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The UniCredit
Economics
Chartbook
Quarterly
Macro Research 25 September 2019
Strategy Research
Credit Research
“ Global slowdown under way – and still downside risk
”
4Q2019 Editor: Chiara Silvestre, Economist (UniCredit Bank, Milan)September 2019 Macro Research
Economics Chartbook
Contents
3 Global slowdown under way – and still downside risk
4 Table 1: Annual macroeconomics forecasts
5 Table 2: Quarterly GDP and CPI forecasts
5 Table 3: Oil forecasts
6 Table 4: Comparison of annual GDP and CPI forecasts
7 Table 5: FI forecasts
8 Table 6: FX forecasts
9 Global
11 US
Eurozone
13 Eurozone
15 Germany
17 France
19 Italy
21 Spain
23 Austria
25 Greece
27 Portugal
CEE
29 Poland
31 Czechia
33 Hungary
35 Russia
37 Turkey
Other Europe
39 UK
41 Sweden
43 Norway
45 Switzerland
Other countries
47 China
49 Oil
Editorial deadline: 25 September 2019, 12:00 (CET).
UniCredit Research page 2 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Global slowdown under way – and still downside risk
■ Global: We are revising slightly downward our global GDP growth forecast for this year by
0.1pp to 3.0% while maintaining our 2020 growth forecast of 2.7% (2018: 3.6%).
Weakness is currently concentrated in the euro area, the UK and China, although we
continue to expect the main drag on growth over the forecast period to come from the US
as its economy slows. Our downward revision reflects two major developments: 1. trade
tensions have intensified; and 2. the near-term outlook is slightly weaker than we had
anticipated. Market expectations of monetary policy have eased in response, but broad
financial conditions are similar to what they were three months ago. Risks are skewed
towards a more-frontloaded and sharper downturn.
■ US: We confirm our GDP growth forecasts of 2.2% in 2019 and of 0.7% in 2020, with
quarterly growth projected to slow to below potential during the second half of the year and
to be followed by a mild recession in 2020. Currently, the major drivers of growth are
private and public consumption, but the fiscal stimulus will progressively fade.
Manufacturing, business investment and exports are weak, reflecting the intensification of
trade tensions and slower global growth. Payroll gains have eased. An expected squeeze
in profit margins will likely stretch weak corporate balance sheets. Headline and core PCE
inflation remain well below 2%, likely due in part to temporary factors. We expect the Fed
to cut rates by 25bp in December, 1Q20 and 2Q20 (i.e. well below the present “dots”),
reflecting our forecast that US growth will be slower than the Fed expects.
■ Eurozone: The economy remains weak, pulled down primarily by Germany and Italy, with
GDP growth set to average 1.2% this year and 0.9% in 2020. The latest indicators signal
rising risk that the manufacturing recession might start spilling over into the services and
construction sectors, which have shown resilience so far. The ECB’s package of stimulus
measures will provide long-lasting accommodation via compression of the term premium,
while tiering and more-appealing conditions of TLTRO-III should bring relief to banks and
contribute to preserving a smooth transmission of monetary policy. The ECB is now likely
to remain on hold well into Christine Lagarde’s term, which begins on 1 November.
■ CEE: Economic growth is likely to hover at 1.7% in 2019 and 2020. Excluding Turkey, which
is expected to exit recession next year, and Russia, where growth could stay below 1.5%,
GDP growth in CEE may decline to around 2.8% in 2020 and thus fall below potential for the
first time since the global financial crisis. External risks are expected to drive the slowdown,
which should gradually affect employment, wage growth and consumer spending. Credit and
fiscal impulses, as well as large inflows of EU funds, will not be sufficient to reverse the
downturn. Central European central banks will likely have to remain on hold due to inflation
being above target for most of 2020. The central banks of Russia and Turkey are expected to
cut interest rates further, to 5.75-6% and 13.5% respectively.
■ UK: We expect either a Brexit deal or an extension to be agreed by 31 October, although
uncertainty surrounding the Brexit process will last for years and will inevitably flare up
during an early election, which is likely to be held in November or early December of this
year. The underlying pace of UK growth has slowed. Even assuming an orderly Brexit, we
project below-trend growth of 1.1% in 2019 and of 0.8% in 2020. A no-deal Brexit would
likely lead to a significant fall in UK output. We expect the BoE’s MPC to cut the bank rate
to zero in 2020 amid a slowdown in global growth. In the event of a no-deal Brexit, the
MPC would likely cut rates to zero much more swiftly.
■ China: We are sticking with our GDP growth forecasts of 6.2% in 2019 and 5.9% in 2020.
High-frequency indicators still point to sluggish domestic and external demand as renewed
trade tensions continue to weigh on business and market sentiment. Beijing is expected to
continue to use a mix of monetary and fiscal policies to maintain reasonably high GDP
growth, while triggering the depreciation of the CNY will likely remain an option of last
resort in a scenario of heightened trade tension with the US.
UniCredit Research page 3 See last pages for disclaimer.September 2019 Macro Research
25 September 2019
Economics Chartbook
Table 1: Annual macroeconomics forecasts
Government budget balance General government debt Current account balance
GDP (%) CPI inflation (%)* Central Bank Rate (EoP) (% GDP) (% GDP) (% GDP)
2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020
US 2.9 2.2 0.7 2.4 1.9 1.7 2.50 1.75 1.25 -4.3 -4.8 -5.2 106.3 106.9 109.1 -2.4 -2.4 -2.1
Eurozone 1.9 1.2 0.9 1.8 1.3 1.2 0.00 0.00 0.00 -0.5 -0.9 -1.0 87.1 88.1 88.9 2.9 2.7 2.5
Germany 1.5** 0.6** 0.9** 1.8 1.4 1.4 - - - 1.7 1.0 -0.3 61.7 59.5 58.4 7.5 7.4 7.2
France 1.7 1.3 0.9 1.9 1.2 1.3 - - - -2.5 -3.1 -2.4 98.5 99.3 99.9 -0.6 -0.5 -0.6
Italy 0.7 0.0 0.3 1.1 0.8 1.0 - - - -2.2 -2.1 -2.3 134.8 136.2 136.8 2.5 2.3 2.0
Spain 2.6 2.1 1.7 1.7 1.0 1.4 - - - -2.5 -2.2 -1.9 97.1 95.8 95.6 1.2 1.0 1.0
Austria 2.4 1.5 1.1 2.0 1.6 1.8 - - - 0.1 0.5 0.2 73.8 71.1 68.8 2.3 1.9 1.9
Greece 1.9 1.5 1.5 0.6 0.5 0.5 - - - 1.1 0.2 0.2 181.1 175.5 170.9 -1.1 -1.0 -0.7
Portugal 2.4 2.0 1.7 1.0 0.5 0.5 - - - -0.4 -0.4 -0.1 122.2 119.8 117.4 -0.8 -0.8 -0.7
CEE
Poland 5.1 4.4 3.4 1.1 3.4 2.7 1.50 1.50 1.50 -0.4 -1.2 -1.6 48.5 46.5 45.6 -0.6 -0.1 -0.8
Czechia 2.9 2.4 2.0 2.0 2.8 2.2 1.75 2.00 2.00 0.9 -0.4 -1.0 32.7 31.2 30.8 0.3 0.9 1.1
Hungary 4.9 4.6 2.7 2.7 4.0 3.1 0.90 0.90 0.90 -2.2 -1.8 -1.3 69.1 69.5 66.8 -0.5 -1.3 -0.6
Russia 2.3 1.2 1.0 4.3 3.7 3.5 7.75 6.75 5.75 2.6 1.4 1.0 12.1 12.5 13.7 6.9 6.3 6.3
Turkey 2.8 -1.3 0.9 20.3 13.5 11.7 24.00 13.50 13.50 -3.5 -5.3 -3.9 30.4 31.4 32.9 -3.5 0.1 -1.9
Other Europe
UK 1.4 1.1 0.8 2.5 1.9 1.7 0.75 0.75 0.00 -1.1 -2.0 -3.0 83.0 84.0 85.5 -3.9 -3.5 -3.0
Sweden 2.4 1.4 1.7 2.1 1.7 1.7 -0.25 -0.25 -0.25 0.9 0.5 0.5 38.8 35.0 33.0 2.2 3.0 2.5
Norway 2.6*** 2.3*** 1.5*** 2.8 2.2 2.0 0.75 1.50 1.50 7.2 5.0 5.0 37.9 32.0 30.0 8.1 6.5 7.5
Switzerland 2.8 0.8 0.8 0.9 0.4 0.2 -0.75 -0.75 -0.75 1.6 0.6 0.5 41.6 40.5 39.6 10.3 9.8 9.3
Others
China 6.6 6.2 5.9 2.1 2.3 2.5 4.35 4.35 4.35 -4.8 -5.9 -5.5 50.4 55.0 59.0 0.4 0.4 0.3
Japan 0.8 0.9 0.3 1.0 0.6 1.0 -0.10 -0.10 -0.10 -2.5 -3.5 -3.1 237.1 237.0 236.0 3.5 3.3 3.5
*Annual averages, except for CEE countries, for which end-of-period numbers are used.
