。Economic Research
Global Data Watch
January 25, 2019
JPMorgan Chase Bank NA
Bruce Kasman(1-212) 834-5515
bruce.c.kasman@jpmorgan
David Hensley(1-212) 834-5516
david.hensley@jpmorgan
Joseph Lupton(1-212) 834-5735
joseph.p.lupton@jpmorgan
geopolitical concerns. With global employment growth
holding up—recent US jobless claims readings and an ex-
pected 170,000 January employment gain support this
view—there is a strong case for global consumption to ac-
celerate. Although the US December reading has been no-
tably delayed, the latest data suggest global consumer
spending accelerated at year-end as lower inflation boosted
purchasing power (Figure 2).
Bank credit continues to flow.Last week we highlighted
the contrast between the concerns aboutcredit tightening
andtheevidence that bank lending continues to expand at a
solid pace. Recent news reinforces the message that the
credit cycle remains a supportive macro impulse, as China
bank credit picked up into year-end and the 1Q19 Euro area
bank lending officers survey points to a continued easing in
credit standards.
First do no harm.With trade and other political conflicts a
key driver of the slowdown it is important that they turn
more positive as we move through this year. To be sure,
geopolitics remains a wild card with a mix ofpositives and
negatives in recent weeks. At the same time, macro policies
are turning more supportive with China stimulus building
broadly and DM central bank rhetoric turning more dovish.
Absent a material negative geopolitical shock, we believe
that policy shifts will gain traction in supporting business
sentiment and financial conditions.
G-3 CBs sensitive to growth, not inflation
The macroeconomic impulse from G-3 monetary policy com-
bines three channels: the growth drag of Fed rate normaliza-
tion; the growth support of stimulative stances even in the
face of Fed moves; and the potential damage to policy credi-
bility in the Euro area and Japan as policymakers have not
responded to persistent inflation undershoots. With global
growth projections edging lower and risks still skewed to the
downside, the Fed has decided to pause, a message that it will
likely reinforce at next week’s FOMC meeting. We expect no
change on balance sheet policy, where we believe there is
misplaced angst over quantitative tightening(see here). As a
result, the drag from the first channel should fade as the pow-
er of the other two channels remains firmly in place.
This week, the ECB was explicit in acknowledging downside
risks and suggesting it will stay in wait-and-see mode before
making policy adjustments. In terms of rate guidance, the
ECB seems to view its current commitment to low rates
through this summer as open-ended and with risks shifting
down, consistent with market pricing for remaining on hold
until 2021. This week’s meeting did not break new ground on
the likely need to extend the LTRO program, but we continue
to expect the ECB to implement a two-year LTRO in June.
For its part, the BoJ also appears sensitive to growth risks and
is signaling it will be on hold indefinitely. These signals have
combined with the Fed pause to lower market expectations on
the path of G-3 policy in the coming two years (Figure 3).
While the shift to stable accommodative stances should sup-
port growth, the failure of the ECB and BoJ to address persis-
tent inflation undershoots is weighing on market expectations
of medium-term inflation (Figure 4). Indeed, neither central
bank has provided a road map for what tools can be employed
if inflation remains well below target, reinforcing the risk that
credibility will erode further.
China data suggest growth is stabilizing
This week’s China data pointed to stabilization in GDP
growth and domestic activity at year-end. Notably, December
data show retail sales and FAI increasing moderately, contrib-
uting to a stronger-than-expected 0.5%m/m increase in IP.
However, advances in final goods demand and IP seem incon-
sistent with the collapse in imports in November/December.
As we suggested last week, one explanation is that companies
reduced inventories, focused principally on imported goods.
