Transcript Financieel beheer - VBA beleggingsprofessionals

Money does not perform. People do.
The economic and financial outlook
in the wake of the credit turmoil
Anton Brender
June 2008 - Amsterdam
Up to now, Emerging countries have been rather
resilient and have supported world growth
GDP growth
Import growth
(% year on year)
(% year on year, in dollars)
14
60
Brazil
China
12
China
40
10
Russia
Russia
8
20
6
Korea
4
2
04
2
05
06
OPEC
-20
Brazil
0
0
07
08
-30
00
01
02
03
04
05
06
07
Source: Thomson Datastream
08
This partly explains why some commodity
prices – oil in particular – have continued to rise
Commodity Index
(Goldman Sachs, January 2007 = 100)
250
300
250
200
200
150
150
100
50
Jan
100
Apr
Jul
2007
Oct
Energy
Industrial metals
Precious metals
Agriculture
Livestock
3
Jan
Apr
Jul
2008
50
Jan
Apr
Jul
2007
Oct
Jan
Apr
Jul
2008
Wheat
Soybeans
Corn
Rice (not included in the index)
Source: Thomson Datastream
OPEC has played a role in pushing oil prices higher…
World petroleum production and consumption
(million barrels per day, annual change)
4
World
consumption
3
2
OPEC “iso-income” curves
35
0
-1
OECD
-2
-3
01
02
03
04
4
05
06
07
08
World
production
3
1
0
?
-1
30
25
2007
*from January
to May 2008
(annual rate)
2008*
20
$950 billion
15
$680 billion
2
Production
(million barrels per day)
1
OPEC petroleum exports
Consumption
Non
OECD
Other
Non
OPEC
OPEC
10
50
70
90
110
130
150
OPEC oil basket price
($ per barrel)
-2
-3
4
01
02
03
04
05
06
07
08
Sources: IEA, Dexia-AM
… but speculation also played its part
Oil price and expectations
120
20
WTI oil price ($) [R.H.S.]
100
10
50
0
Spread spot price –
18-month forward price ($)
-10
95
97
99
01
03
05
07
Non commercial positions
(thousands of contracts)
400
Long positions
300
200
-30
20
30
120
1.60
0
20
100
1.50
80
1.40
60
Jun Aug Oct Dec Feb Apr Jun
2007
2008
1.30
40
-20
10
-40
0
-60
-80
Oct
Dec
2007
Feb
Apr
2008
Jun
WTI oil price
95
5
97
99
01
03
05
07
1.70
140
(long minus short positions, thousands of
contracts, change over 3 months)
Short positions
Euro/dollar exchange rate
and oil price
45
40
60
Net speculative positions
100
0
0
Net speculative positions
and oil price
(% change over 3 months) [R.H.S.]
-10
Oil price ($)
Oil price (€)
(indexed on the dollar oil price in June 2007)
Euro/dollar exchange rate [R.H.S.]
Sources: CFTC, Thomson Datastream
A continuing steep rise in oil prices
could end up choking world growth
OPEC and Russia
trade balance
Trade balance*
($ billions, annual rate)
OPEC
1 400
($ billions, annual rate)
1200
WTI oil price
rises at $150
1 200
Oil prices
(WTI, $ per barrel)
140
400
120
$105
80
40
Exports
800
$72
$66
2006
2007
0
94
Imports
98
6
0
94
Imports
02
400
0
00
Exports
98
WTI oil price
falls back to
$100
06
400
200
(*) Assuming an oil
price at $100 per barrel.
02
Russia
600
2008
800
02
04
06
08
If oil price increases to $150 per barrel and stay
there, growth can continue only if non oil
exporting countries accept and manage to
reduce their surpluses or increase their deficits
by more than $400 billion…
06
Sources: Thomson Datastream, Dexia-AM
The more so since the financial system has
turned much less “borrower friendly”...