**Non-wda figures. Adjusted for working days: 1.5% (2018), 0.6% (2019) and 0.5% (2020).
***Mainland economy figures. Overall GDP: 1.6% (2018), 1.5% (2019) and 1.2% (2020). Source: UniCredit Research
UniCredit Research page 4 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Table 2: Quarterly GDP and CPI forecasts
REAL GDP (% QOQ, SA)
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
US (annualized) 3.1 2.0 1.4 1.3 0.7 -0.2 -0.1 0.3
Eurozone 0.4 0.2 0.2 0.2 0.3 0.2 0.1 0.2
Germany 0.4 -0.1 0.1 0.1 0.2 0.1 0.0 0.1
France 0.3 0.3 0.3 0.2 0.2 0.2 0.1 0.2
Italy 0.1 0.0 0.1 0.1 0.1 0.1 0.0 0.0
Spain 0.7 0.5 0.5 0.5 0.4 0.4 0.3 0.3
Austria 0.6 0.0 0.2 0.3 0.4 0.2 0.2 0.3
CEE
Poland (% yoy) 4.7 4.2 4.4 4.2 3.8 3.3 3.4 3.3
Czechia 0.6 0.7 0.3 0.1 0.6 0.6 0.7 0.7
Hungary (% yoy) 5.3 4.9 4.3 4.0 3.1 2.8 2.5 2.5
Russia 0.2 0.2 0.6 0.8 0.2 0.0 -0.1 -0.2
Turkey (% yoy) -2.4 -1.5 -1.0 -0.6 -0.7 -1.4 1.1 4.3
Other Europe
UK 0.5 -0.2 0.2 0.3 0.3 0.2 0.2 0.0
Sweden 0.1 0.1 0.3 0.4 0.5 0.5 0.4 0.5
Norway (mainland) 0.5 0.7 0.4 0.4 0.3 0.3 0.3 0.4
Switzerland 0.4 0.3 0.2 0.2 0.2 0.2 0.1 0.1
CPI INFLATION (% YOY)*
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
US 1.6 1.8 1.8 2.2 2.4 1.8 1.5 1.2
Eurozone 1.4 1.4 1.0 1.3 1.5 1.2 1.2 1.0
Germany 1.4 1.7 1.4 1.3 1.5 1.5 1.4 1.3
France 1.2 1.1 1.0 1.3 1.5 1.3 1.2 1.2
Italy 1.0 0.8 0.5 0.8 0.9 1.0 1.1 0.9
Spain (HICP) 1.2 1.1 0.6 1.2 1.9 1.1 1.3 1.2
Austria 1.7 1.7 1.5 1.6 1.8 1.8 1.8 1.9
CEE
Poland 1.7 2.6 2.9 3.4 3.9 2.8 2.9 2.7
Czechia 3.0 2.7 2.9 2.7 2.4 2.2 2.0 2.3
Hungary 3.7 3.4 3.0 4.0 3.6 3.1 3.0 3.1
Russia 5.3 4.6 4.1 3.7 3.1 3.2 3.6 3.5
Turkey 19.7 15.7 10.0 13.5 14.4 14.4 12.3 11.7
Other Europe
UK 1.9 2.0 1.8 1.8 1.8 1.8 1.7 1.6
Sweden 1.9 1.9 1.4 1.5 1.5 1.6 1.9 1.9
Norway 3.0 2.4 1.7 1.8 2.1 2.0 2.0 2.0
Switzerland 0.6 0.6 0.4 0.5 0.3 0.3 0.2 0.2
*Quarterly averages, except for CEE countries, for which end-of-period numbers are used. Source: UniCredit Research
Table 3: Oil forecasts
Current 4Q19 1Q20 2Q20 3Q20 4Q20
Brent (USD/bbl, average) 62 67 65 60 60 60
Source: Bloomberg, UniCredit Research
UniCredit Research page 5 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Table 4: Comparison of annual GDP and CPI forecasts
GDP (%)
UniCredit IMF European Commission OECD
(Apr/Jul-19)*** (May/Jul-19)**** (May/Sep-19)*****
2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020
US 2.9 2.2 0.7 2.9 2.6 1.9 2.9 2.4 1.9 2.9 2.4 2.0
Eurozone 1.9 1.2 0.9 1.9 1.3 1.6 1.9 1.2 1.4 1.9 1.1 1.0
Germany 1.5* 0.6* 0.9* 1.4 0.7 1.7 1.4 0.5 1.4 1.5 0.5 0.6
France 1.7 1.3 0.9 1.7 1.3 1.4 1.7 1.3 1.4 1.7 1.3 1.2
Italy 0.7 0.0 0.3 0.9 0.1 0.8 0.9 0.1 0.7 0.7 0.0 0.4
Spain 2.6 2.1 1.7 2.6 2.3 1.9 2.6 2.3 1.9 2.6 2.2 1.9
Austria 2.4 1.5 1.1 2.7 2.0 1.7 2.7 1.5 1.5 2.7 1.4 1.6
Greece 1.9 1.5 1.5 2.1 2.4 2.2 1.9 2.1 2.2 1.9 2.1 2.0
Portugal 2.4 2.0 1.7 2.1 1.7 1.5 2.1 1.7 1.7 2.1 1.8 1.9
CEE
Poland 5.1 4.4 3.4 5.1 3.8 3.1 5.1 4.4 3.6 5.1 4.2 3.5
Czechia 2.9 2.4 2.0 2.9 2.9 2.7 3.0 2.6 2.5 2.9 2.6 2.5
Hungary 4.9 4.6 2.7 4.9 3.6 2.7 4.9 4.4 2.8 5.0 3.9 3.0
Russia 2.3 1.2 1.0 2.3 1.2 1.9 2.3 1.5 1.8 2.3 0.9 1.6
Turkey 2.8 -1.3 0.9 2.6 -2.5 2.5 2.6 -2.3 3.9 2.8 -0.3 1.6
Other Europe
UK 1.4 1.1 0.8 1.4 1.3 1.4 1.4 1.3 1.3 1.4 1.0 0.9
Sweden 2.4 1.4 1.7 2.3 1.2 1.8 2.4 1.7 1.5 2.4 1.6 1.6
Norway 2.6** 2.3** 1.5** 1.4 2.0 1.9 1.4 1.8 1.8 1.4 1.8 2.1
Switzerland 2.8 0.8 0.8 2.5 1.1 1.5 2.5 1.5 2.0 2.5 1.0 1.5
Others
China 6.6 6.2 5.9 6.6 6.2 6.0 6.6 6.2 6.0 6.6 6.1 5.7
Japan 0.8 0.9 0.3 0.8 0.9 0.4 0.8 0.8 0.6 0.8 1.0 0.6
CPI INFLATION (%)******
UniCredit IMF European Commission OECD
(Apr-19) (May/Jul-19) (May-19)
2018 2019 2020 2018 2019 2020 2018 2019 2020 2018 2019 2020
US 2.4 1.9 1.7 2.4 2.0 2.7 2.2 2.0 2.0 2.0 1.6 2.1
Eurozone 1.8 1.3 1.2 1.8 1.3 1.6 1.8 1.3 1.3 1.8 1.2 1.5
Germany 1.8 1.4 1.4 1.9 1.3 1.7 1.9 1.4 1.3 1.9 1.5 1.7
France 1.9 1.2 1.3 2.1 1.3 1.5 2.1 1.3 1.4 2.1 1.1 1.3
Italy 1.1 0.8 1.0 1.2 0.8 1.2 1.2 0.8 1.0 1.2 0.6 1.0
Spain 1.7 1.0 1.4 1.7 1.2 1.6 1.7 0.9 1.2 1.7 1.0 1.6
Austria 2.0 1.6 1.8 2.1 1.8 2.0 2.1 1.7 1.7 2.1 1.9 2.0
Greece 0.6 0.5 0.5 0.8 1.1 1.4 0.8 0.8 0.8 0.8 0.8 1.3
Portugal 1.0 0.5 0.5 1.2 1.0 1.7 1.2 0.9 1.5 1.2 0.7 1.3
CEE
Poland 1.1 3.4 2.7 1.6 2.0 1.9 1.2 2.1 1.7 1.8 1.9 3.0
Czechia 2.0 2.8 2.2 2.2 2.3 2.0 2.0 2.4 2.1 2.1 2.6 2.2
Hungary 2.7 4.0 3.1 2.8 3.2 3.1 2.9 3.2 3.2 2.9 3.0 3.8
Russia 4.3 3.7 3.5 2.9 5.0 4.5 2.9 5.2 4.0 2.9 4.8 4.0
Turkey 20.3 13.5 11.7 16.3 17.5 14.1 16.3 13.1 9.7 16.3 17.3 12.6
Other Europe
UK 2.5 1.9 1.7 2.5 1.8 2.0 2.5 1.8 2.0 2.5 1.7 1.9
Sweden 2.1 1.7 1.7 2.0 1.9 1.7 2.0 1.7 1.6 2.0 1.7 2.0
Norway 2.8 2.2 2.0 2.8 1.9 1.7 3.0 2.6 2.3 2.8 2.5 2.1
Switzerland 0.9 0.4 0.2 0.9 0.8 0.9 0.9 0.7 1.0 0.9 0.5 0.7
Others
China 2.1 2.3 2.5 2.1 2.3 2.5 2.1 - - 1.9 1.9 2.1
Japan 1.0 0.6 1.0 1.0 1.1 1.5 1.0 0.7 0.9 1.0 0.8 1.5
*Non-wda figures. Adjusted for working days: 1.5% (2018), 0.6% (2019) and 0.8% (2020); **Mainland economy figures. Overall GDP: 1.6% (2018), 1.5% (2019) and
1.2% (2020); ***World Economic Outlook (April 2019) and World Economic Outlook Update (July 2019); ****Spring 2019 Economic Forecast (May 2019) and
Summer 2019 Economic Forecast (July 2019); *****Economic Outlook (May 2019) and Interim Economic Outlook (September 2019); ******Annual averages, except
for CEE countries, for which end-of-period numbers are used .
