The Economy at a Glance March

8/7/2019 The Economy at a Glance March

1/43

The art of common sense

The Economy at a Glance

,

Portfolio manager Torgeir Hien


2/43

Ex ect more Eurozone Turmoil

Activity indicators for manufacturing slipped a little from February to March in most countries, but they stillsignal strong growth in the global economy. The activity indicators for the service sector are not in yet, but I donot expect them to change the picture.

e wor was y some severe s oc s n e rs quar er, e mos rama c o ese e ng e mass veearthquake in Japan. Irrespective of what some irresponsible Keynesians are saying, this will have a markednegative impact on the Japanese economy. We expect negative growth in the first two quarters of this year,

and only modest growth from 2010 to 2011. The other tremors from the first quarter will probably recede over. ,

production to fill the Libyan vacuum.

The European Central Bank (ECB) is going to be a first mover among the big central banks and will hike itspolicy rate from 1 to 1.25 percent in April. However, we do not expect this to be the first in a series of

. , ,

Federal Reserve too will probably change direction this summer or early autumn. Hence, short term interestrates are set to move up over the coming quarters, though the pace will be modest this year.

The fiscal stance continues to deteriorate in the Eurozone, with Dublin injecting ever more taxpayer money into

its rotten bank s stem. In Portu al the situation became much worse with ublic deficits for 2009 and 2010much worse than previously thought and a vote of no-confidence for the ruling Socialist party. Portugal needsa bail-out, like Greece and Ireland, but the caretaker government in Lisbon is not able to sign any suchagreement. With large redemptions in April and June, and a new government in place in early June at the

earliest, this crisis may escalate. The underlying problem in the Eurozone is that some of its members areclearly insolvent and even its most solid member states have too much debt and too little political capital tocome to their rescue with anything other than new loans. At some stage bond holders will have to take a hit, asthat is the only way to put peripheral finances on a solid footing.


3/43

Gross Domestic Product in Advanced Economies

Seasonally adjusted GDP levels

135,0135,0 Israel

100120,0

125,0

130,0

100120,0

125,0

130,0

US

New Zealand

Canada

Mainland-Norway

Index,2008:1

105,0

110,0

115,0

Index,2008:1

105,0

110,0

115,0Sweden

Eurozone

UKFinland

90,0

95,0

100,0

90,0

95,0

100,0

Japan

Denmark

Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010


4/43

Gross Domestic Product in Advanced Economies

100

100

Index,2008:1=

Index,2008:1=


5/43

Productivity

GDP per hour worked in the business sector

112,5112,5US

=100

105,0

107,5

110,0

=100

105,0

107,5

110,0

Mainland Norway

Index,2000:1

100,0

102,5

Index,2000:1

100,0

102,5

UK

92,5

95,0

,

92,5

95,0

,

Sweden

Eurozone

Source: EcoWin2007 2008 2009 2010


6/43

Manufacturing Production in Advanced Economies

=100

=100

Index,Jan.2

007

Index,Jan.2

007


7/43

Manufacturing Production in Emerging Economies

Seasonally adjusted levels of manufacturing production

170170

China (s.a. by SKAGEN)

=100

130

140

150

160

=100

130

140

150

160

South Korea

Brazil

Thailand

India (s.a. by SKAGEN)

Taiwan

Turkey

Index,Jan.2007

100

110

120

Index,Jan.2007

100

110

120 Mexico

Russia (s.a. by SKAGEN)

