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December release
Dukascopy Bank Sentiment Index
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Summary
2015 was a tough year for the global economy amid
geopolitical risks and migration crisis as well as slowdown in
emerging markets, particularly in China. However, there was
also a bright spot, with the US economy strengthening and the
Fed feeling confident that the world’s number one economy
could withstand the first interest rate hike in almost a decade.
In the final month of the year, professors’ confidence waned,
as no region saw an uptick in the economic sentiment index in
December.
Europe’s short-term sentiment index remained flat, whereas
the three-year mood indicator fell, despite the ECB’s recent
move. The central bank decided to embark on more stimulus
measures to fight stubbornly low inflation. The central bank
lowered the interest rate of the deposit facility by 10 basis
points to –0.30%. In addition to that, the ECB extended its
asset-purchase programme until the end of March 2017, or
beyond, if necessity arises.
The same picture was seen in professors’ assessment of the
North American economic potential, despite the Fed optimism
about the world’s number one economy and historic decision
to hike interest rates.
Academia experts remained concerned about the Asian-Pacific
region, with China’s economic slowdown being reportedly the
source of economists’ worries.
Monday, January 11,2016
Figure 2: Global economic sentiment index
Parameter/
Region Global Europe
North
America
Asia-
Pacific
Six-month
economic outlook
0.59 ↓(0.02) 0.43 →(0.00) 0.73 →(0.00) 0.61 ↓(0.07)
Three-year
economic outlook
0.65 ↓(0.04) 0.53 ↓(0.06) 0.71 ↓(0.02) 0.71 ↓(0.05)
Figure 1: Mood indicator
0.47
0.52
0.57
0.62
0.67
0.72
August September October November December
Six-month economicsentiment index
Three-year economicsentiment index
Economic outlook (term structure)
Figure 3 represents the term structure of Dukascopy Bank Sentiment Index (Y-axis) mapped against the GDP growth forecasts made by poll respondents (X-axis). Overall, DBSI values and GDP growth forecasts match directionally, suggesting the global economy will perform better three years from now.
The Euro zone economy continues to recover, albeit the pace has been slackening as of late. In a bid to boost the region’s economy, the ECB embarked on more stimulus measures. The central bank lowered the interest rate of the deposit facility by 10 basis points to –0.30%. In addition to that, the central bank extended its asset-purchase programme until the end of March 2017, or beyond, if necessity arises. Still, professors continued to predict a short-term growth of below 1%, while in the long term GDP is seen to increase at 1.3%.
In December, the Federal Reserve turned the page on the Great Recession by hiking interest rates for the first time since 2008. Nevertheless, the historic decision did not influence professors’ confidence and their growth expectations.
Furthermore, academia experts continued to expect a relatively modest growth in the Asian-Pacific region amid the recent economic slowdown in emerging markets, particularly in China. The median growth rate is anticipated to average 3.0% in the coming six months, and to accelerate slightly to 3.5% in three years. Figure 3: Global economic outlook (term structure)
Parameter/Region Europe North America Asia-Pacific
DBSI Growth f. DBSI Growth f. DBSI Growth f.
6-month economic outlook 0.43 →(0.00) 0.87% 0.73 →(0.00) 2.13% 0.61 ↓(0.07) 3.00%
3-year economic outlook 0.53 ↓(0.06) 1.33% 0.71 ↓(0.02) 1.93% 0.71 ↓(0.05) 3.50%
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Monday, January 11,2016
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Economic development stages
Figure 4: Business cycle
Professors’ assessment of Europe’s economic
future continues to point to persistent sluggish
growth, as the overwhelming majority see the
economy in the lower end of the business
cycle curve. In three-year time, experts did not
see much change, expecting the economy to
struggle on the way to the business peak.
North America was reportedly expanding,
gradually paving the way to maximum
productive capacity.
The recent developments were reflected in
professors’ assessment of the Asian-Pacific
economy’s development in six months from
now, as no one placed the economy in the
business peak phase. However, seven
professors expected the economy to reach
maximum capacity.
Parameter/Region Europe North America Asia-Pacific
6-month EDS 3-year EDS 6-month EDS 3-year EDS 6-month EDS 3-year EDS
Contraction 8 9 2 3 3 2
Recessionary Trough 11 6 2 2 5 2
Expansion 11 14 24 21 22 19
Business Peak 0 1 2 4 0 7
6-month EDS
3-year EDS
Monday, January 11,2016
Six-month economic outlook
Figures 5 and 6 show the six-month economic outlook for
Europe, North America, and Asia-Pacific.
Europe’s short-term sentiment index remained flat, whereas the three-year mood indicator fell, despite the ECB’s recent move. The central bank decided to embark on more stimulus measures to fight stubbornly low inflation. The central bank lowered the interest rate of the deposit facility by 10 basis points to –0.30%. In addition to that, the ECB extended its asset-purchase programme until the end of March 2017, or beyond, if necessity arises.
The same picture was seen in professors’ assessment of the North American economic potential, despite the Fed optimism about the world’s number one economy and historic decision to hike interest rates.
Academia experts remained concerned about the Asian-Pacific region, with China’s economic slowdown reportedly being the source of economists’ worries. The short-term economic sentiment index plunged by 0.07 points in December to 0.61, down from 0.68 a month earlier.
