Weekly Export Risk Outlook


Figure of the week:


Singapore's Q/Q annualised Q4 GDP Growth

​Eurozone: Leading indicators


Economic sentiment within the EZ improved for the third consecutive month in January (ESI up +1.4 points to 89.2) while the Composite PMI reached a 10-month high at 48.2. Confidence picked up in most sectors but remained broadly unchanged in industry and retail. Although still below the long-term average, this improvement bodes well for EZ activity, which could show some signs of stabilization in the coming months. Similar to the January Composite PMIs, confidence improved in Germany (ESI +2.5pts to 99.1), Netherlands (+1.0pt to 86.3), Spain (+0.5pt to 88.2) though it deteriorated in France (-0.3pt to 88.2). At its current level, the Economic Sentiment Index (ESI) continues to point to negative GDP growth in Q1 2013. On the monetary front the ECB announced that EUR137.2bn of liquidity will be repaid by 278 EZ banks on January 30 representing 26% the total amount tendered within LTRO 1 operation in Dec 2011. The amount exceeded analysts’ expectations and suggests that banks managed to rebuild balance sheets.


US: Mixed data


Consumer confidence plunged from 66.7 to 58.6, reaching the lowest level since November 2011. The drop was probably caused by the 2% increase in the payroll tax and yet another delay in addressing the “fiscal cliff.” The Case-Shiller home price index for 20 cities rose for the 10th consecutive month, putting the y/y rate at 5.6%, the highest since before the bubble burst in 2006. The latest rounds of Quantitative Easing (QE) have had little effect. Since QE3 was implemented in September to lower mortgage yields, these have fallen just 12 bps. In December QE4 was announced to drive down Treasury yields, yet the yield on the 10 year issue has risen by 32 bps. Nonetheless, it is unlikely that the Fed will change its policy stance for some time yet.


India: Interest rates


After nine months on hold the central bank (RBI) moved to resume rate cutting this week, lowering the key policy rate by 25bps to 7.75%. It also reduced the cash reserve ratio for banks to 4% from 4.25% to ease liquidity and strengthen credit flows. Despite recent less than dovish statements, the influence of three consecutive months in which the pace of inflation, as measured by the Wholesale Price Index, policymakers preferred measure in India, has eased (to 7.18%) has prompted the move, when set against the background of still soft economic activity. Though inflation is still relatively high the RBI notes that it has probably peaked and the economic outlook remains “lacklustre”. As the RBI also acknowledges, there is scope, if limited, to reduce rates further, so expect more cuts, probably small and growth to pick up moderately in FY 2013/14.


UK: Q4 GDP reversal


Real GDP contracted again in Q4 by -0.3% q/q (for the fourth time in the past five quarters, but after an increase of +0.9% in Q3) leaving 2012 growth for the year as a whole flat. The downturn in Q4 was largely driven by the production sector (services were flat, while construction grew by +0.3%, the first quarterly increase since Q4 2011. Once again, one-off factors were important, as the extended and later than usual maintenance of the largest North Sea oil field led to a large fall in oil & gas extraction, which contribute -0.2pp of the overall -0.3% fall in output in Q4. A weaker Q4 was expected after the temporary lift to Q3 growth provided by the Olympic Games. Latest data, despite quarterly volatility, confirm that the underlying trend of the economy is broadly flat. Recent bad weather may weaken Q1, but the economy is still likely to resume modest growth in 2013 (EH forecast


Countries focus

  • Mediterranean, Africa & Middle East – Jordan: Elections
  • Americas – Colombia: Interest rate cut
  • Asia-Pacific – Singapore: Q4 GDP
  • Europe – Slovenia: Government crisis