Bank lending standards
(net percentage of banks tightening their standards)
United States
100
80
40
Loans to firms
Commercial real estate
C&I loans
(medium and
large firms)
7
Loans to individuals
100
80
80
60
Residential
mortgages
40
Other consumer loans
20
0
Credit cards
-40
94
98
02
06
96
00
04
Firms
40
0
0
-40
90
Euro area
08
-20
House
purchase
03
Consumer credit
05
07
Sources: Thomson Datastream, ECB, Federal Reserve
… even if equity capital constraints
do not seem to be binding
Reported credit losses versus capital raised
($ billions, as of May 22)
400
250
200
IMF estimated total losses
200
($ billions, as of March 2008)
Estimated losses on
unsecuritized U.S. loans
225
Estimated mark-to-market loss
on related securities
720
Total losses
945
100
0
0
World
United
States
120
200
of which
Europe Euro area
United
States
80
Losses
100
40
0
8
0
Q2 Q3 Q4 Q1 Q2
2007
2008
Capital raised
Banks
Brokers
Sources: IMF, Bloomberg
Despite some improvement, liquidity on the
interbank market is not back to normal…
TED spread
3-month interbank rate
minus OIS rate
(3 months Eurodollar rate
minus Tbill rate, basis points)
1-month interbank rate
minus OIS rate
(basis points)
120
200
80
80
100
40
40
0
0
Jan
Apr
Jul
2007
Oct
Jan
Apr
2008
Libor $
Euribor €
Jun
Sep
2007
Dec
(basis points)
120
300
Mar
Jun
2008
Libor $
Euribor €
0
Jun
Sep
2007
Dec
Mar
Jun
2008
Starting beginning of August, central banks provided ample liquidity to ease tensions on the money
markets. But market rates continued to spike upwards despite recent central banks’ initiatives.
9
Sources: Thomson Datastream, Bloomberg, Federal Reserve
… and while credit spreads have recently narrowed
appreciably, they still remain wider than a year ago
Subprime ABX AAA
Commercial CMBX AAA
(07-01, basis points)
1200
(NA 3, basis points)
300
US - high yield
US - Leveraged loans
(Merrill Lynch, 5-year, basis points)
750
500
(LCDX NA 5-year, basis points)
400
800
200
550
400
100
350
0
Jun
Sep Dec
2007
Mar Jun
2008
0
Jun
Municipal bonds
120
(ML 10-year, basis points)
80
Sep Dec
2007
Mar Jun
2008
150
Jun
200
Sep
2007
Euro – Crossover Itraxx
750
(5-year, basis points)
Dec
Mar Jun
2008
0
Jun
Sep Dec
2007
Euro – Investment grade Itraxx
200
(5-year, basis points)
650
40
0
100
450
-40
-80
-120
Jun
10
Sep Dec
2007
Mar Jun
2008
250
Jun
Sep Dec
2007
Mar Jun
2008
Mar Jun
2008
0
Jun
Sep Dec
2007
Mar Jun
2008
Sources: Thomson Datastream, JP Morgan, MarkIt
Economic and financial outlook
Contents
United States: in recession… ?
Euro area: weathering the storm?
Annex
11
Up to now, pessimists have been wrong:
the US economy has not yet contracted
Unemployment rate
GDP growth
(% year on year)
6
Contribution to GDP growth
(% year on year)
Likely
4
11
2
GDP ex residential investment
2
7
Goldman Sachs
IMF
0
-1
99
01
03
05
07
1
Likely
3.5
89
3
0
-1
?
-5
-2
12
-1
Residential investment [R.H.S.]
55
62
69
76
Q2
Q3
2008
01
05
Employment
83
90
97
04
-2
[R.H.S.]
40
200
0
0
-60
90
IMF*
Q1
97
(year on year change, thousands)
400
Ex construction & finance
-40
-1
93
80
Goldman
Sachs
0
5.5
1
(% quarter on quarter, annual rate)
2
(%)
8.0
7.5
Construction
& finance
94
98
-200
02
Q4
(*) Quarterly profile is our best “guess”.
Sources: IMF, Goldman Sachs, Thomson Datastream, Dexia-AM
06
-300
Despite high gasoline prices and
weakening consumption…
Gasoline prices and consumption
Consumer confidence
110
Motor vehicle sales
21
20
Consumption
200
7
150
100
90
50
70
03
04
05
06
07
08
3
150
16
100
14
50
12
0
-50
-50
1
-100
0
-150 -1
Consumer confidence - expectations
03
04
05
06
07
08
Consumption
(% / 3 months, annual rate)
13
18
0
-100
50
5
200
Gasoline prices
Gasoline prices
(% / 3 months, annual rate) [R.H.S.]
