CONSENSUS FORECAST - FocusEconomics...Is uncertainty damaging the economy? Who has the best economic...

CONSENSUS FORECAST

U.S. ELECTIONS 2UNITED STATES 8CALENDAR 23NOTES 25

PUBLICATION DATE 27 September 2016FORECASTS COLLECTED 20 September - 26 September 2016

INFORMATION AVAILABLE Up to and 26 September 2016 NEXT EDITION 25 October 2016

United States • October 2016

ContributorsARNE POHLMAN Chief Economist

ARMANDO CICCARELLI Head of Data Solutions

RICARD TORNÉ Head of Economic Research

RICARDO ACEVES Senior Economist

ANGELA BOUZANIS Senior Economist

DIRINA MANÇELLARI Senior Economist

DAVID AMPUDIA Economist MASSIMO BASSETTI Economist OLGA COSCODAN EconomistTERESA KERSTING Economist

LUIS LÓPEZ VIVAS Economist CHRISTOPHER MC INNES Economist JEAN-PHILIPPE POURCELOT Economist

MARLÈNE RUMP Economist ANDREA VETRUGNO Economist MIRIAM DOWD EditorCAROLINE GRAY Editor

FOCUSECONOMICS U.S. Presidential Elections

FocusEconomics Consensus Forecast | 2

October 2016

• The economic plans of the leading presidential candidates, Hillary Clinton and Donald Trump, offer widely different policy agendas, which also mean different sizes and roles of government. We polled our global network of analysts to find out their views on the candidates’ plans. Of the sample of economists from international and local economic institutions we contacted, 72 answered the survey. This special report includes the highlights from our poll.

• Overall, the economic platform of Clinton proposes a broader role for government, envisaging more spending, higher taxes on high-income households and greater regulation. In comparison, Trump’s economic plan affords a lesser role to government, envisaging moderately lower spending, lower taxes and fewer regulations.

• The campaign marks a pivotal moment in the U.S. modern era. For the first time, the two leading presidential candidates have broken completely with the orthodoxy of globalization and free trade. This, as a result, casts a dark shadow on the recovery in global trade.

U.S. ElectionsSpecial Survey

Which candidate do you foresee winning the elections?

Note: Total responses in %. Source: FocusEconomics.

Hillary Clinton81.9%

Donald Trump18.1%

Who will win?National opinion polls suggest that voters are almost evenly split over which candidate will win. But who do the economic experts think will triumph?

Clinton was considered by our analysts as the favorite to win the presidential election on 8 November, for three main reasons: the polls, her qualifications and moderation, and the nature of her opponent Trump.

Although Clinton’s lead in the polls declined in the past weeks, she is showing signs of recovery. Analysts see that, on average, Clinton has remained consistently ahead of Trump in national polls. In nearly every election since 1952, the candidate who had led polling at this stage in the campaign—as Clinton does—has won the popular vote and the election in November. An exception to this was in the 2000 presidential election.

Hillary Clinton will win the elections because, “the alternative is too uncertain.”Tor Borg, Chief Economist at SBAB Bank.

Donald Trump will win the elections because, “US voters are not prone to support another Democratic Party representative and because of the relevance of changing the ruling party from time to time.”

Helcio Takeda, Head of Research at Pezco.



October 2016

Is uncertainty damaging the economy?

Who has the best economic plan?

Is uncertainty surrounding the elections damaging the economy?


Yes59.7%

No40.3%

By a large margin, economic experts rate Clinton’s overall economic plan more highly than Trump’s in terms of its scope to shore up the U.S. economy.

The economic platforms of Clinton and Trump are different in terms of the basic role they perceive the government should play in the economy: Clinton envisages a larger involvement of government than Trump does.

The budgetary impact of their proposals is, however, still very unclear. None of the candidates’ proposed tax and spending plans add up to the budget outcomes they advertise.

Most economists surveyed believe election-related uncertainty is hampering U.S. economic activity. While any election spurs some uncertainty, around 60% of respondents to our survey suggest the current economic cycle is particularly unusual in its behavior.

In general, analysts believe that the uncertainty has the potential to restrain household spending and business investment if consumers and businesses have significant worries about the taxes, new regulations and tariffs they will confront. Investment in particular has been weak, and recent GDP data for Q2 confirmed that investment weakness has indeed continued. Initially, analysts had attributed the sluggishness to the fallout from oil prices, but Fed Chair Janet Yellen reckons that the energy sector alone cannot explain the extent of the decline in investment.

Analysts have trimmed their GDP growth forecasts for the U.S. over the course of this year and the panel now expects growth of 1.6% in 2016, which is down from last month’s 1.7% estimate and 2.5% at the beginning of the year. While 1.6% growth would be disappointing, it also shows most analysts think uncertainty will constrain but not cripple the economy.

“The election result may cause uncertainties, which could have temporarily an adverse impact on economic growth.”Timo Hirvonen, Senior Economist at OP Financial Group.

“Uncertainty modifies consumption and investment decisions, and creates volatility in financial markets.”Raúl Anibal Féliz, Financial Researcher at CIDE.

How would you rate the economic plan of each candidate?

Note: Average of total responses per candidate. 1 = very bad and 5 = very good.Source: FocusEconomics.

1 2 3 4 5

HillaryClinton

DonaldTrump

“It will be hard to get strong leadership and/or congressional support, which may be a problem itself, though may also avoid the most risky scenarios.”

Benjamin Sierra, Financial Markets Economist at Scotiabank Chile.



October 2016

The economic experts we surveyed rated Clinton higher than Trump in all areas. The highest score that Clinton received was for immigration, followed by monetary policy, while she received lower marks for tax reform and government spending. Trump obtained his highest marks for the minimum wage, followed by his energy policy, while his lowest were for immigration and foreign trade.

Clinton’s priorities are to increase spending on infrastructure and other programs, financed mainly by higher taxes on businesses and wealthy individuals. She also supports immigration reform. Trump’s priorities are quite different. He is calling for large tax cuts, some additional spending on infrastructure and a highly restrictive immigration policy. It is worth noting that for the first time in the U.S. modern era the two main candidates are considered effectively anti-free trade, albeit in different ways. Trump’s policy is the most explicitly anti-free trade, whereas Clinton would impose high obstacles and requirements to support trade agreements. Both candidates agree on not ratifying the Trans-Pacific Partnership (TPP).

How would you rate each candidate’s policy?

Who will pick the best economic team?

How do you rate the policy areas of each candidate on...?

Note: Average of total responses per candidate. 1 = very bad and 5 = very good.Source: FocusEconomics.

Energy

Immigration

Foreign Trade

Monetary Policy

Job Creation

Minimum Wage

Government Spending

Tax Reform

1 2 3 4 5

HillaryClinton

DonaldTrump

On appointing the best economic team, economists clearly prefer Clinton: by 75% to roughly 6%, they think the Democratic candidate will be surrounded by the best team of economic policy advisors and that she will make wiser appointments to the Federal Reserve.

Analysts also agree that Clinton’s economic plan is more complete than her adversary’s. Trump’s plan does not have such a nuanced view, nor such detailed policies. He proposes to cut taxes, build a border wall, call China a currency manipulator and outdo it in trade to make America rich. For many analysts the lack of detail in Trump’s campaign is a strong weakness.

“Trump at least offers hope for real reforms.Clinton will preserve the status-quo at best.”Senior Economist in Hong Kong.

Which candidate will pick the most effective policy team?



Donald Trump5.6%

Neither19.4%

“Too many interests in one and ideological obsession in the other.”José J. Villamil, Chairman at Estudios Técnicos.

“Top notch thinkers and doers will work with her. She will understand the nuances of policy and policy design.”João B. Assunção, Professor at Universidade Católica Portuguesa.

Under Hillary Clinton’s proposed plan, “stimulus will go through education, infrastructure spending, immigration, minimum wages.”Gregory Daco, Chief U.S. Economist at Oxford Economics.



October 2016

The majority of analysts surveyed credit Clinton with a better grasp of economics. They also agree she is more experienced and in times when extremism is flourishing, she has remained resolutely centrist.

Who has a better grasp of economics?

Who will make America grow faster again?Both Clinton and Trump say they want to improve the economic prospects of middle-income households. Both candidates argue that their policies will increase economic growth, while ensuring that the benefits from growth will be shared broadly.

Clinton’s priorities are similar to those of President Obama. Consequently, her proposals are, in many ways, an extension of what previous Democratic administrations have tried to achieve. Clinton’s economic plans are moderate in scale and focus on boosting growth through more government spending. Her focus is on providing additional support for working families, addressing distributional inequalities and supporting immigration reform, which would increase labor supply. Trump’s proposals are intended to reverse some of the ill-effects of globalization. Trump also proposes large tax cuts and new spending for veterans and infrastructure.

Overall, the broad Consensus among the economic experts we surveyed is that under Clinton’s plan the U.S. economy will grow faster in both the short- and medium-term, with interest rates increasing moderately. Meanwhile, Trump’s fiscal policies are likely to be highly stimulatory initially, but his other policies are likely to be inflationary. Given that the economy is near full employment, the Fed would therefore likely react more strongly. Analysts also consider Trump’s trade policies highly disruptive both at home and abroad.

