Академический Документы
Профессиональный Документы
Культура Документы
Joachim Fels
Joachim.Fels@morganstanley.com +44 (0)20 7425 6138
Manoj Pradhan
Manoj.Pradhan@morganstanley.com +44 (0)20 7425 3805
Global
Patryk Drozdzik
Patryk.Drozdzik@morganstanley.com +44 (0)20 7425 7483
Philipp Erfurth
Philipp.Erfurth@morganstanley.com +44 (0)20 7677 0528
Will these surprises pan out? We dont know, but they would certainly change the landscape in 2014 if they do. As Monty Python has famously said nobody expects the Spanish Inquisition.
Spotlight
Fed Focus: The Fed Dream Team?
Stanley Fischer, the possible next vice-chairman of the Federal Reserve Board, comes with a resume that cannot be topped. A Yellen-Fischer-led Fed would likely work as a world-class institution if all goes according to plan. Perhaps more importantly for Yellen, what signal is the Administration trying to send? p7
Global Macro Watch Global: Global GDP Nowcast: 4Q Update .................. p 10 Euro Area: No Specific Measures Yet ........................ p 10 Spain: Regional Finances No Longer a Problem? ... p 11 Japan: Abenomics, Labour and Wages: Thousand Mile Journey in a Blizzard.................................................... p 11 UK: Autumn Statement: Finally, Some Better Fiscal News ........................................................................... p 12 EM: The Double Deficit Club & the Safe-Haven Club.. p 12 China: Modest Easing in Growth Momentum.............. p 13 Asia Pacific: Asias Boom-Bust-Adjustment Cycles ... p 13 Indonesia: Policy Rate Kept on Hold .......................... p 14 Latin America: Latam Transitions .............................. p 14
For important disclosures, refer to the Disclosures Section, located at the end of this report.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Global
Forward Guidance Fails Many of the major DM central banks (possibly including the BoJ in the future) have moved towards a regime of forward guidance, which has become an important policy tool for a smooth transition from QE towards more conventional policy. One central bank proves unsuccessful in upholding credible forward guidance on interest rates, and this failure is translated around the world to other central banks as well. Forward guidance then increasingly becomes viewed as mere cheap talk and investors lose confidence in central banks credibility to both support growth and deal with inflation when they need to.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Y=AL K , Capex: Check, but What about Labour? Though the US manufacturing renaissance progresses in 2014, a shortage of skilled labour (thanks to a deep recession and years of outsourcing) throws a spanner in the works. US firms struggle to fill jobs due to a lack of proficient labour supply. Competition for skilled workers leads to upward pressures on wages, which, in turn, hurts competitiveness. Meanwhile in the EU, due to the lack of decisive policy action, long-term youth unemployment stays at record highs, with young jobseekers lacking the experience and skills to drive an economic recovery. Not just in the European periphery but also in countries like the UK, long-term youth unemployment remains at multiples of pre-crisis levels. In both the US and the EU, this skills gap shortage acts as a road block on the way to a sustainable recovery. EM: Showing Policy-Makers the Yellow Card In EM, a dangerous cocktail of economic policies and outcomes cause a serious hangover. Necessary fiscal and monetary tightening measures and other macro adjustments, execution of unpopular structural reforms, a subpar and volatile recovery, currency depreciation and rising divergence between slowing EMs and reaccelerating DMs all play a role. An early World Cup exit for Brazils football team and elections in many, including all core Double Deficit Club EM economies, act as a catalyst for heightened popular awareness about slowing growth prospects and other social problems. The result is social unrest which hurts economic activity in the short term. Policy-makers respond with populist measures which go against the need for structural reforms to help these economies transition from their broken growth models to newer, sustainable ones. A Sharper EM Adjustment, but with a Silver Lining (Finally) As US growth and capex surprise to the upside, EM economies get none of the benefits from better US growth (since they are better equipped to cater to consumer, not investment demand). Higher US Treasury yields and a stronger US dollar create 2013-like effects in the EM world, pushing a sharper adjustment onto asset prices and economic growth. However, this time round, policy-makers finally find religion, and respond with structural reforms that find enough buy-in from global investors aided by the significant adjustment to asset prices. Economic and asset market prospects in EM finally improve for the right reasons.
United States
A Spat at the Fed Vice chairman Stanley Fischer draws a battle line in the sand, arguing forward guidance is ineffective and should be abandoned. Chairwoman Yellen tries to enforce conformity in favour of forward guidance. Nevertheless, Fischers intellectual gravitas draws enough support to split the FOMC. The Fed drops details of forward guidance and simply states policy accommodation will remain in place until the outlook for the labor market has improved substantially in a context of price stability. Confused financial market participants price in earlier tightening and rates jump. More Aggressive Housing Policy Newly installed Federal Housing Finance Agency (FHFA) director Mel Watt paves the way for the Presidents plan to open up refinancing for millions of families by streamlining the process for mortgages not guaranteed by the government. A new wave of refinancing ensues, freeing up a substantial amount of disposable income. Republican Sweep Since 2010, a divided US Congress has slowed passage of legislation to a near glacial pace. The steady stream of partisan gridlock is only periodically interrupted by artificial funding crises, the product of prior makeshift eleventh hour deals. To reset the course, Republicans pour endless hours and funds into divided senate races until Election Day in November 2014. They net the 6 seats needed to control Congress, the President is forced to the table with fewer bargaining chips, and the elusive budget grand bargain becomes reality. Strong legislation and the removal of policy uncertainty comfort consumers, businesses and financial markets.
