Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
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OECD private sector confidence waning
Christopher Dembik
Head of Macroeconomic Research
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
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Last week, the Organisation for Economic Co-operation and Development made large cuts to its economic forecasts, while calling for central banks to signal low rates for longer. Most importantly, it made the case for a coordinated fiscal stimulus along with structural reforms.
Concerns are mostly concentrated on the euro area; Germany’s GDP growth is expected to reach a mere 0.7% this year while Italy may be headed for the worst year since 2013.
In a broader sense, however, the economic outlook is no brighter in other parts of the developed world. OCDE private sector confidence has sharply decreased since Q3 2017. Manufacturing sector confidence has experienced quite a swing over the past 12 months, starting 2018 at 0.8% and now standing at -0.8%, the lowest level since 2012, when Europe was in the middle of the sovereign debt crisis.
The trend is also negative for consumer confidence which is close to its 2016 levels. The first response from the European Central Bank, which came via TLTRO and forward guidance, was aimed to buy time, but further monetary stimulus coupled with fiscal expansion clearly seems needed to offset a much deeper slowdown than forecasted by policymakers.
Last week, the Organisation for Economic Co-operation and Development made large cuts to its economic forecasts, while calling for central banks to signal low rates for longer. Most importantly, it made the case for a coordinated fiscal stimulus along with structural reforms.
Concerns are mostly concentrated on the euro area; Germany’s GDP growth is expected to reach a mere 0.7% this year while Italy may be headed for the worst year since 2013.
In a broader sense, however, the economic outlook is no brighter in other parts of the developed world. OCDE private sector confidence has sharply decreased since Q3 2017. Manufacturing sector confidence has experienced quite a swing over the past 12 months, starting 2018 at 0.8% and now standing at -0.8%, the lowest level since 2012, when Europe was in the middle of the sovereign debt crisis.
The trend is also negative for consumer confidence which is close to its 2016 levels. The first response from the European Central Bank, which came via TLTRO and forward guidance, was aimed to buy time, but further monetary stimulus coupled with fiscal expansion clearly seems needed to offset a much deeper slowdown than forecasted by policymakers.
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