Which candidate has a better understanding of economics?



Donald Trump11.6%

Neither13.0%

“She has a longstanding career and knows many experts.”Helmut Hofer, Senior Researcher at Institut for Advanced Studies IHS Vienna.

“More flexible, business oriented person will create more pragmatic policy team.”Petya Tsekova, Chief Economist at United Bulgarian Bank.

Under which candidate will the economy grow more rapidly?



Donald Trump12.5%

Neither16.7%

Under Donald Trump’s proposed plan, “in the short run vast fiscal stimulus, including tax cuts, would strengthen growth. But in the long run, a combination of protectionism and a yawning fiscal gap would hurt confidence in the economy.”Tim Cooper, Global Economist at BMI Research.



October 2016

By a large margin, the analysts we surveyed rate Clinton’s overall economic plan better than Trump’s, credit her with a better grasp of economics, and think she is more likely to appoint a good economic team. Analysts also agree that rising uncertainty related to the elections is hampering economic activity now, but that the U.S. economy would grow faster under Clinton’s plan both in the near- and medium-term.

Regarding Trump, analysts have concluded that his economic plan, should it be adopted, would have a relatively muted impact on the economy in the short-term, but it would definitely prompt the U.S. economy to slow considerably, or even enter into recession in the medium- to long-term. Researchers found that Trump’s immigration and trade policies are probably the areas that would have the most significant impact on potential growth.

The latest national polls suggest that Clinton remains tenuously ahead of Trump. But even if she wins, the former Secretary of State seems likely to have a House of Representatives still under Republican control, which has shown little inclination to embrace the policies she has discussed thus far. Donald Trump’s ideas could also prove difficult to push through, as many of his ideas go against the views of many congressional Republicans.

Sizing up the two candidates

National Polls

Note: Result of national polls in %. Poll numbers verified as of September 26, 2016.Source: The New York Times.


Donald Trump42.0%

Other and undecided

14.0%



October 2016

Hillary Clinton Donald Trump.

• Keep current tax brackets, with a top rate of 39.6% • Reduce personal tax brackets from seven to three• 4% surcharge on incomes exceeding USD 5 million • Top rate of 33%, down from the current 39.6%• Tax relief on lower incomes

• Cap dividend and capital gains tax at 20%• Limit value of deductions to 28% tax rate• Impose an “exit tax” on tax inversion mergers

• Support “substantial” new infrastructure spending

• Dismantle and dramatically modify ACA• Expand Medicaid for the uninsured• Cut "waste, fraud, abuse and redundant programs"

• Allow refinancing of student loans

• Boost jobs through the infrastructure plan

• Make a temporary pause on new regulations• Review of previous regulations

• Strengthen regulation in the financial system • Reduce excessive regulations

• Declare China a currency manipulator

• Renegotiate or withdraw from NAFTA• Withdraw from TPP

• Establish a national Office of Immigrant Affairs • Increase deportations of illegal immigrants• Build a wall along the southern border

• Spur investment in clean energy • Save the coal industry• Cancel the Paris Climate Agreement

.

• Federal funding for pipeline repair, climate control, subsidies, coal miners

• Renegotiate trade relations with China and Mexico to reduce bilateral trade deficits

• Enact reforms that will allow a path to citizenship for illegal immigrants

• Extend current executive orders on deportation deferrals

• Support quicker naturalization and immigrant integration

• Enforce immigration laws to reduce immigrant population

• Restrict issuance of immigrant visas, including H-1B visas

• Review regulation that forces investment in renewable energy at the expense of coal and natural gas

• Oppose the passage of TPP unless changes are made regarding currency provisions

• Renegotiate labor and environmental standards in NAFTA

• Oppose granting China WTO “market economy” status

• Impose tariffs and sanctions on countries deemed to be “currency manipulators”

• Initiate unfair trade action claims against China at the WTO

• Raise federal minimum wage in steps from USD 7.25 per hour to USD 12.0 per hour

• Keep the minimum wage where it is so U.S. firms can compete

• Stimulate investment to support manufacturing jobs and small manufacturers and start-ups.

• Favors increased regulatory authority for many government agencies

• Job creation through encouraging the launch of new businesses

• Create jobs trough removing regulations, investing in infrastructure and cutting the trade deficit

• Make community colleges tuition-free; subsidize tuition at state colleges

• Introduce tax deduction for individual health insurance premiums

Government Spending

• Impose a 10% repatriation tax on the accumulated untaxed profits of US foreign subsidiaries

• Reduce corporate tax rate and the pass-through tax rate on partnerships to 15%

• Increase federal infrastructure spending by USD 275 billion over five years

• Reauthorize “Build America Bonds” which reduce state and local debt

• Expanded medical care access for Veterans through all providers accepting Medicare

• Create a “public” insurance option for the Affordable Care Act (ACA)

• "Buffet Rule" - min. 30% tax on incomes over USD 1 million

Tax Reform

Immigration

Energy

Regulation

Foreign Trade

Minimum Wage

Job Creation

Candidate’s main economic proposals

FOCUSECONOMICS United States


October 2016

United States

REAL SECTOR | U.S. manufacturing sector contracts in August for first time in six monthsThe ISM manufacturing index declined more than expected in August and entered into contractionary territory for the first time since February. The indicator fell from 52.6 in July to 49.4 in August and came in below market expectations of 52.5. This brought the ISM index below the 50-threshold that indicates an expansion.

The underlying details show a broad-based deterioration. New orders dropped to an eight-month low in August and manufacturing output plunged to the lowest level in four years. Furthermore, employment and supply deliveries decreased compared to the previous month. Inventories’ levels remained virtually unchanged over the previous month.

FocusEconomics Consensus Forecast panelists expect that industrial production will contract 0.8% in 2016, which is unchanged from last month’s forecast. For 2017, panelists see industrial production rebounding and expanding 1.9%.

The Federal Reserve cut its forecast and now expects economic growth to range between 1.7% and 1.9% this year (previous forecast: 1.9% and 2.0%).

Outlook moderates

LONG-TERM TRENDS | 3-year averages

Ricardo AcevesSenior Economist

2012-14 2015-17 2018-20Population (million): 317 323 330GDP (USD bn): 16,747 18,647 20,982GDP per capita (USD): 52,866 57,650 63,576GDP growth (%): 2.1 2.1 1.9Fiscal Balance (% of GDP): -4.5 -2.7 -3.6Public Debt (% of GDP): 103 105 106Inflation (%): 1.7 1.2 2.1Current Account (% of GDP): -2.4 -2.7 -2.9

United States

The world’s largest economy continues operating at two speeds. On the one hand, a strong U.S. dollar and lackluster global demand are weighing on exports, while low oil prices and rising election uncertainty continue adding pressure on business investment. On the other hand, a solid labor market, rising real wages and buoyant consumer confidence are boosting household spending. Economic data for August showed that the ISM manufacturing index fell into contractionary territory for the first time in six months and nominal retail sales decreased over the previous month. The drop in retail sales mainly reflected a price effect from the fall in gasoline prices that month rather than a slowdown in consumption. In fact, consumer fundamentals remain rock solid: employers created 151,000 new jobs in August and consumer confidence rose to an 11-month high.

The U.S. economy is expected to strengthen in the second half, buoyed by solid private consumption and a bounce-back in inventories. Yet a strong U.S. dollar, weak global demand and low oil prices will continue to weigh on the country’s exports and fixed investment. Analysts expect GDP to increase 1.6% in 2016, which is down 0.1 percentage points from last month’s forecast. For 2017, our panel sees GDP growth at 2.1%.

Strengthening economic activity prompted inflation to pick up from 0.8% in July to a four-month high of 1.1% in August. The Fed held interest rates at its 21–22 September meeting and the markets are now pricing in a rate hike in December. Panelists see inflation averaging 1.3% in 2016 and expect it to pick up to 2.2% in 2017.

ISM Manufacturing Index

Note: Manufacturing ISM Report On Business (PMI). Readings above 50% indicate an expansion in the manufacturing sector while readings below 50% point to a contraction.Source: Institute for Supply Management (ISM).

45

50

55

60

Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16

%



October 2016

It left next year’s forecast unchanged at the range between 1.9% and 2.2%. FocusEconomics Consensus Forecast panelists expect GDP to expand 1.6% in 2016, which is down 0.1 percentage points from last month’s forecast. For 2017, the panel expects the economy to expand 2.1%.

REAL SECTOR | Retail sales disappoint in AugustNominal retail sales contracted 0.3% in August compared to the previous month. The result contrasted the upwardly-revised 0.1% expansion in July (previously reported: -0.1% month-on-month) and caught the markets by surprise as they had forecast a 0.2% expansion.

The report from the Department of Commerce showed that the contraction in August mainly reflected lower sales at gasoline stations as fuel prices declined during the month. Meanwhile, the closely-watched core—or control group—retail sales, which excludes cars, gasoline and building materials, fell 0.1% in August and came in just below the flat figure in July.

On an annual basis, retail sales decelerated from a 2.4% increase in July to a 1.9% expansion in August. Sales at department stores declined further in August (-5.0% year-on-year), but sales at so-called non-store retailers—a proxy for e-commerce sales—continued to show strong growth (+10.9% yoy). This suggests that American consumers are increasingly opting to make purchases online.

