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8/7/2019 The Economy at a Glance March
1/43
The art of common sense
The Economy at a Glance
,
Portfolio manager Torgeir Hien
8/7/2019 The Economy at a Glance March
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Ex ect more Eurozone Turmoil
Activity indicators for manufacturing slipped a little from February to March in most countries, but they stillsignal strong growth in the global economy. The activity indicators for the service sector are not in yet, but I donot expect them to change the picture.
e wor was y some severe s oc s n e rs quar er, e mos rama c o ese e ng e mass veearthquake in Japan. Irrespective of what some irresponsible Keynesians are saying, this will have a markednegative impact on the Japanese economy. We expect negative growth in the first two quarters of this year,
and only modest growth from 2010 to 2011. The other tremors from the first quarter will probably recede over. ,
production to fill the Libyan vacuum.
The European Central Bank (ECB) is going to be a first mover among the big central banks and will hike itspolicy rate from 1 to 1.25 percent in April. However, we do not expect this to be the first in a series of
. , ,
Federal Reserve too will probably change direction this summer or early autumn. Hence, short term interestrates are set to move up over the coming quarters, though the pace will be modest this year.
The fiscal stance continues to deteriorate in the Eurozone, with Dublin injecting ever more taxpayer money into
its rotten bank s stem. In Portu al the situation became much worse with ublic deficits for 2009 and 2010much worse than previously thought and a vote of no-confidence for the ruling Socialist party. Portugal needsa bail-out, like Greece and Ireland, but the caretaker government in Lisbon is not able to sign any suchagreement. With large redemptions in April and June, and a new government in place in early June at the
earliest, this crisis may escalate. The underlying problem in the Eurozone is that some of its members areclearly insolvent and even its most solid member states have too much debt and too little political capital tocome to their rescue with anything other than new loans. At some stage bond holders will have to take a hit, asthat is the only way to put peripheral finances on a solid footing.
8/7/2019 The Economy at a Glance March
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Gross Domestic Product in Advanced Economies
Seasonally adjusted GDP levels
135,0135,0 Israel
100120,0
125,0
130,0
100120,0
125,0
130,0
US
New Zealand
Canada
Mainland-Norway
Index,2008:1
105,0
110,0
115,0
Index,2008:1
105,0
110,0
115,0Sweden
Eurozone
UKFinland
90,0
95,0
100,0
90,0
95,0
100,0
Japan
Denmark
Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010
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Gross Domestic Product in Advanced Economies
100
100
Index,2008:1=
Index,2008:1=
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Productivity
GDP per hour worked in the business sector
112,5112,5US
=100
105,0
107,5
110,0
=100
105,0
107,5
110,0
Mainland Norway
Index,2000:1
100,0
102,5
Index,2000:1
100,0
102,5
UK
92,5
95,0
,
92,5
95,0
,
Sweden
Eurozone
Source: EcoWin2007 2008 2009 2010
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Manufacturing Production in Advanced Economies
=100
=100
Index,Jan.2
007
Index,Jan.2
007
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Manufacturing Production in Emerging Economies
Seasonally adjusted levels of manufacturing production
170170
China (s.a. by SKAGEN)
=100
130
140
150
160
=100
130
140
150
160
South Korea
Brazil
Thailand
India (s.a. by SKAGEN)
Taiwan
Turkey
Index,Jan.2007
100
110
120
Index,Jan.2007
100
110
120 Mexico
Russia (s.a. by SKAGEN)
70
80
90
70
80
90
Hungary
South Africa
Source: Reuters EcoWin2007 2008 2009 2010 2011
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PMI Manufacturing in Advanced Economies
PMI manufacturing
7070
ex
55
60
65
ex
55
60
65
Norway
Sweden
US
Diffusionind
40
45
50
Diffusionind
40
45
50EMU
UK
New Zealand
25
30
35
25
30
35
Australia
Japan
Hong Kong
Sources: Reuters EcoWin and Bloomberg2007 2008 2009 2010 2011
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PMI Manufacturing in Emerging Economies
PMI manufacturing
7070
ex
55
60
65
ex
55
60
65
India
Israel
Diffusionind
40
45
50
Diffusionind
40
45
50
South Africa
Mexico
Brazil
Turkey
25
30
35
25
30
35
Russia
Taiwan
South Korea
Sources: Reuters EcoWin and Bloomberg2007 2008 2009 2010 2011
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PMI Services
ex
ex
DiffusionIn
DiffusionIn
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Commodity Prices
ll
USDperbarre
USDperbarre
erton
erton
USD
USD
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Freight rates
Freight rates
1200012000
2000
4000
6000
8000
2000
4000
6000
8000Dry commodities
110
130
150
110
130
150
Crude oil
00
30
50
70
90
30
50
70
90
Source: Reuters EcoWin2007 2008 2009 2010 2011
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Retail Sales in Constant Prices
=100
=100
Index,Jan.2
008
Index,Jan.2
008
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Export in USD
Asia and Latin America175175
Europe and North America175175
125
150
125
150Japan
South Korea
125
150
125
150
GermanyUK
US
50
75
100
50
75
100
India
Brazil
Mexico
50
75
100
50
75
100
FranceItaly
Spain
Sveits
2007 2008 2009 2010 2011
0
25
0
25
2007 2008 2009 2010 2011
0
25
0
25
Source: Reuters EcoWinSource: Reuters EcoWin
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Employment
Employment
64,50150,0
63,75
64,00
64,25
142,5
145,0
147,5
Eurozone (l.s.)