Source: IMF, European Commission, OECD, UniCredit Research
UniCredit Research page 6 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Table 5: FI forecasts
INTEREST RATE AND YIELD FORECASTS (%)
EMU Current Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Refi rate 0.00 0.00 0.00 0.00 0.00 0.00
Depo rate -0.50 -0.50 -0.50 -0.50 -0.50 -0.50
3M Euribor -0.41 -0.40 -0.40 -0.40 -0.40 -0.40
2Y Schatz -0.74 -0.70 -0.70 -0.70 -0.70 -0.60
fwd -0.79 -0.80 -0.81 -0.82 -0.83
5Y Obl -0.77 -0.70 -0.70 -0.65 -0.65 -0.45
10Y Bund -0.61 -0.50 -0.50 -0.45 -0.40 -0.25
fwd -0.59 -0.58 -0.56 -0.55 -0.53
30Y Bund -0.14 -0.10 -0.10 -0.05 0.05 0.30
2/10 13 20 20 25 30 35
2/5/10 -19 -20 -20 -15 -20 -5
10/30 47 40 40 40 45 55
2Y EUR swap -0.44 -0.40 -0.35 -0.35 -0.35 -0.25
5Y EUR swap -0.43 -0.35 -0.30 -0.25 -0.25 -0.05
10Y EUR swap -0.21 -0.05 0.00 0.05 0.10 0.25
US Current Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Fed Fund 2.00 1.75 1.50 1.25 1.25 1.25
3M Libor 2.11 1.63 1.38 1.25 1.30 1.35
2Y UST 1.61 1.45 1.35 1.35 1.35 1.45
fwd 1.51 1.50 1.49 1.47 1.46
5Y UST 1.52 1.50 1.50 1.50 1.65 1.90
10Y UST 1.64 1.65 1.70 1.75 1.90 2.25
fwd 1.65 1.67 1.69 1.71 1.73
30Y UST 2.10 2.15 2.20 2.30 2.55 2.80
2/10 3 20 35 40 55 80
2/5/10 -21 -10 -5 -10 5 10
10/30 45 50 50 55 65 55
2Y USD swap 1.61 1.45 1.35 1.35 1.35 1.45
10Y USD swap 1.52 1.55 1.60 1.65 1.80 2.15
UK Current Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
Key rate 0.75 0.75 0.50 0.25 0.00 0.00
Spreads Current 4Q19 1Q20 2Q20 3Q20 4Q20
10Y UST-Bund 225 215 220 220 230 250
10Y BTP-Bund 143 125 125 125 150 150
10Y EUR swap-Bund -40 -45 -50 -50 -50 -50
10Y USD swap-UST -12 -10 -10 -10 -10 -10
Source: Bloomberg, UniCredit Research
UniCredit Research page 7 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Table 6: FX forecasts
EUR Current 4Q19 1Q20 2Q20 3Q20 4Q20 3M 6M 12M
G10
EUR-USD 1.10 1.14 1.15 1.16 1.17 1.18 1.14 1.15 1.17
EUR-CHF 1.09 1.10 1.10 1.11 1.12 1.12 1.10 1.10 1.12
EUR-GBP 0.88 0.88 0.87 0.86 0.85 0.85 0.88 0.87 0.85
EUR-JPY 118 122 122 122 122 122 122 122 122
EUR-NOK 9.92 9.80 9.70 9.60 9.50 9.45 9.80 9.70 9.50
EUR-SEK 10.65 10.60 10.55 10.50 10.45 10.40 10.60 10.55 10.45
EUR-AUD 1.62 1.65 1.69 1.73 1.77 1.82 1.65 1.69 1.77
EUR-NZD 1.74 1.78 1.83 1.87 1.89 1.93 1.78 1.83 1.89
EUR-CAD 1.46 1.52 1.52 1.51 1.51 1.51 1.52 1.52 1.51
EUR-TWI 97.4 100.0 100.6 100.7 100.8 101.0 100.0 100.6 100.8
CEEMEA & CHINA
EUR-PLN 4.38 4.30 4.32 4.30 4.29 4.30 4.30 4.32 4.29
EUR-HUF 334 330 332 327 333 335 330 332 333
EUR-CZK 25.9 25.7 25.6 25.4 25.3 25.2 25.7 25.6 25.3
EUR-RON 4.75 4.78 4.83 4.84 4.82 4.85 4.78 4.83 4.82
EUR-TRY 6.28 7.04 7.95 8.25 8.13 8.26 7.04 7.95 8.13
EUR-RUB 70.5 75.8 78.8 80.3 81.3 82.2 75.8 78.8 81.3
EUR-ZAR 16.5 16.8 16.9 16.9 16.9 17.0 16.8 16.9 16.9
EUR-CNY 7.83 8.09 8.14 8.18 8.19 8.20 8.09 8.14 8.19
USD Current 4Q19 1Q20 2Q20 3Q20 4Q20 3M 6M 12M
G10
EUR-USD 1.10 1.14 1.15 1.16 1.17 1.18 1.14 1.15 1.17
USD-CHF 0.99 0.96 0.96 0.96 0.96 0.95 0.96 0.96 0.96
GBP-USD 1.25 1.29 1.32 1.35 1.37 1.39 1.29 1.32 1.37
USD-JPY 107 107 106 105 104 103 107 106 104
USD-NOK 9.03 8.60 8.43 8.28 8.12 8.01 8.60 8.43 8.12
USD-SEK 9.69 9.30 9.17 9.05 8.93 8.81 9.30 9.17 8.93
AUD-USD 0.68 0.69 0.68 0.67 0.66 0.65 0.69 0.68 0.66
NZD-USD 0.63 0.64 0.63 0.62 0.62 0.61 0.64 0.63 0.62
USD-CAD 1.33 1.33 1.32 1.30 1.29 1.28 1.33 1.32 1.29
USTW$ 92.5 90.9 90.1 89.2 88.5 87.7 90.9 90.1 88.5
USD-DXY 98.8 95.8 94.8 93.8 92.9 92.0 95.8 94.8 92.9
CEEMEA & CHINA
USD-PLN 3.99 3.77 3.76 3.71 3.67 3.64 3.77 3.76 3.67
USD-HUF 304 289 289 282 285 284 289 289 285
USD-CZK 23.5 22.5 22.3 21.9 21.6 21.4 22.5 22.3 21.6
USD-RON 4.32 4.19 4.20 4.17 4.12 4.11 4.19 4.20 4.12
USD-TRY 5.70 6.18 6.92 7.11 6.95 7.00 6.18 6.92 6.95
USD-RUB 64.1 66.5 68.5 69.2 69.5 69.7 66.5 68.5 69.5
USD-ZAR 14.95 14.70 14.65 14.55 14.45 14.40 14.70 14.65 14.45
USD-CNY 7.12 7.10 7.08 7.05 7.00 6.95 7.10 7.08 7.00
Forecasts are end-of-period Source: Bloomberg, UniCredit Research
UniCredit Research page 8 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Global
Daniel Vernazza, PhD, ■ We are revising down slightly our global GDP growth forecast for this year by 0.1pp. to
Chief International Economist
(UniCredit Bank, London) 3.0%, while maintaining our 2020 growth forecast of 2.7% (2018: 3.6%). The weakness is
+44 207 826-7805 currently concentrated in the euro area, the UK and China, although we continue to expect
daniel.vernazza@unicredit.eu
the main growth drag over the forecast period to come from the US as the economy slows
and enters a mild technical recession in 2020. In the euro area, we have revised down
growth slightly to just below 1% annualized in 2H19 (previously 1.2%). We have also
revised down our global trade forecast for 2H19 to an annualized growth rate of 1.5% from
2.2%. These revisions largely reflect two major developments since June.