(% / 3 months, annual rate) [R.H.S.]
Jan 04 - July 07
average
(Millions, annual rate)
04
05
06
07
08
Core retail sales
12
(% over 3 months, annual rate)
8
-150
4
0
-2
93
97
01
Source: Thomson Datastream
05
… growth has not tumbled,
thanks to support from the rest of the world
Exports
US exports by destination*
(% year on year)
20
Exports
10
15
Exports
10
5
0
0
20
10
0
-5
-10
Real effective
exchange rate [R.H.S.]
-15
90
94
98
02
-15
-15
06
Imports
15
-10 [R.H.S.]
6
10
4
2
0
-10
Domestic
demand [R.H.S.]
Imports
14
94
98
02
06
1.5
1.0
94
98
0
-2
5
20
3
0
02
06
-1
Trade balance
0.5
Canada
(21%)
(15%)
98
00
60
40
(contribution to real GDP growth,
% year on year)
+1%
(% year on year)
LatAm (17%) Other developed
Europe (6%)
-20 Euro area
-30
20
02
04
0
(19%)
Japan
-20
-30
98
94
98
02
06
08
Asia ex Japan
(5%)
00
02
04
-1.0
-1.5
90
06
Middle East (3%)
0
-0.5
(% year on year)
90
90
40
1
External demand
-10
7
(*) The % in bracket is the
share in US exports
Source: Thomson Datastream
06
08
In the coming quarters, front loaded fiscal stimulation
should provide some additional temporary support…
Fiscal stimulation in two episodes
How consumption
might be affected
(% month on month)
2001
3
Consumption
2
1
8
2008
Real disposable income
4
0
Real disposable
income
-1
0
-2
-2
-3
-4
In 2001, tax rebates amounted to 0.6% of disposable
income ($44 billion). Three quarters of the rebates were
spent (i.e. consumption was boosted by roughly 0.5%).
In 2008 rebates will amount to more than 1% of disposable
income. A third has been sent electronically in May.
15
(% quarter on
quarter, annual rate)
Q2 2008
Q3 2008
Q4 2008
Impact on consumption
1-month lag
2-month lag
+2.6
+0.4
-3.0
0.0
+5.6
-5.4
Assuming only a third of the rebates
is spent this time, consumption
should be boosted by 0.3% for the
year as a whole… with a strong
rebound in Q3 if spending takes
place with a 2-month lag.
Sources: Thomson Datastream, Dexia-AM
… while state and local governments’ revenue shortfalls
should not significantly affect their spending, at least in 2008
State and local governments
10
Expenditures and
the business cycle
8
States’ rainy day funds
($ billions)
1.2 80
0.8
6
4
0.4
2
0
-0.4
-2
-4
63
(% year on year)
60
40
0
73
83
Real GDP
93
03
(% year on year)
State and local governments’
expenditures share in GDP
(%, year on year change) [R.H.S.]
16
Contribution of state and local
governments’ expenditures to GDP growth
-0.8
2008
2009
Real state & local expenditures* 2.2
-0.3
-0.3
GDP weight (in %)
12
12
12
0.3
0.0
0.0
0.3
0.2
-0.2
Contributions to GDP
Without using
rainy day funds
20
0
79
86
93
00
During the last few
years, as revenues and
economic
conditions
have rebounded, States
have built up rainy day
funds.
07
Using $35 billions
of rainy day funds
2007
(*) Rate of growth of expenditures
maintaining the same net borrowing
requirement as in 2007 (-1.1% of GDP).
Sources: Thomson Datastream, National Association of State Budget Officers
Still, there is no sign of bottoming
in the housing sector…
Home sales
6500
12
11
Existing
Existing home prices
By metropolitan area
National
30
20
10
S&P/CS
-10
10
OFHEO
-20
(% year on year)
-10
Futures
S&P/CS
-20
(% quarter on quarter, annual rate)
-30
88
92
96
00
04
08
4500
7
(% change over 3 months, annual rate)
0
(% year on year)
0
9
-30
-40
-50
5
2500
85
1400
1300
Sept. 07
Mar. 08
89
93
97
01
3
05
12
11
New
1100
9
900
7
700
5
500
95
97
99
01
03
05
07
Home sales (thousands, annual rate)
Houses for sale to houses sold
(months supply) [R.H.S]
17
Sources: Thomson Datastream, S&P, Bloomberg
3
… partly because the financial turmoil prevented
mortgage rates from falling with Treasury rates
CDS and mortgage spreads
Home sales and mortgage rates
250
Home sales
Mortgage rates
(change over 3 months)
(as given by Bankrate, %)
0.8
Mortgage rates
200
160
0.4
100
8
80
Freddie Mac CDS
7
0
6
0
0.0
5
-100
-0.4
Home sales
-200
-250
03
04
05
06
07
110
30-year fixed rate
70
4
-0.8
08
07
08
290
30-year mortgage rate
minus 10-year Treasury
250
[R.H.S.]
