See the end pages of this presentation for analyst certification and important disclosures.
Global Economic Research
May 2013
This year is different
Bruce Kasman
Chief Economist
(1-212) 834-5515
bruce.c.kasman@jpmorgan.com
www.jpmorganmarkets.com/economics
JPMorgan Chase Bank NA
Main points
The global economy is lifting but 1H performance to remain subpar
•
Two constraints hold back lift: Fiscal drag (concentrated in the US) and poor corporate performance (in Europe
and EM)
•
Early year industry bounce is now fading. This moderation will not produce a growth scare
With tail-risks removed monetary policy gains traction
•
We have removed macro tail risks: EM overheating; China hard landing; Euro area breakup; the US fiscal cliff
•
Supports from asset price appreciation and rising sentiment are a defense against a spring swoon. They build
the base for strong growth later this year
Global inflation moves lower reflecting legacy of weak growth
•
Low inflation redistributes growth towards consumers and the DM
The Fed’s narrative is a major US export
The BoJ has reached a Volcker moment. Success requires altering
expectations and failing to generate 2% inflation
The ECB is in search of a narrative and tools as the Euro area needs demand
stimulus. Its response to building pressure is the key policy call
The outlook: Forecasting a rebound that slowly
gains traction
Global GDP
Global GDP
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
5.0
2010
2011
2012
2013
%q/q, saar
Global potential growth
rate (3.0%)
Source: J.P. Morgan
%q4/q4
2010
2011
2012
1H13
2H13
Global (3.0)
4.0
2.8
2.1
2.5
3.2
DM (1.6)
2.6
1.3
0.6
1.2
1.8
US (2.2)
2.4
2.0
1.7
2.0
2.3
Euro area (1.3)
2.3
0.6
-0.9
-0.5
0.8
Japan (0.5)
3.5
0.1
0.4
2.7
2.7
UK (1.5)
1.5
1.1
0.2
1.1
1.7
EM (5.5)
7.1
5.6
4.9
4.9
5.6
China (8.0)
9.8
8.8
7.9
7.3
8.0
EM Asia ex China (5.2)
7.3
4.4
5.1
4.7
5.3
Latam (3.8)
5.4
3.4
2.6
3.3
4.0
Brazil (3.8)
5.4
1.4
1.4
3.2
4.2
Note: Trend growth in parentheses
Last year’s drags: credit tightening and fear
Bank lending standards
G-3 capital goods orders and global
PMI employment
49
50
51
52
53
-30
-20
-10
0
10
20
30
40
2010
2011
2012
2013
%3m, saar
DI, sa
Source: J.P. Morgan
Orders
Global all-industry PMI
employment
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
2011
2012
2013
Net %, above zero indicates tightening
Source: IIF bank survey, FRB, ECB
US
EM
Euro area
The outcome: Lousy growth and rotation toward
the US
Real GDP growth
EM capex and consumer spending
2
4
6
8
10
12
14
-4
0
4
8
12
16
20
24
01
03
05
07
09
11
13
%oya; both scales
Capex
Retail sales
Source:J.P.Morgan
4
5
6
7
8
9
-1
0
1
2
3
4
2010
2011
2012
2013
%oya; both scales
US
Dev Mkt
excl. US
EM
Weakness produces low inflation
Core consumer prices
Headline CPI, global
2.0
2.5
3.0
3.5
4.0
2010
2011
2012
2013
%oya
Actual/JPM fcst
Model forecast
Central bank target
(upper bound)
Source: J.P. Morgan
0.5
1.0
1.5
2.0
2.5
02
04
06
08
10
12
14
%oya
Source: BEA, Eurostat
US PCE
Give the Fed credit where credit is due
US 10yr real yield and inflation
breakeven
Composition of US growth
-1
0
1
2
3
4
Jan-07 May-08 Sep-09 Feb-11 Jun-12
%
Inflation breakeven
Real yield
Source: J.P. Morgan
-4
-2
0
2
4
6
8
10
12
14
2010
2011
2012
2013
%oya
Gov't expenditures
Interest sensitive demand
Real exports of
goods and services
ECB needs to address regional demand shortfall
Euro area unemployment and
inflation
Euro area bank lending
standards
-20
0
20
40
60
80
03
05
07
09
11
13
Net % of banks reporting tighter lending standards
Corporates
Household
mortgages
Source: ECB
-1
0
1
2
3
4
7
8
9
10
11
12
03
05
07
09
11
13
%
%oya
HICP
Unemp rate
Source: Eurostat
Fading drags provide fuel for lift
EM bank local funding conditions
Business sentiment
Euro area interest rates
5
10
15
20
25
-20
-10
0
10
20
2011
2012
2013
Indexes, sa, both scales
US: Fed capex outlook
Japan: Reuters Tankan
GER: IFO mfg exp.
Source: Reuters, IFO, regional Federal Reserve banks
-40
-30
-20
-10
0
10
20
30
2009
2010
2011
2012
2013
Net %; above zero indicates tightening
Source: IIF
2
3
4
5
6
7
06
07
08
09
10
11
12
13
14
Italy, NFC
borrowing rate
% p.a.
