Bart Van Craeynest
2012: Deeper into crisis or the long road to recovery?
Bart Van Craeynest
2012: Deeper into crisis or the long road to recovery?
Global slowdown No 2008-09 rerun
Crises looking for answers
Eurocrisis US debt crisis Asian bubbles
Global slowdown 09 rerun
Crises looking for answers
US debt crisis Asian bubbles
Growth world economy (in %)
--11 00 11 22 33 44 55 66
1993
1993-- 20032003 20042004 20052005 20062006 20072007
No 2008-09 rerun
Growth world economy (in %)
2008
2008 20092009 20102010 20112011 20122012 20162016
Continuing debt deleveraging Subdued recovery
Liquidity trap
Focus on fiscal tightening Confidence shock
Continuing debt deleveraging Subdued recovery
Focus on fiscal tightening Confidence shock
2012: global slowdown
--8080 --6060 --4040 --2020 20 20 40 40 60 60 80 80
Jun Jun 90
90 92 92 94 94 96 96 98 98 100 100 102 102 104 104
Nov
Nov--0101 NovNov--0303 NovNov--0505 NovNov--0707 NovNov--0909
Source: OECD Industrial Confidence.xls – sheet 1
OECD Industrial confidence
80 80 60 60 40 40 20 20 00 20 20 40 40 60 60 80 80
Jun
Jun--0101 JunJun--0303 JunJun--0505 JunJun--0707 JunJun--0909 JunJun--1111
Global semiconductor sales
Source: WorldSEMICONDUTORSn.xls
Annualised 3
Annualised 3--monthly change in %monthly change in %
--44 --22 00 22 44 66 88
Consumer spending
Consumer spending Consumer expectationsConsumer expectations
Worrying outlook for consumers
Annual change in % Annual change in %
20 20 40 40 60 60 80 80 100 100 120 120 140 140 Consumer expectations
Consumer expectations
Worries for 2012: US households
Worrying outlook for consumers
Source: Input AAC Nov 9 2011.xls– sheet EXTRA1
--8080 --6060 --4040 --2020 00 20 20 40 40 60 60
Jan
Jan--9999 JanJan--0101 JanJan--0303 JanJan--0505 German manufacturing orders
German manufacturing orders EMU export ordersEMU export orders
Manufacturing sector under pressure
Annualised 3
Annualised 3--monthly change in %monthly change in %
05
05 JanJan--0707 JanJan--0909 JanJan--1111
--7070 --6060 --5050 --4040 --3030 --2020 --1010 00 10 10 20 20 EMU export orders
EMU export orders
Manufacturing sector under pressure
Source: Input AAC Nov 9 2011.xls– sheet EXTRA2
100 100 150 150 200 200 250 250
60 70 80 90 100 110 120 130 140
Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Korea Taiwan India
Worries for 2012: emerging Asia slowing down
Industrial production
Eco strat May2011.xls– sheet Asia
Index (August 2007 = 100) Index (August 2007 = 100)
50 50 100 100 150 150 200 200 250 250
Aug
Aug--0707 FebFeb--0808 AugAug--0808 FebFeb--0909 AugAug--0909 FebFeb--1010 AugAug--1010 FebFeb--1111 AugAug--1111 Korea
Korea TaiwanTaiwan IndiaIndia ChinaChina
Worries for 2012: emerging Asia slowing down
Exports
Eco strat May2011.xls– sheet Asia
Index (August 2007 = 100) Index (August 2007 = 100)
Healthy corporates
No investment/inventory excesses
2012: things to be cheerful about
Healthy corporates
No investment/inventory excesses
2012: things to be cheerful about
2.0 2.0 2.5 2.5 3.0 3.0 3.5 3.5 4.0 4.0 4.5 4.5 5.0 5.0 5.5 5.5 6.0 6.0
Q1 70
Q1 70 Q1 74Q1 74 Q1 78Q1 78 Q1 82Q1 82 Q1 86Q1 86 Q1 90Q1 90 Q1 94Q1 94 Q1 98Q1 98 Q1 02Q1 02 Q1 06Q1 06 Q1 10Q1 10 Cash position
Cash position
In % of total assets In % of total assets
Cash position
