A selection of charts presented at Fathom Consulting’s Global Economic & Markets Outlook Seminar on 31st January 2017

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Selected charts

All commentary and opinion is that of Fathom Consulting and any views expressed are not those of Thomson Reuters. The full set of charts presented are available in Thomson Reuters Eikon along with many of the data sources.

Fathom Consulting Global Economic and Markets Outlook Q1 2017

3 Available on Thomson Reuters Eikon

Growth summary

• Our central scenario embodies a rebound in global growth. The emerging economies, together with the U.S., do much of the work.

• Our risk scenario sees much lower growth more or less across the board. But the greatest impact is felt in the emerging economies.

• President Trump adopts restrictive trade policies, notably against China. It is a gamble, but one that pays off in our central case.

• In the UK, growth has exceeded all expectations post-Brexit. But we think it is pain deferred.

• Donald Trump’s election victory is undeniably a significant step along the road towards a more isolationist world. The weight that we attach to our risk scenario has doubled over the past three months.

Overview of Fathom growth forecasts

2015 2016 2017 2018

Year over year % US decouples Global isolation US decouples Global isolation

Global GDP 2.5 (3.2) 2.2 (2.9) 2.9 (3.4) 0.8 (1.3) 3.3 (3.6) 0.3 (1.0)

Advanced Economies*

2.1 1.6 2.1 -0.2 2.1 -0.9

United States 2.6 1.6 3.1 0.7 3.3 -0.4

EA 1.9 1.7 1.3 -1.5 1.3 -2.3

Japan 1.2 0.8 0.8 -0.3 0.6 1.4

United Kingdom 2.2 2.0 0.9 0.3 0.4 -1.2

Emerging and Developing Economies*

2.8 (4.0) 2.7 (3.9) 3.6 (4.4) 1.5 (2.5) 4.1 (4.7) 1.1 (2.3)

*as defined by the IMF. Source: Fathom Consulting. (Using official Chinese GDP).

4 Available on Thomson Reuters Eikon

• Rates in the U.S. are set to rise (but they remain below inflation all the way down the yield curve).

• Rates in other developed economies are stuck at the lower bound.

U.S. about to decoupleConscious decoupling

Policy rates, per cent

Source: Thomson Reuters Datastream / Fathom Consulting

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But growing risk of global trade wars• If the U.S. moves aggressively

against existing trade deals, but everyone else cooperates, then that’s a good outcome for the U.S. in the short term.

• But if everyone else follows suit, it’s a terrible outcome for the global economy.

Global tariffs and global trade

Per cent Per cent of GDP

Source: Thomson Reuters Datastream / Fathom Consulting

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Investors have responded well, with few fearing retaliation• Fathom’s China Exposure Index

(CEI) weights together the equity prices of 25 US firms where sales to China make up a significant share of total revenue, relative to the prices of other firms operating in the same sector.

• Firms exposed to China suffered for a day or two following Mr Trump’s victory, and again following nomination of China Hawk Wilbur Ross. The CEI has nevertheless risen since the election. Implicitly, investors are pricing in a deal with China that is favourable to US firms.

China Exposure Index (CEI)

Index, 8/11/16 = 100

Source: Thomson Reuters Datastream / Fathom Consulting

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U.K. economy surprisingly resilient• Growth during the second half

of last year looks to have been stronger than we had expected before the vote, let alone after.

• Both our survey-based ESI and our model that makes use of partial official data pointed to growth of around 0.5% in 2016 Q4, which was close to the initial ONS estimate of 0.6%.

U.K. Economic Sentiment Indicator

Quarterly percentage changes

Source: Thomson Reuters Datastream / Fathom Consulting

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But Investment takes time• Weaker business investment will

take time to come through – Fathom’s analysis, based on equity market movements, suggests six months or more.

• Investment intentions have slowed. Although some way above recession levels, the Bank of England measure, which we find to be more reliable, has been weaker than its latest reading only 20% of the time.

U.K. investment intentions

Four quarter percentage change Net balances

Source: Thomson Reuters Datastream / Fathom Consulting

Business investment response to positive shock

Per cent

Source: Thomson Reuters Datastream / Fathom Consulting

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View and refresh chart in Thomson Reuters Eikon

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