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China is slowing not only as a result of Beijing's intention to move towards a new growth model, but also because of production overcapacity and overleveraging. This makes short-term management of the economy tricky. It is not impossible that growth could slow to 5%, either in 2015 or gradually over the next three years. In either case, there would be consequences for the rest the global economy, though presumably nothing comparable to the 2009 crisis.
Commercial banks in the Eurozone expanded credit to the non-financial private sector at the fastest pace seen in over three years at the end of last year. Supportive business surveys as well as looser monetary conditions suggest this trend should continue in the coming months.
Yesterday's ECB announcement of an Expanded Asset Purchase Programme (EAPP) is unambiguously positive, in our view, in terms of the size and scope of purchases (including agencies and linkers, up to 30Y, until at least September 2016). The limitations that could potentially mitigate the market impact, including an attempt to reduce the degree of risk-sharing and the fact that capital keys favour large core countries, should not be overstated in our view.
Following months of speculation, the ECB is likely to announce a new broad-based asset-purchase programme on Thursday, which has the potential to surprise the market in various directions. The hope is that a compromise with the hawks on the degree of risk-sharing and moral hazard will allow for a more ambitious programme. The easiest and ‘cleanest' way to surprise would be with a flexible programme of at least EUR500bn, with more to come if needed.
Greece legislative elections are scheduled for January 25th after current coalition parties failed to secure enough votes to elect a new President in December. If elections are to mirror public opinion polls, then Greece far-left opposition party, Syriza, will be ahead of current coalition parties. Given Syriza economic program, confrontational negotiations on public debt are expected with the most likely scenario of longer maturities.
Household consumption, the traditional driving force behind French growth, has been growing at a far slower rate since 2011. Growth has been restricted by low incomes. A in-depth analysis of the determinants of household consumption should allow us to sketch mid-term private consumption trends. This paper also sets out to throw light on household consumption spending on passenger vehicles. Last, we offer a close-up look at consumer lending.
Agricultural prices are now falling from their peak of recent years. This follows two very good harvests for all continents, major cereals (wheat and maize) and oilseeds. There was a similar succession of good harvests in 2009, against the backdrop of an economic crisis that then seemed more worrying. The outlook for demand was a little stronger than now, however, as China is slowing, and agro-fuels have fallen out of favour.
Éclairages Émergents – Edition January 30, 2015
China's share in exports by emerging market countries
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