■ First, trade tensions and macroeconomic uncertainty intensified. On 1 September, the US
imposed additional tariffs on more than USD 125bn worth of Chinese imports, and plans
tariffs on most of the remaining Chinese imports with effect from 15 December. The US
Treasury declared China to be a currency manipulator in August after China retaliated with
additional tariffs. The direct effect of the additional tariffs on global growth is likely small,
but the indirect effects coming through value chains and, in particular, confidence effects
appear to be much greater. Brexit-related uncertainty remains high.
■ Second and related, the near-term outlook is slightly weaker than we had anticipated.
Manufacturing, trade and business investment are weak, likely reflecting trade tensions
and slower global growth. The global manufacturing PMI new export orders index has
continued to fall, as has OECD business confidence. The August reading of our proprietary
leading indicator signals subdued global trade growth of around 1¼% annualized in 3Q19.
Services and domestic labor markets have held up, but there are now signs that external
weakness is spilling over into the domestic sector of several major economies.
■ Actual – and market expectations of – monetary policy have eased. In line with our
expectations, the ECB announced a bold package of easing measures in September. The
Fed cut by 25bp in July and September and we expect further cuts taking the target range
for the fed funds rate to 1-1.25% by end-2Q20 (25bp lower than we forecast in June). The
PBoC recently cut its RRR to the lowest level since 2007. Monetary easing has been in
response to downside news: indeed, financial conditions are similar to three months ago.
■ The risks are skewed towards a more frontloaded and sharper downturn. US-China trade
tensions could intensify, the UK could leave the EU without a deal, the US could impose
tariffs on car imports from mid-November, high equity valuations are predicated on
expectations of monetary easing, and confidence is fragile.
GLOBAL LEADING INDICATOR BY UNICREDIT SUBDUED INVESTMENT HIT BY LOSS OF BUSINESS CONFIDENCE
Global Leading Indicator by UniCredit, in standard deviations Capital goods orders in US and EA OECD business confidence (rs)
3 13
Real global trade, 3M-3M in % (rs) % yoy, 3M MA Index
20 102
2 9
101
1 5 10
100
0 1 0 99
98
-1 -3 -10
97
-2 -7
-20 96
-3 -11 95
-30
94
-4 -15
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-40 93
Aug-01 Aug-04 Aug-07 Aug-10 Aug-13 Aug-16 Aug-19
Source: CPB Netherlands, BLS, ECB, OECD, US Census Bureau, UniCredit Research
UniCredit Research page 9 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Global
PMIS INDUSTRIAL PRODUCTION
Whole economy Manufacturing Services 3M/3M (%)
65 4
60 2
55
0
50
-2
45
-4
40
35 -6
30 -8
Mar-99 Feb-02 Jan-05 Dec-07 Nov-10 Oct-13 Sep-16 Aug-19 Jun-00 Aug-03 Oct-06 Dec-09 Feb-13 Apr-16 Jun-19
■ PMIs have trended down since the beginning of 2018. ■ Global industrial production remains subdued.
OECD COMPOSITE LEADING INDICATORS OECD DIFFUSION INDEX
OECD Leading Indicator OECD diffusion index (rs)
OECD Emerging countries (Brazil, China, India, Indonesia, Russia) 103.0 100
105
102.0 75
103 101.0 50
101 100.0 25
99.0 0
99
98.0 -25
97 97.0 -50
96.0 -75
95
95.0 -100
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
93
Apr-99 Mar-02 Feb-05 Jan-08 Dec-10 Nov-13 Oct-16 Jul-19
■ The OECD Leading Indicator for OECD countries signals an ■ 1
Our OECD diffusion index was rising since 3Q18 but has suffered
ongoing slowdown, while that for emerging countries shows signs a setback recently.
of bottoming out.
INFLATION COMMODITIES
yoy (%)
Headline Core Index points, Jan. 2015=100
6.0 140
Bloomberg Commodity Index Bloomberg Energy
5.0 130
4.0
120
3.0
110
2.0
100
1.0
0.0 90
-1.0 80
-2.0 70
Aug-01 Aug-04 Aug-07 Aug-10 Aug-13 Aug-16 Aug-19 May-16 Jan-17 Sep-17 May-18 Jan-19 Sep-19
■ Global headline and core inflation remain close to 2%. ■ Brent will likely price in some geopolitical risk premium after the
attacks in Saudi Arabia, but oversupply remains the top concern.
Source: Bloomberg, CPB Netherlands, Markit, OECD, UniCredit Research
1
It measures the number of countries for which the respective national OECD Leading Indicator increased minus the number of countries for which the respective
national OECD Leading Indicator declined.
UniCredit Research page 10 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
US
Daniel Vernazza, PhD, ■ We confirm our GDP growth forecasts of 2.2% in 2019 and 0.7% in 2020, with growth
Chief International Economist
(UniCredit Bank, London) slowing to below its potential rate in the second half of the year, followed by a mild
+44 207 826-7805 recession in 2020. The US economy grew by 2.0% qoq annualized in 2Q19, slightly
daniel.vernazza@unicredit.eu
stronger than we had expected, after expanding 3.1% in 1Q19. Following annual revisions,
the US economy is now estimated to have slowed more in 2018 than previously thought.
Manufacturing, business investment and exports are weak, reflecting the intensification of
trade tensions and slower global growth. The main drivers of growth are private and public
consumption but the fiscal stimulus is projected to fade in the coming quarters.
■ As the expansion ages (it is now the longest post-war expansion) and spare capacity has
closed (both in the labor market and capacity utilization in firms), investment is needed to
sustain the expansion, but trade tensions are causing firms to defer investment. Payroll
gains are easing. Nonfarm payrolls rose 130k in July, below the three-month average
(156k), six-month average (150k), and twelve-month average (173k). Private payrolls rose
96k in August, a three-month low. Job openings peaked around the turn of the year and
have been easing gradually since. The expected late-cycle squeeze in profit margins as
unit labor cost growth rises will stretch weak corporate balance sheets. High US equity
valuations are in part predicated on market expectations of monetary easing.
■ Despite decent wage inflation (average hourly earnings increased 3.2% yoy in August, not
far off their cyclical high of 3.4%) and unit labor cost growth above 2%, headline and core
PCE inflation remain well below 2%, at 1.4% and 1.6% respectively in July. Core CPI had
increased quite strongly in August, +0.3% mom, for the third consecutive month, taking the
year-on-year rate to 2.4% – its highest rate in more than a year, suggesting below-target
PCE inflation may reflect temporary factors (particularly for clothing and financial services prices).
■ At its September meeting, the FOMC cut the target range for the fed funds rate by 25bp to
1.75-2.00%. The median “dot” of FOMC participants’ interest rate projections sees rates on
hold through 2020, at 2.1% end-2021, 2.4% end-2022, with the longer-run “dot” at 2.5%.
The Fed said it will “act as appropriate” to sustain the expansion and that policy is not on a
preset course. We continue to expect 25bp cuts in December, 1Q20 and 2Q20, taking the
target range for the fed funds rate to 1.00-1.25% by end-2Q20, reflecting our forecast for
slower US growth than the Fed expects.
LONGEST POST-WAR EXPANSION MANUFACTURING A WEAK SPOT
US business cycle expansions, trough to peak, in years US Manufacturing output (Fed measure) Markit manufacturing PMI output (rs)
11
Current expansion (to Sep-19) % 3M/3M Diffusion index
10 4 65
9
Previous three expansions 60
8 2
7 55
6 0
50
5
4 -2 45
3
2 40
-4
1 35
0 -6
Feb-1961
Dec-1900
Nov-1927
Apr-1958
Nov-1970
Oct-1945
Dec-1914
Oct-1949
Jul-1980
Jul-1921
Jul-1924
Nov-2001
Nov-1982
Aug-1904
May-1954
Mar-1919
Jan-1912
Jun-1908
Mar-1933
Mar-1975
Jun-1938
Mar-1991
Jun-2009
30
Dec 1858
Dec-1867
Apr-1888
Dec-1854
Dec-1870
May-1891
May-1885
Jun-1897
Mar-1879
Jun-1894
Jun-1861
-8 25
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
Source: Fed, IHS Markit, NBER, UniCredit Research
UniCredit Research page 11 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
US
GROWTH LABOR MARKET
qoq annualized (%) yoy (%) Nonfarm payrolls (thous., mom) Unemployment rate (%, rs)
8.0
600 12.0
Forecast
6.0
400 10.0
4.0
200
8.0
2.0 0
6.0
0.0 -200
4.0
-2.0 -400
-4.0 -600 2.0
-6.0 -800 0.0
1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
■ GDP growth is likely to slow below potential in 2H19 followed by ■ Payroll gains eased to 130,000 in August, while the
a mild recession in 2020. unemployment rate is close to a 50-year low at 3.7%.
