on -10 -10 rising, as the increase in input prices has continued in the past few months. Furthermore, prices are pushed higher -20 -20 by the commodity tax increases planned for next year. -30 -30 Finland, value of exports -40 -40 Slower decrease in public sector deficit 98 99 00 01 02 03 04 05 06 07 08 09 10 11 With weaker economic growth, tax revenue growth will Source: Nordea Markets and Reuters Ecowin slow down and the expenses of unemployment will decrease slower. This will also make it more difficult for Weaker confidence is a drag on retail sales the new government to decrease the puclic sector 25 7 Index % y/y financial deficit and cut government borrowing. During 6 20 5 the forecast period, the deficit will narrow slower than 4 we estimated earlier and the amount of debt will 15 3 correspondingly be higher. 10 2 1 Consumer confidence 0 The timing and scope of the expected expenditure cuts 5 -1 and tax hikes should be such that they do not knowingly 0 -2 slow down economic growth, which is already becoming -3 -5 -4 weaker. This is no time to postpone measures supporting Retail sales volume, -5 3M mov. avg., rhs growth. -10 -6 05 06 07 08 09 10 11 Pasi Sorjonen Source: Nordea Markets and Reuters Ecowini [email protected] +358 9 165 59942 Consumers hesitate with major purchases 50 50 Balance Balance 40 New loans, rhs 40 30 20 30 10 20 0 10 -10 -20 0 -30 Major purchases -10 -40 -50 -20 98 99 00 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin 15 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 15. ■ USA No summer – new winter on the way already? • The soft patch of the economy has taken hold together with the escalation of the sovereign debt crisis in the Euro area, the political dogfight over the raising of • Odds of recession at close to 50% the federal debt ceiling in August and Standard & Poor’s • More easing from the Fed on the way subsequent downgrade of US Treasuries have triggered stock market losses that could now push the economy • Major fiscal policy uncertainty back into recession. The outlook for the US economy has worsened markedly Based on hard economic facts no warning lights signal- since the May issue of Economic Outlook. The soft patch ling recession are yet flashing. It is thus positive that that the economy had already hit at that point now ap- businesses still appear to hire more manpower and banks pears to have taken hold, and there is now significant risk step up lending. But uncertainties are rife, as there are not of a new recession, only slightly more than two years af- yet particularly many indicators of how recent weeks’ fi- ter the end of the latest downturn. Currently, we put the nancial turmoil has affected demand from households odds of recession at close to 50%. and businesses. However, consumer and business confi- dence has plunged and if consumers put action behind The bleaker outlook for the US is caused by a number of words, the recession will unfortunately become a reality. factors. Firstly, economic growth was much slower in In other words, fears of recession could become self- 2010 and early 2011 than previously assumed. Sharply fulfilling. (See also the special theme on page 36). downward-revised historical GDP figures now show that not only was the recession in 2008-2009 the most severe But unless stock prices continue to decline, the economy since Word War II, the following upswing has also should in our view continue to expand in coming quar- turned out to be the weakest. ters, albeit at a very moderate pace. One of the factors behind this assumption is that the effects of the steep Secondly, recent months have brought a string of disap- commodity price increases and the supply disruptions af- pointing key figures, showing that consumer spending ter the Japanese earthquake are estimated to diminish fur- ground to a halt in Q2 this year. The unexpectedly abrupt ther. Also, financial players’ risk appetite and domestic slowdown in demand is apparently not only a function of demand are expected to be stimulated by an even more temporary factors such as high commodity prices and the lenient monetary policy, see below. Japanese earthquake in March. More fundamentally, the continued high debt, weak labour market and the belea- Our baseline scenario assumes GDP growth of only ¼% guered housing market still seem to weigh on both con- in H2, equal to a moderate growth rate of 1.3% for 2011 sumer and business confidence. This means that the as a whole. Weak growth of 1.6% and 2.7% is expected economy must be expected to remain fragile for yet an- in 2012 and 2013, respectively. other few years, even if a recession is avoided now. Given the outlook of weak and fragile economic growth, To this should be added that the weak growth indicators unemployment is forecast to remain close to 9% during USA: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (USDbn) 2009 2010 2011E 2012E 2013E Private consumption 10,035.5 -1.9 2.0 1.7 1.3 2.3 Government consumption and investment 2,878.1 1.7 0.7 -2.2 -1.1 -0.5 Private fixed investment 2,128.7 -18.8 2.6 4.7 4.7 7.4 - residential investment 472.4 -22.2 -4.3 -2.3 4.3 10.0 - equipment and software 1,070.0 -16.0 14.6 8.5 5.2 6.9 - non-residential structures 586.3 -21.2 -15.8 0.7 3.4 6.0 Stockbuilding* -41.1 -0.8 1.6 -0.1 0.1 0.1 Exports 1,846.8 -9.4 11.3 7.2 6.3 7.4 Imports 2,556.5 -13.6 12.5 4.7 3.7 6.1 GDP -3.5 3.0 1.3 1.6 2.7 Nominal GDP (USDbn) 14,292 13,939 14,527 15,002 15,531 16,246 Unemployment rate, % 9.3 9.6 9.1 9.1 8.6 Industrial production, % y/y -11.2 5.3 3.4 2.1 3.6 Consumer prices, % y/y -0.3 1.6 3.0 2.0 2.2 Consumer prices ex. energy and food, % y/y 1.7 1.0 1.5 1.3 1.5 Hourly earnings, % y/y 3.0 2.4 2.2 2.2 2.5 Current account (USDbn) -376.6 -470.9 -450.0 -465.9 -568.6 - % of GDP -2.7 -3.2 -3.0 -3.0 -3.5 Federal budget balance (USDbn) -1,471.3 -1,275.1 -1,400.0 -1,100.0 -800.0 - % of GDP -10.6 -8.8 -9.3 -7.1 -4.9 Gross public debt, % of GDP 86.4 94.5 103.8 110.9 115.8 * Contribution to GDP growth (% points) 16 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 16. ■ USA most of the forecast period. The overall inflation rate is Weakest economic recovery since World War II estimated to have peaked, and we now look for a drop 17.5 % Real GDP % 17.5 Change from business cycle trough towards 2% during the period. But core inflation, which 15.0 15.0 currently is boosted by higher rents and other compo- 12.5 Range for the six recessions 1958-1982 12.5 1990-1991 recession nents, is not expected to start declining until 2012. 2001 recession 10.0 10.0 Current cycle Even easier monetary policy in sight 7.5 7.5 The Fed has also sharply revised down its growth fore- 5.0 5.0 cast for the years ahead. This recently prompted a pledge 2.5 2.5 from the bank not to hike the fed funds rate from the cur- 0.0 0.0 rently extremely low level close to zero until mid-2013 at the earliest if the economy develops as expected. At the -2.5 -2.5 -6 -4 -2 0 2 4 6 8 same time the Fed expressed its will to apply additional Quarters after end of recession instruments if the economic outlook worsens further. Source: Nordea Markets and Reuters Ecowin Little hard evidence of a new recession… Against the backdrop of financial turmoil and the risk of 250 6 a new recession, we thus expect the Fed to initiate a new ('000) % y/y 300 round of quantitative easing in the form of financial asset 4 350 purchases (QE3) later this year or early in 2012. 400 2 But pumping out even more cheap liquidity implies a 450 0 clear risk of new bubbles. Therefore it is also our impres- 500 GDP, rhs sion that the Fed – also in response to pressure from oth- 550 Initial jobless claims, -2 reversed axis er central banks – will adopt quite an aggressive pace 600 once the economy allows gradual monetary policy nor- -4 650 malisation. We expect the first rate hike in mid-2013. 700 Note: Shaded areas mark recession -6 86 88 90 92 94 96 98 00 02 04 06 08 10 Major fiscal policy uncertainty Source: Nordea Markets and Reuters Ecowin The need for a very lenient monetary policy is reinforced by the prospect for further fiscal policy tightening … but fears of a double dip could cause one throughout the forecast period. The public spending cuts that result from the agreement to raise the federal debt ceiling in early August will have no major curbing effect on growth in our forecast period. But the phase-out of previous easing measures will, and the pressure on budgets necessitates continued sharp fis- cal policy tightening in the federal states. Our baseline scenario assumes that the temporary income tax break for wage earners of 2% points and the extended unemployment benefit period, both due to expire at year- end, will continue for another year. If not, this could in itself curb growth by about 1% point next year. Unemployment to go sideways A new large fiscal policy rescue package is not likely. On 600 12 ('000) m/m % the contrary, Standard & Poor’s downgrade of US Treas- 400 Payrolls, 3M mov. avg. Unemployment, rhs 10 uries seems to have increased the likelihood of a restora- 200 tion of public finances. This pressure will be reinforced if 8 other rating agencies also downgrade the US. 0 -200 6 Johnny Bo Jakobsen [email protected] +45 3333 6178 -400 4 -600 -800 Note: Shaded areas mark recession 2 90 92 94 96 98 00 02 04 06 08 10 Source: Nordea Markets and Reuters Ecowin 17 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 17. ■ Euro area Flirting with recession • High oil prices have led to abrupt growth slowdown orders. In addition, hard data point to a drop in private consumption during spring. This suggests that the rapid • Resurgent debt crisis increases the risk of recession increase in the price of oil and other commodities, which • Low rates should eventually lift growth somewhat peaked in Q2 has played a significant role in slowing demand. As oil prices have now stabilised, growth in • The ECB will keep rates on hold until Q1 2013 private consumption may again turn positive. Private consumption may also be supported by continued growth After a very strong start to 2011 economic activity in the in employment, which for the Euro area as a whole may Euro area came to an abrupt halt over the summer. This continue growing slightly following the period of strong has coincided with a resurgence of the sovereign debt growth last winter. However, the sharp drop in equity crisis and once again this has contributed to widespread prices and the prospect of further fiscal tightening turbulence in financial markets. The latest round of suggest that private consumption growth will only grow turbulence has implicated both Italy and Spain, the third- modestly over the forecast horizon. and fourth-largest largest economies in the Euro area, and once again the debt crisis threatens to lead to a new Debt crisis points to new round of fiscal tightening round of credit tightening from Euro-area banks. The resurgence of the debt crisis has led to fresh pledges Consequently, the economic outlook for the Euro area is to tighten fiscal policy in several member states. Most fraught with risk. Looking at the coming quarters we notably, the Italian government has unveiled new savings expect economic activity to be stagnant or perhaps even measures worth 3% of Italian GDP to be phased in before decline slightly, and several member states burdened by the end of 2013. To counter speculations about a possible the sovereign debt crisis are likely to experience an downgrade by the rating agencies and to contain a widen- outright recession over the coming quarters. The risk to ing of yield spreads relative to Germany, the French gov- the outlook for the