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BIG PICTURE: The big easy

2-3

Financial conditions in the major advanced economies have eased a lot, which will support growth. The risk of tightening comes not from policy, but from financial market shocks.

THEMES OF THE WEEK Italy: Parallel currencies? The big temptation for a parallel currency in Italy is to get around European fiscal rules, but we doubt this would work. The risk of the currency trading at a discount and lower liquidity argues against widespread adoption.

4–5

UK: Soft data, soft currency Recent data show the economy is somewhat vulnerable to any volatility or loss of confidence around the Brexit process. We expect the Bank of England to keep rates on hold until late 2018 but GBP weakness to test its resolve.

6–7

US: CPI: More than merely idiosyncratic shocks Inflation has disappointed five months in a row. Broad and persistent weakness suggests this is more than just idiosyncratic shocks, and may be due to slower real income growth.

8–9

Japan: Consumption surged in Q2, but will it last? Consumption in Q2 rivalled the pre-VAT-hike surge of Q1 2014. The strength reflects overlapping favourable conditions and a decline is possible in Q3. However, income and employment conditions could see a trend recovery.

10–11

Poland: Is investment growth at a crossroads? Soft credit growth, weak FDI inflows and elevated institutional uncertainty remain the key near-term downside risks to investment growth. Over the medium term, the lack of skilled labour appears to be the main risk factor.

12–13

Mexico: New CPI basket case A newly announced CPI basket adds more volatility, but will have little impact on average inflation. Despite the added weight given to food items and greater knock-on effects from FX, our forecast for 2018 and 2019 is unchanged.

14

Argentina: More aggressive central bank The central bank is on hold but has explicitly reinforced its tightening bias. Intervention efforts to flatten the yield curve suggest rate cuts will take longer to materialise. We do not now expect the easing cycle to start until late Q4 2017.

15

Colombia’s inflation: Down and sideways We lower our end-2017 inflation call to 4.5% (from 5.0%), which still leaves us above consensus. We expect core inflation and public spending to maintain pressure near term, but disinflation to allow rates to fall to 4.0% in 2018.

16

DATES AND DATA One-week calendar

17–19

Global inflation watch

Key data preview

20–23

Forecasts

28

Central bank watch

24–25

Recently published research

29

26–27

Contacts

30

Disclaimer

31

This weekly has been produced by the Market Economics team www.GlobalMarkets.bnpparibas.com

Please refer to important information at the end of the report.

Big picture: The big easy Author: Paul Mortimer-Lee

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The ECB’s concerns about the exchange rate unduly tightening financial conditions look overdone, with our own proprietary measure showing still very slack conditions.

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We sympathize with those on the FOMC who fret about an easing in US financial conditions despite tighter policy, as the FX rate has delivered a big ease this year.

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Japanese and UK financial conditions have also eased.

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Financial conditions in the major advanced economies have eased a lot, which will support growth. The risk of tightening comes not from policy, but from financial market shocks.

@MortimerLeePaul

Chief Market Economist and Head of US Economics New York, BNP Paribas Securities Corp

Concerns about financial conditions tightening …

The most recent minutes from the European Central Bank (ECB) and the US Federal Reserve expressed, in different ways, concerns about financial conditions. The ECB’s account of the July meeting noted: “A premature and unwarranted tightening of financial conditions could put the prospects of a sustained adjustment in inflation towards the Governing Council’s inflation aim at risk”, which was clearly related to an earlier reference to “concerns were expressed about the risk of the exchange rate overshooting”.

… and being too soft

The Fed minutes contained a contrasting discussion that financial conditions might be too soft, and stated: “Several participants noted that the further increases in equity prices, together with continued low longer-term interest rates, had led to an easing of financial conditions,” though there were differing views as to what this meant for monetary policy. Charts 1 through to 4 show our financial and monetary conditions indices (FMCIs) for the euro area, the US, Japan and for these three economies as a group. Our FMCIs are calculated as standard deviations from their longer-run averages (negative being slacker and positive tighter).

Stronger REER has led to tightening in euro area

In the euro area, financial and monetary conditions have indeed tightened due to a stronger real effective exchange rate (REER); the contribution from this became more restrictive by about a 0.6 standard deviation between December 2016 and August 2017. However, we should look at the overall index, which has actually eased slightly since last December. The offsets to the tighter conditions from the exchange rate originated from several other components, with the contribution from equities the most important. Overall, euro area financial and monetary conditions are still very soft, at 1 standard deviation below their longer-term average. We do not believe that the tighter conditions this year are particularly significant from an activity point of view, given the offsetting influences from elsewhere. Given that, the impact of the exchange rate on measured year-over-year inflation may be more important than on activity in the relatively short term. While the EUR has risen a dramatic 12% against the USD since 2 January, the effective exchange rate has risen by only half as much, which is not enough to lower growth significantly when world trade is stronger, nor to trim inflation – even temporarily – by more than one-quarter of a percentage point, or so.

Chart 1: Eurozone FMCI

Chart 2: US FMCI

Source: Macrobond, BNP Paribas


@MortimerLeePaul Macro Matters

24 August 2017

2

www.GlobalMarkets.bnpparibas.com

Eurozone should remain robust in coming months

It seems highly likely that the ECB will announce reduced QE in the fall and that the eurozone economy will remain robust in coming months. Meanwhile, US political developments continue to challenge the greenback, so it seems likely that the euro will remain firm, though the scope for further appreciation may be limited by many players already being long the EUR. It might actually be in the ECB's interest to get the announcement over with in order to catalyse "sellthe-fact" profit-taking from euro bulls. If the ECB were to try to spin out the process of tapering or delay it, it could be counterproductive. While we do not have much sympathy with the ECB’s concerns about financial conditions, given that they are very slack and that the exchange rate is long below where we see equilibrium (north of 1.30 for EURUSD), we do lend a more sensitive ear to those at the Fed who are fretting about financial and monetary conditions having eased, despite higher policy rates over recent quarters. In December 2016, our FMCI for the US was 0.3 of a standard deviation softer than the historical average. In August this year, conditions are almost 1.5 standard deviations slacker than normal, easier than at any time since late 2014, which is probably inappropriate with unemployment likely below the NAIRU.

Most ease in US FMCI comes from exchange rate Fed and ECB have different weights on FX

Of the 1.2 standard deviation ease in the US FMCI since last December, almost all of it has come from the exchange rate, more than offsetting higher fed funds. It is interesting to contrast the ECB’s concerns about the potential effects of the exchange rate moves on euro area inflation with the Fed’s lack of reference to a softer dollar being supportive of future inflation. It probably mirrors a greater role for FX in price formation in Europe than in the US and an asymmetric response of central banks to inflation news when inflation is low (a bigger response to low inflation news than to high). Japan’s FMCI was at a more or less neutral level at the end of 2016, but is now about a 0.8 standard deviation soft. Again, a softer REER has played an important part, but the stronger equity market and a narrowing in the spread between short-term bank debt and T-Bills also helped. The UK’s financial and monetary conditions have eased a lot since the June 2016 referendum, again importantly reflecting a weaker exchange rate, though a confidence (demand) shock due to Brexit may damp the economic response to this.

The 2017 big easing of advanced economies

Overall, what we have seen in the large advanced economies as a group is that financial and monetary conditions, which tightened substantially from 2015 until end-2016, have eased greatly this year – by about a 0.8 standard deviation since last November. We see this as contributing to firm demand and to stretched valuations for risk assets. In terms of future moves in the G3’s FMCIs, we do not forecast rate hikes from any of the three main central banks until the Fed hikes in March next year. Thus, market rate expectations and therefore the 2-year rate differentials that we see as key FX drivers should not shift much. FMCIs should continue to be very slack, giving a good background for growth in advanced and emerging market economies alike. The biggest risk of a tightening is from a financial market correction, either in response to political developments or an economic shock.

Chart 3:Japan FMCI


Chart 4: FMCI in Big 3 advanced economies



24 August 2017

3


Italy: Parallel currencies? Authors: Paul Mortimer-Lee

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There are several thousand complementary currencies in the world, so Mr Berlusconi’s suggestion of a parallel currency in Italy is not new.

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The big temptation for a parallel currency in Italy is to get around European fiscal rules, but we doubt this would work.

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We can see reasons why a parallel currency might be held, but the risk of the currency trading at a discount and lower liquidity argues against widespread adoption.

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We are cautious about the chances of a large-scale parallel currency in Italy taking off. The main risk would be a concern about potential Italexit, potentially pressuring the banks.

@MortimerLeePaul

Global Head of Market Economics Chief Economist North America New York BNP Paribas Securities Corp

Ex-PM Berlusconi argues for a parallel currency

Many doubt the viability of the scheme

Thousands of examples

Over the weekend, Former Prime Minister of Italy Silvio Berlusconi spoke about the possibility of a parallel currency in Italy that could be issued by the government and could run alongside the euro. There may have been a political motivation behind the suggestion in order to strengthen links with other centre-right groups, some of which are anti-euro, but without going so far as to advocate leaving the euro. A parallel currency is an idea that Mr. Berlusconi has advanced before. The Northern League previously outlined a plan for “mini-BOTS” (Buono Ordinario del Tesoro or short-term government bills). The idea is that the government would pay for goods and services, maybe even pensions and government workers’ pay, with these IOUs and, in turn, it would accept them in settling taxes. Many doubt the scheme’s viability, though similar proposals have received support from some serious economists. It is too soon to assess whether political momentum will build for this in the coming weeks in the run-up to the Sicillian elections or to what extent it might be a proposal advanced in next year’s general elections, but it is worth considering its advantages and disadvantages. There are many complementary currencies in the world today, for example, the Bristol pound, which can be used to buy goods and services. Bitcoin is another obvious example, and it is arguable that some electronic payments mechanisms constitute complementary currencies. Cheques are a form of complementary currency, as indeed are bank deposits (the IMF distinguishes between “money” (central bank monetary liabilities) and “quasi-money” (including bank deposits). Commercial banks in Scotland and Northern Ireland issue their own notes, although they have to hold backing assets for their notes at all times. Even air miles or retail coupons perform some function of a complementary currency. In short, “Money is what money does.” Cuba has had the peso (CUP) circulating in the domestic economy and the so-called convertible peso (CUC). So the idea of a parallel currency is neither novel nor crazy. There are many (several thousand) complementary currencies, in the world today including many in Europe.

Complementary currencies typically local

Complementary currencies are very often issued on a local or regional scale, with the objective of promoting economic activity in the locality, perhaps including stimulating small enterprises and often with a view to achieving wider social aims. Since the acceptability of the currency outside the targeted area is limited, there is a larger, local multiplier effect of any spending – cash stays within the local economy. Complementary currencies do not have the status of being legal tender, but if another agent willingly accepts a complementary currency, the distinction from proper currency at that time is more or less irrelevant. Some reasons behind Mr Berlusconi’s proposal echo the rationale for issuing complementary currencies on a more limited scale in jurisdictions smaller than Italy – to promote local business, for example.

Arguments in favour…

Other arguments can be made for a country to issue a parallel currency: 

To reduce debt service costs by issuing zero-interest notes and coins rather than interestbearing debt.


24 August 2017

4


… and those against



To try to avoid fiscal constraints on borrowing. Several proponents of a parallel currency in Italy (for example, the suggestions promoting Tax Credit Certificates), assume it is a way to avoid European fiscal constraints. We doubt the European authorities would allow any local currency not to count as debt, however.



Some in Italy see a parallel currency as a means to smoothing the transition out of the euro, and concerns about this motive seemed to dominate early market reaction to Berlusconi’s weekend thoughts.



To restore monetary sovereignty and to allow the government to accrue more seignorage than under the existing system.



To ease domestic monetary conditions by boosting the money supply.



To the extent that wages and domestic prices were denominated in the new currency, an excess supply of IOUs could lead to a devaluation and a more competitive economy. Though, this begs the question of who would want to be paid in IOUs if devaluation were a serious proposition.

However, there seem to us to be a number of problems: 

A new currency unit that is mainly driven by a government paying for goods services could easily see demand fall short of supply, and so could quickly trade at a discount.



To the extent that the new unit is seen as a precursor to a euro exit, economic actors may be unwilling to hold it, or be paid in it, since future devaluation would seem likely.



Concerns about signalling a euro exit might question the value of bank deposits in euros and could provoke a flight to euro cash.

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To the extent that the new currency increases holdings of notes and coins, and reduces bank deposits (in EUR), there could be a reduction in banks’ ability to extend credit.