The sharp drop in Chinese exports into year-end itself normal-
0.0
0.3
0.6
0.9
1.2
1.5
-0.9
-0.6
-0.3
0.0
0.3
0.6
0.9
2016201720182019
%pt cumulative rolling revision from Jan 2016
Figure 3: G-3 FRI and 2-year government bond yield
Percent per annum
Source: J.P. Morgan
2-year government
bond yield
G-3 FRI
-0.5
-0.4
-0.3
-0.2
-0.1
0.0
0.1
0.2
201720182019
Cumulative %-pt change since Jan 2017
Figure 4: G-3 5y5y inflation swaps
Source: J.P. Morgan
US
Euro area
JapanEconomic Research
Global Data Watch
January 25, 2019
JPMorgan Chase Bank NA
Bruce Kasman(1-212) 834-5515
bruce.c.kasman@jpmorgan
David Hensley(1-212) 834-5516
david.hensley@jpmorgan
Joseph Lupton(1-212) 834-5735
joseph.p.lupton@jpmorgan
ly would have dragged down imports. Theextra margin of
import compression, above and beyond that of exports, could
be due to an inventory adjustment reflecting fears about the
outlook.
Given downside risks to growth, we expect more policy sup-
port to be announced. Moreover, Chinese officials took an
important step to bolster the banking system and the provision
of bank credit this week. Regulators intend to count bank-
issued perpetual bonds as collateral for the PBOC’s liquidity
operations, while also permitting insurance companies to in-
vest inthese bonds. These changes provide a conduit for
banks to access capital from the insurance sector, with the
central bank acting as an intermediary for liquidity as needed.
India and South Africa facing fiscal tests
India’s BJP government presents the last Budget of its term
next week, just months before the summer general election.
We expect the Budget for 2019-20 to incorporate a potentially
large “agricultural package” including unconditional cash
transfers, crop insurance, and interest waivers for farmers.
Already, this year’s plan is under stress with GST revenues
undershooting. However, given India’s cash-accounting sys-
tem, we think policymakers will find a way to stick to the
3.3% of GDP budgeted central government deficit for 2018-
19 and announce modest consolidation for next year, though
markets will scrutinize the assumptionsclosely. India’s total
public sector borrowing remains a hefty 8.2% of GDP and has
been a source of pressure on bond yields. Any new unfunded
liability—like cash transfers—will simply increase the pres-
sure when the next government presents a full Budget in July.
South Africa’s fiscal authorities are on a path to provide sub-
stantial support for state-owned enterprises (SOEs), which
would aggravate an already challenging fiscal situation. This
week’s comments by Finance Minister Mboweni and a
presentation to the ANC leadership add to momentum that
substantial support to SOEs could materialize in the near
term, indeed potentially before the elections in May. Officials
already faced an uphill task to stabilize the debt-to-GDP ratio.
The medium-term fiscal update in October disappointed mar-
kets and ratings agencies alike with a projected fiscal deficit
stuck around 4% of GDP, rather than the sequential narrowing
of the fiscal gap envisaged in the February budget, raising
risks of a sovereign rating downgrade, exclusion from a glob-
al bond index, and resultant portfolio outflows. The Sustaina-
bility Committee’s report to be released around January and
the State of the Nation address on February 7 likely will sig-
nal the path ahead including the magnitude of government
support to SOEs and the reform proposals.
Brexit: Slow motion toward resolution
Our base case remains that UK prime ministerMay ultimately
will gain parliamentary approval of the Withdrawal Agree-
ment because all other alternatives look infeasible or unac-
ceptable. Progress should be made next week. Votes in the
Commons on Tuesday are likely to demonstrate that a majori-
ty of MPswill take steps to preventa disorderly exit. Howev-
er, the lack of a majority to support a second referendum will
also be evident. The talks that will follow likely will demon-
stratethe EU’s lack of flexibility on the Irish backstop. May’s
hope is to win support for the deal in a second attempt in mid-
February. An extension to the Article 50 period beyond
March, simply to allow legislative processes to be completed,
looks inevitableeven if that hope is fulfilled. The deeper
question is whether UK politicians will have established a
majority for acourse of action by then.
Politics and policy in focus in Latam
Venezuela’s political crisis reached a new level this week when
Juan Guaid, president of the National Assembly, declared
himself interim presidentuntil new elections can be held. Gui-
ad is backed by numerous Latin American and Western de-
mocracies but senior Venezuelan military leaders have pledged
their support to Maduro. As discussed in US news outlets, the
US may respond with sanctions on the oil sector, which could
put over 1mbd of oil at risk. Another option would be for the
Guaid administration to seek legal measures to control the
proceeds of Venezuelan oil sales to the US, resulting in a de
facto embargo on 500kbd of US imports.
