Bank Research Consensus Weekly 12.19.11
Outlook 2012: Policy Make or Break
Joachim Fels, Global Head of Economics, Morgan Stanley
Cutting forecasts again: When we slashed our global growth forecasts back in August (see Global Economics: Dangerously Close to Recession, August 17, 2011), many called us alarmist. However, consensus growth expectations have followed us down and recession fears have been on the up. Rightly so, as in our view Europe has now entered another recession, only a little more than two years after the last recession ended - we cut our 2012 GDP forecast for the euro area from 0.5% to -0.2%. Our US base case remains anaemic growth of just over 2% next year, but this crucially depends on our assumption that Congress will extend most of this year's fiscal stimulus into next year - expiration could easily tip the US into a double-dip. Unsurprisingly against this backdrop, growth prospects for emerging market economies have dimmed further - we cut our forecast for the EM universe from 6.1% to 5.7%, with China 2012 GDP going from 8.7% to 8.4%. Overall, this takes our PPP-weighted (and thus EM-heavy) 2012 global GDP forecast down from 3.8% to 3.5% and thus below the long-term average.
Six Themes, 10 Trades
Antero Atilla, Senior Analyst, Danske Bank
Earlier this week, we published FX Top Trades 2012, 14 December. Like the last two years, the trade ideas are based on a number of global themes. In 2012, we assume that: (i) recession fears are excessive, (ii) global monetary easing will continue, (iii) the EMU crises will continue but the euro will not break up, (iv) volatility will stay high, (v) the dollar will face a structural headwind and (6) and we will see continued FX intervention.
FOMC Provides 2012 Outlook
John E. Silvia, Chief Economist, Wells Fargo
This week’s Federal Open Market Committee (FOMC) policy announcement emphasized an economy that is “expanding moderately accompanied by inflation that has “moderated since earlier this year.” As a result, the FOMC decided to keep the target range at 0 percent to 0.25 percent and that economic conditions are likely to warrant exceptionally low levels for the federal funds rates at least through mid-2013.
Canada – Can 2012 Possibly Bring More Surprises Than 2011 Did?
Jacques Marcil, Senior Economist,TD Bank Financial Group
Every year brings its share of surprises, helping keep everyone who works in the forecasting business healthily humble. After all, didn’t that famous economist, John Lennon, once say, “life is what happens to you while you’re busy making other plans”. If there is one thing to be remembered about 2011, it is the large number of unexpected events, some tragic, some enthralling, that took place during its course. It’s hard to fathom, almost twelve months later, that happenings of the magnitude of the Japanese tsunami, the Arab spring, the U.S. debt default and the European sovereign debt crisis all managed to wedge themselves within 2011. Those events – and many other ones we’re not mentioning – didn’t all have the same degree of economic implications, but they all had some impact.
Compiled by David Song, Currency Analyst
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