The liquidity of the IOUs would be less than for euros, as would be the ability to use them outside the issuing country, suggesting euros could be seen as preferable to hold.



ECB interest rate policy would spill over into IOUs, reducing any sovereignty gain.

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The ECB and other governments might oppose the move as raising the spectre of exiting the EUR or an Italexit. There would be no obvious lender of last resort, and so a parallel currency could eventually contribute to financial instability.

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We do not think the scheme would relieve fiscal constraints given European rules.

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The prospect of easier money and looser fiscal constraints could reduce the political and social willingness to undertake more deep-seated structural reforms.

All in all, we are cautious about a large-scale parallel currency in Italy taking off, though it might appeal to national sentiment and achieve acceptance. Ultimately, the success or failure of a parallel currency depends on the willingness of people to use it. Since there are thousands in existence, there appears to be a niche, though how wide is unclear on a national scale. If it were seen as precursor to a euro exit or Italexit, it might not gain much acceptance as economic agents might anticipate a future devaluation. If such expectations took hold, it could raise risk premia and lead to euro deposits exiting the banking system, curbing credit and end up doing more harm than good. What the proposal signals is a desire from some in Italy to ease fiscal and monetary constraints on the economy. Given high unemployment, especially amongst the young, this may have some appeal. However, many of the problems afflicting the economy are more structural and need deeper reform, and a parallel currency cannot substitute for that.


24 August 2017

5


UK: Soft data, soft currency Author:

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Recent data show that UK growth has slowed, particularly in the private sector, and that domestic price pressures remain subdued.

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This leaves the economy somewhat vulnerable to any volatility or loss of confidence surrounding the Brexit process.

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While this supports our central forecast that the Bank of England will keep rates on hold until late next year, we expect the renewed weakness in the GBP will test the Bank’s resolve.

Dominic Bryant Senior European Economist & Head of UK Economics BNP Paribas London branch

Back to school for politicians

After a summer lull, the UK economy is entering a potentially volatile period. From September, parliament will return to business and the new realities arising from June’s surprise election result, which saw the Conservative government lose its majority. The intensifying negotiations with the EU over the UK’s exit deal and its future relationship promise to be tricky, with the parties still some distance apart on key issues. Moreover, the EU is sticking to its line that before even discussing future trading arrangements, it will have to see substantial progress on migrants’ rights, the financial exit settlement and the Northern Ireland border.

Slow growth, especially in consumer spending

Latest data indicate that political challenges will play out against an increasingly vulnerable economic backdrop. After it took the vote to leave the EU in its stride in H2 2016, a slowdown in the UK economy has become increasingly evident in 2017. Growth slowed to 0.2% q/q in Q1 and only edged up to 0.3% q/q in Q2. The annualised growth rate over the last two quarters has, therefore, been only 1%, the lowest since Q1 2013 and below most estimates of trend. The latest national accounts data showed that the slowdown has been concentrated in consumer spending, which rose by only 0.1% q/q in Q2. This means that growth over the previous two quarters has been the weakest since H1 2013. With wages still contracting in real terms, we see little prospect of spending strengthening over the coming quarters, something confirmed by the downward trend in consumer confidence (Chart 1). The Q2 data also showed a relatively lacklustre export growth of 0.7% q/q. At this stage, it looks as though the weakness of the GBP is boosting export prices rather than volumes (Chart 2).

Cautious private sector

On the investment side, businesses appear to be exercising continued caution and keeping their level of capital spending flat, in line with the recent trend (Chart 3). Total fixed investment growth of 0.7% q/q was supported by strong general government capex and a surge in publicsector homebuilding. All in all, therefore, private-sector demand was weak in Q2.

Chart 1: Consumer slowing

Chart 2: Sterling price effect

Source: Macrobond, ONS, European Commission, BNP Paribas

Source: Macrobond, ONS, BNP Paribas 24 August 2017

Macro Matters

6


The composite PMI and the National Institute of Economic and Social Research (NIESR) measure of monthly GDP suggest growth will remain subdued in Q3; the latter estimates that July’s 3m/3m growth rate was only 0.2%, although the risks to this figure seem to be to the upside, given that service sector output was reasonably robust in May and June, which has a positive carryover effect for Q3 growth (Chart 4). Jobs growth likely to moderate

Slower growth has yet to feed through to job creation. Employment has continued to rise at a brisk pace and the unemployment rate fell again in June to 4.4%, its lowest since May 1975. However, the PMI surveys suggest that employment intentions will fade and that the recent resilience is likely to be largely due to lags. Vacancies have fallen for three months running, which also suggests that employment growth will moderate later this year. While unemployment has continued to fall, wage growth has remained subdued. The latest data showed ex-bonus weekly average earnings rising by only 2.1% 3/yr. This could help explain why service sector CPI inflation has remained low (Chart 5). Softer service sector inflation was the main reason that core inflation surprised to the downside in July, as the weak GBP continued to feed into goods prices, as broadly expected.

Vulnerability to Brexit risk

Overall, recent data show that growth has slowed, particularly in the private sector, and that domestic price pressures remain subdued. This leaves the UK economy somewhat vulnerable to any volatility or loss of confidence surrounding the Brexit process.

GBP key to Bank of England’s hawkish hold

We think the outlook supports our central forecast that the Bank of England will keep rates on hold this year and for most of next year. However, the currency is the key risk to its ability to remain on hold during what are likely to be difficult Brexit negotiations. Weaker data have put the GBP under pressure, particularly against EUR, which has benefitted from strong eurozone figures. On a trade-weighted basis, the GBP is now close to its post-crisis and post-Brexit lows (Chart 6). This could make some at the Bank of England nervous and we would not be surprised to hear relatively hawkish rhetoric from the Monetary Policy Committee at or even in the run-up to the September policy meeting.

Chart 3: Corporate caution

Chart 4: Short-term support

Source: Macrobond, ONS, BNP Paribas


Chart 5: Lack of domestic pressure

Chart 6: The elephant in the room


Source: Macrobond, Bank of England, BNP Paribas 24 August 2017

Macro Matters

7


US CPI: More than merely idiosyncratic shocks Authors:

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Inflation has disappointed five months in a row. Broad and persistent weakness suggests this is more than just idiosyncratic shocks, and may be due to slower real income growth.

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Looking at the main CPI sub-components driving the weakness, we see softer inflation continuing in several of them, though maybe not as subdued as in recent months.

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This implies it will take longer for the Fed to reach its inflation goal, implying a flatter path for fed funds than the recent summary of economic projections (SEP) has plotted.

Paul Mortimer-Lee @MortimerLeePaul

Chief Market Economist and Head of US Economics Andrew Schneider Economist, North America New York, BNP Paribas Securities Corp

FOMC discusses nonidiosyncratic factors

The July FOMC meeting had an in-depth discussion about inflation. While the Committee still ascribed “much” of the recent weakness to idiosyncratic factors, the minutes showed that the meeting included a discussion of possible non-idiosyncratic explanations for the coexistence of low inflation and low unemployment. These included: reduced price responsiveness to resource pressures; a lower NAIRU; the possibility of greater labour market slack than implied by the unemployment rate; longer lags in inflation to labour market tightening; and restraints on pricing power from globalization and technology. Most of these explanations imply fed funds lower for longer than what had been outlined in previous Fed plans, though few explain why inflation should have decelerated rather than simply remaining lower for longer. The July CPI release followed the latest FOMC meeting and disappointed expectations yet again, making it the fifth straight report to do so (please see, US Inflation Watch: Still soft at the core). Our view is that while idiosyncratic stories play a role, there is a broader theme linking them. Slower growth in real incomes seems to us to be one explanation, with year-over-year real disposable income growth having decelerated from over 4% in early 2015 to 2.3% in Q1 2016 and to only 1.2% in H1 2017. Technology and competition also appears important to us. If these were the explanation, rather than idiosyncratic shocks, we should expect widespread downward shifts in inflation, where the idiosyncratic explanation would suggest a few downward shocks, and even some upward shocks in some categories. Let’s look at the evidence

Core goods and services have slowed equally

Recent weakness has been broad-based The recent weakness has hit both core goods and core services. Core goods price growth has averaged 0.15pp less per month over March to July than over the previous 12 months, while average core services growth has slowed by 0.13pp. Nearly every major category has underperformed its two-year average over the past five months (see Chart 2) – arguing for more than idiosyncratic shocks. Five categories – Telephone services, Shelter, Vehicles, Apparel and Medical care services – have driven the recent weakness in CPI (Chart 1). Together, they have contributed about 0.12pp less to monthly core CPI growth over the past five months than over the previous two years.

Chart 1: Change in core CPI contributions

Chart 2: Core CPI category performance

Source: BLS, Macrobond, BNP Paribas

Source: BLS, Macrobond, BNP Paribas


24 August 2017

8


Competition in wireless likely to remain…

… As is glut of used cars coming off lease

Apparel prices linked to import prices

Utility prices behind OERrent gap?

Multiple drivers behind hotels discounting prices

Telephone services and Vehicles prices Weakness in wireless telephony has reflected stiffer competition amongst wireless carriers, with a nearly 9% decline in wireless telephone service prices over March and April alone. Slower growth in cell phone demand may be behind this – the percentage growth rate of cell phones used at least once a month fell below 10% for the first time in 2016, according to Statista DMO, and may fall below 5% by 2019. The chances of a repeat of spring 2017’s bumper price falls does not seem high, but companies fighting for market share against a background of slower growth in mobile telephones should keep prices soft. A glut of used vehicles coming off lease has weighed on auto prices. However, if we assume that autos coming off lease will be replaced with leases on new cars, the result should be a shift in the prices of new relative to used cars rather than generalised weakness in both new and used car prices. New auto sales have fallen from a peak annual rate of 18mn in Q4 2016 to only 16.6mn in Q2 2017. Lower demand means lower prices for cars overall, with the lease argument meaning that used cars have suffered more. More cars are set to come off lease in the future, and credit conditions on auto finance are tightening. Car prices should stay soft, especially used ones. Globalization and technology affecting Apparel Globalization and technology’s effects on apparel prices seem likely to explain weakness in this sector, with a business model increasingly reliant on low-cost foreign suppliers and under siege from low-cost online competitors. Indeed, we have found that import prices play a large role in both non-durable and durable goods inflation (please see, US: Goods inflation – dominated by import prices). We think that apparel prices rose unusually quickly in 2016, compared with import prices and that some of the deceleration over the last year is explained by a normalisation. This implies price increases will stay low, but will probably not decelerate significantly further. Shelter and Medical care services Shelter prices are made up of rent of primary residence, owners’ equivalent rent (OER), and lodging away from home. Inflation in the rent of primary residence has decelerated slightly this year, and OER’s year-over-year rate of inflation has fallen relative to that of rent of primary residence, the main benchmark for OER, probably because utility prices have accelerated (many rents are inclusive of utilities charges, so when utility prices rise, other things being equal, the BLS calculates that “pure” rents have fallen). Differential regional rent trends may also have played a role. We do not expect OER to decelerate further compared with rent of primary residence, which means the year-over-year rate of OER should pick up early next year, due to base effects. Having said that, rental vacancy rates, which fell to below 7% in 2016 from 11% in late 2009, have started to move upwards, so rents (which ultimately drive OER) may decelerate somewhat going forward. Lodging away from home prices declined 4.2% m/m (sa) in July – its biggest drop on record; it is down 6.3% since February. The average occupancy rate for US hotels declined for the first time since 2009 in Q2 2017 – the result of an expansion in hotel room supply – which could have resulted in discounting in order to fill excess rooms. Additionally, hotels have tried to win back bookings from online travel agents through loyalty programs and discounts. Competition from online lodging “sharing” sites may also be playing a part. More supply and competition implies subdued prices ahead. Weakness in medical services prices has come largely from two of the largest monthly declines on record in professional medical care services (which accounts for about half of medical care services). Compositional shifts may be at play, and it is difficult to forecast future trends with precision; we assume a reversion to trend.

Trend in core CPI appears to be lower than expected

Overall, our preliminary conclusions are that core inflation may not be as soft as it has been in recent months, but that the trend looks likely to be lower than we had previously expected, and the risks are to the downside. This supports our policy call for the Fed to remain on hold this year until prospects become clearer for progress towards the target.


24 August 2017

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Japan: Consumption surged in Q2, but will it last? Authors: Ryutaro Kono Head of Economics, Japan Chief Japan economist Azusa Kato Senior Japan economist

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Consumption in Q2 rivalled the pre-VAT-hike surge of Q1 2014.

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But the strength reflects overlapping favourable conditions and a reactionary decline is possible in Q3.

