Global IP Scorecard-- Less Synchronised, More Sustainable:: Credit Suisse

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Global IP Scorecard--------------------------------------------------------------------------------------------
Less Synchronised, More Sustainable


● Activity has started to moderate in the US and Europe after the
strongest and most synchronous G3 rebound in 35 years. At the
global level, however, April was likely the short-term low in output
momentum. Japanese production fell 15% in March. We now
expect a few strong months of rebound.
● And the slowdown in Chinese production has already been very
sharp; we look for stabilization and some reacceleration in coming
months. We also expect sustained growth in global final demand
through the summer – especially after the recent correction in oil
prices – meaning that that by late this year, global growth
momentum is set to be growing well above trend.
● Global IP Momentum peaked in January at 9% and has fallen
sharply to 3% in April. The pick-up from here should be swift and
strong. We expect a summer peak around 9%. Global final
demand slowed somewhat at the start of this year but we see no
evidence of persisting weakness.
● Global Risk Appetite has dropped back towards its long-term
average as G3 rates have fallen below their post-earthquake lows
while equities have been volatile but range-bound.



Summary
Activity has started to moderate in the US and Europe after the
strongest and most synchronous G3 rebound in 35 years. We now
expect a few strong months of rebound. We also expect sustained
growth in global final demand through the summer – especially after
the recent correction in oil prices – meaning that that by late this year,
global growth momentum is set to be growing well above trend.
Momentum Outlook
Supply-chain disruptions outside Japan have largely remained
confined to the car and tech sectors. US labor income has continued
to grow robustly in nominal terms and, together with the payroll tax
holiday, has allowed real disposable income to continue to expand
despite the spike in energy prices.
Risk Appetite and Markets
A reacceleration in growth momentum provides scope for Global Risk
Appetite to resume its uptrend and, in due course, G3 short-term
yields. Meanwhile, Equity-Only Risk Appetite has dipped back into
panic. EM equities underperformed developed equities in the post-
QE2 rally, but evidence of a stabilization in EM inflation and a rebound
in the EM cycle should pave the way for a new phase of EM
outperformance, in our view.