170
08
-10
18
07
30
3
06
06
Freddie Mac CDS
US 10-year treasury rate
(thousands, monthly rate)
Banks CDS
(US libor sample)
30-year jumbo rate
(-2M, change over 4M) [R.H.S.]
(basis points)
200
06
07
Sources: Thomson Datastream, Bloomberg
08
90
The Fed and the Administration are trying
to make credit available to borrowers
Fed’s balance sheet and
offbalance sheet selected items
450
400
The Fed is helping
financial institutions
to carry their debt
load…
200
Primary Dealer Credit Facility
(PDCF) and discount
(billions of dollars,
change over 1 quarter at annual rate)
800
GSE backed pools
Repurchase agreements
900
800
700
600
500
19
Financing of home mortgages
Term Securities
Lending facility (TSLF)
Term auction facility (TAF)
0
… without increasing
global liquidity
(billions of dollars)
400
2007
2008
400
Reserve Bank credit
300
Treasury securities
held outright
Repurchase
agreements [R.H.S.]
200
TAF
[R.H.S.]
Other loans [R.H.S.]
2007
2008
0
Commercial banks
and Saving & Loans
-400
94
96
98
00
ABS issuers
02
04
06
100
0
Sources: Thomson Datastream, Federal Reserve
08
However the risk of a deep and long lasting correction
in home prices has significantly increased
OFHEO home prices
(log level)
7.0
7.0
California
Reference
Level*
6.5
12
8
OFHEO prices and
home transactions
5.5
Real OFHEO
(% year on year)
4
-8
76
7.5
5.0
6.5
4.5
83
5.5
0
-4
4.5
Home sales (per year and
hundreds of households) [R.H.S.]
86
96
53%
6.0
06
3.5
2.5
30Q
29 quarters
95
Home prices
Reference level*
4.5
-16%
89
New York State
5.5
Home prices
25%
6.5
01
07
3.5
75
13
83
91
99
United States
6.1
Home prices
5.8
-1% per year
24%
5.5
-11% per year
5.2
Reference level*
4.9
(*) The reference
level is derived,
state by state, by
regressing local
home prices on the
national
disposable income
per household.
4.6
83
20
07
89
95
01
07
13
Sources: Thomson Datastream, OFHEO, Dexia-AM
In the coming years, negative wealth effects could
be a serious headwind for the economy
Household wealth
Mortgage equity withdrawal
(% of annual disposable income)
(% of disposable income)
Financial wealth
350
Tangible wealth
50
60
70
80
90
00
20
97
01
05
Cash out
Turnover related
Home equity borrowing
MEW
21
Acquisition of assets
40
2
0
-1
93
Home improvements
60
4
150
Repayment of non-mortgage debt
80
6
250
(%)
100
9
8
450
Utilization of MEW
0
91
Personal consumption
95
99
03
07
A 10% fall in home prices diminishes
consumption by 1.2% after two years
Sources: Thomson Datastream, Federal Reserve
Even if the credit squeeze recedes quickly,
growth should stay below potential both this year and next
GDP growth
GDP growth in the United States
Q/Q
annual rate (%)
Q2 07
Q3 07
Q4 07
Q1 08
2005
2006
2007
2008
2009
Consumption
1.4
2.8
2.3
1.0
3.2
3.1
2.9
1.7
1.6
Investment
3.0
0.1
-3.2
-6.8
7.3
2.8
-2.5
-4.5
0.2
- Residential
-11.8
-20.5
-25.2
-25.5
6.6
-4.6
-17.0
-22.3
1.4
- Equipment
4.7
6.2
3.1
-0.9
9.6
5.9
1.3
2.1
2.3
- Structures
26.2
16.4
12.4
1.1
0.5
8.4
12.9
-0.1
-8.8
Inventory changes
($ billions)
5.8
30.6
-18.3
-14.4
33.3
40.3
4.6
7.7
16.2
Government
4.1
3.8
1.9
2.0
0.7
1.8
2.0
2.2
1.6
External balance
($ billions)
-574
-533
-503
-480
-618
-624
-556
-448
-365
- Exports
1380
1441
1464
1474
1203
1304
1410
1507
1623
- Imports
1953
1974
1967
1954
1821
1929
1965
1956
1988
3.8
4.9
0.6
0.9
3.1
2.9
2.2
1.7
2.1
GDP
22
(% year on year)
6
4
2
0
95
99
03
07
Unemployment rate
(%)
6.5
5.5
4.5
3.5
95
99
03
Source: Dexia-AM
07
But the combination of ever-increasing gasoline
prices and a protracted credit crunch...