63,00
63,25
63,50
135,0
137,5
140,0
US (l.s.) Japan (r.s.)
62,25
62,50
62,75
127,5
130,0
132,5
Source: Reuters EcoWin
an mar ma u sep nov an mar ma u sep nov an mar ma u sep nov an mar ma u sep nov an
2007 2008 2009 2010 2011
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Unemployment
Perce
nt
Perce
nt
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8/7/2019 The Economy at a Glance March
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Consumer Price Levels in Advanced Economies
Seasonally adjusted consumer price levels
115,0115,0UK
110,0
112,5
110,0
112,5Norway
Canada
EMU
US
Sweden
102,5
105,0
107,5
102,5
105,0
107,5
Japan
Switzerland (SA by SKAGEN)
Germany
97,5
100,0
97,5
100,0
Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010 2011
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Inflation in Emerging Economies
Annual change in CPI
17,017,0India wholesale rices
Russia
9,5
12,0
14,5
9,5
12,0
14,5China
South Korea
Mexico
Brazil
Hungary
4,5
7,0
4,5
7,0
-3,0
-0,5
2,0
-3,0
-0,5
2,0
Taiwan
Poland
Source: Reuters EcoWin
jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar
2007 2008 2009 2010 2011
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Consumer Price Levels in Emerging Economies
8=100
8=100
Index,Jan.20
Index,Jan.20
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Core Inflation in Advanced Economies
Percen
Percen
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Core Consumer Price Levels in Advanced Economies
=100
=100
Index,Jan.
2008
Index,Jan.
2008
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8/7/2019 The Economy at a Glance March
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Core Consumer Price Levels in Emerging Economies
Seasonally adjusted core consumer price levels
125,0125,0
=100
115 0
117,5
120,0
122,5
=100
115 0
117,5
120,0
122,5
Hungary
Brazil
Index,Jan.2008
107,5
110,0
112,5
,
Index,Jan.2008
107,5
110,0
112,5
,
Taiwan (s.a. by SKAGEN)
South Korea (s.a. by SKAGEN)
China (s.a. by SKAGEN)
100,0
102,5
105,0
100,0
102,5
105,0
Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010 2011
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Policy Rates and Overnight Rates
US
66
Eurozone
6,0
4
5
4
5
Policy rate
4,0
5,0
Lending rate
2
3
2
3
2,0
3,0
Target rate
2007 2008 2009 2010 2011
0
1
0
1
Overnight rate
jan mai sep jan mai sep jan mai sep jan mai sep jan
0,0
1,0
Deposit rate
Overnight rate
Source: Reuters EcoWin Source: Reuters EcoWin2007 2008 2009 2010 2011
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Policy Rates and Overnight Rates
Switzerland
7,07,0
UK
77
5,0
6,0
5,0
6,0
Overnight rate
5
6
5
6
2,0
3,0
4,0
2,0
3,0
4,0
Policy rate
2
3
4
2
3
4
Overnight rate
Policy rate
2007 2008 2009 2010 2011
0,0
1,0
0,0
1,0
2007 2008 2009 2010 2011
0
1
0
1
Source: Reuters EcoWinSource: Reuters EcoWin
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8/7/2019 The Economy at a Glance March
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Treasury Bills and Interbank Interest Rates
3 months T-bill
66
3 month interbank rate
77
4
5
4
5
5
6
5
6
2
3
2
3
Germany
UK
2
3
4
2
3
4
EUR
GBP
2007 2008 2009 2010 2011
0
1
0
1
US
2007 2008 2009 2010 2011
0
1
0
1
USD
Source: Reuters EcoWin Source: Reuters EcoWin
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Risk Premium in Interbank Rates
3 month
400400
3 month
400400
300
350
300
350
USD250
300
350
250
300
350
150
200
150
200
GBP
EUR
150
200
150
200
SEK
DKK
2007 2008 2009 2010 2011
0
50
100
0
50
100
2007 2008 2009 2010 2011
0
50
0
50
JPY
Source: Reuters EcoWin Source: Reuters EcoWin
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10 Year Nominal Interest Rates
10 year Treasury yields
5,05,0
t
3,5
4,0
,
t
3,5
4,0
,US
P
ercen
2,0
2,5
,
P
ercen
2,0
2,5
,
Japan
France
jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar
0,5
1,0
,
0,5
1,0
,
Source: Reuters EcoWin2008 2009 2010 2011
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Expected Annual Inflation Next 10 Years
Perc
ent
Perc
ent
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10 Year Risk Premiums
ints
ints
Percenta
gepoi
Percenta
gepoi
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10 Year Risk-Free Real Interest Rates
Percent
Percent
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Base Money
US and Eurozone
1,42,50
UK and Switzerland
130225
1,2
1,3
2,00
2,25
Eurozone (r.s.)