whole of the Euro area mainly ernment has announced that it will present further sav- pertains to the duration of the slowdown, as fiscal policy ings measures to ensure that deficit targets will be met in will be tightened in several member states. There are also spite of slower growth. Italy and Spain have pledged a number of factors which point to a mild slowdown, similar steps, as the ECB demanded that both countries however. First of all, monetary policy is still very undertook a further squeeze of budgets in return for reac- supportive of growth and is likely to remain so over the tivating the purchases of government bonds under its Se- forecast horizon. Secondly, several of the more cyclically curities Markets Program. While it is still too early to sensitive demand components, such as car registrations judge the effect on aggregate GDP, it seems quite obvi- and construction are already at very low levels, and this ous that fiscal policy will exert a drag on growth consid- diminishes the risk of a sharp contraction in activity. erably larger than the 0.5% annually we have previously estimated. Thus, fiscal savings in Italy alone could sub- High oil prices and fiscal policy behind slowdown tract as much as 0.2% points from Euro-area growth in The sharp slowdown in economic activity has been both 2012 and 2013. particularly noticeable in the manufacturing sector, where indicators have pointed to a sharp drop in new Euro area: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011E 2012E 2013E Private consumption 5,190 -1.2 0.8 0.7 0.8 1.5 Government consumption 1,897 2.4 0.6 0.5 0.0 0.0 Fixed investment 1,987 -11.7 -0.9 3.2 1.7 3.9 Stockbuilding* 31 -0.7 0.6 0.0 -0.3 -0.1 Exports 3,874 -13.1 10.9 6.7 4.2 5.4 Imports 3,777 -11.8 9.3 5.5 4.4 5.4 Net exports* 97 -0.8 0.8 0.6 0.0 0.1 GDP -4.1 1.7 1.6 0.6 1.8 Nominal GDP (EURbn) 9,242 8,951 9,183 9,469 9,675 10,002 Unemployment rate, % 9.7 10.1 9.9 10.1 10.0 Industrial production, % y/y -3.5 4.7 2.0 1.0 2.5 Consumer prices, % y/y (HICP) -0.9 1.6 2.6 1.8 1.8 - core inflation 1.3 0.9 1.4 1.3 1.2 Hourly labour cost, wages and salaries % y/y 1.5 1.5 1.6 1.8 1.8 Current account (EURbn) -28 -43 -70 -80 -80 - % of GDP -0.3 -0.5 -0.7 -0.8 -0.8 General govt budget balance, % of GDP -6.3 -6.0 -4.5 -3.6 -2.5 Gross public debt, % of GDP 79.1 84.7 86.6 88.4 88.0 * Contribution to GDP growth (% points) 18 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 18. ■ Euro area Slowdown in exports will also affect investment Surveys point to sharp slowdown in growth The sharp slowdown in global growth is likely to dampen 1.5 % q/q % q/q 1.5 the Euro area’s export growth over the next couple of 1.0 Composite PMI 1.0 quarters. The bleaker prospects for exports are particular- 0.5 0.5 ly disconcerting for member states hit by the sovereign 0.0 0.0 debt crisis, where export growth was supposed to com- -0.5 -0.5 pensate for depressed domestic demand. This has un- -1.0 -1.0 doubtedly played an important role in the latest round of investor concern, which has also hit Italy and Spain, -1.5 -1.5 while strong growth in Emerging Markets will benefit -2.0 -2.0 GDP member states with a relatively high share of capital -2.5 -2.5 goods in exports, such as Germany, which will partly -3.0 -3.0 outweigh the effect of slower demand growth in neigh- 98 99 00 01 02 03 04 05 06 07 08 09 10 11 bouring countries. Further out on the forecast horizon, Euro-area exports should be supported by a gradual de- Cyclically sensitive demand is already low preciation of the EUR vs the USD. 6.5 1.10 % mn m/m 6.4 The momentum behind business investment has been 1.05 6.3 relatively strong, but the sharp decline in equity prices 1.00 6.2 and the risk of a new round of credit tightening in Euro- 6.1 area banks is likely to slow down business investment 0.95 6.0 over the coming quarters. Residential construction will 0.90 5.9 be burdened by a large housing overhang in some Construction, share 5.8 of value added 0.85 member states, particularly Spain, although the low level 5.7 of interest rates expected throughout the forecast horizon 0.80 5.6 should lend support to housing demand in other markets. 5.5 Car registrations, rhs 0.75 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 Inflationary pressures likely to decline Source: Nordea Markets and Reuters Ecowin Headline inflation is likely to decline over the coming months as the base effects associated with the rise in Lower inflation should stimulate consumption energy and food prices last autumn drop out. In addition, -0.5 5 % y/y % y/y Euro area labour markets are likely to weaken once more. 0.0 4 Both the tightening of fiscal policy in several member 0.5 Retail sales, rhs 3 states, which are likely to involve significant 1.0 2 redundancies in the public sector, and the sharp 1.5 1 slowdown in activity suggest that unemployment could 2.0 0 soon start to rise again. Here, it should not be forgotten that labour markets held up relatively well in Germany 2.5 -1 and other core member states during the Great Recession 3.0 HICP inflation, -2 reversed axis, 6M lead in 2008, and this is likely to repeat itself even though 3.5 -3 growth will slow to a crawl. Nevertheless, there is likely 4.0 -4 to be very limited pressure for higher wages, which could 96 98 99 00 01 02 03 04 05 06 07 08 09 10 11 otherwise push up underlying inflation. Source: Nordea Markets and Reuters Ecowin The ECB likely to stay put until 2013 Declining equities likely to weigh on investments Even though the ECB has so far indicated that it was 80 % y/y % y/y 10.0 Investments, rhs concerned about upside risks to inflation, the sharp slow- 60 7.5 ing of growth should cause the ECB to put further rate 5.0 40 hikes on hold. In addition, the resurgence of stress in Eu- 2.5 ro-area money markets, could lead the ECB to introduce 20 0.0 additional liquidity measures, which will ensure that -2.5 0 EONIA rates continue to trade well below the refi-rate. -5.0 Only at the beginning of 2013, do we expect economic -20 -7.5 activity to have revived enough for the ECB to hike in- -40 Euro Stoxx 50, -10.0 terest rates again, and even then we only expect a modest advanced 6M -60 -12.5 hike in rates to 2.00% 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Nordea Markets and Reuters Ecowin Anders Matzen [email protected] +45 3333 3318 19 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 19. ■ United Kingdom Restoration keeps growth on short leash The UK economy is in the midst of a major transition. In Deep public budget cuts the wake of the crisis the government has launched an 140 GBP bn Fiscal consolidation plan % of GDP 12 ambitious restoration plan to ensure public budget bal- 120 Public sector net borrowing, rhs 11 10 ance by 2015. The restoration is intended to be 3:1 in fa- 30 100 9 vour of public spending cuts, with the increase in income Tax increases 30 8 mainly coming from the VAT hike on 1 January 2011. 80 7 The massive tightening has paid off as the UK so far has 29 6 60 withstood the upward pressure on government yields Spending cuts 23 95 5 faced by many other countries. 40 80 4 20 59 3 20 38 The price of the deep public budget cuts has been a very 3.8 22 2 5,5 weak upswing. Consumer spending is under particular 0 1 09 10 11 12 13 14 15 pressure due to negative real wages, a beleaguered hous- ing market and the ongoing public budget slashes. How- Source: Nordea Markets and Reuters Ecowin ever, we believe that towards the end of our forecast pe- Growth under pressure riod the UK will begin to reap the benefits in step with 105 105 consumer spending accelerating and the pressure from Index 104 2007=100 Index 2007=100 104 the public budget cuts starting to ease. 103 Germany 103 102 102 Despite major internal strife the Bank of England (BoE) 101 USA 101 100 100 has maintained a very lenient monetary policy – although 99 99 consumer prices have surged and are currently rising at 98 98 twice the pace of the official 2% target. In coming 97 UK 97 months inflation will likely stay at a very high level, but 96 96 95 95 into 2012 we expect it to drop again. Meanwhile, the low 94 94 capacity utilisation will put heavy downward pressure on 93 93 prices and wages, solidly anchoring the inflation outlook 05 06 07 08 09 10 11 medium term. Source: Nordea Markets and Reuters Ecowin Against this background, we expect the BoE to leave the High inflation, but no rate hikes policy rate unchanged until end-2012. It is still uncertain 6.0 6.0 % y/y % y/y whether the existing asset purchasing programme will need to be extended. In our baseline scenario the BoE 5.0 CPI 5.0 will not extend the current programme, but if the finan- 4.0 4.0 cial market turmoil persists, it may be necessary during the autumn – but so far the gun powder is kept dry. 3.0 3.0 BoE target 2.0 2.0 Jan Størup Nielsen [email protected] +45 3333 3171 1.0 1.0 Core CPI (ex. energy and unprocessed food) 0.0 0.0 00 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin United Kingdom: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (GBPbn) 2009 2010 2011E 2012E 2013E Private consumption 928,0 -3,2 0,7 -0,5 1,5 2,5 Government consumption 314,0 1,0 1,0 0,1 -1,0 -0,6 Fixed investment 240,4 -15,4 3,7 0,2 4,3 4,1 Stockbuilding* 0,3 -1,2 1,5 -0,1 0,0 0,0 Exports 422,9 -10,1 5,2 7,5 6,2 6,2 Imports 460,7 -11,9 8,8 1,5 3,3 4,3 GDP -4,9 1,4 1,2 2,1 2,6 Nominal GDP (GBPbn) 1445,6 1395,0 1455,4 1530,7 1606,1 1676,2 Unemployment rate, % 5,7 7,6 7,9 8,1 8,0 7,7 Consumer prices, % y/y 3,6 2,2 3,3 4,5 2,5 2,0 Current account, % of GDP -1,6 -1,7 -2,5 -2,0 -1,5 -1,5 General govt budget balance, % of GDP -5,0 -11,4 -10,4 -8,5 -6,5 -4,5 Gross public debt, % of GDP 54,4 69,6 80,0 85,0 88,0 90,0 * Contribution to GDP growth (% points) 20 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 20. ■ Japan Recovering from earthquake, new challenges ahead The economy is recovering rapidly from the earthquake GDP growth back in positive territory next year and this rebound will continue the rest of the year. With 40 Index Reuters Tankan % y/y 7.5 30 most production facilities up and running again and few- 5.0 20 er electricity supply problems, the negative effect from 10 2.5 Japan on the rest of the world via supply-chain problems 0 GDP, rhs should very soon fade. And Japanese industrial produc- -10 0.0 tion will again be driven by demand and not supply. -20 -30 -2.5 -40 Unfortunately, the outlook for Japanese exports has be- -50 -5.0 come bleaker in line with the worsened global outlook. -60 -7.5 Furthermore, the prospects of unchanged interest rates -70 for several years in the US have postponed the expecta- -80 -10.0 04 05 06 07 08 09 10 11 tions for JPY weakening, and the record strong JPY erodes exporters’ competitiveness. Exports to Japan’s Source: Nordea Markets and Reuters Ecowin Strong JPY poses a serious risk for exporters biggest export market, China, could, however, gain from 110 125 CNY appreciation as well as from new Chinese stimuli. Index JPY 1990=100 120 120 Effective exchange rate 115 Private consumption too is rebounding strongly from the 130 (reversed axis) 110 depressed days in the aftermath of the disaster. However, 105 140 private consumption growth will be subdued again in USD/JPY, rhs 100 2012 and 2013 as households most likely will be hit by 150 Stronger 95 various tax increases earmarked to finance earthquake JPY 90 160 reconstruction costs. The extent of these tax increases is, 85 however, yet unknown as politicians have failed to reach 170 80 an agreement on this matter. 