Core, NFC borrowing rate
Italy, 10yr govt
bond yield
There are constraints limiting lift
DM fiscal drag
EM bank non-performing loans
EM prices and wages
-1.5
-1.0
-0.5
0.0
0.5
10
11
12
13
14
Percent of GDP
Source: J.P. Morgan
-30
-20
-10
0
10
20
2009
2010
2011
2012
2013
Net %, above zero indicates more NPLs
Source: IIF
-5
0
5
10
15
00
02
04
06
08
10
12
14
%oya
Hourly
compensation
Producer
prices
Source: BLS, J.P. Morgan
Early year growth bounce is fading
Global real GDP
Global PMI and mfg output
1
2
3
4
Jan11 Jun11 Nov11 Apr12 Oct12 Mar13
%q/q, saar; Boxes are JPMorgan fcst
Nowcaster
Actual/fcst
Source: JPMorgan
JPM global PMI mfg
-5
0
5
10
15
42
46
50
54
58
62
66
2010
2011
2012
2013
DI, sa
%3m, saar
Mfg output PMI
Mfg output
Source:J.P.Morgan
47.5
48.0
48.5
49.0
49.5
50.0
46
48
50
52
54
56
2011
2012
2013
DI, sa; both scales
Finished goods
inventories
New orders
This year is different: No midyear growth scare
US employment
Oil price and global retail sales
US initial jobless claims
1.0
1.5
2.0
2.5
-1
0
1
2
3
4
5
Jan 12
May 12
Oct 12
Mar 13
%ch saar over 3 mos, both scales
Goods
Services
Source: BLS
-1
0
1
2
3
4
5
6
-20
-10
0
10
20
30
2010
2011
2012
2013
%3m, saar; Fcst assumes Brent at $103/bbl
Oil (inverted)
Retail sales (volume)
Source: Platts, J.P. Morgan
340
350
360
370
380
390
400
Jan 12
Jul 12
Jan 13
'000s, sawr
This year is different: Central banks gain traction
Central bank balance sheet
Global credit spreads and equities
0
10
20
30
40
50
15
25
35
45
55
65
08
09
10
11
12
13
14
% of GDP; Fcst Mar13 through Dec14
Fed
BoJ
Source:J.P.Morgan, FRB, BoJ
•The Fed narrative
provides a recipe for
easing under ZIRP
•The BoJ delivers regime
shift, the ECB is moving
slowly
•With tail risks removed,
easy money can generate
significant traction
through financial
conditions and sentiment
700
750
800
850
900
950
1000
1050
1100
450
500
550
600
650
700
750
800
850
900
2010
2011
2012
2013
bp
Index
MSCI World
JPM global HY spread to Treasuries
China to rebound but faces structural slowing
China retail sales breakdown
China total social financing and
nominal growth
5
10
15
20
25
30
35
03
05
07
09
11
13
%oya
Nominal
GDP
Total
social
financing
Source: NBS
8
10
12
14
16
18
%oya, ytd
2010
2011
2012
2013
Total retail sales
Catering
Source: NBS
China PMI and real GDP
6
8
10
12
48
50
52
54
56
58
60
2009
2010
2011
2012
2013
DI, sa
%q/q, saar
GDP
PMI
Source: NBS
0.5
0.7
0.9
1.1
1.3
1.5
01 03 05 07 09 11 13 15 17 19
Mn
Source: Census Bureau
2012 projection
2008 projection
0.0
0.5
1.0
1.5
2.0
2.5
60 65 70 75 80 85 90 95 00 05 10 15 20
%
Source: Census Bureau
Current (2012) projection
2008
projection
The US demographic path is troubling
Net international migration
Growth in resident working age
Practical issues in tracking the global
business cycle
Global economic research footprint
Economics research headcount
US
8
Brazil
2
South Africa
1
Singapore
3
India
1
UK
9
Australia
3
HK
3
Japan
3
Mexico
2
Russia
1
Turkey
1
Korea
1
Using products to drive process
Common global requirements:
• Forecast and review data releases
• Forecast key macro and policy variables
• Taking stock once a week
• In-depth research
Common global products:
• Defines set of relevant variables
• Highlights forecast changes and errors
• Allows for peer group comparisons
• Generates a team and a global effort
The top down bottom up balancing act
• It is important to look at the global business
cycle from a top down perspective
• An interaction between our top-down and
bottom-up analysis is central to our process
• These two perspectives are highlighted in
our research
Global real GDP
Nowcaster: 1Q13
1.4
1.8
2.2
2.6
3.0
3.4
3.8
Fe
b
08
Fe
b
15
Fe
b
22
M
ar
0
1
M
ar
0
8
M
ar
1
5
M
ar
2
2
M
ar
2
8
A
pr
0
5
A
pr
1
2
A
pr
1
9
A
pr
2
6
M
ay
0
3
M
ay
1
0
%q/q, saar
Source:J.P.Morgan
JPM forecast
Nowcaster
1
2
3
4
Jan11
Jul11
Jan12
Jul12
Jan13
%q/q, saar; Box is JPMorgan fcst 1Q13
Nowcaster
Actual/fcst
Producing a top-down global growth forecast
Impact of economic indicators on
global GDP growth: The Kalman gain
Cumulative impact on change in
forecast standard error
40%
15%
11%
17%
12%
5%
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
PMI,
mfg
PMI,
srv
Autos
Ret
sales
Cap
ship
Mfg
%-pt, annualized (variables cumulated over data
calendar)
Labels report the
% of the total
reduction in the
standard error
Source: J.P. Morgan
0.0
0.2
0.4
0.6
0.8
Retail
sales
Mfg
output
PMI,
Mfg
PMI,
Srv
Cap.
Ship.