70

80

90

70

80

90

Hungary

South Africa

Source: Reuters EcoWin2007 2008 2009 2010 2011


8/43

PMI Manufacturing in Advanced Economies

PMI manufacturing

7070

ex

55

60

65

ex

55

60

65

Norway

Sweden

US

Diffusionind

40

45

50

Diffusionind

40

45

50EMU

UK

New Zealand

25

30

35

25

30

35

Australia

Japan

Hong Kong

Sources: Reuters EcoWin and Bloomberg2007 2008 2009 2010 2011


9/43

PMI Manufacturing in Emerging Economies

PMI manufacturing

7070

ex

55

60

65

ex

55

60

65

India

Israel

Diffusionind

40

45

50

Diffusionind

40

45

50

South Africa

Mexico

Brazil

Turkey

25

30

35

25

30

35

Russia

Taiwan

South Korea

Sources: Reuters EcoWin and Bloomberg2007 2008 2009 2010 2011


10/43

PMI Services

ex

ex

DiffusionIn

DiffusionIn


11/43

Commodity Prices

ll

USDperbarre

USDperbarre

erton

erton

USD

USD


12/43

Freight rates

Freight rates

1200012000

2000

4000

6000

8000

2000

4000

6000

8000Dry commodities

110

130

150

110

130

150

Crude oil

00

30

50

70

90

30

50

70

90

Source: Reuters EcoWin2007 2008 2009 2010 2011


13/43

Retail Sales in Constant Prices

=100

=100

Index,Jan.2

008

Index,Jan.2

008


14/43

Export in USD

Asia and Latin America175175

Europe and North America175175

125

150

125

150Japan

South Korea

125

150

125

150

GermanyUK

US

50

75

100

50

75

100

India

Brazil

Mexico

50

75

100

50

75

100

FranceItaly

Spain

Sveits

2007 2008 2009 2010 2011

0

25

0

25

2007 2008 2009 2010 2011

0

25

0

25

Source: Reuters EcoWinSource: Reuters EcoWin


15/43


16/43

Employment

Employment

64,50150,0

63,75

64,00

64,25

142,5

145,0

147,5

Eurozone (l.s.)

63,00

63,25

63,50

135,0

137,5

140,0

US (l.s.) Japan (r.s.)

62,25

62,50

62,75

127,5

130,0

132,5

Source: Reuters EcoWin

an mar ma u sep nov an mar ma u sep nov an mar ma u sep nov an mar ma u sep nov an

2007 2008 2009 2010 2011


17/43

Unemployment

Perce

nt

Perce

nt


18/43


19/43

Consumer Price Levels in Advanced Economies

Seasonally adjusted consumer price levels

115,0115,0UK

110,0

112,5

110,0

112,5Norway

Canada

EMU

US

Sweden

102,5

105,0

107,5

102,5

105,0

107,5

Japan

Switzerland (SA by SKAGEN)

Germany

97,5

100,0

97,5

100,0

Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010 2011


20/43

Inflation in Emerging Economies

Annual change in CPI

17,017,0India wholesale rices

Russia

9,5

12,0

14,5

9,5

12,0

14,5China

South Korea

Mexico

Brazil

Hungary

4,5

7,0

4,5

7,0

-3,0

-0,5

2,0

-3,0

-0,5

2,0

Taiwan

Poland


jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar

2007 2008 2009 2010 2011


21/43

Consumer Price Levels in Emerging Economies

8=100

8=100

Index,Jan.20

Index,Jan.20


22/43

Core Inflation in Advanced Economies

Percen

Percen


23/43

Core Consumer Price Levels in Advanced Economies

=100

=100

Index,Jan.

2008

Index,Jan.

2008


24/43


25/43

Core Consumer Price Levels in Emerging Economies

Seasonally adjusted core consumer price levels

125,0125,0

=100

115 0

117,5

120,0

122,5

=100

115 0

117,5

120,0

122,5

Hungary

Brazil

Index,Jan.2008

107,5

110,0

112,5

,

Index,Jan.2008

107,5

110,0

112,5

,

Taiwan (s.a. by SKAGEN)

South Korea (s.a. by SKAGEN)

China (s.a. by SKAGEN)

