Transcript Slide Deck

Global Economic Outlook
Tim Quinlan, Senior Economist
April 2016
Pace of Policy Firming: Two Increases in 2016
Appropriate Pace of Policy Firming
Target Federal Funds Rate at Year-End
5.0%
4.5%
4.0%
Normalization is underway, but
there remains wide variation
between the market and Fed
officials themselves about the
appropriate path of the fed
funds rate
5.0%
March 2016 Median Response
December 2015 Median Response
December 2014 Median Response
Futures Market: March 30
4.5%
4.0%
3.5%
3.5%
3.0%
3.0%
2.5%
2.5%
2.0%
2.0%
1.5%
1.5%
1.0%
1.0%
0.5%
0.5%
0.0%
2016
2017
2018
Source: Federal Reserve Board, Bloomberg LP and Wells Fargo Securities, LLC
Economics
2
Longer Run
0.0%
Unemployment
Unemployment Rate
Seasonally Adjusted
12%
12%
FOMC Central Tendency for Longer Run
Unemployment Rate: Mar @ 5.0%
10%
The labor market is steadily
firming, the unemployment rate
is spot-on the FOMC’s central
tendency target
10%
8%
8%
6%
6%
4%
4%
2%
2%
94
96
98
00
02
04
06
08
10
12
Source: U.S. Department of Labor, Federal Reserve Board and Wells Fargo Securities, LLC
Economics
3
14
16
Labor Turnover
The recent pickup in job openings and quits are consistent with recently strong employment
gains, although there is potential for moderation going forward
Separations
Hiring
Quits vs. Layoffs
Job Openings
Millions of Workers, SA
6.0
6.0
5.5
5.5
5.0
5.0
4.5
4.5
4.0
4.0
3.5
3.5
3.0
3.0
2.5
2.5
2.0
Thousands
Millions of Openings, Seasonally Adjusted
1.5
03
04
05
06
07
08
09
10
11
12
13
14
15
3.0
2.5
2.5
2.0
2.0
1.5
1.5
1.0
1.0
01
16
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
3.0
Quits: Feb @ 2.95M
Layoffs: Feb @ 1.72M
1.5
02
3.5
2.0
Total Job Openings: Feb @ 5.45M
Three-Month Moving Average: Feb @ 5.44M
01
3.5
4
02
03
04
05
06
07
08
09
10
11
12
13
14
15
16
Inflation
PCE Deflator vs. Core PCE Deflator
Year-over-Year Percent Change
5%
Low oil prices continue to weigh
on headline inflation, but core
inflation has remained fairly
stable
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
PCE Deflator: Feb @ 1.0%
"Core" PCE Deflator: Feb @ 1.7%
-2%
-2%
92
94
96
98
00
02
04
06
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
5
08
10
12
14
16
Inflation: A Divide in Goods vs. Services
Core Commodities vs. Core Services CPI
Year-over-Year Percent Change
7%
7%
Core Services CPI: Feb @ 3.1%
6%
Inflation for services has been
much firmer than for
commodities
6%
Core Commodities CPI: Feb @ 0.1%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
-3%
-3%
88
90
92
94
96
98
00
02
04
Source: U.S. Department of Labor and Wells Fargo Securities, LLC
Economics
6
06
08
10
12
14
16
Real GDP Forecast
U.S. Real GDP
Bars = CAGR
Line = Yr/Yr Percent Change
10%
10%
GDP - CAGR: Q4 @ 1.4%
8%
GDP - Yr/Yr Percent Change: Q4 @ 2.0%
6%
6%
Forecast
4%
Outlook is for below-trend
growth to continue
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-6%
-8%
-8%
-10%
2000
-10%
2002
2004
2006
2008
2010
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
8%
7
2012
2014
2016
Housing
Millions of Units
2.4
We continue to look for a
gradual recovery in
homebuilding.
2.1
Multifamily Starts
Multifamily Forecast
Single-family Starts
Single-family Forecast
Single-family housing starts are
beginning to ramp back up.
Gains will be more modest than
in past building cycles.
2.1
1.8
1.8
Forecast
1.5
Apartment demand remains
exceptionally strong but supply
is catching up with demand.