Source: Slides Eco stratJuly2011bis.xls – sheet cash
66 77 88 99 10 10 11 11 12 12 13 13 14 14 15 15 16 16
Q1 70
Q1 70 Q1 74Q1 74 Q1 78Q1 78 Q1 82Q1 82 Q1 86Q1 86 Q1 90Q1 90 Q1 94Q1 94 Q1 98Q1 98 Q1 02Q1 02 Q1 06Q1 06 Q1 10Q1 10 Profit margin
Profit margin
Profit margin
Source: Slides Eco stratJuly2011bis.xls – sheet cash
Healthy corporates
No investment/inventory excesses Deleveraging paying off
Easing inflation
2012: things to be cheerful about
Healthy corporates
No investment/inventory excesses Deleveraging paying off
2012: things to be cheerful about
--33 --22 --11 00 11 22 33 44 55
Jan
Jan--0909 JulJul--0909 JanJan--1010 JulJul--1010 JanJan--1111 JulJul--1111 JanJan--1212 JulJul--1212 Headline inflation Headline inflation Oil in 100
Oil in 100--110 range110 range Oil to 90
Oil to 90 Oil to 130 Oil to 130
Inflation heading lower
Source : Eco strat Oct2011.xls – Sheet US INFL
15.0 15.0 15.5 15.5 16.0 16.0 16.5 16.5 17.0 17.0 17.5 17.5 18.0 18.0 18.5 18.5 19.0 19.0
Q1 1982 Q1 1982 Annual change in %
Annual change in %
Deleveraging is paying off
Source : Eco strat Oct2011.xls – Sheet Fin Obli
15.0 15.0 15.5 15.5 16.0 16.0 16.5 16.5 17.0 17.0 17.5 17.5 18.0 18.0 18.5 18.5 19.0 19.0
Q1 1982
Q1 1982 Q1 1986Q1 1986 Q1 1990Q1 1990 Q1 1994Q1 1994 Q1 1998Q1 1998 Q1 2002Q1 2002 Q1 2006Q1 2006 Q1 2010Q1 2010 Financial obligation ratio
Financial obligation ratio (as a % of disposible income) (as a % of disposible income)
Healthy corporates
No investment/inventory excesses Deleveraging paying off
Easing inflation
Ultra-loose monetary policy Continued liquidity provision
2012: things to be cheerful about
Healthy corporates
No investment/inventory excesses Deleveraging paying off
loose monetary policy Continued liquidity provision
2012: things to be cheerful about
00 500000 500000 1000000 1000000 1500000 1500000 2000000 2000000 2500000 2500000 3000000 3000000
Aug
Aug--0505 AugAug--0606 AugAug--0707 AugAug--0808 AugAug--0909 AugAug--1010 AugAug--1111 Fed
Fed
Source : Eco strat April2011 - sheets world inflation - Core Inflation - Inflation Asia.xls - Sheet balance sheet
Central bank balance sheet
Mln USD Mln USD
00 500000 500000 1000000 1000000 1500000 1500000 2000000 2000000 2500000 2500000 3000000 3000000
Aug
Aug--0505 AugAug--0606 AugAug--0707 AugAug--0808 AugAug--0909 AugAug--1010 AugAug--1111 ECB
ECB
11 11
Source : Eco strat April2011 - sheets world inflation - Core Inflation - Inflation Asia.xls - Sheet balance sheet
Central bank balance sheet
Mln EUR Mln EUR
Low growth at best, important risks Low growth at best, important risks
In Europe: EUROCRISIS
In the US: public & private DEBT In Asia: BUBBLES
Low growth at best, important risks Low growth at best, important risks
In Europe: EUROCRISIS
In the US: public & private DEBT In Asia: BUBBLES
Eurozone interest rates
00 55 10 10 15 15 20 20 25 25 30 30 35 35
20
Eurozone interest rates
Belgium Belgium Italy Italy Spain Spain Portugal Portugal Ireland Ireland Greece Greece
Germany Germany
--250000250000 --200000200000 --150000150000 --100000100000 --5000050000 00 50000 50000 100000 100000 150000 150000 200000 200000 250000 250000
Germany
Germany PIIGSPIIGS
Mln EUR Mln EUR
Eurocrisis: how did we get so far?
Current account
Eurocrisis: how did we get so far?