Europe
Political Backlash: More Regional than European While investors get increasingly worried about the European Parliament elections and the rise of anti-European or antieuro parties, the real trouble is starting to brew at the regional level within individual European countries. In the context of the Scottish independence vote in September 2014 and the planned Catalan referendum in November 2014, it becomes increasingly clear that Member States will use the full force of the EU treaty, which says that any region leaving a country would also find itself outside of the European Union and would need to reapply for entry, to limit potential devolution of national power up to and including full regional independence.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Italy Turns Out to Be the Next Japanand Bond Yields Fall Sharply Signs of Japanification take hold in Italy more than anywhere else in the eurozone. Just like in Japan over the past decade and a half, outright deflation happens and affects inflation expectations, and Italys poor demographic prospects contribute to entrench the declining trend in consumer prices. But, like the Japanese economy at that time, the Italian current account is now in surplus, and its bond market much more owned by domestic investors than before. Thus, with structurally low growth and negative inflation, yields on Italian government bonds fall sharply as long as perception of a European policy backstop remains in place Spain Learns to Love Deflation, Germany Learns to Love Inflation. No Fun in Italy Though. The whole of southern Europe sees outright declines in consumer prices. But this happens just as a result of economic weakness and wide spare capacity in Italy, which struggles to shoulder its debts as consumers and firms postpone spending in expectations of further falls in prices. This makes nominal GDP shrink even more. Yet Spain sees a drop in consumer prices as a result of rising productivity and falling wages courtesy of the labour market reforms. In turn, this regained competitiveness supports GDP growth and lowers the debt burden through the export channel but also thanks to domestic spending, given that product market reforms now make the balance-sheet adjustment feeding through into lower consumer prices. Yet, this is shortlived and doesn't trigger expectations of further drops in prices. And, to round-up the good rebalancing within the eurozone, wage growth and rising house prices boost the German consumers purchasing power, which does actually spend! Cyprus Lifts Capital Controls before Iceland With all capital controls in Cyprus being removed and the country resuming its full effective membership of the euro, doomsayers, who were praising Iceland to be lucky for not being restricted by being a member of the European Union or the Single Currency, will have another opportunity to reconsider their views. The same goes for those who were commenting that the difference between Ireland and Iceland was one letter and six months as Irelands exit from the bailout programme will prove highly successful. EMU-Outs Stifled by Tighter Macro-Prudential Policies In our baseline, the UK and Sweden will grow four to five times as fast as the euro area. One factor that is supporting consumer spending in both countries is a strong performance of the housing market. In Sweden, the strength of the housing market and the accompanying increase in mortgage debt have already become a concern both from a monetary and
macro prudential policy point of view. In the UK, the housing market is already becoming a concern on the macroprudential policy side, despite only small increases in mortgage debt. But with macro-prudential policies which are now applied in both countries still largely being untested, they have a bigger-than-expected impact, causing housing markets to come to a grinding halt or even to go into reverse, thus opening the door for more monetary policy stimulus.
Japan
Wage Inflation Triggers Productivity Boost Wages accelerate to 2%Y quickly, in the face of labour shortages. Moreover, wage acceleration starts in small business, where shortages are worst. In addition, pressure from the Abe government on large companies leads to increases of base wages in the spring wage round, and small firms are forced to follow doubling the pressure on the small firms. A shakeout begins among small firms, and this shakeout reallocates labour to better uses. Although the wage pressure starts a political backlash for more small business support, the tight labour market allows a change of labour laws, to allow more flexible management of hiring/firing. Better incentives for business and labour improve skill levels and justify the higher wages. The higher wage inflation gives BoJ more confidence in its inflation forecast, and it postpones new easing measures, leading to changed expectations for both yen/dollar and JGB yields. The yen stabilises towards our end-2014 level of 109/US$, but does not weaken further. JGB yields rise more in line with our bear case, particularly at the long end of the curve. However, the faster move from deflation to inflation improves tax revenue, and contains fiscal pressures. Equity markets may be concerned about higher input costs, but managements that actively raise productivity will be rewarded with higher stock prices.
Australia
Macro-Prudential Housing Restriction: Aussie Does a Kiwi Australia introduces macro-prudential restrictions on housing finance, following New Zealands lead for only the second time in economic history (we concede that they helped pioneer inflation targeting). The RBNZ could fly solo into its 10/80 rule (no more than 10% of loans above 80% LVR from October 2013) given its joint mandate as central bank and prudential regulator, but the RBA will need to work with its counterparts at APRA. RBA Governor Stevens last week flagged that macro-prudential policies have been discussed, although there was no active plan to deploy them right now. If Australia indeed goes macroprudential in 2014, we expect that investor mortgages would be targeted, with loans for new construction likely exempted, as recently announced across the Tasman.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Asia
Asian Growth Models Transition Fails In China, reforms do not get started in earnest, the government continues to rely on credit-fuelled investment-driven growth which lacks productivity dynamic, thus increasing the financial stability risks. In India and Indonesia, election outcomes bring weaker governments, which fail to address the challenge of lifting productivity while the rise in US dollar and US real rates accelerates. A combination of these developments brings a major downside surprise to GDP growth in the region. China Fast-Tracks Reforms Policy-makers accelerate the pace of rolling out reform measures and the initial impact starts to surface towards late 1H14. In particular, the early initiation of service sector deregulation induced more private sector investment and boosted consumption of service. With the help of a global rebound and domestic demand strengthening, overcapacity has largely been absorbed while local government finance vehicle (LGFV) related liability undergoes more restructuring. Fears of Chinese Hard Landing Make a Comeback Policy-makers inadvertently missed the opportunity to adjust countercyclical policies while they paid too much attention on long-term planning. As a result, domestic demand growth slows down sharply in 1H14. Financial conditions remain tight, which weighs further on manufacturing sector investment. Meanwhile, reform implementation comes to a stall, as downside risks from a widespread deleveraging process loom large. A North Korean Regime Change Following the surprising execution of Jang Sung-taek, the leading political figure and uncle of Kim Jung-un who was believed to be the second person in charge and the de facto country leader during the transition from Kim Jung-il to Kim Jung-un, the stability of the North Korea regime becomes highly questionable. Execution of such a senior official was unseen since the 1950s. Our base case remains that the North Korean regime will be kept intact and that Kim Jung-un may even replace his aides by younger politicians who can bring innovations and reforms to the country. Yet, we cannot rule out the possibility of increasing unrest in the Korean peninsula. This would take a toll on both consumer and business sentiment in South Korea and derail the recovery that we are expecting in 2014. A change in the North Korean regime could possibly see an influx of refugees, posing substantial financial burden on the South Korean government.