US (l.s.)
100
110
120
175
200
Switzerland (r.s.)
0,9
1,0
1,1
1,25
1,50
1,75
70
80
90
100
125
150
UK (l.s.)
2007 2008 2009 2010 2011
0,7
0,8
0,75
1,00
2007 2008 2009 2010 2011
40
50
60
50
75
Source: Reuters EcoWin Source: Reuters EcoWin
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Broad Money
Level
150150
Annual growth
20,020,0
130
140
130
140
Eurozone
US
Switzerland12,5
15,0
17,5
12,5
15,0
17,5UK
US
Sveits
110
120
110
120Japan
5,0
7,5
10,0
5,0
7,5
10,0
2007 2008 2009 2010 2011
90
100
90
100
2007 2008 2009 2010 2011
-2,5
0,0
2,5
-2,5
0,0
2,5
Eurosonen
Source: Reuters EcoWin Source: Reuters EcoWin
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US Industrial Indicators
National indicators
100,070
Regional indicators
50
92,5
95,0
97,5
55
60
65
ISM manufacturing (l.s.)
NIFB Small Businesss Optimism (r.s.)
40
50
60
70
-30
-10
10
30
Chicago PMI (r.s.)Kansas Fed (l.s.)
85 0
87,5
90,0
40
45
50
0
20
10
30
30-50Philadelphia Fed (l.s.)
2007 2008 2009 2010 2011
80,0
82,5
,
30
35
ISM services (l.s.)
jan mai sep jan mai sep jan mai sep jan
-60
-40
-20
-70
-50
-30
-
Richmond Fed (r.s.)
New York Fed (l.s.)
Dallas Fed (r.s.)
Source: Reuters EcoWin Source: Reuters EcoWin2008 2009 2010 2011
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US Consumption Indicators
Retail sales
400400
350
375
350
375
In
dex
In
dex
Billio
nUS
275
300
325
Billio
nUS
275
300
325Total
2007 2008 2009 2010 2011
225
250
225
250
Ex autos and gas
Source: Reuters EcoWin
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The US Labor Market
Tho
usand
M
illion
8/7/2019 The Economy at a Glance March
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Eurozone Indicators
8/7/2019 The Economy at a Glance March
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Eurozone Consumption Indicators
Retail sales
110110
Consumer confidence
1159
106
107
108
109
106
107
108
109
Current prices
100
105
110
6
7
8
Italy (r.s.)
103
104
105
103
104
105
Constant prices85
90
95
3
4
5
Tyskland (l.s.)
2007 2008 2009 2010
100
101
100
101
Source: Reuters EcoWin
2007 2008 2009 2010 2011
75
80
1
2France (l.s.)
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Eurozone GDPs
Seasonally adjusted GDP since Q1 2007
115115Slovakia
Seasonally adjusted GDP since Q1 2007
115115
105
110
105
110
Cyprus
Malta
105
108
110
113
105
108
110
113Luxemburg
Germany
Netherland
90
95
100
90
95
100
Slovenia
Spain
Portugal
Greece95
98
100
103
95
98
100
103
France
Austria
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
80
85
80
85Irland
Estonia
Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3
88
90
93
88
90
93Italy
n an
Source: Reuters EcoWinSource: Reuters EcoWin2007 2008 2009 2010
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Eurozone Interest Rate Spreads
Spread to 10-year German bund Spread to 10-year German bund
1010
6,50
7,50
8,50
9,50
6,50
7,50
8,50
9,50
6
7
8
9
6
7
8
9
Greece
Portugal
Ireland
2,50
3,50
4,50
5,50
2,50
3,50
4,50
5,50
France
Finland
Netherlands2
3
4
5
2
3
4
5
Belgium
Spain
Italy
2007 2008 2009 2010 2011
-0,50
0,50
1,50
-0,50
0,50
1,50
2007 2008 2009 2010 2011
-1
0
1
-1
0
1
Source: Reuters EcoWin Source: Reuters EcoWin