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MACROECONOMIC SCORECARD: THE WORLD’S LARGEST ECONOMIES Presented by: Doug Hermanson Economist March 2013 Current Retail Conditions Clear deterioration in Europe; China and U.S. a bit mixed Summary of Macro Factors Affecting Retail* Q4 2012 or Latest Available Month* World's Largest Economies China Indicators Economic Bloc Euro United EU Japan Zone States GDP, Annualized Growth Rate* Residential & Business Investment* Consumer Spending* Retail Sales Consumer Confidence CPI Headline Index CPI Food Index CPI Core Index █ = IMPROVING █ = MIXED █ = WORSENING 2 * GDP, Investment and Consumer Spending are quarterly through fourth quarter of 2012; Remaining indicators are monthly through January, February or March 2013 • Euro zone and EU declining sharply; inflation may loom with easy money, weak currency • China balancing strong growth vs. inflation pressures • U.S. positive in some measures, but gov’t issues have tripped up confidence © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail 2 The Global Macro Outlook for Retail Threatened by recession and weak growth into 2013 • Europe will remain in recession in 2013 • China and emerging markets follow mixed path, shifting positive • The United States will sustain slow to modest growth • As global demand revives beyond 2013, global commodity price pressure will re-emerge Source: Kantar Retail China Europe Japan United States Short Term (6–12 months) Long Term (2–5 years) Healthy growth likely to persist, but at risk of reigniting inflation pressures Persisting recession conditions with uncertain path toward growth Uneven growth amid weak export demand, & despite aggressive monetary policy to spur growth Weakness/threats offset by persisting gains in housing, investment, hiring Long-term growth unlikely to be as robust as past amid price/cost pressures Growth likely kept stagnant by austerity and lack of confidence Growth kept modest by various factors, including aging population Growth kept modest by constraints on income growth, price pressures Modest global growth Moderate growth Net likely; downside risks most tempered by persisting Outlook apparent in Europe inflation, austerity effects © Copyright 2013 Kantar Retail 3 Summary Conclusions and Implications • Short vs. Long Term. Expect retail demand to remain on a modest and uneven path in the short term. When global growth shifts into a higher gear will be determined by the euro debt crisis and emerging markets, likely in 2014 or beyond. • Europe. Expect flat or negative growth in most countries through at least 2013 due to the escalating euro debt crisis. • China/Emerging Markets. A quick return to robust growth in China and other emerging markets is unlikely. • United States. Expect U.S. retail sales growth to keep a respectable pace, but a notch below last year. • Prices/Costs. Plan on global cost pressures that remain relatively modest for most markets in 2013 as a result of moderate global demand growth in the short term. © Copyright 2013 Kantar Retail 4 Largest Markets: GDP Trends Span Big Range Growth is holding up in China; declining in Europe • Euro zone and EU pressured by fall off in investment Largest Economies: Inflation-Adjusted GDP Qtr-to-Qtr Growth, Seasonally-Adjusted Annualized Rate 8.2% 8.7% 8.2% 2012.2 • Underlying U.S. growth trends stronger than indicated • Growth in Japan is elusive • China is sustaining healthy growth despite threats 2012.3 2012.4 3.1% 1.3% 0.4% 0.4% -0.2% -0.9% -0.3% -0.7% -0.7% -1.9% 0.0% -2.3% European Euro Zone** Union* United States Japan China*** *European Union includes 27 countries **Euro zone includes 17 countries *** Calculated by annualizing quarterly growth rate reported by National Bureau of