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Macroeconomic picture - April 2015







Continued recovery beyond the slight decline in growth recorded since the end of 2014.

  • GDP rose 2.2% in Q4 driven by consumer spending as investment fell. Most figures (apart from the labour market) have disappointed since the end of 2014.
  • Households, which have considerably reduced their debt in the last few years, are benefiting
    from the continuing improvement in the job market and falling fuel prices.
  • The recovery will continue in 2015, but improvement will be limited due to the ongoing weakness in wage dynamics and falling investment in the energy sector. Economic weakness in the rest of the world and the rising dollar will put a slight damper on activity.
  • The Fed will normalise its policy, but very slowly: with inflation so weak, the first rate increase might not come until the end of 2015.
  • Growth potential stunted
    for the foreseeable future
    (“secular stagnation”)
  • Contagion of the rest of
    the world’s economic
    and/or financial economic
  • Excessive rise in the


  • The HSBC manufacturing PMI for March was lower (46.2) than the previous month (49.6) and the consensus forecast (48.2).
  • Despite several rate hikes, consumer price inflation rose once again: 7.7% year-on-year in February, although part of this rise is due to the liberalisation of administered prices.
  • The probability that Dilma Rousseff is destitute is low or zero. However, its popularity has been severely shaken, making it all the more difficult the implementation of reforms, including that relating to fiscal consolidation.


  • Overly contractionary
    monetary policy
    combined with overambitious fiscal
    consolidation could hurt






Continued recovery, sustained by the evolution of the monetary and fiscal policy mix.

  • Economic growth slightly beat expectations in Q4 (+0.3%), and the initial figures for Q1 are encouraging.
  • The recovery will continue in 2015 due to 1) the rollback of austerity measures (2015 budgets, a more accommodative policy stance by the European Commission and new measures, such as the Juncker Plan); 2) the ECB’s highly accommodative monetary policy (start of the massive quantitative easing programme in March), combined with the deferred impact of the measures taken by the ECB in 2014 to shore up balance sheets; and 3) the decline in the euro and oil prices.
  • Inflation will only increase very slowly. The economic upturn and the ECB’s asset purchase programme should nonetheless prevent a self-sustaining deflationary spiral.
  • Political risk remains high (Greece, and even Spain at the end of the year).
  • Intensified deflationary
  • Contagion of the emerging
    world’s economic and/ or financial economic hardships
  • Political risk (rise of anti-institutional parties at elections slated for 2015)



Recovery still buoyant.

  • The solid recovery underway is expected to continue in 2015. Increased consumption and the rise in real estate (despite a slowdown) will remain important factors. Increased business investment (which has been revised upwards) should enable gradual rebalancing. The improved economic backdrop in the eurozone will be beneficial to UK exports.
  • The job market is improving: real wages are finally rising. The drop in inflation reduces the urgency for higher key rates, which are unlikely to occur before the end of 2015.
  • A new housing bubble
  • Elections in May and rise
    of the issue of exiting
    the EU





  • In China, the HSBC manufacturing PMI in March (49.6) was slightly higher than February’s (49.2) and the consensus forecast (49.3).
  • China held its National People’s Congress this month. A number of announcements were made, the most significant of which was certainly the one regarding a reduction of the growth and inflation targets, in addition to the introduction of an “about”, which says a lot about the uncertainty surrounding the slowdown in China.
  • The PBoC also announced a reduction in the minimum downpayment required when purchasing a second home to 40% of the purchase price instead of the 60-70% required until now. This announcement shows that Chinese authorities are trying to stimulate the real estate sector, which has decelerated sharply in the past year. Once again, this is a new measure to support growth.
  • Quicker than expected
    deterioration in loan
  • Drop in external demand
  • Increasing deflationary
  • Inadequate measures
    to support the economy


  • In India, recovery appears to materialize as shown by the significant improvement in the HSBC manufacturing PMI in March (52.1) compared with 51.2 the previous month and 51 forecast by the consensus.
  • After surprising markets by lowering the repo rate in March, the RBI left rates unchanged in early April (7.5%) and declares await the arrival of new data relating in particular to the growth and food inflation before amplify its monetary easing. The fear of RBI is to see a return of the food inflation due to particularly poor weather conditions likely to affect production and increase of prices.
  • Rise in commodity prices
  • A quicker-than-expected
    normalisation of US
    monetary policy


Gradual recovery following disappointing figures

  • After two negative quarters, growth became slightly positive in Q4, but investment remains low.
  • After December’s elections, there are no clouds on the political horizon but the government’s capacity to deliver important structural reforms remains unproven.
  • A few signs of improvement are appearing in terms of wages (but primarily at large companies).
  • The drop in oil prices is undermining the possibility of quickly achieving the BoJ’s 2% inflation target.
  • Exposure to the
    slowdown in China
  • Inflation ebbing with
    lower oil prices


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Cross Asset of April 2015 in English

Cross Asset de Avril 2015 en Français

ITHURBIDE Philippe , Global Head of Research
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Macroeconomic picture - April 2015
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