Transcript Dougie Adams

Dougie Adams
Oxford Economics
A Two-speed Global Economy
Dougie Adams
[email protected]
January 2011
Key points
 2010 saw a marked global recovery
 Expect continued corporate-driven recovery in 2011 but there are
major uncertainties, including
■ New pressures emerging from inflation and austerity
■ Global imbalances
■ Eurozone debt crisis
 Production levels remain below peak levels with some slackening of
momentum evident
 Forecast 25% growth in USMTC orders in 2011 after nearly 80%
growth in 2010
 2011 orders still 10-12% below 2007 and 2008 levels
World growth – better than expected
GDP - view from Beijing
GDP - view from Washington
% pa
% pa
20
5
World
4
China
15
3
2
10
1
World
10
5
20
09
20
08
20
07
20
20
-1
06
0
-2
-5
-5
Source : Oxford Economics/Haver Analytics
Source : Oxford Economics/Haver Analytics
10
20
09
20
08
20
20
-4
07
0
20
US
06
-3
Revisions to Oxford Economics forecasts
(GDP; percentage changes)
2010
2011
USA
3.2
3.0
3.2
Eurozone
1.1
1.5
2.1
China
9.5
9.0
9.0
USA
2.9
3.2
3.5
Eurozone
1.7
1.5
1.7
China
10.1
9.2
9.1
USA
-0.3
0.2
0.3
Eurozone
0.6
0
-0.4
China
0.6
0.2
0.1
2012
January 2010
January 2011
Differences
2010 growth beating earlier expectations…
World: 2010 forecast comparison
% year
27.5
25.0
22.5
20.0
17.5
15.0
12.5
10.0
7.5
5.0
2.5
0.0
-2.5
May 2010
Aug 2010
Nov 2010
Manufacturing
Source: Oxford Economics
Motor
vehicles
High-tech
Consumer
goods
Paced by emerging markets
Emerging Markets: GDP growth
% year
10
8
All emergers
Developing Asia
6
4
Latin America
incl. Mexico
2
0
-2
-4
-6
Central &
Eastern Europe
-8
1996
1998
2000
Forecast
2002
Source: Oxford Economics
2004
2006
2008
2010
2012
2014
Emergers – post recession bounce giving way to sustained growth
Asia: Industrial output
Latin America: Industrial output
% year
40
% year
20
30
15
Brazil
10
China
20
Chile
5
10
0
India
0
-5
Mexico
-10
-10
Rest of emerging East Asia
-20
-15
3 month moving average
-30
1997
1999
2001
Source: Haver Analytics
3 month moving avg
2003
2005
2007
2009
2011
-20
1997
1999
2001
Source: Haver Analytics
Argentina
2003
2005
2007
2009
2011
Subdued recovery for the developed economies
TYPES OF RECESSIONS
TYPES OF RECESSIONS
(output peak at time 0 = 100;
sample of 122 recessions)
(output peak at time 0 = 100;
sample of 122 recessions)
106
106
105
"Normal"
recessions
105
104
"Normal"
recessions
104
103
Recessions
associated
with financial
shocks
102
103
101
102
100
Recessions
associated
with financial
shocks
101
100
99
98
Present
recession
(OECD)
97
96
99
95
98
94
0
1
2
Source: IMF
3
4
5
6
7
8
9
10
11
12
0
1
2
Source : IM F
3
4
5
6
7
8
9
10
11
12
US a lacklustre recovery
US: Private payrolls and consumption
000s
800
%, year
6
Consumption (RHS)
5
600
4
400
3
200
2
0
1
-200
0
-400
Private Payroll change
(LHS)
-600
-800
1996
-1
-2
-3
1998
2000
Source: Haver Analytics
2002
2004
2006
2008
2010
Japan – suffering from yen appreciation
Japan: Industry and exports
3-month % change
30
20
10
0
-10
-20
-30
Export volumes
Industrial output
-40
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source : Oxford Economics/Haver Analytics
German economic renaissance
GDP: Germany vs. rest of Eurozone
% year
6
Forecast
Other
Eurozone
4
2
0
-2
-4
-6
Germany
-8
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: Oxford Economics
The major uncertainties
 Commodity prices and emerging market inflation?
 Too much fiscal tightness in Europe?
 Too much fiscal ease in the US?
 The bursting of the Chinese bubble?
 Persistent imbalances
■ What will happen to the Euro?
■ What will happen to the US-China relationship?