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Barring a dramatic yen depreciation, recovering consumption should become a trend, as income and employment conditions are steadily improving.

BNP Paribas Securities (Japan) Limited

Private consumption soared 0.9% q/q in Q2 (0.4% in Q1), the strongest showing since the preVAT-hike surge of Q1 2014. While some base statistics, as in the monthly Family Income and Expenditure Survey (FIES), make GDP-based consumption prone to fluctuations, the Bank of Japan’s consumption activity index (adjusted for travel) also posted robust 1.2% q/q growth in Q2 (0.7% in Q1). In this report, we discuss the current state of consumption, its outlook, possible risks and more. Favourable conditions boosted Q2 consumption

Consumption in Q2 was boosted by overlapping favourable conditions. First, soaring fresh food prices – from a crop failure which shaved 0.6 points from real purchasing power in Q4 2016 and became a drag on spending through Q1 2017 – were eliminated. Second, the rainy season was unusually dry, with the result that spending on services picked up (0.6% q/q) and outlays on non-durables revived for the first time in five quarters (1.8%), as demand surged for leisure activities, dining out and summertime goods. Third, replacement demand, coupled with car sales connected to the release of new models, propelled durable goods consumption to grow briskly (2.4%). On the downside, outlays on semi-durables fell (‒2.5%), but this weakness could reflect the FIES sample base, as commercial data show clothing sales rose significantly in Q2.

Emergence of replacement demand

The emergence of replacement demand for durables is not due to the surge in spending ahead of the April 2014 VAT hike, but to the spending in 2009-11 that was driven by special factors. Specifically, in the wake of the Lehman shock, the government came out with various programmes to foster consumer spending on durables, which coincided with the switch over to digital terrestrial broadcasting from 2011. So several years’ worth of demand for televisions, cars and white goods was front loaded in 2009-2011. As the replacement cycle is roughly five years for electronics, eight years for cars and ten for white goods, replacement demand is now kicking in for electronics and cars, and demand for white goods could start within two years. While negative demographics argue against a boom in durable goods consumption, replacement demand should underpin spending on durables for a while.

Chart 1: Employee income and private consumption (JPY trn, sa)

Chart 2: Sales of new motor vehicles, including mini vehicles (annualised, sa, million)

265

7.0

263

6.5

261

6.0

259

5.5

295

257

5.0

290

255

4.5

285

253

310

305

Private consumption

300

3.5

249

Employee income (rhs)

275 270 2010

4.0

251

280

3.0

247 2011

2012

2013

2014

2015

2016

2017

2.5

245

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Source: Cabinet office, BNP Paribas

Source: Japan Automobile Dealers Association, Japan Mini Vehicles Association, BNP Paribas 24 August 2017

Macro Matters

10


Income and employment conditions are improving

Consumption in Q2 was also based on steadily improving income and employment conditions. While nominal income has been on the mend since 2013, the weak yen and VAT hike led to a plunge in real income between Q3 2013 and Q2 2014 and sluggishness continued until mid2015. Then, with inflation subsiding as oil prices plunged in 2014, real income bottomed out in Q3 2015 and returned to its pre-VAT-hike level in Q1 2016. Thanks to the global recovery steadily gaining steam from mid-2016, Japan’s export-led recovery accelerated and enabled real wages to continue to improve. Meanwhile, on the job front, with manpower shortages pushing the effective ratio of job offers to applicants to a high not seen since 1974, anxieties about job security have disappeared.

Why private consumption did not strengthen in 2016

While consumption would naturally improve in such income and employment conditions, it would not have been inconceivable for consumption to begin to trend higher from 2016. But that did not happen, as the recovery in consumption was much slower than the recovery in income between the latter half of 2015 and early 2016. One reason was the yen’s depreciation through the summer of 2015. Though falling oil prices exerted downward pressure on inflation, yen weakness pushed import prices higher, sapping households’ inclination to spend, as price of food and other daily items carried on rising to the end of 2016. Compounding matters, the BoJ responded to financial market turmoil by adopting a negative interest rate in late January 2016, triggering widespread concerns about the financial and pension systems, as term interest rates plunged. The yen was strengthening and share prices were falling at this point, and the BoJ’s policy move supported both. With sales halted in products like single-premium whole-life insurance policies, household hopes for future interest income were dashed. On top of all of this, real purchasing power was significantly reduced by a surge in fresh food prices in Q4 2016. With so many negative factors, it could be said that consumption in 2016 was in fact quite firm.

Private consumption should stay firm as a trend

Looking ahead, with the upturn in the global economy supporting Japanese exports, the economy should outperform its trend growth rate of roughly 0.7%, at slightly above 1% for the time being. Meanwhile, baby boomers, a key segment of the labour force, will turn 70 this year and start retiring in droves; the resultant tightening of the labour supply will see nominal wages continue to rise. If companies were to pass this all on to prices, the improvement in real income would stay limited. But companies will fear losing market share if they hike prices, so are likely to refrain from price hikes even when payroll costs rise. With wages continuing to fall from the second half of the 1990s through to the early 2010s while most items in the CPI basket (especially services) stayed flat, many companies have been able to build up a buffer to absorb rising costs. While the base effect from energy prices should raise inflation through the autumn, we do not expect the core CPI to climb as high as 1%. Real income should therefore continue to increase mildly, enabling private consumption to stay firm as a trend.

But payback for Q2’s strength is possible in Q3

However, because consumer spending posted such robust growth in Q2, there could be payback in Q3. According to early data from industry statistics, summer-like temperatures in July were a boon for supermarket and convenience store sales, while car sales plunged 8.2% m/m on sluggish supply-side related deliveries. Department store sales were also weak (‒2.1%), as sales promotions in July last year were brought forward to June this year. August, meanwhile, has been rainy in many areas, and this has dented demand for seasonal items and leisure activities – the lack of sunshine could bode ill for future consumption, as poor harvests would again mean higher prices for fresh food. Thus, private consumption could momentarily succumb to negative growth in Q3.

Risk to consumption is yen depreciation

The biggest risk that could hinder a recovery in consumption is probably yen depreciation. Wage growth is still anaemic, despite the tight labour supply, as the employees and unions of large corporations remain lukewarm about base-pay hikes that could jeopardize lifetime employment. If the yen were to start weakening again dramatically, nominal wage growth could be outpaced by inflation, and this could cause consumer spending to flounder once more. In the past when the yen weakened, employee income rose, especially in export sectors, and this offset the negative impact of imported inflation. But such merits have been eclipsed by Japan’s rapidly ageing society, so that the downside of imported inflation stands out. As retiree households (age 60 and above) now account for more than 50% of all consumer spending, the impact of imported inflation cannot be ignored.

24 August 2017 Macro Matters

11


Poland: Is investment growth at a crossroads? Author:



Polish construction data point to strong investment activity in Q2 2017. Faster EU funds absorption and better business sentiment suggest a further acceleration in capital spending.



Soft credit growth, weak FDI inflows and elevated institutional uncertainty remain the key downside risks to investment growth in the near term.



Over the medium term, the lack of skilled labour appears to be the main risk factor for capital spending, both in Poland and in other regional economies.

Rafal Staroscik Junior Economist Bank BGŻ BNP Paribas SA

Investment growth has picked up this year …

Polish GDP rose 1.1% q/q and 3.9% y/y in Q2 2017, according to preliminary estimates. While final numbers and the breakdown of national accounts will only be published next week, a key driver of buoyant economic growth this spring were investments, in our view. In early 2017 capital spending was still falling, but the pace of the contraction eased to 0.4% y/y, following a 7.7% y/y slump last year. High-frequency data point to gross fixed investments rising by about 3% y/y during April-June and we think that futher acceleration is likely in H2 2017. Nonethless, some downside risks still persist, which may affect the investment outlook, especially from a medium-term perspective.

… on bigger EU fund flows boosting construction …

The swift pick-up in construction activity during the first half of the year clearly heralds an improvement in overall investment dynamics (Chart 1), especially as building and civil engineering account for about 45% of total capital spending in the Polish economy. Construction output rose 5.6% y/y in Q1 and 8.4% y/y in Q2. The near-20% y/y surge in July also suggests robust momentum in early Q3. The key trigger has been stronger inflows of EU structural funds (about EUR 1.1bn in H1 2017) as these are used primarily by the public sector, boosting the government’s infrastructure investments and public utility spending. We look for EU cohesion fund inflows to gain pace over the coming quarters, supporting the construction sector and overall investment activity.

… and improving business sentiment

In addition, stronger business sentiment should also boost capital spending in the months ahead. According to National Bank of Poland’s (NBP) corporate sector survey, as well as estimates by the Ifo Institute (Chart 2), companies have recently become more optimistic about demand prospects, both domestic and external. Stronger business sentiment should translate into faster corporate investment outlays, especially in big, public-sector and FDI-owned entities. In contrast, the investment plans of local SMEs appear to be relatively modest.

The main risks include soft credit growth …

Beyond this factor, we see additional headwinds to capital spending growth down the line. First, investment credit growth, which has been a fairly good proxy of total investment outlays for years, remains pretty soft, which may not bode well for the capex outlook. Nonetheless, companies are reporting higher financing needs for fixed investments (Chart 3), which is likely

Chart 1: Investment and construction

Chart 2: Investment and business sentiment

Source: GUS, Macrobond, BGZ BNP Paribas

Source: GUS, Ifo Institute, Macrobond, BGZ BNP Paribas

IMPORTANT DISCLOSURE: This analysis has been produced by Bank BGZ BNP Paribas and has been reviewed, but not amended, by BNP Paribas. BNP Paribas is a majority shareholder in Bank BGZ BNP Paribas. This analysis does not contain investment research recommendations. 24 August 2017 Macro Matters

12


to be reflected in stronger demand for credit, both among SMEs and large entities in the coming months. This may eventually translate into somewhat faster credit growth, although the relatively tight credit standards may still constrain a major rebound. … and weak FDI flows, reflecting uncertainty

Second, foreign direct investment (FDI) inflows have been slowing steadily since early 2016 (Chart 4). This slowdown could have been a result of growing uncertainty among foreign investors, linked to changes in the political (Constitutional Court crisis) and fiscal (significantly higher social transfers and a cut in the retirement age) environment. Indeed, according to the Ifo Institute survey, uncertainty over the government’s economic policies might have been a major factor behind the massive decline in FDI inflows in 2016. The slight rebound in foreign investors’ confidence more recently suggests stronger, albeit not spectacular, FDI inflows and overall investment growth ahead (Chart 5).

Skilled labour shortage is a key constraint mid-term

Finally, we think that capacity constraints may become an increasingly important factor for investment decisions, as companies are reporting growing difficulties in recruiting skilled staff, both blue- and white-collar. Given the tightening in the Polish labour market, companies could be forced eventually to reduce their investment outlays over the medium term (Chart 6). The problem of a limited workforce in Poland is becoming evident in other regional economies, especially in Hungary (Hungary: Easy does it no longer, 11 March 2016). Over the past few years, Hungary’s unemployment rate has fallen substantially to 4.3% as of June 2017 and the number of unfilled vacancies has reached all time-highs. With no spare capacity on the labour market left, investment demand by Hungarian enterprises has tumbled, as they may have realised that the economic growth outlook may have reached its limits. In Poland, we also think that domestic labour shortages could become a bottleneck for capital spending dynamics over the coming years, if they are not offset by productivity gains or a substantial inflow of workers from abroad.

Chart 3: Investment and corporate financing needs

Chart 4: Investment and FDI flows

Source: GUS, NBP, Macrobond, BGZ BNP Paribas

Source: NBP, GUS, Macrobond, BGZ BNP Paribas

Chart 5: Investment and investor confidence

Chart 6: Investment and capacity constraints

Source: GUS, Ifo Institute, Macrobond, BGZ BNP Paribas

Source: GUS, Macrobond, BGZ BNP Paribas

IMPORTANT DISCLOSURE: This analysis has been produced by Bank BGZ BNP Paribas and has been reviewed, but not amended, by BNP Paribas. BNP Paribas is a majority shareholder in Bank BGZ BNP Paribas. This analysis does not contain investment research recommendations. 24 August 2017 Macro Matters

13


Mexico: New CPI basket case Author



Mexico’s newly announced CPI basket adds more volatility, but will have little impact on average inflation.



Volatility will come from the added weight given to food items and greater knock-on effects from foreign exchange.



No changes to our scenario of 3.5% inflation in 2018 and 3.0% in 2019.