2.4
1.2
1.2
0.9
0.9
0.6
0.6
0.3
0.3
0.0
0.0
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
1.5
8
Thousands
Housing Starts
Household Balance Sheets
A recovery in household asset values has boosted net worth, but households continue to save at
a higher rate than during the past expansion
Household Assets
Household Net Worth
Household Assets
Trillions of Dollars
$110
$100
$90
Financial Assets: Q4 @ $70.3T
Real Per Capita Household Net Worth
Thousands of USD; Savings as a Percent of Disposable Income (Inverted)
$110
Household Real Estate Holdings: Q4 @ $22.0T
$100
Other Tangible Assets: Q4 @ $8.9T
$90
$80
$80
$70
$70
$60
$60
$50
$50
$40
$40
$30
$30
$20
$20
$10
$10
$0
0%
$250
2%
$220
4%
$190
6%
$160
8%
$130
10%
Real Per Capita Net Worth: Q4 @ $246,036.8 (Left Axis)
Saving/Disposable Income: Q4 @ 5.0% (Right Axis, Inverted)
$0
$100
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
12%
90
Source: Federal Reserve Board, U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
$280
9
93
96
99
02
05
08
11
14
Household Balance Sheets
Consumer deleveraging may be nearing an end, but monthly debt and other financial
obligation payments remain near historic lows
Household Debt
Financial Obligations Ratio
Household Debt - Consumer & Mortgage
Financial Obligations Ratio-Total
As a Percent of Disposable Personal Income
100%
100%
18.5%
Consumer Credit: Q4 @ 26.0%
As a Percent of Disposable Personal Income
18.5%
Total: Q4 @ 15.4%
Home Mortgages: Q4 @ 69.9%
80%
18.0%
18.0%
17.5%
17.5%
17.0%
17.0%
16.5%
16.5%
16.0%
16.0%
15.5%
15.5%
15.0%
15.0%
80%
60%
60%
40%
40%
20%
20%
0%
0%
60
65
70
75
80
85
90
95
00
05
10
14.5%
15
Source: Federal Reserve Board and Wells Fargo Securities, LLC
Economics
14.5%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16
10
Power Boat Sales
Economics
Boat Sales by Unit and by Price
Economics
U. S . P owe rsports Unit S a le s Corre la tion Ta ble - Ec onomic Da ta
Annual Correlations (No Lag) - December Year End
Tota l P owe rboa t Unit S a le s: 2 0 0 1- 2 0 15
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non-Farm Payrolls
Gasoline Prices
0.58
0.47
0.57
0.13
0.23
0.21
- 0.35
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.69
0.78
0.20
0.53
0.72
0.63
0.09
Tota l Ne w P owe rboa t Unit S a le s: 19 6 6 - 2 0 15
Tota l Use d P owe rboa t Unit S a le s: 2 0 0 1- 2 0 15
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.20
0.04
0.48
- 0.09
- 0.19
- 0.23
- 0.52
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.65
0.75
0.16
0.48
0.66
0.60
0.23
Ne w O utboa rd Boa t Unit S a le s: 19 6 6 - 2 0 15
Ne w Inboa rd Boa t Unit S a le s: 19 6 6 - 2 0 15
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.62
0.57
0.31
0.36
0.71
0.38
- 0.07
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.59
0.65
0.22
0.57
0.80
0.58
0.20
Ne w S te rndrive Boa t Unit S a le s: 19 6 6 - 2 0 15
ATV Unit S a le s: 19 8 3 - 2 0 15
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.50
0.48
0.35
0.42
0.79
0.28
0.00
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.02
0.27
- 0.40
0.23
0.25
0.45
- 0.06
S nowmobile Unit S a le s: 19 7 2 - 2 0 15
O n- Highwa y Motorc yc le Unit S a le s: 19 8 3 - 2 0 15
Consumer
Confidence
Cons Conf - Pres
Situation
Cons Conf Expectations
Real Personal Disp
Inc
Real Personal
Consum Expend
Non- Farm Payrolls
Gasoline Prices
0.14
0.23
- 0.15
0.33
0.79
0.31
0.36
Source: National Marine Manufacturers Association Annual Statistical Abstract, Motorcycle Industry Council, International
Snowmobile Manufacturers Association, FactSet, Federal Reserve, U.S. Energy Information Association, and Wells Fargo
Securities, LLC
Note :
Consumer Confidence, Present Situations, Expectations 1967- present
Disposable Income 1965- present
Economics
Personal Consumption 1999- present
Non- Farm Payrolls 1965- present
Gasoline Prices is 1993- present
Real PCE Forecast
Real Personal Consumption Expenditures
Bars = CAGR
8%
Line = Yr/Yr Percent Change
8%
6%
6%
Forecast
4%
Consumer spending growth is
set to moderate but remain
positive throughout the forecast
horizon
2%
2%
0%
0%
-2%
-2%
-4%
-4%
-6%
-8%
2000
-6%
PCE - CAGR: Q4 @ 2.4%
PCE - Yr/Yr Percent Change: Q4 @ 2.7%
-8%
2002
2004
2006
2008
2010
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
4%
14
2012
2014
2016
Housing: Emergence of Renters as Occupants
U.S. Homeowners vs. Renters
Percent; Annual Change in Occupied Units, In Thousands
80%
3,000
Renters: 2014 @ 1026.3 Thousand (Right Axis)
Homeowners: 2014 @ -234.5 Thousand (Right Axis)
Homeownership Rate: 2014 @ 64.5% (Left Axis)
75%
The number of renters has been
growing steadily since 2007,
while homeowners have been
declining.