180 Forecast 75 05 06 07 08 09 10 11 12 13 Political deadlock is also to blame for the delay of the Source: Nordea Markets and Reuters Ecowin passage of the third supplementary reconstruction budg- Private consumption has rebounded et. Therefore, the boost to economic growth from recon- 5.0 5.0 % y/y % y/y Private struction-related public spending and investment has consumption been postponed too. It should, however, kick in during 2.5 2.5 2012, thereby alleviating somewhat the negative devel- 0.0 0.0 opments in exports and private consumption. -2.5 -2.5 We expect the authorities to continue their fight against -5.0 -5.0 the strong JPY both via direct interventions and quantita- tive easing. This should prevent excessive JPY strength- -7.5 Retail sales, rhs -7.5 ening. Meaningful weakening of the JPY versus the USD is not to be expected until in 2013, as mentioned above. -10.0 -10.0 05 06 07 08 09 10 11 Bjarke Roed-Frederiksen Source: Nordea Markets and Reuters Ecowin [email protected] +45 3333 5607 Japan: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (JPYbn) 2009 2010 2011E 2012E 2013E Private consumption 291,595.7 -1.9 1.8 -0.7 1.0 0.8 Government consumption 93,242.7 3.0 2.2 2.1 1.0 0.5 Gross fixed capital formation 116,475.2 -11.7 -0.2 2.0 5.0 2.0 Stockbuilding* 2328.6 -1.4 0.6 0.0 0.1 0.0 Exports 88,493.7 -23.9 23.9 1.0 7.5 5.0 Imports 87,758.1 -15.3 9.8 5.5 4.0 4.0 GDP -6.3 4.0 -0.2 2.5 1.2 Nominal GDP (JPYbn) 504,377.6 470,936.6 479,172.5 474,860.3 485,743.4 492,921.5 Unemployment rate, % 5.1 5.1 4.8 4.4 5.0 Consumer prices, % y/y -1.3 -0.7 -0.2 0.3 0.8 Current account, % of GDP 2.8 3.6 2.3 2.9 3.2 General government budget balance, % of GDP -7.1 -7.7 -10.0 -8.0 -7.0 * Contribution to GDP growth (% points) 21 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 21. ■ Switzerland Strong currency threatens growth Since mid-2009 the Swiss economy has experienced a Business confidence loses momentum strong economic boom driven by domestic demand and 65 Index Index 2.5 significant expansion in export markets. The growing 60 KOF, Switerland, rhs 2.0 demand has also increased the pressure on production 1.5 55 factors. Since 2010 unemployment has been on a down- 1.0 trend and capacity utilisation in the manufacturing sector 50 0.5 is back above the historical average. ISM, USA PMI, Euro Area 45 0.0 -0.5 The strong economic headway, a large current account 40 -1.0 surplus and solid public finances have once again made 35 -1.5 Switzerland one of the most sought-after safe-haven countries during the sovereign debt crisis. Moreover, 30 -2.0 06 07 08 09 10 11 considerable winding-up of CHF funding has led to a massive strengthening of the CHF, which adjusted for in- Source: Nordea Markets and Reuters Ecowin flation has appreciated by more than 15% over the past Monetary conditions have tightened sharply year vs major trading partners. 5 % % 5 Monetary Condition Index 4 4 However, despite the sharp tightening of monetary condi- tions the export sector has performed surprisingly well. 3 3 The key reasons are that Swiss exports are concentrated 2 2 in sectors with low price sensitivity (such as pharmaceu- 1 Tighter 1 ticals and high-tech equipment) and that the companies 0 0 have trimmed their profit margins. However, we think that they have now reached the pain threshold and look -1 -1 for a marked slowdown in exports in coming quarters. -2 -2 With exports accounting for more than 50%, this will put -3 -3 heavy downward pressure on Swiss economic growth 90 92 94 96 98 00 02 04 06 08 10 over the forecast period. Source: Nordea Markets and Reuters Ecowin The Swiss central bank has repeatedly warned against the Still very low inflation effects of the strong CHF. At the same time, the verbal 3.5 %, y/y CPI-inflation %, y/y 3.5 intervention has been followed by a massive liquidity in- 3.0 3.0 jection in the Swiss money market to slow the currency 2.5 2.5 CB target strengthening. Despite the central bank’s efforts, results 2.0 2.0 have been limited so far and we believe that a sustained 1.5 1.5 stabilisation cannot be achieved until the central bank 1.0 1.0 acts on the demand side, intervening directly against the 0.5 0.5 currency. It could supplement such action with a specific 0.0 Core 0.0 temporary currency target versus the EUR. -0.5 -0.5 Headline -1.0 -1.0 Jan Størup Nielsen -1.5 -1.5 [email protected] +45 3333 3171 00 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin Switzerland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (CHFbn) 2009 2010 2011E 2012E 2013E Private consumption 308.7 1.4 1.7 1.4 1.8 1.9 Government consumption 59.3 3.3 -1.6 1.1 0.8 0.5 Fixed investment 115.1 -4.9 4.6 4.4 2.7 3.2 Stockbuilding* -0.8 -0.9 -1.3 0.7 0.0 0.0 Exports 307.3 -8.6 9.2 3.5 2.3 4.0 Imports 245.6 -5.5 6.6 1.7 1.2 2.8 GDP -1.9 2.6 2.1 1.8 2.3 Nominal GDP (CHFbn) 545.0 535.6 546.6 559.2 571.5 588.6 Unemployment rate, % 2.5 3.7 3.8 3.5 3.5 3.3 Consumer prices, % y/y 3.6 0.3 0.5 0.2 0.4 0.7 Current account, % of GDP 2.3 11.5 14.2 13.0 11.0 9.0 General govt budget balance, % of GDP 2.0 0.8 0.2 0.2 0.6 0.7 Gross public debt, % of GDP 54.9 54.9 55.0 53.0 52.0 50.0 * Contribution to GDP growth (% points) 22 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 22. ■ Poland Elections coming up • Bleaker and more uncertain outlook General elections 9 October One of the big themes for this autumn is general elections • General elections 9 October scheduled for 9 October. Polls currently point to a re- • Government debt less of a risk, or? election of the incumbent government, ie a government led by the centre-right Civic Platform (PO) and support- • Monetary policy on stand-by ed by the Peasant’s Party (PSL). The risk of a surprise result should not be underestimated given Poland’s re- Bleaker and more uncertain outlook cent election history. Financial markets prefer a PO-led We have revised down our Polish growth forecast some- government with the PO as strong as possible. We would what even though nothing much has changed in this not expect major changes in the economic policy should economy, at least not yet. The global economic outlook the main opposition party, Law and Justice (PiS), be able is uncertain, at best. The world’s largest economies to form the next government. However, the potentially slowed significantly in the second quarter of the year and harder line in foreign policy, especially towards Russia the more high-frequent data such as the PMI manufactur- and Germany, of a PiS-led government could have nega- ing activity indicators point to even further slowdown in tive effects on the investor climate. the third quarter. It remains to be seen if the recent mar- ket turmoil will have additional adverse effects on the Euro-area membership is obviously not a major issue at global economy in the quarters to come, but the risks to the moment given the state of most Euro-area economies. growth are on the downside. However, it is worth mentioning that should the general elections fail to provide a qualified majority in favour of We now expect Polish growth around 3.5% this year and changing the constitution to allow for Euro-area mem- in 2012, while growth in 2013 is expected to be around bership, it will mean that the entry date is postponed at 4%. For the reasons mentioned above, we expect a slow- least a year or two compared to the currently perceived down in exports in the coming quarters. The domestic (though not official) target of 2015. economy is also likely to show slightly weaker momen- tum, as companies may postpone investment decisions Government debt less of a risk, or? due to the uncertain outlook for demand and tighter fi- Another big theme is government debt. Not because gov- nancing conditions, and consumers may decide to post- ernment debt at 50-55% of GDP is detrimental in any pone spending because of general uncertainty and the way, but because of three self-imposed prudential debt rapid strengthening of the CHF, which is important given limits that – when breached – restrict fiscal policy more the widespread use of this currency for mortgage loans. and more. Earlier this year, we argued that the second limit of 55% of GDP could be breached this year, which Poland was never in recession during the global recession would require a balanced budget in 2013 and onwards. at the end of 2008 and the beginning of 2009. The factors However, so far, the budget deficit has been somewhat that kept the Polish economy running back then are to lower than expected and revenues coming from privatisa- some extent still in place and make us believe that an tions and from dividends from state-owned companies outright recession is somewhat unlikely even if the glob- and the central bank have been higher than expected. al economy slows more than we currently expect. The Therefore, this risk is seemingly lower now, at least for main differences now compared with the latest global re- this year. cession are that the Polish domestic economy is weaker and that the room for fiscal policy responses is limited. Or is it? 27% of public debt was in foreign currency at Poland: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (PLNbn) 2009 2010 2011E 2012E 2013E Private consumption 774 2.1 3.2 2.9 1.8 2.7 Government consumption 236 2.0 4.0 2.0 2.0 1.0 Gross fixed capital formation 284 -1.0 -1.0 4.1 4.2 6.9 Exports 509 -8.5 10.1 4.3 2.1 5.3 Imports 560 -12.5 11.6 5.3 3.0 5.8 GDP 1.6 3.8 3.3 3.4 4.0 Nominal GDP (PLNbn) 1,275 1,343 1,415 1,515 1,605 1,712 Unemployment rate, % 11.0 12.1 12.0 11.2 11.0 Consumer prices, % y/y 3.8 2.5 4.2 2.4 2.6 Current account, % of GDP -3.9 -4.5 -2.9 -3.3 -3.7 General government budget balance, % of GDP -7.3 -7.9 -5.5 -4.0 -3.0 23 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 23. ■ Poland the end of the first quarter 2010, mostly in EUR. That Moderate recovery so far means that the recent weakening of the PLN will increase 2.5 % q/q GDP growth, sa Index 60.0 the PLN value of FX denominated government debt. The 2.0 57.5 55.0 Ministry of Finance (MoF) started to exchange EUR re- 1.5 52.5 ceipts from EU funds in the markets to support the PLN 1.0 50.0 and hence to keep debt below the second prudential debt 0.5 47.5 limit already last year, but the amount of EUR sold will 0.0 45.0 be much bigger this year. We expect these EUR conver- 42.5 -0.5 sions to continue and to be stepped up towards year-end, 40.0 -1.0 but renewed market turmoil and a consequent renewed PMI, manufacturing, rhs 37.5 -1.5 weakening of the PLN is a clear risk. 35.0 -2.0 32.5 00 01 02 03 04 05 06 07 08 09 10 CHF concerns Households’ CHF loans are likely to be a drag on growth Source: Nordea Markets and Reuters Ecowin this year, as the CHF has strengthened almost 15% Government debt near 2nd prudential debt limit measured in PLN so far. Polish banks’ still report very 70 70 limited amounts of non-performing CHF loans, but more % of GDP Public debt % of GDP Constitutional limit may come if the CHF remains at current levels or even 60 2 prudential limit 60 strengthens further. Moreover, consumers’ debt servicing 50 1 prudential limit 50 Debt in other FX costs have risen and hence consumers have less money to USD debt spend on other things. At the end of June, 60% of mort- 40 EUR debt 40 gage loans were in foreign currency and probably mostly 30 30 in CHF. This corresponds to around 12% of GDP. 20 Domestic debt 20 Monetary policy on stand-by 10 10 The National Bank of Poland (NBP) hiked by 100 bp in 0 0 the first half of the year before signalling a pause just be- 03 04 05 06 07 08 09 10 fore the summer. The recent market turmoil changes the Source: Nordea Markets and Reuters Ecowin situation for the NBP, though. Headline inflation will fall during the second half of this year due to base effects Housing loans from last year’s significant increase in food and energy 110 110 % y/y % prices and risks to core inflation, ie inflation excluding 100 100 food and energy prices, are now skewed to the downside 90 90 in the medium term given the bleaker and more uncertain 80 Share of loans in domestic currency 80 economic outlook. The NBP should now be more confi- 70 Housing loans 70 60 60 dent that inflation will move gradually down to the infla- 50 50 tion target of 2.5% +/-1% point. 