Tuesday April 12, 2016

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Fedspeak Spans Day; IMF Outlook; U.S. Import Prices QUOTE OF THE DAY BEN BARIS AND JAMES BATTY, BLOOMBERG BRIEF EDITORS "We’ll know soon enough. We WHAT TO WATCH: Philadelphia Fed President Patrick Harker speaks on the are not going to know by April. economic outlook at an event titled “Region on the Rise: A Construction and There is time for us to make Development Summit.” at 9 a.m. San Francisco President John Williams speaks at 3 p. these assessments over the next m. at the LendIt USA 2016 Conference. Richmond President Jeffrey Lacker speaks at 4 p.m. on “Economic Leadership in an Uncertain World." few months and we will." — Dallas Fed President Robert Kaplan on letting ECONOMICS: The NFIB small business optimism index fell to a level of 92.6 in events unfold in determining the timing of the next March from 93.6 in February. Import prices are forecast to rise 1 percent in March from interest-rate increase a month earlier, 8:30 a.m. The International Monetary Fund issues its World Economic Outlook ahead of its spring meetings with the World Bank at 9 a.m. COMMENTARY IN THIS ISSUE GOVERNMENT: President Barack Obama met with Federal Reserve Chair Janet Yellen on Monday to discuss the U.S. economy amid signs that growth may be slowing Bloomberg Intelligence as consumers retreat from spending. It was the first time since November 2014 that the Economics updates its Fed Fed chair has met with the president on her own. Spectrometer, assessing FOMC members' policy MARKETS: U.S. equity-index futures rose with emerging markets and commodities, while the yen slipped with government bonds, as crude oil’s advance above $40 a inclinations based on barrel boosted economic optimism. recent public statements: Carl Riccadonna. (All times local for New York.) Bloomberg Rankings compiles its list of the top forecasters of the U.S. economy, Consumers' Inflation Expectations Fell in March, Fed Says with Market Securities' Christophe Barraud maintaining the top spot.

There has not been much good news in U.S. corporate profits since they began sliding a year ago — until now: Lu Wang.

Bank of America Capital Management's Joseph Quinlan discusses the risks facing the global economy: Surveillance.

Under “certain extreme circumstances” like sharply deficient aggregate demand, exhausted monetary policy and an unwillingness of Congress to use debt- financed fiscal policies, helicopter money U.S. consumers’ expectations for inflation declined in March following a rise from record may be the “best available alternative,” lows the month before, according New York Fed data released Monday. The numbers may writes former Fed Chair Ben Bernanke. add to the debate over downside risks to the Federal Reserve’s 2 percent inflation target. The median respondent to the New York Fed’s March Survey of Consumer Expectations expected inflation to be 2.5 percent three years from now, down from 2.6 percent in the NUMBER OF THE DAY February survey. In January, expected inflation three years ahead was 2.45 percent, marking the lowest level in data going back to June 2013. $5.1 billion — The amount Goldman

— Matthew Boesler, Bloomberg News Sachs will pay to resolve U.S. allegations that it failed to properly vet mortgage- Click here to view a live version of this chart on the Bloomberg terminal. backed securities before selling them to investors as high-quality debt.

FOMC CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMIST April 12, 2016 Bloomberg Brief Economics 2