Current account
Source: Input Financieel Forum 29 Nov 2011.xls– sheet EMU CA
--2020 --1515 --1010 --55 00 55 10 10
EstoniaEstonia GreeceGreece CyprusCyprus PortugalPortugal SpainSpain IrelandIreland FranceFrance
Input OvdP 18 Oct 2011-Layout AWI.xls – sheet 3
Current account deficit countries at risk
ItalyItaly Euro areaEuro area BelgiumBelgium AustriaAustria FinlandFinland GerrmanyGerrmany NetherlandsNetherlands
Current account deficit countries at risk
As a % of GDP As a % of GDP
Monetary unions do not survive
if they are not also a political / economic union Lessunion
Strongcountries leave Weakcountries leave
Major shock to banking sector
Spectacular currency strengthening
Immediate public and private default Banking sector collapse
Deep recession Financial chaos
Monetary unions do not survive
if they are not also a political / economic union
Moreunion
countries leave
Immediate public and private default Banking sector collapse
Eurolevel fiscal authority Eurobonds
Eurolevel banking authority
Structural reforms Takes a long time
Up to the ECB to buy time
ECB bond purchases
00 5000 5000 10000 10000 15000 15000 20000 20000 25000 25000
Eurocrisis: waiting for the ECB
Looking
Looking toto FrankfurtFrankfurt
Mandate: financial stability in the eurozone
Unlimited means Risks
Inflation
Moral hazard Alternative???
150 150 200 200 250 250 300 300 350 350 400 400
Debt-financed growth model is finished
Total debt in US economy
financed growth model is finished
Total debt in US economy
As a % of GDP As a % of GDP
00 20 20 40 40 60 60 80 80 100 100 120 120 140 140
Q1 1952
Q1 1952 Q1 1962Q1 1962 Q1 1972Q1 1972 Q1 1982Q1 1982 Households
Households Non
Non--fin businessfin business Financial sectors Financial sectors Government Government
Debt outstanding
28 Q1 1982
Q1 1982 Q1 1992Q1 1992 Q1 2002Q1 2002
Debt outstanding
As a % of GDP As a % of GDP
US public finances on an unsustainable path
Public debt
20 20 40 40 60 60 80 80 100 100 120 120 140 140 160 160 180 180 200
200 Public debt Public debt Scenario CBOScenario CBO
As a % of GDP As a % of GDP
US public finances on an unsustainable path
Public debt
Source: Input Financieel Forum 29 Nov 2011.xls – sheet US gov debt
--3.53.5 --3.03.0 --2.52.5 --2.02.0 --1.51.5 --1.01.0 --0.50.5 0.0 0.0
2011
2011 20122012 20132013
As % of GDP As % of GDP
Fiscal tightening to hit the economy Fiscal tightening to hit the economy
Source: Input Financieel Forum 29 Nov 2011.xls– sheet US fisc tight
Focus
Focus onon fiscalfiscal tighteningtightening
From fiscal stimulus to fiscal tightening
Obama job plan: 2% stimulus for 2012, but needs Congress
Failed deficit committee: automatic spending cuts from 2013 onwards
25 25 30 30 35 35 40 40 45 45 50 50
1991
1991 19931993 19951995 19971997 19991999 Consumer spending
Consumer spending InvestmentInvestment
Consumer spending vs Investment
As a % of GDP
2001
2001 20032003 20052005 20072007 20092009
Consumer spending vs Investment
Source: Input Financieel Forum 29 Nov 2011.xls– sheet China inv
1. Weak growth in the US, recession in Europe 2. Slowdown in Emerging Asia
3. Belgium in recession, labour market holds up, public finance target does not
4. Inflation coming down
5. Continuing eurocrisis, but euro survives thanks to ECB Weak growth in the US, recession in Europe
Belgium in recession, labour market holds up, public finance
Continuing eurocrisis, but euro survives thanks to ECB
10 for 12
6. Volatile equity markets end the year higher thanks to second half of the year 7. Commodity prices stable to slightly lower
8. Increasing protectionism 9. Obama re-elected
10. Another year of natural disasters
Volatile equity markets end the year higher thanks to second half of the year Commodity prices stable to slightly lower
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Bart Van Craeynest Chief Economist +32 (0)2 229 62 32 [email protected]
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