40 40 30 30 Thus, we have changed our forecast and now expect the 20 20 next interest rate hike in the autumn of 2012. The next 10 10 move is still most likely to be a hike, in our view. How- 0 0 ever, we would not be surprised to see a rate cut in case 00 01 02 03 04 05 06 07 08 09 10 11 the global outlook deteriorates further in the near term. Source: Nordea Markets and Reuters Ecowin Indeed, the NBP has kept a rather dovish tone during the year even when it has seen it necessary to hike interest NBP on hold rates because of high inflation. 7 7 % % 6 6 PLN sideways NBP's key rate 5 5 We now see the PLN closer to 4.00 at year-end. At that rate the MoF would probably be confident that debt-to- 4 4 GDP will remain below 55%. Further PLN weakening is 3 3 likely in the near term, if risk aversion spikes again. Inflation However, closer to the year-end market participants will 2 2 acknowledge that the MoF and possibly even the central 1 1 bank will be ready to go far to support the PLN 0 0 04 05 06 07 08 09 10 11 Anders Svendsen Source: Nordea Markets and Reuters Ecowin [email protected] +45 3333 3951 24 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 24. ■ Russia Comfortable consumers • Consumers in the driver’s seat, investment lagging yet, as average lending rates have dropped to below 9% in the past quarter. • Credit growth accelerates • Core inflation to concern the central bank Some tax reforms should also support business. For ex- ample, social contribution taxes were raised from 26% to As expected, consumers continued to drive the economy 34% this year, but the government has acknowledged in the recent quarter, as judged from the strong retail that this was a wrong move, promising to lower taxes sales growth. This is hardly surprising, given the latest again. Another factor which may spur investment activity developments. Unemployment fell to just above 6%, is the certainty over the tax reform in the oil sector. The down from over 9% at the peak of the crisis. Growth in government plans to introduce the “66/60” tax scheme, savings, as seen from deposit accumulation, has slowed which will help promote oil production and incentivize down, meaning that consumers now opt for more spend- production of higher quality products, and the final de- ing. Meanwhile, wage growth and household credit tails of the plan are to be released before long. growth have accelerated, which should underpin con- sumption in the months ahead. Lastly, one should not underestimate the importance of the uncertainty over the upcoming parliamentary and Consumers may be relieved now that headline inflation presidential elections. Once it is resolved and the frame- has peaked – we expect it to moderate towards 7.5% by work for rules in the coming few years is thus more clear, the end of 2011. Food prices, which have been the key both domestic and foreign businesses will likely have culprit of high inflation since last year, will keep deceler- more courage to invest in Russia. ating in y/y terms. Food constitutes nearly 40% of the consumer basket in Russia, thus the recent developments Credit growth accelerates will help consumers to regain some of the purchasing Credit growth has clearly accelerated since the start of power lost after the food price shock last year. As a re- the year. The monthly rates of household credit growth sult, food retail sales, which lagged the rest of retail sales now correspond to nearly 40% annualised, as corporate recently, will also gain momentum in H2, which will be credit growth also remains robust at around 20% annual- seen from yet stronger consumption numbers. ised. Fixed capital investment – tentative recovery As a reflection of the credit growth, money supply (M2) Fixed capital investment, which started the year dismally, growth has picked up again in y/y terms. More im- undershooting our expectations, recovered somewhat in portantly, the money multiplier (M2 divided by M0) has Q2, yet still remained below our estimates. accelerated from the start of the year, up from 0% y/y in January to over 15% in the past few months. We believe Looking at higher frequency indicators, it seems that in- it is part of the credit growth story, as the banks start vestment has room to recover. Imports of machinery transferring their excess reserves (M0) to finance credit goods and production of investment goods have per- growth – and this is expected to continue as domestic formed, hinting that investment demand is there. Indus- demand gradually recovers. trial production is back in the 5-6% y/y growth range, showing solid recovery. We believe fixed capital invest- The banking sector is strengthening markedly, among ment will return to growth above 8% y/y in H2, as the other things by the gradually decreasing non-performing relevant factors develop favourably. First of all, funds are loan share. It will further help the credit flow improve, still cheap, as the recent monetary policy tightening has supporting the real sector. not translated into higher interest rates in the economy Russia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (RUBbn) 2009 2010 2011E 2012E 2013E Private consumption 20,184 -4.8 3.0 5.7 6.3 6.5 Government consumption 7,360 0.2 1.4 1.6 1.8 1.8 Fixed investment 9,201 -14.4 6.1 7.0 7.5 9.0 Exports 13,074 -4.7 7.1 5.5 5.8 6.0 Imports 9,111 -30.4 25.6 17.0 14.0 15.5 GDP -7.8 4.0 4.9 5.3 5.6 Nominal GDP (RUBbn) 41,277 39,064 45,300 51,559 58,363.4 65,945.9 Unemployment rate, % 8.4 7.5 6.5 5.8 5.5 Consumer prices, % y/y 11.7 6.9 8.5 7.5 7.0 Current account, % of GDP 4.0 4.8 4.0 3.5 3.2 Central govt budget balance, % of GDP -5.9 -4.0 -0.7 -0.5 0.0 25 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 25. ■ Russia Monetary policy tightening to resume Retail sales growth reaccelerates The deceleration of food inflation has taken the heat off 20 % y/y % y/y 20 Nominal retail sales and relieved the CBR. The CBR lifted deposit rates for 15 15 the fourth time before summer and signalled that the rates are appropriate for the “coming months”. 10 10 The CBR maintains that the goal for 2011 is to keep in- 5 5 Real retail sales flation within 6-7% and the government expects to re- 0 0 duce inflation to 4-5% by 2014. These are in our view ambitious targets, requiring more action from the CBR. -5 -5 Yet from the recent comments from policymakers it ap- pears that they are fully committed to this target. -10 -10 Jul Oct Jan Apr Jul Oct Jan Apr Jul 09 10 11 Money supply growth has reaccelerated and money mul- Source: Nordea Markets and Reuters Ecowin tiplier growth has picked up, which should concern the Money multiplier growth accelerates CBR going forward. Given the rising core inflation pres- 35 70 sures, resulting from tightening in the labour market, a % y/y Money supply % y/y 30 60 decreasing savings rate and lower credit growth, we be- M0, rhs 25 50 lieve the tightening of monetary policy is not finished Money multiplier 20 yet. We expect the CBR will resume rate hikes in H2. 40 15 Raising the deposit rates will also help to narrow the op- M2, rhs 30 10 erating interest rate corridor to make the monetary policy 20 5 transmission mechanism more effective. 0 10 -5 0 RUB risks primarily global -10 -10 The RUB reacted negatively to a large sharp fall in oil -15 -20 prices, yet this was mainly due to external factors – the 06 07 08 09 10 11 global spike in risk aversion. The CBR interventions Source: Nordea Markets and Reuters Ecowin have decreased to up to RUB 300m/day, we estimate, which is not enough to call significant. The CBR wid- Monetary policy tightening paused, but not finished ened the RUB floating band from 4 RUB to 5 RUB in 10 % % 10 March 2011, and if the RUB strengthening continues we 9 9 Refinancing rate expect a further widening. 8 8 Excess domestic liquidity, which facilitated capital out- 7 7 flows, is gradually decreasing. Capital outflows have re- 6 6 ceded in recent months and inflows may turn out positive 5 5 Repo rate 1D in H2, which will support the rouble. The reason behind 4 4 the reduction of domestic liquidity, and hence outflows, 3 MosPRIME 3M 3 is the increase in RUB demand domestically, as the 2 Depo rate O/N 2 banks choose to provide credit to the domestic economy 1 1 over directing excess liquidity to the foreign assets. Jan May Jul Sep Nov Jan Mar May Jul 10 11 The CBR has publicly claimed many times that it priori- Source: Nordea Markets and Reuters Ecowin tises the inflation goal over keeping the rouble from strengthening. Thus, we believe that the CBR will not Stronger RUB on the horizon 43 43 stand in the way of rouble strengthening, giving it more Basket Basket flexibility. We expect a much stronger rouble, based on 41 41 our oil forecast of USD 110/bbl toward the end of the 39 39 year. The key risk factors are external – such as a further 37 37 slowdown in global growth or a shock to the financial 35 35 system. 33 33 31 31 RUB basket 29 29 (55% USD and 45% EUR) Aurelija Augulytė 27 27 [email protected] +45 3333 6437 Forecast 25 25 08 09 10 11 12 13 Source: Nordea Markets and Reuters Ecowin 26 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 26. ■ Estonia Recovery exceeds expectations The pace of the recovery during the first half of the year Recovery spreading slowly to domestic economy has exceeded expectations, reaching over 8% y/y on av- erage. Compared to the previous quarter, growth has been strong as well, confirming a robust upward trend. The main factor behind the Estonian tiger has been vig- orous export growth supporting especially the manufac- turing sector. Despite signs of a slowdown in global manufacturing and the US, the growth outlook for Esto- nia’s main trade partners – the Nordics, Russia and the Baltics – has remained decent. However, the economy is not immune to a continued and more wide-spread global slowdown, and this as well as an elevated inflation rate pose the main two risks going forward. Encouragingly, domestic demand is gaining increasing Industrial production booming, retail sales lagging traction. Private consumption is expected to stage a ro- 130 Index 155 bust recovery this year despite the elevated inflation and Index 125 2005=100 2005=100 145 unemployment rate. Inflation, led by food and energy 120 prices, is expected to ease from its recent highs as global 115 135 price pressure abates, thus improving the outlook for 110 Industrial production 125 consumption. In addition, consumer confidence has re- 105 115 covered, and consumers view for instance the future gen- 100 105 eral economic situation fairly positively. On the other 95 90 hand, consumers’ cautiousness is reflected in the will- 95 85 ingness to make major purchases. Growing consumption Retail sales, rhs (sa) 85 80 will boost imports going forward, curbing growth and 75 75 pushing the current account towards a deficit. 