ISM HOUSING MARKET
ISM manufacturing ISM non-manufacturing NAHB Traffic of prospective buyers (% balance of opinion)
Index NAHB Index (% balance of opinion)
65
New home sales (units SAAR, rs)
80 1000
60 900
70
800
55 60
700
50 600
50
40 500
30 400
45
300
20
40 200
10 100
35 0 0
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-07 Jan-10 Jan-13 Jan-16 Jan-19
■ The ISM manufacturing index fell below the 50-level in August, ■ The residential housing market has picked up modestly since the
while the non-manufacturing ISM rebounded to 56.4. turn of the year likely due to lower mortgage rates.
INFLATION MONETARY POLICY
Headline Core
% yoy 2.50
6.0 FOMC members' median projection (September 2019)
5.0 UniCredit forecast
2.25
Fed funds futures (24 September 2019)
4.0
3.0 2.00
2.0
1.75
1.0
0.0
1.50
-1.0
-2.0 1.25
-3.0
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 1.00
Mar-19 Jun-19 Sep-19 Dec-19 Mar-20 Jun-20 Sep-20 Dec-20
■ Headline CPI inflation eased 0.1pp to 1.7% yoy, while core CPI ■ We expect the Fed to cut three times by mid-2020.
inflation rose 0.2pp. to 2.4% yoy in August.
Source: Bloomberg, BLS, UniCredit Research
UniCredit Research page 12 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Eurozone
Marco Valli, ■ The eurozone economy remains stuck in low gear. GDP rose 0.2% qoq in 2Q19, in line with
Head of Macro Research,
Chief European Economist our forecast, but we are slightly reducing our growth projections for the second half of the
(UniCredit Bank, Milan) year to an annualized pace of just below 1%, mainly on the back of weaker external demand.
+39 02 8862-0537
We confirm the quarterly path for 2020. Despite a more subdued 2H19, our estimate for
marco.valli@unicredit.eu
average GDP growth in 2019 rises to 1.2% from 1.0% thanks to some upward revisions to
previous data. However, a negative carryover effect reduces our estimate for average growth
in 2020 to 0.9% (our previous forecast was for 1.0% growth).
■ The underperformance of the manufacturing sector continues. Uncertainty related to
protectionism and the risk of a hard Brexit severely restrain export activity, while the services
and construction sectors remain more resilient as domestic demand benefits from ongoing
(although slowing) job creation, sound balance sheets of households and a mildly
expansionary fiscal stance. Gauges of employment and pricing power reflect this stark
sectoral contrast. In this context, eurozone countries with a large manufacturing base and
export propensity have been hit the hardest, with Germany the first in line. Persistent
divergence between the two main sectors of the economy is not sustainable, and the longer
the manufacturing recession lasts, the higher the risk that the broader economy will ultimately
be dragged down. The September PMIs serve as a warning in this regard. With GDP growth
having settled below potential and no clear reacceleration in sight, the window of opportunity
for a build-up in inflationary pressures will probably close before too long. We expect headline
inflation to average about 1¼% in both 2019 and 2020. Unsurprisingly, market-based
measures of inflation expectations keep hovering around historically low levels.
■ On 12 September, the ECB announced a bold package of stimulus measures that include:
1. an open-ended QE program for public and private assets that will run at a pace of
EUR 20bn per month until “shortly before” key interest rates start rising; 2. a 10bp cut in the
deposit rate along with strengthened forward guidance; 3. a two-tier system for reserve
remuneration; and 4. easier terms for TLTRO-III. ECB President Mario Draghi’s statement
that the side effects of QE are smaller than those of rate cuts suggests a fairly high bar for a
further reduction in the deposit rate, while asset purchases have been calibrated to provide
long-lasting accommodation via compression of the term premium. Tiering and more
appealing conditions of TLTRO-III will bring relief to the banking sector and should, therefore,
contribute to preserving a smooth transmission mechanism of monetary policy. Christine
Lagarde is due to take over at the helm of the ECB on 1 November. With a major monetary
stimulus already set in motion, she is likely to start her term with a loud call for fiscal policy to
play a more active role.
MANUFACTURING SECTOR UNDER PRESSURE MARKETS DO NOT EXPECT INFLATION TO RECOVER
5Y5Y inflation swap (%)
64 3.0
60 2.8
2.6
56
2.4
52
2.2
48 2.0
44 1.8
1.6
40
Manufacturing PMI 1.4
36
Services PMI 1.2
32 1.0
Jul-98 Oct-02 Jan-07 Apr-11 Jul-15 Sep-19 Apr-04 Nov-06 Jun-09 Jan-12 Aug-14 Mar-17 Sep-19
Source: Bloomberg, Markit, UniCredit Research
UniCredit Research page 13 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Eurozone
GROWTH INFLATION
1.2 3.5 3.5
GDP qoq (%) GDP yoy (%, rs) Forecast Headline HICP (yoy %) Forecast
1.0 3.0 3.0
Core HICP (yoy %)
0.8 2.5 2.5
2.0 2.0
0.6
1.5
0.4 1.5
1.0
0.2 1.0
0.5
0.0 0.5
0.0
-0.2 0.0
-0.5
-0.4 -0.5
-1.0
-0.6 -1.5 -1.0
1Q10 2Q12 3Q14 4Q16 1Q19 4Q20 Dec-12 Apr-14 Aug-15 Dec-16 Apr-18 Aug-19 Dec-20
■ We forecast growth of 1.2% this year and 0.9% in 2020. ■ Inflation is unlikely to approach the ECB’s goal anytime soon.
LABOR MARKET INVESTMENT
Unemp. change (in 000s) EC survey (standardized)
500 12.5 2.0
Unemp. rate (%), rs
400 12.0
11.5 1.0
300
11.0
200 0.0
10.5
100 10.0
-1.0
0 9.5
9.0 -2.0
-100
8.5 Industry - capital goods
-200
8.0 -3.0
Construction
-300 7.5
-400 7.0 -4.0
Jan-99 Mar-03 May-07 Jul-11 Sep-15 Aug-19
Aug-03 Nov-06 Feb-10 May-13 Aug-16 Jul-19
■ The unemployment rate is approaching its pre-crisis low. ■ The construction sector remains in good shape.
CREDIT CAR SECTOR
BLS - credit demand for fixed investment (standardized) Average qoq growth in recovery phases
2.0 15 3.0
Capex (yoy) - rs
1.5
10 2.5
1.0
5 2.0
0.5
1.5
0
0.0
1.0
-0.5 -5
0.5
-1.0
-10
0.0
-1.5
-15 GDP
-2.0 -0.5
private consumption
-20 -1.0 investment (transport)
-2.5
car registrations
-3.0 -25 -1.5
4Q02 1Q07 2Q11 3Q15 2Q19 2Q97-1Q01 3Q03-1Q08 3Q09-1Q11 2Q13-to date
■ Credit demand from firms is slowing, but not dramatically. ■ Car registrations have been strong in this recovery phase
Source: ECB, Eurostat, UniCredit Research
UniCredit Research page 14 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Germany
Dr. Andreas Rees, ■ We are revising our GDP growth forecast for 2H19 slightly further downward on the back of
Chief German Economist
(UniCredit Bank, Frankfurt) weaker expectations for global trade and disappointing business sentiment surveys (Ifo,
+49 69 2717-2074 manufacturing PMI). We anticipate a GDP increase of 0.1% qoq instead of a rise of 0.2% qoq
andreas.rees@unicredit.de
in the final two quarters of the year. Hence, a technical recession is still not our baseline
Dr. Thomas Strobel, Economist after the slight decline in overall economic activity in 2Q19 (-0.1% qoq). However, in the
(UniCredit Bank, Munich) meantime, it has become a close call. Our projected quarterly growth pattern for 2020,
+49 89 378-13013
which forecasts meager growth, remains unchanged.
thomas.strobel@unicredit.de
■ We continue to anticipate GDP growth of 0.6% for 2019 as a whole. However, given that
GDP growth is likely to enter next year at a somewhat weaker pace (due to some lower
statistical overhang), we are scaling down our growth forecast slightly to 0.9% for 2020
(from 1.1%). It should be noted that this figure is calculated on a non-working-day-adjusted
basis, as is common in Germany. The more meaningful GDP growth figure, adjusted for
calendar effects, amounts to only 0.5% in 2020.
