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Macroeconomic picture - May 2015


MAY 2015





Gradual rebound after the sharp decline witnessed in Q1.

  • GDP increased by 0.2% in Q1, dragged down by a decline in energy-sector investment and a poor showing from foreign trade. The figures covering the early part of Q2 that have already been released show an improvement, albeit at a somewhat disappointing rate. 
  • Households, which have considerably reduced their debt in the last few years, are nonetheless likely to continue to benefit from the improving job market and falling fuel prices.
  • The recovery will continue in 2015, but the pick-up will be limited by persistently weak investment, the impact of the rise in the dollar and the continued sluggish wage trend. 
  • The Fed will normalise its policy, but very slowly: the first rate increase might not come until the end of 2015.


  • Growth potential stunted for the foreseeable future
    (“secular stagnation”)
  • Contagion of the emerging world's economic and/or financial hardships
  • Excessive rise in the



  • The COPOM voted to increase rates by another 50 bp, which puts the Selic at 13.25%. However, the most recent quarterly inflation report, published in March by the BCB, leads us to believe that this is the end of the cycle.
  • Despite an extremely negative economic and political backdrop, Brazil continues to enjoy high capital inflows, which are doubtless motivated by a strong carry effect.


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






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

  • Initial Q1 figures are encouraging. Consumption, in particular, reacted well to the decline in oil prices, while bank lending is also sending encouraging signs.
  • The recovery will continue in 2015, underpinned by the ECB’s highly accommodating monetary policy, the scaling back of austerity policies and the continued positive impacts of the declines 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).
  • Contagion of the emerging world’s economic and/ or financial economic hardships
  • Increasingly intense deflationary pressures
  • Political risk (rise of anti-institutional parties at elections slated for 2015)



Continued recovery despite the disappointment of Q1 (GDP growth of just +0.3%).

  • The ongoing recovery should continue in 2015. Increased consumption and the rise in real estate (despite a slowdown) will remain important factors. Increased business investment 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
  • Brexit referendum in 2017





  • In China, signs that activity is slowing down are becoming increasingly apparent – at +7%, Q1 GDP growth hit a six-year low, the decline in the HSBC Manufacturing PMI continued in April, industrial output and retail sales were below expectations and, finally, the trade surplus contracted.
  • Faced with this significant slowdown, the Chinese authorities are continuously ramping up their measures to stimulate the economy, including reducing the reserve requirement ratio, and cutting the required downpayment when purchasing a primary residence. Furthermore, rumours of a possible QE by the PBoC have filtered through and, even though the Chinese authorities immediately denied it, such a scenario cannot be counted out


  • Quicker than expected
    deterioration in loan
  • Drop in external demand
  • Increasing deflationary


  • In India, the policy mix seems to be working. Despite the inclement weather conditions, inflation and activity have held up.


  • Rise in commodity prices


Gradual recovery following disappointing figures

  • After two negative quarters, growth became slightly positive in Q4, but investment remains sluggish.
  • A few signs of improvement are appearing in terms of wages (but primarily at large companies).
  • The increase in income, the drop in oil prices, the government’s stimulus plan and “wealth effects” associated with the rise in equities should allow consumption to increase gradually.
  • Due to the improvement in the economic outlook and the stability of inflation expectations, an extension to the BoJ’s asset purchasing plan does not seem imminent.


  • Exposure to the
    slowdown in China
  • Inflation back in negative territory


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Article in English

Article en Français

Cross Asset of May 2015 in English

Cross Asset de Mai 2015 en Français

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