Economic Research
June 24, 2016
Contents
The UK votes to leav e the EU
Expecting BoE, ECB, and BoJ easing; Fed hike pushed to December
13
17
19
Divided we wobble
EMU
0
-7
57
55
53
-14
UK
-21
-28
May 1
51
49
2014
PMI - output
2015
2016
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
21
25
Data Watches
United States
Euro area
Japan
Canada
Mex ico
Brazil
Argentina
Colombia
United Kingdom
Emerging Europe
South Africa & SSA
Australia and New Zealand
China, Hong Kong, and Taiwan
Korea
ASEAN
India
Asia focus
27
35
41
45
47
49
51
53
55
57
61
65
67
71
73
77
79
80
Bruce Kasman
(1-212) 834-5515
bruce.c.kasman@jpmorgan.com
JPMorgan Chase Bank NA
David Hensley
(1-212) 834-5516
david.hensley@jpmorgan.com
JPMorgan Chase Bank NA
Joseph Lupton
(1-212) 834-5735
joseph.p.lupton@jpmorgan.com
JPMorgan Chase Bank NA
www.jpmorganmarkets.com
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
June 24, 2016
article 50 process that sets a two-year limit from the time the
UK notifies the EU of its intentions to leave. But the EU is
unlikely to enter substantive negotiations before receiving a
formal request. And once the two-year clock ends, all existing
EU treaties will cease to apply to the UK, putting enormous
pressure on UK negotiators to reach agreement.
Brexit will have political consequences which, over time, may
prove of greater significance. We have highlighted risks to the
unity of the UK. Scotlands SNP is likely to press for a new
referendum before the UK leaves the EU. The possible reinstitution of border controls in Ireland will likely create difficulties in managing relations between north and south of the
border. The EU will lose a large member state inclined towards market-oriented policies and some balance that exists
between EMU-ins and -outs. Euro-outs will become increasingly marginalized. Perhaps most important, the UK referendum provides a concrete demonstration that the legitimacy of
EU institutions is fragile. In the short term this should energize non-mainstream parties and stall the integration process.
However, the medium-term political consequences are highly
uncertain.
60
40
Profits
7
6
20
-20
Nominal GDP
3
2
-40
98
01
04
07
10
13
16
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
June 24, 2016
EM
EUR
99
release of the 2Q inflation report next Tuesday, however, before we revisit our monetary policy call. While authorities in
Mexico are concerned about financial contagion, they are
opting to maintain a cautious stance. The Foreign Exchange
Commission in charge of interventions said that it will only
act if MXN reacts differently from the rest of the EM. So as to
bolster market sentiment in its fundamentals, the Ministry of
Finance also reaffirmed its commitment to fiscal consolidation. For its part, Banxico said it will wait until next weeks
meeting to decide on the appropriate monetary policy stance.
We project a 50bp hike, although expectations of looser monetary policy in Europe and a delay in rate hikes in the US have
increased the likelihood of inaction.
96
GBP
93
May 31, 16
Jun 6, 16
Jun 12, 16
Jun 18, 16
Jun 24, 16
The growth and financial market fallout from Brexit will likely be largest in the EMEA EM. Countries that are most open
and tied to the Euro areaCzech Republic and Hungaryare
likely to be most affected. The impact will take time and the
growth drag will likely peak in early 2017. We dont expect
any immediate response by CEE central banks, but a more
dovish tone/additional unconventional easing are likely later
this year. Such measures may be a delay in the Czech Republics exit from the FX floor, introduction of new unconventional easing measures in Hungary, and the introduction of
such instruments, which the new governor prefers to rate cuts,
in Poland. While already in our call, we continue to see easing
from Russia. South Africa stands out as we still think the
SARB will hike 25bp this year.
The drag on EM Asia is likely to be less than in EMEA EM.
But with growth already underperforming potential and the
Fed on hold for longer, we continue to look for easing across
the region. We see further cuts from China, Taiwan, Indonesia, Malaysia, and Thailand. More broadly, policy settings
both fiscal and monetarywould be precautionary and lean
toward easing. A more material rise in the USD would likely
bias policy in favor of more fiscal rather than monetary easing
given the risks to financial stability.
In Latin America, the country facing the most significant
stress, Brazil, saw its currency sell off only 1.5% on Friday
while the country with among the best fundamentals, Mexico,
saw its currency tumble 4%. The BCB released a note stating
it stands by to provide support if needed. The lower growth
forecasts in UK and Euro area, in addition to more monetary
easing from the region, would allow for a more aggressive
monetary easing cycle in Brazil. We prefer to wait for the
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global economic outlook summary
Real GDP
2015
United States
Canada
Latin America
Argentina
Brazil
Chile
Colombia
Ecuador
Mexico
Peru
Uruguay
Venezuela
2.4
1.1
-0.4
2.1
-3.8
2.1
3.1
0.3
2.5
3.3
1.0
-5.7
2016
1.7
1.5
-0.8
-1.4
-3.6
1.8
2.1
-2.0
2.4
4.0
0.0
-8.5
4.6
0.7
2.9
2.5
5.8
6.7
7.3
3.1
1.1
5.0
2.8
3.8
5.8
1.5
1.2
2.9
2017
1.9
2.6
1.8
3.4
0.7
2.3
3.0
0.5
2.6
3.5
0.6
2.0
4.6
1.1
3.1
2.4
5.7
6.4
7.1
3.3
2.1
5.3
2.7
3.8
5.2
1.7
2.2
3.0
4Q15
1Q16
2Q16
1.4
0.8 2.0
0.5
2.4
0.2
-1.9
0.4
-1.7
-5.6
-3.0
-6.0
-5.2
-1.1
-3.3
0.4
5.3
0.2
3.1
0.6
1.5
0.2
-3.0
-5.0
2.2
3.3
1.0
5.7
3.1
3.0
0.2
-0.1
-0.3
-9.5
-11.0
-10.0
4.2
4.6
4.6
-1.8
1.9
1.0
3.0
4.3
1.0
3.6
3.0
1.1
5.9
5.4
5.9
6.6
6.0
7.0
7.3
8.0
7.1
3.7
2.8
2.9
0.8
-1.6
2.6
5.2
4.5
4.6
2.7
2.1
3.1
5.0
4.2
1.8
8.8
4.5
4.5
6.2
0.2
1.5
0.8
3.1
1.8
3.4
3.8
1.5
3Q16
2.0
2.8
0.6
3.0
-1.8
1.5
2.0
1.0
2.7
4.0
0.0
-5.0
4.6
1.5
2.2
2.3
5.7
6.6
7.0
3.0
2.4
5.0
2.6
1.8
5.0
1.2
2.2
2.8
Consumer prices
% over a year ago
4Q16
2.0
3.1
1.4
4.0
0.0
2.0
2.0
-2.0
2.5
4.0
0.3
0.0
4.5
1.2
2.9
2.0
5.6
6.3
7.2
3.1
2.2
5.0
2.8
1.4
6.0
1.2
2.2
2.8
1Q17
4Q15
2Q16
4Q16
2Q17
2.0
2.8
1.9
3.8
0.9
3.0
2.5
1.5
2.5
3.0
0.8
5.0
4.6
1.2
3.3
2.6
5.6
6.3
7.1
3.3
2.2
5.2
2.8
2.9
5.3
2.0
2.3
3.0
0.4 1.1
1.9
2.5
1.3
1.7
2.0
2.0
7.1
5.8
5.0
6.7
25.9
42.7
38.5
22.0
10.4
7.7
6.2
9.1
4.1
4.3
3.6
3.3
6.4
6.4
4.1
8.2
3.4
2.7
2.6
2.5
2.3
3.2
3.7
2.6
4.1
3.7
3.2
2.7
9.3
9.4
10.5
10.3
151.4
346.9
480.8
288.2
Asia/Pacific
4.7
1.6
1.8
2.2
2.3
Japan
0.6
0.3
0.4
1.0
-0.4
Australia
2.5
1.7
1.2
1.4
1.8
New Zealand
2.5
0.1
1.0
1.9
0.2
EM Asia
6.0
2.0
2.5
2.8
2.7
China
6.9
1.5
2.7
2.4
2.3
India
7.5
5.3
5.4
5.2
4.8
Ex China/India
3.2
1.6
1.8
2.3
1.5
Hong Kong
2.4
2.4
2.3
2.4
3.2
Indonesia
4.8
4.8
2.8
3.2
3.0
Korea
2.6
1.1
0.9
1.7
2.3
Malaysia
5.0
2.6
1.2
2.4
1.8
Philippines
5.9
1.0
1.6
1.6
1.8
Singapore
2.0
-0.7
0.9
1.2
-0.2
Taiwan
0.6
0.3
1.6
1.4
1.1
Thailand
2.8
-0.9
1.2
2.1
0.6
Western Europe
1.7
1.6
1.3
1.9
2.1
1.3
1.2
1.2
1.3
0.2
0.1
1.0
1.5
Euro area
1.6 1.6
1.3
1.7
2.2
1.3
1.3
1.3
0.2
0.9
1.4
1.3
-0.1
Germany
1.4
1.6
1.3
1.1
2.7
1.3
1.3
1.3
1.3
0.2
0.0
1.0
1.7
France
1.2 1.5
1.1
1.5
2.6
1.0
1.0
1.0
0.2
1.0
1.5
1.3
0.1
Italy
0.6
0.9
0.9
0.7
1.0
0.8
0.8
0.8
1.0
0.2
-0.3
0.5
1.4
Spain
3.2 2.8
2.0
3.2
3.1
1.8
1.8
2.0
-0.5
0.3
1.3
2.5
-1.1
Norway
1.0
0.9
1.7
-0.5
1.3
1.5
1.8
2.0
1.5
2.5
3.3
3.1
2.3
Sweden
3.9 3.7 3.1
6.6
2.0 3.3
3.3
3.2
3.2
0.1
1.5
1.5
0.9
United Kingdom
2.3
1.5
1.1
2.4
1.4
1.0
0.5
0.5
1.0
0.1
0.3
1.1
2.2
EMEA EM
0.3 1.4 2.3
1.7
0.7
0.9
2.1
2.2
2.5
7.8
4.8
4.7
4.6
Czech Republic
4.2
2.8
3.0
1.4
1.4
3.2
5.0
3.3
2.1
0.1
0.3
1.2
1.5
Hungary
2.9 1.5 3.0
2.4 -3.1 3.0
6.1
3.6
2.0
0.5
1.2
2.8
-0.4
Israel
2.5
2.4
3.0
3.4
1.3
2.4
4.1
4.5
3.2
-0.9
-1.1
0.1
1.0
Poland
3.6 3.2
3.5
5.3
-0.4
3.6
3.3
3.4
3.5
-0.6
0.2
1.7
-0.8
Romania
3.8
4.2
3.4
4.6
6.4
2.0
3.6
2.8
4.3
-1.2
-2.5
0.2
2.3
Russia
-3.7 -0.3
1.5
-1.1
-0.1
-0.8
1.0
1.5
1.5
14.5
6.4
5.4
7.4
South Africa
1.3
-0.1
0.8
0.4
-1.2
0.7
0.4
0.4
0.8
4.9
6.2
7.1
6.1
Turkey
4.0 3.3
4.9
3.1
2.2
2.4
4.1
8.2
7.8
7.7
3.5
1.2
7.2
Global
2.6
2.4
2.7
2.2
2.4
2.3
2.6
2.6
2.7
1.7
1.7
2.2
2.5
Developed markets
1.9
1.6
1.7
1.3
1.6 1.5
1.7
1.7
1.7
0.4
1.4
1.9
0.6
Emerging markets
3.8
3.8
4.4
3.7
3.6
3.6
4.1
4.2
4.4
3.9
3.6
3.7
3.4
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 showing 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. Regional CPI aggregates exclude Argentina, Ecuador and Venezuela. Regional GDP aggregates exclude Venezuela. Forecasts for
Argentina are based on JPMorgans estimates of GDP and CPI. Source: J.P. Morgan
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
2016
2015
2016
2017
3Q
4Q
1Q
2Q
3Q
4Q
United States
Real GDP
2.4
1.7
1.9
2.0
1.4
0.8
2.0
2.0
2.0
Private consumption
3.1
2.7
2.2
3.0
2.4
1.9
4.0
2.5
2.3
Equipment investment
3.1
-1.5
3.0
9.9
-2.1
-9.0
-2.1
2.0
3.0
Non-residential construction
-1.5
-4.9
3.2
-7.2
-5.1
-8.9
-8.3
2.0
3.0
Intellectual property products
5.7
1.4
3.2
-0.8
-0.1
-0.1
3.5
2.0
3.0
Residential construction
8.9
8.3
4.8
8.2
10.1
17.2
-2.1
6.0
6.0
Inventory change ($ bn saar)
97.5
52.2
42.3
85.5
78.3
69.6
47.2
46.2
45.7
Government spending
0.7
1.0
1.3
1.8
0.1
1.2
-0.5
1.8
1.9
Exports of goods and services
1.1
-0.3
2.6
0.7
-2.0
-2.0
-0.7
1.8
2.2
Imports of goods and services
4.9
0.8
4.3
2.3
-0.7
-0.2
-1.5
4.5
4.8
Domestic final sales contribution
2.8
2.1
2.3
3.0
1.8
1.3
2.3
2.4
2.4
Inventories contribution
0.2
-0.3
-0.1
-0.7
-0.2
-0.2
-0.6
0.0
0.0
Net trade contribution
-0.6
-0.1
-0.3
-0.3
-0.1
-0.2
0.2
-0.4
-0.4
Consumer prices (%oya)
0.1
1.4
2.5
0.1
0.4
1.1
1.1
1.5
1.9
Excluding food and energy (%oya)
1.8
2.3
2.4
1.8
2.0
2.3
2.2
2.3
2.4
Core PCE deflator (%oya)
1.3
1.8
2.0
1.3
1.4
1.7
1.6
1.8
1.9
Federal budget balance (% of GDP, FY)
-2.4
-2.9
-2.9
Personal saving rate (%)
5.1
5.2
5.1
5.0
5.2
5.7
5.2
5.0
5.0
Unemployment rate (%)
5.3
4.8
4.4
5.2
5.0
4.9
4.8
4.7
4.6
Industrial production, manufacturing
0.8
0.5
1.9
1.7
-0.7
0.6
-1.0
2.3
2.3
Euro area
Real GDP
1.6
1.6
1.3
1.3
1.7
2.2
1.3
1.3
1.3
Private consumption
1.7
1.7
1.8
2.2
1.3
2.2
1.3
1.8
1.8
Capital investment
2.7
3.0
2.1
2.0
5.9
3.4
2.0
2.0
2.0
Government consumption
1.3
1.5
1.2
1.2
2.0
1.6
1.3
1.3
1.3
Exports of goods and services
5.1
2.3
2.2
1.6
2.7
1.7
2.0
2.3
2.3
Imports of goods and services
5.9
3.5
2.5
5.2
5.6
3.0
2.0
2.5
2.5
Domestic final sales contribution
1.7
1.8
1.7
1.8
2.3
2.2
1.4
1.6
1.6
Inventories contribution
-0.1
0.2
-0.3
0.9
0.5
0.4
-0.2
-0.3
-0.4
Net trade contribution
-0.1
-0.4
0.0
-1.4
-1.1
-0.5
0.1
0.0
0.0
Consumer prices (HICP, %oya)
0.0
0.3
1.3
0.1
0.2
0.0
-0.1
0.5
0.9
ex food, alcohol and energy
0.8
0.9
1.0
0.9
1.0
1.0
0.8
0.8
0.9
General govt. budget balance (% of GDP, FY)
-2.1
-1.8
-1.7
Unemployment rate (%)
10.9
10.1
9.6
10.7
10.5
10.4
10.1
10.0
9.9
Industrial production
1.5
2.2
2.3
1.5
1.5
4.0
2.0
2.3
2.3
Japan
Real GDP
0.6
0.7
1.1
1.7
-1.8
1.9
1.0
1.5
1.2
Private consumption
-1.2
0.5
0.9
1.9
-3.2
2.6
1.5
1.0
1.0
Business investment
1.6
1.4
2.5
3.2
5.2
-2.6
2.0
4.0
3.0
Residential construction
-2.7
0.6
2.3
6.8
-4.1
-2.9
2.0
2.0
2.0
Public investment
-1.9
-2.2
3.9
-9.4
-13.8
-2.9
2.0
10.0
5.0
Government consumption
1.2
1.8
0.8
0.7
2.9
3.0
0.8
0.8
0.8
Exports of goods and services
2.8
0.5
3.2
10.8
-3.1
2.4
-1.0
3.5
3.5
Imports of goods and services
0.3
-1.1
4.0
6.9
-4.3
-1.6
-5.0
5.0
5.0
Domestic final sales contribution
-0.4
0.8
1.2
1.4
-1.3
1.5
1.4
1.7
1.4
Inventories contribution
0.6
-0.3
-0.1
-0.5
-0.6
-0.3
-1.0
-0.1
-0.1
Net trade contribution
0.4
0.3
0.0
0.8
0.1
0.7
0.6
-0.1
-0.1
Consumer prices (%oya)
0.8
0.0
1.0
0.2
0.3
0.1
-0.4
-0.2
0.4
General govt. net lending (% of GDP, CY)
-4.9
-5.6
-5.2
Unemployment rate (%)
3.4
3.1
3.0
3.4
3.3
3.2
3.2
3.1
3.0
Industrial production
-1.2
-0.5
4.1
-3.8
0.1
-4.1
3.0
4.0
5.0
Memo: Global industrial production
1.2
1.6
1.6
1.4
0.5
1.3
2.3
3.1
3.2
%oya
1.3
0.8
0.8
1.3
1.8
2.5
Note: More forecast details for the G-3 and other countries can be found on J.P. Morgans Morgan Markets client web site. Source: J.P. Morgan
2017
1Q
2Q
2.0
2.3
4.0
5.0
4.0
5.0
41.6
1.2
3.0
4.8
2.4
-0.1
-0.3
2.6
2.3
1.9
2.0
2.0
3.5
5.0
3.5
5.0
45.5
1.2
3.3
4.8
2.2
0.1
-0.3
2.5
2.4
2.0
5.0
4.5
2.0
5.0
4.4
2.0
1.3
1.8
2.0
1.3
2.3
2.5
1.6
-0.4
0.0
1.5
1.0
1.3
1.8
2.0
1.3
2.3
2.5
1.6
-0.4
0.0
1.4
1.1
9.7
2.3
9.6
2.3
1.2
0.8
3.0
2.0
5.0
0.8
3.5
5.0
1.3
0.1
-0.1
0.7
1.0
0.8
2.0
3.0
2.0
0.8
3.5
4.5
1.1
0.0
-0.1
1.0
3.1
4.0
3.0
4.0
3.0
2.9
3.1
3.1
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Economic Research
Global Central Bank Watch
Current
rate
rate
(%pa)
05-07 avg
oya
2.27
-198
-6
2.27
2.17
2.15
2.20
2.19
2.27
Global
excluding US
Last change
Next mtg
Forecast
next change
Forecast (%pa)
Jun 16 Sep 16 Dec 16 Mar 17 Jun 17 Sep 17
2.87
-134
56
2.88
2.74
2.64
2.62
2.60
2.61
Developed
0.32
-307
0.31
0.25
0.35
0.44
0.44
0.55
Emerging
5.61
-139
-31
5.62
5.46
5.24
5.22
5.19
5.19
Latin America
9.59
-123
81
9.73
9.35
8.97
8.97
9.05
9.13
EMEA EM
6.76
36
-22
6.74
6.49
6.32
6.15
5.88
5.79
EM Asia
4.20
-151
-66
4.19
4.11
3.93
3.93
3.94
3.95
The Americas
2.22
-293
41
2.25
2.17
2.29
2.47
2.50
2.72
0.50
0.50
0.75
1.00
1.00
1.25
United States
Fed funds
0.50
-383
38
Canada
O/N rate
0.50
-313
-25
Brazil
SELIC O/N
14.25
-119
Mexico
Repo rate
3.75
-419
Chile
Disc rate
3.50
Colombia
Repo rate
7.50
Peru
Reference
Europe/Africa
Euro area
Refi rate
13 Jul 16
2Q 17 (+25bp)
0.50
0.50
0.50
0.50
0.75
1.00
50
29 Jul 15 (+50bp)
20 Jul 16
20 Jul 16 (-25bp)
14.25
13.50
12.75
12.75
12.75
12.75
77
Jun 16 (+50bp)
4.25
4.25
4.50
4.75
5.00
5.25
-100
50
Mar 17 (+25bp)
3.50
3.50
3.50
3.75
4.00
4.00
25
300
7.50
7.50
6.75
5.75
5.75
5.75
4.25
27
100
4.25
4.50
4.50
4.50
4.50
4.50
1.42
-226
-2
1.42
1.30
1.26
1.23
1.17
1.16
0.00
-290
-5
10 Mar 16 (-5bp)
21 Jul 16
4Q19 (+25bp)
0.00
0.00
0.00
0.00
0.00
0.00
0.50
-442
5 Mar 09 (-50bp)
14 Jul 16
3Q 16 (-25bp)
0.50
0.00
0.00
0.00
0.00
0.00
Norway
Dep rate
0.50
-258
-75
3Q 16 (-25bp)
0.50
0.25
0.25
0.25
0.25
0.25
Sweden
Repo rate
- 0.50
-302
-25
11 Feb 16 (-15bp)
6 Jul 16
On hold
-0.50
-0.50
-0.50
-0.50
-0.50
-0.50
0.05
-235
1 Nov 12 (-20bp)
30 Jun 16
3Q 17 (+20bp)
0.05
0.05
0.05
0.05
0.05
0.25
Hungary
3-m dep
0.90
-641
-60
1Q 18 (+25bp)
0.90
0.90
0.90
0.90
0.90
0.90
Israel
Base rate
0.10
-412
2Q 17 (+15bp)
0.10
0.10
0.10
0.10
0.50
0.75
Poland
7-day interv
1.50
-317
4 Mar 15 (-50bp)
3Q 16 (-25bp)
1.50
1.25
1.00
1.00
1.00
1.00
Romania
Base rate
1.75
-719
-50
3Q 17 (+25bp)
1.75
1.75
1.75
1.75
1.75
2.00
Russia
10.50
N\A
-100
14 Jun 16 (-50bp)
Sep 16 (-50bp)
10.50
10.00
9.50
9.00
8.50
8.25
South Africa
Repo rate
7.00
-123
125
7.00
7.00
7.25
7.25
7.25
7.00
Turkey
8.14
-787
64
8.00
8.00
8.25
8.50
8.00
8.00
3.16
-46
-54
3.15
3.03
2.90
2.89
2.88
2.88
1.75
-413
-25
3 May 16 (-25bp)
1.75
1.50
1.50
1.25
1.00
1.00
Asia/Pacific
Australia
Cash rate
New Zealand
Cash rate
Japan
Hong Kong
China
6 Jul 16
29 Jul 16
5 Jul 16
Jul 16 (-25bp)
Aug 16 (-25bp)
2.25
-506
-100
Jun 16 (-25bp)
2.00
1.75
1.75
1.75
1.75
1.75
- 0.10
-33
-18
28 Jan 16 (-20bp)
29 Jul 16
29 Jul 16 (-20bp)
-0.10
-0.30
-0.30
-0.30
-0.30
-0.30
Disc. wndw
0.75
-506
25
17 Dec 15 (+25bp)
0.00
14 Dec 16 (+25bp)
0.75
0.75
1.00
1.25
1.25
1.50
1-yr working
4.35
-175
-75
23 Oct 15 (-25bp)
4Q 16 (-25bp)
4.35
4.35
4.10
4.10
4.10
4.10
Korea
Base rate
1.25
-283
-25
11 Jun 15 (-25bp)
14 Jul 16
4Q16 (25bpbp)
1.25
1.25
1.00
1.00
1.00
1.00
Indonesia
BI rate
6.50
-318
-100
21 Jul 16 (-25bp)
6.50
5.00
5.00
5.00
5.00
5.00
India
Repo rate
6.50
-31
-75
5 Apr 16 (-25bp)
9 Aug 16
On hold
6.50
6.50
6.50
6.50
6.50
6.50
Malaysia
O/N rate
3.25
10 Jul 14 (+25bp)
13 Jul 16
13 Jul 16 (-25bp)
3.25
3.00
3.00
3.00
3.00
3.00
Philippines2
Rev repo
3.00
-404
On hold
3.00
3.00
3.00
3.00
3.00
3.00
Thailand
1-day repo
1.50
-219
3 Aug 16
4Q 16 (-25bp)
1.50
1.50
1.25
1.25
1.25
1.25
Taiwan
Official disc.
