Economic ResearchAugust 9, 2019Global Data Watch Latest news increases drag but also highlights resiliency EM low-yielder CBs shift focus from financial stability to growth risks Europe looks weaker across the region Next week: China slows in July; US ULC bounces; Banxico sets up easeIf it keeps on raining, levee's goin' to breakOur 2019-20 outlook highlights tension. A negative business sentiment shock due to trade and other geopolitical conflicts is weighing down the global economy. However, this is balanced against private sector health and policy-makers willingness to cushion the blow. Our baseline view anticipates a drag that keeps global growth below its potential but does not end the expansion. We expect private sector resilience, bolstered by easier policy, to limit the spillover of drags to labor markets and consumers and also to allow private sector credit to continue flowing. This tension also generates fat tails to the risk distribution. For this year, the primary tail risk is recession: that we underestimate the magnitude of the sen-timent shock and/or overestimate the global economys resiliency. Looking toward next year, tail risks seem more symmetric. The risk of further negative shocks and recession should persist, but we also see the case for a bounce in growth if the global economy is able to weather this years storm. Policy eas-ing should generate fuel for future growth, which is likely to be amplified by a rebound in business spending as sentiment recovers. This has been the regular pattern following Fed “mid-cycle adjustments” in recent decades.Rather than moving toward resolution, incoming news points to a magnification of this tension. On the negative side, business spending indicators continue to weaken. Our capex nowcaster, which tracks a stall in global capex (ex. China) last quarter, has turned negative based on early indicators for July. As US-China rela-tions deteriorate and the UK risks of a no-deal Brexit increase, the risk is rising that the negative business sentiment shock (already reflected in the slide in our manufacturing expectations index to a seven-year low) deepens. While the stall in business spending is weighing heavily on manufacturers, global GDP growth remains close to trend, validating our views on resiliency (Figure 1). Consumer confidence remains elevated as householdsbenefit from still-solid labor income gains and from the recent fall in oil prices.-1012345672014 2015 2016 2017 2018 2019 2020%3m3m, saarFigure 1: Global IP and retail salesSource: J.P. MorganMfg outputRetail salesvolumes-10-50510152010 12 14 16 18 20Net % tightening/seeing increase Figure 2: G-4 bank lending surveyStandardsDemandSource:J.P.Morgan, national sourcesContentsThis time isn't that different: Interpreting curve inversion 16China's reaction as US ups the ante in the tr ade war 19The resurgence of China's debt 21CE3: Cracks begin to show 24Mexico: For Banxico, the first cut is the deepest 26Ghana beyond aid 29Global Economic Outlook Summary 4Global Central Bank Watch 6Nowcast of global growth 7Selected recent research from J.P. Morgan Economics 9The J.P. Morgan View: Markets 10Data WatchesUnited States 31Euro area 38Japan 42Canada 46Mexico 48Brazil 50Argentina 52Chile 54United Kingdom 56Scandinavia 58Emerging Europe 60South Africa conversely, a better showing would prompt a revision lower of this probability. This latter scenario would add pressure on BCRA, with the likely policy response entailing even tighter monetary conditions, as well as forward and spot intervention, to preclude the market from reacting to opposition comments on real peso appreciation by selling the currency.Editor: Gabriel de Kock (1-212) 622-6718 gabriel.s.dekockjpmorgan44464850525456-40-30-20-1001020304015 16 17 18 19 20%3m/3m, saar, US$ termsFigure 4: EM Asia exports and capital goods orders PMIIndexSource: National sources and MarkitCapital goods new orders PMIEM Asia exports4Economic ResearchGlobal economic outlook sum-maryAugust 9, 2019JPMorgan Chase Bank NACarlton Strong(1-212) 834-5612carlton.m.strongjpmorganJoseph Lupton(1-212) 834-5735joseph.p.luptonjpmorganGlobal economic outlook summary Real GDP Real GDP Consumer prices% over a year ago % over previous period, saar % over a year ago2018 2019 2020 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 4Q18 2Q19 4Q19 2Q20United States 2.9 2.2 1.7 1.1 3.1 2.1 1.5 1.8 1.8 2.2 1.8 1.7 1.9Canada 1.91.41.60.30.43.21.51.51.62.02.12.02.1Latin America 1.3 0.8 2.0 0.5 -0.7 1.1 2.5 2.0 2.1 4.0 3.9 3.3 3.3Argentina -2.5-1.32.0-5.0-0.91.62.01.02.547.456.440.430.3Brazil 1.1 0.7 2.0 0.4 -0.6 0.4 2.4 2.2 2.0 4.1 4.3 3.2 3.4Chile 4.02.6 2.8 5.3-0.13.2 2.8 3.0 3.0 2.41.92.63.2Colombia 2.6 2.8 3.0 2.8 0.0 4.5 3.5 3.2 3.0 3.3 3.3 3.7 3.5Ecuador 1.4-0.6-0.90.3-3.81.5-2.0-2.0-2.00.30.30.20.3Mexico 2.0 0.7 1.7 0.1 -0.7 0.4 2.0 1.6 1.9 4.8 4.2 3.7 3.4Peru 4.03.33.610.4-2.01.58.04.02.02.12.52.22.4Uruguay 2.0 0.7 1.6 -0.9 0.0 2.0 2.0 1.0 2.0 8.0 8.0 7.8 8.2Venezuela -25.0 .Asia/Pacific 4.84.44.34.5 4.7 4.6 4.2 3.7 4.41.92.1 2.12.6Japan 0.8 1.1 0.3 1.6 2.8 1.8 0.2 -2.0 1.0 0.9 0.8 0.3 0.2Australia 2.81.93.00.91.62.2 2.6 3.83.0 1.81.6 1.4 1.6New Zealand 2.9 2.4 2.6 2.5 2.2 2.3 2.8 2.4 2.8 1.9 1.6 1.2 1.5EM Asia 5.95.45.4 5.55.45.45.35.25.32.22.42.63.2China 6.6 6.2 6.0 6.1 6.8 5.9 5.9 5.6 5.8 2.2 2.6 2.8 3.6India 6.86.47.06.44.86.56.77.07.22.62.93.53.8Ex China/India 3.7 2.9 3.1 3.4 2.3 3.6 3.0 3.1 3.0 2.0 1.5 1.7 2.0 Hong Kong 3.01.02.0-2.05.3-1.20.24.03.62.63.03.03.3 Indonesia 5.2 4.9 4.9 5.1 5.0 5.0 4.7 4.8 4.8 3.2 3.1 2.8 2.5 Korea 2.71.92.33.8-1.54.42.02.02.21.80.71.01.8 Malaysia 4.7 4.3 3.8 5.2 4.4 4.1 3.0 3.8 3.8 0.3 0.7 1.2 1.8 Philippines 6.25.5 5.7 8.3 2.6 5.6 5.6 5.6 5.75.93.0 1.52.9 Singapore 3.1 1.3 1.3 -0.8 3.8 -3.4 5.0 1.2 1.0 