Gasoline prices and
inflation perception
Consumer prices
(% year on year)
5
Total
7
Auto loans delinquency rates
400
Retail gasoline
2.0
5
Core
98
02
06
Nominal wages
8
03
05
07
Consumer confidence
(% year on year)
10
Inflation
in 12 months (%)
4
Wages
6
(through dealers)
300
3
1
Indirect loans
3.0
(cents per gallon) [R.H.S.]
6
(% of loans)
3.5
(Conference board, expectations)
130
100
200
130
1.0
Direct loans
90
95
00
05
Mortgage delinquency rates
(% of loans)
18
16
Subprime
Prime [R.H.S.]
4
0
PCE
deflator
-2
98
23
02
Real wages
06
40
2.5
12
70
2
69 75 81 87 93 99 05
8
3.5
98
02
06
Sources: Thomson Datastream, ABA
1.5
… would lead to a “L-shaped” slowdown
Housing starts
2300
OFHEO home prices
(thousands units, annual rate)
15
(% year on year)
Structures
(% year on year)
20
5
0
0
1500
-5
-20
700
93
97
01
05
09
-15
01
03
05
07
09
-30
95
99
03
07
Consumption
GDP growth
Unemployment rate
(% year on year)
(% year on year)
(%)
6
6
8
7
4
4
2
2
V-SHAPED
5
L-SHAPED
0
95
99
03
07
0
95
99
Reasonably optimistic
24
03
07
3
95
99
03
07
Protracted slowdown
Source: Dexia-AM
To sum up
After lowering its policy rate by 225 basis points since January,
the Fed will stay accommodative for many months and will
continue to try to alleviate credit markets’ strains.
Long term interest rates should stay below 4% as long as the
housing market does not give clear signs of stabilization.
If the economic and financial outlook deteriorates significantly, the
Fed will act aggressively again and the Congress will vote a new
stimulus package to try to avoid a protracted stagnation of the
economy. Long term rates would then fall close to 3%.
Against such a backdrop, the stock market perspectives for end of
2008 remain uncertain: 1500 for the SP500 in our reasonably
optimistic scenario, but 1250 in a “L-shaped” one!
25
Economic and financial outlook
Contents
United States: in recession… ?
Euro area: weathering the storm?
Annex
26
Monthly surveys point to a clear slowdown
in activity in the coming months
PMI indices
Manufacturing
Eurozone PMI and GDP
Services
70
70
5
62
4
60
60
57
50
50
40
40
99
01
03
05
07
2
52
99
01
03
05
07
0
99
47
01
03
05
GDP (% year on year)
France
27
Germany
Italy
Spain
PMI [R.H.S.]