FocusEconomics Consensus Forecast panelists expect private consumption to grow 2.7% in 2016, which is up 0.1 percentage points from last month’s forecast. For 2017, the panel sees private consumption increasing 2.5%.

REAL SECTOR | Non-farm payrolls post another solid gain in AugustNon-farm payrolls grew 151,000 in August, which followed July’s upwardly-revised increase of 275,000 (previously reported: +255,000) and fell short of the 165,000 gain that the markets had expected. The result represented a record period of 71 consecutive months of job creation in the U.S. economy. The strong jobs figures observed in July and August are likely to put pressure on the Federal Reserve to tighten monetary policy in September, although most experts think the Fed will not raise interest rates until its December meeting.

The private sector continues to be responsible for the bulk of new hiring after adding 122,385 jobs in August. The largest gains were registered in the professional business services. The public sector added 25,000 jobs in August.

The unemployment rate and labor participation, which are derived from a different survey, remained steady at July’s 4.9% and 62.8%, respectively.

FocusEconomics Consensus Forecast panelists expect unemployment to average 4.8% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects the unemployment rate to drop to 4.6%.

OUTLOOK | Consumer confidence hits an 11-month high in AugustAfter remaining virtually unchanged in July, consumer confidence hit an 11-month high in August. The consumer confidence indicator published by Conference Board jumped from 96.7 in July to 101.1 in August and overshot the 98.0 that analysts had expected. August’s print, which was the highest since September 2015, suggests that U.S. consumer spending will continue to be a key support for economic growth.

Retail Sales | variation in %

Note: Month-on-month and year-on-year variation of nominal retail sales in %.Source: United States Census Bureau.

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Month-on-month (left scale)

Year-on-year (right scale)

%%

Labour Market

Note: Month-on-month variation of non-farm payrolls in thousands and unemployment rate, seasonally adjusted in %.Source: Bureau of Labor Statistics.

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6.0

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Var. in non-farm payrolls (left scale)

Unemployment rate (right scale)

%



October 2016

The survey result showed that both households’ expectations and assessment of the current economic situation improved substantially over the previous month. Lynn Franco, the Board’s Director of Economic Indicators and Surveys, stated that, “Short-term expectations regarding business and employment conditions, as well as personal income prospects, also improved, suggesting the possibility of a moderate pickup in growth in the coming month.” A notable result was the survey’s labor differential—the percentage of respondents saying that jobs are plentiful less those saying jobs are hard to get—improved to a post-crisis high of 2.6.

OUTLOOK | House prices moderate further in June The S&P/Case-Shiller 20-city home composite index rose 0.8% in June over the previous month. The result, which was in line with market expectations, came in slightly below the 0.9% increase recorded in May and marked a second month of moderation. When adjusted for seasonal factors, home prices decreased 0.1% over the previous month, marking the third consecutive decline (May: -0.1% month-on-month).

In annual terms, home prices rose 5.1% in June, which edged down from the 5.3% increase recorded in May. In a statement, S&P said that Denver, Portland and Seattle continue to be the cities with the greatest increases.

According to S&P, “In the strongest region, the Pacific Northwest, prices are rising at more than 10%; in the slower Northeast, prices are climbing a bit faster than inflation. Nationally, home prices have risen at a consistent 4.8% annual pace over the last two years without showing any signs of slowing.”

MONETARY SECTOR | Inflation accelerates in AugustSeasonally-adjusted consumer prices increased 0.2% in August compared to the previous month. The result came in above the flat reading in July and overshot the 0.1% rise the markets had expected. It reflected a broad-based increase in most prices, which more than offset a decline in food and energy prices. Inflation rose from 0.8% in July to a four-month high of 1.1% in August.

Core consumer prices, which do not include food and energy prices, increased 0.3% over the previous month, which came in above both the 0.1% rise observed in July and the 0.2% market analysts had forecast. Core inflation inched up from July’s 2.2% to 2.3% in August.

Although the Federal Reserve targets an alternative measure of inflation called the personal consumption expenditures price index, it also follows the core inflation measure closely to judge whether inflationary pressures are increasing in the economy.

FocusEconomics Consensus Forecast participants expect inflation to average 1.3% in 2016, which is unchanged from last month’s forecast. For 2017, the panel expects inflation to average 2.2%.

MONETARY SECTOR | Fed holds its fire in September, policy debate intensifiesAt its 21–22 monetary policy meeting, the Fed’s Open Market Committee (FOMC) announced its decision to leave the federal funds target rate unchanged at the current range of between 0.25% and 0.50%—a move in line with the Consensus, although a few analysts called for a rate hike. The Fed has been wavering about the prospects of a second rate move this year after heightened volatility in the financial markets following its December

Consumer Confidence

Note: Consumer Confidence Index.Source: The Conference Board.

70

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Aug-13 Feb-14 Aug-14 Feb-15 Aug-15 Feb-16 Aug-16

Home Prices

Note: S&P/Case-Shiller Composite-20 home price value index and month-on-month non-seasonally adjusted variation.Source: Standard & Poor’s.

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Mom variation in % (left scale)

Home price index (right scale)

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Inflation | Consumer Price Index

Note: Year-on-year and month-on-month variation of seasonally adjusted consumer price index in %.Source: Bureau of Labor Statistics.

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October 2016

increase. Global headwinds have been the main case of delay, including uncertainties over the Chinese economy and economic policies, a sharp drop in commodities prices earlier this year and their subsequent rocky recovery, and the UK’s vote to leave the EU.

Also, the FOMC appears to be increasingly divided over the urgency of rising interest rates. This time, Kansas City Fed President Esther George, Cleveland Fed President Loretta Mester and Boston Fed President Eric Rosengren dissented on the policy statement, saying they favored raising rates this month. At the same time, the majority of U.S. monetary authorities cut the number of rate increases they expect this year from two to one, according to the average forecast released with the statement.

The FOMC said in its statement that, “the Committee judges that the case for an increase in the federal funds rate has strengthened, but decided, for the time being, to wait for further evidence of continued progress toward its objectives.” It added that risks to the outlook were “roughly balanced”, which is a further signal that a move could come at the end of the year. The market reaction to the Fed’s decision was muted. U.S. stocks climbed modestly and Treasuries were little changed, while the U.S. dollar maintained its relative strength. Following the decision, Fed Chair Janet Yellen commented at a press conference that the authority does not reckon that the economy is showing signs of overheating, but said that, “[it] has a little more room to run than might have previously been thought. That is good news.” Despite the hawkish tone of the message, some analysts do not think that the Fed will raise interest rates in November or even this year. Jan Hatzius, Chief Economist at Goldman Sachs, commented:

“Despite the hawkish statement, we see relatively low odds—now about 10%—of a rate increase at the November 1-2 FOMC meeting. There are a limited number of data releases before the November meeting, and even with strong data, officials would need to work hard to convince markets that the FOMC would hike just before the presidential election. […]. We are leaving our subjective odds of a rate increase this year at 65%, and now see odds of 10% for November and 55% for December. The committee looks inclined to hike soon, but a lot can happen between now and December, so a hike this year is not a done deal. Moreover, when faced with conflicting signals, a committee focused on risk management will be inclined to hold fire.”

Explaining his view that there will be no rate hike at all this year, Mikael Olai Milhøj, Senior Analyst at Danske Bank said:

“Although the more hawkish statement puts pressure on our Fed call, we stick to our view that the Fed will not hike this year, especially as we think the Fed may be too optimistic about the current economic situation given the weakness in ISM and retail sales, but it is a close call. However, incoming data will be analysed thoroughly in coming months and we may see markets react more to positive/negative data surprises.”

The U.S. monetary authorities did not give a clear hint of the timing of the next rate hike, but signaled that, “in determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and

Monetary Policy

Note: Total assets in the balance sheet of the Federal Reserve in USD billion and Federal Funds Target Rate in %. Current rate set at a range of between 0.25% and 0.50%.Source: Federal Reserve.

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Federal Funds Target Rate (%, left scale)

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10-year Bond Yield and Stock Market

Note: Daily yield of 10-year Treasury bonds in % and Dow Jones Industrial Average index.Source: Thomson Reuters..

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10-Year Treasury Yield in % (left scale)

Dow Jones Index (right scale)

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October 2016

readings on financial and international developments. In light of the current shortfall of inflation from 2 percent, the Committee will carefully monitor actual and expected progress toward its inflation goal.”

The U.S. Federal Reserve cut its interest rate median projection forecast for this year and expects it to average 0.6% (previous estimate: 0.9%). The Consensus view of our panellists is that the federal funds rate will average 0.67% at the end of 2016. For next year, the Fed trimmed its interest rate projection, which is now more in line with our panelists’ forecasts. The Fed projects, on average, that the federal funds rate will end 2017 at 1.1% (previous estimate: 1.6%). The Consensus view among analysts is that the Fed funds rate will end 2017 at 1.18%.