0.5 0.7 1.6 1.8 Taiwan 2.62.11.71.22.34.71.21.11.30.50.81.91.3 Thailand 4.1 3.1 3.4 3.8 4.1 3.5 4.0 4.1 2.8 0.8 1.1 1.0 1.4Western Europe 1.91.31.51.11.80.61.31.51.72.01.51.11.3Euro area 1.9 1.2 1.6 1.0 1.8 0.8 1.3 1.5 1.8 1.9 1.4 1.0 1.1Germany 1.50.61.50.11.7-0.51.31.51.82.11.71.21.2France 1.7 1.3 1.6 1.6 1.3 1.0 1.3 1.5 1.8 2.2 1.3 1.4 1.5Italy 0.70.10.8-0.20.50.10.30.51.01.50.90.81.1Spain 2.6 2.2 1.8 2.2 2.7 2.0 1.8 1.8 1.8 1.8 1.1 0.9 1.1Norway 2.6 2.3 2.0 4.5 1.2 2.3 2.3 2.3 2.0 3.42.51.61.7Sweden 2.5 1.5 1.4 4.5 2.1 -0.3 1.0 1.3 1.8 2.1 2.0 2.3 2.6United Kingdom 1.41.2 1.30.92.0-0.8 1.31.51.52.32.01.61.9EMEA EM 2.9 1.3 2.4 -0.5 2.2 1.2 2.4 2.5 2.1 7.1 6.7 5.2 5.5Czech Republic 3.0 2.4 2.4 3.6 2.6 2.4 2.0 2.3 2.5 2.12.82.82.4Hungary 4.9 3.9 2.3 4.5 6.0 1.4 2.8 2.0 2.3 3.2 3.7 3.2 2.5Israel 3.33.33.53.95.21.23.04.14.01.10.91.01.2Poland 5.1 4.0 3.7 2.0 6.1 2.7 3.8 3.8 3.8 1.4 2.4 2.9 2.9Romania 4.13.71.43.95.31.91.31.6-0.63.74.03.83.1Russia 2.3 1.0 1.6 0.6 -0.9 2.3 2.8 1.8 1.0 4.0 5.0 4.3 3.7South Africa 0.80.50.81.4-3.22.41.51.0-1.04.94.44.24.8Turkey 2.6 -1.7 3.5 -9.4 5.2 -2.5 1.2 3.5 4.0 22.4 18.0 11.9 14.7Global 3.2 2.6 2.7 2.2 3.0 2.5 2.5 2.5 2.7 2.42.3 2.0 2.3Developed markets 2.2 1.7 1.5 1.1 2.4 1.5 1.3 1.3 1.7 2.0 1.6 1.4 1.5Emerging markets 4.7 4.0 4.4 3.8 3.9 4.1 4.4 4.2 4.3 3.23.33.13.6 Global PPP weighted 3.7 3.1 3.3 2.9 3.3 3.2 3.2 3.1 3.2 2.7 2.6 2.4 2.7Note: For some emerging economies seasonally adjusted GDP data are estimated by J.P. Morgan. Bold denotes changes from last edition of Global Data Watch, with arrows show-ing the direction of changes. Underline indicates beginning of J.P. Morgan forecasts. Unless noted, concurrent nominal GDP weights calculated with current FX rates are used in computing our global and regional aggregates. Regional CPI aggregates exclude Argentina, Ecuador and Venezuela. Regional GDP aggregates exclude Venezuela. Forecasts for Argentina are based on JPMorgans estimates of CPI. Source: J.P. Morgan 5Economic ResearchGlobal Data WatchAugust 9, 2019JPMorgan Chase Bank NACarlton Strong(1-212) 834-5612carlton.m.strongjpmorganJoseph Lupton(1-212) 834-5735joseph.p.luptonjpmorganG-3 economic outlook detail2018 2019 20202018 2019 2020 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2QUnited StatesReal GDP 2.9 2.2 1.7 2.9 1.1 3.1 2.1 1.5 1.8 1.8 1.8Private consumption 3.0 2.5 2.2 3.5 1.4 1.1 4.3 2.4 2.0 2.0 2.0Equipment investment 6.8 2.6 3.1 2.9 7.4 -0.1 0.7 4.0 2.0 3.5 3.5Non-residential construction 4.1 -2.9 1.2 -2.1 -9.0 4.0 -10.6 -4.2 1.5 3.5 3.5Intellectual property products 7.4 7.8 3.4 4.1 11.7 10.8 4.7 5.5 3.0 3.0 3.0Residential construction -1.5 -2.2 1.2 -4.0 -4.7 -1.0 -1.5 -1.0 1.5 2.0 2.0Inventory change ($ bn saar) 48.1 75.2 52.2 87.2 93.0 116.0 71.7 55.2 58.1 56.1 51.9Government spending 1.7 2.4 1.7 2.1 -0.4 2.9 5.0 2.6 1.7 1.3 1.3Exports of goods and services 3.0 0.0 1.1 -6.2 1.5 