Two-speed world economy…
World GDP
$trillion 1980
12
10
8
Industrial countries
6
4
Other countries
2
0
1980
1985
Source : IMF
1990
1995
2000
2005
2010
…impacting commodity prices
World: Oil price
World: Commodity prices
$/barrel
$/bushel
25
160
140
$/lb
1.80
Wheat
(lhs)
20
1.60
1.40
120
1.20
100
15
80
60
40
Cotton
(RHS)
10
Source : Haver Analytics
0.80
0.60
5
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
1.00
0.40
0.20
0
0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Source : Haver Analytics
…leading to food price pressures in the emergers
Emerging markets: Consumer prices
% year
9
8
7
Weighted CPI
inflation
6
5
4
3
Weighted CPI ex
food price inflation
2
1
0
2002
2003
2004
2005
Source: Oxford Economics
2006
2007
2008
2009
2010
2011
The imbalances story times two
 US running current account
deficit of over $450billion
 France, PIGS current account
deficit of over $300 billion
 China running current account
surplus of over $300 billion
 Germany Netherlands current
account surplus of $250 billion
 Intervention by central bank
leading to reserves rising on
average by over $300 billion
per annum in last five years
 Banks were lending to Greek
government, Spanish
companies and Irish banks as
offset to the above imbalances
 No sign of any change in next
few years?
 ECB/EU governments will now
fill the gap?
Worrying that trade imbalances widening again
World: Current account imbalances
$ billion
600
China
OPEC
400
200
Japan
0
-200
EU
-400
-600
US
-800
-1000
1990
Forecast
1994
Source: Oxford Economics
1998
2002
2006
2010
Eurozone – PIGS under pressure
Eurozone: long term rates
% points
13.0
10.5
Greece
Spain
Portugal
Ireland
8.0
5.5
3.0
Jan-2008 Jul-2008 Feb-2009 Sep-2009 Mar-2010 Oct-2010
Source : Oxford Economics/Haver Analytics
Tough to keep up with the Germans
Eurozone: Competitiveness changes
% change in unit labour cost-based real exchange rate since joining Euro
Euro
Germany
Ireland
France
More
competitive
Less
competitive
Netherlands
Portugal
Belgium
Greece
Spain
Italy
-20
-10
0
10
Source : Oxford Economics/Haver Analytics
20
30
40
50
What if the unthinkable happens in the Eurozone?
Recovery – the pluses and minuses
 Corporates cash rich
 Access to finance still an issue
 Employment gains
 High unemployment
 Confidence rebuilding
 Consumer confidence still low
 Recovering household wealth
 Rising commodity prices and taxes
 Interest rates remain low
 Fiscal retrenchment ex-US
 Low levels of investment
through crisis
 Excess capacity
o
 Strength of emergers
 Tightening policy & rising exchange
rates in emergers
= Continuing modest recovery for developed economies
Corporates have hoarded cash
World: PNFC financial balances
% of GDP, 4-quarter average
5
4
3
UK
2
1
0
-1
-2
US
-3
-4
Eurozone
-5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Oxford Economics\Haver Analytics
The beginnings of employment recovery
World: Unemployment
%
12
France
Forecast
11
10
Eurozon
e
9
8
Germany
7
UK
6
5
US
4
3
1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source : Oxford Economics
Consumers still burdened with debt
HOUSEHOLDS
DEBT/GDP RATIOS
110
90
U.K.