Auto
sales
%-pt, annualized (PMI's are 1-pt chg, all else are
1%-pt chg on m/m growth rate); kalman gain scaled by
impact of factor on global GDP growth
The conversation for today
Global PMI manufacturing
Global CPI
JPM global aggregates
47.5
48.0
48.5
49.0
49.5
50.0
47
48
49
50
51
52
Jan 12 Apr 12 Jul 12 Oct 12 Jan 13 Apr 13
DI, sa, both scales
Finished goods
inventories
New orders
Source: J.P. Morgan
Quarters are %3m/3m,saar (PMIs avg level); Months are %m/m (PMIs level)
1Q13
2Q13
Mar 13 Apr 13 May 13 Jun 13
PMI, mfg
52.0
51.5
52.0
51.3
51.5
51.6
PMI, serv
53.3
52.4
53.4
52.1
52.4
52.7
IP
3.6
1.3
0.2
0.0
0.1
0.1
Retail sales
2.6
2.9
0.1
0.3
0.2
0.3
Auto sales
7.1
-6.7
0.4
0.1
0.1
0.1
Cap. Orders
11.1
-1.9
0.0
0.0
-0.1
0.0
Nowcast
3.2
2.4
2.8
2.2
2.3
2.3
Not e. Shaded values show f orecasts comput ed by t he Kalman f ilt er estimat es f rom t he dynamic f actor model. Underlined values are our estimat es based on available dat a and our judgment . Source: J.P. M organ, M arkit , and nat ional stat istical agencies.
2.0
2.5
3.0
3.5
4.0
2010
2011
2012
2013
%oya
Actual/JPM fcst
Model
forecast
Central bank
target
(upper bound)
Source: J.P. Morgan
The US expansion: A different sideways and
backwards focus
Comparing US recoveries
GDP per capita
Total decline Gain 1st 14 qtrs
(%)
of recovery (%)
1957-58
-3.1
17.4
1960
-0.5
21.4
1970
-0.6
15.6
1973-75
-3.2
19.7
1981-82
-2.6
20.1
1990-91
-1.4
12.0
2001
-0.3
10.6
2008-09
-5.1
7.6
Average
-2.1
15.5
Source: BEA
92
94
96
98
100
102
2007 2008 2009 2010 2011 2012 2013
1Q2007=100
UK
US
Source: National statistical agencies
Japan
Euro
area
US outlook hinges on healthy corporates
US private sector employment and
productivity
US corporate profits and net lending
ECI private compensation
-2
0
2
4
6
8
-6
-4
-2
0
2
4
90
95
00
05
10
%oya, both scales
Productivity (inverted)
Employment
Source: BLS
1
2
3
4
5
00
02
04
06
08
10
12
14
%oya, both scales
Source: BLS
-8
-6
-4
-2
0
2
4
6
10
12
14
16
18
20
22
24
70 75 80 85 90 95 00 05 10
% of corporate value added, both scales
Source: BEA, FRB
Net lending
Profit margin
0.0
0.1
0.2
0.3
0.4
0.5
0.0
0.5
1.0
1.5
2.0
00
02
04
06
08
10
12
14
Mn units, saar, both scales
Source: Census Bureau
Single-family starts
1987-2006 avg
Multi-family
starts
The housing recovery rests on normalizing
household formation
Household formation and net new
housing supply
Housing starts
Housing vacancy rates
Months’ supply of existing homes
and house prices
1.0
1.5
2.0
2.5
3.0
8
9
10
11
12
00
02
04
06
08
10
12
%, nsa, both scales
Rental
vacancy rate
Homeowner
vacancy rate
Source: Census Bureau
-24
-18
-12
-6
0
6
12
18
3
5
7
9
11
13
90
95
00
05
10
Sa by J.P. Morgan, 2-qtr mov avg
%oya
Months' supply
(inverted scale)
Case-Shiller national
house price index
Source: S&P/Case-Shiller, National Association of Realtors
0
375
750
1125
1500
1875
2250
05 06 07 08 09 10 11 12 13 14
Ch from year ago, '000s
Household formation
Net new housing
supply
avg formation
1990 - 2012
Near-term consumption dynamics are a wild card
US real consumption and savings
US debt and debt service burden
60
85
110
135
15
16
17
18
19
80
85
90
95
00
05
10
Sa
Percent
Financial obligations ratio
Debt to disposable income
Source: FRB, BEA
US household impulses
0.0
0.5
1.0
1.5
2.0
2.5
-6
-4
-2
0
2
4
2008 2009 2010 2011 2012 2013 2014
%-pts, saar addition to PCE growth
