Global Economic Outlook: From Fiscal Cliff to Rushcliffe in 15 minutes. Tom Rogers. Lead Economist, Oxford Economics.

Transcription

1 Global Economic Outlook: From Fiscal Cliff to Rushcliffe in 15 minutes Tom Rogers Lead Economist, Oxford Economics 16 th January 2013

2 Overview External environment showing signs of stabilisation if not quite yet recovery. So 2013 will be another tough year for UK exporters. Firms will hold back on investment, despite ever-growing cash piles. Jobs growth likely to slow, but with some pickup in wage growth supporting consumer demand. Risks to inflation to upside in short term and downside in medium term. MPC s policy measures look like supporting housing market in UK regional divide in economic prospects but not entirely a North-South story. Other factors matter too.

3 US households in good financial shape US : Household debt measures % of disposable income Household financial obligations Household debt service ratio Source: FRB 3

4 and banks lending to business 4 US & Eurozone: Corporate loan growth % year Eurozone loans to PNFCs Source : Oxford Economics/Haver Analytics US commercial & industrial loans US loans inc. commercial real estate

5 Imminent risk of breakup reduced Weighted average peripheral bond spread % spread over German bunds Jul Dec Jun Dec Jun Dec-12 Source : Oxford Economics/ Haver Analytics

6 but more austerity to go Discretionary fiscal tightening, Percent of GDP Germany Italy France Belgium Spain Ireland Greece Source : Oxford Economics/Haver Analytics

7 unemployment will restrain consumption Eurozone: Unemployment Rate % 30 Greece Spain Portugal 10 Eurozone Source : Oxford Economics/Haver Analytics

8 some way to go to restore competitiveness Unit labour costs 2000= Greece Forecast 140 Italy France Spain Germany Source: Oxford Economics

9 and banks will struggle with bad debt for some time Eurozone Non-performing bank loans % total loans Spain Forecast 12 Italy Eurozone Source : Oxford Economics/World Bank

10 So a lost decade likely in medium-term Eurozone GDP growth % year average 2.5 Forecast Source : Oxford Economics/Haver Analytics

11 Oxford Economics baseline forecast Av US Japan Eurozone of which: World GDP Growth % Change on Previous Year Germany France Italy UK China India Other Asia Mexico Brazil Other Latin America Eastern Europe MENA World World (PPP)

12 UK outlook - summary Spare capacity within firms will limit job creation in 2013 Firms still loathe to invest, despite ever-growing cash piles Inflation above target in 2013, below target in medium term MPC has sparked signs of life the mortgage market But house prices unlikely to take off in 2013 Southern regions fare best, with some interesting localised differences

13 Flat GDP and strong employment growth UK: Labour market Employment (000s) Unemployment (RHS) Employment (LHS) Unemployment (000s) Source : Haver Analytics

14 leaves us with spare capacity within firms UK: Output per worker 2009= Pre-recession trend % Actual Source : Haver Analytics

15 so limited scope for further job creation UK: Unemployment % 9 Forecast ILO Claimant count Source: Oxford Economics

16 Implies only a gradual recovery in consumer spending UK real consumer spending % change on year ago 4% 3% 2% 1% 0% % -2% -3% Forecast -4% Source : Oxford Economics/Haver Analytics

17 Firms still reluctant to invest UK:BoE agents' survey: Investment intentions % balance 4 Services Manufacturing Source : Haver Analytics

18 despite having plenty of cash UK: PNFC financial balance % of GDP, 4QMA Source : Haver Analytics

19 Inflation below target in medium term UK: Inflation relative to target % year 5 Forecast % target 1 CPI inflation Source: Oxford Economics

20 Lending for Business should kick start mortgage lending UK: Mortgage availability % balance : loosening (+) / tightening (-) *The single datapoints represent 3 month forecasts, while the columns represent actual data Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q Source : Bank of England Credit Conditions Survey

21 but further modest house price falls likely UK: House prices & transactions Prices (% year) Transactions (RHS) Prices (LHS) Transactions (000s) 500 F'cast Source : Oxford Economics

22 UK forecast Forecast for UK (Annual percentage changes unless specified) Domestic Demand Private Consumption Fixed Investment Stockbuilding (% of GDP) Government Consumption Exports of Goods and Services Imports of Goods and Services GDP Industrial Production CPI Current Balance (% of GDP) Government Budget (% of GDP) Short-Term Interest Rates (%) Long-Term Interest Rates (%) Exchange Rate (US$ per ) Exchange Rate (Euro per )

23 Regional prospects divided Unemployment rates around UK regions, 2013 Percent of labour force SE SW EE L EM S W NW WM YH NE N Source : Oxford Economics/Haver Analytics

24 Regional prospects divided Average GVA growth Percent on year ago 2.8% 2.6% 2.4% 2.2% 2.0% 1.8% 1.6% 1.4% L SE SW EE WM EM YH NW NI S W NE Source : Oxford Economics/Haver Analytics

25 But not entirely a North-South story