Barclays Global Economic Weekly

Economics Research
4 August 2017
Global Economics Weekly

Momentum drives GDP, not inflation
Euro area real GDP grew by 2.3% q/q saar in Q2. CPI inflation remains low due to Global Forecasts 2
a large output gap and underemployment in European labour markets.
Global Synthesis 3
In Japan, Q2 real GDP likely grew by 2.5% q/q saar, due to strong domestic
demand. Wage pressures remain contained, despite tight labour markets. Global Rates and Inflation 5
The US advanced estimate shows Q2 real GDP growth of 2.6% q/q saar, while United States
solid July employment supports our growth forecast of 2.5% q/q saar in Q3. Outlook 6
US GDP: Q2 GDP tracking at 2.4% 8
The PMI in China declined slightly, while remaining robust in other emerging Data Review & Preview 9
markets. PMIs indicate slower momentum in EM, relative to DM, economies.
Euro Area
Developed Economies Outlook 11
Data Review & Preview 13
United States: Wage growth is not as weak as it seems 6
The continued decline in the unemployment rate has not translated into strong wage United Kingdom
inflation, suggesting other factors may be behind weak pay growth. Outlook 15
Euro area: Well begun is only half won 11
Inflation remains low despite a broad-based economic recovery becoming increasingly Japan
evident in labour markets. Outlook 19
UK: Caught on the wrong footagain 15
July PMI largely came in unchanged as services strengthened and construction fell. Australia & New Zealand
Hiring intentions remained remarkably resilient despite uncertainties. Australia: Conflicting signals 22
Japan: Growth streak looks set to remain intact 19 Emerging Asia

We expect real GDP growth of 2.5% q/q saar in Q2, led by domestic demand. While net China Outlook 24
exports likely weighed on growth, this would be due more to strong imports. Asia Outlook 26
Emerging Markets
EEMENA
China: Tougher Trump wont derail bilateral relations 24 Outlook 30
President Trump is set to announce plans to target Chinas trade practices and Data Preview & Review 32
intellectual property rights, likely including an investigation of certain exports.
Latin America
Emerging Asia: A reluctant cut by the RBI 26 Outlook 33
The RBI cuts the repo rate, but stays non-committal on future action. MPC decisions Data Preview & Review 35
will remain data dependent, with an innate cautionary bias, in our view.
Country Snapshots 36
EEMENA: Recoveries in Russia and Turkey gain pace 30
The manufacturing PMI surveys for July were strong in both Russia and Turkey, Global Weekly Calendar 43
pointing to robust growth rates at the start of Q3.
Latin America: A polarization in fiscal budget executions 33