FOMC CARL RICCADONNA, BLOOMBERG INTELLIGENCE ECONOMIST Fed Spectrometer Shows Doves Unified as Markets Diverge Federal Reserve policy makers and quarter. If the economy is mired in a financial market participants are not in sustained period of sub-2 percent growth agreement on the likely path of U.S. in year-on-year terms, monetary policy interest rates. The dot plot of rate makers will be extremely reluctant to projections published at the March pursue additional policy tightening. FOMC meeting shows a broad In order to accurately estimate the consensus around a median year-end trajectory of monetary policy, it is fed funds forecast consistent with two necessary to scrutinize sometimes subtle hikes of 25 basis points each. There is Fed signals, including changes to official far less unanimity in future years, as communications, as well as any drift in evidenced by the looser clustering of the tone of public comments. The forecasts in 2017 and 2018, although the interpretation of Fed rhetoric depends to median points are essentially consistent a large degree on not only what is being with a pace of four hikes per year. said, but who is saying it. Markets are far more conservative. Fed For this reason, Bloomberg Intelligence funds futures put the first meeting with a Economics maintains the Fed greater than 50 percent chance of a rate Spectrometer — a tool for monitoring the increase in February 2017, and the history and tone of public comments from market-implied probability of two individual FOMC members. As the title of increases of 25 basis points by year-end the tool implies, it attempts to classify stands at just 11 percent. each Governor or regional Reserve Bank This divergence between markets and President along a spectrum spanning -2 policy makers may explain why a number (dovish) to +2 (hawkish) based on his or of ordinarily moderate and dovish policy her policy inclination. The rankings are makers have sounded slightly more the subjective assessment of Bloomberg hawkish lately. They are downplaying Intelligence economists based solely downside economic risks and supporting upon public statements, and they are the notion of two rate hikes so as to avoid updated on an ad hoc basis. Recent further erosion of market sentiment. They comments are rated more heavily. Current are trying to “jawbone” the market to keep rankings are shown in the image at right. the possibility of multiple rate increases The spectrometer at right highlights the this year alive. If expectations for the next voting roster of the FOMC in 2016. The rate increase slip too far into the future, members of the Board of Governors vote the Fed will lose the ability to raise rates continually, along with the President of the without a significant market adjustment. New York Fed. Four additional regional With growth tepid, this is a fine line to walk. Reserve Bank Presidents vote on a The economy appears to be contending rotating basis, which changes annually. with a multiple-quarter run of soft growth. The relevant conclusion from the Real GDP increased just 1.4 percent in Spectrometer at present is that Fed the final quarter of last year, and tracking watchers should not be misled into estimates for the first quarter have now thinking that the hawkish dissent from slipped below 1 percent. The Atlanta Fed’s Kansas City Fed President Esther George GDPNow estimate for the first quarter fell at the March FOMC meeting was the start to 0.1 percent following the latest data on of an unraveling of Chair Janet Yellen’s factory orders, unit motor vehicle sales coalition. There are only two other and wholesale inventories. If that hawkish voters on the FOMC this year, estimate proves accurate, the year-over- and based on recent public comments year pace of growth will slip to 1.8 they appear to have a more moderate percent in the first quarter. stance. (They are both rated at a less- To meet the Fed’s full-year GDP target hawkish reading of +1.) Most of the of 2.2 percent, growth would have to voters this year range from mildly dovish average 2.9 percent over the ensuing to neutral, which should provide Chair three quarters, a feat only accomplished Yellen with broad-based support to twice since 2011. The March retail sales proceed with deliberate caution. Source: Bloomberg Intelligence. Numerical ratings are report will provide important guidance as the subjective assessment of the Bloomberg to whether the economy had indeed sunk A printable version of the Fed Intelligence U.S. Economics team based on recent to a sub-1 percent growth rate last Spectrometer is available here. public comments. Policy makers with the same number are equally ranked, regardless of placement.

TOP FORECASTERS JUDITH SJO-GABER, BLOOMBERG RANKINGS April 12, 2016 Bloomberg Brief Economics 3

TOP FORECASTERS JUDITH SJO-GABER, BLOOMBERG RANKINGS

Market Securities' Barraud Still Top U.S. Forecaster; RHB's Lam Edges Up a Spot Christophe Barraud, Chief Economist at Market Securities, is the top forecaster of the U.S. economy — a position he has held since the fourth quarter of 2014 — according to data compiled by Bloomberg Rankings. Goldman Sachs, represented by Chief Economist Jan Hatzius, reentered the top 10 overall rankings for the first time since the end of 2014. Ryan Sweet, Director of Real- Time Economics at Moody's Analytics took over the top spot for nonfarm payrolls. Click here to see the full ranking of all economists in all 16 categories plus the top overall forecasters on your Bloomberg terminal. Overall Forecasters GDP (4Q)