United
States
Japan
HOUSEHOLDS
DEBT/GDP RATIOS
110
Spain
90
Germany
70
France
70
Eurozone
50
50
Italy
30
30
10
10
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
…with a long period of austerity to come for many…
Eurozone: Fiscal tightening*
UK: Composition of fiscal tightening
% of GDP
1.5
Restrictive
1.0
£bn
45
Tax rises
40
Spending cuts
35
0.5
30
0.0
25
20
-0.5
Expansionary
-1.0
15
10
5
-1.5
2009
2010
Source: Oxford Economics
2011
2012
2013
* Change in deficit not accounted for by
growth impact on government revenues and
spending
0
2010/11
2011/12
Source : HM Treasury
2012/13
2013/14
2014/15
…but rates remain very low
US: Broad money growth
World: Ten year bond yields
6-month annualised growth, %
20
10-year bond yield %
5.5
MZM
15
5.0
4.5
10
US
4.0
5
M2
3.5
0
3.0
-5
2.5
2.0
2007
Germany
2007
Source: S&P
2008
2008
2009
2009
2010
2010
-10
Jan-2007Aug-2007Mar-2008Nov-2008Jun-2009 Jan-2010Sep-2010
Source: BEA
Bigger than usual investment bust over recession
Manufacturing capacity
utilisation (%)
Business Investment
2005=100
160
90
US
150
120
EU25 (LHS)
85
140
130
Operating rate compared with
a year earlier (%)
Germany
Japan (RHS)
80
80
120
110
75
Japan
100
70
90
80
40
65
70
60
2005
2007
2009
Source : Oxford Economics
USA (LHS)
Forecast
2011
2013
2015
0
60
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: Haver / Oxford Economics
Oxford Economics forecast
Summary of International Forecasts
2008
2009
2010
2011
2012
2013
0.0
0.5
-2.6
-2.5
2.9
2.9
3.2
2.4
3.5
3.4
3.6
3.8
Europe
Eurozone
Germany
France
Italy
UK
EU27
0.3
0.7
0.1
-1.3
-0.1
0.4
-4.0
-4.7
-2.5
-5.1
-4.9
-4.2
1.7
3.5
1.5
1.0
1.6
1.8
1.5
2.2
1.8
1.0
2.0
1.8
1.7
1.7
2.0
1.1
2.6
2.1
2.0
2.1
2.1
1.2
3.0
2.4
Asia
Japan
Emerging Asia, excl Japan
China
India
-1.2
6.0
9.6
7.3
-6.3
5.3
9.1
6.8
4.2
8.9
10.1
8.8
1.1
7.3
9.2
8.2
2.1
7.7
9.1
9.0
2.0
7.5
8.8
8.8
1.6
2.8
2.4
-2.1
-0.8
-12.8
3.8
4.6
15.2
3.5
4.3
7.1
3.9
4.8
8.0
4.0
4.8
8.2
Real GDP
North America
United States
Canada
World
World 2005 PPPs
World trade
Marked cyclical rebound underway across sectors…
World: Output growth
% year
50
Motor vehicles
40
Electronics &
computers
30
Consumer
goods
20
10
0
-10
-20
Manufacturing
-30
-40
-50
1998
2000
2002
Source: Oxford Economics
2004
2006
2008
2010
…but production still well below peak levels…
Developed countries: The present cycle
2007/08 cyclical peak = 100
Consumer
105
goods
100
95
90
85
80
75
70
65
60
55
Motor vehicles
50
45
2007
2008
Source: Oxford Economics
2009
Motor vehicles: The present cycle to 2010Q3
2007/08 cyclical peak = 100
105
100
95
90
85
80
US
75
70
Manufacturing
65
60
55
50
45
2010
2007
2008
Electronics &
computers
Source: Oxford Economics
Germany
France
Japan
UK
2009
2010
Growth slowed in latest quarter
Global manufacturing output
% change q-o-q
11
Consumer non-durables
10
Consumer durables
9
8
Intermediate goods
7
Motor vehicles
6
Investment goods (exc. Motor
vehicles)
5
4
3
2
1
0
-1
2009Q4
2010Q1
Source : Oxford Economics
2010Q2
2010Q3
…as this recovery proves lengthier than in earlier cycles…
Developed countries: Quarters from trough taken to surpass previous peak production
Economic cycle
Manufacturing
Motor vehicles
Electronics &
computers
Early 80s
5
3
na
1
Early 90s
4
5
8
5
Early 00s
13
2
9
18
20
(2014Q1)
23
(2014Q4)
11
(2011Q4)
25
(2015Q3)
Latest cycle
Consumer goods
Developed countries: Two yrs after the trough
% of previous peak level
110
Early 80s
Early 90s
100
Early 00s
90
80
Latest
cycle
70
Manufacturing
Source: Oxford Economics
Motor
vehicles
High-tech
Consumer
goods
Car production matching sales in recent months
Net car export & inventory changes†
3mth mav, % of sales
15
10
5
0
-5
-10
-15
-20
† calculated as unit production less sales for US, Western
Europe & Japan
Shading indicates sector downturns
-25
1980
1984
1988
1992
1996
Source: J D Power/Oxford Economics
2000
2004
2008