%
Source: BEA, FRB, University of Michigan
Wealth effect
Median year-ahead
income expectations
0
4
8
12
16
91 93 95 97 99 01 03 05 07 09 11 13
% of DPI (4-qtr mov avg)
Components of US household leveraging
Investment rate
Saving rate
Rising debt
Source: BEA
2
3
4
5
6
7
0
1
2
3
4
Jan 12
Jul 12
Jan 13
Jul 13
%3m/3m, saar
Percent, sa
Consumption
Saving rate
Energy sector lift remains a side show
Oil and gas extraction
Petroleum trade balance
0.0
0.5
1.0
1.5
2.0
2.5
77
82
87
92
97
02
07
12
% of nominal GDP
Source: BEA
Priv investment in
O&G structures,
equipment
Value added, oil and
gas extraction
-16
-14
-12
-10
-8
-6
-50
-40
-30
-20
-10
0
89
94
99
04
09
14
Bn $, sa, 3mma
Source: BLS
Bn 2005 $, sa, 3mma
Real
Nominal
Fiscal debate moves away from factors affecting
near-term growth
Publicly-held debt to GDP
Evolution of US federal deficit
0
50
100
150
200
250
00 10 20 30 40 50 60 70 80 90 00 10 20 30 40
%
CBO estimate with policy
before New Year's deal
CBO estimate with policy
after New Year's deal
Source: CBO
2
3
4
5
6
7
8
12 13 14 15 16 17 18 19 20 21 22
% of GDP, for fiscal year
Cliff and
sequestration
No cliff, no
sequestration
Source: CBO, J.P. Morgan
Evolution of US federal debt
70
72
74
76
78
80
82
84
86
12 13 14 15 16 17 18 19 20 21 22
% of GDP, for fiscal year
Source: CBO, J.P. Morgan
No cliff, no
sequestration
Cliff and
The big question is how much room there is to run
Real potential GDP, assumption
US
EMU
UK
Japan
Growth (%,ann rate)
1Q04 to 2Q08
2.3
1.8
2.1
0.8
3Q08 to 4Q12
2.0
0.5
-0.3
0.5
Reduction in level, 4Q12 (%)
-1.7
-5.4
-9.8
-1.5
Memo:
Potential growth, 2013
2.2
1.3
1.5
0.5
Output gap, 4Q12
-5.0
-2.9
-1.5
-3.0
Source: J.P. Morgan
Real potential GDP, assumption
95
100
105
110
115
120
125
04
06
08
10
12
14
Index, 1Q04 = 100; Data through 4Q13
US
EMU
UK
Japan
US participation rate looks cyclically depressed
Participation rate
College enrollment
Marginally attached workers out of
the labor force
26
28
30
32
34
93 95 97 99 01 03 05 07 09 11
% of population age 16 to 24 enrolled in college
Source: BLS
Participation rate, ages 25-54
73
74
75
76
77
88
89
90
91
92
03
05
07
09
11
13
%, both scales
Male
Female
Source: BLS
63
64
65
66
67
%, annual average
00
02
04
06
08
10
12
14
Actual
JPM
CBO
*
Apr
Source: J.P. Morgan, BLS, CBO
0.6
0.8
1.0
1.2
1.4
1.6
1.8
94 96 98 00 02 04 06 08 10 12 14
Share of labor force; searched for work during last 12
months and available to work now
OMT fixes Euro area structural flaw but there is
much work to be done
Euro area required primary positions
Institutional change and integration loses
momentum
•Clash over timing of individual country structural
change vs. institutional change at regional level
•Divide on burden sharing of legacy assets for banks
and sovereigns
•Disagreement on speed of move toward banking
union, role of ECB and need for shared deposit
guarantee schemes
Euro area unit labor costs
90
100
110
120
130
140
99
01
03
05
07
09
11
13
1Q00 = 100
PRT
ESP
ITA
DEU
FRA
Source: Eurostat
Required 2015 primary positions, % of GDP
Primary
position
2012
M aastricht vision,
debt at 60% of GDP
r>g by 200bp
OM T allows r=g,
debt still at 60%
of GDP
OM T allows r=g
and debt at 80%
of GDP
France
-2.0
3.4
1.6
0.6
Italy
2.2
5.8
3.3
2.3
Spain
-4.2
3.3
1.5
0.5
Ireland
-4.2
5.4
3.0
2.0
Portugal
-2.3
5.3
2.9
1.9
Greece
-0.7
8.7
5.4