LatAm fiscal balances appear mixed, as countries at the regions poles (Mexico and
Argentina) are on much better footing than those in the middle (Brazil and Colombia).
PLEASE SEE ANALYST CERTIFICATIONS AND IMPORTANT DISCLOSURES STARTING AFTER PAGE 49
Barclays | Global Economics Weekly
GLOBAL FORECASTS
Real GDP Real GDP Consumer prices Consumer prices
% over previous period, saar % annual change % over a year ago % annual change
Weight# 1Q17 2Q17 3Q17 4Q17 1Q18 2016 2017 2018 1Q17 2Q17 3Q17 4Q17 2016 2017 2018
Global* 100.0 3.9 4.6 3.9 3.3 3.7 3.3 3.8 3.9 2.3 2.0 2.2 2.3 1.7 2.2 2.2
Advanced 43.2 1.4 2.4 2.1 1.8 1.8 1.6 1.9 2.0 2.0 1.7 1.6 1.6 0.7 1.7 1.7
Emerging* 56.8 5.7 6.2 5.3 4.4 5.1 4.6 5.2 5.2 2.7 2.6 3.2 3.3 3.3 2.9 3.0
BRIC 38.6 6.6 7.5 5.9 4.6 5.8 5.4 6.0 5.9 2.4 2.0 2.9 3.2 3.7 2.6 3.0
Americas* 27.2 1.7 2.4 2.3 2.2 2.0 0.9 1.9 2.3 2.9 2.3 2.2 2.2 2.1 2.4 2.4
United States 19.4 1.2 2.6 2.5 2.0 2.0 1.5 2.0 2.3 2.5 1.9 1.9 1.9 1.3 2.1 2.2
Latin America* 7.8 3.0 2.0 1.7 2.5 2.2 -0.7 1.6 2.2 4.9 4.4 3.8 4.0 6.6 4.2 3.8
Argentina 0.9 4.3 6.1 4.1 3.2 1.6 -2.2 3.1 2.5 32.0 24.4 23.2 22.3 40.3 25.1 17.2
Brazil 3.4 4.3 0.4 0.0 1.6 2.2 -3.6 0.5 1.5 4.9 3.6 2.6 3.0 8.7 3.5 4.2
Colombia 0.7 -1.2 2.4 3.8 5.5 0.4 2.0 1.9 3.0 5.1 4.4 3.8 3.9 7.5 4.3 3.1
Mexico 2.4 2.7 2.4 1.6 2.4 2.4 2.3 2.3 2.5 5.0 6.1 6.2 6.1 2.8 5.9 3.4
Peru 0.4 -0.5 1.7 5.9 3.3 5.2 3.9 2.2 4.0 3.4 3.2 3.0 2.5 3.6 3.0 2.3
Venezuela 0.5 26.6 -25.8 2.9 -14.0 34.8 -14.6 -11.1 3.2 432 461 563 657 307 564 592
Asia/Pacific 48.2 5.8 6.8 5.6 4.6 5.5 5.6 5.7 5.6 1.6 1.5 2.3 2.4 1.7 2.0 2.2
Japan 5.5 1.0 2.5 1.3 0.9 1.0 1.0 1.4 1.2 0.2 0.4 0.7 0.7 -0.3 0.5 0.5
Australia 1.2 1.1 1.6 3.4 3.0 3.2 2.5 2.0 3.1 2.1 1.9 2.0 2.0 1.3 2.0 2.2
Emerging Asia 41.5 6.5 7.5 6.2 5.1 6.1 6.2 6.3 6.2 1.9 1.8 2.7 2.9 2.3 2.3 2.7
China 22.2 7.3 6.9 6.5 6.3 6.1 6.7 6.8 6.4 1.4 1.4 2.9 2.9 2.0 2.2 2.3
Hong Kong 0.4 2.9 0.8 1.0 2.0 2.0 2.0 2.8 2.2 0.5 2.5 2.9 2.6 2.4 2.2 2.3
India 9.0 7.2 12.9 7.8 2.8 8.2 7.9 7.4 7.9 3.6 2.4 2.7 4.1 4.9 3.2 4.9
Indonesia 3.2 4.3 6.0 5.7 6.0 5.5 5.0 5.3 5.7 3.6 4.3 3.7 3.7 3.5 3.8 4.0
South Korea 2.0 4.3 2.4 3.2 2.1 2.6 2.8 2.9 2.7 2.1 1.9 2.0 1.8 1.0 2.0 1.9
Malaysia 0.9 7.5 4.0 3.0 5.0 7.0 4.2 5.2 5.0 4.3 4.0 3.6 2.6 2.1 3.6 2.5
Philippines 0.8 4.3 7.0 6.0 6.0 7.0 6.9 6.6 6.6 3.2 3.0 3.1 2.8 1.8 3.0 3.0
Singapore 0.5 -1.3 -0.4 3.0 6.2 -0.6 2.0 2.6 2.3 0.6 0.9 0.8 0.8 -0.5 0.8 0.6
Taiwan 1.2 3.8 0.6 2.2 3.0 2.4 1.5 2.3 2.2 0.8 0.6 2.0 1.7 1.4 1.3 2.0
Thailand 1.2 5.2 3.5 3.5 4.5 3.2 3.2 3.5 3.8 1.3 0.1 0.3 0.6 0.2 0.6 2.0
Europe and Africa 24.6 2.3 2.5 2.5 1.9 1.8 1.6 2.2 2.0 2.4 2.4 2.2 2.1 1.2 2.3 1.9
Euro area 14.2 2.0 2.3 2.0 1.8 1.7 1.7 2.1 1.9 1.8 1.5 1.3 1.2 0.2 1.4 1.2
Belgium 0.5 2.6 2.0 2.0 1.8 2.0 1.2 1.8 2.0 3.0 2.0 1.8 1.6 1.8 2.1 1.3
France 2.9 2.2 2.2 2.0 2.1 1.7 1.1 1.8 1.9 1.5 1.0 0.8 0.9 0.3 1.1 1.0
Germany 4.1 2.4 2.4 2.1 1.6 1.7 1.8 1.9 1.8 1.9 1.6 1.2 0.9 0.4 1.4 1.2
Greece 0.3 1.8 0.5 0.8 1.2 1.5 0.0 0.3 1.4 1.5 1.3 1.0 0.9 0.0 1.2 0.8
Ireland 0.3 -10.1 3.5 5.1 6.0 1.8 5.2 2.9 3.6 0.4 0.0 -0.4 -0.2 -0.2 -0.1 -0.3
Italy 2.3 1.8 1.1 0.7 0.9 0.9 1.0 1.2 0.9 1.3 1.6 1.3 1.4 -0.1 1.4 1.2
Netherlands 0.9 1.8 2.5 1.7 1.6 2.2 2.1 2.3 2.1 1.3 1.0 1.2 1.2 0.1 1.2 1.2
Portugal 0.3 4.2 2.4 2.1 1.8 2.1 1.4 2.9 2.0 1.4 1.7 1.1 1.3 0.6 1.4 1.2
Spain 1.7 3.3 3.8 3.4 2.8 2.5 3.2 3.2 2.7 2.7 2.1 1.7 1.4 -0.3 2.0 1.5
United Kingdom 2.9 0.9 1.2 1.0 0.8 1.5 1.8 1.5 1.3 2.1 2.7 2.6 2.6 0.7 2.5 2.0
EM Europe & Africa 7.5 3.5 3.3 3.9 2.5 2.1 1.2 2.9 2.5 5.2 5.4 5.1 5.1 5.3 5.2 4.3
Poland 1.1 4.4 1.0 3.7 5.7 3.6 2.7 3.9 3.5 1.5 2.1 2.2 2.2 -0.7 2.0 1.8
Russia 4.0 2.6 3.6 3.2 1.2 0.8 -0.2 1.8 1.5 4.6 4.2 4.3 4.2 7.1 4.4 4.2
Turkey 2.1 4.9 4.0 5.2 3.2 3.6 2.9 4.2 3.8 10.2 11.5 10.3 10.2 7.8 10.6 7.6
Israel 0.3 1.4 2.3 3.3 3.9 3.4 4.0 3.3 3.4 0.5 0.4 0.1 0.4 -0.5 0.4 0.8
Note: Arrows appear next to numbers if current forecasts differ from that of the previous week by 0.5pp or more for quarterly annualized GDP, by 0.2pp or more for
annual GDP and by 0.2pp or more for Inflation. Weights used for real GDP are based on IMF PPP-based GDP (5yr centred moving averages). Weights used for
consumer prices are based on IMF nominal GDP (5yr centred moving averages). # IMF PPP-based GDP weights for 2016. * Aggregates for CPI exclude Argentina
and Venezuela inflation rates & aggregates for Real GDP exclude Venezuela Real GDP. Source: Barclays Research
4 August 2017 2
GLOBAL SYNTHESIS
Momentum drives GDP, not inflation

Tomasz Wieladek Euro area momentum is strong, but CPI inflation is subdued due to a large output gap
+44 (0) 20 3555 2336 and underemployment. In Japan and the US, we expect domestic demand will fuel strong
tomasz.wieladek@barclays.com Q2 real GDP growth. But domestic wage and CPI inflation pressures remain contained.
Barclays, UK The latest PMI data show a moderation in momentum in EM, relative to DM, economies.
Real GDP momentum in the euro area, Japan and the US remains strong
EA Q2 real GDP grew 2.3% q/q Euro area Q2 real GDP grew by 0.6% q/q. This was a slight acceleration from the previous,
saar due to domestic demand now revised down value of 0.5%. So far at the national level, just France, Spain and Austria
GDP have been released, posting strong prints of 0.55% q/q, 0.9% q/q and 0.6% q/q,
respectively. While growth will likely remain strong by historical standards, we expect a
slight moderation in H2 2017, as forward-looking indicators such as PMIs and German
quarterly factory orders indicate a slight moderation in H2 GDP growth.
US advanced estimate shows In the US, the advanced estimate of real GDP growth for Q2 was 2.6% q/q saar. But given
GDP growth of 2.6% q/q saar weaker than expected construction data and new home sales for June, together with
downward revisions to the previous months data, we think that the final Q2 GDP figure will
be revised down a little. Our tracker points to 2.4% q/q saar. A narrower than expected
trade balance deficit reduced our estimated drag from trade, likely due to a weaker US dollar
compared with the beginning of the year. Solid July employment supports our growth
forecast of 2.5% q/q saar in Q3 and our call for a 25bp rate hike in December.
In Japan, we expect Q2 real In Japan, we expect Q2 real GDP to grow by 2.5% q/q saar due to strong domestic demand.
GDP growth of 2.5% q/q saar Consumption will likely rise by 2.0 q/q saar, based on recent strong outturns of the monthly
composite index of consumption. In terms of investment, the rapid growth of 4.8% q/q in
shipments of capital goods, a coincident indicator on the supply side, is consistent with
investment growth of 5.2% q/q. Unusually for Japan, we expect net exports to have
contributed negatively to growth, as domestic demand boosts imports growth.
But inflation pressures are likely to remain weak