Latin America
Brazil Takes a Turn for Orthodoxy No sooner is the October 2014 presidential election over than the central bank restarts its hiking cycle with an aim at finally denting labour market dynamics and slowing wage growth. We are surprised to find that the fiscal and quasi-fiscal authorities are not far behind as fiscal consolidation takes place to avoid a sovereign rating downgrade that appeared in the cards. 2014 ends on a challenging note for consumers, but hope emerges that on the other side of such painful medicine, Brazil's growth profile might improve with the help of a series of structural reforms. Brazil's Labour Markets Start to Unravel While not our central case, a crisis of confidence triggers a selloff in the currency, which leads to a material pick-up in inflation. The hit to disposable income and consumer spending leads to higher unemployment. In order to control inflationary pressures the central bank tightens monetary policy aggressively, which softens domestic demand even further and raises concerns over Brazil's fiscal and debt dynamics. Mexico Loses a Year and Maybe More While we are firmly in the camp that Mexico's Moment comes to fruition in 2014, the anti-reform proponents could gain ground in the first months of 2014 just as enabling legislation is scheduled for congressional passage. (Surprising as that would be for us, there are some grounds 2014 is the 20th anniversary of both NAFTA and the Zapatista uprising). Legislative delays prove temporary, but they cut into advances for the year. A late start is compounded by a series of regulatory delays as neither Mexicos state-owned oil company nor the new regulatory bodies are ready for a brave new world in the oil and gas industry. Chile Reaffirms Orthodoxy Even before the new administration takes office in March, it surprises those concerned with its campaign initiatives by instead announcing a strong cabinet from the center. Once in office, it unveils an aggressive strategy for the electricity sector, allowing mining and industry to gradually regain some of its lost competitiveness, while at the same time tackling shortcomings on education and health care, succeeding in the dual challenge of strengthening the current business-friendly model and addressing calls for a more inclusive society. More taxes? Yes, but there is no wavering from the traditional prudence in fiscal and monetary management.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Venezuela Regains Favour with Big Oil Venezuela revamps the regulatory mix in the oil sector and starts attracting major FDI commitments from Big Oil. We expect macro adjustments next year to include a devaluation (with the currency moving to Bs$12.00/dollar from Bs$6.30/dollar), legalisation of a parallel flexible foreign exchange system and some fiscal tightening. But the real surprise (and not our base case) is the governments more aggressive outreach to the international oil companies. After years of oil production and export declines, potential for Venezuelas macro turnaround rests on progress in this oil opening. Argentina Positively Resolves Bond Standoff with Holdouts The move allows Argentina to regain market access and policy turns more orthodox. Given the timeline for the legal process in US courts, it is likely that the standoff with the holdouts is resolved next year. The debate is whether this resolution will be positive for Argentina with Argentina curing the default and regaining access to capital markets or negative for Argentina with Argentina losing the appeal in the US Supreme Court and entering technical default. There also are encouraging signs that an alternative resolution through an inter-creditor solution may be negotiated early next year. A positive resolution would significantly improve the Argentine outlook both in the near term and the medium term by restoring market access more than a decade after the country lost it in the aftermath of the 2001 default.
In order to allay funding concerns, contain currency volatility and to keep inflows intact, the CBT exhausts all possible channels of the current monetary policy. This time the policy traction remains weak and eventually the CBT adopts an orthodox monetary policy which helps TRY to be one of the outperformers among EM. South Africa: Tougher SARB Squeezes CAD Most South Africa watchers expect the countrys current account deficit to remain wide in the coming years. However, concerns about the impact of currency weakness and its associated pass-through effects on forward-looking inflation outcomes in the wake of Fed tapering (and/or an earlier-thanexpected global recovery) may force the SARB to tighten policy much earlier than currently expected. Such a move is likely to cap household and investment spending, which, in turn, enforces a faster closure of the current account gap. While the initial adjustment process is likely to be perceived negatively by markets, we believe that sentiment should change for the better once the implied macro rebalancing has run a fair share of its course. Czech Republic: Of Deflation and Devaluation Another devaluation in the Czech Republic (CZK), as deflationary forces turn out to be stronger than the CNB was expecting. The background is that the CNB believes that the onset of deflation would have serious consequences on the already weak Czech consumer outlook, and it expects the recent FX devaluation to add about 1% to CPI next year (which implies a 20-25% passthrough). This FX pass-through assumption strikes us as a bit high, so another devaluation to push inflation up is a possibility. We would imagine this devaluation to be in the range of 5% versus EUR, possibly larger. Ukraine Unifies and Looks West This year Ukraine authorities created strong expectations of signing the Deep and Comprehensive Free Trade Area (DCFTA) with the EU. However, this was followed by the Uturn in the foreign policy and a deal with Russia, details of which have been announced this week. It includes a purchase of US$15 billion of Ukrainian Eurobonds and a 30% discount of a gas import price, which we think would allow Ukraine to hold the hryvnia and reserves at current levels to the presidential elections in March 2015. Our surprise would be if spurred by the current protests, President Yanukovych and the opposition leaders reach agreement on signing the EU deal in 2014 and implement an IMF programme, which would allow Ukraine to tackle its imbalance without a sharp movement in the UAH or growing dependence on Russia.