Avg. 4Q 2015 Rank Forecaster Firm Score Rank Forecaster Firm Score* Rank 1 Nariman Behravesh IHS 68.40 1 Christophe Barraud Market Securities 64.51 1 2 Stefane Marion/Krishen Rangasamy National Bank Financial 65.74 High Frequency 2 Jim O'Sullivan 62.99 2 3 Scott Anderson Bank of the West 63.50 Economics 4 Russell Price Ameriprise Financial 61.65 3 Thomas Lam RHB 61.12 4 5 Michelle Girard RBS Securities 61.25 Bernd Weidensteiner/ 4 Commerzbank 60.97 3 Christoph Balz 5 Brian Wesbury/Robert Stein First Trust Portfolios 60.27 6 Nonfarm Payrolls 6 Harald Preissler Bantleon Bank 60.15 5 Rank Forecaster Firm Score 7 Paul Mortimer-Lee BNP Paribas 57.92 7 1 Ryan Sweet Moody's Analytics 67.77 8 Michael Feroli JPMorgan Chase 57.43 9 2 Ted Wieseman Morgan Stanley 65.62 9 Jan Hatzius Goldman Sachs 57.28 NR 3 Stephen Stanley Amherst Pierpont Securities 63.15 10 Avery Shenfeld CIBC World Markets 57.16 NR 4 Stephan Buu CTI Capital 62.95 *In each indicator (out of 77 forecasters). Italicized names indicate the forecast was submitted unattributed. The individual identified is the chief economist for the firm. NR 5 Brian Wesbury/Robert Stein First Trust Portfolios 61.53 means forecaster was not previously ranked in the top 10.

Retail Sales Conference Board Consumer Confidence

Rank Forecaster Firm Score Rank Forecaster Firm Score 1 Stuart Hoffman* PNC Financial Services Group 66.03 1 Jim O'Sullivan High Frequency Economics 70.14 2 Harald Preissler Bantleon Bank 64.26 2 David Kelly JPMorgan Asset Management 64.62 3 Avery Shenfeld* CIBC World Markets 63.81 3 Markus Schomer PineBridge Investments 62.86 4 Maury Harris/Samuel Coffin UBS 62.85 4 Stephen Stanley Amherst Pierpont Securities 62.17 5 Michael Gapen Barclays Capital 62.58 5 Paul Mortimer-Lee BNP Paribas 61.03 Source: Bloomberg. Italicized names indicate the forecast was submitted unattributed. The individual identified is the chief economist for the firm. RANX

Methodology: To identify the best forecasters of the U.S. economy, we used estimates submitted to Bloomberg for 16 key monthly indicators including Consumer Confidence, CPI, Durable Goods Orders, Existing Home Sales, Housing Starts, IP, ISM Manufacturing, ISM Nonmanufacturing, New Home Sales, Nonfarm Payrolls, Personal Income, Personal Spending, PPI, Retail Sales, Unemployment, and GDP. GDP is treated as a monthly indicator by ranking the advance, second, and third revisions. For the first time in two years, this ranking includes PPI. The Labor Department expanded PPI in February 2014 to include prices received for goods, services, government purchases, exports, and construction. The previous index reflected the cost of goods alone. This PPI final demand indicator is now included because the minimum 24 months of data are now available. Bloomberg considers two years of data (ended February 2016) for monthly indicators, with a forecast requirement of at least 15 out of 24 forecasts, a minimum of two consecutive forecasts within the last six months and at least one forecast in the last three periods. Each indicator had at least 65 forecasters who qualified for the ranking. The forecasters indicated with an asterisk are those who predicted the actual number released for the February period. Bloomberg assigned a score between zero and 100 to economists reflecting the accuracy of their historical forecasts. Economists with lower forecast errors relative to other economists would receive higher scores, and vice versa. In the case of a tie of two or more economists, the listings are alphabetical by firm name. To identify the best overall forecasters, we averaged the scores of the 77 forecasters who qualified in at least ten indicators; the top 10 forecasters are shown here. A "Z-score"-based statistical model is employed to calculate the probability of the forecast error. The score is then equated to the probability of the forecast error being larger than the observed error for the given economist. More information on Calculation Methodology (Z-score-based) may be found on the Bloomberg Professional service on the ECOS Help Page under Calculations.