Customer sectors continue to grow globally
Growth in industrial production of machine tools
customer sectors
40%
30%
20%
10%
0%
-10%
-20%
2008
2009
2010
2011
-30%
Europe Japan China
Source: Oxford Economics
India
Central
Europe
US
World
…and across sectors
Global growth in industrial production of machine
tools customer sectors
30%
20%
10%
0%
-10%
2009
2011
-20%
2010
2012
-30%
Motor Veh
Metal
Products
Source: Oxford Economics
Aerospace
Comp &
Mech
engineering electronics
Elec equip
Consumer Intermediate
goods
goods
Growth mostly quicker in US customer sectors
US growth in industrial production of machine tools
customer sectors
30%
20%
10%
0%
-10%
2009
2011
-20%
2010
2012
-30%
Motor Veh
Metal
Products
Source: Oxford Economics
Aerospace
Comp &
Mech
engineering electronics
Elec equip
Consumer Intermediate
goods
goods
Orders are picking up
Capital goods orders
% year
40
US
30
Japan
20
10
0
-10
-20
Eurozone
-30
-40
3 month moving average
-50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Source: Haver Analytics
Short term outlook for investment goods
Investment goods output
% annual
change
30
2009
2010
2011
2012
20
10
0
-10
-20
-30
-40
US
JAPAN
Source: Oxford Economics
EU15
EU_EAST
BRICS
Forecast for the US
US
$ bn
9
Total capital spending by the top
8 customer sectors (RHS)
Forecast
$ bn
180
8
160
7
140
6
120
5
100
4
80
Machine tools
sales (LHS)
3
60
2
40
1
20
0
1998
0
2000
2002
2004
2006
2008
Source: Oxford Economics
Machine tools sales
2010
2012
Forecast for Japan
Japan
US$ bn
US$ bn
6
5
1.40
Forecast
Total capital spending by the top 8
customer sectors (RHS)
1.20
1.00
4
0.80
3
0.60
2
1
0.40
Machine tools
sales (LHS)
0.20
0
1998
2000
2002
2004
Source: Oxford Economics
0.00
2006
2008
Machine tools sales
2010
2012
Forecast for Germany
Germany
US$ bn
US$ bn
11.0
10.0
9.0
225
Total capital spending by
the top 8 customer sectors
(RHS)
Forecast
205
185
8.0
165
7.0
145
6.0
5.0
4.0
3.0
125
Machine tools
sales
(LHS)
2.0
1998 2000 2002 2004
Source: Oxford Economics
105
85
65
2006
2008
Machine tools sales
2010
2012
Forecast for China
China
US$ bn
US$ bn
40
60
Machine
tools sales
(LHS)
35
Forecast
50
30
25
20
40
Total capital spending by the
top 8 customer sectors
(RHS)
30
15
20
10
10
5
0
1998
2000
2002
2004
Source: Oxford Economics
0
2006
2008
Machine tools sales
2010
2012
Quarterly USMTC orders forecast…
US metalworking machine tools orders, USMTC
Forming machine tools, $bn
0.145
0.125
Cutting machine tools, $bn
1.2
Forming machine tools
(LHS)
Forecast
1.1
1
0.105
0.9
0.8
0.085
0.7
0.065
0.045
0.025
2004
0.6
0.5
Cutting machine tools
(RHS)
0.4
0.3
2005
2006
2007
2008
Source : Oxford Economics
US orders
2009
2010
2011
More growth to come in 2010 across the regions
Growth in value of orders for cutting machines
by region
150%
100%
50%
Total
Northeast
South
Midwest
Central
West
0%
-50%
-100%
2009
Source: Oxford Economics
2010
2011
Forming returning to generalised growth too
Growth in value of orders for forming machines
by region
20%
10%
0%
-10%
-20%
-30%
Total
Northeast
South
Midwest
Central
West
-40%
-50%
-60%
-70%
-80%
2009
Source: Oxford Economics
2010
2011
Long term outlook for investment goods
Shares of global investment goods output
%
45
40
35
1990
2010
2030
30
25
20
15
10
5
0
US
JAPAN
Source: Oxford Economics
EU15
EU_EAST
BRICS
Conclusions
 Policy stimulus, turn in inventory cycle and rebound in world
trade drove strong recovery
 Global economic recovery should continue but there are
growing downside risks
 Machine tool orders up sharply from lows. Sales have so far
been more subdued but these should now start to pick up.
 MT sales are forecast to rebound sharply over the next few
years in both developed and emerging markets
 Strong rebound in developed economy markets follows very
deep recession but focus of global MT market still increasingly
moving toward emerging economies
End of presentation
Thank you