EA CPI inflation remains low Despite stronger momentum in growth, core CPI inflation remains low. Unlike the US, the
euro area experienced a second recession following the ECBs policy tightening in 2011 and
FIGURE 1 FIGURE 2
Q2 real GDP growth picks up in Japan, the EA and the US The finance neutral output gap explains low EA inflation
% q/q saar % q/q %

10 5 0.9
8 4 0.8
6 0.7
3
4 0.6
2
2 0.5
1
0 0.4
0
-2 0.3
-4 -1 0.2
-6 -2 0.1
-8 -3 0
Q1 11 Q3 12 Q1 14 Q3 15 Q1 17 Q1 98 Q2 02 Q3 06 Q4 10 Q1 15
US real GDP growth Japan real GDP growth Euro Area finance neutral output gap (LHS)
EA real GDP growth HICP Inflation excluding energy and unprocessed food
Source: Haver Analytics Source: BIS, ECB, Barclays Research
4 August 2017 3
sovereign debt crisis in 2012. We therefore investigate to what extent statistical output gap
measures can explain the recent evolution of euro area core HICP inflation. We explore four
different techniques: The popular Hodrick-Prescott filter, the Beveridge-Nelson filter, the
which can be explained by a ECBs Kalman filter approach and the BISs finance neutral output gap. Only the latter three
finance neutral output gap are robust to real-time data and end-of-sample issues. However, even among these three
methods, only the BISs finance neutral output gap, which accounts for the financial cycle
as well, can explain a statistically large share of euro area core HICP inflation (Figure 2). This
suggests that, in the euro area, a large output gap is likely the reason behind low inflation.
As documented in the Euro Area Outlook, we view this is as a reflection of substantial spare
reflecting underemployment
capacity in European labour markets, with the unemployment rate at 9.1% and
in European labour markets
underemployment measures of about 18%.
Shunto negotiation wage In Japan, despite labour market tightening, CPI inflation remains low due to moderate wage
outcomes imply a gradual rise growth. This year, the final result of the Shunto wage negotiation implied wage growth of
in Japanese CPI inflation 1.98% percent, slightly below the previous years 2.00%. Wage increases are a function of
the previous years CPI, the labour market situation and corporate profits. But even with
rising CPI, and robust corporate profits, wage growth in next years Shunto negotiation is
likely to only be 2.3%. We thus expect CPI inflation to rise, but at a slow pace (Figure 3).
EM PMIs indicate a more moderate recovery than in developed markets

Chinas PMI slowed and we China's NBS manufacturing PMI came in slightly below expectations, easing by 0.3pp to 51.4
revised down our GDP forecast in July from the strong print of 51.7 in June. The moderation was driven by softer readings
for the production and new export orders components. It is worth noting that input prices
rebounded sharply, reaching a four-month high, which suggests that PPI inflation could
rebound in July. We think the softer PMI suggests that GDP growth is likely to slow after the
unexpectedly strong print for Q2. On a q/q saar basis, we forecast GDP growth will
moderate to 6.5% in Q3 from 6.9% in Q2 and decelerate to 6.3% in Q4.
Asian PMIs remain robust Manufacturing PMIs across North Asia remain robust, yet below the strong levels observed
in advanced economies (Figure 4). While the overall pick-up in export growth that we saw in
Q1 has moderated, we believe that the underlying momentum remains strong.
and the surveys were strong In Russia, Julys manufacturing PMI survey was particularly strong, rising to 52.7 from 50.3
in Russia and Turkey in July too in June. In Turkey, the PMI edged down a little, but it remained at a high level of 53.6. In
both cases the surveys point to robust growth in industry at the start of Q3. Only in CEE did
the manufacturing PMIs drop across the board.
FIGURE 3 FIGURE 4
Japanese CPI inflation is forecast to rise gradually PMIs imply weaker momentum in emerging markets
2.0 60
% y/y Barclays
1.5 58
forecasts
1.0 56
0.5 54
0.0 52
-0.5 50
-1.0 48
-1.5 46
-2.0 44
11 12 13 14 15 16 17 18 19
BoJ core CPI (ex perishables and energy)
42
Core CPI (ex perishables) Jan-10 Jul-11 Jan-13 Jul-14 Jan-16 Jul-17
Core-core CPI (ex non-alcoholic food and energy) Emerging Market PMI Developed Market PMI
Source: Haver Analytics, Barclays Research Source: IHS Markit
4 August 2017 4
GLOBAL RATES AND INFLATION

Central Bank rates
Official rate Start of cycle Next move Forecasts
% per annum (unless stated) Current date level Last move expected Q3 17 Q4 17 Q1 18 Q2 18
Advanced
Fed funds rate 1.00-1.25 Tightening:16 Dec 15 0-0.25 Jun 17 (+25) Q4 17 (+25) 1.00-1.25 1.25-1.50 1.50-1.75 1.75-2.00
BoJ rate of policy-rate balances -0.10 Easing: 30 Oct 08 0.50 Jan 16 (-20-0) Q4 18 -0.10 -0.10 -0.10 -0.10
BoJ target of 10y JCB yields 0.00 Easing: 21 Sep 16 - Sep 16 (0) Q3 18 (+10) 0.00 0.00 0.00 0.00
ECB main refinancing rate 0.00 Easing: 3 Nov 11 1.50 Mar 16 (-5) - 0.00 0.00 0.00 0.00
ECB deposit facility rate -0.40 Easing: 3 Nov 11 0.75 Mar 16 (-10) Q2 18 (+10) -0.40 -0.40 -0.40 -0.30
BOE bank rate 0.25 Easing: 6 Dec 07 5.75 Aug 16 (-25) - 0.25 0.25 0.25 0.25
RBA cash rate 1.50 Easing: 3 Feb 15 2.50 Aug 16 (-25) Q2 18 (+25) 1.50 1.50 1.50 1.75
RBNZ cash rate 1.75 Easing: 10 Jun 15 3.50 Nov 16 (-25) Beyond Q1 18 1.75 1.75 1.75 1.75
Emerging
China: 1y bench. lending rate 4.35 Easing: 21 Nov 14 6.00 Oct 15 (-25) Beyond Q2 18 4.35 4.35 4.35 4.35
India: Repo rate 6.00 Easing: 15 Jan 15 8.00 Aug 17 (-25) - 6.00 6.00 6.00 6.00
Indonesia: 7 day reverse repo 4.75 Easing: 17 Feb 15 - Oct 16 (-25) Q3 18 (+25) 4.75 4.75 4.75 4.75
Korea: Base rate 1.25 Easing: 12 Jul 12 3.25 Jun 16 (-25) Q1 18 (+25) 1.25 1.25 1.50 1.50
Hungary: 2w deposit rate 0.90 Easing: 22 Mar 16 1.35 May 16 (-15) Beyond Q2 18 0.90 0.90 0.90 0.90
Poland: 2w repo rate 1.50 Easing: 4 Mar 15 2.00 Feb 15 (-50) Beyond Q2 18 1.50 1.50 1.50 1.50
Russia: One-week repo rate 9.00 Easing: 30 Jan 15 17.00 Jun 17 (-25) Q3 17 (-25) 8.75 8.25 7.50 7.00
Turkey: Late Liquidity Window O/N Le 12.25 Tightening: 24 Jan 17 10.00 April 17 (+50) - 12.25 12.25 12.25 12.25
Turkey: O/N lending rate 9.25 Tightening: 24 Nov 16 8.25 Jan 17 (+75) - 9.25 9.25 9.25 9.25
Turkey: One-week repo rate 8.00 Tightening: 24 Nov 16 7.50 Nov 16 (+50) - 8.00 8.00 8.00 8.00
Brazil: SELIC rate 9.25 Easing: 19 Oct 16 14.25 Jul 17 (-100) Sep 17 (-75) 8.50 8.25 8.25 8.25
Mexico: Overnight rate 7.00 Tightening: 17 Dec 15 3.00 June 17 (+25) Beyond Q2 18 7.00 7.00 7.00 7.00
Note: Rates as of COB 03 August 2017. Source: Barclays Research
Key CPI projections