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin Confidence has strengthened on the vigorous recovery and the euro adoption. This has been reflected in further Consumer sentiment already at decent levels narrowing in the CDS spread to Germany and an im- 5 Index Consumer confidence Index 40 proved credit rating, with Standard & Poor’s latest move 0 30 raising Estonia to AA-. However, challenges remain, as -5 Major purchases over next 12M 20 especially structural unemployment remains high and -10 GDP per capita levels are still clearly lagging other Euro- -15 10 area countries. Higher growth can also be seen as an op- -20 0 portunity to invest into further improvement in the labour -25 -10 market and reach a budget balance faster. -30 General economic situation over next 12M, rhs -20 -35 -30 Annika Lindblad -40 [email protected] + 358 9 1655 9940 -45 -40 00 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin Tönu Palm [email protected] + 372 628 3345 Estonia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (EURbn) 2009 2010 2011E 2012E 2013E Private consumption 8.9 -18.4 -1.9 5.1 4.2 5.0 Government consumption 3.1 0.0 -2.1 2.0 1.5 1.8 Fixed investment 4.6 -32.9 -9.2 16.0 9.0 11.0 Exports 11.5 -18.7 21.7 25.0 6.1 6.6 Imports 12.2 -32.6 21.0 25.7 6.5 7.2 GDP -13.9 3.1 7.5 3.6 4.8 Nominal GDP (EURbn) 16.1 13.9 14.5 16.3 17.4 18.9 Unemployment rate, % 13.8 16.9 12.8 10.5 8.9 Consumer prices, % y/y -0.1 3.0 5.0 3.0 3.9 Current account, % of GDP 4.5 2.8 0.1 -0.5 -1.2 General govt budget balance, % of GDP -1.7 0.1 -0.3 -1.5 0.0 27 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 27. ■ Latvia Upward trend still intact The economy has continued to climb, as reflected in the Uneven and fragile recovery in consumption strong GDP growth for Q2. The gradual upward trend is 10 Index % y/y 30 expected to largely continue during the next couple of 0 Retail sales, rhs 20 years, although stalling global growth would adversely -10 10 affect Latvian export demand. Exports have continued to GDP, rhs develop favourably, clearly exceeding the 2008 highs al- -20 0 ready. The main risk to the economy is nevertheless its Consumer confidence -30 -10 export-dependence – a sharp slowdown in world trade and especially growth in its main trade partners could -40 -20 trigger tougher times for the economy. However, we ex- -50 -30 pect Latvia’s most important trade partners to continue performing fairly well. -60 -40 02 03 04 05 06 07 08 09 10 Private consumption, on the other hand, is still expanding Source: Nordea Markets and Reuters Ecowin only modestly. The continued improvement in consumer Easing food prices bringing relief to inflation confidence does, however, imply improving spending. 35 35 This is also reflected in the consumer confidence index % y/y % y/y 30 30 for major purchases, which points towards higher spend- 25 25 ing a year ahead. Strengthening domestic demand is also Wages 20 20 expected to boost imports, thus pushing the trade balance 15 15 even deeper into negative territory. Spending growth is 10 Food 10 currently weighed down by the only gradually improving 5 5 labour markets and the elevated inflation. The abating 0 CPI 0 global food and energy prices should, however, help de- -5 -5 celerate inflation in the second half of the year, thus im- -10 -10 proving the purchasing power of consumers. -15 -15 00 01 02 03 04 05 06 07 08 09 10 11 The main event this autumn is the parliamentary election Source: Nordea Markets and Reuters Ecowin in mid-September, triggered by the dissolving of the par- liament as a result of the referendum in July. The election Consumers increasingly optimistic on spending increases the risks for the 2012 budget and the continued 30 Index Major purchases Index 30 fiscal consolidation, but overall the tight fiscal stance and 20 20 the work towards a lower budget deficit should continue. Over the next 12M 10 10 The international loan programme will end after this year, but this is not expected to be of any major signifi- 0 0 cance, since Latvia managed a successful return to the in- -10 -10 ternational markets in June with a dollar-nominated Eu- -20 -20 At present robond with a lower-than-expected yield. -30 -30 -40 -40 Annika Lindblad Note: historical averages from 2002 [email protected] + 358 9 1655 9940 -50 -50 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin Andris Strazds [email protected] + 371 67 005 252 Latvia: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (LVLmn) 2009 2010 2011E 2012E 2013E Private consumption 10,181 -24.1 -0.1 4.0 3.9 5.0 Government consumption 3,170 -9.2 -11.0 -0.1 -0.2 1.0 Fixed investment 4,748 -37.3 -19.5 19.5 8.0 9.3 Exports 6,931 -14.1 10.1 11.0 5.5 6.2 Imports 9,141 -33.5 8.4 12.8 5.9 7.0 GDP -18.0 -0.3 4.6 3.6 4.9 Nominal GDP (LVLmn) 16,188 13,083 12,736 13,895 14,880 16,175 Unemployment rate, % 17.1 18.7 16.0 14.3 12.8 Consumer prices, % y/y 3.6 -1.0 4.5 3.3 3.8 Current account, % of GDP 8.6 3.6 0.2 -0.2 -1.0 General govt budget balance, % of GDP -9.7 -7.7 -4.8 -2.6 -2.3 28 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 28. ■ Lithuania Growth continues despite global uncertainties Growth has continued as all key economic indicators Economy recovering but 2008 levels still far away have developed positively. The rising trend is seen con- 21 LTLbn GDP % y/y 16 tinuing over the coming quarters despite recent fears of a 20 12 global slowdown, which at the moment is only expected 19 8 to have a limited effect on Lithuanian growth through in- 18 y/y, rhs 4 creased uncertainty in export demand. Continued quarter- 17 0 ly growth is, however, supported by the positive econom- 16 -4 ic outlook for Lithuania’s main trading partners. 15 -8 14 -12 Especially the industrial sector has continued to benefit Level, sa 13 -16 from strong export demand, but also the domestic econ- omy has begun to gain traction and is expected to post a 12 -20 02 03 04 05 06 07 08 09 10 solid recovery this year. Consequently, overall profitabil- ity of companies has increased substantially with manu- Source: Nordea Markets and Reuters Ecowin facturing and transport sector companies already showing Employment turning gradually to growth pre-crisis profitability levels. Owing to strong foreign 60 ('000) persons 60 demand, capacity utilisation levels of manufacturing 50 ('000) persons 50 companies are rapidly approaching pre-crisis levels. 40 Employment growth, q/q, 40 30 2Q mov. avg. 30 Weighing on consumption is, however, the still fairly 20 20 10 10 modest improvement in the labour market as structural 0 0 unemployment remains high, wage growth is weak and -10 -10 inflation elevated. However, inflation seems to have -20 -20 reached its peak during the summer, and hopes are espe- -30 Unemployment growth, -30 -40 q/q, 2Q mov. avg. -40 cially for further declines in global food and energy pric- -50 -50 es. The slowdown in inflation improves the purchasing -60 -60 power of consumers and could thus give a further boost 04 05 06 07 08 09 10 11 to consumer confidence and consumption. Source: Nordea Markets and Reuters Ecowin The main risk to the recovery remains a global slowdown Inflation peaked in the summer? spreading to Lithuania’s main export partners, as the re- 25 25 % y/y % y/y covery remains export-dependent. In addition, structural 20 20 unemployment in e.g. the construction sector will remain a challenge, as the economy is undergoing structural 15 15 changes by shifting employment from low-cost manufac- 10 10 turing to a growing service sector. A further risk is the Wages high inflation, which not only weighs on spending but is 5 5 Inflation also a risk factor for the plan to adopt the euro in 2014. 0 0 -5 -5 Inflation, food and Annika Lindblad non-alcoholic beverages [email protected] + 358 9 1655 9940 -10 -10 01 02 03 04 05 06 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowin Zygimantas Mauricas [email protected] + 370 5 2657 198 Lithuania: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (LTLmn) 2009 2010 2011E 2012E 2013E Private consumption 73,027 -17.7 -4.5 6.0 4.3 5.0 Government consumption 21,505 -1.9 -3.4 -0.1 1.0 2.0 Fixed investment 28,370 -40.0 0.0 22.0 7.5 9.0 Exports 66,752 -12.7 17.4 12.8 5.7 6.4 Imports 79,922 -28.4 17.9 15.9 6.3 7.0 GDP -14.7 1.3 6.0 3.7 4.8 Nominal GDP (LTLmn) 111,482 91,525 94,461 104,190 111,800 121,415 Unemployment rate, % 13.7 17.8 16.0 13.8 12.2 Consumer prices, % y/y 4.2 1.3 4.3 3.5 3.8 Current account, % of GDP 2.6 1.3 -1.2 -1.8 -2.0 General govt budget balance, % of GDP -9.2 -7.8 -5.0 -2.8 2.4 29 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 29. ■ China Ready to send in the cavalry • Growth is slowing but will likely stabilise soon kicking off infrastructure projects could also come into play again even though the highly profiled high-speed • Stimuli packages and monetary easing on the way rail programme has experienced a serious set-back from • Official public debt only the top of the iceberg the deadly train collision in July. A new stimuli package will, however, be significantly smaller than the CNY • Change of leadership to take centre stage in 2012 4,000bn stimuli from November 2008. Economic growth will continue to slow this year as the If the authorities put action behind their words in the new many monetary policy tightening measures implemented 5-year plan of more balanced growth with more emphasis are kicking in. Also the worsened outlook for advanced on private consumption, stimuli targeting the household economies weighs on China’s export going forward. sector instead of investment should be preferred. However, monetary tightening has most likely come to However, improvements of for instance social security, an end and economic growth should soon stabilise and education and health care take much longer to take effect stay in the 8-9% range throughout the forecast period. than a boost to public investment. Fiscal stimuli will likely be put on the table, especially if the economy falters more dramatically. Inflation remains Monetary easing if needed – rate cuts the last option elevated but will fall gradually going forward, leaving Monetary policy could also be eased if needed, and we room also for monetary easing if needed. expect that to happen early next year. The many reserve requirement hikes could straightforwardly be reversed, China in a favourable position thereby increasing liquidity in the financial system. Also China is entering the current slowdown in a better measures targeted at easing credit conditions for specific position than most advanced economies in the sense that segments such as small and medium-sized enterprises China contrary to the advanced economies does in fact could fairly soon be implemented. still have the possibility to boost its economy via fiscal policy. Furthermore, China is less vulnerable to a Interest rate cuts will only feature on the agenda if the slowdown in advanced economies now than in 2008-09. economy suffers severely because the monetary stance is Firstly, exports as a percentage of GDP is lower now already fairly loose. Despite the five hikes since October than when Lehmann collapsed. Secondly, the plunge in last year, the 1- year lending rate is still lower than before China’s exports during the financial crisis in 2008 was the global financial crisis struck in 2008. And given the exaggerated by dysfunctional trade finance, which should current high inflation, real rates are close to zero. Thus, be avoided this time. Lastly, the external shock in 2008- boosting the amount of credit at the prevailing interest 09 coincided with China’s self-imposed domestic credit rates via higher lending targets and quotas will probably squeeze aimed at cooling down the housing market. This be preferred to cutting rates. time, the construction sector is still thriving as the dampening measures taken in this cycle have had only Dampening the elevated inflation remains a priority for limited effect. the authorities. But inflation seems to have peaked both due to base