October 2016

Economic Indicators | 2011 - 2020

Annual Data 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020Real Sector Population (million) 312 314 317 319 321 323 326 328 330 332GDP per capita (USD) 49,725 51,384 52,697 54,516 56,147 57,356 59,446 61,529 63,587 65,613GDP (USD bn) 15,518 16,155 16,692 17,393 18,037 18,549 19,354 20,167 20,982 21,796Economic Growth (Nominal GDP, ann. var. in %) 3.7 4.1 3.3 4.2 3.7 2.8 4.3 4.2 4.0 3.9Economic Growth (GDP, annual var. in %) 1.6 2.2 1.7 2.4 2.6 1.6 2.1 2.0 1.9 1.8Domestic Demand (annual variation in %) 1.6 2.1 1.4 2.5 3.2 1.9 2.4 2.2 2.1 1.9Private Consumption (annual var. in %) 2.3 1.5 1.5 2.9 3.2 2.7 2.5 2.2 2.1 1.9Government Consumption (annual var. in %) -3.0 -1.9 -2.9 -0.9 1.8 1.0 1.0 1.2 1.3 1.5Fixed Investment (annual variation in %) 6.4 9.8 5.0 5.5 4.0 - - - - -Non-residential Investment (ann. var. in %) 7.7 9.0 3.5 6.0 2.1 -0.2 2.8 2.6 2.1 1.7Residential Investment (ann. variation in %) 0.5 13.5 11.9 3.5 11.7 - - - - -Exports (G&S, annual variation in %) 6.9 3.4 3.5 4.3 0.1 -0.1 2.3 3.2 3.5 3.7Imports (G&S, annual variation in %) 5.5 2.2 1.1 4.4 4.6 1.1 3.6 3.6 3.5 3.3Industrial Production (annual variation in %) 2.9 2.8 1.9 2.9 0.3 -0.8 1.9 1.9 1.7 1.6Retail Sales (annual variation in %) 7.3 5.0 3.6 4.2 2.3 - - - - -Light Vehicle Sales (million) 12.7 14.4 15.5 16.5 17.4 17.3 17.3 16.8 16.6 16.3Housing Starts (million) 0.6 0.8 0.9 1.0 1.1 1.2 1.3 1.4 1.5 1.6S&P/Case-Shiller Home Prices (var. in %) -4.1 6.9 13.4 4.4 5.6 - - - - -Unemployment (% of active population, aop) 8.9 8.1 7.4 6.2 5.3 4.8 4.6 4.7 4.8 4.9Fiscal Balance (Federal, % of GDP) -8.4 -6.7 -4.1 -2.8 -2.4 -2.9 -2.9 -3.2 -3.6 -4.0Public Debt (% of GDP) 98 102 104 104 105 105 105 105 106 106Monetary and Financial Sector Money (annual variation of M2 in %) 7.4 8.6 6.8 6.2 5.8 - - - - -Inflation (CPI, annual variation in %, eop) 3.1 1.8 1.5 0.7 0.7 - - - - -Inflation (CPI, annual variation in %, aop) 3.1 2.1 1.5 1.6 0.1 1.3 2.2 2.2 2.1 2.1Inflation (Core, annual variation in %, aop) 1.7 2.1 1.8 1.7 1.8 - - - - -Inflation (PPI, annual variation in %, aop) 3.9 1.8 1.4 1.6 -0.9 - - - - -Federal Funds Target Rate (%, eop) 0.25 0.25 0.25 0.25 0.50 0.67 1.18 1.76 2.21 2.653-Month LIBOR rate (%, eop) 0.58 0.31 0.25 0.26 0.61 0.99 1.49 2.18 2.82 3.4710-Year Bond Yield (%, eop) 1.89 1.78 3.04 2.17 2.27 1.73 2.12 2.54 2.85 3.17Exchange Rate (USD per EUR, eop) 1.30 1.32 1.38 1.21 1.09 1.09 1.10 1.13 1.17 1.22Exchange Rate (USD per EUR, aop) 1.39 1.29 1.33 1.33 1.11 1.11 1.10 1.11 1.15 1.20External Sector Current Account Balance (% of GDP) -3.0 -2.8 -2.2 -2.3 -2.6 -2.7 -2.8 -2.9 -2.9 -3.0Current Account Balance (USD bn) -460 -447 -366 -392 -463 -505 -547 -578 -616 -656Trade Balance (USD bn) -741 -741 -702 -752 -763 - - - - -Foreign Direct Investment (USD bn) 230 188 212 107 380 - - - - - Quarterly Data Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17Economic Growth (GDP, annual var. in %) 2.2 1.9 1.6 1.2 1.6 1.8 2.1 2.3 2.2 2.1Economic Growth (GDP, saar in %) 2.0 0.9 0.8 1.1 2.7 2.2 2.0 2.2 2.0 2.0Private Consumption (saar in %) 2.7 2.3 1.6 4.4 2.8 2.5 2.2 2.4 2.2 2.2Government Consumption (saar in %) 1.9 1.0 1.6 -1.5 1.2 1.2 1.2 1.3 1.4 1.1Non-residential Investment (saar in %) 3.9 -3.3 -3.4 -0.9 2.8 2.4 2.9 3.1 3.4 3.3Exports (G&S, saar in %) -2.8 -2.7 -0.7 1.2 2.2 1.6 1.9 2.6 2.8 3.1Imports (G&S, saar in %) 1.1 0.7 -0.6 0.3 3.5 3.3 3.8 4.3 4.4 4.2Unemployment (% of active population, aop) 5.2 5.0 4.9 4.9 4.9 4.7 4.7 4.6 4.6 4.6Inflation (CPI, annual variation in %, aop) 0.1 0.4 1.1 1.1 1.3 1.7 2.1 2.0 2.2 2.2Federal Funds Target Rate (%, eop) 0.25 0.50 0.50 0.50 0.50 0.67 0.71 0.91 0.99 1.183-Month LIBOR rate (%, eop) 0.33 0.61 0.63 0.65 0.84 0.99 1.03 1.28 1.27 1.4910-Year Bond Yield (%, eop) 2.06 2.27 1.78 1.49 1.64 1.73 1.83 1.91 2.00 2.12Exchange Rate (USD per EUR, eop) 1.12 1.09 1.14 1.11 1.11 1.09 1.09 1.10 1.10 1.10Current Account Balance (% of GDP) -2.7 -2.5 -2.9 -2.6 -2.6 -2.7 -2.7 -2.7 -2.7 -2.8Current Account Balance (USD bn) -123 -113 -132 -120 -122 -125 -126 -131 -134 -136 Monthly Data Dec-15 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16Industrial Production (s.a. mom var. in %) -0.4 0.5 -0.1 -1.0 0.5 -0.2 0.6 0.6 -0.5 -Retail Sales (s.a. mom nominal variation in %) 0.4 -0.5 0.3 -0.3 1.2 0.2 0.7 0.1 -0.3 -Unemployment (% of active population) 5.0 4.9 4.9 5.0 5.0 4.7 4.9 4.9 4.9 -Conference Board Consumer Confidence 96.3 97.8 94.0 96.1 94.7 92.4 97.4 96.7 101.1 -ISM Manufacturing Index (50%-threshold) 48.0 48.2 49.5 51.8 50.8 51.3 53.2 52.6 49.4 -Markit Manufacturing PMI (50 threshold) 51.2 52.4 51.3 51.5 50.8 50.7 51.3 52.9 52.0 51.4S&P/Case-Shiller 20-City (annual var. in %) 5.6 5.6 5.4 5.5 5.5 5.3 5.1 - - -Housing Starts (millions of units, saar) 1.16 1.13 1.21 1.11 1.16 1.13 1.20 1.21 1.14 -Existing Home Sales (millions of units, saar) 5.45 5.47 5.07 5.36 5.43 5.51 5.57 5.38 5.33 -Inflation (CPI, mom variation in %) -0.1 0.0 -0.2 0.1 0.4 0.2 0.2 0.0 0.2 -Inflation (CPI, annual variation in %) 0.7 1.4 1.0 0.9 1.1 1.0 1.0 0.8 1.1 -Exchange Rate (USD per EUR, eop) 1.09 1.08 1.09 1.14 1.15 1.11 1.11 1.12 1.11 -Trade Balance (G&S, USD bn) -41.5 -43.0 -45.3 -36.9 -38.6 -42.0 -44.7 -39.5 - -



October 2016

Real Sector | Gross Domestic Product

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All real sector data are from the Bureau of Economic Analysis (BEA). Forecasts based on FocusEconomics Consensus Forecast.1 GDP, annual variation in %.2 Quarterly GDP (seasonally adjusted), quarter-on-quarter annualized variation in %.3 GDP, evolution of 2016 forecasts during the last 18 months.4 GDP, evolution of 2017 forecasts during the last 18 months.5 GDP, panelist distribution of 2016 forecasts. Concentration of panelists in forecast interval in

%. Higher columns with darker colors represent a larger number of panelists.

