Global Economic

Outlook

May 2013

2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Major shocks to global economy since 2008
Sub-Prime Crisis
Bear Sterns
Lehman
Bros
Economies
Rebound
(inventory)
Libya, Arab
Spring, Oil
Surges
J apan
Disasters
Greek Debt
Crisis kicks off
Liquidity
Freeze
Global
Great
Recession
US Debt Ceiling
Debacle
Downgraded
Markets
Drag Italy
Into PIIGS
Class
Inflation Surges
in Emerging
Markets
TARP, QE I
China Stimulates
Fiscal Pump Priming
Banking
System is
Stabilized
Mature
Economies
Growth Fades
P
o
l
i
c
y

R
e
s
p
o
n
s
e

Event or Shock
QEII
Global
Real GDP
Growth
Cooling Measures
In EM
China Housing Measures
Fiscal Tightening
Accelerated
ECB
(LTRO)
Iran
embargo
Q3
08
Q4
08
Q1
09
Q2
09
Q3
09
Q4
09
Q1
10
Q2
10
Q3
10
Q4
10
Q1
11
Q2
11
Q3
11
Q4
11
Q1
12
Q2
12
Q3
12
Q4
12
Q1
13
3%
QEIII
OMO
Spanish
banking
crisis
Cypriot
banking
crisis
Monetary and
fiscal loosening in
EM
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Global risks are a little more balanced now
3
The risks facing the global economy are more balanced now, compared
with a year ago
Growth in the United States, Japan, and the rest of Asia (and even
Northern Europe) could surprise on the upside
The rebound in some emerging regions (notably Africa) may well be
stronger than expected
On the other hand, growth in Southern Europe and China could surprise
on the downside
Inflation and interest rates will remain low for at least another year, even
as fiscal policy becomes tighter in the United States and Europe

2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-4
-2
0
2
4
6
8
10
1990 1993 1996 1999 2002 2005 2008 2011 2014 2017
World Advanced countries Emerging markets
(Percent change)
Emerging markets are not providing much independent
growth
4
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
2.5
4.0
5.5
7.0
8.5
10.0
-9
-6
-3
0
3
6
2005 2007 2009 2011 2013 2015 2017
Real GDP growth (Left scale, annual percent change)
Unemployment rate (Right scale, percent)
US real GDP growth and the unemployment rate
5
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
US housing starts in a long climb; prices have also turned
higher
6
150
160
170
180
190
200
210
220
230
0.50
0.75
1.00
1.25
1.50
1.75
2.00
2.25
2.50
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Housing Starts (LS, millions of units)
FHFA House Price Index (RS, purchase-only index, 1991Q1 =100)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
US oil and natural gas production is providing stimulus
(Domestic production, quadrillion Btu, annual rate)
25
30
35
40
45
50
55
1990 1995 2000 2005 2010 2015 2020
7
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
2012 2013 2014 2015
Real GDP 2.2 2.0 2.8 3.2
Consumption 1.9 2.2 2.5 2.5
Residential investment 12.1 16.3 18.5 20.1
Business fixed investment 7.7 3.7 7.3 7.5
Federal government -2.2 -5.3 0.1 -1.5
State & local government -1.4 -0.8 0.1 0.7
Exports 3.4 2.6 5.1 5.4
Imports 2.4 2.3 5.3 4.2
(Percent change)
US economic growth by sector
8
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Europe and US on different cycles of recovery
(Debt to income ratio)
60
80
100
120
140
2000Q1 2006Q1 2012Q1
United States
Euro area
9
80
100
120
140
160
2000Q1 2006Q1 2012Q1
United States
Euro area
(Real house prices)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
The Eurozones multi-dimensional crisis: not out of the
woods yet
10
Sovereign
Debt
Economy Banks
Current Situation
Vicious cycle of fiscal
tightening, economic
recession and
sovereign/banking crisis
Policy Responses
Liquidity injection
Bank bail-out/bail-in
What Are Yet To Be Done
Growth restoration
Banking/fiscal union
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 11
Good news: Little contagion from Cyprus
Greece has been granted more loans and more time but its problems are not
solved and its economic and political situation is unsustainable
The Italian election results underscore the depth of unhappiness about austerity
and reforms, and will complicate crisis management
Austerity is on hold for the moment whats next?
EU officials have become adept at crisis management, but there has been
little progress on longer-term challenges (e.g., banking and fiscal unions)