2,250
70%
1,500
65%
750
60%
0
Series Break
1981
55%
-750
50%
-1,500
66
70
74
78
82
86
90
94
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
15
98
02
06
10
14
Inflation Dynamics: Try Telling a Renter That Inflation is Low
Shelter, OER & Rent Costs
Year-over-Year Percent Change
7%
7%
Shelter: Feb @ 3.3%
Rent: Feb @ 3.7%
6%
Along with higher healthcare
and service costs, rents have
been rising faster than broader
inflation for the past several
years.
6%
OER: Feb @ 3.2%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
00
01
02
03
04
05
06
07
08
09
10
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
16
11
12
13
14
15
16
Business Spending
Real Equipment Investment
Bars = CAGR
Line = Yr/Yr Percent Change
40%
40%
30%
30%
20%
20%
Forecast
10%
0%
Tough to find reasons to get
excited about prospects for
capital outlays
10%
0%
-10%
-10%
-20%
-20%
-30%
-30%
-40%
-40%
-50%
Equipment Investment - CAGR: Q4 @ -2.1%
-50%
Equipment Investment - Yr/Yr Percent Change: Q4 @ 2.5%
-60%
2000
-60%
2002
2004
2006
2008
2010
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
17
2012
2014
2016
Manufacturing & Services: A Divide
ISM Manufacturing & Non-Manufacturing
Composite Index
65
Indexes on business activity
suggest continued growth for
2016. Services have been a
bulwark, while manufacturing
has been impacted by the dollar
and collapse in commodities.
65
60
60
55
55
50
50
45
45
40
40
35
35
30
ISM Manufacturing Index SA: Mar @ 51.8
30
ISM Non-Manufacturing Index SA: Mar @ 54.5
25
25
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16
Source: Institute for Supply Management and Wells Fargo Securities, LLC
Economics
18
Inventories
Quite a bit of stockpiling against a backdrop of weak business investment spending is an
indication that the recent pace of the inventory build is unsustainable and could be a drag on
2H growth.
Inventory Change & Investment
Inventory Contribution
Contributions to U.S. Real GDP
Real Inventory Change vs. Business Investment
Percentage Points at Annual Rate
6%
6%
5%
5%
4%
4%
3%
3%
2%
2%
1%
1%
0%
0%
-1%
-1%
-2%
-2%
-3%
-3%
-4%
-4%
All Other Components: Q4 @ 1.6%
-5%
Inventories: Q4 @ -0.2%
-6%
Yr/Yr Pct Chg, Annualized Quarterly Change Billions of USD
2010
2011
2012
2013
2014
20%
$100
10%
$50
$0
-10%
-$50
-20%
-$100
-30%
-$150
-40%
-5%
04
19
-$200
Change in Inventories: Q4 @ $78.3B (Right Axis)
Business Fixed Investment: Q4 @ 1.5% (Left Axis)
-50%
2015
Source: U.S. Department of Commerce and Wells Fargo Securities, LLC
Economics
$150
0%
-6%
2009
30%
05
06
07
08
09
10
11
12
13
-$250
14
15
U.S. Forecast
Wells Fargo U.S. Economic Forecast
Actual
2015
Real Gross Domestic Product
Personal Consumption
Inflation Indicators
PCE Deflator
1
2013
Actual
2014
2015
Forecast
2016
2017
1Q
2Q
3Q
4Q
1Q
2Q
3Q
4Q
0.6
3.9
2.0
1.4
0.1
2.3
2.6
2.4
1.5
2.4
2.4
1.7
2.3
1.8
3.6
3.0
2.4
1.9
2.7
2.7
2.6
1.7
2.7
3.1
2.5
2.5
0.2
0.3
0.3
0.5
1.1
1.1
1.3
1.6
1.4
1.4
0.3
1.3
2.0
-0.1
0.0
0.1
0.4
1.2
1.2
1.5
1.9
1.5
1.6
0.1
1.4
2.3
-1.9
-2.7
1.5
-3.2