EARNINGS LU WANG, BLOOMBERG NEWS April 12, 2016 Bloomberg Brief Economics 4

EARNINGS LU WANG, BLOOMBERG NEWS

Whipsawed Wall Street Traders See Bullish Sign in Bad Profit There hasn’t been much good news in Analyst Cuts Ease; Earnings Sentiment Halts 7-Month Slide U.S. corporate profits since they began sliding a year ago — until now. At first glance, the earnings season will be downright ugly. Net income is forecast to plunge 10 percent in the worst performance since the aftermath of the financial crisis in 2009. Yet, for the first time in eight months, the pace at which analysts are cutting their estimates is slowing. Improvement in the ratio between upgrades and downgrades foreshadowed the bottom of the earnings cycle in 2001 and 2008. Evidence that earnings aren’t getting worse would be a welcome development for investors, who have endured a white knuckle ride in stocks this year as the Standard & Poor’s 500 Index plunged 11 percent through early February only to recover in an epic comeback not seen since 1933. While the turnaround in While energy is expected to post the just haven’t seen it,” he said. “We will revisions could reverse, it usually doesn’t. biggest retreat, weakness has spread to need to see some validation coming out More than $2 trillion was restored to other industries. Banks, which as of companies that the numbers are equity prices over the last eight weeks as recently as August were predicted to see actually too low for the year.” all but four of the S&P 500’s constituents a 2.8 percent gain in first-quarter income, Determining the trajectory of earnings is bounced from their February lows. are now estimated to suffer a 16 percent crucial with equities stuck in the longest Besides calming nerves after the worst tumble. Industrial company profits may stretch of stagnation outside of a bear start on record, the rebound has pushed fall 12 percent, compared with a market since 1995. Down 2.7 percent valuations back toward the highest level projection for 4.2 percent growth seven from a year ago, the S&P 500 hasn’t seen in six years, with the index trading at months ago. Technology, consumer a new high in 10 months. Even as the about 18.6 times profits. The benchmark staples and utilities are all seen reporting market sat still, the decline in profits has gauge slipped 0.3 percent at 4 p.m. in lower earnings. contributed to higher valuations. New York, reversing an earlier gain of as Based on analyst estimates, income in An uptick in analyst optimism has much as 0.8 percent. the S&P 500 isn’t expected to increase historically pointed to better profits Improving sentiment is visible in a Bank on a year-over-year basis until the third ahead, or at least smaller declines. In of America Corp. gauge of estimate quarter — and that rebound has been January 2009, when Bank of America’s revisions. The indicator tracks the repeatedly pushed back. As recently as revision ratio rose from a record low of number of companies whose yearly profit December, analysts said profits would 0.09, earnings improved in each of the forecasts have been revised by analysts rise 0.5 percent in the January-to-March following four quarters to herald a six- over the past three months. Higher period. Estimates for the second quarter year expansion. The measure’s ascent in numbers signal fewer cuts. On that basis, didn’t turn negative until February. November 2001 following a 18-month the measure flashed 0.53 for March The earnings outlook is so cloudy that slide also preceded five quarters of compared with a seven-year low of 0.47 chasing the rally in U.S. shares is a bad growth acceleration. in February, the first increase since July. idea, according to Andrew Slimmon, Eight of 10 industries saw their Nothing happening now will do Chicago-based fund manager who helps earnings revision ratios go up in March, anything to salvage the current season oversee $5.1 billion at Morgan Stanley led by industrial and material producers. that starts today with Alcoa, which is Investment Management. While U.S. jobs A decline in the dollar contributed to projected to say operating profit fell 92 and manufacturing data are improving, improved sentiment toward multinational percent to 2 cents a share. Analysts have rising risks overseas prompted Fed Chair firms, Savita Subramanian, Bank of been relentlessly lowering forecasts Janet Yellen to signal that officials will be America’s equity and quantitative throughout the S&P 500 for the January- cautious in raising interest rates. strategist, wrote in an April 4 note. to-March period and estimate earnings “If the overall estimates for the year Meanwhile, oil finished March with the will decline 10 percent from 2015 after start to go up because companies are biggest increase in a year, easing carrying out the sharpest downward more optimistic, we’ll change our tune,” pressure on energy profit. revision to estimates in six years. Slimmon said. “But at this junction, we Read the full story here.

