20140116-招商证券_香港_-Give_way,_and_get_a_way_24页_906kb

2014 Macro Analysis Summary

Core Content

This report provides an overview of the macroeconomic outlook for the U.S. and the Eurozone in 2014, with a focus on GDP growth, inflation, unemployment, fiscal policy, and monetary policy developments. It also touches on the impact of quantitative easing (QE) tapering and exchange rate trends on global markets.

Key Forecasts

United States

• GDP Growth: Expected to rise to 2.5% in 2014, slightly below market expectations of 2.6%.
• CPI: Projected at 1.9%, lower than the previous year's 2.1%.
• Unemployment: Anticipated to decrease to 6.7% by year-end.
• Current Account / GDP: Estimated at -2.5%, improving from -2.6% in 2013.
• Fiscal Balance / GDP: Expected to improve to -3.4%, up from -4.0% in 2013.
• Policy Rate: Maintained at 0.25%.
• Dollar Index (DXY): Projected to reach 85 by year-end, reflecting a passive and structural strengthening of the USD.

Eurozone

• GDP Growth: Forecast to increase to 0.9% YoY, up from -0.5% in 2013.
• CPI: Expected to remain at 1.3%.
• Unemployment: Projected to decrease slightly to 12.1%.
• Current Account / GDP: Anticipated to rise to 2.3%, up from 1.54% in 2013.
• Fiscal Balance / GDP: Expected to improve to -2.5%, up from -2.8% in 2013.
• Policy Rate: Kept at 0.25%.
• EUR/USD: Forecast to be 1.30 by year-end.

Main Views

U.S. Economy

• Moderate Recovery: The U.S. economy is expected to continue its moderate recovery in 2014, supported by consumption and investment.
• QE Tapering: The Fed is likely to end QE by the end of 3Q2014, with a gradual and flexible approach. QE tapering is expected to reduce liquidity abundance, but not cause a significant contraction.
• Interest Rates: The Fed is unlikely to raise interest rates in 2014. The phrase "well past" in FOMC statements indicates a more dovish stance, which helps to keep long-term rates low.
• Fiscal Policy: Fiscal policy uncertainties remain, but their negative impact is expected to be less severe than in 2013. The "Fiscal Cliff" situation has been mitigated, though "Obama Care" continues to pose fiscal challenges.
• Stock Market: The U.S. stock market is expected to experience slow growth in 2014 due to lack of strong corporate capital expenditure. Shares buybacks and dividends will provide weaker support, while valuations are expected to return to pre-GFC levels.

Eurozone Economy

• Gradual Recovery: The Eurozone is expected to show a modest recovery in 2014, with GDP growth returning to positive territory but still lacking dynamism.
• Fiscal Consolidation: Fiscal austerity will continue, but it is expected to be relaxed. Investment is likely to recover more strongly in the private sector than in the public sector.
• Monetary Policy: The ECB will maintain accommodative monetary policy, with interest rates remaining low. The possibility of QE is not ruled out if the economic recovery falters.
• Exchange Rate: EUR/USD is expected to slide slightly to 1.30, but this is likely to be offset by the USD's structural strengthening due to QE tapering.
• External Demand: Net exports are expected to be a key contributor to growth, driven by improved external demand and price competitiveness. However, downside risks include uncertainty in U.S. monetary policy and the slowdown in emerging economies.

Key Information

Fiscal Policy

• The U.S. Congress passed a fiscal scheme in October 2013, which did not significantly alter the healthcare reform and deficit reduction plans.
• The fiscal cliff issue was averted, but the "Fiscal Hill" has led to increased fiscal burden and reduced employment in certain sectors.
• "Obama Care" is expected to cost $49 billion in 2014, with a long-term cost of $1363 billion.

QE Tapering

• The Fed's QE tapering is expected to start in January 2014 and end by September.
• QE tapering will reduce liquidity abundance, but not significantly impact the economy due to the Fed's dovish forward guidance.
• The tapering process may have non-symmetrical impacts on various markets, especially emerging markets.

Exchange Rates

• The USD is expected to strengthen in a passive and structural manner, reaching 85 by year-end.
• The Euro is likely to weaken against the USD, but the extent of appreciation is expected to be less than market expectations.
• Emerging market currencies are expected to face pressure due to the strengthening USD, leading to potential capital outflows.

Conclusion

The U.S. and Eurozone economies are expected to show modest recovery in 2014, with the U.S. continuing its moderate growth and the Eurozone gradually returning to positive GDP growth. QE tapering will play a role in shaping market conditions, while fiscal policy uncertainties and corporate investment trends will influence economic performance. The USD is expected to strengthen in a structural manner, while the Euro will likely weaken, with implications for emerging markets.