US UK Euro area France Japan
CPI RPI CPI HICPx* HICP CPI ex tobacco* CPI ex perishables
nsa y/y nsa y/y y/y nsa y/y y/y nsa y/y nsa y/y
Jan-16 236.9 1.4 258.8 1.3 0.3 98.67 0.3 0.3 99.07 0.2 99.5 -0.1
Feb-16 237.1 1.0 260.0 1.3 0.3 98.83 -0.2 -0.2 99.32 -0.2 99.4 0.0
Mar-16 238.1 0.9 261.1 1.6 0.5 100.08 -0.1 0.0 100.02 -0.1 99.5 -0.3
Apr-16 239.3 1.1 261.4 1.3 0.3 100.11 -0.3 -0.2 100.09 -0.2 99.8 -0.4
May-16 240.2 1.0 262.1 1.4 0.3 100.47 -0.2 -0.1 100.51 0.0 99.9 -0.4
Jun-16 241.0 1.0 263.1 1.6 0.5 100.63 0.0 0.1 100.64 0.2 99.8 -0.4
Jul-16 240.6 0.8 263.4 1.9 0.6 100.06 0.1 0.2 100.26 0.2 99.6 -0.5
Aug-16 240.8 1.1 264.4 1.8 0.6 100.14 0.2 0.2 100.59 0.2 99.6 -0.5
Sep-16 241.4 1.5 264.9 2.0 1.0 100.54 0.4 0.4 100.35 0.4 99.6 -0.5
Oct-16 241.7 1.6 264.8 2.0 0.9 100.80 0.5 0.5 100.37 0.4 99.8 -0.4
Nov-16 241.4 1.7 265.5 2.2 1.2 100.70 0.5 0.6 100.36 0.6 99.8 -0.4
Dec-16 241.4 2.1 267.1 2.5 1.6 101.26 1.1 1.1 100.66 0.6 99.8 -0.2
Jan-17 242.8 2.5 265.5 2.6 1.8 100.39 1.7 1.8 100.41 1.4 99.6 0.1
Feb-17 243.6 2.7 268.4 3.2 2.3 100.77 2.0 2.0 100.52 1.2 99.6 0.2
Mar-17 243.8 2.4 269.3 3.1 2.3 101.59 1.5 1.5 101.14 1.1 99.8 0.2
Apr-17 244.5 2.2 270.6 3.5 2.7 101.96 1.8 1.9 101.23 1.1 100.1 0.3
May-17 244.7 1.9 271.7 3.7 2.9 101.84 1.4 1.4 101.28 0.8 100.3 0.4
Jun-17 245.0 1.6 272.3 3.5 2.6 101.86 1.2 1.3 101.30 0.7 100.2 0.4
Jul-17 244.9 1.8 272.4 3.4 2.5 101.31 1.2 1.3 100.99 0.7 100.1 0.5
Aug-17 245.5 1.9 273.9 3.6 2.7 101.55 1.4 1.3 101.48 0.9 100.3 0.7
Sep-17 246.2 2.0 274.0 3.4 2.7 102.05 1.5 1.4 101.44 1.1 100.4 0.8
Oct-17 246.2 1.9 274.0 3.5 2.7 102.17 1.4 1.3 101.43 1.1 100.5 0.7
Nov-17 246.1 2.0 274.2 3.3 2.6 102.06 1.4 1.3 101.35 1.0 100.5 0.7
Dec-17 246.0 1.9 275.6 3.2 2.4 102.40 1.1 1.0 101.60 0.9 100.4 0.6
2015 0.1 1.0 0.0 0.0 0.0 0.0 0.5
2016 1.3 1.7 0.7 0.2 0.2 0.2 -0.3
2017 2.1 3.3 2.5 1.5 1.4 1.0 0.5
2018 2.2 2.9 2.0 1.3 1.2 1.2 0.5
Note: Shaded values indicate actual data. R indicates revision to front-month forecast. Note: * Based on tracking profile; For more information please refer to Euro
Area Inflation - Introducing new tracking profiles for Euro HICPx and FRCPIx indices (7 March 2017) Source: Barclays Research
4 August 2017 5
OUTLOOK: UNITED STATES
Wage growth is not as weak as it seems

Blerina Urui The continued decline in the unemployment rate has not translated into strong wage
+1 202 452 4774 inflation, suggesting other factors may be behind weak pay growth.
blerina.uruci@barclays.com
BCI, US
A simple wage model of inflation and productivity growth explains most of the wage
puzzle, although recently realized wages are stronger than fundamentals suggest.
The rise in the labor share since 2015 and the implied boost to worker bargaining
power could explain why real wages have risen more than productivity.
The fall in the UR has not Wage inflation has been disappointing, especially considering the sharp decline in the
boosted wage growth as much unemployment rate (UR) in recent years (Figure 1) and economists expectations that slack in
as expected labor markets is fast diminishing. One reason for the recent underperformance of wage growth
could be that there is more slack in the labor market than the decline in the UR alone would
suggest. We see two reasons why: either the equilibrium UR is lower than we think, or some
portion of the working age population, which is out of the labor force for reasons other than
demographics, is more attached to the labor market than appreciated, so it could re-enter the
labor force more easily. There has been some research from the Congressional Budget Office1
and the Federal Reserve Bank of Atlanta2 recently providing support for the view that there is
more slack in the labor market. We also believe nominal wage rigidities may have played a role
in the evolution of wages in this recovery. During the downturns, wages did not decline as
much as the surge in the UR would imply; as a result, the pickup in wage growth during the
recovery could be more muted to account for that lack of correction during the recession.
Low productivity growth and Another explanation for the recent weakness in wage growth could be the trend decline in
disappointing inflation explain productivity growth and the persistently low inflation prints. To explore the validity of this
some of the weakness in argument, we look at a simple economic relationship, namely, that nominal wage growth is
wages determined by the rate of inflation and the growth rate of productivity. We find that once
low inflation and productivity growth are taken into account, wage growth does not look so
puzzlingly low. On the contrary, our simple model suggests that between 2015 and early
FIGURE 1 FIGURE 2
Wage growth remains slow, given the large decline in the UR Recent wage growth stronger than productivity and inflation
imply
% y/y % % y/y, 4 qtr average

5.0 2 8
4.5 3
7
4.0 4
6
5
3.5
6 5
3.0
7 4
2.5
8 3
2.0 9 2
1.5 10
1
1.0 11
0
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
90 93 96 99 02 05 08 11 14 17
AHE - Production and non-supervisory workers (lhs)
Unemployment rate (rhs, 6m lag, inverted) Actual wage growth Fitted
Source: BLS, Haver Analytics, Barclays Research Source: BLS, Haver Analytics, Barclays Research
1 The Labor Market in 2016 (Joshua Montes), February 2017.

