Global Macroeconomic Outlook 2019...Global Macroeconomic Outlook 2019 Fastmarkets RISI –PPI...

Global Macroeconomic Outlook 2019

Fastmarkets RISI – PPI Transport Symposium

Lasse Sinikallas, Director of Macroeconomics

2019 | Fastmarkets | Macroeconomic Outlook 2019

Global economy growing moderately, risks heightened

2019 | Fastmarkets | Macroeconomic Outlook 2019

1.6 %2.3 %

2.9 % 2.6 %

1.1 %1.8 %

2016 2017 2018 2019 2020 2021

USA1.9 %

2.5 %

1.8 %

1.1 % 0.9 %1.4 %

2016 2017 2018 2019 2020 2021

Europe

6.7 %6.9 %

6.6 %

6.2 %6.0 % 6.1 %

2016 2017 2018 2019 2020 2021

China

-0.9 %

1.1 % 0.9 % 0.8 %1.7 %

2.8 %

2016 2017 2018 2019 2020 2021

Latin America

Annual real GDP growth

2

Oil prices are volatile and remain relatively low

3

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

WTI Brent

2019 | Fastmarkets | Macroeconomic Outlook 2019

Elevated global economic policy uncertainty

4

$0.00

$50.00

$100.00

$150.00

$200.00

$250.00

$300.00

$350.00

85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

US Three Component Index US News Based Index Global Index (current)

Source: Measuring Economic Policy Uncertainty by Scott Baker, Nicholas Bloom and Steven J. Davis at www.PolicyUncertainty.com.

2019 | Fastmarkets | Macroeconomic Outlook 2019

US: Good performance, slowdown ahead?

2019 | Fastmarkets | Macroeconomic Outlook 2019 5

US job growth continues

-800

-600

-400

-200

0

200

400

600

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Employment change Six-month moving average (employment change) 24-month moving average (employment change)

2019 | Fastmarkets | Macroeconomic Outlook 2019 6

Monthly employment change, total non-farm, thousands; six-month moving average; 24-month moving average

Industrial production now supported by policy?

30

35

40

45

50

55

60

65

70

0.85

0.90

0.95

1.00

1.05

1.10

1.15

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Industrial production (L) PMI (R)

2019 | Fastmarkets | Macroeconomic Outlook 2019 7

Index of industrial production, January 2012 = 1.00; PMI

Dollar regained strength in 2018, remains strong

80

90

100

110

120

130

140

95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

8

Trade weighted US dollar index: broad, goods, 1997=100

2019 | Fastmarkets | Macroeconomic Outlook 2019

Investment growth slowing down

80

90

100

110

120

130

140

-40%

-30%

-20%

-10%

0%

10%

20%

30%

97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18

Private residential fixed investment Private nonresidential fixed investmentTrade weighted US dollar index: Broad, goods (R)

2019 | Fastmarkets | Macroeconomic Outlook 2019 9

Fixed investment, percent change year/year, seasonally adjusted annual rate, USD Index

US GDP growth expected to slow

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

10

Real GDP growth, annualized percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

Europe: Loss of momentum

2019 | Fastmarkets | Macroeconomic Outlook 2019 11

European industrial production hit the breaks in 2018

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

EU-27 (from 2019) EU-28 Euro area (19 countries) Germany France United Kingdom

12

Volume index of production, year-over-year percentage change, calendar adjusted

2019 | Fastmarkets | Macroeconomic Outlook 2019

Euro has lost some of the strength of early 2018

$0.70

$0.80

$0.90

$1.00

$1.10

$1.20

$1.30

$1.40

$1.50

$1.60

$1.70

99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

USD/EUR

132019 | Fastmarkets | Macroeconomic Outlook 2019

Euro area GDP growth slower

-8%

-6%

-4%

-2%

0%

2%

4%

6%

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Germany France Italy UK Eurozone

14

Real GDP growth, annual percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

China: Trade war dampening the economy

2019 | Fastmarkets | Macroeconomic Outlook 2019 15

Chinese industrial sector has cooled down

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

-5%

0%

5%

10%

15%

20%

25%

30%

35%

40%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Fixed asset investment Industrial production PMI (R)

16

Year-over-year growth in industrial production, fixed asset investment; Purchasing Managers Index

2019 | Fastmarkets | Macroeconomic Outlook 2019

Volatility in Chinese trade growth and renminbi strength

¥5.0

¥5.5

¥6.0

¥6.5

¥7.0

¥7.5

¥8.0

¥8.5

-60%

-40%

-20%

0%

20%

40%

60%

80%

100%

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19Exports Imports RMB/USD

17

Exports and imports, year-over-year percentage change, RMB/USD

2019 | Fastmarkets | Macroeconomic Outlook 2019

High lending, increased debt risk

0%

5%

10%

15%

20%

25%

30%

35%

-¥800

¥200

¥1,200

¥2,200

¥3,200

¥4,200

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19

Aggregate financing (L) New loans (L) M2 (R)

18

New bank loans, aggregate financing, billion renminbi; money supply, year-over-year percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

Chinese GDP trending lower, 2019 a slowdown

0%

2%

4%

6%

8%

10%

12%

14%

16%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

19

Real GDP growth, annual percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

Latin America: Improving, with challenges

2019 | Fastmarkets | Macroeconomic Outlook 2019 20

Improving domestic environment should help Latin American economy despite global slowdown

-3%

-2%

-1%

0%

1%

2%

3%

4%

5%

6%

7%

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21

21

Latin America, real GDP growth*, annual percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

* Measured at purchasing power parity exchange rates.

Inflation slowing, except in Argentina

05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-20%

-10%

0%

10%

20%

30%

40%

50%

60%

70%

Brazil Argentina Chile Mexico

22

Consumer price indexes, year over year percentage change

2019 | Fastmarkets | Macroeconomic Outlook 2019

Investment remains low in Latin America

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 2010%

15%

20%

25%

30%

35%

Advanced economies Emerging market and developing economiesLatin America and the Caribbean ArgentinaBrazil Chile

23

Investment as percentage of GDP

2019 | Fastmarkets | Macroeconomic Outlook 2019

Mexican exports supported by US consumption, production growth negative

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

Industrial production year-over-year growth (R) Exports year-over-year growth (L)

24

Monthly indicator of economic activity, Imacec, 2013=100

2019 | Fastmarkets | Macroeconomic Outlook 2019

Conclusions

2019 | Fastmarkets | Macroeconomic Outlook 2019 25

Conclusions

• World economy expected to decelerate 2019, 2020

• US economy projected to slow down Still healthy domestic economy

• China moving toward consumer-led growth Trade war, continued slowdown, debt a major risk

• Europe’s momentum slower, still growth Unemployment low, policy uncertainty

• Latin America improves, but challenges remain Politics, global slowdown impact

2019 | Fastmarkets | Macroeconomic Outlook 2019

Risks

• Trade policy issues and trade war Uncertainty slows growth

• Central banks’ ability to continue stimulus

• Pace of GDP growth deceleration in China

• Low inflation

• Overall political uncertainty

• Geopolitical tensions

2019 | Fastmarkets | Macroeconomic Outlook 2019