CEEMEA
Moscow Becomes the New Brussels In recent years, Putin has promoted a Russian-led Customs Union as a way of strengthening economic and, in time, political ties among the former states of the Soviet Union a theme which we picked up on in last years surprise Back in the USSR. However, this has not worked well so far: no pickup in trade, a high cost in subsidies, and a lack of popular appeal, particularly in Ukraine. Meanwhile, the Russians are concerned that the proposed EU-US Free Trade Agreement may set standards for the global economy. So, our surprise would be a change of tack, with a new Russian focus on negotiating free trade agreements with the US, Europe and globally ideally from Putins perspective with Moscow negotiating on behalf of the Eurasian Customs Union, as Brussels negotiates on behalf of the EU. Turkey: The Return of Central Bank Orthodoxy The commencement of Fed tapering and the associated rise in cost of borrowing reignites funding fears, given Turkey's high borrowing requirement as well as her debt rollover need.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
EM Regional Themes EM growth has stabilised but important transitions are needed to progress recovery
towards a more sustainable one and/or improve macro-stability. Asia ex-Japan: China needs to focus on pro-market reforms, economic rebalancing and deleveraging which might come at the expense of short-term performance but will improve medium-term outlook. India needs higher real rates and more friendly investment environment to alleviate the macro-stability risks. Koreas growth needs to be more consumption driven. Indonesia needs higher rates and lower REER. Latin America: While there is unlikely to be near-term unravelling in Brazil, we also dont expect a major policy shift necessary to fix the structural challenges before elections either. Mexico and Colombia will need to implement proposed reforms, while Chiles political transition could be accompanied by greater focus on inequality issues. Peru is shifting to a new lower normal on the back of lower mining investment. CEEMEA: Russias mild cyclical rebound will need stronger investment while Turkey needs to tighten monetary policy to ease external balance sheet concerns. Polands growth is on the mend and rebalancing towards greater contributions from domestic demand. S. Africa CAD will involve a painful adjustment for the domestic economy.
SSS Growth
For our global forecasts, see 2014 Global Macro Outlook: Five Key Transitions, December 2, 2013. For our cross-asset views, see Global Debates Playbook: The Alpha Games: Catching Fire, December 6, 2013.
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Quarterly
2013 Real GDP (%Q, SAAR) 1Q 2Q 3QE 4QE 1QE 2QE 2014 3QE 4QE 1QE 2QE 2015 3QE 4QE
Annual
2013E 2014E 2015E
Global** G10 US Euro Area Japan UK EM (%Y) China (%Y) India (%Y) Brazil (%Y) Russia (%Y)
2.5 1.1 1.1 -0.9 4.3 1.5 4.9 7.7 4.8 1.9 1.6
3.5 2.2 2.5 1.1 3.8 2.7 4.5 7.5 4.4 3.3 1.2
4.0 2.3 3.6 0.3 1.9 3.2 5.1 7.8 4.8 2.0 1.2
3.4 1.6 1.9* 0.5 2.3 2.8 4.5 7.4 4.8 2.0 1.9
3.3 2.3 3.3 0.2 3.3 2.4 4.8 7.5 5.0 2.1 2.4
2.8 1.3 2.8 0.4 -3.0 2.0 4.8 7.3 5.0 1.3 3.2
3.6 1.9 2.5 1.1 0.7 2.4 4.8 7.0 5.2 2.0 2.6
3.7 2.1 2.8 1.2 1.5 2.0 5.1 7.1 5.3 2.3 2.0
3.3 2.0 2.6 1.2 1.1 2.4 4.8 7.2 5.5 1.9 2.9
3.8 2.1 2.7 1.2 1.7 2.4 5.0 7.6 6.1 1.4 3.9
3.7 2.1 2.6 1.2 2.8 1.6 5.1 7.4 6.3 1.2 4.9
3.5 1.8 2.7 1.2 -1.1 2.4 5.3 7.4 6.3 1.5 5.9
2.9 1.1 1.6 -0.5 1.8 1.4 4.7 7.6 4.7 2.3 1.6
3.4 1.8 2.6 0.5 1.3 2.5 5.0 7.2 5.1 1.9 2.7
3.7 2.0 2.7 1.1 1.1 2.2 5.3 7.4 6.0 1.5 2.6
3.3 1.8 1.7 1.9 -0.3 2.8 4.9 2.4 10.7 6.4 7.1
3.2 1.7 1.4 1.4 0.0 2.7 4.6 2.4 9.5 6.6 7.2
3.2 1.8 1.6 1.3 0.7 2.7 4.7 2.8 9.7 6.1 6.4
3.2 1.5 1.2 0.9 1.0 2.3 4.9 3.0 10.0 5.9 6.3
3.1 1.3 1.1 0.9 1.2 2.4 4.8 2.2 9.2 5.9 5.7
3.3 1.4 1.7 1.1 3.1 2.5 5.1 3.4 8.8 5.8 5.4
3.3 1.2 1.5 0.9 2.8 2.6 5.3 3.8 7.8 6.1 4.9
3.1 1.2 1.6 1.3 2.8 2.5 4.9 3.3 6.9 6.4 4.8
3.3 1.8 1.5 1.2 2.5 2.4 4.8 3.4 6.4 6.2 4.8
3.4 1.6 1.6 1.3 0.5 2.3 5.1 3.5 6.4 6.2 4.8
3.6 1.7 1.6 1.3 0.5 2.3 5.3 3.8 6.2 6.0 4.9
3.3 1.7 1.6 1.2 1.8 2.3 4.9 3.6 6.5 5.9 4.7
3.2 1.4 1.5 1.4 0.3 2.6 5.0 2.7 10.0 6.2 6.7
3.3 1.6 1.5 1.1 2.4 2.5 5.0 3.2 8.2 6.0 5.2
3.2 1.5 1.6 1.3 1.3 2.3 4.7 3.6 6.4 6.1 4.6
3.1 0.6 0.15 0.75 0.10 0.50 5.9 6.00 7.50 7.25 5.50
3.0 0.5 0.15 0.50 0.10 0.50 5.7 6.00 7.25 8.00 5.50
2.9 0.5 0.15 0.50 0.10 0.50 5.7 6.00 7.50 9.00 5.50
2.9 0.5 0.15 0.25 0.10 0.50 5.4 6.00 7.75 10.00 5.50
2.8 0.4 0.15 0.10 0.10 0.50 5.4 6.00 8.00 10.50 5.50
2.9 0.4 0.15 0.10 0.10 0.50 5.5 6.00 8.00 10.50 5.25
2.9 0.3 0.15 0.10 0.10 0.50 5.6 6.00 7.75 10.50 5.25