1.500
-102
2Q16 (-13bp)
1.38
1.38
1.38
1.38
1.50
1.63
29 Apr 15 (-25bp)
Source: J.P. Morgan. 1 Refers to trough end-quarter rate from 2009-present Effective rate adjusted on daily basis 3 BoJ targets 80tn/year expansion in monetary base and sets the IOER (O/N) as
policy guidance. Bold denotes move since last GDW and forecast changes. Underline denotes policy meeting during upcoming week. Aggregates are GDP-weighted averages. 4 The Philippines introduced a recalibrated reverse repo rate effective June 3 at a level of 3.00%
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Economic Research
Global Data Watch
Last week
4 weeks ago
2.4
2.2
2.3
2.1
2.3
2.2
2.2
2.2
%q/q, saar
May16
50.1
51.4
-0.1
0.1
0.1
1.5
2.2
Jun 16
51.2
52.1
0.2
0.3
0.2
-0.7
2.6
Note. Shaded values show forecasts computed by the Kalman filter estimates from the dynamic factor model.
Underlined values are our estimates based on available data and our judgment.
Source: J.P. Morgan, Markit, and national statistical agencies.
Against solid April activity data, our marks for May numbers
appear lower, especially in manufacturing output, where the
current tracking for May looks for a tepid 0.1% increase fol-
Nowcast
2.9
Jul 29
Jul 22
Jul 15
Jul 08
Jul 01
Jun 24
Jun 17
Jun 10
Jun 03
May 27
2.1
1.9
1.7
May 20
2.7
2.5
2.3
May 13
J.P. Morgan
Aug 19
2.3
2.2
Aug 12
2.4
2.2
Aug 05
J.P. Morgan
Global Nowcaster
May 06
1Q16
Source:J.P.Morgan
Nowcaster
(dashed line shows %m/m)
Actual/JPM
(%q/q, saar)
Jan 12
Dec 12
Dec 13
Dec 14
Dec 15
Source:J.P.Morgan
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Economic Research
Selected recent research
Japan
Japan: Fiscal package and wage gains too little to attain 2% CPI target, Jun 3, 2016
Japan: Abenomics 2.0 needs to step up further, May 27, 2016
Japan: What will happen if the VAT hike is delayed, May 20, 2016
Japan: Consumption looks better with the BoJ's index, May 13, 2016
Japan: Fiscal policy is back; is it helicopter money? Apr 22, 2016
Japan: Weak consumption induces fiscal stimulus, but story is not simple Apr 1, 2016
Why can't the RBA just ignore low inflation? Jun 17, 2016
EM Asia: Services lift offsetting manufacturing drift, Jun 17, 2016
India: Is the free lunch ending, at the "margin"? Jun 17, 2016
Australia: 3% growth can still be deflationary, Jun 10, 2016
China's proactive fiscal policy, Jun 10, 2016
China: A closer look at the undercurrents of FAI growth, Jun 10, 2016
Korea and Taiwan: Decoding the PMI divergence, Jun 10, 2016
Australia: Digesting the dwelling supply expansion, Jun 3, 2016
China: Recalibrating monetary policy, Jun 3, 2016
Tracking Koreas growth potential: Implications and limitations, May 27, 2016
Australia: Real inflation problem needs real exchange rate solution, May 13, 2016
China: A liquidity perspective on the onshore commodity boom, May 13, 2016
China: Labor market not immune from slowing growth, May 6, 2016
Hong Kong: Housing market to drive slowing in consumption, May 6, 2016
Korea: Revisiting FX macroprudential measures, May 6, 2016
Australia: GDP growth under the microscope, Apr 22, 2016
EM Asia exports: The unbearable lightness of G-3 demand, Apr 8, 2016
China: Signs of a moderate, near-term growth pickup, Apr 8, 2016
Korea: BoK encounters election headwinds, Apr 8, 2016
Australia: Upside and downside risks in business credit, Apr 1, 2016
Western Europe
The implications of Brexit, Jun 17, 2016
Brexit: Tracking the result in real time, Jun 17, 2016
Norway: Slight improvement in growth outlook, Jun 17, 2016
Germany: Labor market starting to show migration impact, Jun 3, 2016
Brexit: When is it safe to chill out about turnout? Jun 3, 2016
Riksbank sensitivity to the currency remains strong, Jun 3, 2016
Euro area: Construction is slowly beginning to recover, May 27, 2016
Greece: A summer lull, May 27, 2016
Nowcasting the Euro area business cycle and GDP, May 20, 2016
Brexit: Putting the BoE's policy dilemma under the microscope, May 20, 2016
Euro: Monetary transmission and growth resilience, May 13, 2016
Euro area: Big current account surplus hides net trade drag, May 13, 2016
UK: Euroscepticism after a vote to stay, May 13, 2016
Assessing the Brexit referendum polling: Remain by 4%, May 6, 2016
Greece: The contours of official debt relief, May 6, 2016
Brexit: Wealth effects are much larger than income effects, Apr 29, 2016
France: Taking stock of the reform agenda, Apr 29, 2016
Brexit: How much are "leave" fears weighing on UK growth? Apr 22, 2016
Spain: Solid but slower growth ahead as fiscal woes resurface, Apr 15, 2016
Helicopter money may come to a Euro area airport near you, Apr 8, 2016
Euro area: Governments take big chunk of oil windfall, Apr 8, 2016
Brexit: How would low turnout sway the vote? Apr 1, 2016
Latin America
Mexico: Potential GDP, output gap, and inflation, Apr 15, 2016
Brazil: More red ink, Apr 15, 2016
Note: Research notes listed have been published in GDW; Special Reports and Global Issues are stand-alone features, but may also have appeared in some form in GDW.
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Global Data Watch
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Economic Research
The J.P. Morgan View
Fixed Income
Bonds rallied sharply on Friday as it became clear that the
UK had voted to leave the European Union, as Brexit risk
had largely been priced out amid a shift in polls since the
weekend. 10Y yields ended the week around 5-6bp lower in
the US, UK and Germany.
As noted last week, we think the major medium-term impact
should be local and regional rather than global: we see UK and
Euro area growth 1.4% and 0.5% lower relative to our previous
baseline over the coming year, largely due to uncertainty effects.
In terms of central bank responses, we now see the BoE cutting
rates by 50bp by end-Aug, and the ECB cutting deposit rates by
10bp to -0.50% and extending QE purchases by 9M to end-2017
at its Sep meeting, and eventually to mid-2018 (around 1.2tn of
additional purchases at the current pace). But the full implications
of Brexit for the UK and the EU will take years to play out as negotiations over the terms of the UKs withdrawal take place.
Given the moves in German yields, with benchmark bonds
out to 7Y maturities trading below the ECBs deposit rate of 0.40% (thus ineligible for purchases), we think this exacerbates the scarcity effect for the ECB. Indeed, our European
rates colleagues estimate that only 75bn of German conventional bonds could be bought going forward before hitting the
33% issuer limit for eligible bonds. Unless the ECB tweaks
its QE framework, the Bundesbank looks set to run out of
bonds to buy by the end of this year. We re-enter 10s/30s
flatteners in Germany.
For the UK, the deterioration in the macro outlook with lower
growth and ongoing uncertainty, and our expectation of two
cuts (vs. money market curve pricing in one by 1Q17) means
that we think UK gilts can rally further from here. Our UK
rates colleagues expect 10Y gilt yields to reach 85bp by 3Q16
from 108bp currently. We thus enter longs in 10Y gilts.
Equities
Global equities sold off today in the aftermath of the Leave
vote in the UKs referendum on EU membership. Euro area
equities were down almost 9% in local currency terms today
underperforming other regions, weighed down by the uncertainty around economic and political outcomes. We remain
overweight UK vs. Euro area, on a currency hedged basis,
Credit
Credit spreads widened dramatically today, following yesterdays Brexit vote. In the US, HG widened by less than the
rally in underlying UST yields and HG bond prices are up
about half a percent as of writing. HY prices are lower and
spreads are wider on the 5% drop in oil prices. Euro and Sterling HG bond prices are down with spreads rising more than
the rally in government yields, simply as they are closer to
the shock and more dominated by financials.
Two months ago, we decided to hedge the duration risk of
our longs in credit in our long-short portfolio as we feared the
rising Fed warnings about its intention to hike rates. We retained a simple OW of Credit versus equities in our long-only
portfolio. Hedging the duration risk worked last month, but
has cost us dearly in recent weeks, and in particular today.
We now no longer forecast any Fed hiking until after the US
elections, and thus do not see as much need to hedge duration. We therefore choose to return to own US credit, both
HG and HY outright against cash instead of against USTs in
our long-short portfolio.
We exit long Euro HY and corporate hybrids as the benefit
of higher yield by carrying subordination risk should see
more reversal in Europe. We add long US HG vs. Euro HG,
vs. Euro HY and vs. Sterling HG, with short legs in
spreads, as US HG should continue to see strong demand
despite Brexit, while European and UK credit should widen
further. We are also OW non-financials vs. financials in
both the US and Europe, as financials are most exposed to
Brexit risk and will continue to underperform.
In our view, Sterling credit, particularly UK banks, will
have the most direct impact as a result of Brexit. We forecast
spreads for sterling HG to widen to 320bp, and senior financials to widen to 200bp. European credit should also see
10
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spreads widen. Euro HG and HY spreads should widen further after today to 135bp and 650bp. In CDS, we see iTraxx
Main and Crossover moving to 125bp and 500bp (Bailey et
al., Brexit Alert, Jun 23).
Foreign exchange
We have always thought that Brexit was a huge local issue
and a minor global one, so JPMs longstanding FX targets
in the event of Brexit were always more aggressive for
sterling than for other currencies. Ahead of the vote, when
GBP/USD was trading in the mid-1.40s, we targeted cable at
1.32 and EUR/GBP at 0.83 the day after Brexit, since the
currency seemed to price only an ordinary cyclical downturn
that triggered BoE easing rather than a proper regime change
that would permanently alter the UKs trade and investment
environment. We saw limited scope for retracement higher in
the subsequent weeks or months, given the array of new economic and political uncertainties that begin after the referendum.
EUR/USD contagion was expected to be significant in the
hours after the vote, but since the macro and political readacross should be limited, we put EUR/USD at 1.09. We expected gradual retracement to 1.12 in Q3 given a dovish Fed
and US Presidential election risks that would favor reserve
assets like the euro, yen and gold. USD/JPY was expected to
decline to 101 intra-day, with limited retracement afterwards
in view of Fed policy, and relatedly, the ineffectiveness of
BoJ easing. Even if the MoF/BoJ were to intervene, a
USD/JPY spike would probably reverse within a week. We
thought highly-cyclical currencies like commodity FX and
emerging markets might fall 2% to 3% on the day but
should stabilize the following week since the hits to UK and
Euro area growth would be too small collectively to affect
global demand or commodity balances.
Today almost all currencies have met these initial projections, and since there is no change to the macro and policy
context we expect to prevail over the next several months,
forecast changes are minor. With USD/JPY, we lower the
Q3 target from 106 to 103 as a mark-to-market rather than a
Commodities
Despite the volatility surrounding the UKs decision to leave
the European Union, international benchmark Brent crude
prices remain close to the $50/bbl mark for now. Oils 5%
drop overnight has lagged our expectations which were for a
more meaningful pullback short-term in this eventuality. Further price weakness in the days ahead, as markets adjust to
the new reality, could become a reality if the large speculative
position in Brent futures is aggressively unwound. Such a
dramatic position-squaring exercise would undoubtedly
weigh on oil prices. Nevertheless, the bigger picture outlook
for oil has deteriorated only marginally and barring more
meaningful deterioration in the growth outlook we regard this
pullback in oil prices will prove short-lived. Counterintuitively, the rise in uncertainty could yet dampen the nascent recovery in oil companies desire to increase spending,
with the consequence of further extending the downswing in
company capex plans. This would, in time, be positive for oil
prices rather than a quicker recovery in capex budgets. Consequently, we would prefer to remain long oil than short on a
six-month horizon and would look to scale into any further
price weakness towards $42-45/bbl on Brent and WTI (Martin et al., Oil Market Weekly, Jun 24).
Heading into the UK referendum, we were looking for gold to
trade up to $1,350/oz to $1,400/oz today in the event of a
vote for Brexit. Gold did reach an intra-day peak just shy of
$1,360/oz shortly before 5:00 am London when it became
increasingly clear that the vote would come in for a Leave
outcome. Since then, it has retraced and has broadly hovered
between $1,310/oz and $1,330/oz. Looking ahead, over the
coming days we envisage further retracement, mostly due to
likely profit taking, given the very long net managed money
position in CME gold and have chosen to tactically take
profit on our long Dec16 CME gold trade recommendation. Further out, however, yesterdays vote for Brexit underlies our medium- to long- term bullish view on gold as we
move throughout 2H2016 and 2017. In addition to the fall out
surrounding Brexit, the recent more dovish shift in Fed policy, yield-diminishing unconventional monetary policy around
the world, and a business cycle that is rapidly aging, keeps us
generally constructive on gold and we would look to re-enter
a long position at more attractive levels in the future (Kaneva
et al., Metals Weekly, Jun 24).
11
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The J.P. Morgan View
Investment themes
Current
Sep-16
Dec-16
Mar-17
Jun-17
0.39
0.50
0.75
1.00
1.00
10-year yields
1.58
1.65
1.70
1.75
1.80
Refi rate
0.00
0.00
0.00
0.00
0.00
10-year yields
-0.05
-0.15
-0.10
-0.05
0.00
United Kingdom
Repo rate
0.50
0.00
0.00
0.00
0.00
1.09
0.85
0.85
1.00
1.20
Japan
10-year yields
Overnight call
rate
-0.10
-0.30
-0.30
-0.30
-0.30
10-year yields
-0.20
-0.20
-0.20
-0.10
-0.05
GBI-EM - Yield
6.42
6.64
Emerging markets
Credit Markets
Current
Dec-16
176
160
100
135
642
650
465
650
379
350
Foreign Exchange
383
375
Current
Sep-16
Dec-16
Mar-17
Jun-17
EUR/USD
1.11
1.13
1.15
1.17
1.18
USD/JPY
102
103
103
102
101
GBP/USD
1.36
1.29
1.30
1.32
1.33
AUD/USD
0.75
0.72
0.70
0.67
0.65
USD/BRL
3.38
3.70
3.90
3.95
4.00
USD/CNY
6.62
6.63
6.75
6.75
6.70
USD/KRW
1179
1200
1240
1240
1220
USD/TRY
2.92
3.00
3.05
3.10
3.15
117.0
118.1
118.6
117.9
116.8
Commodities
Quarterly Averages
16Q4
17Q1
Current
16Q3
Brent ($/bbl)
48
50
50
50
55
Gold ($/oz)
1320
1200
1250
1330
1300
4781
4300
4500
4300
4400
US
16.9%
11.6%
7.5%
2.0%
8.5%
-0.1%
-1.1%
1.7%
21.8%
18.3%
1.1%
OW
OW
N
UW
N
N
OW
N
N
N
Europe
17.4%
7.3%
4.4%
-5.9%
3.8%
-7.5%
-9.9%
-4.3%
-6.4%
1.7%
-1.4%
N
UW
UW
OW
N
OW
N
N
OW
OW
Japan
-21.2%
-19.0%
-12.0%
-20.3%
-7.9%
-7.8%
-26.2%
-16.5%
0.8%
-22.7%
-15.2%
OW
N
N
UW
UW
UW
OW
N
UW
OW
Tactical overview
Direction
Country
Asset
allocation Short risk
Credit & CO
OW vs EQ and
Bonds
Equities
UW
Bonds
UW and
NZ, AU vs
small short EU PeInflation linkers
duration
riphery
Credit
OW spreads
US on
yield
FX
Flat USD,
Short
commodity
FX
Comds
OW
17Q2
EM$
17.8%
13.5%
0.2%
2.7%
8.5%
-1.5%
4.1%
7.1%
5.7%
8.0%
6.4%
UW
OW
OW
UW
OW
N
UW
OW
UW
UW
Sector
HY
Long Gold,
Energy. Short
Metals
12
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Economic Research
The UK votes to leave the EU
area, reflecting the need for regulatory control and the sectors
high share in value added. If the UK were to take unilateral
action that was perceived as unfriendly, negotiations could get
very difficult, and in the extreme the UK could end up trading
with the EU under WTO rules.
The UK will also have to negotiate new trade agreements with
the rest of the world. At the moment, UK trade with other
countries is governed by over 50 bilateral, free-trade agreements negotiated by the EU. These will cease to apply once
the UKs membership of the EU ends. Commentators generally assume that it takes time to negotiate trade agreements, so
it could easily take more than a decade to replace all of these
agreements. Importantly, third countries are unlikely to want
to agree a bilateral trade deal with the UK until the UKs trade
relationship with the rest of the EU is settled. Until new bilateral deals are agreed, the UK will trade with third countries
under WTO rules once it has left the EU.