Brazil’s Congress will choose new speakers of the Lower
House and Senate when it returns from the summer recess on
Friday. The selections will be a key gauge of legislative support
for the timely approval of pending reforms. So far, it seems that
the outcome of both elections will be favorable for the govern-
ment, in line with market expectations. If this comes to pass,
momentum could build for swift approval of reforms.
In Mexico, recent developments challenge our view that Banxi-
co will deliver a final 25bp rate hike in May. Inflation under-
shot expectations markedly in early January, falling three-tenths
to 4.5%oya, including a decline in the core rate. The better
news on inflation comes against the backdrop of economic
weakness. Despite a slightly stronger November GDP proxy
print this week, our tracking tools suggest GDP contracted
0.5% ar in 4Q, with the preliminary result due next week. This
week’s change in the central bank board toward a less hawkish
lineup also reinforces the risk of a prolonged pause.
Editor:Gabriel de Kock (1-212) 622-6718 gabriel.s.dekock@jpmorganEconomic Research
Global economic outlook sum-
mary
January 25, 2019
JPMorgan Chase Bank NA
David Hensley(1-212) 834-5516
david.hensley@jpmorgan
Carlton Strong(1-212) 834-5612
carlton.m.strong@jpmorgan
Joseph Lupton(1-212) 834-5735
joseph.p.lupton@jpmorgan
Global economic outlook summary
Real GDPReal GDPConsumer prices
% over a year ago% over previous period, saar % over a year ago
2018201920203Q184Q181Q192Q193Q194Q192Q184Q182Q194Q19
United States2.92.31.53.42.51.8↓2.3↑1.81.52.62.21.31.5
Canada2.1
1.8↓1.7
2.0
1.5↓1.5↓1.8
2.2
2.3
2.3
2.0↑2.0
2.0↓
Latin America1.31.82.21.8-0.72.13.43.02.43.54.14.2↑3.8
Argentina-2.7
-1.5
2.6
-2.7
-10.0
-0.1
6.0
4.0
3.0
27.1
47.3
49.3
28.5
Brazil1.22.32.23.10.62.63.23.22.03.34.14.2↑3.8↓
Chile3.9
3.5
3.0
1.1
3.5
4.0
4.2
4.0
3.8
2.2
2.8
3.3
3.5
Colombia2.73.13.10.93.02.84.53.53.53.23.33.53.7
Ecuador1.1
-0.4
-0.8
3.6
-2.5
-1.5
1.0
-2.0
-1.0
-0.8
0.0
0.3
0.5
Mexico2.01.71.73.4-0.51.52.01.82.04.64.84.84.0
Peru4.0
3.9
3.6
-3.1
3.0
4.5
4.0
4.0
4.0
0.9
2.42.6
2.7
Uruguay2.11.91.9-0.10.52.03.04.01.07.37.47.87.2
Venezuela-10.0
…
1.0
2.0
…
…
…
…
28250
600000
..
..