Sources: Thomson Datastream, Reuters
07
As in the United States,
European households are facing strong inflation
Wholesale gasoline prices
180
United States
France
Germany
120
170
2007
2008
Retail gasoline prices
2
Germany
France
Italy
28
(Jan. 2007 = 100)
2007
2008
(% year on year)
01
03
3
(in dollars)
90
0
05
07
Milk, cheese
& eggs
Meat
1
Food
30
20
%
Bread &
cereals
Fruits
10
0
0
-1
99
(% year on year)
01
03
05
Motor fuel
Shares in the Euro CPI-food
Contribution to the Euro CPI-food
United States
130
5
0
-1
99
United States
Euro
%
2
Italy
Shares in the total CPI
10
United States
4
(Jan. 2007 = 100)
80
15
Euro area
6
(in euros)
160
CPI-food
7
07
Sources: Thomson Datastream, Eurostat
But except in Spain and Ireland,
employment growth has kept its momentum…
Employment by country
(% year on year)
Employment in the Euro area
and the United States
(% year on year)
3
Spain
4
2
Euro area
2
4
0
-2
1
Germany
99
03
05
2
07
United States
99
01
03
05
Belgium
1
0
-1
6
-1
Germany
-2
99
Spain
Netherlands
01
03
4
07
2
0
29
01
France
3
8
0
-2
7
6
Ireland
99
01
03
05
07
Source: Thomson Datastream
05
07
… and a progressive improvement in
German consumption is to be expected
Employment and wages
(2003=100)
105
Employment
108
France
Real wages per employee
106
Real consumption and
income in Germany
France
103
102
101
99
03
Germany
05
Euro area
5
4
98
94
03
07
Germany
05
07
3
1
(% year on year)
0
France
4
-1
-2
2
Disposable income
2
Real disposable income
5
(% year on year)
Consumption
93
96
99
02
05
0
-2
93
30
Germany
99
05
Sources: Thomson Datastream, Dexia-AM
08
Moreover, equipment investment in many Euro countries –
in Germany in particular – seems to keep on growing
Credit to non financial corporations by country
Equipment investment in the Euro
area and the United States
(% year on year)
35
Spain
30
(% year on year, nominal)
20
15
Euro area
10
Germany
10
-5
0
USA
10
04
05
06
07
08
40
-5
Ireland
30
-10
99
01
03
05
07
5
0
Germany
-5
-10
Spain
-15
Netherlands
Belgium
Italy
France
15
0
5
04
05
06
20
10
31
20
04
05
06
07
08
Source: Thomson Datastream
07
08
The sources of Euro domestic demand growth should
hence progressively become more balanced…
Domestic demand growth
Contributions to euro area
domestic demand growth
Domestic demand growth
(% year on year)
(% year on year)
8
5
(%, annual average rate)
2007
4
1.5
2008
2
6
1.0
4
0.5
0
2
0.0
0
-4
96
Others 21%
98
00
02
04
06
08
-1.0
96
98
Euro area
Germany
Italy
Spain
France
32
Spain Euro area
Shares in Euro
domestic demand
-0.5
-2
Germany
00
02
04
06
08
Germany 26%
Spain 13%
Italy 18%
Sources: Thomson Datastream, Dexia-AM
France 22%
… while, despite the appreciation of the euro,
exports should not totally falter
Extra Euro area exports
Recent exchange
rate movements
1.7
1.6
Euro / $
1.4
Euro effective
exchange rate
1.2
125
By country of destination (%)
Other 2%
Africa 5%
United States 12%
Middle East 6%
Western
Hemisphere 4%
United Kingdom
15%
Developing
+3% since Asia 12%
Other developed
January 08
Europe 13%
(indexed on the euro $ in 01/07)
J FMAM J J ASOND J FMAM J J
2007
2008
Pound
115
CEE & CIS 25%
Other advanced 6%
By exporting country (%)
Austria 4% Finland 3%
100
Czech Koruna
85
33
Zloty
J F MA M J J A SO N D J F M A M
2007
2008
Germany
40%
Netherlands
11%
(ULC based, 2007 = 100)
110
Italy
Belgium
Netherlands
Spain
France
Germany
105
100
95
United