2.9 0.3 0.15 0.10 0.10 0.50 5.7 6.00 7.50 10.50 5.00
2.9 0.3 0.15 0.10 0.10 0.50 5.7 6.00 7.50 12.00 5.00
2.9 0.3 0.15 0.10 0.10 0.75 5.7 6.25 7.50 13.00 4.75
2.9 0.3 0.15 0.10 0.10 0.75 5.7 6.25 7.50 13.00 4.75
3.0 0.3 0.15 0.10 0.10 1.00 5.9 6.25 7.50 12.00 4.75
2.9 0.5 0.15 0.25 0.10 0.50 5.4 6.00 7.75 10.00 5.50
2.9 0.3 0.15 0.10 0.10 0.50 5.7 6.00 7.50 10.50 5.00
3.0 0.3 0.15 0.10 0.10 1.00 5.9 6.25 7.50 12.00 4.75
Note: Global and regional aggregates are GDP-weighted averages, using PPPs. Japan policy rate is a range from 0.00-0.10%, with 0.05% as the midpoint; CPI numbers are period averages. *US GDP forecast for the current quarter is a tracking estimate. **G10+BRICs+Korea Source: Morgan Stanley Research forecasts
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
As introduced in the 2014 Global Macro Outlook, we use an early indicator model or nowcast to get an early take on quarterly global activity before the quarter ends. The indicators used in the model are: OECD Composite Leading Indicators Global Purchasing Managers Surveys (PMIs) CPB World Trade Index Morgan Stanley Nowcast Model
Accuracy of Nowcasts
For full details, see ECB Watch: No Specific Measures Yet, December 5, 2013.
10
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
11
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
2013-14
2014-15
2015-16
2016-17
2017-18
12
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
13
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
14
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Inflation target
US Euro Area Japan UK Canada Switzerland Sweden Australia New Zealand Russia Poland Czech Rep. Hungary Romania Turkey Israel S. Africa Nigeria Ghana Kenya China India Hong Kong S. Korea Taiwan Indonesia Malaysia Thailand Brazil Mexico Argentina Chile Peru Colombia
2.0% PCE Price Index < 2% HICP (u) 2% CPI (u) 2% 1-3% <2% CPI (u) 2.0% CPI 2-3% over the cycle 1-3% CPI 5-6% CPI 2.5% (+/- 1%) CPI 2.0% (+/-1%) CPI 3.0% CPI 2.5 (+/-1%) CPI 5% 1-3% 3 - 6% 9% +/-2% 5% +/-2.5% 2.5%-3.5% 4.5% +/- 1.0% 0.5-3.0% core CPI 4.5% +/-2.0% IPCA 3% +/-1% CPI 15.5-24.2% M2 growth 3% +/-1% CPI 2% +/-1% CPI 3% +/-1% CPI
0.7% 0.9% 0.7% 2.1% 1.2% -0.5% 0.1% 0.9% 1.4% 6.5% 0.6% 1.1% 0.9% 1.8% 7.3% 1.9% 5.3% 7.9% 13.2% 7.4% 3.0% 11.2% 4.3% 0.8% 0.8% 8.4% 2.8% 1.9% 5.8% 3.6% 10.5% 2.4% 3.0% 1.8%
1.5% 1.3% 0.6% 2.4% 1.8% 0.2% 1.4% 1.5% 5.0% 2.1% 1.8% 2.1% 2.9% 6.9% 1.6% 5.5% 9.5% 10.5% 8.1% 1.8% 7.5% 4.5% 2.5% 1.8% 6.5% 2.5% 2.8% 6.4% 4.3% 10.4% 3.0% 2.4% 3.2%
18 Dec 09 Jan 20 Dec 09 Jan 22 Jan 19 Mar 13 Feb 4 Feb 30 Jan 14 Feb 08 Jan 06 Feb 26 Jan 08 Jan N/A 23 Dec 29 Jan Jan-14 05 Feb 09 Jan N/A 28 Jan 29 Jan 09 Jan 26 Dec Jan 2014 29 Jan 22 Jan 15 Jan 31 Jan N/A 16 Jan 09 Jan 20 Dec
0.15 0.25 0.10 0.50 1.00 0.00 1.00 2.50 2.50 5.50 2.50 0.05 3.00 4.00 4.50 1.00 5.00 12.00 16.00 8.50 6.00 7.75 0.50 2.50 1.88 7.50 3.00 2.50 10.00 3.50 N/A 4.50 4.00 3.25
-2 2 0 -1 -1 0 0 -4 10 0 -1 -2 7 2 7 13 26 4 -7 -5
ECB could announce additional liquidity measures Balanced risks Cut unlikely, given a balanced outlook in October statement Housing market pressures, weaker currency, US Fed policy 25bp cut FX blow-out/growth recovery ushers in earlier hike EMFX pressure prompts tightening by the CBN Upside surprise in inflation increases risk of a rate hike Rate cut due to weak exports and low inflation. No rate change due to Feds likely delayed QE exit Upside risks Evenly balanced Evenly balanced EM funding crisis Limited as central bank signaled easing over -
(u) = unofficial Notes: Inflation numbers in red indicate values above target; MS expectations in red (green) indicate our rate forecasts are above (below) market expectations. Japan policy rate is an interval of 0.00-0.10%; Source: National central banks, Morgan Stanley Research forecasts
15
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Source: National Central Banks, Morgan Stanley Research forecasts; Note: Japan policy rate takes a mid-range value.
16
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Global Economy G10 US Euro Area Germany France Italy Spain Japan UK Canada Sweden Australia Emerging Markets CEEMEA Russia Poland Czech Rep Hungary Ukraine Kazakhstan Turkey Israel South Africa Nigeria Ghana Kenya Asia ex-Japan China India Hong Kong Korea Taiwan Singapore Indonesia Malaysia Thailand Latin America Brazil Mexico Chile Peru Colombia Argentina Venezuela
3.2 1.5 2.8 -0.6 0.7 0.0 -2.6 -1.6 1.9 0.1 1.7 0.9 3.7 4.9 2.7 3.4 2.0 -0.9 -1.6 0.2 5.0 2.2 3.2 2.5 6.5 7.9 4.5 6.1 7.7 5.1 1.5 2.0 1.3 1.3 6.2 5.6 6.5 2.9 1.0 3.8 5.6 6.3 4.0 1.9 5.5