Asia/Pacific4.8
4.6
4.5
3.6
4.9
4.4↓4.5
5.0
3.9
2.0
1.9↓2.0
2.0
Japan0.80.90.6-2.52.51.20.82.5-3.50.60.90.40.3
Australia3.0
2.6↓2.7
1.0
2.8↓3.0↑2.6
2.5
2.9↓2.1
1.6↓1.8↓2.5↑
New Zealand2.82.5↓2.61.32.0↓2.92.62.52.41.51.9↑1.8↑1.7↑
EM Asia6.0
5.6↓5.6
5.4
5.6↑5.3↓5.6↑5.9↑5.8
2.3
2.2
2.4
2.4
China6.66.26.2↑6.06.15.9↓6.2↑6.4↑6.21.82.22.42.2
India7.3
7.2
7.1
6.9
6.8
6.6
7.1
7.5
7.7
4.8
2.7
3.7
4.5
Ex China/India3.8↑3.43.52.93.8↑3.1↓3.3↓3.63.72.0↓2.01.81.9
Hong Kong3.3
2.7
2.6
0.4
2.0
4.0
3.5
3.3
3.1
2.1
2.6
2.8
3.0
Indonesia5.14.84.94.84.74.74.74.74.83.33.23.02.8
Korea2.7↑2.7
2.6
2.3
3.9↑2.0↓2.6↓2.9
2.9
1.5
1.8
1.5
1.5
Malaysia4.74.44.36.74.04.54.34.34.31.30.31.31.8
Philippines6.2
6.0
5.9
6.1↑6.4↑6.1
6.1
5.7
6.1
4.8
5.9
3.3
2.1
Singapore3.32.43.03.01.63.01.02.83.00.30.91.41.6
Taiwan2.7
1.7↓2.0
1.5
2.3↓0.9↓1.9
2.1
2.1
1.7
0.5
0.3
1.6
Thailand4.23.33.8-0.14.52.83.54.54.51.31.11.21.3
Western Europe1.8
1.5
1.7
0.9
0.9
1.7
1.7
1.7
1.8
1.8
2.0
1.4
1.2
Euro area1.81.41.70.60.81.81.81.51.81.71.91.11.0
Germany1.5
1.4
1.7
-0.8
0.3
2.8
1.8
1.5
1.8
1.9
2.1
1.7
1.3
France1.51.11.71.30.51.01.31.51.82.12.21.21.2
Italy0.9
0.4
0.9
-0.5
0.0
0.5
0.8
0.8
0.8
1.0
1.5
0.8
0.8
Spain2.52.21.92.22.52.32.32.02.01.81.80.70.8
Norway2.42.32.11.12.82.52.52.32.32.4
3.4
2.8
1.7
Sweden2.41.91.8-0.93.32.02.02.02.01.92.12.02.3
United Kingdom1.4
1.5
1.8
2.5
1.0
1.0
1.5
2.3
2.0
2.4
2.3
2.1
1.9
EMEA EM2.81.82.41.20.7↑0.8↓2.3↓3.23.34.67.17.05.5
Czech Republic2.72.62.91.62.03.32.82.82.92.3
2.2
2.7
2.3
Hungary4.83.52.84.92.43.53.43.23.02.73.43.32.5
Israel3.2
3.3↓3.5↑2.1
2.0
3.2↓3.2↓4.1↓4.1↑0.7
1.1↓0.6↓0.9↓
Poland5.0↓3.83.57.03.3↑3.53.53.53.51.71.62.32.5
Romania4.2
2.7
1.4
7.8
0.5
1.7
1.7
2.4
3.3
5.3
3.6
2.9
3.5
Russia1.71.41.60.41.50.02.02.52.32.53.9↓5.44.9
South Africa0.6
1.3
1.1
2.2
1.6
0.8
1.3
1.1
1.2
4.5
4.9↓5.1↓5.1↓
Turkey3.30.23.5-4.3-3.9-1.62.05.05.812.822.419.012.4
Global3.22.92.72.62.72.6↓3.0↑3.12.62.4
2.5
2.1
2.0
Developed markets2.21.81.51.71.9↓1.7↓1.9↑1.81.12.12.01.31.3
Emerging markets4.74.44.6↑4.1↓3.84.1↓4.8↑5.0↑4.82.8
3.2
3.4
3.1
Global —PPP weighted3.83.43.4↑3.33.23.2↓3.6↑3.7↑3.32.62.82.62.4
Note: For some emerging economies seasonally adjusted GDP data are estimated by J.P. Morgan.Bold denotes changes from last edition of Global Data Watch, with arrows show-
ing the direction of changes. Underline indicates beginning of J.P. Morgan forecasts.Unless noted, concurrent nominal GDP weights calculated with current FX rates are used in
computing our global and regional aggregates.RegionalCPI aggregatesexcludeArgentina, Ecuador and Venezuela.Regional GDP aggregates exclude Venezuela. Forecasts for
Argentina are based on JPMorgan’s estimates of CPI.Source: J.P. Morgan。