There will be other political consequences flowing from the
decision to leave. In particular, the unity of the UK itself is
likely to come under pressure. The SNP is likely to press for
another referendum on Scottish independence before the UK
formally leaves the EU. Although the decision to hold a referendum lies in the hands of the central government in Westminster, denying Scotland another referendum is likely to
cause support for independence to build. In addition, the possible reinstitution of border controls in Ireland would likely
create difficulties in managing relations between north and
south of the border.
Growth: Uncertainty around the UKs future trading relationships, with both the EU and the rest of the world, is likely to
depress firms employment and investment, and limit household spending. We have created a composite indicator of uncertainty and calibrated how uncertainty typically affects the
UK economy. Our judgment is that the uncertainty caused by
this referendum will weigh on growth by over 1%-pt over the
coming quarters, which will push actual growth below 1%
(Table 2 summarizes the range of estimates). Although sterling is likely to fall in value, recent experience suggests that
UK corporates are not well positioned to take advantage of
currency weakness by increasing their investments and building market share. In the meantime, import price increases
would likely be passed through to households, compressing
real income growth. We would expect some of the uncertainty
drags on growth to dissipate as it becomes clear that the terms
of the EU exit will take a number of years to negotiate. Table
1 summarizes the changes to our growth forecasts, while Table 2 summarizes the range of estimates on the short term
impact of the referendum decision on UK growth.
14
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UK
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
Remain
1.6
1.0
2.5
2.5
2.0
2.0
Leave
1.6
1.0
0.5
0.5
1.0
1.5
Euro area
Remain
Leave
2.2
2.2
1.3
1.3
1.8
1.3
2.0
1.3
1.8
1.3
1.8
1.3
-2.7
-1.6
Source: HM Treasury and stated above. *This refers to the most probable outcome rather than
the average of best and worst case scenarios
The longer-term consequences for economic activity will depend critically on what new trading relationships are established, both with the EU and with the rest of the world. Most
likely, these will be more restrictive than current arrangements, leading to some long-run decline in the level of economic activity relative to the situation of the UK having remained in the EU; Table 3 summarizes the range of published
estimates.
Policy: The Bank of England has argued that the policy consequences of a decision to leave are not clear cut, because
even as growth slows and unemployment rises, the fall in sterling will lift inflation. Nevertheless, we expect the Bank of
England to be very active, initially in providing verbal reassurance that price stability and financial stability will be
maintained and subsequently in delivering actual monetary
easing. Even though the labor market is relatively tight, we
expect the real-economy effects to dominate the Bank of Englands thinking. Thus, we now expect a cumulative 50bp easing by the end of August (our central case is 25bp cuts in July
Sources: HM Treasury and stated above, *This refers to the most probable outcome rather than
the average of best and worse case scenarios, **These estimates refer to GDP per capita
15
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The UK votes to leave the EU
Spillovers elsewhere
A UK decision to exit the EU would also be a meaningful
shock to the rest of Western EuropeSweden, Switzerland,
Denmark, and Norway. These countries are very sensitive to
upward pressure on their currencies, and they would respond
either to sustain the current peg in Denmark or to limit appreciation in Sweden and Switzerland. Depending on the extent
of the pressure, these countries could see some combination
of rate cuts, asset purchases, and FX intervention. Limits on
rate cuts or asset purchases due to concern about pressure on
bank profitability or market liquidity are not as relevant as
elsewhere. In Norway, the central bank could act to counteract
a tightening of financial conditions.
There will be other political consequences of the UKs departure. The EU will lose a large member state inclined to an
economically-liberal, market-friendly, free-trade approach.
Without the UK, the EU risks emphasizing solutions that involve greater centralization, protectionism, and harmonization. The UKs departure is also likely to change the balance
of power between the Euro-ins and Euro-outs. The Euro-outs
will lose a sizable ally.
We note the UKs referendum has provided a vivid demonstration to politicians in the EU of something they already
knewthat the legitimacy and popularity of the EU project is
not at all secure in the eyes of voters. Although the intensity
of the UK debate is not shared universally, many of its themes
echo around the region. To date, the reaction to this challenge
has been for European leaders to (a) avoid referenda on EUrelated issues, (b) recognize the political limits to further steps
16
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Global Data Watch
Units
1st print
RMSE for
final print
000000s
%chg
index
index
index
%chg
%chg
%chg
index
000000s
%chg
000s
000s
%chg
index
index
index
000s
000s
%chg
%chg
%chg
index
%chg
index
%
%chg
0.49
0.21
0.4
3.9
5.1
0.87
6.60
2.47
9.5
0.22
0.75
50
69
0.45
1.9
1.4
2.3
47
65
4.83
0.14
0.35
9.8
0.54
8.7
0.17
0.56
0.21
0.25
1.4
2.0
1.6
1.14
6.50
2.80
3.2
0.64
1.47
32
26
0.42
1.1
0.0
0.5
44
97
3.35
0.21
0.54
3.9
0.46
7.9
0.09
0.32
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US: Which indicators are most
useful on first print?
0%
20%
40%
60%
80%
100%
Construction spending
New home sales
Personal income
Consumer credit
Pending home sales
Durable goods orders
Richmond Fed manufacturing
Factory orders
Existing home sales
Consumption spending
Capacity utilization
Unemployment rate
Industrial production
Housing starts
Retail sales
Housing permits
Wholesale inventories
Business inventories
Nonfarm payrolls
Auto sales
Chicago PMI
Philly Fed manufacturing
Conference Board confidence
Empire State manufacturing
ISM manufacturing
NAHB sentiment
Michigan sentiment
Source: J.P. Morgan. All indicators measured with transformation that corresponds to growth.
1.0
Payroll forecast
Chicago Fed NAI forecast
0.9
0.8
0.7
Auto
sales
(m1)
IP (m1)
Durables
(m1)
Auto
sales
(m2)
IP (m2)
Durables
(m2)
Typical progression of data releases over 2 months (not all reports labelled)
Source: J.P. Morgan
We thank Natalie Kozlova, an intern on our team, for assistance with this report.
18
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to preserve price stability, while the immediate aim is to safeguard an appropriate monetary policy transmission and the
singleness of monetary policy across the region. But, this
involves purchases of government bonds in Euro area countries experiencing difficulty, that are in ESM adjustment programs, and whose yields have been pushed to high levels by
increased risk premia. In addition, the ECB set no ex ante
limit on the scale of any purchases and accepted the same
(pari passu) treatment as private investors should there be a
restructuring of the bonds.
In its initial opinion in February 2014, the GFCC raised numerous objections to OMT. It questioned whether OMT was
really aimed at maintaining price stability, despite the ECBs
claim. It suspected that the real aim was to prevent a breakup
of EMU, even though decisions about EMU membership are
for governments to make. It also argued that targeted purchases of bonds of a country in an adjustment program and whose
creditworthiness is being questioned by financial markets is
functionally equivalent to economic assistance. This is because the aim is to reduce bond yields, which helps with the
countrys financing. In the GFCCs initial view, this violates
the prohibition on monetary financing, also because the
ECBs pari passu status indicates preparedness to participate
in a debt restructuring, no minimum rating threshold was set
for the purchases, the bonds are held to maturity, and no exclusion period was set around primary issuance.
While the GFCC made its own view very clear, it still referred
the case to the ECJ. In June 2015, the ECJ rejected the objections and ruled that OMT was fully compatible with the
TFEU. The ECJs arguments were in three parts:
ECJ: OMT is monetary policy. The ECJ took the ECBs
word about the objective of OMT, without questioning it. In
fact, it even argued that it was important for the ECB to fix
any impairment to the transmission mechanism, as otherwise it would not have the tools to maintain price stability.
And as monetary policy needed to be effective across the
region, targeted purchases were allowed to tackle localized
impairments, even if this had some side-effects.
ECJ: OMT is proportionate. Even if a chosen policy tool
falls within the area of monetary policy, the ECJ ruled that
its use must be necessary and proportionate to the problem.
But, due to the technical nature of monetary policy, it
was willing to trust the ECBs assessment of this. In doing
so, it turned many of the GFCCs arguments upside down,
arguing that features of OMT that the GFCC had concerns
over were actually enhancing OMTs effectiveness.
ECJ: OMT is not monetary financing. The GFCC worried that any reduction in bond yields could reduce the
pressure on a government to make required adjustments.
But, the ECJ was more tolerant of side-effects, as long as
19
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German Court's OMT ruling
strengthens ECB's policy tools
20
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2014
-19.5
-5.2
-11.3
-4.6
56.9
28.9
61.5
-6.7
-12.5
4.4
24.3
12.4
16.3
3.9
11.7
18.7
7.0
0.2
-0.3
4.4
1Q15
-5.2
-7.0
-4.6
-3.4
10.1
4.0
13.5
-1.1
-1.8
1.2
5.4
2.9
3.2
0.2
0.7
4.1
3.4
1.7
-0.1
0.1
2015
-18.8
-6.4
-18.1
-13.9
38.1
14.2
52.0
-4.1
-5.8
5.1
19.4
7.7
11.9
4.2
9.5
9.8
0.3
2.1
-0.2
0.4
1Q16
-3.4
-5.6
-3.7
-3.1
7.1
1.9
10.2
-0.6
-1.0
1.3
3.3
3.6
4.6
1.0
1.8
2.2
0.4
-2.1
0.1
0.1
2016f
-15.0
-5.5
-15.1
-11.6
31.0
10.6
42.6
-3.5
-5.0
5.1
15.0
7.0
10.0
3.0
7.0
8.5
1.5
1.0
0.0
0.0
98.9
55.1
53.7
34.4
46.4
21
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Colombia
Transfers
-5
-15
-20
Source: BanRep
Services
Income
Goods
08
15
10
5
Net portfolio
0
-5
Source: BanRep
08
10
12
14
16
-10
10
12
14
16
% of GDP
50
45
40
35
30
25
20
15
10
5
0
07
08
Govt external
debt (bonds +
loans)
Private loans
Equity holdings
Pvt external debt
09
10
11
12
13
14
15
16
All told, the current account deficit remains wide, but a gradual correction is underway. Portfolio financing is more important, but for now Colombia has ample access to international markets, as well as support from multilaterals. That
said, markets may lose patience with Colombia, especially if
poor management of the fiscal accounts leads to downward
ratings pressure. Notably, S&P put a negative outlook on its
BBB rating for Colombia earlier this year, with focus squarely
on the governments pledge to deliver revenue-enhancing
structural fiscal reform to stabilize debt and aid in dampening
the CAD. Leading us to the fiscal side
22
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slippage,
The main news in the release of the Fiscal Plan (Marco Fiscal) was the governments acknowledgment that it would
miss its fiscal target this year and the upward adjustment of
next years target, taking advantage of the space afforded by
Colombias Fiscal Rule. The 2016 central government fiscal
deficit is now seen at 3.9% of GDP, up from 3.6%; for 2017
the deficit is projected at 3.3% of GDP, up from 3.1% originally planned in last years Marco Fiscal.
The government passed on an opportunity to recognize fiscal
slippage last year when the lower oil price and growth outlook
(vis--vis the 2015 Plan) implied clear downside risks for the
3.6% deficit target. Indeed, the Fiscal Rulewhich targets a
structural deficit based on long-term growth and oil
price/output parametersallows an additional cyclical deficit. This means Colombia can run a higher overall fiscal deficit in 2016 due to low oil prices, low oil output and weak
GDP growth and still comply with the Rule (Table 2).
Table 2: Colombia's central government accounts (% of GDP)
Total revenue
Oil-related
Non-oil
Total Expenditure
Current
Investment
Other
Balance (total)
Primary balance
Fiscal Rule accounting
Structural Revenues
Non-energy
Energy
Cyclical Revenues
Tax (ex-oil and mining)
Energy
Structural balance
Cyclical balance
'12
16.1
2.7
13.4
18.4
15.1
2.8
0.5
-2.3
0.1
'13
16.9
3.4
13.5
19.3
15.9
3.2
0.2
-2.4
-0.1
'14
16.7
2.6
14.1
19.1
16.1
3.0
0.0
-2.4
-0.2
'15
16.1
1.1
15.0
19.2
16.1
3.1
0.0
-3.0
-0.5
'16e
15.0
-0.1
15.1
19.0
17.0
1.9
0.0
-3.9
-0.7
'17f
14.8
0.0
14.9
18.2
17.0
1.1
0.0
-3.3
-0.1
16.0
13.4
2.7
0.1
0.0
0.1
-2.4
0.1
17.0
13.8
3.2
0.0
-0.1
0.1
-2.3
0.0
16.8
14.8
2.0
-0.1
-0.1
0.0
-2.3
-0.1
16.9
15.3
1.6
-0.8
-0.3
-0.5
-2.2
-0.8
16.8
15.3
1.5
-1.8
-0.4
-1.4
-2.1
-1.8
16.1
n/a
n/a
-1.3
n/a
n/a
-2.0
-1.3
-2.7
Official target
-3.3
-3.9
Permitted by rule
13 14 15 16 17 18 19 20 21 22 23 24 25 26 27
Source: Finance Ministry
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Colombia
Expenditure
18
Unidentified
Revenues
16
Revenues
2.4%
14
12
10
12
14
16
18
20
22
24
26
So is the government throwing in the towel on a 2016 tax reform, with revenues for 2017? We dont think so. While no
2016 revenues from tax reform are included in the plan, we
believe that the 0.8%-pt of GDP reduction in primary expenditure, focused solely on investment, will be a bitter pill
for legislators to swallow. From a political negotiation standpoint, the government was aware that some politicians bristled at the unnecessarily fiscally hawkish stance embodied
by the previous insistence on the original deficit targets (3.6%
and 3.1% of GDP in 2016 and 2017, respectively). The governments concession of wider targets for 2016-17 now may
be a sign to the Congress of willingness to be somewhat flexible, despite some costs in terms of market credibility. However, even with this wider deficit, the government must still
cut expenditures to meet the new targets (Figure 6).
In this context, the Congress could understand that the only
way to spend more in 2017, while sticking with the new deficit target, will be to pass the tax reform this year. Indeed, the
Marco Fiscal clearly states that, if as a consequence of the
reform additional revenues are realized in 2017, it will be
necessary to include them in a revision of the financial plan
for that year. For legislators, this may appear to be a carrot
of additional spending.
% of GDP
18
16
12
14
16
18
20
22
24
26
42.6 43.1
40
'16 plan
35
34.5
30
'15 plan
'14 plan
25
20
02
04
06
08
10
12
14
16
18
20
22
24
26
The government expects growth to average 4.3% over 201722. This is not a terribly aggressive assumption if the peace
deal prospers and the 4G highway infrastructure process unfolds as planned. But it is not overly conservative either, especially if uninspired tax reform leads to ratings downgrades
and a negative confidence shock. If the financing of twin deficits is not forthcoming, then their correction will necessarily
be faster and more abrupt, leading to hard landing risks. This
is not our base case, and we think a sufficiently robust tax
reform can be approved this year, allowing Colombias ratings to remain firmly in the investment grade space. However,
the stakes are high, as still-wide twin deficits mean Colombia
can ill afford a loss of market confidence.
24
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30
Real exports
20
Strong domestic demand since 3Q15 amid sluggish external demand bucks historical trend
10
We expect EM Asia ex. CN/IN growth will revert a trajectory underpinned by external demand weakness
-10
03
05
07
09
11
13
15
17
Given that robust fiscal spending has buoyed domestic demand, one of markets primary concerns is the sustainability
of the current level of fiscal stimulus. Absent further fiscal
spending gains, domestic demand likely will slow toward the
external demand trend in due course, reviving the historical
relationship. Therefore, beyond the near-term investment
boost, we expect EM Asia ex. CN/IN growth to weaken
again.
1.0
0.5
0.0
-0.5
-1.0
03
05
07
09
11
13
15
17
3.0
Consumption
Fixed investment
3.0
2.0
2.5
1.0
2.0
0.0
10
12
14
16
25
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EM Asia
10
8
Consumption
6
4
2
0
-2
-4
PH
TH
KR
ID
MY
SG
TW
HK
2.0
Non-construction
Construction
0.8
1.5
0.5
1.0
0.3
0.5
0.0
0.0
10
12
14
16
Others
Construction
Machinery
2.5
1.0
Government
2.0
0.5
1.5
0.0
10
12
14
16
1
0
-1
-2
PH
TH
KR
ID
TW
MY
SG
HK
26
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United States
This past weeks reports on May new and existing home sales
confirm that falling mortgage rates are boosting housing demand in 2H16 (Figure 2). The May durables report indicates
that manufacturing was still stuck in a rut, although early June
manufacturing surveys show hints of improvement. Other
indicators were generally positive for growth, including the
latest low-side reading on initial jobless claims.
S&P 500
124
122
2080
120
2010
118
1940
Dollar
1870
1800
Jul 15
116
114
112
Sep 15
Nov 15
Jan 16
Mar 16
May 16
Jul 16
Source: Standard and Poor's, J.P. Morgan; latest values at press time
0.57
0.54
3.5
3.7
0.51
3.9
0.48
30-year mortgage rate
(inverted scale)
0.45
0.42
0.39
2014
percent
2015
2016
4.1
4.3
4.5
2017
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United States
5.5
7.5
7.0
6.5
5.0
Months' supply on
the market
4.5
6.0
5.5
5.0
4.5
4.0
2012
4.0
2013
2014
2015
2016
Sa
53.5
52
51.5
51
49.5
50
47.5
49
48
Jan 15
45.5
Apr 15
Jul 15
Oct 15
Update on manufacturing
53
from a more representative national sample, increased 0.7%pt to 51.4, also a relatively low reading for this survey. Most
key measures of activity rose in the PMI but export orders
were the standout, up 2.8%-pts to 52.5, its highest level since
September 2014 (Figure 4). There will be keen interest in
whether the final June survey shows any early impacts of the
Brexit vote on export and overall orders.
Jan 16
Apr 16
4-week
average
300
290
280
270
260
Weekly
250
240
Oct 15
Dec 15
Feb 16
Apr 16
Jun 16
28
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Feb
-64.0
2.1
2.1
Mar
-56.0
-1.9
-5.6
Apr
-57.5
2.4
2.5
May
-56.9
0.5
0.0
growth for the quarter. We do not expect very large revisions to the main components of growth based on the economic indicators that have been released since the BEAs
May 27 report showing 1Q growth at 0.8%. But on net, we
expect the revisions to be slightly positive. We also anticipate that the composition of growth in 1Q will be favorable, with growth in final sales revised higher and the
change in inventories revised lower.
Tue
Jun 28
9:00am
Business activity
Incoming new business
Employment
Business expectations
Input prices
Prices charged
Backlogs of work
May
Jun
51.3
50.9
54.0
63.3
51.9
50.5
48.5
52.8
52.3
53.1
64.1
52.8
50.1
49.8
51.3
52.0
52.5
60.7
53.3
51.3
47.8
51.5
Jun 28
8:30am
Real GDP
Final sales
Domestic final sales
Consumption
Equipment
Intellectual property
Nonres. structures
Residential investment
Government
Net exports (pct.pt.contr.)
Inventories (pct.pt.contr.)