0%

20%

40%

60%

< 0.6 0.9 1.2 1.5 1.8 2.1 2.4 2.7 > 2.7

Real GDP growth in %

Individual Forecasts 2016 2017Allianz 1.6 2.1ANZ 1.5 2.2BBVA Research 2.0 2.1Berenberg 1.4 2.1BMI Research 1.5 2.2BMO Capital Markets 1.5 2.2BNP Paribas 1.5 1.6CIBC World Markets 1.5 2.1Citigroup Global Mkts 1.5 2.2Commerzbank 1.5 2.0Credit Agricole 1.5 2.3Credit Suisse 1.9 2.2Danske Bank 1.7 1.9DBS Bank 1.7 3.0DekaBank 1.6 2.3Deutsche Bank 1.3 1.7DIW Berlin 1.4 2.3DZ Bank 1.6 2.0EIU 1.6 2.3Emirates NBD 2.0 2.5Euromonitor Int. 1.6 2.1Frontier Strategy Group 2.0 2.1Goldman Sachs 1.5 2.1Ifo Institut 1.8 2.1ING 1.5 2.4Intesa Sanpaolo 1.9 2.2JPMorgan 1.4 1.8Julius Baer 1.5 1.8Kiel Institute 1.6 2.4Lloyds TSB 2.1 2.4Macroeconomic Advisers 1.5 2.3National Bank of Canada 1.6 2.0Nomura 1.4 1.9Nordea 1.5 2.1Oxford Economics 1.6 2.3Raiffeisen Research 1.6 2.4RBC Capital Markets 1.6 2.3Scotiabank 1.5 2.3Société Générale 1.6 2.3Standard Chartered 1.0 1.3Toronto-Dominion Bank 1.5 2.1UBS 1.4 2.4Unicredit 1.5 2.0SummaryMinimum 1.0 1.3Maximum 2.1 3.0Median 1.5 2.2Consensus 1.6 2.1History30 days ago 1.7 2.160 days ago 1.9 2.190 days ago 1.9 2.2Additional ForecastsFederal Reserve (Sep. 2016) 1.7 - 1.9 1.9 - 2.2IMF (July 2016) 2.2 2.5

1 | Real GDP | 2000-2020 | var. in %

3 | GDP 2016 | evolution of forecasts

2 | Real GDP | Q1 13-Q4 17 | var. in %

4 | GDP 2017 | evolution of forecasts

-4

-2

0

2

4

6

2000 2005 2010 2015 2020

United StatesG7World

-3

0

3

6

Q1 13 Q1 14 Q1 15 Q1 16 Q1 17

United States

G7

1

2

3

4

May Aug Nov Feb May Aug

MaximumConsensusMinimum0

1

2

3

4


MaximumConsensusMinimum

5 | GDP 2016 | Panelist Distribution



October 2016

Real Sector | Additional forecasts

9 | Investment | evol. of forecasts

-2

0

2

4

6


2016 2017

8 | Investment | variation in %

-20

-10

0

10

2000 2005 2010 2015 2020

United StatesG7

7 | Consumption | evolution of fcst

2.4

2.6

2.8

3.0


2016 2017

6 | Consumption | variation in %

-2

0

2

4

6

2000 2005 2010 2015 2020

United States

G7

Consumption and Investment

Individual Forecasts 2016 2017 2016 2017Allianz 2.7 2.5 - -ANZ - - - -BBVA Research - - - -Berenberg 2.7 2.7 -1.2 2.1BMI Research 2.7 2.5 - -BMO Capital Markets 2.7 2.5 -0.7 2.1BNP Paribas 2.5 2.1 -0.9 1.7CIBC World Markets 2.6 2.4 -0.8 2.3Citigroup Global Mkts 2.6 2.5 -0.9 2.9Commerzbank 2.7 2.6 -1.7 2.7Credit Agricole - - - -Credit Suisse 2.7 2.7 -0.6 2.1Danske Bank 2.7 2.3 0.6 2.3DBS Bank 2.8 3.0 -0.7 3.4DekaBank 2.7 2.2 0.8 4.2Deutsche Bank - - - -DIW Berlin - - - -DZ Bank 2.8 3.2 0.8 1.5EIU 2.7 2.8 -1.3 1.8Emirates NBD - - - -Euromonitor Int. - - - -Frontier Strategy Group 2.7 2.2 - -Goldman Sachs 2.6 2.4 -0.5 3.0Ifo Institut 2.5 2.4 2.3 4.0ING - - - -Intesa Sanpaolo 2.5 2.5 -0.5 3.6JPMorgan 2.6 2.2 - -Julius Baer - - - -Kiel Institute 2.7 2.8 1.2 4.5Lloyds TSB 2.7 2.6 2.7 4.0Macroeconomic Advisers 2.8 2.5 -0.7 3.1National Bank of Canada 2.6 2.4 -0.9 1.4Nomura 2.7 2.4 -0.6 2.7Nordea - - - -Oxford Economics 2.8 2.7 0.8 2.4Raiffeisen Research - - - -RBC Capital Markets 2.7 2.4 -0.5 3.1Scotiabank 2.7 2.7 -0.9 2.5Société Générale 2.6 2.5 -0.6 4.2Standard Chartered - - - -Toronto-Dominion Bank 2.7 2.5 -0.6 2.3UBS 2.6 2.7 0.2 3.9Unicredit - - - -SummaryMinimum 2.5 2.1 -1.7 1.4Maximum 2.8 3.2 2.7 4.5Median 2.7 2.5 -0.6 2.7Consensus 2.7 2.5 -0.2 2.8History30 days ago 2.6 2.5 0.0 3.060 days ago 2.7 2.5 0.3 3.390 days ago 2.6 2.4 0.6 3.9

Consumption Investmentvariation in % variation in %

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All real sector data are from the Bureau of Economic Analysis (BEA). Forecasts based on FocusEconomics Consensus Forecast.6 Private consumption, annual variation in %.7 Private consumption, evolution of 2016 and 2017 forecasts during the last 18 months.8 Non-residential fixed investment, annual variation in %.9 Non-residential fixed investment, evolution of 2016 and 2017 forecasts during the last 18 months.



October 2016


0

2

4

6


2016 2017

13 | Imports | evol. of forecasts

-20

-10

0

10

20

2000 2005 2010 2015 2020

United States

G7

12 | Imports | variation in %

-20

-10

0

10

20

2000 2005 2010 2015 2020

United States

G7

10 | Exports | variation in %

-2

0

2

4

6


2016 2017

11 | Exports | evolution of fcst

Exports and Imports

Individual Forecasts 2016 2017 2016 2017Allianz -0.2 2.5 1.2 4.7ANZ - - - -BBVA Research - - - -Berenberg - - - -BMI Research 0.0 3.0 2.3 3.7BMO Capital Markets -0.2 2.4 0.9 2.4BNP Paribas -0.2 2.0 1.1 4.2CIBC World Markets -0.2 3.8 1.2 4.8Citigroup Global Mkts -0.5 1.5 0.8 3.3Commerzbank -0.6 0.9 0.7 2.7Credit Agricole - - - -Credit Suisse -0.3 0.6 0.4 2.5Danske Bank 0.3 2.4 0.9 2.8DBS Bank 0.0 4.1 0.8 3.1DekaBank 0.2 3.8 1.5 5.2Deutsche Bank - - - -DIW Berlin - - - -DZ Bank -0.5 1.4 1.1 5.0EIU -0.1 1.9 0.7 2.3Emirates NBD - - - -Euromonitor Int. - - - -Frontier Strategy Group 0.9 2.6 2.5 2.6Goldman Sachs - - - -Ifo Institut 0.6 3.8 1.5 4.0ING - - - -Intesa Sanpaolo 0.5 3.5 1.8 3.8JPMorgan 0.1 3.1 1.1 4.3Julius Baer - - - -Kiel Institute -0.2 3.7 0.9 4.7Lloyds TSB 1.1 3.3 2.0 2.7Macroeconomic Advisers -0.5 3.9 0.8 4.8National Bank of Canada -0.8 -1.1 0.8 2.9Nomura -0.2 2.6 1.1 4.0Nordea - - - -Oxford Economics -0.4 1.8 0.8 2.7Raiffeisen Research - - - -RBC Capital Markets 0.0 1.9 1.0 2.8Scotiabank -0.3 2.6 1.0 3.8Société Générale -0.9 -1.8 0.7 1.9Standard Chartered - - - -Toronto-Dominion Bank -0.5 2.7 0.8 4.6UBS -0.8 1.0 0.6 4.4Unicredit - - - -SummaryMinimum -0.9 -1.8 0.4 1.9Maximum 1.1 4.1 2.5 5.2Median -0.2 2.6 1.0 3.8Consensus -0.1 2.3 1.1 3.6History30 days ago 0.1 2.4 1.4 3.860 days ago 0.8 2.6 1.7 4.090 days ago 0.4 3.0 1.6 4.2

Exports Imports variation in % variation in %

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All real sector data are from the Bureau of Economic Analysis (BEA). Forecasts based on FocusEconomics Consensus Forecast. 10 Real exports of goods and services, annual variation in %.11 Exports, evolution of 2016 and 2017 forecasts during the last 18 months.12 Real imports of goods and services, annual variation in %.13 Imports, evolution of 2016 and 2017 forecasts during the last 18 months.



October 2016


4.4

4.6

4.8

5.0


2016 2017

17 | Unemployment | evol. of forecasts

3

5

7

9

11

2000 2005 2010 2015 2020

United States

G7

16 | Unemployment | % of active pop.