4.4
r refers to average borrowing cost on sovereign debt, g refers to nominal GDP
Required primary positions
Euro area remains weak and divergent
Euro area composite PMIs
Euro area composite PMI and real GDP
35
40
45
50
55
60
65
07
09
11
13
DI, sa
Germany
Periphery
Source: Markit, J.P.Morgan
-2
-1
0
1
2
3
4
45
50
55
60
03
05
07
09
11
13
DI, sa (monthly)
%q/q, saar
PMI
GDP
0
10
20
30
40
50
15
25
35
45
55
65
08
09
10
11
12
13
14
% of GDP; Fcst Mar13 through Dec14
Fed
BoJ
Source:J.P.Morgan, FRB, BoJ
50
100
150
200
250
80
85
90
95
00
05
10
US/Japan; Indexed 1980=100
Capex
Consumption
Source: BEA, ESRI
0.6
0.8
1.0
1.2
1.4
75
80
85
90
95
00
05
10
Index
Germany
US
Japan
Source: OECD
Japan decides deflation has done too much
damage
Export market performance
Japan slack and inflation
Domestic demand: US vs Japan
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
-6 -5 -4 -3 -2 -1 0 1 2 3 4 5 6
1Q90 to 4Q93
1Q00 to 3Q12
Core inflation, %oya
Output gap, %
1Q94 to 4Q99
Source: MIAC
Success will come with growth; achieving 2%
inflation target would be a failure
Japan: government deficit and debt
•BoJ needs to produce shift in
expectations and financial
conditions that generate
growth
•Large fiscal adjustments and
structural changes are coming
•With inflation below 2% the
BoJ has room to provide
ongoing support for needed
change
Japan inflation swaps and JGB yields
-15
-10
-5
0
5
50
100
150
200
250
90
95
00
05
10
% of GDP, both scales
Source: OECD
Debt
Deficit
-0.5
0.0
0.5
1.0
1.5
0.4
0.6
0.8
1.0
1.2
1.4
2011
2012
2013
%, both scales
10yr JGB yield
Source: J.P. Morgan
Official Current Forecast
rate rate (%pa) 05-07 av g Trough1 Jul 11 nex t change Jun 13 Sep 13 Dec 13 Mar 14 Jun 14 Sep 14 Dec 14
Global 2.14 -223 31 -60 2.14 2.13 2.13 2.17 2.20 2.22 2.28 ex cluding US 2.80 -152 32 -68 2.79 2.79 2.79 2.84 2.88 2.91 2.98 Developed 0.42 -307 0 -39 0.42 0.42 0.41 0.41 0.41 0.43 0.48 Em erging 5.39 -169 49 -87 5.37 5.36 5.38 5.48 5.57 5.59 5.65 Latin America 6.02 -475 0 -301 6.16 6.44 6.49 6.58 6.58 6.57 6.57 EMEA EM 4.63 -182 69 32 4.38 4.10 4.13 4.12 4.12 4.23 4.47 EM Asia 5.43 -43 93 -58 5.43 5.42 5.42 5.57 5.71 5.72 5.74 The Am ericas 1.43 -389 26 -61 1.46 1.51 1.52 1.54 1.54 1.56 1.58 United States Fed funds 0.125 -438 0 0 16 Dec 08 (-87.5bp) 19 Jun 13 On hold 0.125 0.125 0.125 0.125 0.125 0.125 0.125 Canada O/N rate 1.00 -273 75 0 8 Sep 10 (+25bp) 29 May 13 3Q 14 (+25bp) 1.00 1.00 1.00 1.00 1.00 1.25 1.50 Brazil SELIC O/N 7.50 -775 0 -500 17 Apr 13 (+25bp) 29 May 13 29 May 13 (+25bp) 7.75 8.25 8.25 8.25 8.25 8.25 8.25 Mex ico Repo rate 4.00 -387 -10 -50 8 Mar 13 (-50bp) 7 Jun 13 On hold 4.00 4.00 4.00 4.00 4.00 4.00 4.00 Chile Disc rate 5.00 31 450 -25 12 Jan 12 (-25bp) 16 May 13 Nov 13 (+25bp) 5.00 5.00 5.25 5.75 5.75 5.75 5.75 Colombia Repo rate 3.25 -406 25 -125 22 Mar 13 (-50bp) 31 May 13 Nov 13 (+25bp) 3.25 3.25 3.75 4.50 4.50 4.50 4.50 Peru Reference 4.25 19 300 0 12 May 11 (+25bp) 9 May 13 On hold 4.25 4.25 4.25 4.25 4.25 4.25 4.25 Uruguay Reference 9.25 200 300 125 28 Dec 12 (+25bp) 2Q 13 2Q 13 (+25bp) 9.50 9.50 9.50 9.50 9.50 9.25 9.25