effects and somewhat slower food price Fiscal stimuli ahead – but less than in 2008 increases. Thus, inflation should not stand in the way for When renewed fiscal stimuli nevertheless prove policy easing. necessary, the authorities have several tools at their disposal. The massive social housing project is already Overall public debt manageable but not negligible ongoing and could fairly easily be scaled up, perhaps Much attention has been drawn to the size of Chinese already late this year. And the well-known tool of public debt and more specifically to the huge hidden debt China: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (CNYbn) 2009 2010 2011E 2012E 2013E Private consumption 11,059 9.2 8.5 9.5 9.8 10.0 Government consumption 4,175 6.1 7.5 9.0 9.5 9.0 Fixed investment 12,808 22.0 11.3 10.0 9.5 9.0 Stockbuilding* 1,024 -0.7 -0.5 0.1 0.0 0.0 Exports 10,990 -9.1 15.8 10.0 9.0 8.0 Imports 8,567 -2.7 12.0 11.0 12.0 11.0 GDP 9.2 10.3 9.1 8.5 8.1 Nominal GDP (CNYbn) 31,490 34,502 39,798 45,529 51,357 57,673 Unemployment rate, % 4.3 4.1 4.1 4.0 4.1 Consumer prices, % y/y -0.7 3.3 5.3 4.3 4.2 Current account, % of GDP 5.9 5.2 4.1 3.6 3.2 General government budget balance, % of GDP -2.3 -1.6 -2.2 -1.9 -2.0 * Contribution to GDP growth (% points) 30 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 30. ■ China of local authorities. A significant chunk of the Economic growth to stabilise in the 8-9% range investments in the 2008 fiscal package was carried out by 16 % y/y GDP % q/q 16 local authorities who set up investment corporations 14 y/y, official 14 which accumulated huge off-balance debt. Recently, the 12 12 publication of several reports (some leaked and some 10 10 published by authorities) has shed some light on the size of this debt, and independent research institutions (for 8 8 instance Dragonomics, China Economic Quarterly, June 6 q/q sa. annualised, 6 2011) estimate the true public debt to amount to around 4 official 4 80% of GDP compared to the official figure for q/q sa. annualised, 2 Nordea estimation 2 government treasury debt of less than 20% of GDP. A Forecast major part of the off-balance debt is likely bad debt, 0 0 05 06 07 08 09 10 11 12 13 which poses a risk for the banking system. Still, most banks are state-owned and China has before successfully Source: Nordea Markets and Reuters Ecowini transferred bad debt from banks to formal government Scale-up of social housing the new boosting tool debt. And with all public debt held by residents, a 15.0 mn units mn units 15.0 conventional public debt crisis seems unlikely. New housing supply 12.5 12.5 Non-commercial housing Change of leadership to take centre stage in 2012 Reclassifcation The fifth generation of leaders since the revolution will 10.0 Social housing 10.0 Commercial housing take over power next year with Hu Jintao stepping down 7.5 7.5 as Party Secretary in late 2012 and as President in March 2013. Also the National People’s Congress, the Central 5.0 5.0 Committee and the Politburo’s Standing Committee will be replaced in late 2012. The new President and the new 2.5 2.5 Secretary of the Communist Party will almost with 0.0 0.0 certainty be the current Vice President Xi Jinping. 00 02 04 06 08 10 12 14 Source: Dragonomics Very little is known about the policy orientation of Xi and the other new leaders. The best indication of future Monetary policy easing should start early next year economic policies is probably the new 5-year plan from 24 24 % % early 2011 which likely was drafted by the incoming 22 22 leadership. As described in more detail in Economic 20 20 18 Reserve requirement 18 Outlook from January 2011, the key objectives of the Big banks 16 16 plan include “...driving economic growth higher via 14 14 domestic demand and achieving a more equal income 12 Small banks 12 7 day distribution.” What is known, however, is that the new 10 1Y lending rate (policy rate) repo rate 10 leadership in general will be better educated, more 8 8 6 6 internationally-oriented (and English-speaking) and have 3M interbank rate 4 4 more bureaucratic experience than their predecessors. 2 (SHIBOR) 2 0 0 Currency appreciation to continue 07 08 09 10 11 Inflation seems to have peaked but will remain elevated Source: Nordea Markets and Reuters Ecowini and likely breach the target also next year. With monetary policy more likely to be eased than tightened Gradual appreciation versus USD to continue due to the external slowdown, renminbi appreciation 8.5 8.5 CNY CNY remains an important tool to dampen inflation. And also 8.0 8.0 the continued efforts to internationalise the renminbi acts USD/CNY in favour of continued renminbi revaluations. Should the 7.5 20% 7.5 current financial turmoil on the other hand escalate into a 7.0 7.0 full-blown crisis with further deterioration of the outlook for China’s export market, the authorities will likely 6.5 6.5% 6.5 bring CNY appreciation to a halt just like they did in 2008 in order to support the export sector. 6.0 6.0 Forecast 5.5 5.5 Bjarke Roed-Frederiksen 04 05 06 07 08 09 10 11 12 13 [email protected] +45 3333 5607 Source: Nordea Markets and Reuters Ecowin 31 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 31. ■ India Authorities in straitjacket India will be hit by the slowdown in the developed econ- Investment dampened by higher interest rates omies, though less so than many other countries thanks 26 % y/y % y/y 26 24 24 to the economy’s relative closedness. But unlike last time 22 22 Investment the global crisis hit back in 2008, the domestic economy 20 20 is this time unfortunately already slowing. Private sector 18 18 16 16 investment is severely hurt by the high interest rates fol- 14 14 lowing the many rate hikes from the Reserve Bank of In- 12 12 GDP dia. And we have not even yet seen the full effect of the 10 10 8 8 aggressive hikes in the first half of 2011. More bad news 6 6 comes from private consumption, which despite high 4 Private consumption 4 2 2 wage increases for urban workers and a good harvest in 0 0 rural areas will be dampened as persistently high infla- -2 -2 tion erodes households’ purchasing power. 05 06 07 08 09 10 11 Private consumption growth will also slow Public investment projects, which could mitigate the 11 % y/y Index 70 overall slowdown, have become more difficult to get 10 Private through due to renewed focus on the bad shape of public consumption 60 9 finances. Even though the lower global energy prices re- duce the bill for subsidising end-user energy and fertiliser 8 50 prices, the public deficit (state + central government: 8% 7 40 of GDP) and public debt (70% of GDP) are close to the 6 levels seen in troubled southern Europe. The good thing 5 30 is that most debt is domestically held and that the still 4 Business confidence, 20 high GDP growth allows India to run a bigger deficit 3 employees, rhs without increasing the debt to GDP ratio. 2 10 05 06 07 08 09 10 11 With the politicians in a straitjacket, one could hope for Source: Nordea Markets and Reuters Ecowin the Reserve Bank of India to ease the slowdown. Howev- er, the chronically high inflation will have to fall before High inflation prevents rate cuts monetary policy can be eased. And even though global 18 % y/y % y/y 18 commodity prices are falling, domestic food price infla- 16 CPI, all India, 16 industrial worker tion should remain high due to demand pressures result- 14 14 ing from the improved living standards of part of the 12 12 population that have structurally changed the consump- 10 10 tion pattern. 8 8 6 6 Although the authorities have fewer tools at their dispos- 4 4 al to ease the current slowdown, the underlying long- 2 Wholesale price inflation 2 term trend remains encouraging, among other factors due 0 0 to favourable demographics and the big pool of labour. -2 -2 06 07 08 09 10 11 Economic growth should therefore stay close to 8% in the forecast period. Source: Nordea Markets and Reuters Ecowin Bjarke Roed-Frederiksen [email protected] +45 3333 5607 India: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (INRbn) 2009 2010 2011E 2012E 2013E Private consumption 32,578 7.3 8.3 7.0 7.5 8.0 Government consumption 6,164 16.4 4.8 6.0 6.5 6.5 Fixed investment 17,888 7.3 8.6 10.0 12.0 11.0 Exports 13,110 -9.0 14.0 14.0 12.0 13.0 Imports 16,140 -7.9 11.6 11.0 12.0 12.0 GDP 9.1 8.8 7.7 8.0 8.2 Nominal GDP (INRbn) 55,826 65,503 78,756 91,347 103,657 118,340 Wholesale prices, % y/y 2.4 9.6 8.3 5.5 6.0 Current account, % of GDP -1.9 -3.0 -3.0 -2.5 -3.5 General government budget balance, % of GDP -6.1 -5.0 -5.5 -5.0 -4.5 32 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 32. ■ Brazil Better foreign financing mix Domestic private consumption growth remains high, Inflation topped the comfort limits supported by still robust credit growth of around 20% 8 % y/y % y/y 8 y/y. Recently introduced measures (for instance a dou- 7 7 bling of the tax on consumer credits) should slow down 6 6 credit growth going forward, however. As expected, in- 5 5 flation has breached the upper tolerance limit of 6.5% y/y and will remain sticky in the coming months, we think. 4 IPCA inflation 4 The labour market remains tight, as unemployment con- 3 Inflation targets 3 tinues to fall. This intensifies the inflationary pressures as 2 2 wage growth remains robust in real terms. A strong BRL 1 1 supports consumers relative to local producers, as indus- trial production has stalled over the past quarters, not 0 0 06 07 08 09 10 11 least due to import competition. Source: Nordea Markets and Reuters Ecowini Consumption strong – at the expense of production? The central bank has acknowledged that inflation will not 20 20 come down to the target level of 4.5% soon (within a % y/y % y/y year’s time). However, the most recent indicators suggest 15 15 that economic activity is finally slowing. Coupled with 10 Retail sales 10 the unfavourable global development, the central bank 5 5 should be done hiking rates despite its earlier announce- ment that the tightening cycle has been prolonged. This 0 0 will leave the policy rate at 12.5%. -5 -5 Industrial production, 3M mov. avg. The policymakers have continued to introduce a number -10 -10 of measures against speculation in a stronger BRL lately, -15 -15 yet these did not prevent the BRL from strengthening. 