4.1 -5.2 0.5 1.8 1.8 1.8Imports of goods and services 4.4 2.0 3.1 8.6 3.5 -1.5 0.1 4.0 3.3 3.3 3.0Domestic final sales contribution 3.0 2.3 2.2 2.8 1.4 1.8 3.6 2.4 2.0 2.1 2.1Inventories contribution 0.1 0.2 -0.1 2.2 0.1 0.5 -0.9 -0.4 0.1 0.0 -0.1Net trade contribution -0.2 -0.3 -0.3 -2.1 -0.4 0.7 -0.7 -0.6 -0.3 -0.3 -0.2Consumer prices (%oya) 2.4 1.7 2.1 2.6 2.2 1.6 1.8 1.8 1.7 2.1 1.9Excluding food and energy (%oya) 2.1 2.1 2.3 2.2 2.2 2.1 2.1 2.2 2.2 2.2 2.4Core PCE deflator (%oya) 1.9 1.7 2.1 2.0 1.9 1.6 1.5 1.7 1.8 2.0 2.1Federal budget balance (% of GDP, FY) -3.8 -4.2 -4.5Personal saving rate (%) 7.7 8.2 8.3 7.5 7.8 8.5 8.1 8.1 8.3 8.3 8.3Unemployment rate (%) 3.9 3.6 3.3 3.8 3.8 3.9 3.6 3.6 3.5 3.4 3.3Industrial production, manufacturing 2.3 0.4 1.3 3.6 1.5 -1.9 -2.2 3.1 1.4 1.4 1.2Euro areaReal GDP 1.9 1.2 1.6 0.7 1.0 1.8 0.8 1.3 1.5 1.8 1.8Private consumption 1.3 1.4 1.6 0.5 1.3 2.2 1.3 1.5 1.5 1.8 1.8Capital investment 2.0 2.3 2.2 1.7 6.2 0.2 0.8 2.0 2.0 2.5 2.5Government consumption 1.0 1.2 1.3 0.2 2.5 0.4 1.3 1.3 1.3 1.3 1.3Exports of goods and services 3.4 2.6 2.8 1.1 4.7 2.7 1.0 2.5 3.0 3.0 3.0Imports of goods and services 2.6 2.7 2.8 3.9 4.1 1.4 1.5 2.5 3.0 3.0 3.0Domestic final sales contribution 1.3 1.5 1.6 0.6 2.4 1.3 1.1 1.5 1.5 1.7 1.7Inventories contribution 0.1 -0.3 -0.1 1.2 -1.9 -0.2 -0.1 -0.3 -0.1 -0.1 -0.1Net trade contribution 0.5 0.1 0.1 -1.2 0.5 0.7 -0.2 0.1 0.1 0.1 0.1Consumer prices (HICP, %oya) 1.8 1.2 1.3 2.1 1.9 1.4 1.4 1.0 1.0 1.3 1.1ex food, alcohol and energy 1.0 1.0 1.3 1.0 1.0 1.0 1.0 0.9 1.1 1.2 1.1General govt. budget balance (% of GDP, FY) -0.9 -1.0Unemployment rate (%) 8.2 7.6 7.0 8.0 7.9 7.8 7.6 7.5 7.4 7.2 7.1Industrial production 0.9 -0.1 1.7 -0.3 -4.7 3.5 -2.0 2.0 2.0 2.0 2.0JapanReal GDP 0.8 1.1 0.3 -1.9 1.6 2.8 1.8 0.2 -2.0 1.0 0.8Private consumption 0.4 0.8 0.2 -0.5 1.5 0.4 2.5 0.8 -3.1 1.0 0.8Business investment 3.9 2.3 -0.1 -10.0 11.4 1.7 6.1 -3.0 -3.0 1.0 0.5Residential construction -5.9 1.6 -1.3 3.1 5.5 2.3 1.0 5.0 -10.0 -5.0 5.0Public investment -3.4 1.4 4.2 -7.1 -5.1 5.6 4.0 8.0 8.0 4.0 2.0Government consumption 0.8 1.2 0.8 1.0 2.9 -0.3 3.8 -1.0 0.5 1.0 1.0Exports of goods and services 3.4 -2.0 0.8 -8.2 4.9 -7.6 -0.2 -1.0 1.0 2.0 1.0Imports of goods and services 3.3 -0.7 0.9 -4.6 15.4 -16.0 6.7 2.0 -1.5 1.0 1.0Domestic final sales contribution 0.6 1.2 0.4 -2.0 3.1 0.8 3.3 0.2 -2.1 1.0 1.0Inventories contribution 0.2 0.2 -0.1 0.8 0.3 0.3 -0.4 0.5 -0.4 -0.1 -0.2Net trade contribution 0.0 -0.2 0.0 -0.6 -1.7 1.7 -1.2 -0.5 0.4 0.2 0.0Consumer prices (%oya) 1.0 0.4 0.3 1.1 0.9 0.3 0.8 0.4 0.3 0.2 0.2ex food and energy 0.1 0.4 0.4 0.2 0.2 0.3 0.4 0.5 0.5 0.4 0.3General govt. net lending (% of GDP, CY) -2.7 -2.5 -2.8Unemployment rate (%) 2.4 2.3 2.2 2.4 2.4 2.4 2.4 2.2 2.2 2.2 2.2Industrial production 1.0 -1.5 1.4 -2.7 5.2 -9.5 2.2 -2.4 0.8 2.7 2.0Memo: Global industrial production 2.7 1.2 