2.9 1.1 1.6 -0.5 0.4 0.2 -1.9 -1.3 1.8 1.4 1.7 0.6 2.6 4.7 2.2 1.6 1.4 -1.6 0.9 -1.2 5.8 3.6 3.8 1.8 6.8 7.0 5.0 6.0 7.6 4.7 3.0 2.9 2.0 3.6 5.7 4.5 3.1 2.7 2.3 1.3 4.2 4.9 3.9 4.9 1.9
3.4 1.8 2.6 0.5 1.4 0.4 0.2 0.6 1.3 2.5 2.4 2.5 2.8 5.0 3.4 2.7 3.0 1.5 2.2 1.3 6.8 3.9 3.0 2.8 7.8 7.5 5.2 6.0 7.2 5.1 2.7 3.5 3.4 3.9 5.1 4.7 4.0 2.9 1.9 3.3 3.9 5.4 4.4 3.0 2.5
3.7 2.0 2.7 1.1 1.8 1.1 0.8 1.2 1.1 2.2 2.5 3.0 2.9 5.3 3.7 2.6 3.2 2.5 1.9 2.8 6.3 4.7 3.1 3.5 7.5 7.5 5.8 6.4 7.4 6.0 3.0 3.7 3.7 4.0 5.5 4.8 4.5 3.0 1.5 4.0 4.4 5.3 5.1 2.0 2.9
3.4 1.9 2.1 2.5 2.0 2.0 3.0 1.8 -0.1 2.8 1.5 0.9 1.8 4.8 5.6 5.1 3.7 3.3 5.7 0.6 5.1 8.9 1.7 5.7 12.2 9.2 9.7 4.2 2.6 9.7 4.1 2.2 1.9 4.6 4.3 1.7 3.0 6.2 5.4 4.1 3.0 3.7 3.2 10.0 21.1
3.2 1.4 1.5 1.4 1.5 0.9 1.2 1.8 0.3 2.6 1.2 0.0 2.0 5.0 5.3 6.7 1.0 1.4 1.8 0.6 6.0 7.6 1.6 5.8 8.5 11.4 5.8 4.3 2.7 10.0 4.5 1.3 1.0 2.4 7.0 2.1 2.2 7.4 6.2 3.7 1.8 2.7 2.1 10.6 40.7
3.3 1.6 1.5 1.1 1.5 1.3 0.5 0.0 2.4 2.3 1.8 0.9 2.1 5.0 5.0 5.2 2.0 1.4 1.5 2.0 6.1 6.3 2.1 5.6 9.0 10.2 8.0 4.3 3.2 8.2 3.6 2.5 1.8 2.5 7.5 2.9 2.6 7.6 6.0 3.8 3.0 2.7 3.1 10.4 44.1
3.2 1.5 1.6 1.3 1.7 1.3 0.9 1.3 1.3 2.3 1.7 1.8 2.5 4.7 5.0 4.6 2.6 2.1 3.2 5.3 6.4 6.6 1.6 5.5 9.0 9.2 8.1 4.1 3.6 6.4 2.8 2.8 2.0 2.6 6.5 3.2 2.5 6.7 6.1 3.6 3.1 2.4 3.2 12.0 29.2
17
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Morgan Stanley entities: London/South Africa Morgan Stanley & Co. International plc; New York Morgan Stanley & Co. LLC; Hong Kong/Shanghai Morgan Stanley Asia Limited.; Singapore Morgan Stanley Asia (Singapore) Pte.; Japan Morgan Stanley MUFG Securities Co., Ltd.; India Morgan Stanley India Company Private Limited; Russia OOO Morgan Stanley Bank; Brazil Morgan Stanley C.T.V.M. S.A.; Australia Morgan Stanley Australia Limited
18
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
Disclosure Section
The information and opinions in Morgan Stanley Research were prepared or are disseminated by Morgan Stanley & Co. LLC and/or Morgan Stanley C.T.V.M. S.A. and/or Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V. and/or Morgan Stanley Canada Limited and/or Morgan Stanley & Co. International plc and/or RMB Morgan Stanley (Proprietary) Limited and/or Morgan Stanley MUFG Securities Co., Ltd. and/or Morgan Stanley Capital Group Japan Co., Ltd. and/or Morgan Stanley Asia Limited and/or Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research) and/or Morgan Stanley Taiwan Limited and/or Morgan Stanley & Co International plc, Seoul Branch, and/or Morgan Stanley Australia Limited (A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents), and/or Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents), and/or Morgan Stanley India Company Private Limited, and/or PT Morgan Stanley Asia Indonesia and their affiliates (collectively, "Morgan Stanley"). For important disclosures, stock price charts and equity rating histories regarding companies that are the subject of this report, please see the Morgan Stanley Research Disclosure Website at www.morganstanley.com/researchdisclosures, or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY, 10036 USA. For valuation methodology and risks associated with any price targets referenced in this research report, please email morganstanley.research@morganstanley.com with a request for valuation methodology and risks on a particular stock or contact your investment representative or Morgan Stanley Research at 1585 Broadway, (Attention: Research Management), New York, NY 10036 USA.
Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at www.morganstanley.com/institutional/research/conflictpolicies.
Morgan Stanley is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Morgan Stanley Research does not provide individually tailored investment advice. Morgan Stanley Research has been prepared without regard to the circumstances and objectives of those who receive it. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of an investment or strategy will depend on an investor's circumstances and objectives. The securities, instruments, or strategies discussed in Morgan Stanley Research may not be suitable for all investors, and certain investors may not be eligible to purchase or participate in some or all of them. Morgan Stanley Research is not an offer to buy or sell any security/instrument or to participate in any trading strategy. The value of and income from your investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. If provided, and unless otherwise stated, the closing price on the cover page is that of the primary exchange for the subject company's securities/instruments. The fixed income research