Wednesday, March 10, 2010

Powerful lift−off but gravity still strong

Powerful lift−off but gravity still strong


Introduction - Powerful lift-off but gravity still strong
Alternative Scenario 1 - Stronger for longer
Alternative Scenario 2 - Eurosclerosis returns
US - Recovery on track, but not fast track
Euroland - The weakest link
Asia - Recovery still looks strong


Powerful lift-off but gravity still strong
  • 2010 will be the moment of truth for the global economy: it will become apparent whether the recovery is sustainable or whether a double-dip scenario will materialise. Since 2010 is effectively a ‘make or break’ year, the markets are expected to be more volatile than in 2009.
  • We continue to be cautiously optimistic and expect a road of sustained recovery. It will, however, be moderate by historical standards. Global growth momentum is likely to peak in Q1 as strong cyclical tailwinds from stimuli and inventories taper off.
  • We leave our growth forecasts for the US and Asia broadly unchanged. We have revised down our projections for Euroland slightly in 2010 based on the growth disappointment in late 2009. Our projections are still slightly above consensus in all regions.
  • Key for sustainability will be a return of US job growth. We expect the strong US economic growth in the second half of 2009 to translate into decent gains in employment of around 200-250k per month. This should lead to sustained growth in US final demand of 2.5-3.0% in the coming years.
  • We expect the Euroland recovery to continue in 2010 mainly driven by exports. The Asian upswing is one step ahead and we already see strong growth in final demand. Focus is changing to policy tightening to avoid inflation and bubbles in asset markets.
  • Monetary exit strategies in the US and Euroland are likely to be slow as inflation is not yet an issue and the recovery is moderate. We look for a first hike from the Fed in November while the ECB is expected to hike in early 2011. In China


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