Latest turns in the Eurozone sovereign-debt crisis
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
1/1/2007 1/21/2008 2/4/2009 2/18/2010 3/4/2011 3/20/2012
Italy Spain France Germany
(Percent, 10-year government bond yield)
Diverging risks in Europe
12
Source: IMF
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
A divided Europe
0 1 2 3 4 5
Greece
Italy
Portugal
Ireland
Spain
UK
France
Germany
EU Competitiveness Divide
(ULC, annual % change, 2001-09)
0 25 50 75 100 125
Spain
Germany
Eurozone
France
Ireland
United States
Portugal
Italy
Greece
Net Government Debt by Country
(Percent of GDP, 2011)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Eurozone unemployment rate up to record high
14
0.0
5.0
10.0
15.0
20.0
25.0
30.0
Eurozone Spain Greece Germany
(Unemployment rate, percent)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 15
Eurozone remains in doldrums
-4
-2
0
2
4
6
1999 2001 2003 2005 2007 2009 2011 2013 2015
Real GDP
(Percent change)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-3
-2
-1
0
1
2
3
Germany France United
Kingdom
Italy Spain
2012 2013 2014 2015 2016-20
(Annual percent change)
Real GDP growth in Western Europe
16
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-8
-6
-4
-2
0
2
4
Eurozone Italy Spain Greece Portugal Ireland
2012 2013 2014 2015 2016-20
(Annual percent change)
Real GDP growth in the Eurozones peripheral countries
17
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent. 18
J apans triple dip
-10
-8
-6
-4
-2
0
2
4
6
2000Q1 2002Q1 2004Q1 2006Q1 2008Q1 2010Q1 2012Q1 2014Q1
GDP CPI
(Percent change)
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
(Yen per US dollar, quarterly averages)
Yen/dollar exchange rate
19
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
J apan experienced its third recession in five years during 2012; recovery is
expected in 2013 as new stimulus measures take effect
The strength of J apans recovery will depend on export performance and how
effectively the new Abe administration implements fiscal stimulus programs and
structural reforms
The Bank of J apan aims to reach its 2% inflation target in two years by doubling
bond purchases and the monetary base
Anticipation of monetary stimulus has contributed to a sharp yen depreciation
J apans participation in the Trans-Pacific Partnership free-trade negotiations has
the potential to energize its economy
The sales tax is scheduled to increase from 5% to 8% in April 2014 and to 10% in
October 2015, which will adversely affect consumer spending
GDP growth will be 1.0% this year, rising to 2.5% in 2014

J apan: A modest expansion is under way, thanks to
aggressive policies
20
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0
2
4
6
8
10
China India Australia South
Korea
Indonesia Taiwan
2012 2013 2014 2015 2016-2020
(Annual percent change)
Real GDP growth in Asia-Pacific
21
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0
2
4
6
8
Thailand Malaysia Singapore Hong Kong Philippines
2012 2013 2014 2015 2016-20
(Annual percent change)
Real GDP growth in Asia-Pacific
22
Chinaa rebound
without recovery?


2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
0
2
4
6
8
10
12
14
16
1994Q11996Q21998Q32000Q42003Q12005Q22007Q32009Q42012Q1
(Quarterly real GDP, percent change from a year earlier)
Chinas recent growth deceleration
24
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
-5
0
5
10
15
2008Q1 2009Q1 2010Q1 2011Q1 2012Q1 2013Q1
Net exports
Capital formation
Consumption
GDP growth (%)
An investment problem
25
(Percentage points, contribution to GDP growth)
0
2
4
6
8
10
2008Q12009Q12010Q12011Q12012Q12013Q1
Capital formation
Capital formation's
average contribution to
growth from 2008
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
(Percent change from a year earlier)
-10
0
10
20
30
40
50
60
70
2008M22008M102009M6 2010M22010M102011M6 2012M22012M10
Manufacturing Infrastructure FAI-Total Real Estate
The construction and manufacturing investment cycle
26
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
The policy deadlock?
27
Macro
policy
deadlock
?
Inflation
Employment
Imbalances
Overcapacity
Overleveraging
Fiscal and financial
stability
Industrial deflation
Housing inflation
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
Structural challenges
28


Reform
Globaliz
ation
Demogra
phic
dividend
Industrialization
Urbanization
Consumption
upgrade
2011, IHS Inc. No portion of this presentation may be reproduced, reused, or otherwise distributed in any form without prior written consent.
China outlook summary
*Annual average, **Billions of US dollars
0
5
10
15
2007 2009 2011 2013 2015 2017
Real GDP growth (%) Consumer price inflation (%)
Exchange rate per USD* Current-account balance**
29
Xianfang Ren
Senior Economist, China Economics
xianfang.ren@ihs.com