analysts, strategists or economists principally responsible for the preparation of Morgan Stanley Research have received compensation based upon various factors, including quality, accuracy and value of research, firm profitability or revenues (which include fixed income trading and capital markets profitability or revenues), client feedback and competitive factors. Fixed Income Research analysts', strategists' or economists' compensation is not linked to investment banking or capital markets transactions performed by Morgan Stanley or the profitability or revenues of particular trading desks. With the exception of information regarding Morgan Stanley, Morgan Stanley Research is based on public information. Morgan Stanley makes every effort to use reliable, comprehensive information, but we make no representation that it is accurate or complete. We have no obligation to tell you when opinions or information in Morgan Stanley Research change apart from when we intend to discontinue equity research coverage of a subject company. Facts and views presented in Morgan Stanley Research have not been reviewed by, and may not reflect information known to, professionals in other Morgan Stanley business areas, including investment banking personnel. Morgan Stanley may make investment decisions or take proprietary positions that are inconsistent with the recommendations or views in this report. To our readers in Taiwan: Information on securities/instruments that trade in Taiwan is distributed by Morgan Stanley Taiwan Limited ("MSTL"). Such information is for your reference only. The reader should independently evaluate the investment risks and is solely responsible for their investment decisions. Morgan Stanley Research may not be distributed to the public media or quoted or used by the public media without the express written consent of Morgan Stanley. Information on securities/instruments that do not trade in Taiwan is for informational purposes only and is not to be construed as a recommendation or a solicitation to trade in such securities/instruments. MSTL may not execute transactions for clients in these securities/instruments. To our readers in Hong Kong: Information is distributed in Hong Kong by and on behalf of, and is attributable to, Morgan Stanley Asia Limited as part of its regulated activities in Hong Kong. If you have any queries concerning Morgan Stanley Research, please contact our Hong Kong sales representatives. Morgan Stanley is not incorporated under PRC law and the research in relation to this report is conducted outside the PRC. Morgan Stanley Research does not constitute an offer to sell or the solicitation of an offer to buy any securities in the PRC. PRC investors shall have the relevant qualifications to invest in such securities and shall be responsible for obtaining all relevant approvals, licenses, verifications and/or registrations from the relevant governmental authorities themselves. Morgan Stanley Research is disseminated in Brazil by Morgan Stanley C.T.V.M. S.A.; in Japan by Morgan Stanley MUFG Securities Co., Ltd. and, for Commodities related research reports only, Morgan Stanley Capital Group Japan Co., Ltd; in Hong Kong by Morgan Stanley Asia Limited (which accepts responsibility for its contents); in Singapore by Morgan Stanley Asia (Singapore) Pte. (Registration number 199206298Z) and/or Morgan Stanley Asia (Singapore) Securities Pte Ltd (Registration number 200008434H), regulated by the Monetary Authority of Singapore (which accepts legal responsibility for its contents and should be contacted with respect to any matters arising from, or in connection with, Morgan Stanley Research); in Australia to "wholesale clients" within the meaning of the Australian Corporations Act by Morgan Stanley Australia Limited A.B.N. 67 003 734 576, holder of Australian financial services license No. 233742, which accepts responsibility for its contents; in Australia to "wholesale clients" and "retail clients" within the meaning of the Australian Corporations Act by Morgan Stanley Wealth Management Australia Pty Ltd (A.B.N. 19 009 145 555, holder of Australian financial services license No. 240813, which accepts responsibility for its contents; in Korea by Morgan Stanley & Co International plc, Seoul Branch; in India by Morgan Stanley India Company Private Limited; in Vietnam this report is issued by Morgan Stanley Singapore Holdings; in Canada by Morgan Stanley Canada Limited, which has approved of and takes responsibility for its contents in Canada; in Germany by Morgan Stanley Bank AG, Frankfurt am