Analyse fra BNP Paribas:
Global growth remains disappointingly lacklustre. Despite the purported boost from the c.50% fall in oil prices, consensus forecasts for 2015 global GDP growth have actually drifted slightly lower over the past six months. The latest Bloomberg consensus forecast (estimated using market, not PPP, prices) sees world GDP growth at a sub-trend 2.9% in 2015, down a hair from the 3.0% forecast back in September. The positive supply shock of sharply lower oil prices has had such little effect on growth primarily because of offsetting negative demand shocks.
Disappointing US growth has been critical in this regard. The softness of the economy in early 2015 should be confirmed by Q1 GDP data on 29 April, which are expected to show only a 0.8% annualised rate of gain. With US consumer confidence hovering at its highest levels since 2006 and a raft of labour-market indicators, such as job openings, initial jobless claims and the non-manufacturing ISM employment index, all showing continued buoyancy, however, we view a substantial portion of Q1’s softness as temporary.
The harsh weather and West Coast port dispute are the key culprits behind the Q1 weakness. Data showing a record surge of inbound containers in March indicate a substantial disruption. This will have had an impact on manufacturing, leading to lower exports and potential component shortages. Lower oil prices have also led to a very sharp reduction in investment in the oil industry. This has had an inevitable knock-on effect on manufacturing, which has been very soft so far this year. These factors should fade later in 2015. While markets’ willingness to price out US Fed rate ‘lift off’ until next year, or maybe December this year, signals that many view Q1 weakness as potentially longer lasting, most FOMC members appear to be more in our camp. Until we get more data, however, the jury will remain out.
The April labour-market report in two weeks’ time appears to be the critical data point, with our forecast of a strong 275k gain in non-farm payrolls likely to nudge a sceptical, even complacent, market towards our view that Fed rate ‘lift off’ is still likely in September. The current data fog in the US, however, means few, if any, fireworks should be expected from the upcoming FOMC meeting, which will be the major focus of the week, with the statement essentially a holding operation that re-emphasises both the Committee’s bias to begin tightening and its continued data dependence.
In light of the market’s low expectations for the meeting, any more hawkish slant would be significant. China’s weak growth, which is about a lot more than the weather, is probably a more important contributor to the global growth disappointment. The country’s recent Q1 national accounts data suggested an economy increasingly flirting with a hard landing, despite the increasingly implausible official estimates of real GDP growth of 7%. The more reliable nominal GDP estimates showed only their third quarterly contraction in the last 25 years and the first outside a financial crisis. Industrial production contracted in Q1 as well, also the first time since the global financial crisis.
The continued weakening of the ‘flash’ Markit/HSBC manufacturing PMI in April to further below the 50 breakeven level worryingly also signalled that macro momentum is decaying further in Q2. With fading top-line growth pushing the Chinese economy deeper into a debt trap, the authorities have abandoned eschewing aggressive policy easing and encouraging de-leveraging. Growth preservation increasingly appears to be the objective. The recent 1% reduction in bank reserve requirements, also the largest since the global financial crisis, showed the extent of the concern and was at least in part motivated by an attempt to ensure that the A-share equity market’s increasingly epic bubble continues to inflate as well as to offset the effect on the monetary base of capital outflows. Many indicators, not least the rate of increase of margin debt, suggest that the speculative mania should soon be nearing a climax. The monetary easing means that the market could continue to soar in the near term. Overall, the A-share bubble can be read as a microcosm for the Chinese economy: larger imbalances forestalling the worst of the downside risks from crystallising, but at the cost of greater future downside risks.