Core PCE price index
(%oya)
GDP chain price index
(%oya)
Adj. corporate profits
(%oya)
4Q15
1.4
1.6
1.7
2.4
-2.1
-0.1
-5.1
10.1
0.1
-0.1
-0.2
1.3
1.4
0.9
1.1
-7.8
-11.5
Adv
1Q16
0.5
0.9
1.2
1.9
-8.6
1.7
-10.6
14.9
1.2
-0.3
-0.3
2.1
1.7
0.7
1.3
Sec
1Q16
0.8
1.0
1.2
1.9
-9.0
-0.1
-8.9
17.2
1.2
-0.2
-0.2
2.1
1.7
0.6
1.2
0.3
-5.7
Thi
1Q16
0.9
1.2
1.2
1.8
-9.4
1.6
-8.1
16.4
1.3
-0.1
-0.3
Jan
5.7
0.8
5.0
5.4
Feb
5.4
0.7
4.7
5.3
Mar
5.4
0.9
4.7
5.2
Apr
5.3
0.4
Index, sa
Apr
Tue
Jun 28
10:00am
Consumer confidence
Sa
Conference Bd index
Present situation
Jobs plentiful
Jobs hard to get
Labor mkt diff
Expectations
Mar
96.1
114.9
25.4
25.2
0.2
83.6
Apr
94.7
117.1
24.2
22.8
1.4
79.7
May
92.6
112.9
24.3
24.4
-0.1
79.0
Jun
95.0
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Wed
Jun 29
8:30am
Economic Research
United States
Personal income
Thu
Jobless claims
Jun 30
8:30am
Thousands, sa
Personal income
Wages & salaries
Consumption
Real consumption
PCE price index
Core
Mkt-Based Core
Core (%oya)
Mkt-Based Core (%oya)
Saving rate
Feb
0.1
0.0
0.2
0.3
-0.1
0.18
0.2
1.7
1.6
5.5
Mar
0.4
0.4
0.0
0.0
0.1
0.06
0.0
1.6
1.5
5.9
Apr
0.4
0.5
1.0
0.6
0.3
0.17
0.1
1.6
1.4
5.4
May
0.2
0.2
0.4
0.3
0.2
0.18
1.7
5.2
Jun 29
10:00am
Feb
109.0
3.4
5.0
Mar
110.7
1.6
3.2
Apr
116.3
5.1
2.9
Apr 16
Apr 23
Apr 30
May 7
May 14
May 21
May 28
Jun 4
Jun 11
Jun 18
Jun 25
May
114.0
-2.0
2.7
Continuing claims
Wkly
4-wk avg
248
257
274
294
278
268
268
264
277
259
265
2129
2124
2165
2153
2160
2172
2112
2162
2142
261
256
258
268
276
279
277
270
269
267
266
2157
2141
2138
2143
2151
2163
2149
2152
2147
Insured
Jobless,%
1.6
1.6
1.6
1.6
1.6
1.6
1.5
1.6
1.6
Composite1
New orders (30%)
Output (25%)
Employment (20%)
Sup. del. (15%, inv.)
Stks of purch (10%)
New export orders
Backlogs of work
Output prices
Input prices
Stocks of finished goods
Quantity of purchases
ISM-weighted composite2
Apr
50.8
52.0
50.3
50.2
47.8
47.9
48.6
47.7
49.3
51.2
48.9
48.6
50.5
May
50.7
51.7
49.4
51.3
48.0
48.1
49.7
48.1
50.1
52.2
50.7
50.6
50.5
Flash
Jun
51.4
52.4
50.9
56.6
47.4
47.4
52.5
55.6
54.7
58.5
50.8
58.7
56.8
Final
Jun
51.5
1. Weights in parentheses
2. Attributes ISM-composite weights (equal weights) to corresponding PMI
30
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The headline figure and many of the underlying details improved in the flash June report, suggesting that the manufacturing sector may be starting to turn the corner following a fairly
weak period. If this is the case, we should see the headline continue to improve. Modest upward revisions have also been fairly
common in the PMI data over the past year or so.
Fri
Jul 1
10:00am
Fri
Jul 1
10:00am
Jul 1
Apr
50.8
54.2
55.8
45.5
49.2
49.1
52.5
50.0
59.0
May
51.3
52.6
55.7
45.0
49.2
54.1
52.5
50.0
63.5
Jun
51.0
%m/m, sa
Feb
1.4
1.8
2.6
0.9
0.5
Mar
1.5
2.3
3.2
1.3
-0.6
Apr
-1.8
-1.5
-1.5
-1.5
-2.8
May
0.2
-0.1
-0.2
0.0
1.0
Mar
16.5
3.5
13.0
5.1
7.9
Apr
17.3
3.8
13.5
5.0
8.5
May
17.4
4.0
13.3
5.1
8.2
Jun
17.3
Mar
5.36
5.7
4.0
4.4
4.3
5.1
Apr
5.45
1.7
4.9
4.7
4.7
6.3
5.43
1.3
4.7
May
5.55
1.8
4.9
5.6
5.53
6.3
4.7
4.7
4.7
Fri
Mar
51.8
55.3
58.3
47.0
48.1
50.2
52.0
49.5
51.5
Economic Research
Global Data Watch
Feb
5.7
0.5
Mar
6.1
0.7
6.2
0.8
Apr
6.1
0.5
5.9
0.2
Apr
May
Jun
50.8
52.0
50.3
50.2
47.8
47.9
48.6
47.7
49.3
51.2
48.9
48.6
50.5
50.7
51.7
49.4
51.3
48.0
48.1
49.7
48.1
50.1
52.2
50.7
50.6
50.5
51.0
51.4
52.4
50.9
52.0
47.4
47.4
52.5
51.9
51.8
52.7
49.0
51.4
51.0
1. Weights in parentheses
2. Attributes ISM-composite weights (equal weights) to corresponding PMI series
31
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This latest reading is not especially strong, but the PMI had
been trending lower for over a year, and the June report could
be a sign that we are finally starting to see activity improve in
the sector. The improvement in the PMI was fairly widespread in June, and included gains reported in the measures of
new orders, output, and employment.
The export orders index also jumped 2.8pts to 52.5, reaching
its highest level since September 2014. While one month of
data does not necessarily make a trend, we have been expecting the drag from the stronger dollar to fade.
New home sales (Jun 23)
Total (000s,saar)
%m/m
%oya nsa
Months supply
Median price (%oya)
Mar
531
-1.3
8.7
5.5
1.5
522
-0.6
6.5
5.6
1.6
Apr
619
16.6
27.1
4.7
9.7
586
12.3
18.8
4.9
9.4
May
565
-8.7
11.4
551
-6.0
8.5
5.3
1.0
Apr
3.4
0.5
-0.6
0.5
0.4
-0.1
3.3
-0.4
0.4
0.6
-0.4
May
-0.2
0.5
0.0
-0.2
-0.3
Mays durable goods report was weaker than expected. Total durable goods orders declined 2.2%, with much of the
decline concentrated in a 34.1% drop in orders for military
aircraft. But durable goods orders excluding transportation
still declined 0.3%. Orders and shipments for the core capital goods categories, which are important source data for
GDP, were also disappointing, with orders down 0.7% and
shipments down 0.5%. However, with modest upward revisions to April, our already-pessimistic forecast for core
capital goods shipments, and a slight upward surprise on
aircraft shipments, implications for GDP tracking are
small. We now look for equipment spending to contract
at a 1.2% rate in 2Q, a modest upward revision to our 2.1% forecast before the report. We leave our forecast
for 2Q GDP growth at 2.0% and our tracking of 1Q
GDP growth at 0.9%.
Consumer sentiment (Jun 24)
New orders
Ex transportation
Nondef cap. gds ex air
Shipments
Nondef cap. gds ex air
Inventories
Economic Research
United States
-2.2
-0.3
-0.7
-0.5
-0.3
May
94.7
109.9
84.9
Pre
Jun
94.3
111.7
83.2
2.4
2.5
156
2.4
2.3
155
Fin
Jun
94.0
93.5
110.8
82.4
2.6
2.6
154
Sources: ADP/Moodys Analytics, BEA, BLS, Census Bureau, Conference Board, Department of
Labor, Federal Reserve Board, ISM, J.P. Morgan forecasts, NAHB, NAR, NFIB, NY Fed, Markit,
Philadelphia Fed, Standard & Poors, University of Michigan, US Treasury
32
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Economic Research
Global Data Watch
The May payroll report showed that only 38,000 jobs were
added during the month, a large disappointment relative to
expectations and the preceding trend. The first print of the
May payroll count was based on a smaller sample of firms
than used in the first print of the May reports in recent years,
raising the possibility that the revision to the May data released in the June payroll report adds to the currently-reported
May figure. While we find that there is a relationship between
the collection rates used in the payroll report and the magnitude of subsequent revisions, we do not think that the May
data are likely to be revised very meaningfully.
Collection rates represent the share of reports received to derive a monthly estimate of the payroll data relative to the total
number of actively reporting sample units on the registry. It is
intuitive that higher collection rates correspond with more
modest revisions in the payroll data; in Figure 1, we see that
collection rates used in the first prints of the payroll data have
tended to rise over time while the magnitude of revisions to
the payroll count following the first print has tended to decline. But while collection rates have generally trended higher, the collection rate for May 2016 (74%) was the lowest
initial response rate for May since 2012.
Figure 1: CES collection rates and first revision to payroll data
% of reports received compared to total sample
90
% of payroll employment
0.4
80
0.3
70
50
60
70
CES collection rate, % (1981-present)
80
90
60
0.2
50
Absolute value of
first revision
40
30
81
86
91
96
01
06
11
0.00
0.1
-0.02
0.0
-0.04
16
-0.06
81
86
91
96
01
06
11
16
y = 0.30x - 0.00
R = 0.01
0.2
0.1
0.0
-0.1
-0.2
-0.3
-0.08
-0.06
-0.04
-0.02
0.00
0.02
Prior 12m average, % of payroll employment
0.04
33
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Economic Research
Focus
34
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Economic Research
Global Data Watch
Euro area
UK decision to leave the EU will hit the Euro area via
trade, confidence, and financial channels
We lower our Euro area GDP and inflation forecasts
and now expect additional ECB easing
Long period of uncertainty lies ahead, just as the Euro
area business cycle was becoming more robust
Backward-looking data remain positive, but this provides limited comfort at present
The UKs decision to leave the EU is a significant economic
and political shock to the Euro area. Direct trade spillovers
from the uncertainty hit to the UK are likely to hurt Euro area
growth even before any longer-term impacts become clear. In
addition, there is likely to be an impact on growth from lower
Euro area confidence and financial markets. It is far too early
to assess this drag with much confidence. Across Euro area
countries the impact is likely to operate through varying
channels. Germany may be affected mainly via trade and uncertainty channels. In France, the trade impact is likely to be
smaller but the uncertainty impact is likely to be amplified by
existing fragilities and by next years presidential election.
Trade channel effects are likely to be even smaller for Italy,
while uncertainty effects and financial pressures on the sovereign and the banks (already under stress due to the high level
of NPLs) may be more acute. In Spain, uncertainty and financial shocks are likely to add to a shaky political outlook. Outside of Ireland, which is likely to be hit most severely, our
inclination is to cut our growth forecasts by similar amounts
across most of the region (Table 1). Except in 2Q16 and
3Q16, where 0.25%-pt of the forecast downgrade relates to
tracking/momentum, the remainder is due entirely to the
Brexit shock. Hence, we now see the Euro area economy
growing at only a 1.25% pace for the next few quarters.
%q/q, saar
Euro area
Old
Germany
France
Italy
Spain
3Q16
1.25
2.00
1.25
1.00
0.75
1.75
4Q16
1.25
2.00
1.25
1.00
0.75
1.75
1Q17
1.25
1.75
1.25
1.00
1.00
2.00
2Q17
1.25
1.75
1.25
1.00
1.00
2.00
1Q16
0.0
1.0
0.8
-7.4
2Q16
-0.1
0.8
0.9
-7.8
3Q16
0.4
0.8
1.1
-3.6
4Q16
0.8
0.9
1.0
-0.2
1Q17
1.5
1.0
1.6
4.8
2Q17
1.3
1.1
1.5
3.1
3Q17
1.1
1.0
1.5
1.3
4Q17
1.2
1.1
1.4
1.0
3Q17
1.50
1.75
1.50
1.25
1.00
2.00
4Q17
1.50
1.75
1.50
1.25
1.00
2.00
%q/q saar
4
0
Actual GDP
-2
2010
2011
2012
2013
2014
2015
2016
2017
35
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Economic Research
Euro area
saar. The bigger issue with the June PMI is that, even before
the Brexit vote, it was not showing the rise we needed for it to
validate our 2% 2H16 GDP growth forecast. We had lowered
the growth forecast 0.25%-pt ar to create a less challenging
near-term trajectory. But, as noted above, the UK decision to
leave the EU is likely to cause additional weakness in 3Q16
and beyond, prompting a larger downward revision.
54
50
France
46
%q/q saar
42
2013
2014
2015
2016
2017
2.0
PMI
DFM-Nowcast
(Underlying)
1.5
In light of the weak French PMI, the Euro area results were
actually very encouraging. The Euro area composite employment index rose 0.5pt to a solid 52.5, new orders 0.1pt to 52.5,
and the backlog of work jumped 1.4pts to 51.5. At the sector
level, the manufacturing details were particularly impressive,
with increases a 1.4pts increase in output to 53.8, a 1.7pts jump
in new orders to 53.4, a 0.9pt rise in the employment index to
52.1, and a higher order-inventory ratio. These manufacturing
results were helped by big jumps in Germany, where new export orders surged 4pts to a two-and-a-half-year high 54.8 and
total new orders are now even higher at 56.8 (Figure 3). In contrast, the service sector results were more mixed in the Euro
area. The activity index dropped 0.9pt to 52.4, employment
rose 0.3pt to 52.6, and new business declined 0.4pt to 52.2
while outstanding business jumped 1.5pts to 51.4. At the country level, only France was weak; the German composite PMI
declined 0.5pt but remains elevated at 54.1 and with strikingly
strong details, while the composite for the rest of the region
rebounded 1pt to 53.8, reversing Mays surprise fall.
Figure 3: German manufacturing PMI - new export orders
DI, sa
65
Bridge
1.0
DFM-Nowcast
(GDP tracker)
0.5
0.0
Apr 18, 16
Jul 7, 16
Jul 27, 16
Other data broadly reinforced the PMIs message of an encouraging underlying trajectory through June. Consumer confidence was little changed, consolidating recent improvements
(Figure 5). And, in Germany, the IFO continued to recover
rapidly from the sharp falls seen at the start of the year (Figure 6).
Figure 5: Euro area consumer confidence
Consumer
confidence
Composite PMI
-2.0
60
-3.0
2011
55
2012
2013
2014
2015
2016
2017
50
45
40
Idx, sa
35
10
12
14
16
Business climate
124
118
Current conditions
112
106
100
94
2010
Expectations
2011
2012
2013
2014
2015
2016
2017
Source: IFO
36
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Economic Research
Global Data Watch
Unemployment
Euro area
% balance of responses, sa
Industrial confidence
Economic confidence
Recent production trend
Production expectations
Export order books
Stocks of finished products
Selling-price expectations
Construction confidence
Retail confidence
Service confidence
Consumer confidence
-4.1
103.0
-0.7
6.4
-13.3
6.5
-4.6
-20.4
1.8
9.6
-9.7
Apr
-3.6
104.0
-1.1
7.6
-12.6
5.8
-2.8
-19.2
1.3
11.7
-9.3
May
-3.6
104.7
2.1
6.1
-12.9
5.3
-0.7
-17.5
3.2
11.3
-7.0
Jun
104.5
Fri
Jul 1
11:00am
Euro area
Harmonized measure (Eurostat)
Unemployment rate (%, sa)
Thu
Jun 30
9:55am
Germany
Registered (ch m/m, 000s, sa)
000s, nsa
Unempl. rate (%, sa)
Thu
Jun 30
9:55am
May
10.3
10.2
10.2
10.1
Mar
Apr
May
Jun
-3
2844.9
6.2
-16
2743.9
6.2
-11
2664.0
6.1
-8
6.1
Germany
Change m/m, 000s, sa
Feb
Mar
Apr
May
44
47
41
35
Retail sales
Mar
Apr
May
102.2
102.7
102.1
Jun
Thu
Jun 30
8:00am
Apr
Mar
Employment
Euro area economic sentiment fell in 1Q16, largely on account of financial market turmoil. As turmoil abated, business and consumer sentiment bounced back in April and
May. We expect sentiment to edge marginally lower in
June, mostly on account of prolonged strikes in France and
political uncertainty in Spain.
Tue
Jun 28
10:00am
Feb
Mar
Apr
May
Jun
Euro area
Overall region
51.6
51.7
51.5
52.6
Germany
France
Italy
Spain
50.7
49.6
53.5
53.4
51.8
48.0
53.9
53.5
52.1
48.4
52.4
51.8
Feb
Germany
Sales ex. autos and petroleum, volumes, sa
%m/m
0.2
%oya
1.8
Mar
Apr
-1.2
0.3
-0.3
0.0
May
Feb
France
Consumption of goods, volumes, swda
%m/m
0.2
%oya
1.3
Mar
Apr
1.1
3.1
-0.2
2.5
May
Source: European Commission, Eurostat, ECB, FSO, Bundesbank, IFO, INSEE, ISAE, Istat, INE,
CBS, BNB, Markit, and J.P. Morgan forecasts
37
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Economic Research
Euro area
Inflation
Consumer prices
Mar
Thu
Jun 30
11:00am
Wed
Jun 29
8:00am
Germany (prelim)
%m/m, nsa
%oya
HICP (%oya)
Baden Wuerttemberg (%oya)
Bavaria (%oya)
Brandenburg (%oya)
Hesse (%oya)
North-Rhine West (%oya)
Saxony (%oya)
Thu
Jun 30
8:45am
France (prelim)
%m/m, nsa
%oya, nsa
HICP (%oya)
Thu
Jun 30
11:00am
Italy (prelim)
%m/m, nsa
%oya, nsa
HICP (%oya, nsa)
Wed
Jun 29
9:00am
Spain (flash)
%m/m, nsa
%oya, nsa
HICP (%oya, nsa)
Wed
Jun 29
8:00am
Belgium CPI
%m/m, nsa
%oya, nsa
Apr
May
0.0
1.0
-0.2
0.7
-0.1
0.8
0.1
0.9
Mar
Apr
May
Jun
0.8
0.3
0.1
0.1
0.3
0.0
0.1
0.4
0.3
-0.4
-0.1
-0.3
-0.3
0.0
-0.4
-0.3
0.0
-0.1
0.3
0.1
0.0
0.0
0.3
-0.2
0.0
0.2
0.1
0.2
0.4
0.3
0.4
0.7
0.0
0.3
0.5
0.5
Mar
Apr
May
Jun
0.7
-0.1
-0.1
0.1
-0.2
-0.1
0.4
0.0
0.1
0.3
0.4
0.3
Mar
Apr
May
Jun
0.2
-0.2
-0.2
-0.1
-0.5
-0.4
0.3
-0.3
-0.3
0.3
-0.2
-0.1
Mar
Apr
May
Jun
0.6
-0.8
-1.0
0.7
-1.1
-1.2
0.5
-1.0
-1.1
0.3
-0.9
-1.1
Mar
Apr
May
Jun
0.9
2.2
0.2
2.0
0.3
2.2
Producer prices
Thu
Jun 30
10:00am
France
%m/m, nsa
%oya, nsa
Italy
%m/m, nsa
%oya, nsa
Feb
Mar
Apr
-0.5
-4.2
0.3
-3.9
-0.5
-4.1
Feb
Mar
Apr
-0.5
-3.6
0.2
-3.4
-0.7
-4.1
Mon
Jun 27
10:00am
Euro area
M3 (%m/m, sa)
M3 (%oya)
M3 (%oya, 3mma)
Loans (%oya)1.
Loans (m/m, bn)1.
1.
Feb
Mar
Apr
0.4
4.9
4.9
0.9
41.0
0.5
5.0
5.0
0.9
0.7
0.3
4.6
4.8
0.9
10.3
May
Source: European Commission, Eurostat, ECB, FSO, Bundesbank, IFO, INSEE, ISAE, Istat, INE,
CBS, BNB, Markit, and J.P. Morgan forecasts
May
Jun
-7.0
-6.5
-7.3
Thu
Jun 30
8:45am
Jun
May
Euro area
Overall region
Germany
France
Apr
May
Jun
51.7
51.8
48.0
51.5
52.1
48.4
52.0
Apr
May
Jun
53.1
54.5
50.6
53.3
55.2
51.6
53.8
52.6
54.4
47.9
52.4
53.2
49.9
Euro area
Overall region
Germany
France
Apr
May
Jun
53.0
53.6
50.2
53.1
54.5
50.9
53.6
52.8
54.1
49.4
38
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Global Data Watch
The Euro area composite PMI fell 0.3pt to 52.8 in June (consensus: 53.0; J.P. Morgan: 53.6). The details were pretty solid,
however, with only France falling sharply (-1.6pts to 49.5). The
decline in France could in part reflect widespread strikes and
flooding, while the European football championships likely
came too late to provide much of a boost. In light of the weak
French PMI, the Euro area results were actually very encouraging. Euro area composite employment rose 0.5pt to a solid 52.5,
new orders rose 0.1pt to 52.5, and backlog of work jumped
1.4pts to 51.5. At the sector level, the manufacturing details
were particularly impressive, with increases in output (+1.4pts
to 53.8), new orders (+1.7pts to 53.4), and employment (+0.9pt
to 52.1) and higher order-inventory ratios. These manufacturing
results were helped by big jumps in Germany, where new export orders surged 4pts to a two-and-a-half-year high of 54.8
and where total new orders are now even higher at 56.8. In contrast, the services sector was more mixed in the Euro area. The
activity index fell 0.9pt to 52.4, employment rose 0.3pt to 52.6,
and new business fell 0.4pt to 52.2 while outstanding business
jumped 1.5pts to 51.4. At the country level, only France was
weak, but the German composite PMI was still elevated (-0.5pt
to 54.1) and with strikingly strong details, while the rest of the
region rebounded (+1pt to 53.8), reversing Mays surprise fall.