Main and Morgan Stanley Private Wealth Management Limited, Niederlassung Deutschland, regulated by Bundesanstalt fuer Finanzdienstleistungsaufsicht (BaFin); in Spain by Morgan Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states that Morgan Stanley Research has been written and distributed in accordance with the rules of conduct applicable to financial research as established under Spanish regulations; in the United States by Morgan Stanley & Co. LLC, which accepts responsibility for its contents. Morgan Stanley & Co. International plc, authorized by the Prudential Regulatory Authority and regulated by the Financial Conduct Authority and the Prudential Regulatory Authority, disseminates in the UK research that it has prepared, and approves solely for the purposes of section 21 of the Financial Services and Markets Act 2000, research which has been prepared by any of its affiliates. Morgan Stanley Private Wealth Management Limited, authorized and regulated by the Financial Conduct Authority, also disseminates Morgan Stanley Research in the UK. Private U.K. investors should obtain the advice of their Morgan Stanley & Co. International plc or Morgan Stanley Private Wealth Management representative about the investments concerned. RMB Morgan Stanley (Proprietary) Limited is a member of the JSE Limited and regulated by the Financial Services Board in South Africa. RMB Morgan Stanley (Proprietary) Limited is a joint venture owned equally by Morgan Stanley International Holdings Inc. and RMB Investment Advisory (Proprietary) Limited, which is wholly owned by FirstRand Limited. The trademarks and service marks contained in Morgan Stanley Research are the property of their respective owners. Third-party data providers make no warranties or representations relating to the accuracy, completeness, or timeliness of the data they provide and shall not have liability for any damages relating to such data. The Global Industry Classification Standard (GICS) was developed by and is the exclusive property of MSCI and S&P. Morgan Stanley bases projections, opinions, forecasts
19
MORGAN STANLEY RESEARCH December 18, 2013 The Global Macro Analyst
and trading strategies regarding the MSCI Country Index Series solely on public information. MSCI has not reviewed, approved or endorsed these projections, opinions, forecasts and trading strategies. Morgan Stanley has no influence on or control over MSCI's index compilation decisions. Morgan Stanley Research or portions of it may not be reprinted, sold or redistributed without the written consent of Morgan Stanley. Morgan Stanley research is disseminated and available primarily electronically, and, in some cases, in printed form. Additional information on recommended securities/instruments is available on request. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (DIFC Branch), regulated by the Dubai Financial Services Authority (the DFSA), and is directed at Professional Clients only, as defined by the DFSA. The financial products or financial services to which this research relates will only be made available to a customer who we are satisfied meets the regulatory criteria to be a Professional Client. The information in Morgan Stanley Research is being communicated by Morgan Stanley & Co. International plc (QFC Branch), regulated by the Qatar Financial Centre Regulatory Authority (the QFCRA), and is directed at business customers and market counterparties only and is not intended for Retail Customers as defined by the QFCRA. As required by the Capital Markets Board of Turkey, investment information, comments and recommendations stated here, are not within the scope of investment advisory activity. Investment advisory service is provided in accordance with a contract of engagement on investment advisory concluded between brokerage houses, portfolio management companies, non-deposit banks and clients. Comments and recommendations stated here rely on the individual opinions of the ones providing these comments and recommendations. These opinions may not fit to your financial status, risk and return preferences. For this reason, to make an investment decision by relying solely to this information stated here may not bring about outcomes that fit your expectations.
20
The Americas 1585 Broadway New York, NY 10036-8293 United States Tel: +1 (1)212 761 4000
Europe 20 Bank Street, Canary Wharf London E14 4AD United Kingdom Tel: +44 (0)20 7425 8000
Japan 4-20-3, Ebisu, Shibuya-ku, Tokyo 150-6008, Japan Tel: +81 (0)3 5424 5000
Asia/Pacific 1 Austin Road West Kowloon Hong Kong Tel: +852 2848 5200