Kingdom
90
Belgium 8%
Yen
Real effective exchange rate
United States
85
2007
Spain 5%
Italy 14%
France 15%
Source: Thomson Datastream
2008
If the US avoids a protracted slowdown,
Euro growth could stay close to potential
GDP growth
GDP growth in the Euro area
(% Q/Q
annual rate)
Q107
Q207
2004
2005
2006
2007
2008
2009
Consumption
0.2
2.6
2.1
-0.3
1.5
1.6
1.8
1.5
1.3
1.6
Investment
5.3
-0.1
4.4
3.4
2.0
3.1
5.3
4.1
3.3
2.8
- Construction
2.0
2.0
4.6
1.7
1.9
0.9
- Equipment
2.8
4.2
6.5
6.0
4.7
4.5
- Other
-0.5
2.5
2.9
4.4
2.4
1.6
Unemployment rate
(%)
Change
in inventories
(contribution, % GDP)
Government
1.9
-1.5
0.9
-0.5
0.2
0.0
0.2
0.0
0.1
-0.4
4.1
0.9
2.6
-0.4
1.4
1.4
2.0
2.2
1.6
2.0
External balance
(contribution, % GDP) -0.8
1.0
-0.6
-0.6
0.1
-0.3
0.2
0.4
-0.1
0.4
- Exports
3.3
3.6
8.4
2.3
6.7
4.9
8.1
6.0
4.3
4.8
- Imports
5.3
1.3
10.2
-1.2
6.5
5.7
7.8
5.1
4.6
4.2
2.7
1.3
2.9
1.5
1.9
1.7
2.9
2.5
1.8
1.9
GDP
34
Q307 Q407
(% year on year)
5
4
2
0
95
99
11
03
07
10
8
6
95
99
Source: Dexia-AM
03
07
Still risk factors have accumulated, with fiscal
policy having only a limited capacity to respond
Change in cyclically adjusted
primary balances
Bank lending survey
Factors affecting demand for
loans to Euro area enterprises
Debt restructuring
20
Stimulation
-20
-40
-60
03
M&A
-0.5
-1.5
05
06
07
08
Budgetary leeway*
Demand for loans to enterprises
-40
-60
-80
03
Euro area
Germany
04
05
06
07
08
(% of GDP, 2008)
-20
Public deficit
0
Greece
60
Italy
40
6
40
20
(basis points)
80
-1.0
Fixed investment
04
Governments’ spread
vs German 10-year Bund
0.0
Inventories
0
Restriction
(%, 2008)
0.5
SP
IR
GE
SL
Euro
AU
FN
BG
IT
LX
FR
PT
NL
GR
40
1.0
4
2
0
-2
-3
-4
0
20
FN
LX
0
NL
SP
GE
SL
BG
GR
AU
PT
IR
40
60
Spain
France
J F MAM J J A SO ND J FMAM
2007
IT
FR
20
Belgium
80
Public debt
100 120
(*) Bubble size
proportional to weight in
euro area GDP
(% of GDP, 2008)
35
Sources: Thomson Datastream, European Commission, Dexia-AM
2008
The ECB has tried its best to keep the interbank
market liquid but has not changed its policy rate
300
Frontloading the distribution of
liquidity
Policy rate and monetary pillar
14
(€ billions)
250
Reserves
200
(% year on year)
10
Reserves
requirement
3
Repo rate
M3
100
Jan Mar May Jul Sep Nov Jan Mar May Jul
2007
2008
Lengthening the average maturity
of operations
2
99
01
0
Longer-term
refi. operations
(€ billions)
Main
refinancing
operations
Fine-tuning operations
-200
Jan Mar May Jul Sep Nov Jan Mar May Jul
2007
2008
36
03
05
Consumer prices
2
07
Cumulated deviation from the
ECB inflation target
(% year on year)
5
104
Oil=$150
(index, 1999=100)
103
Headline CPI
Total net refinancing operations
200
(%) [R.H.S.]
(% year on year)
4
400
4
6
150
600
5
Credit to the
private sector
102
Oil=$125
2
101
100
99
99
Core CPI
03
07
0
97
99
01
03
05
07
09
Sources: Thomson Datastream, ECB, Dexia-AM
Up to now, the euro / dollar exchange rate has remained
driven by expectations on monetary policies
Memo:
December 2007
5.5
5.0
Expected Sept. 08
US short term rates (%)
Exchange rates and short term interest rates differentials
6
Expected June 09
US ST rates (%)
4.0
June 09 short term
rate differential
(%, Euro-US) [R.H.S.]
5
Expected Sept. 08
Euro short term rates (%)
3.0
Oct Jan Apr Jul Oct
2006
2007
1.53
Sept. 08 short term
1.50
1.68
1.0
1.53
0.4
4
0.7
rate differential
3
(%, Euro-US) [R.H.S.]
