Extreme Forecast Uncertainty - ENGIE...Total economy Manufacturing Auto sector Coke, refined...
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Romania: Consumers on steroids Ciprian Dascalu, Chief Economist, ING Romania
Transcript of Extreme Forecast Uncertainty - ENGIE...Total economy Manufacturing Auto sector Coke, refined...
Romania: Consumers on steroids
Ciprian Dascalu, Chief Economist, ING Romania
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Growth picture looking monochromatic, with private consumption stealing the show.
Services growth spurt, started in 2014, looks set to continue through 2017.
GDP above potential of 3.5-4.0%, upside limited by structural issues related to labour market
2,2 1,6
4,2
5,3
4,3
1,9
3,4 2,9
4,4
3,5 3,8 4,0 4,3
6,0
4,3
4,8 5,7
6,1
-5
-2
1
4
7
10
Private consumption Public consumption
Fixed investment Others
Net exports GDP (%YoY)
2,2
1,6
4,2
5,3
4,3
1,9
3,4
2,9
4,4
3,5 3,8
4,0 4,3
6,0
4,3
4,8
5,7 6,1
-1,5
0,0
1,5
3,0
4,5
6,0
7,5
Agriculture Industry
Constructions All services
Others GDP (%YoY)
75
85
95
105
115
125
ian.-00 ian.-07 ian.-14
ESI Long-term average
-70
-60
-50
-40
-30
-20
-10
0
iun.-01 iun.-07 iun.-13
Consumer Long-term average
-30
-20
-10
0
10
20
30
ian.-00 ian.-07 ian.-14
Retail Long-term average
-50
-40
-30
-20
-10
0
10
ian.-00 ian.-07 ian.-14
Construction Long-term average
-25
-20
-15
-10
-5
0
5
10
15
ian.-00 ian.-07 ian.-14
Industry Long-term average
-30
-15
0
15
30
45
60
iun.-02 iun.-06 iun.-10 iun.-14
Services Long-term average
3
Cautious optimism ahead, except for consumers
Consumer confidence Economic sentiment index Retail sentiment
Construction sentiment Industry sentiment Services sentiment
-5,0
-2,5
0,0
2,5
5,0
7,5
1Q09 3Q10 1Q12 3Q13 1Q15 3Q16
Retail sales (QoQ%)
Household spending (QoQ%)
38
33
29
28
27
26
23
23
22
19
16
12
0 10 20 30 40
IT
BE
NL
ES
AT
DE
FR
Europe
UK
CZ
PL
RO % of consumers
who would
spend most of
the extra money
0
200
400
600
800
1000
1200
1400
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Net financial assets Property assets
(RONbn)
HH spending pullback... ... in 3Q16 is looking temporary. Surge in consumption, though some signs suggest a bit of caution ahead.
Wary consumers One in eight Romanians would spend the helicopter money, the lowest share among countries surveyed.
Wealth effect... ... however, property assets are one third below their 2007 high, probably still weighing on overall sentiment.
4
Mid-to-late cycle for retail sales? Not quite...
ING survey: what would you do with extra 200€/month?
Maybe people are still shaken after 2008 crisis.
Consumption frenzy coming back with a vengence after soft 2H16
-70
-60
-50
-40
-30
-20
-10
0
10
Financial
Economy
Unemployment
Savings
Consumer confidence index
(long term average)
(12 months ahead outlook)
-100
-90
-80
-70
-60
-50
-40
-30
1Q02 3Q05 1Q09 3Q12 1Q16
Buy a car Purchase/build home
Home improvements
(major purchase intentions over 12 months)
2-digit wage growth... Due to minimum pay hikes, increases for state employees. Concerns about manufacturing competitiveness.
Good sentiment... ... but consumers marginally more prudent than in 2008 on economy, own financial situation.
Bigger ticked items… ... are picking-up on improved confidence due to income and employment expectations.
5
Wages being pushed higher by state wage policy
Confidence jumped to a record high in 1Q17
Consumers, ready to dig deeper in their wallets
Still, solid wages to keep things moving along
-5
0
5
10
15
20
25
30
Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Manufacturing Public sector
Private sector
(nominal wage growth, %YoY)
-4
0
4
8
12
16
20
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Food Non-food
Fuel Retail sales (% YoY)
0,0
2,5
5,0
7,5
10,0
12,5
15,0
17,5
19
90
1
99
1
19
92
1
99
3
19
94
1
99
5
19
96
1
99
7
19
98
1
99
9
20
00
2
00
1
20
02
2
00
3
20
04
2
00
5
20
06
2
00
7
20
08
2
00
9
20
10
2
01
1
20
12
2
01
3
20
14
2
01
5
20
16
E
Arrival of Romanian tourists in domestic hotels
Departures abroad of Romanians
(millions)
0
10
20
30
40
50
60
70
80
90
IE
CZ
H
U
SI
SK
R
O
BG
P
L
HR
LI
EE
F
I D
E
AT
S
E
DK
P
T
LV
E
Z
IT
ES
B
E
EL
NL
FR
U
K
MT
C
Y
LU
(services as % of GDP)
Interest for white goods Household items and clothing still in demand, but food category is worse off.