Statistics of China Source: EuroStat, China National Bureau of Statistics and Kantar Retail © Copyright 2013 Kantar Retail 5 Largest Markets: Little Momentum in Retail Sales Trends in U.S and China still portend sustained global growth Largest Economies: Nominal Retail Sales • Euro zone and EU have fallen flat Year-to-Year Percent Change; Not Adjusted for Inflation* 20% • U.S. growth holds at modest pace • Japan trending with flat price growth 17% China 14% 11% 8% United States 5% • Renewed letup in China is concern; unlikely to persist given consumer confidence 2% -1%Mar-11 European Union** Mar-12 Euro zone*** Japan -4% * United States , Japan and China are through February Others are through January ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor 6 Largest Markets: Price Pressures Mostly Easing Pockets of stronger inflation in China and United States • Weather-affected commodities have pushed Chinese food prices higher Largest Economies: Consumer Price Inflation Year-to-Year Percent Change, Through February* 21% 18% 15% • U.S. inflation mostly dormant; elevated gasoline prices an issue • Inflation pressures easing in Europe and Japan; Easy money policies may change this 12% 9% China 6% 3% 0% Mar-11 -3% European Union** Euro zone*** Mar-12 United States Japan * Through February except the Japan is through January ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor 7 Largest Markets: Core Inflation Dormant Excluding food and fuel, little inflation in other categories • All the major markets have core inflation rates at or below 2.0% Largest Economies: Core Consumer Price Inflation Year-to-Year Percent Change, Through February* 21% 18% 15% • China’s core rate is surprisingly more modest than in United States • Japan’s rate once again declining, triggering easy money policies to spur inflation 12% 9% 6% 3% 0% Jan-11 -3% China European Union** United States Euro zone*** Jan-12 Japan * Through November, except the Japan is through October ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor 8 Largest Markets: Confidence Metrics Mixed Weak in Europe; picking up in China, Japan; volatile in U.S. Largest Economies: Consumer Confidence • China most positive • Expectations for aggressive growth policies may be boosting Japan’s confidence • Confidence in Europe is holding at very weak levels • U.S. plagued by uncertainty around government budget Year-to-Year Percent Change, through February* 15 100 China 10 5 80 United States 0 -5 60 -10 Japan 40 -15 -20 20 Euro zone*** (right scale) European Union** (right scale) 0 Apr-11 -25 -30 -35 Apr-12 * Through February, except the United States through March ** European Union includes 27 countries *** Euro zone includes 17 countries © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Labor 9 Scorecard: European Union and Euro Zone • The euro area hurt most by Spain and Italy, but France and Germany increasingly a negative factor 1 • EU indicators are similar due to a renewed decline in the United Kingdom • Easing inflation may soften declines in unitdemand—but weak currency raises inflation threat The Largest Economies: Selected Indicators █ = IMPROVING █ = MIXED █ = WORSENING European Union 2 GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Retail Sales Excluding Auto & Fuel Channels 1 Consumer Confidence (Points) 1 CPI Headline Index, Not Seasonally Adjusted (NSA) CPI Food Index, Not Seasonally Adjusted (NSA) CPI Core Index, excluding food and fuel (NSA) Period Y-to-Y Q4 '12 Q4 '12 Q4 '12 Jan-13 Feb-13 Feb-13 Feb-13 Feb-13 -0.6% -3.5% -0.7% -0.1% -2.8 2.0% 3.2% 1.4% Period Y-to-Y Q4 '12 Q4 '12 Q4 '12 Jan-13 Feb-13 Feb-13 Feb-13 Feb-13 -0.9% -4.9% -1.2% -0.7% -2.8 1.8% 2.7% 1.3% Euro Area GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Retail