Marcelo Carvalho Head of Emerging Market Research, Latam Luiz Eduardo Peixoto Economist Banco BNP Paribas Brasil SA

This article was published as a desknote on 24 August. CPI to rely more on food inflation from August 2018

Mexico’s Statistics Bureau, INEGI, has announced that the weighted basket it uses to calculate the consumer purchasing index will be updated, starting in August 2018. The main change from the existing basket is that it carries a larger contribution from the food and agriculture component, which will in future comprise 31.5% of the total, up 8pp (Table 1). New or reclassified items represent only 4.2% of the whole and are unlikely to have much impact. Table 1: Current and announced new weights on Mexico’s CPI, main groups (%)

Source: INEGI, BNP Paribas

Higher FX pass-through and relevant shift in core

A slightly higher pass-through from changes in the MXN could be expected, also supporting the view of more volatility. FX-related foods gain weight (cereals and bread, for up by a full 1.7pp, fruit by 0.5pp). The core composition will rebalance, stripping 9pp from services towards food and beverages, while some relevant non-core items, such as tomatoes and beef, gain weight.

Comparing the old and new CPI adds little to headline

A simple exercise comparing past CPI numbers with the new methodology, using the announced composition of the main sub-groups, corroborates expectations of more unpredictability in future (Chart 1). But the effective headline number is unlikely to change much, as the average CPI rises only 14bp using the new basket to recalculate previous prints.

Our scenario for inflation is not changing

Our scenarios for inflation are not changing, as the new methodology only adds an estimated 9bp in 2018 and zero in 2019. For 2017 there is no actual change, as the new basket is effective from August next year. Thus, we reaffirm our view of lower headline inflation of 3.5% in 2018 and 3.0% in 2019 – even if it adds a bit more excitment to short-term forecasts (Chart 2).

Chart 1: Hypothetical scenario using new basket (% y/y)

Chart 2: Estimated historical volatility (std. deviation) 0.66

6.98%

7.0% 6.5%

6.58%

New CPI basket estimation

6.0% 5.5%

0.65

5.0%

0.64

4.5% 4.0% 3.5% 3.0% 2.5% 2.0% Jan-10

0.63

Current CPI basket 0.62 Jul-11

Jan-13

Jul-14

Jan-16

Current basket

Jul-17

Source: INEGI, BNP Paribas. Numbers include both biweekly releases.

Source: INEGI, BNP Paribas. New basket derived from BNP Paribas estimates. Deviations estimated using data from 2000 to July 2017.

Follow us on Twitter: @MCarvalhoEcon Macro Matters

New basket (Aug 2018)

24 August 2017

14


Argentina: More aggressive central bank 

Argentina’s central bank is on hold but has explicitly reinforced its tightening bias.



Intervention efforts to flatten the yield curve suggest rate cuts will take longer to materialise.

BNP Paribas Sucursal Buenos Aires



Therefore, we do not now expect the easing cycle to start until late Q4 2017.

On hold but more hawkish bias

Argentina’s central bank, Banco Central de la Republica Argentina (BCRA), kept the key policy rate on hold at its meeting on 22 August, an outcome both we and consensus had expected. Nevertheless, we have put back our expectation of rate cuts from September towards the end of the year, in light of the reinforced tightening bias evident in both its statement and its recent aggressive intervention in the secondary market for liquidity paper – a clear sign, in our view, that rates will remain high for longer than we had anticipated.

Guiding inflation gradually lower

At August’s monetary policy meeting, the BCRA reiterated that it will maintain its anti-inflationary bias to ensure the disinflation process continues towards the official targets: 12–17% in 2017 (which looks very unlikely, in our view) and 10% +/− 2% for 2018 (challenging, but not impossible). The bias reflects the discomfort with above-target inflation expectations (see Chart 1) and stubbornly high core inflation (1.8% m/m in July).

Continuing interventions to lift Lebac yields

Importantly, the BCRA also explicitly stated this time that “it will continue to restrict liquidity conditions through active secondary market operations in the Lebac market”. In fact, it has intervened actively since the day of the monetary policy meeting to lift rates by 140bp in the sixto nine-month area of the Lebac yield curve. In the short-end, meanwhile, the rise in yields was more modest (20–40bp on average).

Start of easing cycle Unemployment is about pushed to Q4

The central bank has recently intervened actively in the markets in a bid to flatten the Lebac yield curve (Chart 2). We view this as a sign that rate cuts will now take longer to materialise than September, our previous expected date for the start of the easing cycle. In our opinion, the central bank’s recent, more aggressive intervention suggests that the start of the easing cycle will now be delayed to late Q4. The BCRA appears to be clearly focused on keeping peso real interest rates firmly in positive territory.

Lower inflation to allow more rate cuts in 2018

We expect the disinflation trend to remain firmly intact. We forecast inflation will end the year at 20% y/y (slightly up on our previous 19% forecast) and then decline to 12% in 2018. The disinflation trend will eventually pave the way for the BCRA to start guiding rates lower, in our view. For the time being, though, we expect rates to be kept high in order to bring inflation down to levels that the central bank considers more reasonable. We expect the policy rate to be cut from the current 26.25% to 24.75% by the end of this year (above our previous 23.25% forecast) and forecast a stable monthly easing pace of 100bp in H1 2018.

Author: Florencia Vazquez Economist

Chart 1: Inflation targets and consensus forecasts (%)

Chart 2: Lebac yield curve (% p.a.) 28

30 Consensus CPI estimates (REM)

Last

27

25

26

20

25

17

1 month ago

24

15

23

10 5

10

12

3 months ago

22 21

BCRA targets

0 Jan 17

Jul 17

20

Jan 18

1

Jul 18

2

3

4

5

6

7

8

Tenor (months)

Source: BCRA (REM: market expectations survey), Macrobond, BNP Paribas

Source: INE, Macrobond, BNP Paribas


15


Colombia’s inflation: Down and sideways Authors: Florencia Vazquez Economist



We lower our end-2017 inflation call to 4.5%, from 5.0%, still above consensus.



Inflationary pressures stem from core items and public spending in the near term.



For rates, we now expect 4.00%, as disinflation builds and activity frustrates in 2018.


Luiz Eduardo Peixoto Economist Banco BNP Paribas Brasil SA

This article was first published as a standalone desknote on 22 August 2017. Recent inflation prints on Colombia have surprised on the downside, coming in below the floor of expectations in June and July. Though initially driven principally by food items, disinflation has spread out more consistently of late, with a drop in the diffusion index and a move downwards on inflexible core components, albeit modest (see Chart 1).

New inflation forecast …

The dip in inflation, however, is expected to be interrupted. As the base effect from last year’s CPI (which peaked in August 2016) shifts from comparisons with high monthly prints to negative ones, the annual rate is expected to rise again over the next few prints, until it gradually reaches the 4.5% we expect by December, while most analysts, along with BanRep, are nearer 4.0%.

… to the same inflation dynamics

Different dynamics support our above-consensus inflation view. The four core inflation subgroups monitored by the central bank, while pointing to a deceleration from a static 5.5% y/y earlier in the year to 4.9% in July, are still edging down. In view of this, we expect the past year’s inflation to continue to play a role in the next few months, driven by sticky non-tradable items (see Chart 2).

Rigid prices are now less sensitive to the output gap

The Central Bank in a study published this month (Borrador 1007) pointed out that rigid prices have become less sensitive to output gap shocks since the start of the target regime. This explains why the economy’s deceleration has not had much of an impact on core CPI measures which, while falling at the margin, have been remarkably stubborn and shown increased rigidity.

Fiscal policy unlikely to help inflation near term

Nor is fiscal policy likely to help much, remaining expansionary in the near term as infrastructure spending picks up ahead of the 2018 elections. Public works activity rose 6.5% y/y in Q2, supporting this view, and we forecast a public sector budget shortfall of 4.2% of GDP this year, due to increased spending and less growth than accounted for (1.5%, versus 2.5%).

Limited scope for further rate cuts after August

If no further downside surprises happen, the implications for monetary policy should be muted this year, in our view. We had already envisaged a 25bp cut this meeting (see Colombia’s rates: Another look at risks) and still see things heading that way, with the year finishing at 5.25%.

Change of signals in 2018; rates heading to 4.00%

For 2018, we now see new cuts happening as early as Q1, as activity prints are likely to come in below official estimates and inflation falls more markedly in the quarter (Chart 2). BanRep is expected to reduce its policy rate to 4.00% by year-end, given its activity bias, downplaying on fiscal issues, and inflation within range throughout 2018 – reaching ~3.5% y/y by December.

Chart 1: Four core groups* average and food CPI (% y/y)

Chart 2: Non-tradable inflation 10 CPI (% y/y) 8 Nominal policy rate (% p.a.)

6

4 2

0 Real rate ex-post

-2

08

Source: BanRep, Macrobond, BNP Paribas. * The average core number represents the simple average of four subgroups (ex-food, ex-food/regulated, ex-perishable food, fuels and public services, and 20 policy sensitive items).

09

10

11

12

13

14

15

16

17

18

Source: BanRep, BNP Paribas


16


Economic calendar: 25 August – 1 September HIGH-INCOME ECONOMIES Fri 25/08

GMT

Local

23:30

08:30

23:30 (24/08) 06:00

08:30

06:00

08:00

08:00 08:00

Wed 30/08

Thu 31/08

Macro Matters

Forecast

Consensus

Core CPI national y/y: Jul

0.4%

0.5%

0.5%

Core CPI Tokyo y/y: Aug

0.2%

0.2%

0.3%

GDP (final) q/q: Q2

0.6%

0.6%

0.6%

GDP (final) y/y: Q2

2.1%

2.1%

2.1%

10:00

Ifo business climate: Aug

116.0

116.2

115.7

10:00

Ifo current conditions: Aug

125.4

125.8

125.3

08:00

10:00

Ifo expectations: Aug

107.3

107.3

106.9

06:45

08:45

France

104

101

104

12:30

08:30

US

Durable goods orders (prel) m/m: Jul

6.4%

-5.0%

-5.7%

12:30

08:30

Durable goods ex-transport (prel) m/m: Jul

0.1%

0.8%

0.5%

12:30

08:30

Core capital goods shipments (prel) m/m: Jul

0.1%

-0.8%

-

19:00

13:00

Eurozone

07:00

09:00

Germany

Retail sales (real, sa) m/m: Jul

1.1%

-0.9%

-

07:00

09:00

Retail sales (real, nsa) y/y: Jul

1.5%

2.3%

-

08:00

10:00

M3 y/y: Jul

5.0%

4.9%

-

08:00

10:00

12:30

08:30

US

23:30

08:30

Japan

23:30 (28/08)

08:30

06:00

08:00

Germany

06:45

08:45

France

06:45

08:45

09:00

11:00

09:00

11:00

14:00

10:00

US

07:00

09:00

Spain

07:00

09:00

08:30

09:30

08:30

09:30

09:00

11:00

09:00

11:00

09:00

11:00

12:00

14:00

12:00

08:00

Mon 28/08

Tue 29/08

Previous Japan

Germany

UK

Eurozone

Consumer confidence: Aug

ECB’s Draghi speaks in Jackson Hole

Public holiday

M3 3m y/y: Jul

Italy

4.9%

4.9%

-

USD-64.0bn

USD-65.5bn

USD-65.3bn

Household consumption y/y: Jul

2.3%

0.2%

-

Unemployment rate (sa): Jul

2.8%

2.8%

-

Advance goods trade balance: Jul

GfK consumer confidence: Sep

10.8

10.8

-

GDP (prel) q/q: Q2

0.5%

0.5%

0.5%

GDP (prel) y/y: Q2

1.1%

1.8%

1.8%

Istat business confidence: Aug

107.7

-

-

Istat consumer confidence: Aug

106.7

-

-

Consumer confidence: Aug

121.1

121.0

119.0

HICP (flash) m/m: Aug

-1.2%

0.2%

-

1.7%

2.0%

-

HICP (flash) y/y: Aug UK Eurozone

Mortgage approvals: Jul

64.7k

65.5k

-

Net consumer credit: Jul

GBP1.5bn

GBP1.5bn

-

111.2

111.0

-

4.5

4.3

-

Economic sentiment: Aug Industrial sentiment: Aug Consumer sentiment: Aug

-1.7

-1.5

-

CPI (prel) m/m: Aug

0.4%

0.2%

-

14:00

CPI (prel) y/y: Aug

1.7%

1.9%

-

12:00

14:00

HICP (prel) m/m: Aug

0.4%

0.3%

-

12:00

14:00

HICP (prel) y/y: Aug

1.5%

1.9%

-

12:15

08:15

12:30

08:30

23:50 (30/08)