■ Business sentiment surveys continued to deteriorate further until recently when some
tentative signs of stabilization have emerged (Ifo). Business expectations of manufacturing
companies have still remained at their lowest level since the eurozone crisis in 2012. The
signs of negative spillover effects to the services sector have also become more visible:
business expectations of services companies have remained at levels last seen in 2009,
when the German economy was recovering from the global financial crisis.
■ The negative spillover effects from exports to internal demand can also be seen when
looking at the latest labor market data. Vacancies have started to decline on a yearly basis
with increases in employment becoming significantly less strong. We think that more
weakening is yet to come.
■ The latest remarks by Chancellor Angela Merkel and Finance Minister Olaf Scholz have
made it clear that the government is sticking to a roughly balanced budget for next year. A
significant fiscal stimulus package is likely to come only in the event of a severe economic
crisis such as an outright escalation in US-Chinese trade tensions and/or a hard Brexit. An
abrogation or an amendment of the debt brake is unlikely in the foreseeable future since it
would need a two-thirds majority in the Bundestag and Bundesrat.
BUSINESS EXPECTATIONS (IFO DIFFUSION INDICES)
AT HISTORICALLY LOW LEVELS JOB CREATION WEAKENING
40 1000 200
Services Manufacturing Employment, in 1,000 yoy Vacancies, in 1,000 yoy (rs)
30 800 150
20
600 100
10
400 50
0
-10 200 0
-20 0 -50
EMU crisis
-30
-200 -100
-40
-50 -400 -150
Global financial crisis
-60 -600 -200
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Feri, UniCredit Research
UniCredit Research page 15 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Germany
GROWTH NEW ORDERS
Real GDP (in % qoq) Real GDP (in % yoy, rs) Forecast qoq %
3 6 10.0
2 4
5.0
July (mom, %)
1 2
0.0
0 0
-1 -2 -5.0
-2 -4
-10.0
-3 -6
-15.0
-4 -8
-5 -10 -20.0
1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 1Q20 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19
■ GDP declined 0.1% qoq in 2Q19. ■ New orders in the manufacturing sector declined 2.7% mom
in July 2019.
MANUFACTURING ACTIVITY INFLATION
qoq % yoy %
10.0 4.0
Headline Core (ex energy & food)
3.5
5.0 3.0
2.5
0.0 2.0
1.5
July (mom, %)
-5.0 1.0
0.5
-10.0 0.0
-0.5
-15.0 -1.0
1Q07 1Q08 1Q09 1Q10 1Q11 1Q12 1Q13 1Q14 1Q15 1Q16 1Q17 1Q18 1Q19 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
■ Manufacturing activity decreased 0.8% mom in July 2019. ■ Consumer prices (headline) rose 1.4% yoy in August 2019.
LABOR MARKET PUBLIC BUDGET BALANCE
mom 1,000 Forecast
120 2.0
100 1.0
80
0.0
60
-1.0
40
20 -2.0
0 -3.0
-20
-4.0
-40
-5.0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
-60
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
■ In the last three months, job creation has slowed to 14,000 a ■ We expect a budget surplus of 1.0% of GDP in 2019 after 1.7%
month on average. last year.
Source: Feri, UniCredit Research
UniCredit Research page 16 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
France
Tullia Bucco, Economist ■ We confirm our 1.3% GDP forecast for 2019 and 0.9% for 2020. Growth came in line with
(UniCredit Bank, Milan)
+39 02 8862-0532 expectations in the first half of the year, with economic activity expanding at an annualized
tullia.bucco@unicredit.eu pace of 1.3%. The major disappointment was private consumption (at an annualized 1.1%
on average), which failed to accelerate despite fiscal stimulus measures announced by
President Emanuel Macron, first in December 2018 (worth EUR 10bn) in reaction to the
yellow vest protests and then in April of this year (worth an additional EUR 7bn) – at the
end of Mr. Macron’s vast national debate on the country’s economic and social priorities.
However, the lower-than-expected growth in private consumption was compensated for by
relatively more resilient export growth, which broadly stabilized in 1H19 at the fair levels
recorded at end-2018. Encouragingly, PMI data suggest that growth held up at decent
levels in 3Q19, although it may have lost momentum towards the end of the quarter.
Overall, France is likely to outperform its largest eurozone peers this year.
■ The government’s return from summer recess has coincided with a shift in Mr. Macron’s tone,
which is now aimed at forging broader consensus with regard to the ambitious economic
reforms he intends to implement in the second part of his term. The change in Mr. Macron’s
rhetoric seems to be based on a desire to attract left-wing voters ahead of municipal elections
scheduled for March 2020 and to prevent yellow-vest protests from regaining ground.
Mr. Macron has shown a willingness to extend the period of discussion on the draft of the
pension-reform bill and to abandon some of its most controversial features in order to secure
the support of the French Democratic Confederation of Labor, France’s largest union, and
thus avoid the risk of major protests erupting. Mr. Macron also eventually abandoned the idea
of identifying offsetting fiscal measures worth EUR 3bn to fully finance the fiscal concessions
announced in the spring for low-income households and retirees.
■ The deliberate decision to avoid the introduction of new, unpopular fiscal measures and
slight reduction of growth estimates, should lead to a 0.1-0.2pp upward revision of the
government’s target for the 2020 budget deficit, most likely to 2.1-2.2% of GDP. This
would still represent a meaningful improvement from 3.1% expected for this year, which
however largely reflected the impact of temporary measures. The negative impact on
fiscal revenue of slower growth is however expected to be partly compensated for by
lower interest expenditure. The overall fiscal stance, as measured by the change in the
structural balance, is likely to be broadly neutral and thus fall short of Brussel’s demands.
Consequently, we expect the debt-to-GDP ratio to moderately increase in 2020, to 99.9%
(after 99.3% we forecast for this year).
AN INCREASE IN DISPOSABLE INCOME FAILED TO FRENCH MANUFACTURING PMIS HAVE BEEN
TRANSLATE INTO SIGNIFICANTLY HIGHER CONSUMPTION OUTPERFORMING THOSE OF THE COUNTRY’S PEERS
8 17 Manufacturing PMI index (>50=expansion)
65
6 16
60
4 15
55
2 14
50
0 13
45
-2 Nominal disposable income (yoy, %) 12
40
Household consumption (yoy, %) Eurozone Italy Germany France
-4 11 35
Saving ratio (% disposable income, rs)
-6 10 30
4Q06 3Q08 2Q10 1Q12 4Q13 3Q15 2Q17 1Q19 Sep-07 Sep-09 Sep-11 Sep-13 Sep-15 Sep-17 Sep-19
Source: Eurostat, Markit, UniCredit Research
UniCredit Research page 17 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
France
GROWTH GROWTH DRIVERS
Contribution to qoq GDP growth (pp)
1.5 4 2.0
1.0 3 1.6 Net exports Inventories
Gross fixed investment Public consumption
0.5 1.2 Private consumption GDP growth (qoq, %)
2
0.0 0.8
1
-0.5 0.4
0
-1.0 GDP (qoq %) 0.0
Forecast
GDP (yoy %, rs) -1
-1.5 -0.4
-2.0 -2 -0.8
1Q08 4Q09 3Q11 2Q13 1Q15 4Q16 3Q18 2Q20 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19
■ We confirm our GDP forecasts at 1.3% for 2019 and 0.9% ■ Gross fixed investment has steadily contributed to GDP amid
for 2020. sustained spending by non-financial corporates.
SERVICES SENTIMENT INFLATION
(standardized values) yoy %
4.0
4
Services PMI
Forecast
INSEE services climate indicator
3.0
2 Bank of France services sentiment indicator
2.0
0
1.0
-2
0.0
-4 -1.0
Jul-98 Oct-03 Jan-09 Apr-14 Jul-19 Nov-04 Aug-06 May-08 Feb-10 Nov-11 Aug-13 May-15 Feb-17 Nov-18 Aug-20
■ The services PMI almost closed the gap that had opened up with ■ Inflation is likely to hover around 1.2% throughout the forecast
national surveys. horizon, barring any major tension with regard to oil supply.