Sales Excluding Auto & Fuel Channels 1 Consumer Confidence (Points) 1 CPI Headline Index, Not Seasonally Adjusted (NSA) CPI Food Index, Not Seasonally Adjusted (NSA) CPI Core Index, excluding food and fuel (NSA) Growth Q-to-Q or Chg Chg Q-to-Q M-to-M Y-to-Y or M-to-M -1.9% -0.2% -2.4% -3.4% -0.3% -0.6% -1.0% 0.2% -0.8% 0.2% 0.2% 0.6% 0.8 0.9 0.8 0.4% -0.1% 1.2% 0.2% -0.6% -0.6% 0.3% -0.1% 1.8% Growth Q-to-Q or Chg Chg Q-to-Q M-to-M Y-to-Y or M-to-M -2.3% -0.3% -2.1% -4.4% -0.6% -1.4% -1.6% 0.3% -1.2% 0.2% 0.3% 0.7% 0.5 0.9 0.7 0.4% -0.1% 1.4% 0.1% -0.5% -0.4% 0.3% -0.1% 2.1% 1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 Consumer spending (inflation-adjusted) is estimated by Kantar Retail Y-to-Y = Year-over-Year change; Q-to-Q = change from prior quarter; M-to-M = change from prior month. Chg Y-to-Y = rate of Year-over-Year change in percentage points; Same for quarterly and monthly growth. All data is seasonally adjusted unless indicated by "NSA" or Not Seasonally Adjusted © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail 10 Scorecard: China, Japan, and United States • Japan is struggling to maintain growth amid weak global demand 1 • China still faces tough task to sustain strong growth without causing more inflation • U.S. positive in some key measures, but tax/spend issues have tripped up confidence 1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales 2 China’s consumer spending is estimated by Kantar Retail The Largest Economies: Selected Indicators █ = IMPROVING █ = MIXED █ = WORSENING United States 2 GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Retail Sales Excluding Auto & Fuel Channels 1 Consumer Confidence (Points) 1 CPI (Headline Index) CPI Food Index CPI (Core Index, excluding food and fuel) Period Y-to-Y Q4 '12 Q4 '12 Q4 '12 Feb-13 Mar-13 Feb-13 Feb-13 Feb-13 1.7% 7.2% 1.8% 4.1% -5.5 2.0% 1.2% 2.0% Period Y-to-Y Q4 '12 Q4 '12 Q4 '12 Feb-13 Feb-13 Jan-13 Jan-13 Jan-13 0.4% 0.1% 1.1% -0.6% 2.7 -0.3% -0.7% -0.7% Period Y-to-Y Q4 '12 Feb-13 Feb-13 Feb-13 Feb-13 Feb-13 Feb-13 Feb-13 7.8% 21.2% 11.3% 13.3% 2.3 3.2% 6.0% 1.8% Japan GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted) Consumer Spending (Inflation-Adjusted) Retail Sales at Supermarkets and Department Stores 1 Consumer Confidence (Points) 1 CPI (Headline Index) CPI Food Index CPI (Core Index, excluding food and fuel) China GDP (Inflation-Adjusted), Annualized Growth Rate Residential & Business Investment (Inflation-Adjusted), NSA 1 Consumer Spending (Inflation-Adjusted), NSA 1,2 Retail Sales of all Consumer Goods, NSA 1 Consumer Confidence (Points) 1 CPI (Headline Index), NSA CPI Food Index, NSA CPI excluding food and fuel prices, NSA Growth Q-to-Q or Chg Chg Q-to-Q M-to-M Y-to-Y or M-to-M 0.4% -0.9% -2.7% 14.0% 1.0% 13.1% 1.8% 0.0% 0.3% 0.4% 0.1% -0.1% -2.3 -3.9 -1.2 0.7% 0.4% 0.7% 0.1% 0.1% 0.1% 0.2% 0.1% -0.1% Growth Q-to-Q or Chg Chg Q-to-Q M-to-M Y-to-Y or M-to-M 0.0% -0.1% 1.0% 0.0% -4.4% 1.3% 0.5% 0.0% 1.0% -0.1% -0.4% 0.3% 1.6 1.1 0.4 0.0% -0.2% -0.1% 1.4% -0.4% 1.0% 0.0% -0.1% 0.1% Growth Q-to-Q or Chg Chg Q-to-Q M-to-M Y-to-Y or M-to-M 8.2% 0.1% -0.4% 0.0% 0.0% 67.2% -2.2% -1.2% -2.8% -1.4% -0.8% -2.8% 1.0 -1.6 1.6 2.6% 1.2% 4.1% 3.0% 3.1% -1.6% -0.2% 0.3% -0.9% © Copyright 2013 Kantar Retail Source: EuroStat, Japan National Statistics Center, National Bureau of Statistics of China, U.S. Department of Commerce, Conference Board, and Kantar Retail 11 Frank Badillo Senior Economist Doug Hermanson Economist KRIQ T: +614.355.4019 F: +614.355.4059 T: +614.355.4044 F: +614.355.4059 245 First Street www.KantarRetailiq.com Floor 10 F +1 617 Insights 499 2723 Cambridge, MA website: Macroeconomics www.KantarRetailiq.com 02142 Topics & Trends > Macroeconomics © Copyright 2013 Kantar Retail