FEDSPEAK April 12, 2016 Bloomberg Brief Economics 5

FEDSPEAK

Fed's Kaplan Says Weak Data a Sign That No Need for April Hike STEVE MATTHEWS, BLOOMBERG NEWS Market Agrees No April Rate Increase, Mostly Rules Out June Federal Reserve Bank of Dallas President Robert Kaplan said he doesn’t back an interest-rate increase this month in light of a puzzling weakening of economic growth, though a June tightening by the U.S. central bank remains a possibility. “It is worth in this environment being patient and basically being willing to be cautious and let events unfold,” Kaplan told reporters after a speech Monday in Ruston, Louisiana. “We’ll know soon enough. We are not going to know by April. There is time for us to make these assessments over the next few months and we will.” The policy-setting Federal Open Market Committee meets April 26-27 and June 14-15. Investors have lowered the odds of a move at either meeting after Chair Janet Yellen said on March 29 that “There is no question first-quarter GDP The FOMC decided last month to hold central bankers should “proceed numbers are weak,” said Kaplan, off from raising interest rates, while policy cautiously” amid heightened global referring to gross domestic product, “and makers halved their forecasts for the economic risks. probably inconsistent with the job number of rate increases that would be Officials are discussing how quickly numbers” which show “solid” warranted this year from the four moves they should raise rates a second time employment gains. Even so, he said it they projected in December. following their initial hike in December, was likely that growth will pick up in the “I am certainly very open” to the when they lifted rates held near zero final three quarters of the year, based on possibility of a June move, said Kaplan. since 2008, amid signs the U.S. his expectation of stronger consumer “I am not a big fan of predicting what my economy appears to have slowed in the spending. “Being patient and cautious judgment is going to be” far in advance. opening months of the year. The Atlanta doesn’t mean standing still,” the Dallas “I am certainly open minded and will be Fed’s GDPNow forecasting model Fed leader said. “There is a point at making a judgment” as reports come in. currently estimates growth at an annual which I will be advocating to take the rate of just 0.1 percent in the first quarter. next step, but it is not now.”

Williams Says Market Views Fed as Increasingly Data-Dependent JANA RANDOW, BLOOMBERG NEWS an economic letter published Monday. data dependence of policy actions, Investors are beginning to see “This suggests that investors are market-based measures of future interest monetary policy through the eyes of the increasingly viewing monetary policy rates became more responsive to Federal Reserve. actions as data dependent.” economic news,” Williams and Pyle For almost two years, Fed Chair Janet While market-based measures of future wrote, referring to the policy-setting Yellen has preached that any decision to interest rates, such as bond yields, react Federal Open Market Committee. “The raise interest rates will be data- to economic data in normal times by responsiveness of the longer yields to dependent. Now, market participants rising or falling, that pattern can be short- news increased more significantly,” have become more responsive to circuited when borrowing costs are near which “reflects investor expectations that economic news, according to a study by zero and expected to stay there for a rates will move further away from zero San Francisco Federal Reserve long time. Indeed, during the 2010-2014 over the subsequent two years.” President John Williams and Benjamin period, Treasury yields with maturities of Yellen referred to the market acting as Pyle, a research associate at the bank. one year or less responded relatively an ‘automatic stabilizer’ for the U.S. “In the past year or so, market-based little to economic news, according to the economy in a speech last month in which measures of data dependence have report. she noted that investors had scaled back risen considerably, although they are still “With the economy on the mend and the number of Fed rate hikes they expect below earlier norms,” Williams and Pyle FOMC communications emphasizing the this year. wrote in

CANADA GREG QUINN AND THEOPHILOS ARGITIS, BLOOMBERG NEWS April 12, 2016 Bloomberg Brief Economics 6