Apr
May
106.7
100.5
113.2
107.7
101.6
114.2
113.3
Jun
107.8
101.7
108.0
102.1
114.2
108.7
103.1
114.5
The German IFO was solid in June, continuing its rapid recovery from the sharp falls at the start of the year. Encouragingly,
the manufacturing sector led the improvement in June, consistent with the German manufacturing PMI, which jumped in
June with key subcomponents hitting two-and-a-half-year highs.
Apr
France (INSEE survey - manufacturing)
Index
Composite index
104.9
Index of past production
10.2
Exp. output - personal
8.9
Exp. output - general
-1.3
104.5
12.4
7.8
6.0
Apr
May
-2.4
-4.9
-7.2
-3.2
-2.8
-6.3
-4.6
-2.6
May
3Q15
France (3rd estimate)
%q/q, sa
0.4
%q/q, saar
1.5
%oya
1.1
GDP components (%q/q, saar)
Private consumption
1.7
2.0
Government consumption
1.1
1.2
Fixed investment
0.4
0.3
Exports
-0.7
-1.2
Imports
6.6
7.2
Contribution to GDP growth (%q/q saar)
Domestic final sales
1.3
1.5
Inventories
2.6
2.7
Net trade
-2.3
-2.6
4Q15
1Q16
0.4
1.7
1.4
1.5
1.3
0.6
2.6
1.3
-0.1
1.7
4.7
3.3
10.3
0.3
1.9
4.2
3.4
11.5
4.5
1.9
5.9
-0.2
3.1
1.4
2.6
-2.2
1.5
4.2
-0.5
-1.1
-2.6
Inflation
Producer prices
Germany
%m/m, nsa
%m/m, sa
%oya, nsa
Real GDP
Mar
Apr
0.0
-0.1
-3.1
0.1
0.0
-3.1
May
0.4
0.4
-2.7
Source: European Commission, Eurostat, ECB, FSO, Bundesbank, IFO, INSEE, ISAE, Istat, INE,
CBS, BNB, Markit, and J.P. Morgan forecasts
Jun
104.3
13.1
6.7
5.3
101.7
-0.6
9.0
1.0
Jun
0.7
-1.2
-5.0
-3.0
39
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We do not think that there is substantial risk in either direction to our forecast for 1.0% annualized GDP growth in 2Q at
this stage; at the same time, we are less comfortable with our
projected 2H growth pickup to 1.5%q/q, saar in 3Q and 1.2%
in 4Q, because there is no sign of an improvement in business
confidence. Brexit likely will add to the caution weighing on
business and household spending.
Output
60
55
50
Headline
45
40
2012
New orders
2013
2014
2015
2016
Next weeks May data, especially the IP report, which includes manufacturers output projections for June and July,
will offer us more color on current economic momentum. The
2Q BoJ Tankan, a comprehensive business survey covering
not only business confidence, but also business plans for profits and capex will add insight on firms business outlook and
spending plans. Moreover, the expected slowdown in core
CPI inflation excluding energy should support our call that
the BoJ will deliver additional easing on July 29.
2017
Source: Markit
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2
1
0
-1
Manufacturing
-2
-3
-4
00
03
06
09
12
15
The seasonally adjusted nominal trade surplus declined modestly to a 270billion, sa from a 397 billion post-Tohoku
earthquake high in April (Figure 4). Ahead, we expect the rise
in oil prices to raise the value of imports, but our forecast
looks for an offsetting rise in exports, offsetting the rise in
imports. Thus, we project a steady surplus around 1% of GDP
in coming quarters. However, export prices, which were
closely correlated to USD/JPY until 2014, have been relatively weak lately (Figure 5), suggesting that prices in local currency fell, so a larger-than-expected decline in the trade balance is possible.
Figure 4: Customs trade balance and mineral fuel imports
Yen bn, sa
1500
500
500
1000
1500
-500
2000
-1000
2500
-1500
3000
-2000
3500
05
07
09
11
15
17
Yen
Export prices
140
130
125
%3m/3m, saar
120
115
Exports
20
13
135
110
100
106
10
USD/JPY
90
96
0
-20
2013
80
87
70
00
-10
Imports
2014
2015
2016
Source: BoJ
1000
02
04
06
08
10
12
14
16
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%m/m, sa
Wholesale sales
Total retail sales
%oya
Wed
Jun 29
2:00pm
May
-0.3
-2.0
Mar
48.8
47.9
49.5
Apr
47.8
46.1
49.2
May
45.6
44.7
46.4
Fri
Jul 1
8:30am
Mar
3.8
1.8
2.9
3.3
Apr
0.5
1.6
-1.7
-2.2
Fri
Jul 1
8:30am
May
0.0
Mar
8.4
2.0
0.99
Apr
9.0
0.2
0.99
May
4.0
-3.2
0.96
Mar
Apr
May
Jun
-0.1
-0.3
0.6
-0.4
-0.3
0.6
-0.5
-0.5
0.5
-0.6
-0.6
0.4
-0.1
-0.3
0.7
-0.3
-0.3
0.7
-0.4
-0.4
0.6
%m/m, sa
Feb
3.3
-0.8
0.9
1.9
1.28
Mar
3.2
-0.3
-0.2
-2.3
1.30
Apr
3.2
0.3
0.3
0.0
1.34
May
3.1
1.33
Jun
47.0
Fri
Jul 1
8:30am
Apr
2.8
-0.1
-0.9
Diffusion index
Production
Shipments
Inventories
Inventory/shipments ratio
Thu
Jun 30
2:00pm
Mar
-3.6
1.5
-1.0
Thu
Jun 30
8:50am
Feb
0.1
-2.3
0.4
Mar
Apr
May
0.5
-5.3
-0.7
-4.3
0.2
-0.4
2.9
0.4
0.0
-4.5
3.7
71.5
0.5
74.2
BoJ Tankan
DI, "good" minus "bad"
Large mfg
Large nmfg
Small mfg
Small nmfg
Capex plans, %oya
Large firms
Small firms
Current profit plans, %oya
Large firms
Small firms
Dec
12
25
0
5
FY2015
Mar
9.8
3.9
3.9
4.6
Mar
6
22
-4
4
Actual
9.0
1.5
Jun
3
17
-7
-1
FY2016
Mar
-0.9
-19.3
Sep
1
13
-10
-7
Jun
1.0
-18.0
4.2
7.0
-2.0
-5.4
-2.5
-7.0
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Auto registrations
Mar
Total %oya
-3.2
Mn units saar
2.96
J.P. Morgan adjusted (incl. light vehicles)
Mn units saar
3.66
Apr
7.2
3.55
May
6.6
3.38
4.15
3.93
Jun
2.0
3.34
Indicators, including the May registration numbers, suggest that any adverse effects on the auto sector from the
earthquakes have been relatively mild and short-lived.
Consumer sentiment
Fri
Jul 1
DI, sa
2:00pm
Consumer sentiment
Standard of living
Income growth
Labor market conditions
Durable goods purchases
Mar
41.7
40.5
40.6
43.9
41.7
Apr
40.8
39.6
40.8
42.8
39.8
May
40.9
39.7
40.8
42.9
40.2
Jun
41.0
-1.8
Apr
427
-1.2
-3.6
823
-1.6
-4.0
397
-1.3
-3.8
May
396
-1.5
-1.0
161
-1.4
-3.8
270
-1.3
1.0
-41
0.1
4.9
Feb
0.7
0.6
0.6
0.1
20.5
0.4
1.9
1.9
2.3
Mar
1.5
0.7
0.6
1.3
15.4
0.7
2.1
1.9
2.8
Apr
0.3
0.2
0.2
1.0
4.3
-1.4
1.9
1.8
2.3
0.0
0.0
0.0
1.1
-1.7
-1.5
2.0
1.5
3.3
Apr
48.2
Overall index
May
47.7
Jun
48.5
47.8
The final report for the June manufacturing PMI, where revisions will likely be minor as usual, is scheduled to be released
July 1 (see main essay for our assessment of the flash report).
Services producer prices (Jun 24)
Base year 2010
%oya
3
17
Diffusion index
-2.0
Jun
May
2
19
%oya
Consumer sentiment showed signs of stabilizing at not-solow levels in May, soon after the earthquakes. Although retail trading firms have recently been pointing to a drag from
weak stock prices on sentiment among wealthy consumers,
we think its impact on overall sentiment is fairly small.
Apr
10
23
Manufacturing
Nonmanufacturing
1. The DI asks whether a respondent thinks that now is a good time to purchase durables
Mar
295
0.1
-1.9
749
1.1
-2.1
Diffusion index
Mar
-3.0
0.0
Apr
-3.9
-1.5
May
-4.0
0.5
-5.3
-0.8
Mar
0.2
Apr
0.2
0.3
May
0.2
Oya inflation of the May SPPI was the lower side of the 0.2%0.3% range seen since September 2015. The decline in leasing/rental accelerated, while transport extended a string of decline since autumn 2015. In contrast, advertising services and
real estate each further accelerated their oya rise, the latter driven by rental fees in Tokyo and surroundings. Information/
communication also remained firm, marking the fourth consecutive oya rise.
Source: JADA, CAO, MoF, BoJ, JDSA, MHLW, Markit, J.P. Morgan forecasts
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Canada
65
diffusion index
% 3m/3m, saar
10
8
6
4
2
0
-2
-4
-6
Expectations
60
55
50
Retail sales
45
2012
2013
2014
2015
2016
2017
For a second month auto sales were a significant drag on retail sales in April. Excluding auto sales (-0.3%m/m), retail
sales were up 1.3%m/m. Gasoline station sales soared
6.0%m/m on higher prices at the pump. Moreover, higher
gasoline prices had little dampening effect on spending elsewhere. Sales of furniture, home furnishings, and electronics
bounced 3.2%m/m, a solid rebound after the 2%m/m decline
in March. Miscellaneous store retailers (3.7%m/m) and general merchandise stores (1.3%m/m) also gained in April.
Wholesale
10
5
0
Manufacturing
-5
-10
2013
2014
2015
2016
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Monthly GDP
Sa
Total, %m/m
%oya
Thu
Jun 30
8:30am
Jan
0.5
1.4
Feb
-0.1
1.4
Mar
-0.2
1.1
Apr
0.1
1.4
Feb
-0.9
-1.2
-0.6
1.8
Mar
-0.6
-2.0
-1.3
0.5
Apr
-0.5
-1.6
-0.8
0.3
May
0.2
-2.0
0.0
0.4
Industrial PPI
%m/m, nsa, unless noted
Total
%oya
Ex energy
%oya
Feb
-2.3
3.3
-2.2
3.4
Mar
-1.0
1.3
-0.8
1.7
Apr
1.0
0.4
Mar
-1.0
3.2
-0.3
0.9
-0.2
3.0
-1.3
2.2
-0.8
3.5
-0.1
1.3
-0.1
3.2
-1.1
2.5
Apr
0.9
4.3
0.8
2.6
0.4
4.3
0.3
2.9
0.1
-0.2
Feb
0.6
5.7
0.3
2.7
0.9
4.9
1.4
4.2
5.8
0.4
2.9
5.0
4.6
1.3
3.4
0.6
4.7
0.1
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Mexico
calendar-adjusted series
-2
13
14
15
16
Source: INEGI
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Mexico
Fri
Jul 1
9:00am
12-month
rolling sum
14
Longterm
average
8
6
Index, sa
Mar
51.9
50.9
Manufacturing
Non-manufacturing
12
10
Fri
Jul 1
10:00am
4
2
Apr
51.6
50.9
May
51.9
51.3
Jun
52.4
51.6
Mar
2.2
-2.4
Apr
2.2
8.3
May
2.4
9.4
Remittances
Feb
2.1
13.0
0
04
05
06
07
08
09
10
11
12
13
14
15
Source: INEGI
Mon
Jun 28
9:00am
2.4
Private consumption
3.0
3.5
Public consumption
1.5
1.8
Fixed investment
Feb
-783
29.0
-2.6
29.7
2.2
1Q15
2.3
1.9
2.3
2.5
3.6
3.3
1.0
-0.4
4.1
0.6
0.6
Exports
10.0
5.1
2.5
1.4
Imports
6.2
2.2
1.5
2.1
Jun 3
Jun 10
Jun 17
177.3
177.4
___
May 1H
-0.48
0.08
2.53
2.92
May 2H
0.17
0.11
2.66
2.94
Jun 1H
0.09
0.19
2.62
3.00
0.02
0.16
2.55
2.98
Apr
4.1
0.3
3.0
-1.2
Consumer prices
%2w/2w
Core
%oya
Core
Trade balance
Balance (US$ mn)
Exports (US$ bn)
%oya
Imports (US$ bn)
%oya
4Q15
3.6
3Q15
Supply & demand
Mar
87
31.5
-7.9
31.4
-6.7
Apr
-2,080
30.4
-7.8
32.5
-1.7
May
-1,230
30.3
-3.0
31.5
2.6
Mar
1.2
0.1
0.0
-0.2
Retail sales
%oya
%m/m sa
Feb
9.6
0.3
0.4
Mar
6.4
3.0
3.2
Apr
8.0
-0.5
10.6
-1.4
% of labor force
Unemp. rate
Sa
Feb
4.2
4.2
Mar
3.7
4.2
Apr
3.8
3.9
May
4.0
4.0
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Brazil
Government has been very active, proposing new
measures and addressing specific issues
Next weeks TJLP decision and Inflation Report should
be key to give further steps of the monetary policy
IPCA-15 inflation was lower than expected, but wholesale prices are rising substantially
Current account in surplus for a second consecutive
month in May, the first since August-September 2007
Developments in Brazil this week were less negative for the
government than in the past couple of weeks. The most important highlight is that, after a long discussion, the government
seems to have reached an agreement regarding states debts.
The states will interrupt their interest payments to the federal
government for six months and gradually resume them from
January 2017 until July 2018. The media have reported a
BRL50 billion impact on the central government interest revenues for the next three years. In exchange, the states will have
to put a cap on spending growth similar to the one Finance
Minister Henrique Meirelles has proposed for the central government and already sent to the Congress. While this can be
seen as a political victory for interim President Temer, the cost
is significant and opened room for further local government
claims for fiscal benefits. Of note, the local media have reported that the government could release the 2017 primary balance
target of around 1.6% of GDP in coming days.
The government and the Congress are also moving forward
with the economic agenda. First, at the beginning of the week
the Lower House approved removing the 20% limit on foreign investment in Brazilian airlines; the bill now moves to
the Senate. Meanwhile, the Senate approved a bill to improve
governance in state-owned companies mainly by creating
incentives for the nomination of market names to these companies boards; the bill will now be sent for the sanction of
interim President Temer. The government also indicated willingness to move forward with other changes, such as the reform of the rules for the exploration of deep water oil reserves, freeing Petrobras from the obligation to participate in
every project with a 30% stake, and allowing foreigners to
buy rural land. Also, the press reported that labor market reform could be sent to the Congress shortly, including the outsourcing bill, which would regulate activity in the country,
and the possibility of employer-employee deals prevailing
over the labor laws, making the labor market more flexible by
adapting to each sector or companys needs.
On the political front, the federal police arrested one former
Workers Party (PT) minister, Paulo Bernardo, and took an-
11
10
9
8
7
Target ceiling
6
Core
5
4
2012
2013
2014
2015
2016
2017
Source: IBGE
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Brazil
Wed
Jun 29
8:00am
20
Wed
Jun 29
9:30am
10
0
08
10
12
14
May
0.8
11.1
Feb
10.2
16
Thu
Jun 30
Mar
10.9
Apr
11.2
May
11.3
Mar
Apr
May
23.0
10.6
-10.2
12.1
2.1
10.8
36.8
2.3
9.7
38.8
2.3
10.1
39.4
2.4
9.9
39.2
TJLP
3Q15
7.0
Fri
Jul 1
8:00am
Jun
1.52
12.03
Fiscal sector
BRL bn
Primary
12-month sum, as % of GDP
Primary
Nominal
Net debt, % of GDP
Industrial
-10
Apr
0.3
10.6
Agricultural
30
Mar
0.5
11.6
%m/m
%oya
4Q15
7.5
1Q16
7.5
2Q16
8.0
Industrial production
Feb
-2.9
-9.7
%m/m, sa
%oya, nsa
Mar
1.4
-11.5
Apr
0.1
-7.2
May
-1.0
-9.5
as % of GDP
FDI
4.8
3.2
Apr
0.5
9.3
May
0.9
9.6
Jun
0.52
9.11
0.40
8.98
CAD
2.4
1.6
2011
2013
2014
2015
2016
2017
Source: BCB
The trade balance was the highlight, but profits and dividends
remained resilient. Mays US$6.3 billion trade surplus
brought the 12-month surplus to US$39.4 billion, aided by the
recent recovery in the terms of trade. Finally, we note that net
portfolio flows are heading further into negative territory,
with the fixed income outflow accelerating in the month.
Mar
-0.9
-41.4
-2.4
5.6
Apr
0.4
-34.1
-2.0
6.8
May
2.5
-28.2
-1.6
5.9
1.2
-29.5
-1.7
6.1
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Argentina
Jan-09
Headline Balance
Primary Balance
Jan-11
Jan-13
Jan-15
579.0
341.7
211.3
13.7
12.3
655.1
589.9
116.8
260.4
187.1
25.6
65.2
-76.1
0.5
30.0
27.5
57.0
-75.6
Same
period
2015
443.0
267.3
158.0
11.3
6.4
515.4
449.9
94.8
186.3
146.1
22.7
65.5
-72.3
-14.8
12.0
13.8
40.6
-87.2
%oya
%oya real
terms**
30.7
27.8
33.7
20.8
91.9
27.1
31.1
23.3
39.7
28.1
12.7
-0.4
-6.3
-9.2
-3.3
-16.2
54.9
-9.9
-5.9
-13.8
2.7
-9.0
-24.3
-37.4
* through May
** Deflated CPI Congress
Source: MHyFP and J.P. Morgan
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Argentina
26-Mar-16
26-May-16
26-Jul-16
Tue
Jun 28
Policy rate
%
Wed
Jun 29
Jun-7
33.25
Jun-14
32.25
Jun-21
31.50
Jun-28
31.00
2Q15
0.4
3Q15
2.5
4Q15
-1.5
1Q16
-0.6
GDP
%oya
3Q15
-4.1
4Q15
-4.6
1Q16
-4.2
-4.0
In our view, the 75bp-weekly pace is consistent with the decline in 12-month inflation expectations. The University
Torcuato Di Tella (UTDT) published its survey of 12-month
inflation expectations this week, with the median down to
25%, 300bp below Mays print, and, thus, returning to Januarys levels. The expected fall in inflation reinforces our reading of the revamped core GBA-CPI print for May published
last week, and the expectation of more easing in the coming
weeks (see note). We believe BCRA will continue the easing
52
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Colombia
kbpd
1100
1000
Oil production
900
800
700
600
500
2012
1
0.5
-0.5
-5
-1
-10
12-month trailing
trade balance
-15
Monthly
trade
balance
-20
10
11
12
13
14
15
-2
30
-2.5
20
On the export side, most categories remain weak, except coffee. Coffee exports rose 57%oya, driven by a 95% increase in
volumes, supporting an otherwise lackluster performance in
exports. Shipments of other traditional exports such as oil,
coal, and ferronickel are languishing, depressed mainly by
weak prices. And, despite the more competitive exchange rate,
weak regional trade partner demand is still weighing down
demand for Colombias nontraditional exports.
While oil prices have continued to recover since April, falling
volumes have undermined oil exports. Oil production is falling as capex (and FDI) in the sector collapsed. And domestic
consumption has increased, we believe due to greater domestic refinery intake (Reficar) and to an El Nio-related increased in thermal power generation. As such, petroleum export volumes fell 21%oya in April (Figure 2).