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Parameter/Region Global Europe North America Asia-Pacific
Median 0.75 0.75 0.75 0.75
Mean (DBSI) 0.59 ↓(0.02) 0.43 →(0.00) 0.73 →(0.00) 0.61 ↓(0.07)
Mode 0.75 0.75 0.75 0.75
Standard Deviation 0.23 ↓(0.01) 0.22 ↑(0.02) 0.10 ↓(0.01) 0.24 ↓(0.03)
Figure 5: Six-month economic outlook
Figure 6: Six-month economic sentiment index
Monday, January 11,2016
0
10
20
30
40
50
Definitelynegative
Fairlynegative
Neutral Fairlypositive
Definitelypositive
Europe
North America
Asia-Pacific
0.30
0.40
0.50
0.60
0.70
0.80
August September October November December
Europe
North America
Asia-Pacific
Global
Three-year economic outlook
Figure 7 and 8 present the three-year economic outlook for
Europe, North America, and Asia-Pacific.
All the long-term economic sentiment indexes dropped in December due to persistent concerns among the academic elite. European index saw the biggest decline, with the corresponding gauge plunging by 0.06 points in the reported month.
At the same time, North American and Asia-Pacific three-year economic sentiment indexes both declined to 0.71 in December.
As a result, the global sentiment index slid 0.04 points in the last month of the year, hitting the second lowest level in 2015.
The decline in the three-year economic sentiment index suggested that professors remained concerned about the world’s economy in the foreseeable future.
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Parameter/Region Global Europe North America Asia-Pacific
Median 0.75 0.75 0.75 0.75
Mean (DBSI) 0.65 ↓(0.04) 0.53 ↓(0.06) 0.71 ↓(0.02) 0.71 ↓(0.05)
Mode 0.75 0.75 0.75 0.75
Standard Deviation 0.23 ↑(0.02) 0.24 ↑(0.05) 0.19 ↑(0.03) 0.21 ↓(0.01)
Figure 7: Three-year economic outlook
Figure 8: Three-year economic sentiment index
Monday, January 11,2016
0
10
20
30
40
50
Definitelynegative
Fairlynegative
Neutral Fairlypositive
Definitelypositive
Europe
North America
Asia-Pacific
0.40
0.45
0.50
0.55
0.60
0.65
0.70
0.75
0.80
August September October November December
Europe
North America
Asia-Pacific
Global
Parameter/Region Europe North America Asia-Pacific
Local experts Foreign experts Local experts Foreign experts Local experts Foreign experts
6-month economic outlook 0.40 0.45 0.70 0.74 0.70 0.56
3-year economic outlook 0.55 0.53 0.73 0.70 0.73 0.70
Economic outlook comparison
Figure 9 presents a discrepancy in views on the economic outlook of two time frames among the local and foreign professors.
The biggest discrepancy in views was among the professors from Asia-Pacific and foreigners over the region’s six-month growth outlook. Experts from overseas appeared to be considerably less optimistic about the Asian-Pacific economic potential both in the short and long term.
In America and Europe, local professors appeared to be less sanguine about the six-month economic outlook, compared with their colleagues from overseas. Nevertheless, Americans and Europeans voiced more optimism about the regions’ economic development in three years from now.
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Figure 9: Discrepancy in views on economic outlook among local and foreign experts (*1)
Monday, January 11,2016
-0.10
-0.05
0.00
0.05
0.10
0.15
Six-month economic outlook Three-year economicoutlook
Europe
North America
Asia-Pacific
Description Starting from November 2011, Dukascopy Bank SA is publishing a monthly Dukascopy Bank Sentiment Index (DBSI). The index is based on a survey of 30 experts from academia (10 from every region in focus), who are asked to assess future (six-month and three-year) economic prospects of the three regions: Europe, North America and Asia-Pacific. The DBSI can take values from 0 to 1 as outlined below.
Parameters Median – the middle observation in a data set; Mean – the sum of the values divided by the number of values; Mode – the value that occurs most frequently in a data set; Standard deviation – the variation from the average (mean). Calculations (*1) – difference between local experts mean estimate and foreign experts mean estimate. Universities that have participated in December’s poll: Hebrew University of Jerusalem; University of Calgary; Carnegie Mellon University; RISEBA; University of Tennessee, Knoxville; Nova School of Business and Economics; University of Zagreb, University of St Andrews, SBS Swiss Business School, University of Latvia, University of York Webster University Geneva University of Dundee; Skyline University College Sharjah; Universiti Sains Malaysia; Capital University of Science & Technology; Central University of Kashmir; University of Hyderabad; University of Management and Technology
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Value Outlook 0 Extremely negative
0 – 0.5 Negative
0.5 Balanced
0.5 – 1 Positive
1 Extremely positive
Explanations
Dukascopy Bank SA, Route de Pre-Bois 20, International Center Cointrin, Entrance H, 1215 Geneva 15, Switzerland tel: +41 (0) 22 799 4888, fax: +41 (0) 22 799 4880 [email protected]
Disclaimer Everything in this article, including opinions and figures, is provided for informational purposes only and may not be interpreted as financial advice or solicitation of products. Dukascopy group assume no responsibility for the completeness or the accuracy of any data contained in this article. Financial figures indicated in this article have not been verified by the Dukascopy group. Views, opinions and analyses are those of the author of the article, and are not endorsed by the Dukascopy group. Dukascopy group waive any and all warranties, express or implied, regarding, but without limitation to, warranties of the merchantability or the fitness for a particular purpose, with respect to all information in this article. Dukascopy group shall under no circumstances be responsible for any direct, indirect, consequential, contingent or any other damages sustained in connection with the use of this article.
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