CANADA GREG QUINN AND THEOPHILOS ARGITIS, BLOOMBERG NEWS

Want an Indicator of Canada's Recovery? Check Its Bank Stocks Canada may no longer have an oil Total Credit to Businesses in Canada Rose 6.3% YoY in Feb. boom, but it still has itsbanks. With Bank of Canada officials preparing for an interest-rate decision Wednesday, one thing that will comfort Governor Stephen Poloz and temper consideration of further interest rate cuts is the health of the nation’s lenders. Credit to households has accelerated in recent months and loans to businesses continue to grow at above historical averages, even with the recent commodity slump, fueling an economic expansion that’s on track to be among the fastest in the Group of Seven this year. That’s one advantage Canada has over other regions like Europe, whose banks continue to struggle with bad loans and are more reluctant to lend. “We still have a clean banking system,” Mark Chandler, head of fixed-income research at RBC Capital Markets in point gain from a year earlier, according growth of 2.9 percent in the first quarter. Toronto, said of why monetary policy to data from the Bank of International That marks a turnaround from last year seems to be more effective in Canada. Settlements. Among major economies, when Poloz cut rates twice as the “In places elsewhere, it’s not the case.” only Australia has posted a bigger economy tottered toward recession. At It’s another example of Canada’s increase. the time, the “Great White Short” bet banks, ranked the ranked the soundest In Europe, banks continue to keep their against Canada’s banks and lenders was by the World Economic Forum, riding to money idle even with the ECB a prevailing theme. Canadian financial the rescue. The country emerged from implementing negative rates, where stocks had their worst start to the year in the 2009 recession as one of the most commercial banks are charged interest a quarter century in 2015, fueled in part robust economies in the western world on deposits. by the Poloz’s first rate cut and concern largely because its lenders avoided the “When you go down the granular about declining oil prices, an inflated trouble that ensnared global peers. reasons behind why Canada’s financial housing market and indebted consumers. Now, as Canada struggles with the system has weathered the storm better Betting on Canada’s banks to collapse in oil prices, those banks are than elsewhere, they are very good underperform is turning into a money keeping lending channels open. reasons,” said Derek Holt, an economist loser. Total credit to businesses in Canada in at Bank of Nova Scotia. “That’s enabled The eight-company Standard & Poor’s February was up 6.3 percent from a year the country to avoid the overwhelming /TSX Commercial Banks Index, which ago, according to Bank of Canada data. financial-sector problems that have includes Canadian Imperial Bank of While the pace has slowed over the past plagued Europe and the U.S.” Commerce and National Bank of year, it’s still at about average since the The credit is in turn fueling a recovery Canada, has climbed 3.8 percent this recession and above average over the that investors believe will keep Poloz year, compared with the 13 percent past 25 years. Credit to households has from lowering interest rates again this decline of the 24-member KBW Bank been growing at a pace of more than 5 year. Employment jumped by 40,600 Index of large U.S. lenders. The percent year-over-year since last August, new positions in March, quadrupling the Bloomberg World Banks Index of the 157 the highest levels since 2012. median forecast, Statistics Canada said largest banks is down 10 percent this On this front, Canada is a world beater. Friday. A week earlier the agency year. Total credit to the non-financial sector in reported the fastest monthly economic Looking forward, bank-stock Canada increased to 285 percent of GDP growth since 2013. Economists surveyed performance may turn out to be a better in the third quarter, an 18 percentage by Bloomberg News last week project gauge of Canada’s economic health than oil.

DATA & EVENTS April 12, 2016 Bloomberg Brief Economics 7

DATA & EVENTS

OVERNIGHT Core CPI Would Benefit From Import Price Pickup

Europe U.K. inflation accelerated to a 15- month high in March as an early Easter boosted air fares and clothing prices increased. Consumer prices rose 0.5 percent from a year earlier, the fastest pace since December 2014, the Office for National Statistics in London said today. That exceeded the 0.4 percent median estimate in a Bloomberg survey of economists. Core inflation, which excludes volatile food and energy prices, quickened to 1.5 percent, the most since October 2014. Italian officials and bank executives agreed to create a multibillion-euro fund The extended period of falling U.S. import prices is swiftly ending, as the dollar's to help troubled lenders raise capital and appreciation and crude oil's decline have both stalled — at least temporarily. The broad, offload bad loans, as the nation tries to trade-weighted dollar fell about 1 percent in the first three months of the year, leaving the 12- assuage investor jitters. The new vehicle month gain through March at just 4.5 percent — the slowest pace in 18 months. Oil also will be named Atlante and will be appears to have found some stability, rising 24 percent in March after a 29 percent decline financed by banks, insurers and in the prior three months. Analysts should be on the lookout for significant increases in both institutional investors. It will be worth headline and ex-petroleum import prices. The consensus estimate is for a 1 percent gain in about 5 billion euros ($5.7 billion). the headline, which will lift the 12-month change to minus 4.8 percent from minus 6.1 German discontent toward the percent prior. Core CPI will accelerate if the drag from goods price deflation ends. European Central Bank is rising — and — Carl Riccadonna and Yelena Shulyatyeva, Bloomberg Intelligence Economists the feeling seems to be mutual. Days Click here to view a live version of this chart on the Bloomberg terminal. before Group of 20 and International Monetary Fund meetings in CALENDAR Washington, German Finance Minister Wolfgang Schaeuble has suggested that ECB President Mario Draghi shares TIME COUNTRY EVENT SURVEY PRIOR the blame for the rise of populist parties. 8:00 India CPI YoY 5.00% 5.18% With mainstream representatives piling 8:00 India Industrial Production YoY 0.80% -1.50% on the opprobrium, ECB officials are showing exasperation that they’re under 8:00 Brazil Retail Sales MoM 0.00% -1.50% attack from politicians who have failed to 8:00 Brazil Retail Sales YoY -5.60% -10.30% upgrade the euro area’s economic 8:00 Brazil Retail Sales Broad YoY -6.50% -13.30% foundations. 8:30 U.S. Import Price Index MoM 1.00% -0.30% 8:30 U.S. Import Price Index YoY -4.80% -6.10% Asia 14:00 U.S. Monthly Budget Statement -$104b -$52.9b The Bank of Japan is reducing the share of funds financial institutions keep 17:00 Chile Overnight Rate Target 3.50% 3.50% at the BOJ that will be subject to the new 19:50 Japan Money Stock M2 YoY 3.10% 3.10% negative interest rate policy. Enacting a 19:50 Japan PPI MoM 0.00% -0.20% technical adjustment that the central bank indicated was a possibility when it 19:50 Japan PPI YoY -3.50% -3.40% unveiled the new policy in January, the Source: Bloomberg. Surveys updated at 5:25 a.m. New York. BOJ enlarged the share of new current- Click on the highlighted releases to see the full range of economists' forecasts on the terminal. account funds that will be charged a zero