EXPORTS CURRENT ACCOUNT
Goods exports by region (value, % yoy) France's current account (% GDP)
50 6
40 4
30 2
20 0
10 -2
0 -4
-10 -6 Primary income balance Secondary income balance
US Africa Trade balance - services Trade balance - goods
-20 -8
Asia Europe Current account balance
-30 -10
Jan-10 Mar-11 May-12 Jul-13 Sep-14 Nov-15 Jan-17 Mar-18 May-19 Mar-08 Dec-10 Sep-13 Jun-16 Mar-19
■ Exports of goods to France’s European peers have been less ■ The profits repatriated by multinational companies roughly
dynamic, reflecting a slowdown in demand from Russia and Turkey. compensate for the deficit in the goods trade.
Source: Eurostat, INSEE, Markit, UniCredit Research
UniCredit Research page 18 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Italy
Dr. Loredana Maria Federico, ■ The improvement in Italy’s GDP growth in 2H19 is now expected to be slower than
Chief Italian Economist
(UniCredit Bank, Milan) previously thought (+0.1% qoq, on average, rather than 0.2%). This reflects persistent
+39 02 8862-0534 weakness from abroad and still-fragile internal demand. Due to this lower carryover effect,
loredanamaria.federico@unicredit.eu
we are lowering our average annual GDP growth forecast for 2020 to 0.3% from 0.4%.
This follows flat growth in 2019 (unchanged from our previous estimate).
■ Regarding the main growth drivers, exports showed some resilience in the first half of the
year, probably courtesy of a weaker exchange rate. Still, further slowdown in foreign demand,
particularly from Europe (including the risk of recession in Germany, Italy’s primary trading
partner) and China, is likely to weigh on Italian exports, and in turn machinery and equipment
investment. At the beginning of 3Q19, industrial production declined 0.7% mom, with the
reduction particularly pronounced in the output of capital goods (-1.6% mom). Moreover,
domestic spending is expected to remain weak. First, the recovery in investment in
construction and intellectual property products is still tentative, although both areas stand to
benefit from the government’s intention (if implemented) to boost growth in the capital stock.
Second, the impulse coming from private consumption will probably be positive but modest
and is likely to be dragged down by the looming employment slowdown.
■ Looking at the credit cycle, loan growth has been on a slowing trend since the beginning of
the year, mainly due to a deterioration in corporate lending growth, which has turned
slightly negative. This deterioration has probably been caused by a tightening in supply
conditions and a renewed weakening in loan demand. Still, the Bank of Italy lending survey
shows that the worsening of both factors appears to be moderate. If credit standards
benefit, to some extent, from the bold package of measures announced by the ECB, a
reversal of the current trend is likely.
■ In terms of public finance, we expect the budget deficit to be at 2.1% of GDP this year and,
given our own macro forecasts, at 2.3% in 2020. Our key assumption is that the level of the
budget deficit will be constrained by the broad willingness of the government to comply
with the EU budget rules. The public debt/GDP ratio is expected to significantly increase in
2019 (as the government will probably miss the 1.0% of GDP privatization target) and to a
lesser extent in 2020, up to 137%, from 134.8% in 2018 – the latter was revised upward
due to a methodology change. Still, given the lower level of government bond yields,
interest expenditure is likely to broadly stabilize or decline slightly and this may mitigate
any risk to public debt sustainability.
EXPORTS TO DECLINE DUE TO SLOWING DEMAND CREDIT TO NON-FINANCIAL CORPORATIONS IS WEAKENING
yoy (%) 4.5 120 16
16 Tight supply conditions /
100 Expansive demand cond.
3.5 12
12 80
8 2.5 8
60
4 1.5 40 4
0 20
0.5 0
0
-4
-0.5 -4
-20
-8
-1.5 -40 -8
TWI Euro (-2Q), ls
-12
-60
Real exports of goods and services, ls -2.5 Credit standards (-6Q) -12
-16 -80
Demand conditions (-3Q) Easing supply conditions /
-20 World GDP (proxy for Italy) -3.5 -16
-100 Loan growth, yoy (%), rs Contractionary demand cond.
-24 -4.5 -120 -20
1Q03 2Q06 3Q09 4Q12 1Q16 2Q19 4Q05 2Q07 4Q08 2Q10 4Q11 2Q13 4Q14 2Q16 4Q17 2Q19 4Q20
Source: Eurostat, Istat, ECB, Bank of Italy, UniCredit Research
UniCredit Research page 19 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Italy
GROWTH INFLATION
1.0
GDP qoq (%, ls) yoy (%) Headline CPI
2.5
4.5
GDP yoy (%, rs)
0.5 1.5 4.0
3.5
0.5 3.0
0.0
2.5
-0.5
2.0
-0.5 -1.5 1.5
1.0
-2.5
0.5
-1.0
-3.5 0.0
-0.5
-1.5 -4.5 -1.0
2Q10 4Q11 2Q13 4Q14 2Q16 4Q17 2Q19 4Q20 Dec-10 Dec-12 Dec-14 Dec-16 Dec-18 Dec-20
■ We expect modest growth throughout 2020. ■ Inflation is likely to rise slightly by year-end, but risks are skewed
to the downside.
CONSTRUCTION SECTOR LABOR MARKET
Construction firms yoy (%)
4.0 4.0
192 160
Output (index 2015=100)
3.0 3.0
182 150 2.0 2.0
172 Output, MA(3M)
140 1.0 1.0
162 Sentiment indicator, rs
0.0 0.0
152 130 -1.0 -1.0
142 120 -2.0 -2.0
-3.0 -3.0
132 110
-4.0 Real GDP -4.0
122
100 -5.0 -5.0
112 Employment
-6.0 -6.0
102 90
-7.0 -7.0
92 80 -8.0 -8.0
Aug-06 Nov-09 Feb-13 May-16 Aug-19 2Q99 2Q01 2Q03 2Q05 2Q07 2Q09 2Q11 2Q13 2Q15 2Q17 2Q19
■ Construction output remains relatively flat, while sentiment ■ Despite resilience so far, a slowdown in employment growth
among construction firms is historically high. is likely.
STATE SECTOR BORROWING REQUIREMENT(SSBR) NET INTERNATIONAL INVESTMENT POSITION (NIIP)
State sector borrowing requirement % of GDP
EUR bn, YTD NIIP - 1Q19
20 Netherlands
2019 2018 2017 2016 2015 Denmark
10 Germany
Malta
Belgium
0 Luxembourg
Sweden
Austria
-10 Finland
Italy
UK
-20 Czechia
France
-30 Slovenia
Estonia
Lithuania
-40 Bulgaria
Romania
Latvia
-50 Hungary
Poland
-60 Croatia
Slovakia
Spain
-70 Portugal
Cyprus
Greece
-80
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec -150 -130 -110 -90 -70 -50 -30 -10 10 30 50 70 90
■ The execution of SSBR up until August does not suggest a risk of ■ Italy’s NIIP (as a percentage of GDP) hit a new low in 1Q19 and it
significant fiscal slippage on the government’s 2019 deficit target is now more or less balanced.
of about 2% of GDP.
Source: Istat, Ministry of Economy and Finance, Eurostat, UniCredit Research
UniCredit Research page 20 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Spain
Edoardo Campanella, ■ We confirm our GDP growth forecast of 2.1% in 2019 and 1.7% in 2020. The most recent
Economist
(UniCredit Bank, Milan) PMI surveys, which have highlighted a widening gap in the performance of the services and
+39 02 8862-0522 manufacturing sectors, are consistent with GDP expansion of 0.5% qoq. Going forward, we
edoardo.campanella@unicredit.eu
expect domestic demand to moderate on the back of a slowdown in private consumption,
whereas investment is also likely to lose momentum and net exports will probably remain
slightly negative.
■ The labor market is becoming tighter. In 2Q19, the unemployment rate dropped to 14.1%
from 14.2% in 1Q. This is the slowest quarterly decline since 2013. According to anecdotal
evidence, a growing number of companies are having trouble finding qualified workers.
■ The political stalemate in Spain is weighing on public finances. The 2018 budget was rolled
over into 2019. We now expect something similar to happen also in 2020, with the budget
deficit set to reach 1.9% next year (this is based on a scenario in which legislation remains
unchanged). As discussed below, we do not expect a clear majority to emerge at the next
general elections and this will likely prevent the main parties from reaching an agreement on
the 2020 budget. The political stalemate that has characterized Spain since 2016 has
impaired the ability of each minority government to pursue its own fiscal agenda, thus
depriving the Spanish economy of a clear fiscal stance.
■ On 10 November, Spain will hold its fourth general election in four years and the second in
2019. PSOE’s offer to Podemos of a government of cooperation – more than simple external
support to a PSOE minority government, less than a coalition – did not work out. Podemos
expected to have top senior ministers in the executive, but PSOE was not able to offer that
because it wanted to retain maximum flexibility in terms of short-lived alliances with the other
parties on an issue-by-issue basis. The next general vote is unlikely to deliver a parliament
much different from the departing one. According to the most recent polls, both PSOE and
PP have gained some additional support in recent months, with the former still in the lead.