Tourism, on a tear Last year was a banner year for domestic tourism, despite a spike in trips abroad.
Big potential Long term, as Romania’s consumers will get more wealthy, the relevance of industry and agriculture will fade.
6
Retail sales slowing down on base effects
Traveling more both internally and abroad
Convergence process to give more weight to services
Retail sales have peaked, but overall services OK
90
95
100
105
110
115
0
2
4
6
8
10
12
14
RO manufacturing (%YoY, 3mma, lhs)
German Ifo business expectations (3mma, rhs)
-7,5
-5,0
-2,5
0,0
2,5
5,0
7,5
10,0
ian.-10 ian.-12 ian.-14 ian.-16
Mining Manufacturing
Utilities Industry (%YoY)
(12 months rolling)
Exports to Germany... ... account for one fifth of Romania’s total, making the jump in the Ifo index all the more relevant.
Car exports... ... are Romania’s main staple, so the latest cooling in registrations in Europe could spell some trouble in 2017.
Headline slowing down on mining sector (restructuring), but surge in oil prices could be a boon for the energy sector.
7
Strengthening German economy beginning to show
Slowdown in European car sales is somewhat worrying
Robust manufacturing thanks to auto segment
Some positive external tailwinds for industry
-20
-10
0
10
20
30
New car registrations, Western Europe
RO manufacturing of motor vehicles
(%YoY, 3mma)
46 45 48
25
54
43 39 45
35 41 37
81
44 43
34 37
34 30
22
49
40
51
24
51
25 27
16
138
94
70 74
26
0
20
40
60
80
100
120
140
Total economy Manufacturing Auto sector Coke, refined petroleum producs
IT, consultancy Professional, technical activities
Arts, leisure Trade
Czech Republic Hungary Poland Romania
(Gross value added per hour worked,
% of EU average)
Get ready for a shift to more automation due to wage pressures
8
Poor performance relative to peers fro industry on low automation. Services fare much better. Unfortunately, development is limited by structural constraints (ie educational).
Inflationary policies in place for too long
‘Stimulative’ monetary policy, loose fiscal and expansionary wage policy
-5
-4
-3
-2
-1
0
1
2
3
4
5
ING f'cast NBR target NBR f'cast
(CORE 3,
%YoY)
-4
-3
-2
-1
0
1
2
3
4
5
ING f'cast NBR target NBR f'cast
(CPI,
%YoY)
10
Base effects and higher oil prices only part of the reasons behind positive CPI in 2017...
... as CORE3 inflation is rapidly moving higher (and is seen close to 4% in 2018 by NBR).
Era of low inflation drawing to a close
0
1
2
3
4
5
6
7
8
9
10
Key policy rate 3M ROBOR
Credit facility rate Deposit facility rate
ING
estimates, %
0
5
10
15
20
25
-20
-15
-10
-5
0
5
10
15
20
ian
.-0
7
ian
.-0
8
ian
.-0
9
ian
.-1
0
ian
.-11
ian
.-1
2
ian
.-1
3
ian
.-1
4
ian
.-1
5
ian
.-1
6
ian
.-1
7
Banks' position vis-à-vis the NBR (RON/bn/day, monthly average, lhs)
3M ROBOR (%, average)
Key rate (%)
11
Liquidity surplus - room for tightening by narrowing standing facilities corridor...
... expected by ING in 4Q17 ahead of a key rate hike in 2Q18.
First key rate hike expected in 2Q18. Still dovish, tying the move to Poland’s central bank.
RON: strong fundamentals
...but watch out for fiscal risks and the NBR talking down RON firming
-25
-20
-15
-10
-5
0
5
10
Goods Services Primary Income
Secondary Income CA CA+KA+FDI
(EURbn, 12M rolling sum)
-2400
-2000
-1600
-1200
-800
-400
0
-35
-30
-25
-20
-15
-10
-5
0
5
10
15
20
25
30
35
Trade gap (EURm, RHS) Exports (%YoY, LHS)
Imports (%YoY, LHS)
(12M rolling average)
13
Trade gap has deteriorated, but it does not look so bad when put in historic perspective.
Services surplus might not be enough if trade gap shoots up on private consumption.