08:50

06:45

08:45

06:45

08:45

CPI (prel) y/y: Aug

06:45

08:45


06:45

08:45

07:55

09:55

07:55

09:55

Germany

US

ADP labour change: Aug

178k

185k

175k

GDP (second, saar) q/q

1.2%

2.8%

2.6%

Japan

Industrial production (prel, sa) m/m: Jul

1.6%

-0.2%

-

France

CPI (prel) m/m: Aug

-0.3%

0.5%

-

0.7%

1.0%

-

-0.4%

0.5%

-

0.8%

1.0%

-

-9k

-3k

-

5.7%

5.7%

-

HICP (prel) y/y: Aug Germany

Unemployment (chg, sa): Aug Unemployment rate: Aug

17

24 August 2017 www.GlobalMarkets.bnpparibas.com

Economic calendar: 25 August – 1 September HIGH-INCOME ECONOMIES GMT

Local

Thu 31/08

09:00

11:00

(cont)

09:00

Fri 01/09

Previous Eurozone

Forecast

Consensus

HICP (flash) y/y: Aug

1.3%

1.5%

-

11:00

Core HICP (flash) y/y: Aug

1.2%

1.2%

-

09:00

11:00

Unemployment rate: Jul

9.1%

9.0%

-

09:00

11:00

CPI (NIC, prel) m/m: Aug

0.1%

0.2%

-

09:00

11:00

CPI (NIC, prel) y/y: Aug

1.1%

1.1%

-

09:00

11:00


-1.9%

-0.1%

-

09:00

11:00

HICP (prel) y/y: Aug

1.2%

1.3%

-

12:30

08:30

Canada

GDP q/q

3.7%

12:30

08:30

US

12:30

Italy

Initial claims

232k

240k

-

08:30

Personal income m/m: Jul

0.0%

0.3%

0.3%

12:30

08:30

Personal spending m/m: Jul

0.1%

0.4%

0.4%

13:45

09:45

Chicago PMI: Aug

58.9

59.7

57.5

08:30

09:30

UK

CIPS manufacturing: Aug

55.1

55.3

55.0

06:30

08:30

Eurozone

ECB’s Nowotny in panel discussion in Alpbach, Austria

Portugal

Portugal sovereign debt rated by Moody’s

Germany

Germany sovereign debt rated by Fitch 4.3%

US

12:30

08:30

Unemployment rate: Aug

4.3%

4.3%

12:30

08:30

Non-farm payrolls (chg): Aug

209k

195k

180k

12:30

08:30

Average hourly earnings m/m: Aug

0.3%

0.3%

0.2%

14:00

10:00

Construction spending m/m: Jul

-1.3%

0.5%

0.7%

14:00

10:00

ISM manufacturing: Aug

56.3

56.7

56.0

14:00

10:00

Michigan sentiment (final): Aug

93.4

96.7

94.5

For our four-week calendar, please click here

Macro Matters

18


Economic calendar: 25 August – 1 September CEEMEA Thu 31/08

Fri 01/09

GMT

Local

08:00

10:00

Previous

12:00

14:00

07:00

09:00

Hungary

07:00

09:00

Poland

07:00

09:00

Czech Rep.

07:30

09:30

Poland

Forecast

Consensus

GDP (final) y/y: Q2

3.9%

-

-

CPI inflation (prel.) y/y: Aug

1.7%

1.7%

-

Manufacturing PMI: Aug

54.2

56.5

-

Manufacturing PMI: Aug

52.3

53.0

-

4.5%

-

-

55.3

55.5

-

GDP (final) y/y: Q2 Manufacturing PMI: Aug

Release dates and forecasts as of close of business prior to the date of publication; (p) = preliminary; (r) = revised Source: BNP Paribas, Reuters, Bloomberg, national statistics, central banks, ratings agencies


LATAM GMT

Local

Mon 28/08

13:00

08:00

Mexico

Wed 30/08

13:30

10:30

Brazil

Fiscal report: Jul

12:00

09:00

Chile

Manufacturing production y/y: Jul

0.9%

12:00

09:00

Industrial production y/y: Jul

-2.1%

-

17:30

12:30

19:30

14:30

MXN141.9bn

-

19:00

16:00

Argentina

Industrial production y/y: Jul

6.6%

12:00

09:00

Brazil

National unemployment rate: Jul

13.0%

12:00

09:00

Chile

Unemployment rate: Jul

7.0%

15:00

10:00

Colombia

Urban unemployment rate: Jul

14:00

09:00

Mexico

12:00

09:00

Brazil

GDP q/q: Q2

1.0%

0.2%

12:00

09:00

GDP y/y: Q2

-0.4%

0.2%

0.0%

12:00

09:00

GDP 4Qtrs accumulated: Q2

-2.3%

-1.4%

-1.5%

Trade balance monthly: Aug

USD6.3bn

USD4.5bn

-

12:00

09:00

Thu 31/08

Previous

Mexico

Trade balance: Jul

-

1.5%

-

Mexican central bank inflation report Budget balance YTD: Jul

Chile

Consensus

-

Overnight lending rate

Fri 01/09

Forecast

USD0.1bn

Net outstanding loans: Jul

Retail sales y/y: Jul

12.9%

-

10.8%

11.0%

10.8%

5.50%

5.25%

5.25%

-

MXN3790bn

4.2%

0.0%

-

Release dates and forecasts as of close of business prior to the date of publication; (p) = preliminary; (r) = revised Source: BNP Paribas, Reuters, Bloomberg, national statistics, central banks, ratings agencies


Macro Matters

19


Key data preview: North America US: Personal income and spending (July)

BNP Paribas forecast: Strong spending Jul (f)

Jun

May

Apr

0.3

0.0

0.3

0.2

Personal spending

0.4

0.1

0.4

0.4

Real personal spending PCE prices

0.3

0.1

0.2

0.3

PCE prices (y/y)

0.1 1.4

0.0 1.4

0.0 1.5

0.2 1.7

Core PCE prices Core PCE prices (y/y)

0.1 1.5

0.1 1.5

0.1 1.5

0.2 1.6

% m/m Personal income

RELEASE DATE: Thursday 31 August  Personal income is projected to have increased by 0.3% m/m in July, based on payrolls and earnings data for the month.  We expect a chunky 0.4% m/m gain in nominal personal spending and a 0.3% m/m gain in real personal spending, given headline prices.  We project soft readings in both headline and core PCE prices, in line with the weak July CPI print for the month. Source: BLS, Dallas Fed, Macrobond, BNP Paribas

US: Employment (August)

BNP Paribas forecast: Solid Aug (f)

Jul

Jun

May

195

209

231

145

Private payrolls (‘000s) Unemployment rate (%)

185 4.3

205 4.3

194 4.4

153 4.3

Avg hourly earnings (% m/m) Avg hourly earnings (% y/y)

0.3 2.7

0.3 2.5

0.2 2.5

0.2 2.5

m/m Payroll jobs (‘000s)

RELEASE DATE: Friday 1 September  We expect nonfarm payrolls to have remained firm in August, albeit softer than in July. We project a fall in leisure and hospitality hiring after July’s outsized gain.  We expect earnings to be solid for the second straight month. Combined with favourable base effects, we expect this gain to have resulted in a 0.2pp rise in the y/y rate.  We see the unemployment rate remaining at 4.3%, still well below (by 0.3pp) the FOMC’s longer-run equilibrium unemployment rate. Source: BLS, Macrobond, BNP Paribas

US: ISM manufacturing survey (August)

BNP Paribas forecast: Slightly up Manufacturing ISM

Aug (f)

Jul

Jun

May

56.7

56.3

57.8

54.9

RELEASE DATE: Friday 1 September  We expect the ISM manufacturing index to show business sentiment to have ticked up mildly in August.  Regional manufacturing surveys have moved up on an ISM-adjusted basis so far this month.  While business sentiment remains elevated, we expect some dimming of Trump reflation hopes to weigh on confidence slightly.

Source: ISM, Macrobond, BNP Paribas

Macro Matters

20


Key data preview: North America US: Consumer sentiment (August)

BNP Paribas forecast: Elevated Index Conference Board University of Michigan

Aug (f)

Jul

Jun

May

121.0

121.1

117.3

117.6

96.8

93.4

95.1

97.1

RELEASE DATE: Tuesday 29 August (Conference Board); Friday 1 September (Michigan)  We expect the Conference Board’s measure of consumer confidence to have stayed flat in August, down from its March cycle high of 124.9.  We expect the University of Michigan index of consumer sentiment to have pulled back from its H1 reading of 97.6, but still to end the month well, higher than July.  Despite falling approval ratings in many areas, President Trump has maintained public confidence in his handling of the economy, which appears to be showing in still-elevated consumer sentiment. Source: Conference Board, Macrobond, BNP Paribas

Macro Matters

21


Key data preview: Asia Japan: Industrial production (July)

BNP Paribas forecast: Upward trend % m/m Industrial production

120

Jul (f)

Jun

May

Apr

-0.2

2.2

-3.6

4.0

115

(2010=100, sa)

110 105 100 95 90 85 80 75 70 2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

RELEASE DATE: Thursday 31 August  We expect industrial production to have fallen 0.2% m/m in July, after rising 2.2% in June.  The production index has been volatile of late, probably because of seasonal adjustment problems. In trend terms, production has been picking up at a solid rate in the past few quarters.  Exports softened somewhat in Q2, as shipments of electronic parts and devices to Asian countries slowed. But with production of the iPhone8 set to kick in, shipments of high-tech components should resume growth. With capex and private consumption also recovering, we expect production growth to continue in the coming quarters.

Source: METI, BNP Paribas

Macro Matters

22


Key data preview: Latam Chile: Manufacturing production (July) 6

BNP Paribas forecast: Improvement 30

3m/3m, saar (RHS)

20

3 10 0

0 -10

-3 -20

y/y 3m MA y/y -6 Jan 12

-30 Jan 13

Jan 14

Jan 15

Jan 16

Jan 17

% y/y Manufacturing production

Jul (f) 1.5

Jun

May

0.9

3.0

Apr -7.1

RELEASE DATE: Wednesday 30 August  We expect the year-on-year pace of manufacturing production to have picked up a bit in July, even though it probably remained below its potential pace. If this is so, the three-month moving average will have swung back into positive territory for the first time in more than a year.  Manufacturing performance has been weak so far this year (-0.8% y/y in H1 2017), affected in part by natural disasters, such as the wildfires that hit the pulp and paper industry early in the year. We expect performance to become gradually less negative in H2 2017, once these effects work through. That said, growth is likely to remain below potential.

Source: INE, Macrobond, BNP Paribas

Colombia: Policy rate (August)

BNP Paribas forecast: Easing cautiously % pa Overnight rate

Aug (f) 5.25

Jul 5.50

Jun 5.75

May 6.25

RELEASE DATE: Thursday 31 August  We expect the Central Bank of Colombia (BanRep) to cut its policy rate by 25bp in August once again, in line with analyst and market expectations.  Although the central bank is more cautious in its communiques, inflation fell by 60bp y/y in July and Q2 GDP came in at the lower bound of BanRep’s forecasts, thus likely driving board members to make yet another policy rate cut.  As rates near neutral territory and with inflation expected to rebound in the coming months, BanRep is likely to halt monetary easing until end2017, in our view, with the next cuts expected only in Q1 2018 (for more details, please see Colombia’s inflation: Down and sideways). Source: BanRep, DANE, Macrobond, BNP Paribas

Brazil: Real GDP (Q2 2017)

BNP Paribas forecast: On track to recovery % Real GDP (% q/q, sa) Real GDP (% y/y) Real GDP (% y/y 4q avg)

Q2 (f) 0.2 0.2

Q1

Q4

Q3

1.0 -0.4

-0.9 -2.5

-0.8 -2.9

-1.4

-2.3

-3.6

-4.4

RELEASE DATE: Friday 1 September  We forecast real GDP to have grown again on a quarterly basis in Q2 2017, up 0.2% q/q s.a, after the deepest recession in Brazil’s history. If our forecast is correct, GDP will have risen in year-on-year terms in Q2 for the first time since Q1 2014.  Looking ahead, we expect economic data to confirm that the economy is recovering. We forecast real GDP to rise 0.5% in 2017 (with risks to the upside) and 3.0% in 2018. Source: IBGE, Macrobond, BNP Paribas

Macro Matters

23


Central bank watch EUROPE Current rate (%)

Date of last change

Next change in coming six months

Refinancing rate

0.00

−5bp (10/3/16)

No change

Deposit rate

−0.40

−10bp (10/3/16)

No change

0.25

−25bp (4/8/16)

No change

Date of last change


Comments

No change

We expect the Fed to adjust its balance-sheet policy at its 20 Sept. meeting with only “significant adverse developments” that could stand in its way. Weak inflation data and the likely end to Chair Yellen’s term will probably cause the Fed to pause on hiking rates until its March 2018 meeting. Early 2018, we expect a step-up in y/y inflation due to base effects, along with some possible fiscal stimulus, though the Fed will want to see this borne out before acting.

