A selection of charts presented
at Fathom Consulting’s Global Economic
& Markets Outlook Seminar
on 1st November 2016
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Fathom Consulting Global Economic
and Markets Outlook Q4 2016
Selected charts
All commentary and opinion is that of Fathom Consulting and any views expressed are not those of Thomson Reuters.
More charts from Fathom Consulting are available in Thomson Reuters Eikon along with many of the data sources.
Growth summary
Overview of Fathom growth forecasts
2015
2016
2017
2018
Central
Central
Isolationism
Central
Isolationism
Year over year %
Global GDP
2.5 (3.1)
2.2 (2.8)
2.5 (3.1)
0.6 (1.3)
2.8 (3.3)
0.2 (0.9)
Advanced
Economies*
2.1
1.4
1.4
–0.6
1.5
–0.9
United States
2.6
1.4
1.9
0.2
1.8
–0.5
EA
2.0
1.3
0.9
–1.8
1.1
–2.5
Japan
0.6
0.6
0.4
–0.6
0.5
1.3
United Kingdom
2.2
1.9
0.5
–0.9
1.1
0.1
2.8 (3.9)
2.8 (3.9)
3.3 (4.3)
1.4 (2.6)
3.8 (4.6)
0.9 (2.2)
Emerging and
developing
economies
(Using official Chinese GDP)
*as defined by the IMF
• O
ur central scenario sees victory for the Democrats and the US run ‘business as usual’.
The next most likely outcome is a watered down version of the Republican candidate’s
manifesto.
• Our risk scenario is one of increasing isolationism.
• T
he chances of a marked downturn in global trade as a share of global GDP over the next
one to two years are small. But over a longer horizon, this becomes a serious threat.
• T
he emerging economies have the most to gain under ‘business as usual’ and the most
to lose in a world of increasing isolationism.
3
‘Business as usual’ – our central scenario
•
Debt brings forward economic activity
from the future to the present, allowing
an economy to grow more rapidly for
a time. But the quid pro quo is that it
must grow less rapidly later, particularly
if the resources that have been
borrowed are consumed, or squandered
on non-productive assets.
GDP per capita
GDP per capita
USD
logarithmic
scale
USD thousand,
thousand, logarithmic
scale
View and refresh chart in
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50.0
10.0
5.0
1.0
0.5
1960
1970
US
1980
1990
2000
2010
UK
Germany
Japan
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
… Puts a fundamental tenet of economics
at risk
Global trade
View and refresh chart in
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Share
of global
Global
tradetrade GDP, percent
70
Share of global GDP, per cent
60
•
Since David Ricardo developed his
theory of comparative advantage almost
200 years ago, a firm belief in the
virtues of free trade has been one of the
defining characteristics of an economist.
50
40
30
20
60
65
70
75
80
85
90
95
00
05
10
15
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
4
Available on Thomson Reuters Eikon
Isolationism good for workers … a disaster
for capitalists
• F
ollowing a return to 1980s levels of
global trade as a share of global GDP,
workers get a larger share of a smaller
pie.
• W
e find that the former effect dominates
– workers are better off. Equities
plummet.
US
Isolationism
US isolationism
View and refresh chart in
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Changes relative to base, per cent
Changes relative to base, percent
10
5
0
-5
-10
-15
-20
GDP
Labour share Household income Equity prices
Source:
ThomsonDatastream
Reuters Datastream
/ Fathom Consulting
Source: Thomson
Reuters
/ Fathom
Consulting
UK post-referendum panic short lived
•
The intense period of panic that followed the Brexit vote was short-lived, with the
uncontested appointment of Theresa May in early July appearing to put a floor under
the currency.
•
But following a Conservative Party Conference littered with speeches that spoke of a socalled ‘hard’ Brexit, investors have got the jitters again.
Sterling exchange rates
View and refresh chart in
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Index, 23/06/2016 = 100
Spot rate, both axes
EU referendum
TM is PM
1.50
0.74
0.76
CPC16
0.78
0.80
0.82
0.84
0.86
1.45
1.40
1.35
1.30
1.25
1.20
J
F
M
GBPUSD
A
M
J
2016
J
A
S
O
0.88
0.90
0.92
EURGBP (inverted) (RHS)
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
5
View and refresh chart in
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UK equity prices
Index, 23/06/2016 = 100
Sterling
spot
rate, exchange
both axies rates
1.55
UK equity prices
120
EU referendum
TM is PM
A
J
CPC16
110
100
90
80
70
J
F
M
FTSE 100, LC
FTSE 100, USD
M
J
2016
A
S
O
FTSE 250, LC
FTSE 250, USD
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
Available on Thomson Reuters Eikon
Europe’s banking crisis
•
Cooperation between members of
the European single currency is, quite
literally, vital.
Non-performing loans
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Non-performing loans
Percent
totalgross
gross
loans
Per cent of
of total
loans
35
30
25
20
15
10
5
0
00
02
04
Spain
UK
Italy
06
08
Germany
Greece
Ireland
10
12
14
16
US
France
Portugal
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
Mapping out a banking crisis
•Our own analysis puts
BNP Paribas at the
heart of the global
banking system.
•
A crisis at that French
institution would spread
rapidly around the
world.
6
China’s economy has turned a corner …
GDP and Fathom China
momentum indicator
View and refresh chart in
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GDP and Fathom China Momentum Indicator
Four-quarter
percentage
changes
Four-quarter percentage
changes
16
•That China has succeeded in bringing
its dramatic slowdown to a halt is now
close to the consensus.
•We first alerted clients to this prospect –
which we referred to as ‘doubling down’
– at the beginning of this year.
14
12
10
8
6.7
6
4
2
2.7
1995
GDP
2000
2005
2010
2015
Fathom China Momentum Indicator
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
We have been here before
•
According to our Financial Vulnerability
Indicator, when judging the risk of a
banking crisis, it is not just the level of
debt that matters. The rate of change
of debt matters too.
•
From a levels perspective, China’s
debt-to-GDP ratio exceeds that seen in
the UK and in the US on the eve of the
2008/09 financial crisis. It is close to
the level seen in Japan shortly after
that country’s bubble burst.
•
The rate of growth of debt in China
– proxied by its level relative to a
ten-year moving average – has been
phenomenal.
7
Credit to private
non-financial sector
View and refresh chart in
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Credit to private non-financial sector
Difference relative
to to
ten-year
MA,MA,
percentage
points points
Difference
relative
ten-year
percentage
60
40
20
0
-20
-40
60
65
US
70
75
80
85
90
95
00
05
10
15
Japan
China
UK
Germany
Source: Thomson Reuters Datastream / Fathom Consulting
Source: Thomson Reuters Datastream / Fathom Consulting
Available on Thomson Reuters Eikon
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