2 Behind the Increase in Prime-Age Labor Force Participation (Whitney Mancuso, John Robertson), July 2017.
4 August 2017 6
2017, wage growth has been even stronger than the model estimates and the fundamental
indicators would warrant (Figure 2), although the gap between realized and estimated wage
growth has closed somewhat in the past two quarters as the rates of inflation and
productivity growth have improved.
Realized wage growth appears One reason for the large gap between predicted and realized wage growth is that our simple
stronger that our simple model model does not control for worker bargaining power. A widely used economics metric for
suggests this is the labor share. This trended lower for much of the past two and a half decades
(Figure 3), but this steady decline stabilized in 2012 and actually reversed from late 2014,
the same period in which the gap between realized and estimated wage growth emerges in
our mode. A rise in the labor share is consistent with a larger portion of the returns from
output being allocated to the workforce rather than capital and suggests that workers are
able to extract more profits for themselves and that the capital-for-labor substitution
pattern prior to 2015 has been reversed (at least for now). The substitution of capital for
labor varies during the business cycle and tends to be more intense around recessions.
but controlling for the recent For instance, earlier in this recession, hours worked (and total employment) dropped much
rise in the labor share and faster than output, and the subsequent recovery in output was much faster than the recovery
labor bargaining power in jobs, leading to strong productivity growth. However, since about 2011, output and
employment have been rising at a similar pace, leading to the sluggish productivity
performance. This pattern suggests to us that the replacement of workers with automation or
outsourcing may have come to a pinnacle (at least temporarily) and current job growth is
focused in areas where further capital substitution of labor is not feasible. To control for this
pattern, we introduce the labor share estimate to our model (Figure 4). Once we adjust for the
interaction between labor bargaining power, labor force and their effect on productivity, wage
growth is more closely aligned with the fundamental strength of the economy.
wage growth may not be as Our analysis suggests the weakness in wage growth can be explained to some extent by the
weak as it seems sluggish trend productivity growth, the disappointing performance of inflation and the
interaction between capital and labor. An increase in capital intensity early in the recovery
boosted output and productivity growth, but exacerbated the decline in the labor share.
However, in the past couple of years, it seems the low-hanging fruit has been picked and firms
are seeing less scope for substitution of capital for labor. As a result, the labor share and wage
growth have picked up stronger than productivity and inflation trends alone would justify. Of
course, the big unknown is how the labor force will be affected by the automation of low skilled
services jobs (eg, self-driving cars, self-checkout). If the early years of the recovery are any
indication, the labor share could suffer again and wage growth remain modest.
FIGURE 3 FIGURE 4
A recent reversal of the downside trend in the labor share Rising labor share helps close actual versus fitted wage gap
% % y/y, 4 qtr average

66 8
7
64
6
62 5
4
60 3
2
58
1
56 0
67 71 75 79 83 87 91 95 99 03 07 11 15 90 93 96 99 02 05 08 11 14 17
Labor share (6 qtr average) Actual wage growth Fitted
Source: BLS, Haver Analytics, Barclays Research Source: BLS, Haver Analytics, Barclays Research
4 August 2017 7
GDP TRACKING: UNITED STATES
US GDP: Q2 GDP tracking at 2.4%

Blerina Urui Our Q2 GDP tracking estimate ended the week at 2.4% q/q saar, two-tenths lower than
+1 202 452 4774 the advance Q2 GDP estimate. Weak construction spending in June drove our tracker
blerina.uruci@barclays.com lower, while factory orders data left the tracker largely unchanged.
BCI, US
June construction spending surprised sharply to the downside, driven by a large decline in
public construction. This implies lower state and local government spending than the
assumptions incorporated in the advance estimate of Q2 GDP released last week. As a result,
we revised our Q2 GDP tracking estimate lower by two-tenths, to 2.4%. June factory orders
rose strongly, in line with our expectations and consistent with the BEAs assumptions
included in the advance GDP release. After rounding, our Q2 tracking estimate was left
unchanged at 2.4% q/q saar. Similarly, the June trade balance narrowed broadly as expected
and left the Q2 tracker unchanged.
FIGURE 1
Effect of incoming data on current-quarter GDP tracking
Release date Indicator Period Q2 GDP tracking
24-Jul Existing home sales Jun 2.5
26-Jul New home sales Jun 2.4
27-Jul Advance goods trade balance Jun 2.7
28-Jul Q2 advance GDP estimate Q2 2.6
1-Aug Construction spending Jun 2.4
3-Aug Factory orders Jun 2.4
4-Aug Trade balance Jun 2.4

Note: Our GDP tracking estimate is distinct from our official published GDP forecast. It reflects the mechanical aggregation of monthly activity data that feed directly
into the BEAs GDP calculation. Our official GDP tracking estimates stands at 2.5%, based on our belief that the economy will rebound in Q2 but also on our
methodology of not actively forecasting inventories. A rebound in inventories could well push our GDP tracker above our official forecast. Source: Barclays Research
FIGURE 2 FIGURE 3
June construction spending dragged lower by public sector Q2 GDP tracking estimate at 2.4% q/q saar
%m/m Construction spending %m/m q/q % chg, saar

3.0
3.0 12.0
2.0 8.0
2.5
1.0 4.0
0.0 0.0
2.0
-1.0 -4.0
-2.0 -8.0
1.5
Jul-15 Jan-16 Jul-16 Jan-17 Jul-17
08-May 24-May 09-Jun 25-Jun 11-Jul 27-Jul
Total Private Public, RHS Q2 Advance estimate
Source: Census Bureau, Haver Analytics, Barclays Research Source: BEA, Haver Analytics, Barclays Research
4 August 2017 8
DATA REVIEW & PREVIEW: UNITED STATES