2015
2016
2014
-1.5
16
2013
Volume terms
10
0
-10
-20
Value terms
-30
Apr 12 Oct 12 Apr 13 Oct 13 Apr 14 Oct 14 Apr 15 Oct 15 Apr 16
Source: DANE and J.P.Morgan
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Economic Research
Colombia
Thu
Jun 30
Mar
3.9
Apr
-3.4
May
1.5
Feb
7.3
Mar
1.4
Apr
7.9
May
3.2
Feb
5.9
Mar
6.3
Apr
6.4
May
6.6
Mar
10.10
Apr
9.0
May
Mar
-1.1
Apr
-1.0
April
7.00
May
7.25
Jun
7.50
Mar
0.6
4.3
Apr
0.0
3.9
May
0.2
3.5
Retail sales
%oya
Feb
1.8
Unemployment
%
Colombia
Week of June 27-July 1
Thu
Unemployment
Jun 30
%
Feb
10.0
US$bn
-1.1
Peru
Week of June 27-July 1
CPI inflation
Fri
Jul 1
%m/m
%oya
Jun
0.2
3.4
54
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Economic Research
Global Data Watch
United Kingdom
On policy, the Bank of England has argued that the consequences of a decision to leave are not clear cut, because even
as growth slows and unemployment rises, the fall in sterling
will lift inflation. If the currency remains close to current levels, we would expect inflation to rise above the BoEs 2%
target next year. Nevertheless, we expect the BoE to be active.
Even though the labor market is relatively tight, we expect the
real economy effects to dominate the BoEs thinking. Thus,
we now expect the MPC to ease by the August meetingwe
project two 25bp cuts, at the July and August meetings. The
speed and magnitude of the MPC response will, however, be
sensitive to moves in financial markets.
The Bank of England has already planned emergency liquidity auctions and indicated in a statement that its stands ready to
provide more if neededan Indexed Long Term Repo
(ILTRO) had already been scheduled for June 28 and Carney
on Friday indicated the BoE is ready to provide 250bn of
additional funds through its normal facilities if necessary.
Table 1: GDP and CPI forecast changes
%ch over prior period, annualized
UK GDP
Old
1.6
1.0
2.5
2.5
1.9
2.0
2.0
2.1
1Q16
2Q16
3Q16
4Q16
2016
1Q17
2Q17
2017
UK CPI
New
1.6
1.0
0.5
0.5
1.5
1.0
1.5
1.1
Old
0.3
0.3
0.6
0.9
0.6
1.4
1.8
1.8
New
0.3
0.3
0.9
1.3
0.7
1.9
2.4
2.5
Mar
7
Apr
-13
May
7
Jun
55
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Wed
Jun 29
7:00am
Mar
0.7
5.7
5.9
Feb
0.6
5.6
1.0
2.2
0.9
2.4
Mar
0.4
6.4
-0.4
1.6
0.4
2.3
Apr
0.0
4.1
-0.1
1.0
-0.7
1.6
May
Fri
Jul 1
9:30am
2Q15
0.7
3.6
3Q15
1.3
4.9
4Q15
-2.0
3.0
1Q16
Mar
50.8
Apr
49.4
May
50.1
Jun
49.8
Mar
1.8
70.3
7.4
Apr
1.3
66.3
0.3
May
Source: Rightmove, CBI, BBA, BCC, GFK, BRC Markit, SMMT, RICS, ONS, BoE, and J.P. Morgan forecasts
Nsa
Mar
0
Apr
-3
May
-1
Jun
bn, sa
Trade in goods and services
Income
Current transfers
Current balance
Nsa
2Q15
-4.7
-8.1
-6.2
-19.0
3Q15
-8.9
-5.8
-5.4
-20.1
4Q15
-12.2
-13.1
-7.4
-32.7
1Q16
%m/m
May
0.4
Jun
0.8
bn, nsa
Mar
PSNCR
-17.8
PSNB
6.1
- ex. pub. banks
6.7
Current budget (ex. pub. banks) -0.7
Net debt to GDP (%)
98.8
- ex. pub. banks
83.7
Sa
3Q15
4Q15
1Q16
1Q16
0.4
2.2
1.8
0.6
2.1
2.4
0.4
2.0
1.4
0.4
2.0
1.4
0.6
0.7
0.4
-0.5
2.9
0.6
0.3
-1.1
0.1
0.9
0.7
0.4
0.5
-0.3
0.8
-17.7
5.7
6.3
-0.4
Apr
2.4
6.6
7.2
-5.6
98.4
83.3
May
2.0
7.6
8.2
-4.5
-3.4
9.1
9.7
-7.8
98.7
83.7
83.4
Apr
-11
17
4
May
-8
20
2
Jun
Apr
0.3
40.1
May
-2
23
1
BBA lending
Index of services
Sa
Sa
%m/m
%oya
%3m/3m, saar
Apr
1.3
Thu
Jun 30
9:30am
Jun
Sa
% balance
Thu
Jun 30
9:30am
May
0.2
4.7
5.3
Thu
Jun 30
9:30am
Thu
Jun 30
9:30am
Apr
0.2
4.8
5.8
Money supply
1.
Thu
Jun 30
12:05am
Sa
M4 ex IOFCs (%m/m)
M4 ex IOFCs (%3m/3m, ar)
M4 (%m/m)
M4 (%oya)
M4 lending (%m/m)1
M4 lending (%oya)1
Wed
Jun 29
9:30am
Wed
Jun 29
9:30am
Economic Research
United Kingdom
Jan
0.2
2.8
3.8
Feb
0.2
2.7
3.2
Mar
-0.1
2.6
2.4
Apr
0.1
2.5
1.5
Mar
3.7
43.9
3.8
44.3
40.0
1.7
42.2
Source: Rightmove, CBI, BBA, BCC, GFK, BRC Markit, SMMT, RICS, ONS, BoE, and J.P. Morgan forecasts
56
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Emerging Europe
UK referendum impact to be felt through EU growth
ramifications and the financial/sentiment channel
Czech Republic and Romania: Central banks expected
to stay on hold
Inflation likely to tick up again in Poland in June
As expected, the CBRT cut its ON lending rate 50bp
and kept other rates unchanged
The short-term impact of the UK referendums outcome in the
EMEA EM will be determined by the financial/sentiment
channel and Euro area growth ramifications, rather than by
direct economic linkages. This is due to the fact that the UK is
a rather small trade partner and FDI investor for the region.
There are strong financial linkages between the UK and the
Anglophone Sub-Saharan Africa, with international lending
by UK banks worth 5% of GDP in Zambia, 3.8% in Ghana,
2.6% in Kenya and 1.7% in South Africa. Outside Africa,
only Turkey is meaningfully exposed to the UK banks, which
hold claims worth 2.4% of GDP. Central Europes financial
sector is mostly dependent on parent funding from core Euro
area parent banks. Despite all the market volatility, EMEA
EM FX depreciation has been limited thus far, hence there are
no significant implications for the inflation outlook yet.
For the regions central banks, growth likely will be a greater
source of concern, as J.P. Morgan has cut its Euro area growth
estimates by 0.75%pts saar in 2H16 and by 0.25-0.50%pts
saar in 2017, which implies growth revisions to the downside,
in particular in the CEE region. The countries with the most
open economiesCzech Republic and Hungaryare likely
to be most affected. Poland and Romania are less open and
also are benefiting from substantial fiscal stimulus. We look
for a limited impact on growth in 2016, but in 2017, the lower
Euro area imports should have a more meaningful influence.
With this in mind, we dont expect any immediate response
by CEE central banks, but a more dovish tone/additional unconventional easing are likely later this year. Such measures
may include a delay in the Czech Republics exit from the FX
floor, new unconventional easing measures in Hungary and
potentially the introduction of such instruments in Poland,
which the new governor prefers to rate cuts. In South Africa,
inflation is above target and on an upward trend while the CA
deficit remains wide, so we think the SARB will still hike
25bp one more time this year.
Economic Research
Global Data Watch
outlooks. Also, now that UK voted to leave the EU, the risk
that CNB delays the exit has increased; it is likely that implications for NBR are limited at this stage.
We think the CNB continues to see downside risks to its inflation outlook because of the global and domestic environment,
notably the declining Euro area PPI and spillover of longlasting low inflation. These downside risks may incentivize
the central bank to delay the exit from the exchange rate regime, which we currently expect around mid-2017. However,
we think next week is probably too soon for such a decision,
as we expect inflation to accelerate sharply starting in July;
until then, headline CPI inflation should remain close to zero,
making the central bank nervous. Last, Czech Republic is the
only country in the CE-4 region where core inflation is on a
mild upward trend as opposed to flat or downward. Under
normal conditions, this might have led to a hawkish shift, but
now that UK voted to leave the EU, the CNBs dovish bias
likely will intensify.
The NBR is facing a slightly different scenario: headline inflation is deep in negative territory (-3.6%oya for May), but
because of VAT cuts; also, growth in private consumption is
around 10%oya in Romania versus about 3% in the Czech
Republic. Fiscal risks remain significant because 2016 is an
election year. Finally, nominal wage growth has accelerated
to above 12%oya, while in the Czech Republic it picked up to
around 4%oya. These factors would suggest some response
from the Romanian central bank is required, but core inflation
remains flat (1.5% to 2% in May, depending on the measure)
and below the 2.5% target. In addition, the external environment largely remains disinflationary, so the NBR does not
feel powerful pressure to react immediately. The UK vote to
leave the EU will likely make the NBR more cautious in
terms of tightening monetary conditions. Our view remains
that tightening is likely in early 2017.
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core inflation to 0.2%oya by end-2016. Assuming some stabilization in Brent prices around the US$50 level, inflation
should fluctuate around -0.7%oya until September, accelerating quickly after that as base effects kick in, bringing overall
CPI inflation to 0.5%oya by end-2016.
%
14
Czech Republic:
Thu
Jun 30
Fri
Jul 1
9:00am
3Q15
4.7
4.3
2.7
8.0
4Q15
4.0
1.4
3.0
8.5
1Q16
3.0
1.4
2.9
0.0
We expect that the final GDP reading will confirm the preliminary release.
0
2011
10
ON lending rate
12
Economic Research
Emerging Europe
ON borrowing rate
Source: CNB, National Statistics, Eurostat, J.P. Morgan forecasts
2013
2014
2015
2016
Source: CBRT
Hungary:
Thu
Jun 30
10:00am
Producer prices
%oya
Producer prices
Domestic
Export
Thu
Jun 30
9:00am
Feb
-1.6
-4.8
0.0
Mar
-1.6
-5.1
0.1
Apr
-1.4
-4.7
0.2
May
__
__
__
Feb
978
1508
1571
8.0
7.4
Mar
952
2459
2581
-3.5
-3.2
Apr
959
3418
3013
5.1
-1.9
May
__
__
__
__
__
External trade
EUR mn
Trade balance
Ytd
Ytd a year ago
Exports, %oya
Imports, %oya
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Poland:
Thu-Fri
Jun 30
Apr
-1.1
0.3
May
-0.9
0.1
Jun
-0.7
__
We expect inflation to tick higher to -0.7%oya, supported mainly by higher fuel prices. Please see main text.
Source: NBP, National Statistics, Eurostat, J.P. Morgan forecasts
Romania:
Thu
Jun 30
Russia:
Wed
Jun 29
2:00pm
Fri
Jul 1
5:00pm
Fri-Mon
Jul 1
Mar
0.5
7.3
Apr
0.4
7.3
May
0.4
7.3
Jun
__
__
3Q15
8
28.9
-37.4
-38.1
-12
4Q15
15
30.3
-30.5
-31.7
-7
1Q16
12
21.6
-34.2
-15.3
-5
2Q16
__
__
__
__
__
Balance of payments
US$ bn
Current account balance
Goods balance
Exports %oya
Imports %oya
Service balance
3Q15
-3.7
1.7
4Q15
-3.8
-1.1
1Q16
__
__
Turkey:
Thu
Jun 30
10am
Foreign trade
US$ bn, except as noted
Trade balance
Exports
%oya
Imports
%oya
EUR mn
Current account balance
Trade balance
Exports %oya
Imports %oya
Service balance
Income balance
Current transfers
Fin + cap balance
FDI, net
Portfolio investment
Other investment
3Q15
1492
964
8.1
7.3
1744
-1080
-137
2653
-589
1427
3959
1490
-1081
-137
2653
-558
3928
4Q15
1010
1134
7.5
4.4
859
-1005
22
4995
-602
1446
3907
1018
-997
5867
97
4081
1Q16
__
__
__
__
__
__
__
__
__
__
__
1740
1654
4.7
3.9
1155
-647
-423
1288
-238
2796
702
Real GDP
Real GDP, nsa
%q/q, saar
Balance of payments
Economic Research
Global Data Watch
Feb
-3.2
12.4
1.2
15.6
-8.1
Mar
-5.0
12.8
2.0
17.8
-5.2
Apr
-4.2
12.0
-10.2
16.2
-11.9
May
-5.1
12.1
9.5
17.2
-3.8
Russia:
Real economy indicators
Real terms, %oya
Construction
Agriculture
Transportation
Retail sales
Unemployment, %nsa
Average monthly wage
Industrial output
Mar
-1.4
2.7
-0.3
-5.8
6.0
1.5
-0.5
-6.2
Apr
-5.9
2.7
0.8
-4.8
5.9
-1.7
0.5
0.7
-4.9
-1.1
May
__
__
2.6
__
0.6
__ -6.1
__
5.6
__
-1.0
__
0.7
59
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Economic Research
Emerging Europe
Turkey:
CBRT rate decision
%
CBRT 1-week repo rate
CBRT ON borrowing rate
CBRT ON lending rate
Apr
7.50
7.25
10.00
May
7.50
7.25
9.50
Apr
68.5
85.3
90.0
91.2
69.1
May
68.8
85.6
89.9
93.7
69.0
Jun
7.50
7.25
9.00
Jun
69.5
86.0
90.3
92.5
72.5
69.4
87.5
91.2
91.3
70.6
Capacity utilization
%
Total manufacturing
Durables
Nondurable
Apr
75.3
71.0
71.6
May
75.7
71.4
72.1
Jun
75.8
72.8
72.5
76.1
71.5
72.0
60
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Economic Research
Global Data Watch
%oya
Headline
6
5
Core
4
3
2
10
11
12
13
14
85
REER
14
80
15
75
16
17
Sep 15
USD/ZAR
70
65
Oct 15
Dec 15
Jan 16
Mar 16
Apr 16
In our view, the rate tightening cycle is now very close to its
end: The Feds more dovish tone and the favorable shifts in
inflation risks from the rise in the trade-weighted rand, and
dismal domestic activity indicators suggest to us there is only
limited scope for further tightening. We expect the SARB to
remain on hold in July and likely September, but retain a 25bp
move in November on the premise of better-than-even chances that the inflation-focused SARB would hike at year-end if
the inflation outlook deteriorated again (e.g., if USD/ZAR
reaches 15.50-16.00).
DI, 2010=100
USD/ZAR
13
15
16
17
On the first day of the new regime, the CBN sold US$4.02
billion in a special intervention aimed at clearing the backlog of demand for dollars; this amount largely was sold at 280
in 1- to 3-month forwards, while the US$532 million sold in
the spot market transacted at rates between 280 and 382. In
the days thereafter, the central bank sold approximately
US$150 million at 280-284. The depreciation pressure on the
naira rate remains substantial, with the parallel rate still trading at 343 on June 23 (Figure 3). FX sales by the central bank
over the past week have failed to clear the backlog of demand
for foreign exchange, while the current exchange rate fails to
provide an incentive for locals to reduce their long dollar positions or for foreign investors to buy naira assets. At the same
time, the central bank will very quickly deplete its international reserves if it attempts to continue selling foreign exchange at this pace: international reserves stood at US$26.4bn
on June 22 (30-day moving average).
61
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Economic Research
South Africa & SSA
South Africa
Data releases and forecasts
Parallel market
350
Interbank rate
300
Official rate
250
Mar-15
Aug-15
Feb-16
200
150
Sep-14
Thu
Jun 30
11:30am
May
__
__
__
__
__
__
Feb
8.1
0.8
Mar
7.1
0.7
Apr
7.0
0.8
May
__
__
Feb
-1.3
90.5
26.7
91.7
2.7
Mar
2.0
95.2
5.3
93.2
1.6
Apr
0.4
92.2
-3.2
91.8
-1.5
May
__
__
__
__
__
Mar
50.5
47.7
53.1
54.3
50.3
47.2
87.8
51.1
51.0
Apr
54.9
56.4
58.4
51.8
54.0
50.4
77.7
55.9
52.5
May
51.9
52.9
51.8
56.2
51.5
48.0
80.1
54.1
50.8
Jun
__
__
__
__
__
__
__
__
__
Mar
-14.2
-1.3
Apr
-9.2
-15.0
May
-10.3
6.3
Jun
__
__
Trade balance
R bn, except as noted
Fri
Jul 1
11:00am
Apr
9.0
6.9
7.1
-1.1
2.3
7.3
Trade balance
Exports
%m/m
Imports
%m/m
Fri
Jul 1
11:00am
Mar
10.3
7.8
8.8
0.9
4.6
9.3
Producer prices
Total (%oya)
%m/m, nsa
Thu
Jun 30
2:00pm
Feb
10.3
9.1
9.0
1.3
4.8
9.5
62
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Economic Research
Global Data Watch
CPI
%m/m, sa
Core
Apr
6.2
0.8
5.5
May
6.4
0.4
5.5
6.1
0.2
5.5
Source: Stats SA, SARB, SARS DTI, BER, National Statistics, J.P. Morgan forecasts
SSA
Data releases
Weeks of June 27 July 1
Kenya
GDP
Jun 22
%oya
Zambia
Consumer prices
June 15 - 30
%oya
Kenya
Consumer prices
Jun 30
%oya
2Q15
5.9
3Q15
6.0
4Q15
5.7
1Q16
__
Mar
22.2
Apr
21.8
May
21.3
Jun
__
Mar
6.5
Apr
5.3
May
5.0
Jun
__
4Q15
4.1
1Q16
__
4.9
63
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Economic Research
South Africa & SSA
64
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Economic Research
Global Data Watch
11
12
13
14
15
16
17
65
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By region, the surprise relative to our forecast owes to weaker-than-forecast price gains in Sydney, an outcome that compounds the 1.6%q/q decline in the prior quarter. Prices in the
remaining capital cities played close to script, with Melbourne
and Brisbane both eking out modest gains, while Perth remains the laggard. The composition of price outcomes is unchanged, with established dwellings easily outpacing the
higher-density sector across most of the major regions. Part of
this outperformance owes to supply-side developments, with
an unprecedented number of dwellings currently under construction, the bulk of which are concentrated in the higherdensity sector.
Economic Research
Australia and New Zealand
Australia
Data releases and forecasts
Week of June 27 to July 1
Private sector credit
Thu
Jun 30
11:30am
Feb
0.6
%m/m
Mar
0.4
Apr
0.5
May
0.6
16Q1
1.0
-0.2
%q/q
15Q3
2.2
4.1
15Q4
0.2
4.2
%q/q
6
4
New Zealand
Data releases and forecasts
Mon
Jun 27
8:45am
-2
09
10
11
12
13
14
15
16
Feb
366
Mar
189
Apr
292
May
200
66
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Economic Research
Global Data Watch
Greater China
China: New home prices rose 0.9%m/m in May
Hong Kong: CPI inflation ticked lower to 2.6%oya in
May
Taiwan: Export orders rose moderately in May after
earlier disappointment
IP rebounded in May, rising 1.9%oya
The National Bureau of Statistics (NBS) 70-city house price
data for May showed that new home prices declined in four
cities in May (vs. five in April), increased in 60 cities, and
were flat in the rest. Based on the NBS data, national house
prices rose 0.9%m/m on average in May, marking the fourteenth consecutive monthly increase, but slowing modestly
from Aprils 1.1% rise. Annual national house price inflation
accelerated to 5.2%oya in May, the fastest pace since May
2014.
New home price increases in Tier 1 cities slowed further in
May. In Shenzhen, the best-performing city in the past year,
prices rose just 0.5%m/m in May, down from 2.3% in April.
Meanwhile, increases were more stable in some tier-2 and
tier-3 cities; prices in some tier-2 cities such as Nanjing and
Xiamen still rose over 5%m/m in May (Figure 1).
Figure 1: China house price inflation
%oya
Tier-2 cities
Tier-1 cities
25
Tier-3 cities
20
15
10
5
0
Source: Soufun
We expect real estate investment to grow 4.5% in 2016, accelerating from 1% in 2015, which is good news for Chinas
growth stabilization efforts (Figure 2).
Figure 2: FAI growth by industry
%oya
36
Total FAI
30
Infrastructure
24
18
12
6
Manufacturing
Real estate
-6
2013
2014
Source: NBS
2015
2016
-5
-10
2012
Housing market performance has diverged across cities. Tier1 cities have led the housing market activity rebound, but the
strong momentum appears to have faded since the introduction of tightening measures (e.g., limiting non-local buyers
from purchasing homes, lowering LTV, suspending collective
home purchases, and restricting down payment loans through
finance companies). By contrast, activity in some tier-2 and
tier-3 cities has gained momentum.
years
2013
2014
2015
2016
5.0
4.5
4.0
Average
3.5
3.0
2.5
00
02
04
06
08
10
12
14
16
67
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Greater China
30
20
10
-10
-20
-2
-30
06
08
10
12
14
16
18
Nontech
Tech
20
0
-20
-40
2013
2014
2015
2016
2017
Geographically, orders from a number of major markets, including the US, Europe, and China/Hong Kong, rose moderately in May.