-0.6
1.4
1.1
2.2
1.9
2.9
0.3
-0.2
2.0
4.6
0.6
-5.1
-11.5
-3.3
-0.7
1.9
1.8
2.0
1.7
-3.1
-0.1
1.6
92.1
90.0
92.3
94.5
89.8
89.8
91.5
93.3
75.9
78.4
91.1
91.1
96.1
5.6
5.4
5.2
5.0
4.9
4.8
4.7
4.6
7.4
6.2
5.3
4.7
4.5
0.98
1.16
1.16
1.14
1.17
1.22
1.23
1.24
0.92
1.00
1.11
1.20
1.25
2
Consumer Price Index
Industrial Production
1
Corporate Profits Before Taxes
Trade Weighted Dollar Index
Unemployment Rate
Housing Starts
Forecast
2016
2
3
4
Quarter-End Interest Rates 5
Federal Funds Target Rate
0.25
0.25
0.25
0.50
0.50
0.75
0.75
1.00
0.25
0.25
0.27
0.75
1.63
Conventional Mortgage Rate
3.77
3.98
3.89
3.96
3.69
3.89
3.95
4.06
3.98
4.17
3.85
3.90
4.28
10 Year Note
1.94
2.35
2.06
2.27
1.78
1.94
2.01
2.13
2.35
2.54
2.14
1.97
2.40
Forecast as of: April 6, 2016
1
C ompound Annual Growth Rate Quarter-over-Quarter
2
Year-over-Year Percentage C hange
3
Federal Reserve Major C urrency Index, 1973=100 - Quarter End
4
Millions of Units
5
Annual Numbers Represent Averages
Economics
20
International Developments
How Exposed is the U.S. Economy to China?




U.S. exports to China comprise about 7% of all U.S. exports and less than 1% of GDP.
U.S. imports from China are roughly 4X the size of exports to China.
American banks have about $100 billion on the hook to China (less than 1% of loans).
Total Chinese external debt is roughly $900 billion – small potatoes compared to Chinese
foreign assets of $6+ trillion.
Lopsided Trade Relationship
Lending to China
U.S. Trade With China
U.S. Bank Exposure to China
Billions of Dollars
Billions of Dollars
$600
$120
$600
$120
Total Exposure: Q2 @ $110.3 Billion
U.S. Exports to China: 2014 @ $124.0 Billion
U.S. Imports from China: 2014 @ $466.7 Billion
$500
$100
$400
$400
$80
$80
$300
$300
$60
$60
$200
$200
$40
$40
$100
$100
$20
$20
$500
$0
$0
$0
00
02
04
06
08
10
12
$100
$0
05
14
06
07
08
09
10
11
Source: Bank for International Settlements, IHS Global Insight and Wells Fargo Securities, LLC
Economics
22
12
13
14
15
Will Chinese Stock Market Selloff Ruin Transition to Domestic Demand?
 Since last summer the Shanghai and Shenzhen composites have introduced greater
volatility in global financial markets.
 Unlike many developed economies, however, equity holdings of the typical household in
China comprise less than 10% of total financial assets.
Stock Prices
Value Added
Chinese Stock Market
Financial Assets of Chinese Households
Trillions of Yuan
Index, January 4, 2013 = 100
380
80
380
Shanghai Composite: February 4 @ 122.1
Shenzen Composite: February 4 @ 201.8
80
Other: 2013 @ 6.6T Yuan
Currency: 2013 @ 4.9T Yuan
Bonds: 2013 @ 0.9T Yuan
Stocks: 2013 @ 6.4T Yuan
Insurance: 2013 @ 9.0T Yuan
Bank Deposits: 2013 @ 47.8T Yuan
340
70
300
300
60
260
260
50
50
220
220
40
40
180
180
30
30
140
140
20
20
100
100
10
10
340
60
Jan-13
Jan-14
Jul-14
Jan-15
Jul-15
0
04
Jan-16
05
06
07
Source: Bloomberg LP, CEIC and Wells Fargo Securities, LLC
Economics
60
0
60
Jul-13
70
23
08
09
10
11
12
13
How Important is China to Other Asian Economies?