09 10 11 The Brazilian currency is to become less volatile and less Source: Nordea Markets and Reuters Ecowin susceptible to capital outflows now due to the improving FDI overtakes portfolio inflows balance of payments situation. The current account defi- 150 Net capital inflows 150 USDbn USDbn cit has stabilised at just above 2% to GDP, as the trade 125 125 Portfolio Investment balance has improved. Meanwhile, the financing of the Direct Investment 100 100 current account has become of better quality as the bulk Other Investment of net capital inflows to the country is now in the form of 75 75 foreign direct investment (FDI) – this is in sharp contrast 50 50 to the situation in 2010 when the portfolio invesment in- 25 25 flows constituted around two-thirds of the total capital 0 0 inflows. -25 -25 Note: 12M rolling sum Aurelija Augulytė -50 -50 [email protected] +45 3333 6437 07 08 09 10 11 Source: Nordea Markets and Reuters Ecowini Brazil: Macroeconomic indicators (% annual real changes unless otherwise noted) 2008 (BRLbn) 2009 2010 2011E 2012E 2013E Private consumption 1,786.8 4.2 7.0 4.5 4.4 4.8 Government consumption 612.1 3.9 4.0 3.2 3.2 3.0 Gross fixed capital formation 579.5 -10.4 22.0 6.9 6.3 6.8 Stockbuilding* 47.6 -2.0 0.2 0.0 0.2 0.2 Exports 414.3 -10.3 11.5 8.5 6.6 7.0 Imports 408.5 -11.5 36.3 12.8 6.9 7.2 GDP -0.7 7.6 3.9 4.1 4.2 Nominal GDP (BRLbn) 3,031.9 3,257.1 3,721.5 4,114.1 4,505.5 4,915.4 Unemployment rate, % 8.1 6.7 6.5 6.4 6.2 Consumer prices, % y/y 4.9 5.0 6.4 5.2 4.7 Current account, % of GDP -1.5 -2.3 -2.5 -2.8 -2.8 General government budget balance, % of GDP -3.2 -2.7 -3.0 -2.5 -2.2 * Contribution to GDP growth (% points) 33 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 33. ■ Oil Long term oil prices still trending up – blury short-term outlook Sovereign debt worries, a growing mistrust in politicians Oil price forecasts Brent – baseline (USD/barrel) and a weaker underlying economic environment on both Q1 Q2 Q3 Q4 Year sides of the Atlantic Sea will continue to weigh on de- 2007 59 69 75 89 73 mand for oil. Waves of risk aversion may trigger tempo- 2008 96 123 117 57 98 2009 46 60 69 76 63 rary sell-offs and the oil price may dip below the under- 2010 77 79 77 88 80 lying long-term upward sloping trend. We expect the oil 2011E 106 115 110 110 110 supply/demand balance to continue to tighten over the 2012E 112 113 114 115 114 forecast period, but at a slower pace on the back of the 2013E 116 119 121 123 120 gloomier outlook for the world economy. OPEC spare capacity will remain at low levels in the forecast period Oil price forecasts – baseline and low price as global oil demand is expected to continue to pick up at 140 USD per barrel USD per barrel 140 a faster rate than non-OPEC supply growth. 130 130 120 120 110 110 We think non-OPEC oil production can surprise on the 100 Baseline 100 upside. Higher oil prices trigger investment in deepwater 90 90 production and unconventional oils such as Canadian oil 80 80 70 70 sand and US shale oil. Marginal production costs are ex- Low price 60 60 pected to continue up from around USD 85/barrel in 50 50 2011. Investment has picked up markedly since the sharp 40 40 fall in 2009 and we expect this trend to persist. Higher 30 Forecast 30 exploration and production activity is expected to in- 20 20 02 03 04 05 06 07 08 09 10 11 12 13 crease demand for equipment, steel and labour. Cost in- flation indicates that oil prices will find higher support Source: Nordea Markets and Reuters Ecowin levels going forward. OPEC capacity expansion plans are Oil prices in USD and euro struggling with project delays and underinvestment. Even 160 160 Saudi Arabian capacity expansion plans may develop too USD per barrel EUR per barrel slowly to be able to keep a sufficient buffer capacity and 140 Brent Crude 140 meet the rapidly rising domestic oil consumption in the 120 120 future. OPEC oil production has taken a hit from the shut-down of around 80% of Libyan oil production. 100 100 Strong geopolitical tensions in the Middle East and North 80 80 Africa region (MENA) will continue to put oil produc- 60 60 tion, refineries and the infrastructure at risk. In addition, the political climate in vital oil producing countries out- 40 Brent Crude, rhs 40 side MENA such as Nigeria, Venezuela and Su- 20 20 dan/South-Sudan heightens the risk of supply-side dis- 06 07 08 09 10 11 turbances and oil shortages. Source: Nordea Markets and Reuters Ecowin Oil demand is closely correlated to growth in economic Saudi Arabian oil consumption and population activity, increasing living standards and population growth growth. The lion’s share of future oil demand growth is 3.0 40.0 mn barrels mn persons expected to come from emerging economies, especially per day 35.0 2.5 China, India and the Middle East. Power sector problems 30.0 in China and the long-term effect of the earthquake in Ja- 2.0 25.0 pan on the nuclear power industry may boost demand for 1.5 20.0 oil. The transportation sector is expected to be the prima- 15.0 ry driver of future oil demand growth, accounting for 1.0 10.0 more than 50% of total consumption. Although higher oil 0.5 5.0 prices also will trigger investment in competing fuel 0.0 0.0 sources such as natural gas and electric cars, we do not 0 5 0 5 0 5 0 5 0 5 0 5 0 expect this to make an impact on transportation fuel de- 7 7 8 8 9 9 0 0 1 1 2 2 3 19 19 19 19 19 19 20 20 20 20 20 20 20 mand over the forecast period. So urce: United Natio ns and Internatio nal Energy A gency Thina M. Saltvedt [email protected] +47 2248 7993 34 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 34. ■ Oil Slowdown can push oil prices below USD 85/barrel threshold A severe slowdown in global economic activity will cut Oil price Brent – low-growth scenario (USD/barrel) oil demand markedly and thereby trigger a sharp fall in Q1 Q2 Q3 Q4 Year 2010 77 79 77 88 80 oil prices. During the financial crisis the Brent oil price 2011E 106 115 110 95 107 fell by 75% to USD 36.6/barrel in December 2008 from 2012E 80 70 72 75 74 USD 146/barrel in July. If we assume that the recent in- 2013E 80 82 85 87 84 crease in uncertainty and the weaker economic perfor- mance of the US and the Euro zone will push the world OPEC’s new unofficial price range economy into a prolonged period of low economic 150 USD/barrel USD/barrel 150 Saudi 140 140 growth, do we expect a new collapse in the oil price? Arabia 130 40 130 increase 120 days 120 Assuming that global GDP growth will be 0.5% lower in 110 surpris 110 100 New price target range Production 100 2011 and 2% lower in 2012 than in our baseline scenario, 90 unchanged 90 oil demand is expected to be reduced by 400k in 2011 80 Increase 80 Old price target range 0.5 m b/d and 1.4mb/d in 2012. A new economic downturn will 70 No changes 70 60 60 clearly trigger a sharp fall in oil demand, but in our opi- 50 Discussing a cut 50 nion a few recent developments in the oil market may 40 Production cut Production cut Producti 40 1,7 on cut 4. have a counterbalancing effect on the fundamental situa- 30 OPEC's old target price USD 22-28/bb 30 20 20 tion, thereby preventing oil prices from falling to the 10 10 lows seen in 2008. 00 01 02 03 04 05 06 07 08 09 10 11 First, OPEC has not changed its official output quota Marginal cost of a new barrel of oil since January 2009 when the cartel agreed to cut 4.2 140 140 mb/d. The cartel does not need to coordinate new produc- 130 USD per USD per 130 barrel barrel tion quotas before it can start reducing its output if de- 120 120 mand conditions deteriorate to a level where the market 110 North Sea, Gulf of Mexico, 110 100 100 becomes oversupplied. Second, we expect OPEC to cut 90 Latin America, 90 Africa, Far East oil production at an earlier stage of a new recession cy- 80 80 70 70 cle. Huge spending packages to try to prevent further up- 60 60 Oil Sand, rising in the MENA region have in our opinion pushed 50 Shale oil, 50 up OPEC’s breakeven price of oil – the price at which its 40 Middle East EOR, gas-to- 40 30 liquid 30 budget is balanced while accommodating greater public 20 20 spending. In 2009 OPEC’s unofficial oil price target was 10 10 USD 70-90/barrel, but we now expect this unofficial 0 Low Cost Medium cost High cost 0 price range to have moved to around USD 85-105/barrel. Source: PIRA and Nordea Markets Saudi Arabia, the cartel’s ultimate leader, needs an oil price of around USD 85/barrel to balance its budgets. Indicative oil price to balance budgets – OPEC Third, the refilling of the emergency inventories after the 140 140 IEA stock release will contribute to tighten the market. In USD per barrel USD per barrel 120 120 addition, as prices drop we would not be surprised if China uses this opportunity to fill up its strategic petrole- 100 100 um reserves (SPRs). 80 80 How far can oil prices fall before we see cuts in oil in- 60 60 vestments? The global average marginal cost of a new 40 40 project is around USD 85/barrel, but it varies markedly 20 20 around the world. For example in the North Sea the mar- ginal cost averages around USD 50-70/barrel compared 0 0 Kuwait Venezuela Saudi- Nigeria Irak Iran to USD 20-40/barrel in the low-cost Middle East. If the Arabia oil price falls below the marginal cost, new projects may Source: PIRA and Nordea Markets be put on hold or cancelled. This in turn will reduce ac- tivity in the oil sector and cut demand for upstream and downstream services. Falling costs may counterbalance the drop in investments, but with a lag. Thina M. Saltvedt [email protected] +47 2248 7993 35 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 35. ■ Metals Metal prices to reflect subdued economic growth Base metal prices in general normally reflect the cur- Base metal price forecasts (USD per tonne) rent strength in global industrial production, while the 2011E 2012E 2013E forward market provides signals about the industrial Aluminium 2,460 2,500 2,600 Copper 9,200 8,500 8,500 production growth outlook. Since the previous issue of Nickel 23,600 21,000 21,000 Economic Outlook (May) prices initially rose in June- Zinc 2,200 2,000 2,000 July, before falling sharply in August to new lows for Source: Nordea Markets the year. The outlook for a more subdued economic re- covery than previously expected has weighed on metal Prices signal slower growth for a while 5.0 5.0 prices recently. The forward market term structure has ('000) Index ('000) Index also moved to price in slower growth in the near term. 4.5 4.5 We lower our metal price forecasts to reflect this less 4.0 4.0 optimistic view on metals demand. 3.5 3.5 3.0 Metal prices (LME) 3.0 Global aluminium demand has set new record-highs 2.5 2.5 this year and has in every month since January grown 2.0 2.0 stronger than output. Demand should remain strong in 1.5 1.5 the coming years. Growing urbanisation, income and 1.0 1.0 market share in automotive, aerospace, electrical, elec- 0.5 0.5 tronics and solar energy support robust demand growth 00 01 02 03 04 05 06 07 08 09 10 11 in the coming years, albeit at a slower pace than previ- Source: Nordea Markets and Reuters Ecowin ously estimated. Supply will struggle to keep up in our base scenario, with few expansions to come on stream Copper and aluminium – strong fundamentals outside China the next two years. We lower our price 11 ('000) USD per tonne ('000) USD per tonne 3.50 forecasts slightly but expect higher average prices over 10 Copper 3.25 the forecast period. 9 3.00 8 2.75 Copper output has struggled with declining ore grades 7 2.50 and supply disruptions for years. 2012 will, however, 6 2.25 see a strong rebound in supply growth. Demand will 5 2.00 continue to show steady growth as urbanisation and in- 4 1.75 Aluminium, rhs dustrialisation in China and other Emerging Markets 3 1.50 continue. We forecast a more balanced market over the 2 1.25 next two to three years due to our dampened GDP 04 05 06 07 08 09 10 11 growth outlook, but copper prices will likely stay high Source: Nordea Markets and Reuters Ecowin and volatile. Nickel and zinc – weaker fundamentals Nickel has been the underperformer among base metals 5.0 ('000) USD per tonne ('000) USD per tonne 55 recently on expectations of steady supply additions this 4.5 50 year and in 2012. China’s ramp-up of production of 4.0 45 nickel pig iron has further reduced import requirements 3.5 40 Zinc of refined nickel and will continue to do so for a while. 3.0 35 A slower economic growth trajectory will also reduce 2.5 30 demand, thereby relaxing the market balance further. 2.0 25 20 We lower our price forecasts, but longer-term funda- 1.5 15 mentals such as the marginal cost of production should Nickel, rhs 1.0 10 support nickel prices at around USD 20,000/tonne. 