100,0

102,5

105,0

100,0

102,5

105,0

Sources: Reuters EcoWin and SKAGEN2007 2008 2009 2010 2011


26/43

Policy Rates and Overnight Rates

US

66

Eurozone

6,0

4

5

4

5

Policy rate

4,0

5,0

Lending rate

2

3

2

3

2,0

3,0

Target rate

2007 2008 2009 2010 2011

0

1

0

1

Overnight rate

jan mai sep jan mai sep jan mai sep jan mai sep jan

0,0

1,0

Deposit rate

Overnight rate

Source: Reuters EcoWin Source: Reuters EcoWin2007 2008 2009 2010 2011


27/43

Policy Rates and Overnight Rates

Switzerland

7,07,0

UK

77

5,0

6,0

5,0

6,0

Overnight rate

5

6

5

6

2,0

3,0

4,0

2,0

3,0

4,0

Policy rate

2

3

4

2

3

4

Overnight rate

Policy rate

2007 2008 2009 2010 2011

0,0

1,0

0,0

1,0

2007 2008 2009 2010 2011

0

1

0

1

Source: Reuters EcoWinSource: Reuters EcoWin


28/43


29/43

Treasury Bills and Interbank Interest Rates

3 months T-bill

66

3 month interbank rate

77

4

5

4

5

5

6

5

6

2

3

2

3

Germany

UK

2

3

4

2

3

4

EUR

GBP

2007 2008 2009 2010 2011

0

1

0

1

US

2007 2008 2009 2010 2011

0

1

0

1

USD

Source: Reuters EcoWin Source: Reuters EcoWin


30/43

Risk Premium in Interbank Rates

3 month

400400

3 month

400400

300

350

300

350

USD250

300

350

250

300

350

150

200

150

200

GBP

EUR

150

200

150

200

SEK

DKK

2007 2008 2009 2010 2011

0

50

100

0

50

100

2007 2008 2009 2010 2011

0

50

0

50

JPY



31/43

10 Year Nominal Interest Rates

10 year Treasury yields

5,05,0

t

3,5

4,0

,

t

3,5

4,0

,US

P

ercen

2,0

2,5

,

P

ercen

2,0

2,5

,

Japan

France

jan mar mai jul sep nov jan mar mai jul sep nov jan mar mai jul sep nov jan mar

0,5

1,0

,

0,5

1,0

,

Source: Reuters EcoWin2008 2009 2010 2011


32/43

Expected Annual Inflation Next 10 Years

Perc

ent

Perc

ent


33/43

10 Year Risk Premiums

ints

ints

Percenta

gepoi

Percenta

gepoi


34/43

10 Year Risk-Free Real Interest Rates

Percent

Percent


35/43

Base Money

US and Eurozone

1,42,50

UK and Switzerland

130225

1,2

1,3

2,00

2,25

Eurozone (r.s.)

US (l.s.)

100

110

120

175

200

Switzerland (r.s.)

0,9

1,0

1,1

1,25

1,50

1,75

70

80

90

100

125

150

UK (l.s.)

2007 2008 2009 2010 2011

0,7

0,8

0,75

1,00

2007 2008 2009 2010 2011

40

50

60

50

75



36/43

Broad Money

Level

150150

Annual growth

20,020,0

130

140

130

140

Eurozone

US

Switzerland12,5

15,0

17,5

12,5

15,0

17,5UK

US

Sveits

110

120

110

120Japan

5,0

7,5

10,0

5,0

7,5

10,0

2007 2008 2009 2010 2011

90

100

90

100

2007 2008 2009 2010 2011

-2,5

0,0

2,5

-2,5

0,0

2,5

Eurosonen



37/43

US Industrial Indicators

National indicators

100,070

Regional indicators

50

92,5

95,0

97,5

55

60

65

ISM manufacturing (l.s.)

NIFB Small Businesss Optimism (r.s.)

40

50

60

70

-30

-10

10

30

Chicago PMI (r.s.)Kansas Fed (l.s.)

85 0

87,5

90,0

40

45

50

0

20

10

30

30-50Philadelphia Fed (l.s.)

2007 2008 2009 2010 2011

80,0

82,5

,

30

35

ISM services (l.s.)

jan mai sep jan mai sep jan mai sep jan

-60

-40

-20

-70

-50

-30

-

Richmond Fed (r.s.)

New York Fed (l.s.)

Dallas Fed (r.s.)

Source: Reuters EcoWin Source: Reuters EcoWin2008 2009 2010 2011


38/43

US Consumption Indicators

Retail sales

400400

350

375

350

375

In

dex

In

dex

Billio

nUS

275

300

325

Billio

nUS

275

300

325Total

2007 2008 2009 2010 2011

225

250

225

250

Ex autos and gas



39/43

The US Labor Market

Tho

usand

M

illion


40/43

Eurozone Indicators


41/43

Eurozone Consumption Indicators

Retail sales

110110

Consumer confidence

1159

106

107

108

109

106

107

108

109

Current prices

100

105

110

6

7

8

Italy (r.s.)

103

104

105

103

104

105

Constant prices85

90

95

3

4

5

Tyskland (l.s.)

2007 2008 2009 2010

100

101

100

101


2007 2008 2009 2010 2011

75

80

1

2France (l.s.)


42/43

Eurozone GDPs

Seasonally adjusted GDP since Q1 2007

115115Slovakia

Seasonally adjusted GDP since Q1 2007

115115

105

110

105

110

Cyprus

Malta

105

108

110

113

105

108

110

113Luxemburg

Germany

Netherland

90

95

100

90

95

100

Slovenia

Spain

Portugal

Greece95

98

100

103

95

98

100

103

France

Austria

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

80

85

80

85Irland

Estonia

Q1 Q3 Q1 Q3 Q1 Q3 Q1 Q3

88

90

93

88

90

93Italy

n an

Source: Reuters EcoWinSource: Reuters EcoWin2007 2008 2009 2010


43/43

Eurozone Interest Rate Spreads

Spread to 10-year German bund Spread to 10-year German bund

1010

6,50

7,50

8,50

9,50

6,50

7,50

8,50

9,50

6

7

8

9

6

7

8

9

Greece

Portugal

Ireland

2,50

3,50

4,50

5,50

2,50

3,50

4,50

5,50

France

Finland

Netherlands2

3

4

5

2

3

4

5

Belgium

Spain

Italy

2007 2008 2009 2010 2011

-0,50

0,50

1,50

-0,50

0,50

1,50

2007 2008 2009 2010 2011

-1

0

1

-1

0

1


The Economy at a Glance March

Documents

Transcript of The Economy at a Glance March