 The rest of Asia sends about 13% of its total exports to China. However the best way to
measure the true economic effect that China has on other countries in the Asian region is via
the contribution that its final domestic demand (final spending by Chinese consumers,
businesses and the government) makes to value added in those other economies.
Country-Level Exposure to China
Share of Exports; Value Added Attributable to Chinese FDD, 2011
Value Added Share
India
Export Share
Japan
Australia
Singapore
Korea
Malaysia
Taiwan
Hong Kong
0%
10%
20%
30%
40%
50%
60%
Source: Organisation for Economic Cooperation and Development, IMF and Wells Fargo Securities, LLC
Economics
24
Will a Construction Slowdown Take Down the Chinese Economy?
 Although the construction sector in China is experiencing its worst downturn since 1989,
the sector accounts for just 7% of value added.
 Even if the situation worsened, Chinese policymakers would not hesitate to recapitalize
the banking system (and/or) lower borrowing rates.
Construction Sector in China
Value Added
Construction Started in China
Composition of Value Added in China by Sector
Percent of Total Value Added
Square Meters, Yr/Yr Pct. Change of YTD Total
40%
40%
100%
100%
Service: 2013 @ 42.8%
Construction: 2013 @ 6.9%
Industrial: 2013 @ 42.9%
Primary: 2013 @ 8.0%
90%
30%
30%
20%
20%
10%
80%
10%
0%
0%
-10%
-10%
Construction Started: Q2 @ -17.2%
-20%
06
07
08
09
10
11
12
13
14
70%
70%
60%
60%
50%
50%
40%
40%
30%
30%
20%
20%
10%
10%
0%
79
15
Source: CEIC, The United Nations and Wells Fargo Securities, LLC
Economics
80%
0%
-20%
05
90%
25
83
87
91
95
99
03
07
11
China Real GDP
Chinese Real GDP Forecast
Year-over-Year Percent Change
16%
16%
14%
14%
12%
12%
10%
Growth in China has stabilized,
but we do not expect it to return
to the double-digit growth rates
seen in the past
WF
Fcst.
10%
8%
8%
6%
6%
4%
4%
2%
2%
Year-over-Year Percent Change: Q1 @ 6.7%
0%
2000
2002
2004
2006
2008
Source: Bloomberg LP and Wells Fargo Securities, LLC
Economics
26
2010
2012
2014
2016
0%
2018
Japanese GDP
Japanese Real GDP
Bars = Compound Annual Rate
Line = Yr/Yr % Change
12%
Mixed track record for
Abenomics
12%
8%
8%
4%
4%
0%
0%
-4%
-4%
-8%
-8%
-12%
-16%
-20%
2000
-12%
-20%
2002
2004
2006
2008
2010
Source: Bank of Japan, IHS Global Insight and Wells Fargo Securities, LLC
Economics
-16%
Compound Annual Growth: Q4 @ -1.4%
Year-over-Year Percent Change: Q4 @ 0.7%
27
2012
2014
Japanese Monetary Base
Japan's Monetary Base
Trillions of Yen
¥450
¥400
The expansion of the monetary
base will continue to expand the
size of the BoJ’s balance sheet
considerably;
The move into negative rates is
dangerous and uncharted
ground
¥450
¥400
Bank of Japan current policy path
¥350
¥350
¥300
¥300
¥250
¥250
October 2014 announcement
of QQE expansion
¥200
¥200
¥150
¥150
Introduction of QQE
¥100
¥100
¥50
¥0
2000
¥50
¥0
2002
2004
2006
2008
2010
Source: Bank of Japan, IHS Global Insight and Wells Fargo Securities, LLC
Economics
28
2012
2014
2016
Japanese Currency Intervention?
