De dårlige udsigter for den globale økonomi skyldes, at både eurozonen og Japan er blevet stærkt svækkede. Hvad værre er, det er de to økonomier, der er mest afhængige af Kina, som rammes hårdt af corona-virussen.
Uddrag fra ABN Amro:
Eurozone and Japan data weak even before coronavirus
Global Macro: A fragile starting point, even before the coronavirus hit – Q4 GDP data for both Japan and the eurozone suggest very weak underlying growth dynamics, well before the impact of the coronavirus will be felt. Given that these economies are the most exposed of the developed world to China (see below), the weakness does not bode well for the global growth outlook – and suggests downside risks to our already low growth expectations for 2020 (see here). This supports our against-consensus calls for more ECB and Fed easing, and there is now the added risk that the BoJ will have to step in to support fiscal stimulus efforts in Japan.
Japan growth weakness not all about the consumption tax hike – GDP growth contracted sharply in Japan in Q4, by 6.4% qoq annualised, and was revised lower in the eurozone from an already weak 0.09% qoq unrounded to 0.06%, i.e. bordering stagnation. While GDP in Japan was expected to contract due to the long-planned hike in consumption tax, the degree of contraction was much bigger. Indeed, private consumption and housing investment were expectedly weak, but the dramatic decline in fixed business investment (-14.1% annualised) sharply exceeded the decline seen following the last consumption tax hike in 2014 (-7.3%), suggesting considerable underlying weakness. Exports meanwhile, which ought to have been immune to the effects of the tax hike (and were unaffected in 2014), contracted for a second consecutive quarter, despite an already weak first half in 2019; for the year as a whole, exports contracted -1.8% – the worst performance since 2009.
Weak eurozone Q4 points to an even weaker 2020 – Similarly for the eurozone, the industrial sector continued to be the main driver of weakness in Q4 growth, but the sharp fall in December retail sales suggests that the consumer is also now feeling the effects of the slowdown. Industrial production contracted by 2.1% mom in December and by 1.4% qoq in Q4 as a whole. Before the outbreak of the coronavirus, the outlook for production in Q1 was already bleak. Whereas the manufacturing PMI rose in the final months of 2019 and in January 2020, it has remained well below the expansion/contraction level of 50. Moreover, in January, the ratio of orders to inventories still was below the level consistent with expansion in production. The weakness in industry suggests that exports and fixed investment also were depressed at the end 2019. France has already published the details of GDP, with exports contracting by 0.2% qoq in Q4 and fixed investment up by just 0.3% qoq. Germany has only published a written statement, mentioning that exports ‘were slightly down’ in Q4, whereas investment in machinery and equipment ‘was down considerably’.
Besides the weakness in exports and investment, private consumption was also sluggish moving into 2020. Eurozone retail sales contracted by 1.6% mom in December, and France reported a slowdown in consumption growth to 0.2% qoq in Q4, down from 0.4% in Q3. Germany’s statement mentioned that ‘after a very strong third quarter, the final consumption expenditure of both households and government slowed down markedly’. All in all, the weakness in eurozone growth in Q4 implies that the statistical carry-over for GDP growth in 2020 is only 0.2%. An expected slowdown in 2020Q1 due to the corona virus will push qoq growth into negative territory (we have pencilled in -0.1% qoq, but the risks are tilted to the downside). This means that yoy growth will drop to close to zero around the middle of this year, in the absence of a sharp rebound in Q2.The starting point before the virus impact hits is therefore already weak, for both Japan and the eurozone.
Japan and the eurozone are the industrialised regions most exposed to China – Just how exposed are the two economies to China? The share of exports to China in Japan’s total good exports is close to 20%, and the share of exports to China in Japan’s GDP is around 3%. For the eurozone these shares are 8% and 1.5% respectively. Within the eurozone, Germany would (again) be the country that is hit hardest by the slowdown in industry and exports, with the share of exports to China in Germany’s GDP at 3%. For comparison, the US’s trade exposure to China is much smaller, with the share of exports to China in GDP at just 0.5%. On top of this, tourism from China has also become a rising source of income for Japan. It is now 1% of GDP – up sharply from just 0.3% in 2012. This is important, because as the SARS episode taught us, the hit to tourism is one of the main sources of economic spillovers from such an outbreak. For the eurozone, the share of tourism in GDP is more limited, at just 0.1%. Italy and France are the two eurozone countries that would suffer the most, but related to their GDP the impact is still rather small.