Europe/Africa 1.40 -246 0 -55 1.35 1.28 1.29 1.29 1.29 1.31 1.43 Euro area Refi rate 0.50 -248 0 -100 2 May 13 (-25bp) 6 Jun 13 On hold 0.50 0.50 0.50 0.50 0.50 0.50 0.50 United Kingdom Bank rate 0.50 -444 0 0 5 Mar 09 (-50bp) 9 May 13 On hold 0.50 0.50 0.50 0.50 0.50 0.50 1.00 Czech Republic 2-w k repo 0.05 -235 0 -70 1 Nov 12 (-20bp) 27 Jun 13 On hold 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Hungary 2-w k dep 4.75 -238 0 -125 23 Apr 13 (-25bp) 28 May 13 28 May 13 (-25bp) 4.25 4.00 4.00 4.00 4.00 4.00 4.00 Israel Base rate 1.75 -250 125 -150 24 Dec 12 (-25bp) 27 May 13 On hold 1.75 1.75 1.75 1.75 1.75 1.75 1.75 Poland 7-day interv 3.25 -127 0 -125 6 Mar 13 (-50bp) 8 May 13 8 May 13 (-25bp) 3.00 2.75 2.75 2.75 2.75 2.75 2.75 Romania Base rate 5.25 -294 0 -100 29 Mar 12 (-25bp) 1 Jul 13 1 Jul 13 (-25bp) 5.25 4.50 4.25 4.00 4.00 4.00 4.00
Russia Repo rate 5.50 N/A N/A N/A 13 Sep 12 (+25bp) May 13 2Q 13 (-25bp) 5.25 4.75 4.75 4.75 4.75 5.00 5.25 South Africa Repo rate 5.00 -329 0 -50 19 Jul 12 (-50bp) 23 May 13 On hold 5.00 5.00 5.00 5.00 5.00 5.00 5.50 Turkey Effctv e rate 5.28 -1065 0 -97 N/A² 16 May 13 N/A² 4.75 4.75 5.00 5.00 5.00 5.00 5.50 Asia/Pacific 3.64 -5 73 -48 3.64 3.63 3.62 3.71 3.80 3.82 3.86 Australia Cash rate 3.00 -294 0 -175 4 Dec 12 (-25bp) 7 May 13 Nov 13 (-25bp) 3.00 3.00 2.75 2.75 2.75 3.00 3.25 New Zealand Cash rate 2.50 -488 0 0 10 Mar 11 (-50bp) 13 Jun 13 Sep 13 (+25bp) 2.50 2.75 2.75 3.00 3.00 3.00 3.00 Japan O/N call rate3 0.05 -17 0 0 5 Oct 10 (-5bp) 22 May 13 On hold 0.05 0.05 0.05 0.05 0.05 0.05 0.05 Hong Kong Disc. w ndw 0.50 -548 0 0 17 Dec 08 (-100bp) 20 Jun 13 On hold 0.50 0.50 0.50 0.50 0.50 0.50 0.50 China 1-y r w orking 6.00 -14 69 -56 7 Jul 12 (-31bp) - 1Q 14 (+25bp) 6.00 6.00 6.00 6.25 6.50 6.50 6.50 Korea Base rate 2.75 -140 75 -50 11 Oct 12 (-25bp) 9 May 13 9 May 13 (-25bp) 2.50 2.75 2.75 2.75 2.75 2.75 3.00 Indonesia BI rate 5.75 -412 0 -100 9 Feb 12 (-25bp) 14 May 13 2Q 13 (+25bp) 6.00 6.00 6.00 6.00 6.00 6.00 6.00 India Repo rate 7.25 38 250 -75 3 May 13 (-25bp) Jun 13 3Q 13 (-25bp) 7.25 7.00 7.00 7.00 7.00 7.00 7.00 Malay sia O/N rate 3.00 -24 100 0 5 May 11 (+25bp) 9 May 13 On hold 3.00 3.00 3.00 3.00 3.00 3.00 3.00 Philippines Rev repo 3.50 -356 0 -100 25 Oct 12 (-25bp) 13 Jun 13 On hold 3.50 3.50 3.50 3.50 3.50 3.50 3.50 Thailand 1-day repo 2.75 -108 150 -50 17 Oct 12 (-25bp) 29 May 13 On hold 2.75 2.75 2.75 2.75 2.75 2.75 2.75 Taiw an Official disc. 1.875 -71 62.5 0 30 Jun 11 (+12.5bp) 2Q 13 1Q 14 (+12.5bp) 1.875 1.875 1.875 2.00 2.125 2.25 2.25 1 Refers to trough end-quarter rate from 2009-present ² Effectiv e rate adjusted on daily basis 3 BoJ targets ¥50-60tn/y ear ex pansion in monetary base
Bold denotes mov e since last GDW and forecast changes. Underline denotes policy meeting during upcoming w eek. Aggregates are GDP-w eighted av erages. Change since (bp)
Last change Nex t mtg Forecast (%pa)
JPMorgan CB
forecast
JPMorgan US forecast
Source: JPMorgan
4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 2012 2013 2014 2012 2013 2014 Gross domestic product
Real GDP 0.4 2.5 1.5 2.0 2.5 2.0 2.5 1.7 2.1 2.5 2.2 1.8 2.3
Final sales 1.9 1.5 1.7 2.1 2.5 1.9 2.4 2.1 2.0 2.4 2.1 1.9 2.2
Domestic 1.5 1.9 2.0 2.3 2.6 2.2 2.6 1.8 2.2 2.7 2.0 1.9 2.5
Consumer spending 1.8 3.2 1.8 1.9 2.2 1.5 2.0 1.8 2.3 2.0 1.9 2.1 1.9
Business inv estment 13.1 2.1 4.5 6.8 6.7 6.7 6.8 5.5 5.0 6.9 8.0 5.0 6.7
Equipment 11.8 3.0 4.0 7.0 6.0 6.0 6.0 4.7 5.0 6.4 6.9 4.9 6.1
Structures 16.7 -0.2 6.0 6.0 9.0 9.0 9.0 7.3 5.1 8.2 10.8 5.4 8.2