+25bp (12/7/17)

+25bp (25/10/17)

The BoC raised its policy rate by 25bp to 0.75% at its July meeting. With the economy projected to run above potential throughout the forecast horizon, there are probably more rate hikes in store. While the BoC has opted for a non-committal approach to the path for interest rates, we think the baseline path would be similar to the Fed’s and expect a 25bp rate hike in October.

Interest rate

Current rate (%)

Date of last change


Deposit rate

−0.10

−20bp (29/1/16)

No change

10-year rate

c.0%

(21/9/16)

No change

Interest rate

Current rate (%)

Date of last change


Comments

No change

M2 growth weakened to 9.2% in July, but M2 has become less relevant as a measure of liquidity supply as it is distorted by the WMP development. Better indicators are TSF, the weighted CIBI interest rate, O/N rate and 7-day repo. To balance financial regulation strengthening and stable economic growth, the PBoC has carefully managed liquidity supply against changing market demand.

Interest rate

Comments

EUROZONE We expect the ECB to adjust its forward guidance in September by removing the reference to accelerating QE, followed by an announcement in October of a further scale-back of asset purchases, to EUR 30bn a month, effective from January.

UK Bank rate

We expect the Bank of England to keep its policy rate unchanged for the foreseeable future. The risks are tilted in the direction of policy tightening; a fresh fall in sterling is the main potential trigger.

NORTH AMERICA Interest rate

Current rate (%)

US

Fed funds target range

1.0 to 1.25

+25bp (14/6/17)

CANADA

Overnight rate

0.75

JAPAN Comments Recent data and exchange-rate moves suggest the inflation rate is unlikely to rise even to 1% this year. As a result, we expect the BoJ to keep its policy on hold for some time. There is a risk, however, that political pressure will build on the BoJ to start exiting from the current policy.

CHINA

1y bank deposit rate

1.50

−25bp (24/10/15)

CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA Interest rate

Current rate (%)

Date of last change


Comments

CZECH REPUBLIC

Repo rate

0.25

+20bp (3/08/17)

No change

After the CNB’s 20bp rate hike at its August meeting, Governor Rusnok said that CZK developments will be key in terms of the timing of future policy moves. We look for the CZK to rise further in the coming months and so to deliver a major part of the desired policy tightening. We therefore expect interest rates to be kept on hold for rest of 2017 and in H1 2018.

0.90

−15bp (24/5/16)

No change

The latest policy meeting confirmed that rates will probably stay on hold for a long period. Although we see inflation rising swiftly in H2 2017, we do not expect policymakers to change their bias and tighten monetary policy by year-end.

HUNGARY Base rate


24


Central bank watch (cont) CENTRAL AND EASTERN EUROPE, MIDDLE EAST AND AFRICA (cont) Interest rate

Current rate (%)

Date of last change

1.50

−50bp (4/3/15)


Comments

No change

The lower inflation path (reflecting recent falls in oil prices and modest underlying price pressure) anticipated for 2017 in the central bank’s July projection, is likely to support a dovish policy bias in the months ahead. We see no case for an interest-rate hike until the end of 2017. A softer core price outlook (thanks to weaker unit labour costs) alongside lower food and fuel prices should see inflation undershooting SARB and consensus forecasts this year and next. Coupled with a weaker economic outlook, we expect the SARB to ease policy by a further 25bp in September and November and in January 2018.

POLAND Repo rate

SOUTH AFRICA

6.75

–25bp (20/7/17)

−25bp (Sep 2017)

8.00

+50bp (24/11/16)

No change

Overnight lending rate

9.25

+75bp (24/1/17)

No change

Late liquidity o/n lending rate

12.25

+50bp (26/4/17)

No change

Current rate (%)

Date of last change


Comments

26.25

+150bp (11/4/17)

–150bp (Q4 2017)

The central bank’s August statement and its intervention in the secondary Lebac market suggest the easing cycle will take longer to start. We now expect the first rate cut in late Q4 2017. Lower inflation should allow more cuts in 2018 but, given above-target expectations, the pace is likely to be gradual.

9.25

−100bp (26/7/17)

−100bp (6/9/17)

At its 26 July meeting, the central bank signalled an intention to keep its ratecutting pace at 100bp next time, in September. We think the risks around our below-consensus terminal rate call of 7% remain to the downside.

2.50

−25bp (18/5/17)

No change

Chile’s central bank delivered its last 25bp rate cut in May and adopted a neutral bias. Despite downside surprises in inflation, we think the scenario in the last Monetary Policy Report remains valid. We forecast the BCCh to remain on hold until end-2017 and expect a rate-hiking cycle to start in 2018.

5.50

−25bp (27/7/17)

−25bp (31/8/2017)

The latest communiqués assumed a more cautious tone, as forecasts point to inflation accelerating above the target range set by BanRep and real rates falling. Nevertheless, as economic activity continues to decelerate, we expect one additional 25bp cut at the next meeting for a year-end rate of 5.25%.

7.00

+25bp (18/5/17)

No change

It now appears that Mexico’s central bank is done hiking for the time being. While another policy-rate rise later this year cannot be ruled out if inflation prospects start to sour again, the board considers the current policy rate is consistent with inflation converging back to its 3% target.

Repo rate

TURKEY One-week repo rate

Inflation is likely to follow a volatile path for the rest of the year on the back of base effects. Apart from these, there is no fundamental disinflation story. We expect the CBRT to maintain its current policy unchanged and keep the marginal lending rate at its late liquidity rate of 12.25% for some time to come.

LATIN AMERICA Interest rate ARGENTINA

7-day repo rate

BRAZIL

Selic overnight rate

CHILE Overnight rate

COLOMBIA Overnight rate

MEXICO

Overnight rate

Source: BNP Paribas, TEB, national central banks, BGZ BNP Paribas


25


Global inflation watch Table 1: BNP Paribas inflation forecasts

2016 2017(1) 2018(1)

Eurozone Headline HICP Ex-tobacco HICP Index % m/m % y/y Index % m/m % y/y 100.2 0.2 100.2 0.2 101.7 1.5 101.6 1.4 102.8 1.1 102.7 1.0

France Headline CPI Ex-tobacco CPI Index % m/m % y/y index % m/m % y/y 100.2 0.2 100.2 0.2 101.2 1.0 101.2 1.0 102.1 0.9 102.1 1.0

US CPI urban SA CPI urban NSA Index % m/m % y/y Index % m/m % y/y 240.0 1.3 240.0 1.3 244.7 2.0 244.7 2.0 250.3 2.3 250.2 2.3

Q1 2017 Q2 2017 Q3 2017(1) Q4 2017(1) Q1 2018(1) Q2 2018(1) Q3 2018(1) Q4 2018(1)

101.0 102.0 101.7 102.2 101.9 103.0 102.9 103.6

-

1.8 1.5 1.4 1.2 0.9 1.0 1.2 1.4

100.9 101.9 101.6 102.1 101.8 102.8 102.7 103.5

-

1.7 1.5 1.4 1.2 0.9 0.9 1.1 1.3

100.7 101.3 101.3 101.5 101.5 102.2 102.3 102.6

-

1.2 0.9 0.9 1.0 0.8 0.9 1.0 1.0

100.7 101.3 101.2 101.5 101.5 102.2 102.3 102.6

-

1.2 0.9 0.8 1.0 0.8 0.9 1.0 1.1

244.1 243.9 244.6 246.3 247.6 249.1 251.0 253.4

-

2.6 1.9 1.7 1.7 1.4 2.1 2.6 2.9

243.4 244.7 245.2 245.5 246.9 249.9 251.5 252.7

-

2.5 1.9 1.7 1.7 1.4 2.1 2.6 2.9

Jan-17

100.5

-0.8

1.8

100.4

-0.9

1.7

100.4

-0.2

1.3

100.4

-0.2

1.4

244.2

0.6

2.5

242.8

0.6

2.5

Feb-17

100.8

0.4

2.0

100.8

0.4

2.0

100.5

0.1

1.2

100.5

0.1

1.2

244.5

0.1

2.8

243.6

0.3

2.7

Mar-17

101.7

0.8

1.5

101.6

0.8

1.5

101.2

0.6

1.1

101.1

0.6

1.1

243.8

-0.3

2.4

243.8

0.1

2.4

Apr-17

102.0

0.4

1.9

102.0

0.4

1.8

101.3

0.1

1.2

101.2

0.1

1.1

244.2

0.2

2.2

244.5

0.3

2.2

May-17

101.9

-0.1

1.4

101.8

-0.1

1.4

101.3

0.0

0.8

101.3

0.0

0.8

243.8

-0.1

1.9

244.7

0.1

1.9

Jun-17

102.0

0.0

1.3

101.9

0.0

1.2

101.3

0.0

0.7

101.3

0.0

0.7

243.8

0.0

1.6

245.0

0.1

1.6

Jul-17 Aug 17(1)

101.4

-0.5

1.3

101.3

-0.5

1.3

101.0

-0.3

0.7

101.0

-0.3

0.7

244.0

0.1

1.7

244.8

-0.1

1.7

101.7

0.2

1.5

101.6

0.2

1.4

101.5

0.5

0.9

101.5

0.5

0.9

244.6

0.2

1.8

245.1

0.1

1.8

Sep 17(1)

102.0

0.3

1.4

101.9

0.4

1.4

101.3

-0.2

0.9

101.3

-0.2

0.9

245.2

0.2

1.7

245.6

0.2

1.7

Oct 17(1)

102.2

0.1

1.3

102.0

0.1

1.2

101.4

0.1

1.0

101.4

0.1

1.0

245.6

0.2

1.6

245.6

0.0

1.6

Nov 17(1)

102.1

0.0

1.4

102.0

0.0

1.3

101.4

0.0

1.1

101.4

0.0

1.0

246.3

0.3

1.7

245.5

-0.1

1.7

Dec 17(1)

102.4

0.3

1.1

102.3

0.3

1.0

101.7

0.3

1.1

101.7

0.3

1.1

246.9

0.2

1.7

245.5

0.0

1.7

Jan 18(1)

101.3

-1.1

0.8

101.2

-1.1

0.8

101.2

-0.6

0.7

101.1

-0.6

0.7

247.2

0.1

1.3

245.9

0.2

1.3

Feb 18(1)

101.6

0.3

0.8

101.5

0.3

0.7

101.5

0.3

1.0

101.5

0.3

0.9

247.7

0.2

1.3

246.8

0.4

1.3

Mar 18(1)

102.8

1.2

1.1

102.7

1.2

1.1

102.0

0.5

0.8

102.0

0.5

0.8

247.8

0.0

1.7

247.8

0.4

1.7

Apr 18(1)

102.9

0.0

0.8

102.7

0.0

0.8

102.1

0.1

0.9

102.1

0.1

0.9

248.8

0.4

1.9

249.2

0.5

1.9

May 18(1)

103.0

0.1

1.0

102.8

0.1

1.0

102.2

0.1

0.9

102.2

0.1

0.9

249.1

0.1

2.1

250.0

0.3

2.1

Jun 18(1) Updated Next Release

103.0

0.1

1.1 102.9 Aug 17

0.1

1.0

102.2

0.0

0.9 102.2 Aug 11

0.0

0.9

249.5

0.2

2.3 250.7 Jul 14

0.3

2.3

Aug flash HICP (Aug 31)

Aug flash CPI (Aug 11)

Aug CPI (Sep 14)

Source: BNP Paribas, national statistics offices; (1) forecasts

Chart 1: Eurozone HICP inflation

Chart 2: US CPI inflation

Source: Macrobond, Eurostat, BNP Paribas

Source: Macrobond, BEA, BNP Paribas

Eurozone headline HICP inflation was stable at 1.3% y/y in July, while core inflation inched up to 1.2% y/y from 1.1% in June. Eurozone core inflation has been volatile of late. Smoothing out the month-on-month volatility, the six-month average suggests, however, that core inflation is clearly on an upward trend. Although some volatility may persist, we see core inflation remaining on a gentle upward trend over the coming months, as domestic price pressures filter through into consumer prices.