Michael Gapen, Blerina Urui
Review of last weeks data releases

Main indicators Period Previous Barclays Actual Comments
Chicago PMI moderated in July, in line with
Chicago PMI index Jul 65.7 60.0 58.9
expectations
Pending home sales rebounded more than
Pending home sales, % m/m Jun -0.7R 0.8 1.5
expected
July auto sales were a touch lower than
Vehicle sales, mn saar Jul 16.59R 17.10 16.69 expected, but posted a modest improvement
on the month
Personal income growth disappointed in June,
Personal income, % m/m Jun 0.3R 0.4 0.0 but the weakness was driven by largely volatile
components
Personal spending growth was broadly in line
Personal spending, % m/m Jun 0.2R 0.2 0.1
with our expectation
PCE price index, % m/m (y/y) Jun 0.0 (1.5)R 0.0(1.3) 0.0(1.4) Headline and core PCE were in line with our
Core PCE price index, % m/m (y/y) Jun 0.1 (1.5R) 0.1(1.4) 0.1(1.5) expectations
Manufacturing sentiment moderated in July,

ISM manufacturing index Jul 57.8 56.5 56.3
but remains elevated
Construction spending surprised sharply to the
Construction spending, % m/m Jun 0.3R 0.6 -1.3 downside, driven by an unexpected, large drop
in public construction spending
The ISM non-manufacturing index moderated
ISM non-manufacturing index Jul 57.4 56.5 53.9
more than expected
Factory orders staged a strong rebound, in line
Factory orders, %m/m Jun -0.3R 3.5 3.0
with expectations
Durable goods orders-f, % m/m Jun 6.5P - 6.4 June durable goods orders were revised a
Durable goods ex transportation-f, % m/m Jun 0.2P - 0.1 touch lower in the final print amid broad-based
revisions across subcomponents
Core capital goods orders-f, % m/m Jun -0.1P - 0.0
Nonfarm payrolls increased more than
Nonfarm payrolls, chg, thous Jul 231R 175 209 expected in July, driven by strong private sector
employment
Private sector payrolls rose solidly amid higher-
Private payrolls, chg, thous Jul 194R 170 205 than-expected manufacturing sector
employment and strong services sector payrolls
The unemployment rate edged lower by one-
Unemployment rate, % Jul 4.4 4.3 4.3
tenth
Average hourly earnings rose in line with
Average hourly earnings, % m/m (y/y) Jul 0.2 (2.5) 0.3(2.4) 0.3(2.5)
expectations
Average weekly hours Jul 34.5 34.5 34.5 Average weekly hours held steady
Trade deficit narrowed a touch more than
Trade balance, $ bn Jun -46.5 -44.0 -43.6
expected
Preview of the upcoming week

Monday 07 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus
9:45 St. Louis Fed President Bullard (FOMC non-voter) speaks on U.S. Economy in Nashville, TN
13:25 Minneapolis Fed President Kashkari (FOMC voter) speaks in Bloomington, MN
St. Louis Fed President Bullard (FOMC non-voter) speaks: Bullard is likely to stress that further normalization will prohibit a
return of inflation to 2.0%, in line with his previous views that the economy remains in a low-growth, low-interest rate
equilibrium. He is unlikely to support further rate hikes and sees the current level of the federal funds rate as appropriate.
4 August 2017 9
Minneapolis Fed President Kashkari (FOMC voter) speaks: Kashkari is likely to signal his support for balance sheet runoff, which
is likely to be announced in September in our baseline outlook, but we see him as arguing against further rate hikes until there is
more evidence inflation is firming. Kashkari was a dissenter against previous rate increases.
Tuesday 08 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

6:00 NFIB small business optimism Jul 104.5 104.5 103.6 - 103.8
10:00 JOLTS, thous job openings Jun 5785 5967 5666 - -
Wednesday 09 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

8:30 Non-farm productivity-p, % q/q Q2 3.5 1.8 0.0 1.5 0.8
8:30 Unit labor cost-p, % q/q Q2 2.0 1.3 2.2 1.5 1.0
10:00 Wholesale inventories-f, % m/m Jun -0.5 0.4 0.6P 0.6 0.6
Productivity/ULC: We forecast Q1 productivity to have increased 1.5% q/q saar and 1.6% y/y (measured as nonfarm business
output per hour). We expect unit labor costs to have risen by 1.5% q/q saar and -0.1% y/y (a measure of how much faster
compensation is growing relative to output).
Thursday 10 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

8:30 Initial jobless claims, thous (4wma) 05 Aug 234 (244) 245 (244) 240(242) 240(240) -
8:30 PPI, % m/m (y/y) Jul 0.5 (2.5) 0.0 (2.4) 0.1 (2.0) 0.1(2.2) 0.1(2.3)
8:30 Core PPI, % m/m (y/y) Jul 0.4 (1.9) 0.3 (2.1) 0.1 (1.9) 0.2(2.1) 0.2(2.1)
10:00 Fed Vice Chairman Dudley (FOMC voter) speaks in New York
14:00 Treasury budget balance, $ bn Jul 50.5 6.2 -90.2 - -
PPI: We expect final demand PPI to have risen by 0.1% m/m and 2.2% y/y in July. We forecast core PPI to have increased by
0.2% m/m and 2.1% y/y. Final demand PPI has risen gradually over the past year as the drag from the energy component has
diminished, and core PPI has also picked up. Moreover, the PPI inflation measure has not been as soft as CPI in recent months.
We expect pipeline price pressures to remain firm, reflecting the fact that the headwind from imported inflation and global
commodity prices has abated in recent months.
Fed Vice Chairman Dudley (FOMC voter) speaks: We believe Dudley will argue for balance sheet normalization, which we see as
being announced in September, as well as further increases in the federal funds rate. Although inflation has been below
expectations, we see Dudley as pointing to still-accommodative financial market conditions as justifying further front-end rate hikes.
Friday 11 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

8:30 CPI, % m/m (y/y) Jul 0.2 (2.2) -0.1 (1.9) 0.0 (1.6) 0.2(1.8) 0.2(1.8)
8:30 Core CPI, % m/m (y/y) Jul 0.1 (1.9) 0.1 (1.7) 0.1 (1.7) 0.2(1.7) 0.2(1.7)
8:30 CPI, NSA index Jul 244.524 244.733 244.955 244.900 244.918
9:40 Dallas Fed President Kaplan (FOMC voter) speaks in Arlington, TX
11:30 Minneapolis Fed President Kashkari (FOMC voter) speaks to Independent Community Bankers, MN
CPI: We expect June headline CPI to have increased 0.2% m/m (a soft two-tenths increase) and 1.8% y/y. We forecast core CPI
to have increased 0.2% m/m (a soft two-tenths increase) and 1.7% y/y. While we see a number of transitory factors pushing CPI
lower recently, such as wireless communication prices and prescription drug prices, we are also concerned by the continued
decline in core goods prices, particularly for used vehicles and apparel. In addition, we see two-sided risks related to shelter
inflation for the first time in the recovery, as the steady upward trend in this series seems to have come to a halt. Overall, we
expect some of the headwinds for inflation to abate by early to mid-2018 and, as a result, forecast that CPI will gradually pick up.
For the CPI NSA index, we expect a reading of 244.9.
Dallas Fed President Kaplan (FOMC voter) speaks: In recent remarks, Kaplan supported balance sheet normalization as early as
September, but also desired more evidence that inflation was rising to 2.0% before taking further steps to raise the policy rate. We
expect a repeat of these remarks when he speaks in Arlington, Texas.
Minneapolis Fed President Kashkari (FOMC voter) speaks: Kashkari is likely to signal his support for balance sheet runoff, which
is likely to be announced in September in our baseline outlook, but we see him as arguing against further rate hikes until there is
more evidence inflation is firming. Kashkari was a dissenter against previous rate increases.
Source: BEA, BLS, Census Bureau, Federal Reserve, University of Michigan, Haver Analytics, Barclays Research
4 August 2017 10
OUTLOOK: EURO AREA
Well begun is only half won