0.5 5 04 05 06 07 08 09 10 11 Zinc still has the weakest fundamentals of the base Source: Nordea Markets and Reuters Ecowin metals complex. There is expected to be ample supply next year, but we see scope for a structural strengthen- ing of the zinc market towards the end of the forecast period as several large mines could reach the end of their life and be shut. Bjørnar Tonhaugen [email protected] +47 2248 7959 36 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 36. ■ Special theme Gauging the risk of recession in the US and the Euro area • Financial turmoil reflects fear of recession event of more downgrades, potentially triggered by the weaker growth prospects and/or a new round of political • The risk of a recession is approaching 50% paralysis as recently seen during the debt ceiling discus- • A US recession would most likely be shallow sions. Specifically, if policymakers fail to extend the 2011 payroll tax cut and the emergency unemployment • The Euro-area debt crisis could be a recession trigger benefits programme, the fiscal drag will be intense in ear- ly 2012 as these programmes expire. In our baseline scenario we predict that both the US and the Euro area will avoid sliding into a recession. Howev- Finally, a potential trigger of a new recession could be er, the turmoil in financial markets on both sides of the further tightening of US financial and credit conditions, Atlantic has significantly raised the risk of a vicious cir- reflecting heightened concerns about debt sustainability cle, where market participants’ fears of a recession cause and bank solvency in several European countries. consumers and businesses to pull back, creating a self- fulfilling prophecy. In the following we look at the key A Great Recession 2.0 does not seem likely recession triggers in the two economies. In reality, a re- A new recession could be very difficult to pull out of be- cession in the US could easily trigger a recession in the cause policymakers might not have the resources or the Euro area and vice versa. will to respond appropriately. Still, a new US recession of the same severe depth as the so-called Great Recession Nordea’s risk scenarios for GDP growth in 2008-2009 seems unlikely. Real GDP growth, Probability, USA Euro area % % 2011 2012 2011 2012 Baseline 45 1.3 1.6 1.6 0.6 Cyclically sensitive demand still at very low levels Positive surprise 10 1.5-2.0 2.0-3.0 1.7-2.0 1.0-2.0 32 32 % of GDP Cyclically sensitive demand * % of GDP Mild recession 40 0.7-1.2 0.5-1.5 1.2-1.5 -0.5-0.5 Deep recession 5 0.5-1.0 -2.0--1.0 0.5-1.0 -2.0--1.0 30 30 28 28 Potential triggers of a new US recession 26 26 As the US economy has lost upward momentum, a dou- ble-dip recession could be triggered more easily. The risk 24 24 of recession is amplified because the already fragile 22 22 economy seems to have moved into a vicious circle with negative sentiment now feeding on itself. Hence, it would 20 *) Private consumption of durable goods, residential investment and fixed business investment 20 not take much of a shock to push the economy back into 18 Note: Shaded areas mark recessions 18 recession. The mere fear of a double-dip could cause one. 50 55 60 65 70 75 80 85 90 95 00 05 10 Currently, we put the odds of recession at close to 50%. Source: Nordea Markets and Reuters Ecowin In our baseline scenario, where the US economy just Higher private sector savings act as a buffer barely escapes recession, further easing of monetary pol- 12.5 % of GDP US saving balances % of GDP 12.5 icy later this year or in early 2012 is assumed to support 10.0 10.0 financial players’ risk appetite and domestic demand. 7.5 Private sector 7.5 Recent surveys also suggest that more asset purchases by 5.0 5.0 the Fed may already be priced in. However, additional 2.5 2.5 monetary stimulus is far from certain, especially if the 0.0 0.0 Fed does not see evidence of a renewed decline in core -2.5 -2.5 inflation. Moreover, the central bank may also be wary of -5.0 -5.0 a potential boost to commodity prices from QE3, which -7.5 -7.5 Current account Public sector would weaken real incomes. -10.0 -10.0 -12.5 Note: Shaded areas recessions. National accounts basis. -12.5 70 75 80 85 90 95 00 05 10 But even in case of more monetary easing the support to the real economy might not be enough to prevent a reces- Source: Nordea Markets and Reuters Ecowin sion given the already low level of bond yields and the already ample liquidity in banks and businesses. First of all, US banks’ balance sheets are now much healthier relative to the situation prior to the Great Re- More fiscal tightening could also risk triggering a new cession. It is indeed encouraging that US banks contin- recession. Standard & Poor’s downgrade of the US sov- ued to ease lending standards across all major categories ereign rating has increased the likelihood of fiscal re- of loans through July and that bank lending has contin- straint at a time when the economy is already weak. The ued to expand despite recent weeks’ market volatility. pressure for fiscal consolidation would increase in the Banks as well as businesses are awash in liquidity, but 37 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 37. ■ Special theme should liquidity begin to dry up in earnest, the Fed and conditions. Indicators already suggest that funding condi- other central banks have the tools that worked in 2008. tions for Euro-area banks have deteriorated to levels last Moreover, the still-low level of cyclically sensitive de- seen during the Great Recession, and this could easily mand reduces the risk of a new sharp drop in GDP. The spill over to lending conditions for households and firms. most extreme example of this is residential construction where a further decline of the magnitude normally seen In a risk scenario, a new round of credit tightening during a recession is physically impossible. With em- among Euro-area banks leads to a liquidation of business ployment still at the same level as in 2004 and GDP back inventories and a curtailment of business investments. As at 2008 levels, there also seems to be no apparent need in the aftermath of the Lehmann collapse in September for businesses to shed jobs very aggressively, unless de- 2008, such a situation might lead to a further drop in risk mand collapses. Finally, historically very high private appetite, causing overall liquidation of inventories across sector savings act as a buffer for the economy. Thus, in the globe. Such a drop in global demand would also feed the event of a new shock, households and businesses back to the Euro area through lower exports and could al- could more easily than previously absorb it by cutting so affect the export-oriented German economy. their savings instead of their spending. Under such a scenario we would expect GDP to decline Sovereign debt crisis key recession risk in Euro area by 0.1% in 2012 compared to our baseline forecast of The risk of a recession in the Euro area is closely linked 0.6% growth next year. For 2013 we would expect to the risk of a recession in the US, but a further deterio- growth to turn positive again, although the rebound in ac- ration of the sovereign debt crisis could also trigger a tivity would most likely be dampened by the need for drop in economic activity. Here the slowdown in global additional fiscal tightening. Consequently we would ex- growth and the general deterioration in risk appetite have pect to see growth just above 1% compared to our base- also hit Euro-area growth prospects, and in turn this has line forecast of 1.8% growth in 2013. led to increasing investor concern about the ability of Eu- ro-area member states to successfully consolidate public CDS premia for European banks at Lehman levels finances. The latest round of turbulence has implicated both Italy and Spain, the 3rd and 4th largest economies in the Euro area, and once again the debt crisis threatens to lead to a new round of credit tightening from Euro-area banks. For the moment, the ECB has successfully managed to con- tain Italian and Spanish yields by reactivating its Securi- ties Markets Program, but this has been done on the ex- press condition that the European Financial Stabilisation Fund (EFSF) will take over the responsibility shortly. This awaits the approval of the EFSF’s new powers by national parliaments, a process that is unlikely to be completed before the beginning of October – at the earli- A drop in world trade would hurt Euro area exports est. 40 25 % y/y % y/y 20 30 Even if the EFSF begins to purchase bonds later this fall, World trade, rhs 15 it remains questionable if this approach will quell the 20 10 debt crisis on its own. If the ECB/EFSF should end up 10 5 with the same holdings of Italian and Spanish bonds as the 10-15% of Greek, Irish and Portuguese bonds esti- 0 0 mated to be held by the ECB, the ECB/EFSF would have -10 Euro area -5 to purchase for EUR 230bn Italian bonds and for EUR exports -10 -20 85bn Spanish bonds, an amount which would quickly -15 drain remaining reserves at the EFSF. In addition, it is -30 -20 worth remembering that the ECB’s bond purchases in the 98 99 00 01 02 03 04 05 06 07 08 09 10 11 three smaller peripherals could not prevent a general up- Source: Nordea Markets and Reuters Ecowin ward drift in yield spreads. Johnny Bo Jakobsen The resurgence of the debt crisis has already led to a new [email protected] +45 3333 6178 round of austerity measures, and this creates a risk of re- cession in the member states concerned, particularly Italy Anders Matzen and Spain. For the Euro area as a whole the risk of a re- [email protected] +45 3333 3318 cession primarily pertains to a further tightening of credit 38 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
- 38. ■ Economic Research Nordea Economic Research Nordea Denmark: Sweden: Helge J. Pedersen, Global Chief Economist Annika Winsth, Chief Economist Sweden [email protected], tel. +45 3333 3126 [email protected], tel. +46 8 614 8608 Johnny Bo Jakobsen, Chief Analyst Torbjörn Isaksson, Chief Analyst [email protected], tel. +45 3333 6178 [email protected], tel. +46 8 614 8859 Anders Matzen, Chief Analyst Bengt Roström, Senior Analyst [email protected], tel. +45 3333 3318 [email protected], tel. +46 8 614 8378 Anders Svendsen, Chief Analyst Andreas Jonsson, Senior Analyst [email protected], tel. +45 3333 3951 [email protected], +46 8 534 910 88 Troels Theill Eriksen, Senior Analyst Carolinne Bjerking, Junior Analyst [email protected], tel +45 3333 2448 [email protected], tel. +46 8 614 8003 Jan Størup Nielsen, Senior Analyst [email protected], tel. +45 3333 3171 Estonia: Tönu Palm, Chief Analyst Bjarke Roed-Frederiksen, Analyst [email protected], tel. +372 628 3345 [email protected], tel. +45 3333 5607 Aurelija Augulyte, Analyst Latvia: [email protected], tel. +45 3333 6437 Andris Strazds, Senior Analyst Ianna G. Yordanova, Assistant Analyst [email protected], tel. +371 67 096 096 [email protected], tel. +45 3333 3901 Lithuania: Thomas Gade, Assistant Analyst Zygimantas Mauricas, Analyst [email protected], tel. +45 3333 4007 [email protected], +370 5 2657 198 Georg von Wowern, Assistant Analyst [email protected], tel. +45 3333 6102 Russia: Dmitry A. Savchenko, Analyst Finland: [email protected], +7 495 777 34 77 4194 Pasi Sorjonen, Acting Chief Economist Finland [email protected], tel. +358 9 1655 9942 Annika Lindblad, Analyst [email protected], tel. +358 9 1655 9940 Norway: Steinar Juel, Chief Economist Norway [email protected], tel. +47 2248 6130 Erik Bruce, Chief Analyst [email protected], tel. +47 2248 4449 Thina M. Saltvedt, Senior Analyst [email protected], tel. +47 2248 7993 Katrine Godding Boye, Senior Analyst [email protected], tel. +47 2248 7977 Bjørnar Tonhaugen, Senior Analyst [email protected], tel. +47 2248 7959 39 EKONOMISKA UTSIKTER │AUGUSTI 2011 NORDEA MARKETS
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