Overall, the May increase in import orders after Aprils
plunge is somewhat reassuring. While near-term external demand conditions remain cloudy, demand does not seem as
weak as suggested by the disappointing April export orders.
Meanwhile, imports have picked up notably. Imports jumped
9.4%m/m, sa in real terms in May, adding to Aprils 1.7%
gain. In particular, capital goods imports, which had been
sluggish since 3Q15, jumped 14.0%, adding to the Aprils
8.6% increase, led-by tech-related capital goods imports. This
pickup hints at a recovery in corporate capex and tech exports
later in the year (Figure 6).
Figure 6: Taiwan tech exports and capital goods imports
%3m/3m saar, both scales
30
Tech exports
20
Capital goods
imports (leading
by 4-months)
10
0
-10
-20
-30
2013
2014
2015
2016
150
125
100
75
50
25
0
-25
-50
2017
68
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Nontech IP
Tech IP
40
20
0
-20
-40
2010
2011
2012
2013
2014
2015
2016
2017
Looking ahead, while J.P. Morgan looks for the global economy to return to a trend-like growth in the middle quarters of
the year, Taiwans latest data, including the modest rise in
export orders in May, suggest that the external demand outlook may not be as gloomy as the April data had indicated.
Having said that, even after taking into account the May production data, IP is still tracking slightly softer than in 1Q16,
which is in line with our 1.8%q/q, saar GDP growth forecast
for 2Q16, vs 3.1% in 1Q16 (Figure 8).
Figure 8: Taiwan real GDP and IP
%q/q saar, both scales
15
10
IP
Real GDP
2Q16 GDP
forecast
20
15
10
0
-5
-5
-10
2012
2Q16 IP
forecast
2013
2014
2015
2016
-10
-15
2017
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Greater China
China:
Data releases and forecasts
Taiwan:
Data releases and forecasts
Fri
Jul 1
9:00am
Index
Mar
49.7
50.4
50.2
52.3
Overall (Markit)
Output
Overall (NBS)
Output
Apr
49.4
49.9
50.1
52.2
May
49.2
49.8
50.1
52.3
Jun
49.0
___
50.0
___
Thu
Jun 30
15Q4
1.625
16Q1
1.500
16Q2
1.375
Mar
51.1
51.2
Apr
49.7
49.3
May
48.5
47.0
Jun
49.0
___
-4.7
3.9
Apr
-11.1
-7.1
-11.1
-7.1
May
-5.7
2.0
-5.8
2.7
3.90
3.90
Apr
3.97
3.90
4.00
3.90
May
3.98
3.85
3.96
3.84
-3.6
1.1
Apr
-3.6
-1.6
-4.1
-1.9
May
1.1
0.5
1.9
1.1
Rediscount rate
Fri
Jul 1
10:00am
No data released.
Source: NBS, Markit, China customs, J.P. Morgan forecasts
Hong Kong:
Data releases and forecasts
%oya
%m/m, sa
Merchandise trade
Mon
Jun 27
4:30pm
HK$ bn
Feb
-33.1
204.5
-10.4
237.6
-10.1
Balance
Exports
%oya
Imports
%oya
Mar
-47.0
275.4
-7.0
322.4
-5.8
Apr
-31.0
285.3
-2.3
316.3
-4.5
May
-31.2
289.3
-0.9
320.5
-3.4
%
Unemployment rate, sa
Unemployment rate, nsa
% change
Feb
-19.5
0.5
%oya
%m/m, sa
Mar
-8.8
-2.0
Apr
-7.6
0.4
May
-7.6
2.4
Mar
3.92
3.90
Thu
Jun 30
4:30pm
Mar
-4.7
3.9
Mar
-3.6
1.1
Source: Taiwan Ministry of Economic Affairs, DGBAS, MoF, J.P. Morgan forecasts
Mar
2.9
0.1
2.9
0.1
Apr
2.7
-0.7
2.7
-0.7
May
2.9
0.4
2.6
0.3
Source: Hong Kong Census and Statistics Department, J.P. Morgan forecasts
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Korea
Case for additional accommodative fiscal measures in
2H gains force
Producer prices declined May on utility gas price adjustments
Next week: IP, consumer goods sales, CPI inflation, and
customs exports
The data schedule was relatively light this week, but the UKs
vote to leave the EU hit financial markets significantly, with
KRW depreciating 2.5% against USD, the benchmark KOSPI
stock market index falling3.1%, and 3Y government bond
yields falling below the BoKs base rate. Koreas direct export direct exposure to the UK is limited (1.4% of total exports in 2015), but the second-round effect from the potential
negative impact of Brexit on the EU economy (the destination
of 9.1% of Koreas exports) and financial market moves will
be important to watch.
Meanwhile, the likelihood of a supplementary budget appears
to be rising in Korea, although political concerns remain a
wild card (see Korea: the case of supplementary budget,
June 20). The government is scheduled to release its official
2H economic outlook next week, likely accompanied by additional supportive fiscal measures. It remains uncertain if the
measures will include supplementary on-budget activity, but
officials have hinted that the government will maintain a
growth-friendly stance throughout 2016. In addition to downside risk from corporate sector restructuring, the rationale for
additional fiscal measures includes stronger-than-expected
fiscal revenues. That is, 1Q fiscal spending rose 6.8%oya (official plan of full-year growth: +0.5%), while revenues surged
17.0% (official projection of full-year growth: +3.7%), with
much of the revenue gains coming from real estate-related
taxes and housing transactions (Figure 1). That said, the unexpected gain in 1Q fiscal revenues provides room for the
government to increase its expenditures, without additional
bond issuance to finance the spending.
Figure 1: Government revenues and expenditures
20
%m/m
10
0
Revenues
Expenditures
-5
2012
-20
2013
2014
2015
2016
10
5
-10
15
-5
2014
20
2015
2016
Next weeks data releases will shed light on whether our projection for 2Q growth is on track. We project that industrial
production edged up in May, supported by automobile pro71
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Apr
101
May
99
Index, sa
Mar
92.5
85.6
Apr
96.0
92.9
May
94.7
94.7
Thu
Jun 30
8:00am
Fri
Jul 1
8:00am
%oya
%m/m, sa
Fri
Jul 1
8:00am
Mar
-0.6
-1.3
Apr
-2.8
-1.3
May
0.6
0.5
Fri
Jul 1
10:30am
Jun
9.8
41.9
32.1
% change
Mar
1.0
-0.2
Apr
1.0
0.1
May
0.8
0.0
Jun
0.9
0.2
Current account
US$ bn nsa
Feb
7.2
Mar
10.1
Apr
3.4
May
7.5
Mar
49.5
Apr
50.0
May
50.1
Jun
50.3
%oya
Feb
0.9
3.6
Mar
0.7
3.0
Apr
-1.9
-1.1
May
0.6
0.4
We expect the inventory correction continued, while shipments edged up with the recovery in exports and domestic
demand.
% change
%oya
Mar
-3.3
Apr
-3.1
-3.0
May
-3.1
% change
2010=100, sa
Feb
135.9
Mar
136.7
Apr
137.7
May
138.3
Feb
2.8
Mar
2.6
Apr
2.1
May
2.9
Service activity
% change
%oya
Thu
Jun 30
8:00am
May
7.1
39.8
32.7
Thu
Jun 30
8:00am
Apr
8.8
41.0
32.2
Consumer prices
PMI - Manufacturing
Mar
9.9
43.0
33.2
Industrial production
Feb
2.3
3.2
May
5.0
US$ bn nsa
Balance
% change
Apr
4.2
Customs trade
%oya
%m/m, sa
Jun
93.5
95.0
Mar
5.7
Jun
98
Feb
3.2
Trade balance
Exports
Imports
% change
Consumer survey
Index
Fri
Jul 1
9:00am
Thu
Jun 30
8:00am
%oya
Mar
-4.7
Apr
-4.1
May
-4.0
-3.5
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ASEAN
21
Expenditure
Balance
19
-1
17
-2
15
Revenue
13
-3
07
08
09
10
11
12
13
14
15
16
30
28
Level
26
24
22
20
18
Impulse
16
07
09
11
13
-1
15
17
Source: BI
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ASEAN
%oya
25
40
20
Ex big-4 banks
30
15
Big-4 banks
Credit
20
10
10
Deposits
0
07
09
11
13
15
17
%oya
60
Share of loans
Change
5.5
45
30
4.5
3.5
2.5
1.5
09
09
11
13
15
11
13
-15
400
17
Source: BI
15
17
15
-30
07
07
Source: BI
Source: BI
300
Base money
200
100
0
Echoing this dichotomy, state banks are adjusting their lending rates more rapidly than the private banks (Figure 5).
09
11
13
15
17
Source: BI
16
10
15
Private banks
BI rate
14
13
12
6
State banks
09
07
-200
-300
11
-100
5
11
13
15
17
Source: BI
50
NFA
40
M0
40
30
20
20
10
-20
-10
07
09
11
13
15
17
Source: BI
74
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Indonesia
Data releases and forecasts
Time deposits
Savings and
current deposits
30
20
Thu
Consumer prices
Jul 1
% change
Mar
Apr
May
Jun
%oya
4.4
3.6
3.3
3.2
%m/m, sa
0.5
0.0
0.4
0.3
Food, %oya
9.1
8.9
7.7
__
Nonfood, %oya
3.2
2.2
2.2
__
Feb
Mar
Apr
May
1.8
2.8
2.3
2.5
13.6
16.4
15.7
15.9
11:00am
10
0
07
Source: BI
09
11
13
15
17
Figure 10: Indonesia 1-mo TD rate and local currency time deposits
No data released.
%p.a.
Malaysia:
Data releases and forecasts
%oya
11
1-mo TD rate
10
40
Time deposits
30
9
8
20
10
6
5
Merchandise trade
Jul 1
12:00pm
Trade balance
Exports
0
07
09
11
13
15
17
Source: BI
However, the latter option hinges on the idea that banks themselves would want to increase funding to expand credit. Given
the NPL overhang, this seems unlikely in the near term. This
option is also constrained by the recent deposit rate caps,
which limit the interest that banks can pay for deposits (see
Indonesia: Being mindful of the unintended consequences of
deposit rate caps, March 31).
%oya
-8.2
-9.3
-5.3
-5.2
Imports
11.8
13.6
13.4
13.5
%oya
-12.6
-14.5
-8.9
-11.8
Philippines:
Data releases and forecasts
Week of Jun 27 Jul 1
No data releases.
Mar
Apr
May
4.00
4.00
4.00
BSP kept both the policy rate and the Special Deposit Account
(SDA) rate unchanged today at 3.00% and 2.50%, respectively.
The reserve requirement rate was also left unchanged at 20%.
The inflation outlook remains manageable and growth conditions robust. Indeed, the near-term focus for the central bank
remains on implementing its liquidity framework to shift market
rates into the interest rate corridor.
Source: Central Bureau of Statistics, Indonesia; Department of Statistics, Malaysia; Coordination
Board and National Statistics Office, Philippines
75
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Thu
Jun 30
% change
Mar
Apr
Imports
5.4
6.4
6.2
6.5
%oya
-5.6
11.7
22.7
29.2
Feb
Mar
Apr
May
%oya
2.1
4.2
5.3
5.8
%m/m, sa
-0.5
2.3
-0.2
0.5
2:30pm
Thu
Jun 30
% change
Feb
Mar
Apr
May
%oya
0.9
1.2
1.4
2.0
%m/m, sa
-1.6
-0.3
0.0
0.5
May
2:30pm
Singapore:
Data releases and forecasts
Week of Jun 27 Jul 1
Thu
Merchandise trade
Jun 30
No data releases.
2:30pm
-1.0
%m/m, sa
0.1
Apr
-0.5
-0.2
-0.1
0.4
Feb
Mar
Apr
Trade balance
6.0
4.7
2.2
0.5
Exports, %oya
6.2
-1.0
-7.6
-5.3
Imports, %oya
-16.3
-9.1
-13.4
-5.9
May
Fri
Consumer prices
-0.7
-1.6
Jul 1
% change
0.1
-0.9
Singapores May CPI fell a larger-than-expected reflecting a rebate to occupants of government housing (this was a two-week
to 1-month S&CC rebate for the month of May). The effect of
this rebate on the CPI will be reversed in coming months and,
as such, does not suggest any change to the fundamental trajectory for inflation in Singapore.
Mar
Apr
May
Jun
Total, %oya
-0.5
0.1
0.5
0.5
%m/m, sa
0.1
0.2
0.3
0.1
Apr
%oya
0.1
2.9
3.0
0.9
%m/m, sa
1.3
4.8
4.4
-1.7
1-day repo
May
-0.4
Apr
May
Jun
1.50
1.50
1.50
Vietnam:
Data releases and forecasts
Week of Jun 27 Jul 1
Thailand:
Data releases and forecasts
No data releases.
Manufacturing production
the week
% change
Mar
Apr
May
%oya
-1.7
%m/m, sa
2.0
2.2
1.5
3.9
0.6
-0.1
0.2
%oya
%m/m, sa
Apr
1.9
0.5
May
2.3
0.6
Jun
2.4
0.4
Source: Coordination Board and National Statistics Office, Philippines; Office for Industrial Economics, Singapore, Bank of Thailand, Thailand; General Statistics Office of Vietnam; J.P. Morgan
forecasts
76
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India
In a surprise, RBI governor Rajan announced he would
return to academia at the end of his term in September
Finance minister indicated that a decision on Rajans
successor would be made soon
Government continues to liberalize FDI regime, eased
restrictions in nine sectors
Liberalization to give further fillip to FDI flows, which
have increased significantly in last two years
In an email to the RBI staff, the governor stated that he accomplished all of his initial goals: moving to a new monetary
framework, bolstering FX reserves, licensing new banks, bolstering the payments system. However, the governor also noted I am an academic and I have always made it clear that my
ultimate home is in the realm of ideas. The approaching end
of my three-year term, and of my leave at the University of
Chicago, was therefore a good time to reflect on how much
we had accomplished. While all of what we laid out on that
first day is done, two subsequent developments are yet to be
completed. Inflation is in the target zone, but the monetary
policy committee that will set policy has yet to be formed.
Moreover, the bank clean-up initiated under the Asset Quality
Review, having already brought more credibility to bank balance sheets, is still ongoing. International developments also
pose some risks in the short term.
While I was open to seeing these developments through, on
due reflection, and after consultation with the government, I
want to share with you that I will be returning to academia
when my term as Governor ends on September 4, 2016. I will,
of course, always be available to serve my country when
needed.
The finance minister indicated in a statement that a decision
on Rajans successor would be made soon. Investors likely
had expected the governor to continue for a second term and,
given his role in restoring macroeconomic stability, the news
probably came as a negative surprise. It is therefore important
that policymakers manage the transition well, particularly
given the imminent uncertainties surrounding post UK vote to
leave EU and the FCNR outflow. In particular, investors
would expect continuity and an institutionalization of existing
77
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India
Source: Central Statistical Organization and Ministry of Commerce, Government of India; Markit;
Reserve Bank of India; and J.P. Morgan forecasts
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The inflation trajectory in EM Asia is heavily driven by supply-side factors, primarily global food and crude oil prices. In
this note, we examine the impact of crude oil price movements on retail gasoline prices over two periods since the start
of the dramatic oil price fall: June 2014 to January 2015,
when crude oil prices fell 57%, and January to May 2016,
when they rose 53%.
Interestingly, while we observe a general decline in pump
prices across the region during the first period, retail motor
fuel prices diverged during the second period despite the rise
in crude oil prices (Figures 1 and 2, Table 1). We attribute this
difference to the varying management of passthrough effects
via direct and indirect measures that resulted in mixed inflation trends across the region.
In general, oil price movements have had a greater impact in
the US than in EM Asia, except in Taiwan during the second
phase (Figures 1 and 2, Table 1). In the latest CPI-derived
data available across the region, Taiwan has seen the biggest
changes in pump prices across both periods (-30% and +17%,
respectively). This is largely due to the high degree of liberalization in domestic pump prices in recent years.
Jan'16 to May'16*
0.4
0.0
-0.4
US
10
0
-10
-20
-30
-40
-50
-57%
Brent US
TW
TH
SG
KR
HK
IN
CN
PH
MY
ID
53%
20
10
TW
TH
SG*
KR
HK*
IN
CN*
PH
MY*
ID
Jun'14 to Jan'15
0.8
Brent
US pump
China
Pump
Hong Kong
Pump
India
Pump
Indonesia
Pump
Korea
Pump
Malaysia
Pump
Philippines
Pump
Singapore
Pump
Taiwan
Pump
Thailand
Pump
Dec-15
58
75
56
102
54
93
56
89
57
100
58
92
64
101
57
96
57
93
58
82
58
85
Jan-16
48
72
45
106
43
91
45
88
45
95
47
90
51
95
45
94
46
90
47
76
46
82
Mar-16
61
72
58
103
56
91
59
91
56
95
60
86
63
83
58
93
57
89
59
82
59
85
Apr-16
65
78
64
104
61
91
64
95
61
89
64
87
66
88
63
95
62
88
64
83
64
86
May-16
73
83
73
..
70
..
73
99
71
89
75
89
78
..
73
96
71
..
74
89
73
91
Chg.1
53
15
62
-2
63
0
62
12
57
-7
59
-1
52
-8
60
3
56
-2
59
17
60
11
-10
MY*
ID
TH
IN
US
TW Brent
79
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US economic calendar
Monday
Tuesday
Wednesday
Thursday
Friday
27 Jun
28 Jun
29 Jun
30 Jun
1 Jul
4 Jul
5 Jul
6 Jul
7 Jul
8 Jul
Employment (8:30am)
Jun
Consumer credit (3:00pm)
May
FOMC minutes
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
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Tuesday
Wednesday
Thursday
Friday
27 Jun
28 Jun
29 Jun
30 Jun
1 Jul
Euro area:
M3 (10:00am) May
Germany:
Import prices (8:00am) May
France:
INSEE cons. conf. (8:45am) Jun
Italy:
ISAE bus. conf. (10:00am) Jun
ISAE cons. conf. (10:00am) Jun
Euro area:
EC cons. conf. final (11:00am) Jun
EC econ. sent. (11:00am) Jun
104.5
Germany:
GfK cons. conf. (8:00am) Jul
CPI 6 states and prelim (2:00pm)
Jun 0.4%oya
Spain:
CPI prelim (9:00am) Jun -0.9%oya
Belgium:
CPI (8:00am) Jun
Netherlands:
CBS bus. conf. (6:30am) Jun
Euro area:
HICP flash (11:00am) Jun
0.1%oya
ECB account of the June 2nd
monetary policy meeting (1:30pm)
Germany:
Retail sales (8:00am) May
Employment (9:55am) May
35k ch m/m, sa
Unemployment (9:55am) Jun
-8k ch m/m, sa
France:
Cons. of mfg goods (8:45am) May
CPI prelim (8:45am) Jun 0.4%oya
PPI (8:45am) May
Italy:
CPI prelim (11:00am) Jun
-0.2%oya
PPI (12:00pm) May
Euro area:
PMI mfg final (10:00am) Jun 52.6
Unemployment rate (11:00am)
May 10.1%
Germany:
PMI mfg final (9:55am) Jun
France:
PMI mfg final (9:50am) Jun
Italy:
PMI mfg (9:45am) Jun
Spain:
PMI mfg (9:15am) Jun
4 Jul
5 Jul
6 Jul
7 Jul
8 Jul
Euro area:
PPI (11:00am) May
Euro area:
PMI serv. & comp final (10:00am)
Jun
MFI Interest Rates (11:00am) May
Retail sales (11:00am) May
Germany:
PMI serv. & comp final (9:55am)
Jun
France:
PMI serv. & comp final (9:50am)
Jun
Italy:
PMI serv. & comp (9:45am) Jun
Spain:
PMI serv. & comp (9:15am) Jun
Germany:
Mfg orders (8:00am) May
Germany:
Industrial production (8:00am) May
France:
Foreign trade (8:45am) May
Netherlands:
CPI (6:30am) Jun
Germany:
Foreign trade (8:00am) May
France:
Industrial production (8:45am) May
Monthly budget situation (8:45am)
May
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
Italy:
Industrial production (10:00am)
May
Germany:
CPI final (8:00am) Jun
Euro area:
Industrial production (11:00am)
May
France:
CPI final (8:45am) Jun
Italy:
CPI final (10:00am) Jun
Spain:
CPI final (9:00am) Jun
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
Euro area:
ECB bank lending survey
(10:00am) 2Q
Germany:
ZEW bus. survey (11:00am) Jul
Belgium:
BNB cons. conf. (3:00pm) Jul
Euro area:
Balance of Payments (10:00am)
May
Germany:
PPI (8:00am) Jun
Euro area:
ECB rate announcement (1:45pm)
France:
INSEE bus. conf. (8:45am) Jul
Euro area:
PMI mfg, serv & comp prelim
(10:00am) Jul
Germany:
PMI mfg, serv & comp prelim
(9:30am) Jul
France:
PMI mfg, serv & comp prelim
(9:00am) Jul
Euro area:
New car regs (8:00am) Jun
Foreign trade (11:00am) May
HICP final (11:00am) Jun
Italy:
Foreign trade (10:00am) May
Highlighted data are scheduled for release on or after the date shown. Times shown are local.