percent rate. That portion is referred to as the macro add-on balance.

MARKET INDICATORS April 12, 2016 Bloomberg Brief Economics 8

MARKET INDICATORS

Source: Bloomberg. Updated 5:30 a.m. New York time.

SURVEILLANCE April 12, 2016 Bloomberg Brief Economics 9

SURVEILLANCE

Q: You are saying, sure, the world Q: Is there anything that can bring us Joseph Quinlan, Chief Market Strategist at Bank economy is fragile, but is it ugly to a world recession? Should we be of America Capital Management, speaks with enough for Janet Yellen to not worried more about risks, about some Bloomberg's Tom Keene and Francine Lacqua normalize, or is it just an excuse for kind of shocks out there in the about the risks facing the global economy and the the Fed to buy themselves time? financial system? chances of a global recession. A: Maybe a little bit of both. We have A: I think a shock that takes us down heard the Fed talk back just a couple of globally, not yet. Because the central weeks ago that international banks are doing their part; they're Q: Negative yields in Germany, developments are still soft and fragile. pumping money, they're talking up negative yields in Denmark, a strong They pulled back on the four rate hikes everyone to spend more, capital yen — what's the so-what for this year that no one believed in investment — I think the key will be American investors? anyways. Maybe we're discussing, corporations. Corporations, they're the A: The so-what, is that the global instead of two it will be one. So it is ones that drive trade. There the one's economy is still struggling seven, eight affecting the Fed. How it plays out, we'll that hire. And the feeling amongst years after the crisis. The United States see. But there's no doubt that they're corporations, particularly in the United is OK, but we are not strong enough to looking globally and not liking what States, is like, it's OK, it's not great. So pull along the rest of the world. It is very they're seeing. they can continue on. In Europe, maybe indicative also that growth in China, you get a little cyclical recovery here. If probably like five, six percent, not Q: Tell us about the risks out there. China grows by five percent, six percent, anything close to seven. So we're in this We know about China, Brexit, Japan that gives us enough lift to keep plodding very fragile situation where you see and the great financial experiment that along at that subpar rate, but it's very policy makers still pushing on the string may not be working out. Is there fragile, as you know, and it's not a great with monetary policy, not much fiscally, anything else? backdrop. and a lot of companies and corporations A: I think globally, it's de-globalization. are just standing off to the sidelines. The borders are going up. And it's not Q: You mentioned the earnings just about barbed wire in Europe, it's also season in the U.S. Is it going to be Q: As we go to the IMF meetings, we about data protection, localizing servers, more of the same? Cost-cutting, are not an island, are we? you saw a slowdown in trade, the global synergies, and they just need to cut A: We are not an island. We need the supply chains are contracting, the fat? trade, we need the investment, the corporations — they're not pulling money A: I think that's going to be the main capital, the human resources, and we home. They are also pulling also work story. I think there will be some top line need the demand. We're in a world of home, production. So there's a feeling growth, maybe certain sectors, whether lack. out there that corporations, if they're it's technology, maybe materials and going to build something, they're looking industrials, but the forward guidance will Q: This is a demand deficiency now? closer to home because they don't like be cautious. It'll be a similar page from A: I think so. Maybe not so much in the U. the risk factor in China, which wants its the Fed. S., but it doesn't matter, it's global. own standards, or in Europe, which isn't growing. This interview has been edited and condensed.

Bloomberg Brief: Economics

Bloomberg Brief Managing Editor Chief U.S. Economist Marketing & Partnership Director Jennifer Rossa Carl Riccadonna Johnna Ayres [email protected] [email protected] [email protected] +1-212-617-1833 Economics Editors U.S. Economist

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