US CPI inflation disappointed for a fifth straight month in July, with core CPI rising by 0.1% m/m (0.11% unrounded) and headline rising by the same amount on account of flat food and energy prices. The disappointment in core CPI took a similar form to recent months, with core goods prices falling and core services price increases remaining softer than they were last year. Within core services, rent and OER were both firm, but were offset by a 4.2% m/m drop in lodging away from home prices, enough pull month-on-month core CPI to 0.1% from what otherwise would have been 0.2%.

Macro Matters

26


Table 2: BNP Paribas inflation forecasts Japan

2016 2017(1) 2018(1) Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2017 2017 2017(1) 2017(1) 2018(1) 2018(1) 2018(1) 2018(1)

Core CPI SA Index % m/m % 99.7 100.2 100.9 -

y/y -0.3 0.5 0.7

UK

Core CPI NSA Index % m/m % 99.7 100.2 100.9 -

y/y -0.3 0.5 0.7

Headline CPI Index % m/m % 100.7 103.4 106.3 -

y/y 0.6 2.7 2.8

RPI Index % m/m 263.1 272.1 281.0 -

% y/y 1.7 3.4 3.3

100.0 100.1 100.3 100.5 100.8 100.9 100.9 101.2

-

0.2 0.4 0.8 0.8 0.8 0.8 0.7 0.6

99.7 100.2 100.4 100.6 100.5 101.0 101.0 101.2

-

0.2 0.4 0.8 0.8 0.8 0.8 0.7 0.6

102.0 103.2 103.7 104.7 105.1 106.1 106.6 107.4

-

2.2 2.8 2.8 3.2 3.0 2.8 2.8 2.5

267.7 271.5 273.2 275.9 277.2 280.6 282.2 284.2

-

3.0 3.6 3.4 3.8 3.5 3.3 3.3 3.0

Jan-17

100.0

0.2

0.1

99.6

-0.2

0.1

101.4

-0.5

1.9

265.5

-0.6

2.6

Feb-17

100.0

0.0

0.2

99.6

0.0

0.2

102.1

0.7

2.3

268.4

1.1

3.2

Mar-17

100.0

0.0

0.3

99.8

0.2

0.3

102.5

0.4

2.3

269.3

0.3

3.1

Apr-17

100.0

0.0

0.3

100.1

0.3

0.3

102.9

0.4

2.7

270.6

0.5

3.5

May-17

100.1

0.1

0.5

100.3

0.2

0.4

103.3

0.4

2.9

271.7

0.4

3.7

Jun-17 Jul 17(1)

100.1

0.0

0.4

100.2

-0.1

0.4

103.3

0.0

2.7

272.3

0.2

3.5

100.2

0.1

0.6

100.2

0.0

0.7

103.3

0.0

2.7

271.7

-0.2

3.2

Aug 17(1)

100.3

0.1

0.8

100.4

0.2

0.8

103.8

0.4

2.8

273.7

0.7

3.5

Sep 17(1)

100.4

0.1

0.9

100.5

0.1

0.9

104.2

0.4

3.0

274.3

0.2

3.6

Oct 17(1)

100.5

0.1

0.9

100.7

0.2

0.9

104.5

0.3

3.2

274.9

0.2

3.8

Nov 17(1)

100.5

0.0

0.8

100.6

-0.1

0.8

104.7

0.2

3.3

275.7

0.3

3.9

Dec 17(1)

100.6

0.1

0.8

100.6

0.0

0.8

105.1

0.4

3.1

277.0

0.5

3.7

Jan 18(1)

100.7

0.2

0.7

100.3

-0.3

0.7

104.5

-0.6

3.1

275.0

-0.7

3.6

Feb 18(1)

100.8

0.1

0.8

100.4

0.1

0.8

105.2

0.6

3.0

277.8

1.0

3.5

Mar 18(1)

100.9

0.1

0.9

100.7

0.3

0.9

105.5

0.3

2.9

278.7

0.3

3.5

Apr 18(1)

100.8

-0.1

0.8

101.0

0.3

0.9

105.8

0.3

2.9

279.9

0.4

3.5

May 18(1)

100.9

0.0

0.8

101.1

0.1

0.8

106.1

0.3

2.7

280.6

0.2

3.3

Jun 18(1) Updated Next Release

100.8

0.0

0.7 101.0 Jul 28

-0.1

0.7

106.3

0.2

2.9 281.3 Aug 15

0.3

3.3

Jul CPI (Aug 25)

Source: BNP Paribas, national statistics offices;

(1)

Aug CPI (Sep 12)

Forecasts

Chart 3: Japanese CPI inflation

Chart 4: UK CPI inflation

Source: Macrobond, Statistics Japan, BNP Paribas

Source: Macrobond, ONS, BoE, BNP Paribas

In June, the national core CPI (excludes fresh food) was unchanged from May with a reading of 0.4% y/y, as energy price growth came in at 4.9%, virtually identical to May’s figure (5.1%). Meanwhile, the new core CPI (also excludes energy), which the BoJ focuses on, remained at 0.0% for a third straight month. Based on the Tokyo CPI for July (this report precedes the nationwide figures by one month), we project that the national index that month should pick up 0.1 point and rise by 0.5%. The new core CPI should return to positive growth for the first time in five months, rising 0.1% thanks to a rebound by household durables and overseas package tours.

UK headline CPI inflation was stable at 2.6% y/y in July, 0.1pp lower than the market consensus. The downward surprise was mainly driven by core inflation remaining unchanged at 2.4% y/y, compared with expectations for 0.1pp pickup. Looking at the breakdown, core goods inflation increased further, reaching its highest level since 2010, largely driven by the lagged impact past GBP depreciation. The more domestically-generated service price inflation, meanwhile, declined slightly on the month. Subdued services price inflation likely owes something to moderating domestic demand and the softening of wage growth of late. Beyond monthly volatility, we expect UK headline inflation to continue trending higher, mainly driven by imported inflation, and breaching 3% towards year-end.

Macro Matters

27


Economic forecasts (GDP and CPI inflation) Table 1: GDP growth forecasts (% y/y)

Change since last Global Outlook

Forecasts

Previous forecasts

2014

2015

2016

2017

2018

2019

2017

2018

2017

2018

US

2.4

2.6

1.6

2.3

2.6

1.3

0.0

0.1

2.3

2.5

Eurozone

1.2

1.9

1.7

2.1

1.6

1.3

0.2

0.0

1.9

1.6

China

7.3

6.9

6.7

6.6

6.4

6.5

0.4

0.0

6.2

6.4

Japan

0.3

1.1

1.0

1.7

1.0

0.3

0.3

0.0

1.4

1.0

UK

3.1

2.2

1.8

1.5

1.0

2.1

0.0

0.0

1.5

1.0

Poland

3.3

3.8

2.7

3.8

2.6

2.4

0.6

0.0

3.2

2.6

South Africa

1.6

1.3

0.3

0.7

1.3

1.5

-0.5

-0.1

1.2

1.4

Brazil

0.5

-3.8

-3.6

0.5

3.0

2.5

-0.5

0.0

1.0

3.0

Mexico

2.2

2.6

2.3

2.0

1.5

2.5

0.5

-0.5

1.5

2.0

Source: BNP Paribas, national statistics offices, national central banks

Table 2: CPI inflation forecasts (% y/y)

Change since last Global Outlook

Forecasts

Previous forecasts

2014

2015

2016

2017

2018

2019

2017

2018

2017

2018

US

1.6

0.1

1.3

1.9

2.3

2.8

-0.1

-0.2

2.0

2.5

Eurozone

0.4

0.0

0.2

1.5

1.1

1.6

-0.1

-0.3

1.6

1.4

China

2.0

1.4

2.0

1.8

2.3

2.5

-0.9

-0.2

2.7

2.5

Japan

2.7

0.8

-0.1

0.4

0.6

0.5

-0.7

-0.4

1.1

1.0

UK

1.5

0.1

0.6

2.8

2.8

2.4

0.0

0.0

2.8

2.8

Poland

0.0

-0.9

-0.6

2.2

2.1

2.1

-0.4

-0.3

2.6

2.4

South Africa

6.1

4.6

6.3

5.0

4.7

5.3

-0.4

-0.4

5.4

5.1

Brazil

6.3

9.0

8.8

3.6

3.8

4.2

-0.5

-0.5

4.1

4.3

Mexico

4.0

2.7

2.8

5.7

4.0

3.3

-0.3

0.3

6.0

3.7

Source: BNP Paribas, national statistics offices, national central banks

Macro Matters

28


Recently published research Central and Eastern Europe, Middle East and Africa – click here for access to all desknotes on this region South African inflation: Hitting the mid-point

Jeffrey Schultz

15 August

South Africa: Taking stock

Jeffrey Schultz

15 August

Germany: Could Central Europe boost wages?

Michal Dybula

11 August

Xingdong (XD) Chen

17 August

Germany: Domestic tailwinds

Michal Dybula

18 August

Italy: Debtor’s prism

Clemente De Lucia

16 August

Eurozone: Resurrecting the Phillips curve

Dominic Bryant

10 August

Bank of England: Hoping for stability

Dominic Bryant

3 August

Italy’s growth: Post-boost reboot

Clemente De Lucia

2 August

China – click here for access to all desknotes on this country China: To retain growth within the desired range Europe – click here for access to all desknotes on this region

Global – click here for access to all global desknotes Big picture: Working hard or hardly working?

Bricklin Dwyer

17 August

Big Picture: The age of r-stardom

Bricklin Dwyer

10 August

Big picture: USD down, EM up

Marcelo Carvalho

3 August

Japan – click here for access to all desknotes on this country Japan: The reality of “Abe the all-powerful”

Ryutaro Kono

21 July

Japan: Why, despite full employment, does monetary and fiscal stimulus continue? Ryutaro Kono

14 July

Ryutaro Kono, Hiroshi Shiraishi

Japan: To have and to hold

14 July

Latin America – click here for access to all desknotes on this region Colombia's inflation: Down and sideways

Luiz Eduardo Peixoto

22 August

Argentina: Primary colors

Florencia Vazquez

14 August

Brazil’s rates: Six in the mix

Marcelo Carvalho

14 August

Chile: Inflation dynamics turning against further cuts

Florencia Vazquez

14 August

Mexico: A guide to NAFTA talks

Marcelo Carvalho

9 August

US and Canada – click here for access to all desknotes on this region US: What’s driving all the hiring?

Bricklin Dwyer

17 August

US FOMC: The president’s board

Bricklin Dwyer

10 August

US debt limit: Scare me again?

Bricklin Dwyer

3 August

US: What took the pay out of payrolls?