Residential inv estment 17.5 12.6 16.5 22.0 25.0 20.0 20.0 14.9 18.9 20.0 12.1 16.1 20.9
Gov ernment -7.0 -4.1 -1.2 -2.0 -1.8 -1.2 -0.7 -1.8 -2.3 -0.8 -1.7 -2.5 -1.2
Net ex ports ($bn, chained $2005) -385 -401 -410 -418 -425 -436 -447 - - -
-Ex ports (goods and serv ices) -2.8 2.9 4.0 5.0 4.5 5.0 5.0 2.1 4.1 5.2 3.4 2.4 4.9
Imports (goods and serv ices) -4.2 5.4 5.0 5.5 5.0 6.0 6.0 0.2 5.2 6.5 2.4 2.5 5.9
Inv entories (ch $bn, chained $2005) 13.3 50.3 42.1 38.6 38.7 41.2 45.2 - - -
-Contribution to real GDP grow th (% pts):
Domestic final sales 1.6 2.0 2.0 2.3 2.6 2.2 2.6 1.8 2.2 2.7 2.0 1.9 2.5
Net ex ports 0.3 -0.5 -0.2 -0.2 -0.1 -0.3 -0.2 0.3 -0.2 -0.3 0.1 0.0 -0.2
Inv entories -1.5 1.0 -0.2 -0.1 0.0 0.1 0.1 -0.4 0.2 0.1 0.1 0.0 0.0
Income and profits (NIPA basis)
Adjusted corp profits 9.6 5.0 5.0 6.0 8.0 4.0 6.0 3.1 6.0 6.0 6.8 6.7 5.9
Real disposable personal income 6.2 -5.3 2.0 2.5 2.8 2.0 2.5 3.2 0.4 2.5 1.5 0.8 2.4
Sav ing rate1 4.7 2.6 2.6 2.8 2.9 3.1 3.2 - - - 3.9 2.8 3.2
Prices and labor cost
Consumer price index 2.2 1.4 0.1 1.7 1.7 1.7 1.8 1.9 1.3 1.7 2.1 1.4 1.6
Core 1.7 2.1 1.5 1.5 1.5 1.6 1.7 1.9 1.6 1.7 2.1 1.7 1.6
Producer price index 2.0 0.7 1.5 1.8 1.8 1.8 1.8 1.7 1.4 1.8 1.9 1.7 1.8
Core 0.6 2.0 1.3 1.4 1.5 1.5 1.5 2.1 1.5 1.5 2.6 1.6 1.5
PCE deflator 1.6 0.9 0.2 1.3 1.4 1.4 1.5 1.6 0.9 1.5 1.8 1.1 1.3
Core 1.0 1.2 1.4 1.4 1.5 1.4 1.4 1.5 1.3 1.4 1.7 1.2 1.4
GDP chain-ty pe price index 1.0 1.2 1.4 1.4 1.4 1.4 1.4 1.8 1.3 1.4 1.8 1.4 1.4
S&P/C-S house price index (%oy a) 7.3 7.2 7.2 7.1 7.0 6.3 5.4 7.3 7.0 3.9 2.8 7.1 5.0
Productiv ity -1.7 0.7 1.0 1.5 1.5 1.0 1.5 0.6 1.2 1.5 0.9 0.8 1.4
Other indicators
Housing starts (mn units, saar)1 0.904 0.969 1.060 1.130 1.200 1.270 1.320 - - - 0.782 1.090 1.338
Industrial production, mfg. 2.3 5.3 3.0 4.0 4.0 2.0 2.0 2.8 4.1 2.5 3.9 3.1 2.9
Capacity utilization, mfg. (%)1 75.7 76.3 77.1 77.4 78.0 78.5 78.7 - - - 75.8 77.2 78.9 Light v ehicle sales (mn units, saar)1 15.0 15.2 14.9 15.0 15.2 15.2 15.3 - - - 14.4 15.1 15.4
Unemploy ment rate1 7.8 7.7 7.5 7.4 7.3 7.2 7.2 - - - 8.1 7.5 7.2
Pay roll employ ment (ch, '000s, samr)1 209 206 150 175 180 185 185 - - - 183 178 195
Nominal GDP 1.4 3.7 2.9 3.4 3.9 3.4 3.9 3.5 3.5 3.9 4.0 3.3 3.7
Current account balance ($bn)1 -111.0 -109.4 -113.8 -118.3 -121.9 -129.5 -135.8 - - - -470.2 -463.5 -557.1
% of GDP -2.8 -2.7 -2.8 -2.9 -3.0 -3.1 -3.2 - - - -3.0 -2.9 -3.3
Federal budget balance ($bn)1 - - - - - - - - - - -1089.2 -850.0 -700.0
% of GDP - - - -6.9 -5.2 -4.2
1. Ent ries are av erage lev el f o r t he perio d. F ederal balance f igures are f o r f is c al years .
May 3 2Q13 3Q13 4Q13 1Q14 Interest rate forecast (end of period)
Fed funds target 0.13 0.13 0.13 0.13 0.13
3-mo LIBOR 0.28 0.24 0.24 0.24 0.24
2-y r Treasury 0.22 0.23 0.25 0.27 0.29
5-y r Treasury 0.73 0.70 0.82 0.92 1.02
10-y r Treasury 1.74 1.70 1.85 2.00 2.15
Global Economic
Outlook Summary
*Underline indicates beginning of JPMorgan forecast