However, they are both far short of securing an absolute majority. Podemos and Ciudadanos
have lost some support, probably because of their unwillingness to compromise with PSOE,
which led to the breakdown of negotiations. While PSOE is likely to win the election again,
Ciudadanos will likely be the kingmaker. It will either decide to support a PSOE-led
government or form a minority government with the PP, with the external support of Vox. We
attach to the latter scenario a non-negligible probability as Ciudadanos wants to position itself
on the center right of the political spectrum.
FISCAL IMPULSE CLOSE TO ZERO HERE WE GO AGAIN
Change in cyclically adjusted primary balance (% GDP) Popular support (%)
35
6.0 Opinion polls
Tigheter fiscal policy Polilitcal stalemate 30 April 2019 election
4.0
2016 Election
25
2.0
20
0.0
-2.0 15
-4.0 10
-6.0 5
Looser fiscal policy
-8.0 0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 PSOE PP Ciudadanos Podemos Vox
Source: Eurostat, various polling sources, UniCredit Research
UniCredit Research page 21 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Spain
GROWTH PMIS
GDP(%, qoq) GDP(%, yoy, RS) Manufacturing PMI Services PMI
65
1.0
2.5
60
55
0.0 0.0 50
45
Forecast
40
-1.0 -2.5
35
30
-2.0 -5.0 25
2Q08 4Q09 2Q11 4Q12 2Q14 4Q15 2Q17 4Q18 2Q20 Jan-01 Jan-03 Jan-05 Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19
■ We expect GDP growth to continue to gradually decelerate. ■ The gap between the performance of the manufacturing and
services sectors has widened.
INFLATION CREDIT CONDITIONS
80
HICP inflation (yoy;%) Demand conditions (net percentage)
6.0
5.0 40
4.0
Forecast
3.0 0
2.0
-40
1.0
0.0
-80
-1.0 Loans to NFCs
Loans for house purchase
-2.0 -120
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20 1Q031Q041Q051Q061Q071Q081Q091Q101Q111Q121Q131Q141Q151Q161Q171Q181Q19
■ Inflation is likely to peak with oil later in the year before dropping
■ Demand for loans has weakened, also for house purchases,
again. whereas for non-financial firms it remains weak.
LABOR MARKET SURVEYS
Affiliates to social security by sector (yoy; %) 10
20
Construction Industry Services Total
0
10
-10
0
-20
-10
-30
-20
-40
Consumer confidence (smoothed)
Industrial confidence (smoothed)
-30 -50
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18
■ Employment creation in the construction sector has slowed ■ Industrial confidence has recovered some lost ground.
significantly though it remains high.
Source: INE, Eurostat, UniCredit Research
UniCredit Research page 22 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Austria
Stefan Bruckbauer, ■ The current polls suggest that the conservative Austrian People's Party (ÖVP), under the
Chief Austrian Economist
(Bank Austria) leadership of former Austrian Chancellor Sebastian Kurz and with an approval rating of
+43 505 05 41951 35%, will be the clear winner of early parliamentary elections on 29 September. As in 2017,
stefan.bruckbauer@unicreditgroup.at
the Austrian Social Democratic Party (SPÖ) and the right-wing, nationalist Freedom Party
Walter Pudschedl, Economist of Austria (FPÖ) look set to be engaged in a close race for second place, with around 20%
(Bank Austria) of the vote and a slight advantage projected for the SPÖ. The Green party should make a
+43 505 05 41957
comeback in parliament. On the basis of these surveys, we see three realistic coalition
walter.pudschedl@unicreditgroup.at
constellations. The first is a continuation of the coalition between ÖVP and FPÖ. Possible
alternatives would be cooperation between the ÖVP with the SPÖ or between the liberal
NEOs party and the Greens. On average, government negotiations in Austria take about
three months. In the meantime, government business is conducted by an independent
expert government under Chancellor Brigitte Bierlein.
■ Following economic growth of 1.7% in the first half of the year, we continue to expect GDP
growth to be slightly lower (at 1.5%) for 2019 as a whole, as support from domestic
demand should weaken towards the end of the year. With export conditions still very
challenging, we still expect growth to exceed 1% in 2020, driven by domestic demand. In
the course of next year, however, we expect that not only investment activity but also
private consumption will lose momentum.
■ Since the beginning of 2019, Austria’s seasonally adjusted unemployment rate has stabilized
at 4.6%. In the coming months, we expect a turnaround to set in and unemployment to move
moderately upwards. The unemployment rate for 2019 should average 4.6%, which is below
the previous year's figure of 4.9%. Due to the weaker economy, however, we expect
unemployment to start rising in winter at the latest. We expect to see a slight increase in the
unemployment rate to an average of 4.7% in 2020 as a whole.
■ Based on the strong domestic economy, budget revenues in the first seven months of 2019
increased by an average of more than 3% yoy. In addition, expenditures rose more
moderately than planned, primarily thanks to the low-interest-rate environment. We
therefore now expect the 2019 budget to be in surplus by the equivalent of 0.5% of GDP.
Taking into account measures recently adopted by parliament, such as reductions in health
insurance contributions for low-income earners, and slower economic momentum, we
expect Austria’s 2020 budget to be in surplus again but, at an equivalent of 0.2% of GDP,
less so than in 2019.
ECONOMIC GROWTH SLOWS MANUFACTURING SUFFERS FROM GLOBAL SLOWDOWN
GDP, sa, %, qoq (rs) GDP, %, yoy UniCredit Bank Austria PMI Industrial production (yoy, %, 3MMA, rs)
4.0 2.0 66 8
64 7
3.0 1.5 62 6
2.5 2.4
60 5
2.1
2.0 1.0 58 4
1.5
1.1 56 3
1.0 0.5 54 2
52 1
0.0 0.0 50 0
48 -1
Forecast
-1.0 -0.5 46 -2
1Q16 3Q17 1Q19 3Q20 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
Source: Statistik Austria, IHS Markit, UniCredit Research
UniCredit Research page 23 See last pages for disclaimer.September 2019 Macro Research
Economics Chartbook
Austria
EXPORT SECTOR SENTIMENT INDICATORS
Exports (yoy, %, 3MMA) PMI new export orders - rs Standardised Consumer sentiment
10 65 4.0
Industrial sentiment
3.5
8 62 Construction sentiment
3.0
6 59
2.5
4 56 2.0
2 53 1.5
1.0
0 50
0.5
-2 47
0.0
-4 44
-0.5
-6 41 -1.0
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
■ The decline in new orders has so far slowed export momentum ■ While industrial sentiment has deteriorated, the good mood
only slightly, as order backlogs are being processed. In the first among consumers and in the construction sector promises a
half of the year, exports rose by an average of 3.3% yoy. continuation of strong domestic demand.
LABOR MARKET INFLATION
Number of employed (mom, sa) Number of unemployed (mom, sa) Energy Other effects Total CPI
Labor force (mom, sa) 3.0
15,000 Forecast
2.5
10,000 2.0
5,000 1.5
1.0
0
0.5
-5,000
0.0
-10,000 -0.5
-15,000 -1.0
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19 Jan-16 Mar-17 May-18 Jul-19 Sep-20
Foreca
■ The economic slowdown has affected the labor market. ■ Despite recent price fluctuations in the oil market, we continue to
Seasonally adjusted figures show an increase in unemployment expect moderate inflation, averaging 1.6% in 2019 and 1.8%
since the spring as the employment dynamic declines. in 2020.
FEDERAL GOVERNMENT BUDGET REVENUES BUDGET BALANCE AND PUBLIC DEBT
yoy, %, 6MMA GDP (%)
20 1.0 90
Budget balance Total public debt - rs
17
0.5 83.0
85
14 0.5
0.1 0.2
11
0.0 80
78.2
8
5 -0.5 73.8 75
-0.8
2 71.1
68.8
-1 -1.0 70
-4 -1.6
Tax revenues, total Payroll tax -1.5 65
-7
VAT Corporate income tax
-10
-2.0 60
Jan-16 Jul-16 Jan-17 Jul-17 Jan-18 Jul-18 Jan-19 Jul-19
2016 2017 2018 2019 2020
■ Despite the slowdown in the economy, tax revenues rose by more ■ Supported by slight budget surpluses, public debt should also fall
than 3% in the first seven months of the year, with payroll tax in 2019 and 2020. For the end of 2020, we assume general
contributing in particular to the momentum. government debt of only 68.8% of GDP.
Source: Statistik Austria, IHS Markit, European Commission, UniCredit Research
UniCredit Research page 24 See last pages for disclaimer.You can also read