External picture still largely favourable
4,35
4,40
4,45
4,50
4,55
4,60
4,65
EUR/RON NBR "lines in the sand"
7 Jan-16: „stability zone”
reaffirmed by c.bank governor 7 Jan-15: NBR governor
Isarescu hints at „stability zone”
9 Feb-17: Isarescu sees limited
room, if any, for RON strengthening
due to competitiveness erosion
EUR/RON: 4.50-4.60, the new „stability zone”
14
Isarescu: EUR/RON comfort zone shifting higher as local producers lost market share in labour intensive sectors. Maybe fiscal/political risks behind RON underperformance in CEE.
Conclusions
Romania 1Q16 2Q16 3Q16 4Q16 2016 1Q17F 2Q17F 3Q17F 4Q17F 2017 1Q18F 2Q18F 3Q18F 4Q18F 2018
GDP
(%YoY) 4.3 6.0 4.3 4.7 4.8 5.7 6.1 6.3 6.0 6.0 5.5 4.4 4.6 4.6 4.8
CPI (%YoY) -3.0 -0.7 -0.6 -0.5 -1.6 0.2 0.9 1.6 2.3 1.2 3.5 3.6 3.0 3.1 3.3
Key rate
(%) 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 1.75 2.00 2.25 2.50
3M rate (%) 0.78 0.81 0.69 0.90 0.86 0.86 1.58 1.25 1.25 1.50 1.85 2.25
10Y yield
(%) 3.30 3.42 2.84 3.49 3.86 3.89 4.10 3.90 3.90 4.10 4.15 4.20
Eurozone 1Q16 2Q16F 3Q16 4Q16 2016 1Q17F 2Q17F 3Q17F 4Q17F 2017 1Q18F 2Q18F 3Q18F 4Q18F 2018
GDP
(%QoQ,
ann) 2.1 1.4 1.8 2.1 1.8 2.3 2.1 2.1 2.0 2.0 1.8 1.7 1.7 1.7 1.8
CPI (%YoY) 0.0 0.1 0.4 1.1 0.3 1.8 1.5 1.4 1.3 1.5 1.2 1.4 1.4 1.5 1.4
Key rate
(%) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00
3M rate (%) -0.24 -0.29 -0.30 -0.32 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.33 -0.20
10Y yield
(%) 0.15 -0.13 -0.12 0.21 0.33 0.75 0.60 0.40 0.50 0.70 0.75 0.80
FX/oil (eop) 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17F 4Q17F 1Q18F 2Q18F 3Q18F 4Q18F
EUR/RON 4.47 4.52 4.45 4.54 4.55 4.55 4.60 4.55 4.55 4.50 4.48 4.45
EUR/USD 1.14 1.11 1.12 1.05 1.07 1.14 1.18 1.20 1.20 1.25 1.27 1.30
Oil
(US$/bbl) 40 50 49 57 55 51 57 45 42 42 47 47
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Main ING forecasts
• Domestic growth capped by structural issues ↓
• Government policy and leveraging keep fuelling demand ↓
• Inflationary forces should finally show up ↓
• Higher RON rates, absent political pressures on NBR ↓
• EUR/RON heavily managed, missing the regional rally.
• Forecast uncertainty remains high: • Election promises vs new government plan
• European election calendar: Italian elections • Geopolitical tensions
17
Summing up
Thank you
ING EM Economics Team
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Country Name Title Telephone Email
UK Dorothée Gasser-Châteauvieux Chief Economist EMEA, South Africa, Israel 44 20 7767 6023 [email protected]
US Gustavo Rangel Chief Economist, LATAM 1 646 424 6464 [email protected]
Czech R. Jakub Seidler Senior Economist, Czech Republic 420 257 474 432 [email protected]
Hungary Peter Virovacz Senior Economist, Hungary 36 1 235 8757 [email protected]
Philippines Joey Cuyegkeng Economist, Philippines 632 479 8855 [email protected]
Poland Rafal Benecki
Piotr Poplawski
Jakub Rybacki
Chief Economist, Poland
Senior Economist, Poland
Economist, Poland
48 22 820 4696
48 22 820 4078
48 22 820 4608
Romania Ciprian Dascalu Chief Economist, Romania 40 21 209 1393 [email protected]
Russia Dmitry Polevoy
Egor Fedorov
Chief Economist, Russia & CIS
Senior Credit Analyst, Russia & CIS
7 495 771 7994
7 495 755 5480
Singapore Tim Condon
Prakash Sakpal
Chief Economist, Asia
Economist, Asia
65 6232 6020
65 6232 6181
Turkey Muhammet Mercan Chief Economist, Turkey 90 212 329 0751 [email protected]
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