-15

-10

-5

0

5

10

2000 2005 2010 2015 2020

United States

G7

14 | Industry | variation in %

-2

0

2

4


2016 2017

15 | Industry | evol. of forecasts

Industry and Unemployment

Individual Forecasts 2016 2017 2016 2017Allianz -0.7 2.0 4.9 4.7ANZ - - - -BBVA Research - - 4.8 4.6Berenberg -0.7 1.9 4.8 4.5BMI Research - - 4.9 4.9BMO Capital Markets -0.7 2.0 4.9 4.6BNP Paribas -0.4 3.6 4.9 5.1CIBC World Markets - - 4.9 4.7Citigroup Global Mkts -0.9 1.3 4.8 4.5Commerzbank - - 4.8 4.6Credit Agricole - - - -Credit Suisse -1.0 - 4.9 4.5Danske Bank - - 4.8 4.6DBS Bank - - 4.8 -DekaBank - - 4.8 4.4Deutsche Bank - - 4.9 4.4DIW Berlin - - 4.9 4.7DZ Bank - - 4.8 4.5EIU -1.1 1.5 4.8 4.5Emirates NBD - - - -Euromonitor Int. -0.1 1.9 4.9 4.8Frontier Strategy Group -1.2 1.5 4.8 4.9Goldman Sachs - - 4.9 4.5Ifo Institut - - 4.8 4.7ING - - - -Intesa Sanpaolo -0.1 2.9 4.8 4.6JPMorgan - - 4.8 4.7Julius Baer - - - -Kiel Institute - - 4.9 4.7Lloyds TSB - - - -Macroeconomic Advisers -0.9 1.9 4.8 4.4National Bank of Canada - - 5.0 5.2Nomura - - 4.9 4.6Nordea - - - -Oxford Economics -0.8 1.7 4.8 4.6Raiffeisen Research - - 4.8 4.2RBC Capital Markets - - 4.9 4.7Scotiabank -0.8 2.5 4.8 4.7Société Générale - - 4.8 4.4Standard Chartered - - - -Toronto-Dominion Bank -1.0 1.3 4.9 4.6UBS -0.8 1.1 4.8 4.6Unicredit - - - -SummaryMinimum -1.2 1.1 4.8 4.2Maximum -0.1 3.6 5.0 5.2Median -0.8 1.9 4.8 4.6Consensus -0.8 1.9 4.8 4.6History30 days ago -0.8 2.1 4.8 4.660 days ago -0.5 2.1 4.8 4.690 days ago -0.2 2.2 4.8 4.6

Industry Unemploymentvariation in % % of active pop.

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All real sector data are from the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS). See below for details. Forecasts based on FocusEconomics Consensus Forecast.14 Industrial production, annual variation in %. Source: BEA.15 Industrial production, evolution of 2016 and 2017 forecasts during the last 18 months. 16 Unemployment, % of active population. Source: BLS.17 Unemployment, evolution of 2016 and 2017 forecasts during the last 18 months.



October 2016


100

102

104

106


2016 2017

21 | Public Debt | evol. of forecasts

40

60

80

100

120

2000 2005 2010 2015 2020

United States

G7

20 | Public Debt | % of GDP

-10

-5

0

5

2000 2005 2010 2015 2020

United States

G7

18 | Fiscal Balance | % of GDP

-3.0

-2.8

-2.6

-2.4

-2.2


2016 2017

19 | Fiscal Balance | evol. of forecasts

Fiscal Balance and Public Debt

Individual Forecasts 2016 2017 2016 2017Allianz -2.8 -2.8 - -ANZ - - - -BBVA Research -3.0 -3.0 - -Berenberg -2.2 -2.1 101 99BMI Research -3.0 -3.2 - -BMO Capital Markets -3.2 -3.1 - -BNP Paribas -3.1 -3.1 - -CIBC World Markets - - - -Citigroup Global Mkts -3.2 -3.1 107 107Commerzbank - - - -Credit Agricole -2.8 -3.0 - -Credit Suisse -3.2 -2.7 - -Danske Bank -2.9 -2.8 105 103DBS Bank -2.6 -2.5 - -DekaBank - - - -Deutsche Bank -3.2 -3.1 - -DIW Berlin - - - -DZ Bank - - 111 111EIU -3.2 -3.2 - -Emirates NBD -2.5 -2.5 - -Euromonitor Int. - - - -Frontier Strategy Group - - - -Goldman Sachs -3.1 -3.1 - -Ifo Institut -2.4 -2.4 - -ING -2.4 -2.3 - -Intesa Sanpaolo - - - -JPMorgan -3.2 -3.1 - -Julius Baer - - - -Kiel Institute -2.9 -3.0 - -Lloyds TSB - - - -Macroeconomic Advisers - - - -National Bank of Canada - - - -Nomura -3.1 -3.2 - -Nordea -3.2 -3.1 - -Oxford Economics - - - -Raiffeisen Research -2.9 -2.9 105 104RBC Capital Markets - - - -Scotiabank -2.9 -2.9 - -Société Générale -3.1 -2.8 102 103Standard Chartered - - - -Toronto-Dominion Bank - - - -UBS - - - -Unicredit - - 106 106SummaryMinimum -3.2 -3.2 101 99Maximum -2.2 -2.1 111 111Median -3.0 -3.0 105 104Consensus -2.9 -2.9 105 105History30 days ago -2.9 -2.8 105 10460 days ago -2.8 -2.8 105 10490 days ago -2.8 -2.7 103 103

Fiscal Balance Public Debt % of GDP % of GDP

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All real sector data are from the Bureau of Economic Analysis (BEA). Forecasts based on FocusEconomics Consensus Forecast.18 Federal government balance as % of GDP.19 Federal government balance as % of GDP, evolution of 2016 and 2017 forecasts during the last 18 months.20 Public debt as % of GDP.21 Public debt as % of GDP, evolution of 2016 and 2017 forecasts during the last 18 months.



October 2016

Monetary Sector | Inflation

22 | Inflation | 2000 - 2020 | in %

24 | Inflation 2016 | evol. of forecasts

23 | Inflation | Q1 13-Q4 17 | in %

25 | Inflation 2017 | evol. of forecasts

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All monetary sector data are from the Bureau of Labor Statisics (BLS). Forecasts are based on FocusEconomics Consensus Forecast.22 Inflation, annual average variation of consumer price index (CPI) in %.23 Inflation, annual variation of quarterly average consumer price index (CPI) in %. 24 Inflation, evolution of 2016 forecasts during the last 18 months.25 Inflation, evolution of 2017 forecasts during the last 18 months.26 Inflation, panelist distribution of 2016 forecasts. Concentration of panelists in forecast interval

in %. Higher columns with darker colors represent a larger number of panelists.

Individual Forecasts 2016 2017Allianz 1.2 2.2ANZ 1.1 2.2BBVA Research - -Berenberg 1.2 2.2BMI Research 1.8 2.5BMO Capital Markets 1.2 2.2BNP Paribas 1.2 2.1CIBC World Markets 1.3 2.4Citigroup Global Mkts 1.3 1.9Commerzbank 1.2 2.2Credit Agricole 1.3 2.2Credit Suisse 1.2 2.0Danske Bank 1.4 2.5DBS Bank 1.3 2.2DekaBank 1.2 2.7Deutsche Bank 1.3 2.1DIW Berlin 1.2 2.0DZ Bank 1.3 2.5EIU 1.1 2.1Emirates NBD 1.7 2.2Euromonitor Int. 1.3 1.9Frontier Strategy Group 1.2 1.7Goldman Sachs 1.2 2.1Ifo Institut 1.0 2.1ING 1.3 1.9Intesa Sanpaolo 1.2 2.2JPMorgan 1.3 2.4Julius Baer 1.1 1.5Kiel Institute 1.2 2.2Lloyds TSB 1.2 2.4Macroeconomic Advisers 1.3 2.5National Bank of Canada 1.2 2.0Nomura 1.2 2.4Nordea 1.2 2.7Oxford Economics 1.1 2.2Raiffeisen Research 1.4 2.7RBC Capital Markets 1.2 2.3Scotiabank 1.4 2.3Société Générale 1.2 2.1Standard Chartered 1.6 1.2Toronto-Dominion Bank 1.3 2.6UBS 1.3 2.2Unicredit 1.2 2.4SummaryMinimum 1.0 1.2Maximum 1.8 2.7Median 1.2 2.2Consensus 1.3 2.2History30 days ago 1.3 2.260 days ago 1.4 2.390 days ago 1.4 2.3Additional ForecastsIMF (July 2016) 1.1 2.5