$ against the euro
Expected June 09 Euro
short term rates (%)
-0.2
1.38
-0.8
0
1.40
2
Oct
1.30
$ against the euro
1.23
O D F A J A O D F A J
2007
2006
37
1.6
-1
Jan Apr
2006
Jul
2007
Oct
Jan Apr
2008
1.23
Oct
Jan Apr
2006
Jul
Oct
Jan Apr
2007
-1.4
Sources: Thomson Datastream, Dexia-AM
2008
-1.4
To sum up
With high inflation and an economy staying close to
potential, the ECB is likely to stay pat this year.
Long term 10-year interest rates should stay around 4%
until the end of 2008.
If financial distress increases, the ECB might contribute
to global stabilization by adjusting its policy rates.
As in the US, the stock market perspectives for end of
2008 remain uncertain: the MSCI EMU should be close to
250 if growth tracks our reasonably optimistic scenario,
but at 190 with a deeper slowdown.
38
Economic and financial Outlook
Contents
United States: walking on a tight rope…
Euro area: how resilient?
Annex
39
Delinquency rates for US commercial banks
COMMERCIAL BANKS DELINQUENCY AND CHARGE-OFF RATES
(% of loans)
Delinquency rates
8.0
8.0
8.0
Total
C&I loans
Real Estate
Consumer loans
7.0
6.0
5.0
7.0
Total
7.0
6.0
Residential
6.0
Commercial
5.0
4.0
4.0
3.0
3.0
3.0
2.0
2.0
2.0
1.0
1.0
1.0
0.0
97
02
07
87
Charge-off rates
4.0
3.0
Other
92
97
02
07
87
3.0
Total
Residential
Commercial
2.5
2.0
2.5
2.0
1.5
7.0
6.0
1.5
5.0
1.0
4.0
0.0
1.0
-0.5
0.0
40
95
00
05
07
3.0
0.5
90
02
Total
Credit cards
Other
8.0
0.5
85
97
9.0
1.0
0.0
92
Consumer loans
charge-off rates
Real estate charge-off rates
Total
C&I loans
Real Estate
Consumer loans
3.5
Credit cards
0.0
0.0
92
Total
5.0
4.0
87
Consumer loans
delinquency rates
Real estate delinquency rates
2.0
85
90
95
00
05
85
90
95
00
05
Sources: Thomson Datastream, Federal Reserve
Mortgage delinquency rates in the United States
MORTGAGE DELINQUENCY RATES
(% of loans)
Prime residential loans seriously delinquent
4.4
Prime residential loans foreclosure started
1.2
Prime
Fixed rate
Adjustable rate
3.9
3.4
Prime
Fixed rate
Adjustable rate
Adjustable mortgage delinquency rates and
projected ARM resets
0.8
2.9
2.4
1.9
Subprime - adjustable rate
Prime - adjustable rate
0.4
1.4
4
0.9
0.4
0.0
98 99 00 01 02 03 04 05 06 07 08
98 99 00 01 02 03 04 05 06 07 08
12
10
3
8
2
Subprime residential loans seriously delinquent
25
Subprime
Fixed rate
Adjustable rate
20
Subprime residential loans foreclosure started
6.0
5.0
4.0
15
Subprime
Fixed rate
Adjustable rate
6
4
1
2
0
989900 01020304 05060708
30d
0
60d
9899000102030405060708
> 90d
3.0
10
2.0
5
1.0
0
98 99 00 01 02 03 04 05 06 07 08
41
0.0
98 99 00 01 02 03 04 05 06 07 08
Source: Thomson Datastream
Selected indicators for Spain
Credit institutions’ balance sheet
Housing prices
(% year on year)
20
Spain
15
(year on year change, euro billions)
500
France
Assets
400
0
0
-5
97
00
03
Loans
100
United States
0.4
0.0
00
Securities other than shares
-100
00
06
(% of total loans)
0.8
200
5
1.6
1.2
Total assets
300
10
Ratio of doubtful loans
02
04
06
08
02
04
40
(% year on year)
250
Construction and
real estate activities
150
30
100
20
10
0
97
42
Liabilities
200
Domestic deposits
Securities other than shares
50
Households
Other business
00
03
06
09
0
-50
00
RoW deposits
02
04
06
08
Default rate curve by vintage
Credit to the private sector
50
06
08
Sources: Thomson Datastream, Central bank of Spain, Dexia-AM
Money does not perform. People do.
The economic and financial outlook
in the wake of the credit turmoil
Anton Brender
June 2008 - Amsterdam