Japanese Currency Intervention vs. Yen
Thousands
Trillions of Yen, Purchases of Foreign Exchange; JPY per USD
Talk of currency intervention is
misplaced in our view
¥10.0
60
Net FX Purchases/Yen Sales (L)
JPY per USD: Jan @ 118.3 (R, Inverted)
¥8.0
75
¥6.0
90
¥4.0
105
¥2.0
120
¥0.0
135
00
02
04
06
08
10
Source: Bank of Japan, IHS Global Insight and Wells Fargo Securities, LLC
Economics
29
12
14
16
Eurozone Real GDP
Eurozone Real GDP
Bars = Compound Annual Rate
Line = Yr/Yr % Change
8%
8%
Compound Annual Growth: Q4 @ 1.1%
Year-over-Year Percent Change: Q4 @ 1.5%
4%
2 Years of
Uninterrupted Growth
Forecast
0%
0%
-4%
-4%
-8%
-8%
-12%
2002
-12%
2004
2006
2008
2010
Source: IHS Global Insight and Wells Fargo Securities, LLC
Economics
4%
30
2012
2014
2016
Eurozone PMIs
Eurozone Purchasing Managers' Indices
Index
The Eurozone purchasing
managers’ indices are pointing
to continued recovery
65
65
60
60
55
55
50
50
45
45
40
40
35
30
1998
30
2000
2002
2004
2006
Source: Bloomberg LP and Wells Fargo Securities, LLC
Economics
35
E.Z. Manufacturing: Feb @ 51.2
E.Z. Services: Feb @ 53.3
31
2008
2010
2012
2014
2016
Eurozone Bank Lending
Eurozone Loan Growth
Year-over-Year Percent Change
Bank lending in the euro area is
starting to grow again after two
years of contraction
12%
12%
10%
10%
8%
8%
6%
6%
4%
4%
2%
2%
0%
0%
-2%
-2%
-4%
-4%
Loans to European Residents: Dec @ 0.7%
-6%
2000
2002
2004
2006
2008
Source: IHS Global Insight and Wells Fargo Securities, LLC
Economics
32
2010
2012
2014
-6%
2016
Outstanding Government Debt
Outstanding Government Debt
Trillions of Euros, 2014
€2.4
The outstanding debt of the
Spanish and Italian
governments swamps the others
€2.4
€2.0
€2.0
€1.6
€1.6
€1.2
€1.2
€0.8
€0.8
€0.4
€0.4
€0.0
€0.0
Irish
Gov't Debt
Portuguese
Gov't Debt
Greek
Gov't Debt
Source: IHS Global Insight Wells Fargo Securities, LLC
Economics
33
Spanish
Gov't Debt
Italian
Gov't Debt
Global Forecast
Wells Fargo International Economic Forecast
(Year-over-Year Percent C hange)
GDP
Growth in the global economy
likely will grind closer to long
term trend
CPI
2015
2016
2017
2015
2016
2017
Global (PPP Weights)
Global (Market Exchange Rates)
2.9%
2.8%
2.8%
2.5%
3.2%
3.0%
3.3%
n/a
3.3%
n/a
3.6%
n/a
Advanced Economies 1
United States
Eurozone
United Kingdom
Japan
Korea
Canada
2.0%
2.4%
1.5%
2.3%
0.5%
2.6%
1.2%
1.7%
1.7%
1.7%
1.6%
-0.1%
2.7%
1.8%
2.2%
2.3%
2.0%
1.9%
0.7%
3.1%
2.5%
0.2%
0.1%
0.0%
0.1%
0.8%
0.7%
1.1%
0.9%
1.4%
0.3%
0.7%
0.4%
0.9%
1.3%
1.8%
2.3%
1.1%
1.5%
1.1%
1.9%
1.9%
Developing Economies 1
China
India2
Mexico
Brazil
Russia
3.7%
6.9%
7.2%
2.5%
-3.9%
-3.7%
3.8%
6.3%
7.5%
2.4%
-3.5%
-0.5%
4.2%
5.8%
7.2%
2.6%
1.4%
2.2%
6.1%
1.4%
6.0%
2.7%
9.0%
15.6%
5.6%
2.0%
4.9%
3.2%
9.6%
7.4%
5.3%
1.9%
4.9%
3.2%
8.4%
6.1%
Forecast as of: April 6, 2016
1
Aggregated Using PPP Weights
2
Forecasts Refer to Fiscal Year
Source: International Monetary Fund and Wells Fargo Securities, LLC
Economics
34
Wells Fargo Securities, LLC Economics Group
Global Head of Research and Economics
Economists
Diane Schumaker-Krieg
………………… …[email protected]
Global Head of Research & Economics
Azhar Iqbal, Econometrician………………… ……………[email protected]
……
Eric J. Viloria, Currency Strategist
Sarah House, Economist
Chief Economist
…………… …………
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John E. Silvia …
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Senior Economists
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[email protected]
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[email protected]
[email protected]
[email protected]
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[email protected]
Sam Bullard, Senior Economist
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[email protected]
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Economics
35