0%

20%

40%

60%

80%

100%

< -0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0 > 3.0

26 | Inflation 2016 | Panelist Distribution

Inflation | annual variation of consumer price index in %

0

1

2

3



-1

0

1

2

3

4

2000 2005 2010 2015 2020

United States

G7

1

2

3

4



-1

0

1

2

3

Q1 13 Q1 14 Q1 15 Q1 16 Q1 17

United States

G7



October 2016

Monetary Sector | Interest Rates

Individual Forecasts 2016 2017 2016 2017 2016 2017Allianz - - 0.90 1.50 2.00 2.60ANZ 0.75 1.25 0.93 1.55 1.60 2.00BBVA Research 0.75 1.25 - - 1.72 1.86Berenberg 0.75 1.50 - - - -BMI Research - - - - - -BMO Capital Markets 0.63 1.13 1.05 1.51 1.70 2.00BNP Paribas 0.63 0.63 0.85 0.95 1.60 1.50CIBC World Markets 0.63 1.13 0.88 1.38 1.90 2.35Citigroup Global Mkts 0.75 1.25 - - 1.60 1.65Commerzbank 0.75 1.25 1.00 1.40 1.65 2.00Credit Agricole 0.75 1.25 0.90 1.60 1.95 2.70Credit Suisse - - - - - -Danske Bank 0.50 0.75 0.80 1.05 1.40 1.85DBS Bank 0.75 - - - - -DekaBank 0.75 1.50 0.90 1.35 1.75 2.35Deutsche Bank 0.63 - 0.83 - 1.75 -DIW Berlin - - - - - -DZ Bank - - - - - -EIU - - - - 1.80 2.50Emirates NBD 0.50 1.00 1.54 2.34 - -Euromonitor Int. - - - - - -Frontier Strategy Group - - - - - -Goldman Sachs 0.63 1.38 - - 2.00 2.50Ifo Institut - - - - - -ING 0.50 1.00 - - 1.40 1.90Intesa Sanpaolo - - 0.99 1.62 1.74 1.87JPMorgan 0.75 1.25 - - 1.75 -Julius Baer 0.50 1.00 - - 1.70 1.70Kiel Institute - - - - - -Lloyds TSB 0.75 1.25 0.90 1.40 1.60 1.90Macroeconomic Advisers - - - - - -National Bank of Canada 0.75 1.25 - - 1.70 2.06Nomura 0.63 0.88 0.95 1.25 1.75 2.00Nordea 0.75 1.50 1.00 1.60 1.90 2.40Oxford Economics - - 0.94 1.39 1.81 2.18Raiffeisen Research 0.75 1.50 1.15 1.90 2.10 2.90RBC Capital Markets 0.50 1.00 - - 1.70 2.10Scotiabank 0.75 1.50 - - 1.70 2.00Société Générale 0.63 - - - - -Standard Chartered 0.50 - 1.00 - 1.60 -Toronto-Dominion Bank 0.75 1.00 - - 1.70 1.90UBS 0.63 1.13 1.25 1.70 - -Unicredit 0.75 1.25 0.95 1.40 1.70 2.30SummaryMinimum 0.50 0.63 0.80 0.95 1.40 1.50Maximum 0.75 1.50 1.54 2.34 2.10 2.90Median 0.75 1.25 0.95 1.45 1.70 2.00Consensus 0.67 1.18 0.99 1.49 1.73 2.12History30 days ago 0.64 1.14 0.86 1.43 1.68 2.1760 days ago 0.62 1.13 0.82 1.44 1.73 2.2490 days ago 0.71 1.35 1.00 1.72 2.07 2.59

Fed Funds 3-Month USD 10-Year BondTarget Rate in % LIBOR in % Yield in %

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All monetary data are from the Federal Reserve Board (Fed). Variation in forecasts for federal funds target rate partly reflects current range of between 0% and 0.25% determined by the Fed. Forecasts based on FocusEconomics Consensus Forecast.27 Federal funds target rate in %.28 Federal funds target rate in %, evol. of 2016 and 2017 forecasts during the last 18 months.29 10-year benchmark bond yield (eop).30 10-year benchmark bond yield, evolution of 2016 and 2017 forecasts during the last 18 months.

Policy Rate, Benchmark Rate and 10-Year Bond Yield

1

2

3

4


2016 2017

30 | 10-Year Bond Yield | evol. of fcst

1

2

3

4

5

6

2000 2005 2010 2015 2020

United States

G7

29 | 10-Year Bond Yield | in %

0

2

4

6

8

2000 2005 2010 2015 2020

United States

G7

27 | Policy Rate | in %

0

1

2

3


2016 2017

28 | Policy Rate | evol. of forecasts



October 2016

0%

20%

40%

60%

80%

< -3.8 -3.5 -3.2 -2.9 -2.6 -2.3 -2.0 -1.7 > -1.7

External Sector | Current Account Balance

36 | Current Account | % of GDP

38 | Current Account 2016 | evol. of fcst

37 | Curr Account | Q1 13-Q4 17 | % of GDP

39 | Current Account 2017 | evol. of fcst

Individual Forecasts 2016 2017Allianz -2.6 -3.1ANZ - -BBVA Research -2.8 -3.0Berenberg -2.5 -2.5BMI Research -2.8 -2.6BMO Capital Markets -2.6 -2.6BNP Paribas -2.6 -2.7CIBC World Markets - -Citigroup Global Mkts -2.7 -3.0Commerzbank -2.5 -2.5Credit Agricole -2.8 -3.1Credit Suisse - -Danske Bank -2.9 -3.3DBS Bank -2.8 -2.6DekaBank -3.0 -3.0Deutsche Bank -2.5 -2.7DIW Berlin - -DZ Bank -2.7 -2.8EIU -2.4 -2.1Emirates NBD -2.7 -2.7Euromonitor Int. -2.7 -2.7Frontier Strategy Group - -Goldman Sachs - -Ifo Institut -2.8 -2.8ING - -Intesa Sanpaolo -2.7 -2.4JPMorgan - -Julius Baer - -Kiel Institute -2.6 -2.7Lloyds TSB -2.6 -2.5Macroeconomic Advisers - -National Bank of Canada -2.7 -2.6Nomura -2.7 -2.9Nordea -2.7 -3.0Oxford Economics -2.6 -2.6Raiffeisen Research -3.2 -3.5RBC Capital Markets -2.8 -3.0Scotiabank -2.7 -2.8Société Générale -3.0 -3.6Standard Chartered -2.5 -2.0Toronto-Dominion Bank - -UBS -3.0 -3.9Unicredit -2.9 -3.1SummaryMinimum -3.2 -3.9Maximum -2.4 -2.0Median -2.7 -2.8Consensus -2.7 -2.8History30 days ago -2.7 -2.960 days ago -2.7 -2.990 days ago -2.7 -2.9

40 | Current Account 2016 | Panelist Distribution

Current Account Balance | % of GDP

-5

-4

-3

-2

-1



-6

-4

-2

0

2000 2005 2010 2015 2020

United States

G7

-5

-4

-3

-2

-1



-3.0

-2.7

-2.4

-2.1

Q1 13 Q1 14 Q1 15 Q1 16 Q1 17

Notes and sources

Long-term chart period from 2000 to 2020 unless otherwise stated. All external sector data are from the Bureau of Economic Analysis (BEA). Forecasts based on FocusEconomics Consensus Forecast.36 Current account balance as % of GDP.37 4-quarter moving average of current account balance as % of GDP.38 Current account balance as % of GDP, evolution of 2016 forecasts during the last 18 months.39 Current account balance as % of GDP, evolution of 2017 forecasts during the last 18 months.40 Current account balance as % of GDP, panelist distribution of 2016 forecasts. Concentration

of panelists in forecast interval in %. Higher columns with darker colors represent a larger number of panelists.



October 2016

Fact Sheet

United States in the Region

Population | %-share in G7 GDP | %-share in G7

United States52.7%

Japan12.0%

Germany9.9%

United Kingdom

8.4%

France7.1%

Italy5.3%

Canada4.5%

United States42.6%

Japan16.8%

Germany10.8%

United Kingdom

8.6%

France8.5%

Italy8.0%

Canada4.8%

Canada14.8%

Japan5.7%

Other EU-2712.6%

Germany5.3%

Other Asia

ex-Japan11.5%

China19.9%

Other LatAm6.3%

Mexico12.5%

Other11.5%Canada

19.3%

EU-2717.1%

Other Asia ex-Japan

11.6%China7.6%

Other LatAm10.6%

Mexico14.8%

MENA5.3%

Other13.6%

Other6.3%

Manufact. Products71.7%

Mineral Fuels16.8%

Food5.3%Other

16.5%

Manufact. Products62.5%

Mineral Fuels10.8%

Food10.3%

Trade Structure

Primary markets | share in %

Primary products | share in %

Economic Structure

GDP by Sector | share in % GDP by Expenditure | share in %

Exports

Exports

Imports

Imports

-20

0

20

40

60

80

100

1202005-07 2008-10 2011-13

Net Exports

Investment

GovernmentConsumption

PrivateConsumption

0

20

40

60

80

1002005-07 2008-10 2011-13

Agriculture

Manufacturing

Other Industry

Services

General Data

Economic Infrastructure

Political Data

Long-term Foreign Currency Ratings

Strengths Weaknesses

• Growing energy self sufficiency • High public debt• Strong domestic market • Persistent current account deficit• Diversified economy • High household debt• Flexible job market

Energy (2012)Primary Energy Production (trillion Btu): 79,212Primary Energy Consumption (trillion Btu): 95,058Electricity Generation (billion kW-h): 4,048Electricity Consumption (billion kW-h): 3,832Oil Supply (thousand bpd): 11,119Oil Consumption (thousand bpd): 18,490CO2 Emmissions (million metric tons): 5,270