Paul Mortimer-Lee

For further research, please see: Macro Matters

Macro Matters

Global Outlook Q3 2017: Steady ahead

27 July Economic research

Global rates plus

29

FX weekly

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Market coverage Economist

Coverage

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Phone

Paul Mortimer-Lee

Chief Market Economist and Head of US Economics

New York, BNP Paribas Securities Corp

1 212 841 3709

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Head of European Economics and Global Markets Research Analytics & Production

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44 20 7595 8322

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Eurozone, UK


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380 44 230 4854

Marcelo Carvalho

Head of Emerging Markets Research, Latam

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55 11 3841 3418

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Brazil


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Mexico, Colombia, Brazil


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This document does not, nor is it intended to, constitute an offer to issue, sell or acquire, or solicit an offer to sell or acquire any securities or to enter into any transaction. South Africa: BNP Paribas Securities South Africa (Pty) Ltd (Registration number 1996/009716/07) is a licensed member of the Johannesburg Stock Exchange and an authorised Financial Services Provider (FSP 29451) in terms of the Financial Advisory and Intermediary Services Act, 37 of 2002. Any view or opinion expressed in this report does not constitute advice and the recipient should obtain their own advice prior to making any decision or taking any action whatsoever based hereon. China: This document is being distributed in the People’s Republic of China (“PRC”), excluding the Hong Kong or Macau Special Administrative Regions or Taiwan) by BNP Paribas (China) Limited (“BNPP China”), a subsidiary of BNP Paribas. BNPP China is a commercial bank licensed by the China Banking Regulatory Commission to carry on banking business in the PRC. India: In India, this document is being distributed by BNP Paribas Securities India Pvt. Ltd. ("BNPPSIPL"), having its registered office at 5th floor, BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai 400 051 (Tel. no. +91 22 3370 4000 / 6196 4000 / Fax no. +91 22 3370 4363). BNPPSIPL is registered with the Securities and Exchange Board of India (“SEBI”) as a stockbroker in the Equities and the Futures & Options segments of National Stock Exchange of India Ltd. and Bombay Stock Exchange Ltd. (SEBI Regn. Nos.: INB/INF231474835, INB/INF011474831; CIN: U74920MH2008FTC182807; Website: www.bnpparibas.co.in). Indonesia: This report is being distributed by PT BNP Paribas Securities Indonesia and is delivered by licensed employee(s) to its clients. PT BNP Paribas Securities Indonesia, having its registered office at Menara BCA, 35th Floor, Grand Indonesia, Jl. M.H.Thamrin No.1, Jakarta, 10310, Indonesia, is a fully subsidiaries company of BNP Paribas SA and is licensed under Capital Market Law No. 8 of 1995 and the holder of broker-dealer and underwriter licenses issued by the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK). PT BNP Paribas Securities Indonesia is also a member of Indonesia Stock Exchange. Neither this research publication nor any copy hereof may be distributed in Indonesia or to any Indonesian citizens except in compliance with applicable Indonesian capital market laws and regulations. This research publication is not an offer of securities in Indonesia. Some of the securities referred to in this research publication have not been registered with the Capital Market and Financial Institutions Supervisory Agency (BAPEPAM-LK) pursuant to relevant capital market laws and regulations, and may not be offered or sold within the territory of the Republic of Indonesia or to Indonesian citizens through a public offering or in circumstance which constitute an offer within the meaning of Indonesian capital market laws and regulations. Japan: This report is being distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited or by a subsidiary or affiliate of BNP Paribas not registered as a financial instruments firm in Japan, to certain financial institutions defined by article 17-3, item 1 of the Financial Instruments and Exchange Law Enforcement Order. BNP Paribas Securities (Japan) Limited is a financial instruments firm registered according to the Financial Instruments and Exchange Law of Japan and a member of the Japan Securities Dealers Association, the Financial Futures Association of Japan and the Type II Financial Instruments Firms Association. BNP Paribas Securities (Japan) Limited accepts responsibility for the content of a report prepared by another non-Japan affiliate only when distributed to Japanese based firms by BNP Paribas Securities (Japan) Limited. Some of the foreign securities stated on this report are not disclosed according to the Financial Instruments and Exchange Law of Japan. Malaysia: This report is issued and distributed by BNP Paribas Capital (Malaysia) Sdn Bhd. The views and opinions in this research report are our own as of the date hereof and are subject to change. BNP Paribas Capital (Malaysia) Sdn Bhd has no obligation to update its opinion or the information in this research report. This publication is strictly confidential and is for private circulation only to clients of BNP Paribas Capital (Malaysia) Sdn Bhd. This publication is being provided to you strictly on the basis that it will remain confidential. No part of this material may be (i) copied, photocopied, duplicated, stored or reproduced in any form by any means or (ii) redistributed or passed on, directly or indirectly, to any other person in whole or in part, for any purpose without the prior written consent of BNP Paribas Capital (Malaysia) Sdn Bhd. Philippines: This report is being distributed in the Philippines by BNP Paribas Manila Branch, an Offshore Banking Unit (OBU) of BNP Paribas whose head office is in Paris, France. BNP Paribas Manila OBU is registered as an offshore banking unit under Presidential Decree No. 1034 (PD 1034), and regulated by the Bangko Sentral ng Pilipinas. This report is being distributed in the Philippines to qualified clients of OBUs as allowed under PD 1034, and is qualified in its entirety to the products and services allowed under PD 1034. Hong Kong: This report is being distributed in Hong Kong by BNP Paribas Hong Kong Branch, a branch of BNP Paribas whose head office is in Paris, France. BNP Paribas Hong Kong Branch is registered as a Licensed Bank under the Banking Ordinance and regulated by the Hong Kong Monetary Authority. BNP Paribas Hong Kong Branch is also a Registered Institution regulated by the Securities and Futures Commission for the conduct of Regulated Activity Types 1, 4 and 6 under the Securities and Futures Ordinance. Singapore: BNP Paribas Singapore Branch is regulated in Singapore by the Monetary Authority of Singapore under the Banking Act, the Securities and Futures Act and the Financial Advisers Act. This report may not be circulated or distributed, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor pursuant to Section 274 of the Securities and Futures Act, Chapter 289 of Singapore ("SFA"), (ii) to an accredited investor or other relevant person, or any person under Section 275(1A) of the SFA, pursuant to and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provisions of the SFA. South Korea: Branch: BNP Paribas Seoul Branch is regulated by the Financial Services Commission and Financial Supervisory Service for the conduct of its financial investment business in the Republic of Korea. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. 33

Securities: BNP Paribas Securities Korea is registered as a Licensed Financial Investment Business Entity under the FINANCIAL INVESTMENT SERVICES AND CAPITAL MARKETS ACT and regulated by the Financial Supervisory Service and Financial Services Commission. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in South Korea. Taiwan: BNP Paribas Taipei Branch is registered as a licensed bank under the Banking Act and regulated by the Financial Supervisory Commission, R.O.C. This report is directed only at Taiwanese counterparties who are licensed or who have the capacities to purchase or transact in such products. This report does not constitute an offer to sell to or the solicitation of an offer to buy from any person any financial products where it is unlawful to make the offer or solicitation in Taiwan. Thailand: Research relating to Thailand and Thailand based issuers is produced pursuant to an arrangement between BNP PARIBAS (“BNPP”) and Finansia Syrus Securities Public Company Limited (“FSS”). FSS International Investment Advisory Securities Co Ltd (“FSSIA”) prepares and distributes research under the brand name “BNP PARIBAS/FSS”. BNPP is not an affiliate of FSSIA or FSS. FSS also publishes a different research product under the brand name “FINANSIA SYRUS,” which is prepared by research analysts who are not part of FSSIA and who may cover the same securities, issuers, or industries that are the subject of this report. The ratings, recommendations, and views expressed in this report may differ from the ratings, recommendations, and views expressed by other research analysts or research teams employed by FSS. This report is being distributed outside Thailand by members of BNP Paribas. Australia: This material, and any information in related marketing presentations (the Material), is being distributed in Australia by BNP Paribas ABN 23 000 000 117, a branch of BNP Paribas 662 042 449 R.C.S., a licensed bank whose head office is in Paris, France. BNP Paribas is licensed in Australia as a Foreign Approved Deposit-taking Institution by the Australian Prudential Regulation Authority (APRA) and delivers financial services to Wholesale clients under its Australian Financial Services Licence (AFSL) No. 238043 which is regulated by the Australian Securities & Investments Commission (ASIC).The Material is directed to Wholesale clients only and is not intended for Retail clients (as both terms are defined by the Corporations Act 2001, sections 761G and 761GA). The Material is subject to change without notice and BNP Paribas is under no obligation to update the information or correct any inaccuracy that may appear at a later date. Some or all of the information contained in this document may already have been published on https://globalmarkets.bnpparibas.com © BNP Paribas (2017). All rights reserved. IMPORTANT DISCLOSURES by producers and disseminators of investment recommendations for the purposes of the Market Abuse Regulation: Although the disclosures provided herein have been prepared on the basis of information we believe to be accurate, we do not guarantee the accuracy, completeness or reasonableness of any such disclosures. The disclosures provided herein have been prepared in good faith and are based on internal calculations, which may include, without limitation, rounding and approximations. The date and time of the first dissemination of this investment recommendation by BNP Paribas or an affiliate is addressed above. BNP Paribas and/or its affiliates may be a market maker or liquidity provider in financial instruments of the issuer mentioned in the recommendation. BNP Paribas and/or its affiliates may provide such services as described in Sections A and B of Annex I of MiFID II (Directive 2014/65/EU), to the Issuer to which this investment recommendation relates. However, BNP Paribas is unable to disclose specific relationships/agreements due to client confidentiality obligations. Section A and B services include A. Investment services and activities: (1) Reception and transmission of orders in relation to one or more financial instruments; (2) Execution of orders on behalf of clients; (3) Dealing on own account; (4) Portfolio management; (5) Investment advice; (6) Underwriting of financial instruments and/or placing of financial instruments on a firm commitment basis; (7) Placing of financial instruments without a firm commitment basis; (8) Operation of an MTF; and (9) Operation of an OTF. B. Ancillary services: (1) Safekeeping and administration of financial instruments for the account of clients, including custodianship and related services such as cash/collateral management and excluding maintaining securities accounts at the top tier level; (2) Granting credits or loans to an investor to allow him to carry out a transaction in one or more financial instruments, where the firm granting the credit or loan is involved in the transaction; (3) Advice to undertakings on capital structure, industrial strategy and related matters and advice and services relating to mergers and the purchase of undertakings; (4) Foreign exchange services where these are connected to the provision of investment services; (5) Investment research and financial analysis or other forms of general recommendation relating to transactions in financial instruments; (6) Services related to underwriting; and (7) Investment services and activities as well as ancillary services of the type included under Section A or B of Annex 1 related to the underlying of the derivatives included under points (5), (6), (7) and (10) of Section C (detailing the MiFID II Financial Instruments) where these are connected to the provision of investment or ancillary services. BNP Paribas and/or its affiliates do not, as a matter of policy, permit pre-arrangements with issuers to produce recommendations. BNP Paribas and/or its affiliates as a matter of policy do not permit issuers to review or see unpublished recommendations. BNP Paribas and/or its affiliates acknowledge the importance of conflicts of interest prevention and have established robust policies and procedures and maintain effective organisational structure to prevent and avoid conflicts of interest that could impair the objectivity of this recommendation including, but not limited to, information barriers, personal account dealing restrictions and management of inside information. BNP Paribas and/or its affiliates understand the importance of protecting confidential information and maintain a “need to know” approach when dealing with any confidential information. Information barriers are a key arrangement we have in place in this regard. Such arrangements, along with embedded policies and procedures, provide that information held in the course of carrying on one part of its business to be withheld from and not to be used in the course of carrying on another part of its business. It is a way of managing conflicts of interest whereby the business of the bank is separated by physical and non-physical information barriers. The Control Room manages this information flow between different areas of the bank where confidential information including inside information and proprietary information is safeguarded. There is also a conflict clearance process before getting involved in a deal or transaction. In addition, there is a mitigation measure to manage conflicts of interest for each transaction with controls put in place to restrict the information flow, involvement of personnel and handling of client relations between each transaction in such a way that the different interests are appropriately protected. Gifts and Entertainment policy is to monitor physical gifts, benefits and invitation to events that is in line with the firm policy and Anti-Bribery regulations. BNP Paribas maintains several policies with respect to conflicts of interest including our Personal Account Dealing and Outside Business Interests policies which sit alongside our general Conflicts of Interest Policy, along with several policies that the firm has in place to prevent and avoid conflicts of interest. The remuneration of the individual producer of the investment recommendation may be linked to trading or any other fees in relation to their global business line received by BNP Paribas and/or affiliates. 34

IMPORTANT DISCLOSURES by disseminators of investment recommendations for the purposes of the Market Abuse Regulation: The BNP Paribas disseminator of the investment recommendation is identified above including information regarding the relevant competent authorities which regulate the disseminator. The name of the individual producer within BNP Paribas or an affiliate and the legal entity the individual producer is associated with are identified above in this document. Where this investment recommendation is communicated by Bloomberg chat or by email by an individual within BNP Paribas or an affiliate, the date and time of the dissemination by the relevant individual is contained in the communication by that individual disseminator. The disseminator and producer of the investment recommendations are part of the same group, i.e. the BNP Paribas group. The relevant Market Abuse Regulation disclosures required to be made by producers and disseminators of investment recommendations are provided by the producer for and on behalf of the BNP Paribas Group legal entities disseminating those recommendations and the same disclosures also apply to the disseminator. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via Bloomberg chat or email, the disseminator’s job title is available in their Bloomberg profile or bio. If an investment recommendation is disseminated by an individual within BNP Paribas or an affiliate via email, the individual disseminator’s job title is available in their email signature. For further details on the basis of recommendation specific disclosures available at this link (e.g. valuations or methodologies, and the underlying assumptions, used to evaluate financial instruments or issuers, interests or conflicts that could impair objectivity recommendations or to 12 month history of recommendations history) are available at https://globalmarkets.bnpparibas.com/gmportal/private/globalTradeIdea. If you are unable to access the website please contact your BNP Paribas representative for a copy of this document.

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BIG PICTURE - BNP Paribas GlobalMarkets

BIG PICTURE - BNP Paribas GlobalMarkets

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