Fabio Fois Inflation remains low despite a broad-based economic recovery becoming
+39 02 6372 2637 increasingly evident in labour markets.
fabio.fois@barclays.com
We expect inflation to continue to lag; a greater degree of labour market slack than
Barclays, UK
suggested by the unemployment rate will likely weigh on wage developments.
Recent currency appreciation adds further short and medium-term downside risks
to our projected profile for tradable goods prices.
The EA economy is on the right The euro area (EA) economy came out of H1 17 on strong footing, but soft data suggest it is
track, yet not strong enough to unlikely to strengthen further. We expect the job-rich recovery will remain on track in the
signal an end to persistent second half of the year, perhaps decelerating slightly. Meanwhile, inflation remains low and
lowflation we expect it to lag throughout the forecast horizon, dragged down by still large labour
market slack and recent currency appreciation. Still, we believe that returning to levels close
to the ECB mandate is a matter of when more than if; hence, we continue to expect the ECB
to go ahead with policy normalisation, albeit very gradually.
The EA economic recovery Growth increased by 0.6% q/q in Q2, accelerating slightly from the downwardly revised Q1
improved in Q2 print (-0.1pp to 0.5% q/q), in line with expectations (Figure 1). So far at the national level,
just France, Spain and Austria GDP have been released, posting strong prints of 0.55% q/q,
0.9% q/q and 0.6% q/q, respectively. German and Italian readings are due on 15 and 16
August, respectively. We expect German growth to remain solid at 0.6% q/q and Italian
activity to slow a little to 0.3% q/q, after temporary factors boosted growth to +0.44% q/q
in Q1; indeed, we do not rule out that the strong print could be revised down somewhat.
but soft data point to slight Composite PMI data for July declined slightly driven by the manufacturing sector, while
deceleration in H2 services sentiment remained stable. Both sectors recorded slightly weaker forward-looking
components, suggesting that confidence is likely to moderate further from the multi-year
high levels recorded earlier in the year. A broadly similar picture was painted by the July
European Commission survey, which showed some consolidation in manufacturing
sentiment, while services confidence improved a little. Consistent with the data, we expect
EA economic growth to slow to 0.5% q/q in both Q3 17 and Q4 17. On an annual basis, we
forecast economic activity to accelerate to 2.1% y/y in 2017 from 1.7% in 2016.
FIGURE 1 FIGURE 2
A solid and broad-based economic recovery set to stabilise Unemployment rate on a steady decline despite rising LFP
pp GFCF 13 73
1.0 Stockbuilding
Forecast
Net trade
0.8 12
Final consumption
GDP (% q/q) 72
0.5 11
0.3 10 71
0.0
9
-0.3 70
8
-0.5
7 69
-0.8
05 06 07 08 09 10 11 12 13 14 15 16 17
-1.0 Unemployment rate, % (LHS)
10 11 12 13 14 15 16 17 18 19 Labour Force Participation rate, % (RHS)
Source: Haver Analytics, Barclays Research Source: Haver Analytics, Barclays Research
4 August 2017 11
Labour market indicators Strong activity data continue to be accompanied by strengthening labour market
remain strong conditions. The sharp decline in the unemployment rate that started in April 2013
continued, reaching 9.1% in June which was the lowest level since March 2009. The
recovery appears to be solid: not only is it synchronised and widespread across the regions,
but it is also unfolding alongside a steadily rising labour force participation (LFP) rate, which
reached 72.9% in Q2 17 from 69.7% in Q1 05 (Figure 2).
but not all that glitters is Despite solid activity and labour market data, we believe that it is still too early to call for a
gold sustained acceleration in underlying inflation. In July, headline (inflation) was unchanged at
1.3% while core edged up 0.1pp to 1.2%. The improvement in core was driven by fairly
resilient performance of services inflation and improving non-energy industrial (NEIG)
prices, but in both cases we do not expect it to represent a gear shift.
We do not expect wages to We interpret the rise in services inflation as mainly driven by seasonal factors which should
accelerate in the near term as correct in September. Hence, we keep our cautious stance that services inflation remains on
labour market slack remains track but is unlikely to accelerate decisively unless labour markets tighten further to the
ample point that it starts to generate sustained wage inflation pressure (not our near-term
baseline). We believe, in fact, that labour markets may be subject to a greater degree of
slack than the level suggested by the unemployment rate. Combining the estimates of the
unemployed and the underemployed with broader measures of unemployment suggests
that labour market slack currently affects around 18% of the extended labour force, almost
twice the level captured by the traditional unemployment rate measure (Figure 3).
while also flag considerable We believe that the recent resurgence of NEIG inflation does not look strong enough to change
downside risk to tradable our view that ongoing currency appreciation (+7.5% since mid-April in multilateral terms) casts
prices from recent currency a long shadow over both the pace and sustainability of the recovery in tradable prices. Should it
strengthening continue, currency appreciation will likely weigh considerably on the outlook for core goods
prices. The impact along the price chain would be twofold: in the near term, the appreciation
would have a strong impact on extra-euro area import prices (Figure 4); on the other hand over
the medium term, it could extinguish the nascent and long-awaited core goods PPI recovery
despite producer prices having become less effective in transmitting euro NEER swings along
lately (for see Euro area inflation: Story of a broken relationship, 5 October 2016).
Barclays view on EA inflation We continue to forecast headline inflation to average 1.4% in 2017 and 1.2% in 2018 (core:
and the ECB 1.0%/1.2%, respectively) and the ECB to extend QE into 2018 albeit at a slower pace, as
well as two 10bp hikes in the deposit rate, in Q2 18 and Q4 18.
FIGURE 3 FIGURE 4
Labour underutilisation as a % of the extended labour force Currency strength casts downside risks on import prices
40 6 -15
%
35
-10
4
30
-5
25 2
20 0
15 0
5
10
-2
10
5
0 -4 15
08 09 10 11 12 13 14 15 16 17 06 07 08 09 10 11 12 13 14 15 16 17
Extra-EA import prices, % y/y
EA Germany France Italy Spain Euro NEER, % y/y (Inverted, rhs)
4 August 2017 12
DATA REVIEW & PREVIEW: EURO AREA

Fabio Fois, Antonio Garcia Pascual, Philippe Gudin, Apolline Menut, Tomasz Wieladek