Agency Rating OutlookMoody’s: Aaa StableS&P Global Ratings: AA+ StableFitch Ratings: AAA Stable

Telecommunication (2014) Telephones - main lines (per 100 inhabitants): 39.8Telephones - mobile cellular (per 100 inhabit.): 110Internet Users (per 100 inhabitants): 84.2Broadband Subscriptions (per 100 inhabitants): 31.1

Transportation (2013) Airports: 13,513Railways (km): 224,792Roadways (km): 6,586,610Waterways (km): 41,009Chief Ports: Los Angeles, New York, Houston

President: Barack Hussein ObamaLast elections: 6 November 2012Next elections: 8 November 2016Central Bank Governor: Janet Yellen

Official name: United States of AmericaCapital: Washington D.C. (4.4m)Other cities: New York (19.3m)

Los Angeles (12.6m)Area (km2): 9,826,675Population (million, 2015 est.): 321Population density (per km2, 2015): 32.7Population growth rate (%, 2015 est.): 0.8Life expectancy (years, 2015 est.): 79.7Illiteracy rate (%, 2003): 1.0Language: EnglishMeasures: U.S. customary unitsTime: GMT-5 to GMT-10

FOCUSECONOMICS


October 2016

Economic Release Calendar

Date Country Event27 September United States September Consumer Confidence27 September United States July S&P/Case-Shiller Home Price Index28 September France September Consumer Confidence28 September Germany September Consumer Confidence28 September Italy September Consumer Confidence28 September Italy September Business Confidence29 September Euro area September Economic Sentiment29 September Germany September Consumer Prices (*)29 September United States Q2 2016 National Accounts (third estimate)30 September Canada July Monthly GDP30 September Euro area August Unemployment30 September Euro area September Consumer Prices (*)30 September France September Consumer Prices (*)30 September Italy September Consumer Prices (*)30 September Japan August Consumer Prices30 September Japan August Industrial Production30 September Switzerland September KOF Indicator30 September United Kingdom August Nationwide House Price Index (**)30 September United Kingdom September GfK NOP Consumer Confidence (**)1 October Italy September Markit/ADACI Manufacturing PMI1 October United Kingdom September Markit/CIPS Manufacturing PMI3 October France September Markit Composite PMI 3 October Japan Q3 2016 Tankan Business Confidence3 October Switzerland September Credit Suisse Manufacturing PMI3 October Switzerland August Retail Sales3 October United States September ISM Manufacturing4 October Japan September Consumer Confidence6 October Switzerland September Consumer Prices7 October Canada September Ivey PMI7 October Germany August Industrial Production7 October United Kingdom August Industrial Production7 October United States September Unemployment8 October Canada September Housing Starts9 October France August Industrial Production9 October Italy August Industrial Production10 October Germany August Merchandise Trade12 October Euro area August Industrial Production12 October Japan August Machinery Orders13 October Canada September Teranet House Price Index13 October United Kingdom Central Bank Meeting14 October France September Consumer Prices14 October Italy September Consumer Prices14 October United States September Retail Sales17 October Euro area September Consumer Prices

(*) Preliminary estimate. (**) Approximate date.

Calendar

FOCUSECONOMICS


October 2016

Economic Release Calendar

Date Country Event18 October United Kingdom September Consumer Prices18 October United States September Consumer Prices19 October Canada Central Bank Meeting19 October United Kingdom September Unemployment20 October Germany October Business Confidence (**)21 October Canada September Consumer Prices21 October Euro area Central Bank Meeting22 October France October Business Confidence23 October France October Markit Composite PMI (*)23 October Germany October Markit Composite PMI (*)24 October Euro area October Markit Composite PMI (*)24 October Japan September Merchandise Trade24 October Japan October Nikkei Manufacturing PMI

(*) Preliminary estimate. (**) Approximate date.

FOCUSECONOMICS


October 2016

Notes and Statements

PUBLICATION NOTE

Consensus forecasts are mean averages of projections of economic forecasters surveyed by FocusEconomics for our monthly publication. Quarterly averages may not correspond to the annual figures due to different forecast panels.

The GDP-weighted averages for the world refer to economies surveyed by FocusEconomics on a monthly basis, and include the following countries and regions, comprising more than 90% of total global output:

G7 (Group of Seven, 7 countries): Canada, Japan, United Kingdom and United States; France, Germany and Italy are also Euro area countries.BRIC (4 countries): Brazil, Russia, India, and China. The term was coined by Goldman Sachs in November 2001 and has since been widely adopted in investment and finance.Euro area (19 countries): Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.Nordic Economies (5 countries): Denmark, Norway, Sweden and Iceland. Finland is also a Euro area member.Additional Countries: Switzerland.

Weights are based on market exchange rates and reflect the latest forecasts on GDP growth, inflation and exchange rates.

COPYRIGHT NOTE

© Copyright 2016 FocusEconomics S.L.U. Duplication, reproduction, transmission, publication or redistribution in any form or by any means electronic, mechanical, or otherwise without prior written consent of FocusEconomics S.L.U. is strictly prohibited. Please cite source when quoting. All rights reserved under International Copyright Conventions.

The FocusEconomics Consensus Forecast – Major Economies is a monthly publication of FocusEconomics. Communications to the Editor or FocusEconomics in general should be addressed as follows:

FocusEconomics S.L.U.Gran Via 657E-08010 BarcelonaSpaintel: +34 932 651 040fax: +34 932 650 804e-mail: [email protected] web: http://www.focus-economics.com

DISCLOSURE STATEMENT

The FocusEconomics Consensus Forecast – Major Economies (“Forecast”) is based on information obtained from sources believed to be reliable. FocusEconomics and the participating panelists (“Information Providers”) do not guarantee that the information supplied in the Forecast is accurate, complete or timely. The Information Providers do not make any warranties with regard to the results obtained from the Forecast. The Information Providers are not responsible for any errors or omissions, or for any injuries or damages resulting from the use of this information, including incidental and consequential damages. Recipients should not regard the Forecast as a substitute for the exercise of their own judgement. The recommendations made in the Forecast may be unsuitable for investors depending on their specific investment objectives and financial position. The Forecast has been prepared solely for informational purposes and is not a solicitation of any transaction or an offer to enter into any transaction. Any opinions expressed in this report are subject to change without notice and the Information Providers are under no obligation to update the information contained herein.

Notes

FocusEconomics reports are designed to give you fast access to the data and insight you need so that you can make the right decisions for your business. Our reports provide hundreds of economic and commodities price forecasts from our network of more than 900 of the most reputable economic analysts in the world.

MAJOR ECONOMIES G7 countries (United States, Canada, Japan, United Kingdom, France, Germany & Italy) and overview of the BRIC countriesEURO AREA & SWITZERLAND Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain and SwitzerlandNORDIC ECONOMIES Denmark, Finland, Iceland, Norway and SwedenCENTRAL & EASTERN EUROPE Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and SloveniaCIS COUNTRIES Armenia, Azerbaijan, Belarus, Georgia, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, Ukraine and UzbekistanSOUTH-EASTERN EUROPE Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Cyprus, Greece, Kosovo, Macedonia, Montenegro, Romania, Serbia and TurkeyEAST & SOUTH ASIA Bangladesh, China, Hong Kong, India, Korea, Mongolia, Pakistan, Sri Lanka, Taiwan, Australia and New ZealandASEAN ECONOMIES Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam, Australia and New ZealandLATIN AMERICA Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Mexico, Paraguay, Peru, Uruguay and VenezuelaCENTRAL AMERICA & THE CARIBBEAN Belize, Costa Rica, Dominican Republic, El Salvador, Guatemala, Haiti, Honduras, Jamaica, Nicaragua, Panama, Puerto Rico and Trinidad and TobagoMIDDLE EAST & NORTH AFRICA Algeria, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Morocco, Oman, Qatar, Saudi Arabia, Tunisia, United Arab Emirates and YemenSUB-SAHARAN AFRICA Angola, Botswana, Côte d’Ivoire, DR Congo, Ethiopia, Ghana, Kenya, Mozambique, Nigeria, South Africa, Tanzania, Uganda and Zambia

ECONOMIC FORECASTS FOR KEY INDICATORS IN 127 COUNTRIES IN 12 REGIONS

REAL SECTOR GDP per capita, Economic Growth, Consumption, Investment, Industrial Production, Unemployment Rate, Fiscal Balance and Public DebtMONETARY & FINANCIAL SECTOR Money, Inflation Rate, Policy Interest Rate and Exchange RateEXTERNAL SECTOR Current Account, Trade Balance, Exports, Imports, International Reserves and External Debt

ENERGY Brent Crude Oil, WTI Crude Oil, Coking Coal, Ethanol, Gasoil (European market), Gasoline (U.S. benchmark), Natural Gas, Thermal Coal and UraniumBASE METALS Alumina, Aluminium, Aluminium Alloy, Copper, Iron Ore, Lead, Nickel, Steel (European and U.S. markets), Tin and ZincPRECIOUS METALS Gold, Silver, Palladium and PlatinumAGRICULTURAL Cocoa, Coffee, Corn, Cotton, Oats, Soybeans, Sugar, Wheat and Wool

PRICE FORECASTS FOR 33 COMMODITIES IN 4 MAIN GROUPS

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