81
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
28 Jun
Wednesday
5 Jul
Friday
29 Jun
30 Jun
1 Jul
IP
(8:50am) May 0.0%m/m, sa
Housing starts
(2:00pm) May 4.0%oya
4 Jul
Thursday
6 Jul
7 Jul
8 Jul
Bank lending
(8:50am) Jun
Current account
(8:50am) May
Employers survey preliminary
(9:00 am)May
Economy Watchers survey
(2:00pm) Jun
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
M3
(8:50am) Jun
Private machinery orders
(8:50am) May
IP final
(1:30pm) May
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
Holiday:Japan
Construction spending
(2:00 pm) May
Reuters Tankan
(8:30am) Jul
82
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
28 Jun
Wednesday
29 Jun
Thursday
30 Jun
Friday
1 Jul
4 Jul
5 Jul
11 Jul
12 Jul
18 Jul
19 Jul
International transactions in
securities (8:30am)
May
6 Jul
7 Jul
8 Jul
13 Jul
14 Jul
15 Jul
20 Jul
21 Jul
22 Jul
CPI (8:30am)
Jun
Retail sales (8:30am)
May
All existing home sales are tentative. Times shown are local.
83
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
Wednesday
Thursday
Friday
27 Jun
28 Jun
29 Jun
30 Jun
1 Jul
Brazil:
FGV: consumer confidence Jun
BCB credit report May
Mexico:
Trade balance May US$1.2 bn
Argentina:
BCRA policy decision 31.0%
Brazil:
Central government budget May
BRL - 13.0bn
Mexico:
Unemployment rate May 3.95%
Central bank reserves (prior week)
Argentina:
Real GDP 1Q -0.6%oya
Brazil:
IGP-M Jun
1.52 m/m; 12.03% oya
National unemployment rate May
11.3%
Primary budget balance May
BRL -12.1bn
Net Debt as % of GDP May
39.2%
Chile:
Retail sales May 3.2%oya
IP May 1.5%oya
Unemployment rate May 6.6%
Colombia:
Unemployment rate May
Mexico:
Banxico meeting 4.25%
PS budget balance May
Commercial bank credit May
Uruguay:
Current account 1Q
PS budget balance May
Brazil:
IP May
-1.0% m/m sa
-9.5% oya
Manufacturing PMI Jun
Trade balance Jun
Colombia:
Economic activity index Apr
Exports May
Mexico:
IMEF manufacturing index Jun
52.4
IMEF nonmanufacturing index Jun
51.6
Remittances May US$2.4 bn
Banxico economic survey
Peru:
CPI Jun 0.2%m/m; 3.4%oya
Holiday: Chile
Holiday: Peru
During the week: Argentina: Govt tax collection Jun (1-6 Jul); Brazil: Vehicle sales Jun (1-5 Jul); Colombia: Current account 1Q (27-30 Jun)
4 Jul
5 Jul
6 Jul
7 Jul
8 Jul
Chile:
BCCh minutes
Argentina:
Auto report Jun
Brazil:
FIPE CPI Jun
Services PMI Jun
Chile:
Economic activity index May
Colombia:
CPI Jun
Mexico:
Gross fixed investment Apr
Central bank reserves (prior week)
Uruguay:
CPI Jun
Brazil:
Auto production Jun
Uruguay:
Unemployment rate May
Brazil:
IGP-DI Jun
Chile:
Trade balance Jun
Mexico:
CPI Jun
Brazil:
IPCA Jun
Chile:
CPI Jun
Colombia:
BanRep minutes
Mexico:
Consumer confidence Jun
Nominal wages Jun
Holiday: Colombia
During the week: Brazil: BCB Commodity price index Jun (6-13 Jul); Mexico: Auto report Jun (6-8 Jul); Peru: Trade balance May (8-11 Jul)
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
Brazil:
Retail sales May
Mexico:
IP May
Central bank reserves (prior week)
Uruguay:
IP May
Argentina:
CPI Jun
Chile:
BCCh meeting
Mexico:
Banxico minutes
Peru:
BCRP meeting
Brazil:
IGP-10 Jul
Colombia:
IP May
Retail sales May
Peru:
Economic activity index May
Unemployment rate Jun
During the week: Brazil: Tax collections Jun (15-22 Jul), Economic activity index May; Mexico: Formal job creation Jun (12-13 Jul)
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
Colombia:
Trade balance May
Mexico:
Central bank reserves (prior week)
Brazil:
BCB meeting
Argentina:
Budget balance Jun
Brazil:
IPCA-15 Jun
Mexico:
CPI Jul 1H
Holiday: Uruguay
Holiday: Colombia
During the week: Brazil: Formal job creation Jun (18-22 Jul)
Times shown are local.
84
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
Wednesday
Thursday
Friday
28 Jun
29 Jun
30 Jun
1 Jul
United Kingdom:
CBI distributive trades (11:00am)
Jun
Financial Policy Committee meeting
Sweden:
PPI (9:30am) May
Retail sales (9:30am) May
Trade balance (9:30am) May
United Kingdom:
Nationwide HPI (7:00am) Jun
M4 & M4 lending final (9:30am)
May
Net lending to individuals (9:30am)
May
Sweden:
Household lending (9:30am) May
Norway:
Retail sales (10:00am) May
United Kingdom:
Gfk cons. conf. (12:05am) Jun
BoP (9:30am) 1Q
Business inv. final (9:30am) 1Q
Index of services (9:30am) Apr
0.1%m/m, sa
Real GDP 3rd est. (9:30am) 1Q
1.4%q/q, saar
Sweden:
Wage stats (9:30am) Apr
Norway:
Credit indicator growth (10:00am)
May
United Kingdom:
PMI Mfg (9:30am) Jun 48.8
BoE quarterly bulletin (12:00pm)
2Q
Sweden:
PMI Mfg (8:30am) Jun
Norway:
PMI Mfg (9:00am) Jun
Labor directorate unemployment
(10:00am) Jun
4 Jul
5 Jul
6 Jul
7 Jul
8 Jul
United Kingdom:
PMI Construction (9:30am) Jun
United Kingdom:
PMI Services (9:30am) Jun
Financial stability report (10:30am)
Sweden:
PMI Services (8:30am) Jun
Industrial production & orders
(9:30am) May
Services production (9:30am) May
United Kingdom:
New car regs (9:00am) Jun
BoE housing equity withdrawal
(9:30am) 1Q
ONS economic review (9:30am)
Jul
Sweden:
PES unemployment (8:00am) Jun
Riksbank rate announcement
(9:30am)
United Kingdom:
Halifax HPI (8:30am) Jun
Industrial production (9:30am) May
Quoted mortgage interest rates
(9:30am) Jun
Sweden:
Budget Balance (9:30am) Jun
House price data (9:30am) Jun
Norway:
IP Mfg (10:00am) May
United Kingdom:
Markit jobs report (12:01am) Jun
Trade balance (9:30am) May
Sweden:
Household Consumption (9:30am)
May
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
Norway:
CPI (10:00am) Jun
PPI (10:00am) Jun
United Kingdom:
BRC retail sales monitor (12:01am)
Jun
BCC economic survey (9:30am)
2Q
Minutes of the June 28th FPC
meeting (9:30am)
Sweden:
CPI (9:30am) Jun
United Kingdom:
BoE credit conditions survey
(9:30am) 2Q
Sweden:
Prospera inflation expectations
(8:00am) Jul
Norway:
House prices (10:00am) 2Q
United Kingdom:
RICS HPI (12:01am) Jun
MPC rate announcement, asset
purchase target & minutes
(12:00pm) Jul
United Kingdom:
Construction output (9:30am) May
Norway:
Trade balance (10:00am) Jun
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
United Kingdom:
Rightmove HPI (12:01am) Jul
United Kingdom:
CPI (9:30am) Jun
PPI (9:30am) Jun
House price index (9:30am) May
Sweden:
Minutes from the July 6th monetary
policy meeting (9:30am)
United Kingdom:
Labor market report (9:30am) Jun
United Kingdom:
Public sector finances (9:30am)
Jun
Retail sales (9:30am) Jun
Norway:
Building statistics (10:00am) Jun
During the week: United Kingdom: CBI industrial trends Jul (21-26 Jul) Norway: Retail sales Jun (20-30 Jul), Credit indicator growth Jun (20-30 Jul)
Times shown are local
85
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
Wednesday
27 Jun
28 Jun
Israel:
BoI rate decision (4:00pm)
On hold, 0.10%
Hungary:
Unemployment (9:00am) Apr
South Africa:
Quarterly employment statistics
(11:30am) 1Q
29 Jun
Thursday
Friday
30 Jun
1 Jul
Czech Republic:
CNB rate decision (1:00pm)
On hold, 0.05%
Hungary:
PPI (9:00am) Apr
Trade balance final (9:00am) Apr
Poland:
NBP inflation expectations
(2:00pm) Jun
Romania:
NBR rate decision
On hold, 1.75%
Turkey:
Foreign trade (10:00am) May
-US$5.1bn
South Africa:
Private sector credit (8:00am) May
Budget (2:00pm) May
Trade balance (2:00pm) May
Czech Republic:
GDP final (9:00am) 2Q
PMI (9:30am) Jun
Hungary:
PMI (9:00am) Jun
Poland:
PMI (9:00am) Jun
Russia:
Manufacturing PMI (10:00am) Jun
Current account final (5:00pm) 2Q
Turkey:
PMI (10:00am) Jun
South Africa:
Vehicle sales Jun
Barclays PMI (11:00am) Jun
4 Jul
5 Jul
6 Jul
7 Jul
8 Jul
Turkey:
CPI (10:00am) Jun
Hungary:
Retail sales (9:00am) May
Romania:
Retail sales (9:00am) May
Poland:
NBP rate decision
Czech Republic:
Trade balance (9:00am) May
Hungary:
Industrial output (9:00am) May
South Africa:
Gross reserves (8:00am) Jun
Czech Republic:
Industrial output (9:00am) May
Retail sales (9:00am) May
Hungary:
CPI (9:00am) Jun
Trade balance (9:00am) May
Romania: GDP final (9:00am) 2Q
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
Poland:
CPI (2:00pm) Jun
Romania:
CPI (9:00am) Jun
Trade balance (9:00am) May
Russia:
Current account (5:00pm) 2Q
Czech Republic:
CPI (9:00am) Jun
Poland:
Core inflation (2:00pm) Jun
Russia:
Foreign trade (5:00pm) May
South Africa:
Manufacturing output (1:00pm)
May
Romania:
Industrial output (9:00am) May
South Africa:
Retail sales (1:00pm) May
Czech Republic:
Current account (10:00am) May
Poland:
Current account (2:00pm) May
Romania:
Current Account May
Turkey:
Current account (10:00am) May
Industrial output (10:00am) May
Israel: CPI (2:00pm) Jun
Turkey:
Unemployment (10:00am) Apr
18 Jul
19 Jul
20 Jul
21 Jul
Poland:
Average gross wages and Employment (2:00pm) Jun
Poland:
Industrial output (2:00pm) Jun
PPI (2:00pm) Jun
Retail sales (2:00pm) Jun
Russia:
Retail sales, Unemployment &
Investment (5:00pm) Jun
Turkey: CBRT rate decision
Czech Republic:
PPI (9:00am) Jun
South Africa:
CPI (10:00am) Jun
South Africa:
SARB rate decision
Israel:
22 Jul
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Watch
Tuesday
Wednesday
Thursday
Friday
27 Jun
28 Jun
29 Jun
30 Jun
1 Jul
New Zealand:
Trade balance (10:45am)
May NZ$200mn
Hong Kong:
Trade balance (4:30pm)
May HK$31.2bn
Korea:
Consumer survey (6:00am) Jun
98, index
Korea:
FKI Business Survey (6:00am)
May 93.5, index
Australia:
Pvt. sector credit (11:30am)
May 0.6%m/m
New Zealand:
Building permits (10:45am) May
NBNZ business confidence
(1:00pm) Jun
Hong Kong:
Retail sales (4:30pm) May
-7.6%oya
Korea:
IP (8:00am) May 0.6%oya
Taiwan:
CBC monetary policy meeting
12.5bp rate cut
Thailand:
PCI (2:30pm) May 5.8%oya
PII (2:30pm) May 2.0%oya
Trade balance (2:30pm)
May US$0.5bn
China:
PMI mfg. (NBS) (9:00am) Jun
50.0, index
PMI Mfg. (9:45am) Jul
49.0, index
India:
PMI mfg. (10:30am) Jul
Indonesia:
CPI Jun 3.2%oya
Korea:
CPI (8:00am) Jun 0.9%oya
Current account balance (8:00am)
Jun US$7.5bn
Trade balance (9:00am) Jun
US$9.8bn
PMI mfg. (10:30am) Jun
50.3, index
Malaysia:
Trade balance (12:00pm)
May US$2.5bn
Taiwan:
PMI mfg. (10:30am) Jun
49.0, index
Thailand:
CPI Jun 0.5%oya
Holiday: Hong Kong, Thailand
4 Jul
5 Jul
Australia:
ANZ job advertisements (11:30am)
Jun
Building approvals (11:30am) May
Singapore:
PMI (9:00pm) Jun
Australia:
Retail sales (11:30am) May
Trade balance (11:30am) May
RBA official rate announcement
New Zealand:
ANZ commodity price Jun
Philippines: CPI (9:00am) Jun
Taiwan: CPI (8:30am) Jun
6 Jul
7 Jul
8 Jul
China:
Foreign Exchange Reserves Jun
Taiwan:
Trade balance (4:00pm) Jun
11 Jul
12 Jul
13 Jul
14 Jul
15 Jul
Australia:
Housing finance (11:30am) May
Australia:
NAB business confidence Jun
India:
CPI (5:30pm) Jun
IP (5:30pm) May
Malaysia:
IP (12:00pm) May
Philippines:
Exports (9:00am) May
China:
Trade balance Jun
Korea:
Export price index (6:00am) Jun
Import price index (6:00am) Jun
Unemployment rate (8:00am) Jun
Money supply (12:00pm) May
Malaysia:
BNM monetary policy meeting
Australia:
New motor vehicle sales Jun
Unemployment rate (11:30am) Jun
New Zealand:
Business NZ PMI (10:30am) Jun
India:
WPI (12:00pm) Jun
Korea:
BOK monetary policy meeting
China:
FAI (10:00am) Jun
GDP (10:00am) 2Q
IP (10:00am) Jun
Retail sales (10:00am) Jun
Indonesia:
Trade balance Jun
Singapore:
Retail sales (1:00pm) May
18 Jul
19 Jul
20 Jul
21 Jul
22 Jul
Singapore:
NODX (8:30am) Jun
Hong Kong:
Unemployment rate (4:30pm) Jun
Korea:
PPI (6:00am) Jun
Malaysia:
CPI (12:00pm) Jun
Taiwan:
Export orders (4:00pm) Jun
Hong Kong:
CPI (4:30pm) Jun
Indonesia:
BI monetary policy meeting
Taiwan:
Unemployment rate (8:30am) Jun
IP (4:00pm) Jun
87
This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.
Economic Research
Global Data Diary
Monday
27 June
Brazil
BCB credit report
Israel
BOI mtg: no chg
Mexico
Trade balance (May)
United States
Intl trade (May, adv)
Flash srv PMI (Jun)
2 8 July
India
Trade balance (May)
Russia
CPI (Jun)
Singapore
GDP (2Q, flash)
4 July
Turkey
CPI (Jun)
Tuesday
28 June
Mexico
Unemployment rate (May)
United States
Real GDP (1Q, fnl)
CB cons conf (Jun)
Case-Shiller HPI (Apr)
5 July
Australia
Retail sales (May)
RBA mtg: no chg
Euro area
Retail sales (May)
Taiwan
CPI (Jun)
United States
Factory orders (May)
Global
All-industry PMI (Jun)
Wednesday
29 June
Argentina
Real GDP (1Q)
Euro area
EC econ snt (Jun)
Germany
CPI (Jun)
Japan
Shoko Chukin svy (Jun)
United States
Personal income (May)
Pending hm sales (May)
6 July
Germany
Mfg orders (May)
Poland
NBP mtg: no chg
Sweden
Riksbank mtg: no chg
United States
Intl trade (May, fnl)
ISM non-mfg (Jun)
All-ind PMI (Jun)
FOMC minutes
Thursday
30 June
Friday
1 Jul
Czech Republic
CNB mtg: no chg
Euro area
HICP flash (Jun)
Germany
Unemployment (Jun)
Retail sales (May)
Japan: IP (May)
Korea: IP (May)
Mexico
Banxico mtg: +50bp
Romania
NBR mtg: no chg
South Africa
Trade balance (May)
Taiwan
CBC mtg: -12.5bp
United Kingdom
Real GDP (1Q, 3rd est)
Brazil
IP (May)
Trade balance (Jun)
Euro area
Unemployment rate (Jun)
Japan
Core CPI (May)
HH spending (May)
Unemployment rate (May)
BoJ Tankan (2Q)
Korea
CPI (Jun)
Trade balance (Jun)
United States
Light veh. sales (Jun)
ISM mfg (Jun)
7 July
China
FX reserves (Jun)
Germany
IP (May)
Mexico
CPI (Jun)
United Kingdom
IP (May)
United States
ADP employment (Jun)
Global
Manufacturing PMI (Jun)
8 July
Brazil
CPI (Jun)
Germany
Trade balance (May)
Japan
Employers srvy (May)
Taiwan
Trade balance (Jun)
United States
Labor mrkt report (Jun)
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clients only. This material does not take into account the specific investment objectives, financial situation or particular needs of the recipient. The recipient of this material must not distribute it to any third party or
outside Australia without the prior written consent of JPMSAL. For the purposes of this paragraph the term wholesale client has the meaning given in section 761G of the Corporations Act 2001. New Zealand:
This material is issued and distributed by JPMSAL in New Zealand only to persons whose principal business is the investment of money or who, in the course of and for the purposes of their business, habitually
invest money. JPMSAL does not issue or distribute this material to members of "the public" as determined in accordance with section 3 of the Securities Act 1978. The recipient of this material must not distribute it
to any third party or outside New Zealand without the prior written consent of JPMSAL. Canada: The information contained herein is not, and under no circumstances is to be construed as, a prospectus, an advertisement, a public offering, an offer to sell securities described herein, or solicitation of an offer to buy securities described herein, in Canada or any province or territory thereof. Any offer or sale of the securities
described herein in Canada will be made only under an exemption from the requirements to file a prospectus with the relevant Canadian securities regulators and only by a dealer properly registered under applicable
securities laws or, alternatively, pursuant to an exemption from the dealer registration requirement in the relevant province or territory of Canada in which such offer or sale is made. The information contained herein
is under no circumstances to be construed as investment advice in any province or territory of Canada and is not tailored to the needs of the recipient. To the extent that the information contained herein references
securities of an issuer incorporated, formed or created under the laws of Canada or a province or territory of Canada, any trades in such securities must be conducted through a dealer registered in Canada. No securities commission or similar regulatory authority in Canada has reviewed or in any way passed judgment upon these materials, the information contained herein or the merits of the securities described herein, and any
representation to the contrary is an offense. Korea: This report may have been edited or contributed to from time to time by affiliates of J.P. Morgan Securities (Far East) Limited, Seoul branch. Brazil: Ombudsman
J.P. Morgan: 0800-7700847 / ouvidoria.jp.morgan@jpmorgan.com. Revised June 18, 2016. Copyright 2016 JPMorgan Chase Co. All rights reserved. Additional information available upon request.
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This document is being provided for the exclusive use of Giovanna Murillo at RIMAC SEGUROS Y REASEGUROS.