1.2 2.2 0.8 0.9 0.2 2.4 2.5 2.9 2.9%oya 2.6 1.9 1.5 1.0 0.9 1.3 1.8 2.6Note: More forecast details for the G-3 and other countries can be found on J.P. Morgans Morgan Markets client web site. Source: J.P. Morgan 6Economic ResearchGlobal Central Bank WatchAugust 9, 2019JPMorgan Chase Bank NAJoseph Lupton(1-212) 834-5735joseph.p.luptonjpmorganOlya Borichevska(1-212) 834-5398olya.e.borichevskajpmorganGlobal Central Bank Watch Official Current Change since (bp) Last change Next mtg Forecast Forecast (%pa)rate rate (%pa) 05-07 avg oya next change Sep 19 Dec 19 Mar 20 Jun 20 Sep 20Global 2.55 -155 0 2.40 2.35 2.32 2.30 2.30excluding US 2.66 -155 20 2.55 2.48 2.44 2.41 2.42Developed 1.03 -207 -3 0.87 0.86 0.85 0.84 0.86Emerging 4.96 -206 -4 4.83 4.71 4.65 4.61 4.59Latin America 6.08 -483 -16 5.81 5.79 5.72 5.77 5.96EMEA EM 7.69 120 45 7.35 7.03 6.83 6.53 6.25EM Asia 4.13 -158 -12 4.09 3.99 3.95 3.95 3.95The Americas 2.83 -232 18 2.59 2.57 2.56 2.57 2.60United States Fed funds 2.25 -208 25 31 Jul 19 (-25bp) 18 Sep 19 18 Sep 19 (-25bp) 2.00 2.00 2.00 2.00 2.00Canada O/N rate 1.75 -188 25 24 Oct 18 (+25bp) 4 Sep 19 Oct 19 (-25bp) 1.75 1.50 1.50 1.50 1.50Brazil SELIC O/N 6.00 -944 -50 31 Jul 19 (-50bp) 18 Sep 19 18 Sep 19 (-50bp) 5.50 5.50 5.50 5.75 6.25Mexico Repo rate 8.25 31 37 20 Dec 18 (+25bp) 15 Aug 19 6 Feb 20 (-25bp) 8.25 8.25 8.00 7.75 7.50Chile Disc rate 2.50 -200 0 6 Jun 19 (-50bp) 30 Sep 19 Sep 19 (-25bp) 2.25 2.00 2.00 2.00 2.00Colombia Repo rate 4.25 -300 0 29 Jan 18 (-25bp) 27 Sep 19 On hold 4.25 4.25 4.25 4.25 4.25Peru Reference 2.50 -148 -25 8 Aug 19 (-25bp) 26 Sep 19 Aug 19 (-25bp) 2.50 2.50 2.50 2.50 2.50Europe/Africa 1.46 -222 -5 1.32 1.26 1.22 1.16 1.14Euro area Depo rate - 0.40 -238 0 10 Mar 16 (-5bp) 12 Sep 19 3Q 19 (-10bp) -0.50 -0.50 -0.50 -0.50 -0.50United Kingdom Bank rate 0.75 -417 0 2 Aug 18 (+25bp) 19 Sep 19 Aug 20 (+25bp) 0.75 0.75 0.75 0.75 1.00Norway Dep rate 1.25 -183 75 20 Jun 19 (+25bp) 15 Aug 19 2Q 20 (+25bp) 1.25 1.25 1.25 1.50 1.50Sweden Repo rate - 0.25 -277 25 20 Dec 18 (+25bp) 5 Sep 19 3Q 20 (+25bp) -0.25 -0.25 -0.25 -0.25 0.00Czech Republic 2-wk repo 2.00 -40 75 2 May 19 (+25bp) 25 Sep 19 On hold 2.00 2.00 2.00 2.00 2.00Hungary 3-m dep 0.90 -641 0 21 May 16 (-15bp) 27 Aug 19 On hold 0.90 0.90 0.90 0.90 0.90Israel Base rate 0.25 -397 15 26 Nov 18 (+15bp) 28 Aug 19 3Q 20 (+25bp) 0.25 0.25 0.25 0.25 0.50Poland 7-day interv 1.50 -317 0 4 Mar 15 (-50bp) 11 Sep 19 On hold 1.50 1.50 1.50 1.50 1.50Romania Base rate 2.50 -644 0 7 May 18 (+25bp) 3 Oct 19 On hold 2.50 2.50 2.50 2.50 2.50Russia Key pol rate 7.25 NA 0 14 Jun 19 (-25bp) 6 Sep 19 Sep 19 (-25bp) 7.00 6.75 6.75 6.50 6.50South Africa Repo rate 6.50 -173 -650 18 Jul 19 (-25bp) 19 Sep 19 Nov 19 (-25bp) 6.50 6.25 6.25 6.25 6.25Turkey 1-wk repo 19.75 374 200 21 Jul 19 (-425bp) 12 Sep 19 Sep 19 (-125bp) 18.50 17.50 16.50 15.50 14.00Asia/Pacific 3.14 -47 -13 3.0