2012 2013 2014 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 4Q12 2Q13 4Q13 2Q14 4Q14 The Am ericas United States 2.2 1.8 2.3 0.4 2.5 1.5 2.0 2.5 2.0 2.5 1.9 1.5 h 1.3 h 1.7 1.7 Canada 1.8 1.4 2.1 0.6 1.6 1.6 2.0 2.1 1.9 2.2 0.9 1.4 1.6 1.8 2.0 Latin America 2.6 3.3 3.8 3.4 2.4 4.2 4.3 3.5 3.9 3.7 4.7 5.1 4.6 4.3 4.3 Argentina 1.9 3.0 1.5 5.2 3.5 3.0 1.6 1.5 1.5 1.4 10.6 10.0 11.0 11.0 11.0 Brazil 0.9 3.0 4.0 2.2 2.7 3.7 4.4 3.9 4.2 4.0 5.6 6.5 5.8 5.4 5.4 Chile 5.6 5.5 4.5 6.1 5.2 i 5.4 h 5.0 h 5.0 h 4.5 4.5 2.2 1.6 i 2.4 i 3.0 3.0 Colombia 4.0 4.5 5.0 7.4 4.2 5.5 5.5 5.1 4.5 4.7 2.8 2.0 2.4 2.5 2.5 Ecuador 5.0 4.0 4.5 5.5 5.0 3.0 3.0 4.0 5.0 5.0 4.6 3.7 3.5 3.3 4.4 Mex ico 3.9 3.2 3.6 3.1 1.5 5.4 5.1 2.9 3.6 3.2 4.1 4.0 3.4 3.2 3.2 Peru 6.3 6.0 6.5 2.5 5.0 7.0 7.5 6.0 6.5 7.0 2.9 2.5 h 2.6 h 2.5 2.5 Uruguay 3.5 3.7 4.0 2.3 4.0 3.0 5.0 4.0 4.3 3.2 8.9 8.4 7.7 7.1 6.6 Venezuela 5.6 2.0 3.0 5.7 -4.0 2.0 2.0 2.0 4.0 4.0 18.7 31.0 35.7 30.8 27.7 Asia/Pacific 4.8 4.6 4.8 5.0 4.2 i 5.4 i 5.1 i 5.3 5.3 5.3 2.2 2.5 2.9 i 3.6 3.3 Japan 2.0 1.1 1.2 0.2 2.2 3.2 2.5 2.9 3.4 -3.6 -0.2 0.1 0.7 2.6 2.4 Australia 3.6 2.5 3.3 2.4 1.9 2.4 3.7 2.8 4.2 3.0 2.2 2.8 2.7 2.8 2.5 New Zealand 2.5 2.5 2.9 6.1 2.1 3.5 -2.0 4.4 4.3 2.9 0.9 1.1 2.2 2.5 2.5 Asia ex Japan 6.2 6.4 6.7 7.5 5.4 i 6.7 i 6.6 i 6.7 6.8 6.6 3.4 3.5 i 4.0 i 4.2 3.8 China 7.8 7.8 7.9 9.0 6.4 8.2 8.0 8.0 8.0 7.8 2.1 2.6 3.3 3.8 3.2 Hong Kong 1.4 3.8 3.6 4.9 3.5 3.5 5.0 5.0 2.0 3.5 3.8 3.5 3.7 3.7 3.2 India 5.0 5.8 6.5 4.7 6.4 6.5 5.3 5.6 7.6 6.5 10.1 9.0 8.5 7.5 7.5 Indonesia 6.2 5.6 i 5.4 h 6.9 5.3 h 5.0 i 5.2 i 5.5 5.5 5.5 4.4 6.1 h 6.9 h 4.4 4.5 Korea 2.0 2.5 3.7 i 1.1 3.5 2.4 i 4.5 4.0 i 4.0 3.5 1.7 1.3 i 1.9 i 3.3 3.0 Malay sia 5.6 5.3 i 5.3 i 7.9 4.7 4.2 i 4.8 i 5.0 i 5.5 i 5.5 1.3 1.6 i 1.7 i 1.4 1.5 Philippines 6.6 5.3 5.3 6.1 4.5 4.9 5.3 5.3 5.3 5.3 3.0 2.8 i 3.1 i 3.7 3.5 Singapore 1.3 2.1 i 3.8 i 3.3 -0.8 h 6.6 i 6.1 4.9 0.8 4.1 4.0 2.2 i 2.9 i 4.1 3.7 Taiw an 1.3 2.7 i 3.9 h 7.3 -3.2 i 3.4 h 4.5 h 4.8 h 3.4 3.7 1.8 1.3 1.9 2.4 2.3 Thailand 6.4 5.3 i 4.5 15.0 2.0 i 4.0 i 1.0 i 4.0 i 4.5 4.5 3.2 2.2 i 1.0 i 2.4 2.7 Africa/Middle East Israel 3.1 3.1 3.3 2.4 3.2 2.8 3.6 3.6 3.2 3.6 1.6 1.9 2.2 1.9 2.2 South Africa 2.5 2.6 3.6 2.1 2.2 2.8 3.4 3.6 3.8 3.3 5.6 5.8 5.4 5.7 5.4 Europe 0.1 0.1 1.7 -1.7 -0.2 0.3 1.2 1.4 1.8 1.8 3.0 2.3 i 2.1 i 2.2 2.1 Euro area -0.5 -0.6 1.2 -2.3 -0.5 -0.5 0.5 1.0 1.5 1.5 2.3 1.3 i 1.2 i 1.4 1.3 Germany 0.9 0.6 2.1 -2.3 1.5 1.0 1.8 2.0 2.5 2.5 2.0 1.3 i 1.5 i 1.8 1.7 France 0.0 -0.7 1.0 -1.2 -1.3 -1.3 0.0 0.5 1.5 1.5 1.7 1.0 i 1.0 1.3 1.2 Italy -2.4 -1.6 0.7 -3.7 -1.5 -1.5 0.0 0.5 1.0 1.0 2.6 1.4 i 1.4 i 1.4 1.2 Spain -1.4 -1.8 0.5 -3.1 -2.0 -1.8 -0.8 0.0 1.0 1.3 3.2 1.7 i 0.4 i 0.4 0.4 United Kingdom 0.3 1.0 1.9 -1.2 1.2 1.0 1.5 2.0 2.0 2.0 2.7 2.8 2.7 2.5 2.5 Emerging Europe 2.3 2.3 3.4 0.9 0.2 3.4 3.9 2.7 3.1 3.0 5.7 5.4 4.7 4.5 4.7 Bulgaria 0.8 1.2 1.7 … … … … Czech Republic -1.3 -0.2 1.9 -0.7 -0.1 0.6 1.0 1.0 2.1 2.5 2.8 1.7 1.9 1.5 2.1 Hungary -1.7 -0.7 1.4 -3.4 -0.3 0.3 1.2 1.5 1.5 1.5 5.4 2.5 2.4 2.8 2.8 Poland 1.9 1.3 2.6 0.4 0.8 1.6 2.3 2.8 2.8 2.5 2.9 0.7 1.5 2.0 2.0 Romania 0.7 1.9 2.3 1.8 1.2 2.4 5.3 2.4 1.6 1.2 4.8 5.5 3.7 3.6 4.5 Russia 3.4 2.5 3.6 1.5 0.0 4.5 4.8 3.0 3.5 3.5 6.5 6.8 5.5 5.2 5.4 Turkey 2.2 3.7 4.5 … … … 6.8 6.7 6.3 5.8 5.8 Global 2.4 2.3 3.1 1.6 2.2 i 2.7 3.0 3.2 3.3 2.7 2.5 2.3 i 2.4 2.7 2.6
Dev eloped markets 1.2 0.9 1.8 -0.5 1.3 1.1 1.6 2.0 2.1 1.3 1.7 1.3 i 1.3 i 1.9 1.8
Emerging markets 4.6 4.9 5.4 5.4 3.9 i 5.5 i 5.6 i 5.3 5.5 5.3 4.1 4.2 4.2 i 4.3 4.1
Memo:
Global — PPP w eighted 3.0 3.0 3.6 2.5 2.7 i 3.3 3.5 i 3.7 3.8 3.4 3.0 h 2.8 i 2.8 3.0 2.9
% o ver previo us perio d, saar
Real GDP
% o ver a year ago
Real GDP Consumer prices