E19: "Flash" HICP, % m/m (y/y) Jul 0.0 (1.3) (1.3) R -0.5 (1.3)
E19: 'Eurostat' core (HICP x fd, alc, tob, ene), % Core improves but does not shift gear
Jul 0.2 (1.1) (1.2) R -0.6 (1.2)
m/m (y/y)
E19: Preliminary GDP, % q/q Q2 0.5 0.6 0.6 Confirming a strong H1
E19: "Final" manufacturing PMI, index Jul 57.4 56.8 56.6
E19: "Final" services PMI, index Jul 55.4 55.4 55.4 Cooling, but from heatwave
E19: "Final" composite PMI, index Jul 56.3 55.8 55.7
Domestic investment supports German
Germany: Factory orders, %m/m (y/y) Jun 1.1 (3.8) R 0.4 (4.2) 1.0 (5.1)
factory orders
Preview of the week ahead

06:00 Germany: Industrial production, % m/m (y/y) Jun 0.2 (2.1) 0.7 (2.8) 1.1 (5.0) -0.6 (2.9) 0.1 (3.7)
06:00 Norway: Manufacturing production, % m/m (y/y) Jun -0.7 (-3.2) 1.7 (0.4) -0.3 (0.0) - 0.4
07:15 Switzerland: CPI, % m/m (y/y) Jul 0.2 (0.4) 0.2 (0.5) -0.1 (0.2) - -0.3 (0.3)
Germany IP: We expect Germany IP to contract in June by 0.6% m/m, due to weak factory orders in April.

04:30 Netherlands: HICP, % m/m (y/y) Jul 0.9 (1.4) -0.4 (0.7) -0.3 (1.0) - -
05:45 Switzerland: Unemployment rate (adj), % Jul 3.2 3.2 3.2 - 3.2
06:00 Germany: Trade balance sa, bn Jun 19.8 19.8 20.3 - 23.9
06:45 France: Trade balance, bn Jun -5.2 -5.6 -4.9 - -4.9
06:45 France: Budget, year-to date, bn Jun -29.6 -57.9 -66.4 - -
06:30 France: BdF industrial business sentiment, index Jul 104.5 104.4 103.1 - 103.0
08:00 Italy: Industrial production, % m/m (y/y) Jun 0.4 (2.8) -0.5 (1.2) 0.7 (2.9) 0.3 0.2
09:00 Greece: HICP, % y/y Jul 1.6 1.5 0.9 - -
Italy IP: We expect Italian IP to have increased 0.3% m/m in June.

06:00 Norway: CPI, headline, % m/m (y/y) Jul 0.2 (2.2) 0.2 (2.1) 0.4 (1.9) - (1.4)
06:00 Norway: CPI-ATE, underlying, % m/m (y/y) Jul 0.3 (1.7) 0.3 (1.6) 0.5 (1.6) - 0.3 (1.2)
06:45 France: Industrial production, % m/m (y/y) Jun 2.3 (2.5) -0.6 (0.1) 1.9 (3.2) -0.6 (3.1) -0.6 (3.1)
07:00 Denmark: CPI, headline, % m/m (y/y) Jul 0.2 (1.1) -0.1 (0.8) -0.1 (0.6) - (0.8)
07:30 Sweden: Industrial production, % m/m (y/y) Jun 0.1 (3.6) -1.3 (0.4) 2.1 (8.0) - -0.6
07:30 Sweden: Service production, % m/m (y/y) Jun 0.5 (4.9) -0.1 (3.4) 0.6 (4.3) - -
09:00 Greece: Unemployment rate, % May 22.6 22.0 21.7 - -
10:00 Ireland: HICP, % m/m (y/y) Jul 0.4 (0.7) -0.2 (0.0) 0.1 (-0.6) - -
10:00 Portugal: HICP, % m/m (y/y) Jul 1.5 (2.4) -0.3 (1.7) -0.5 (1.0) - -
4 August 2017 13

06:00 Germany: Final CPI, % m/m (y/y) Jul -0.2 (1.5) 0.2 (1.6) 0.4 (1.7) P 0.4 (1.7) 0.4 (1.7)
06:00 Germany: Final HICP, % m/m (y/y) Jul -0.2 (1.4) 0.2 (1.5) 0.4 (1.5) P 0.4 (1.5) 0.4 (1.5)
06:45 France: Final CPI, % m/m (y/y) Jul 0.0 (0.8) 0.0 (0.7) -0.3 (0.7) P -0.3 (0.7) -0.3 (0.7)
06:45 France: Final HICP, % m/m (y/y) Jul 0.0 (0.9) 0.0 (0.8) -0.4 (0.8) P -0.4 (0.8) -0.4 (0.8)
06:45 France: CPI ex tobacco index Jul 101.23 101.28 101.30 100.99 -
07:00 Spain: Final HICP, % m/m (y/y) Jul 0.0 (2.0) 0.1 (1.6) -1.2 (1.7) P -1.2 (1.7) -1.2 (1.7)
08:00 Italy: Final CPI, % m/m (y/y) Jul -0.2 (1.4) -0.1 (1.2) 0.1 (1.1) P 0.1 (1.1) -
08:00 Italy: Final HICP, % m/m (y/y) Jul -0.1 (1.6) -0.2 (1.2) -1.9 (1.2) P -1.9 (1.2) (1.2)
Note: All the events are listed in GMT time. Source: Haver Analytics, IHS Markit, Bloomberg, Barclays Research
4 August 2017 14
OUTLOOK: UNITED KINGDOM
Caught on the wrong footagain

Fabrice Montagne July PMI largely came in unchanged as services strengthened and construction fell.
+44 (0) 20 7773 3277 Hiring intentions remained remarkably resilient despite uncertainties.
fabrice.montagne@barclays.com
Barclays, UK
The message from the August MPC was largely dovish as Governor Carney highlighted
the negative consequences of lower investment forecasts.
While the Bank cut its growth forecasts, it left inflation forecasts unchanged and
maintained that rates would need to increase more than expected by the markets.
Overall, the July PMI print Composite PMI strengthened in July driven by services which contrasted with unconvincing
suggests that Q3 activity could manufacturing data and a fall in construction. The headline gauge remains about 0.4sd
look a lot like Q2. below its long-term average as heightened economic uncertainty as well as fragile
confidence among clients acted as a brake on growth. Hiring intentions continued to
surprise to the upside, signalling that businesses are expanding staff regardless of political
or economical woes, while inflation pressures rebounded to a three-month high.
Stronger services, The improvement in services was broad-based, with prices charged, input prices and new
disappointing manufacturing business the biggest positive contributors. Outstanding business was the only component
and sharp decline in to print lower in July. Employment and price components are the only ones currently above
construction their long-term average. Construction deteriorated as the headline activity index fell
markedly driven by a sharp decline in commercial activity and new orders. In
manufacturing (see UK Manufacturing PMI: Capacity constraints bite, 1 August 2017),
confidence rose as new export orders climbed to their second highest reading on record.
Output, however, was held back by capacity and supply constraints, limiting the upside
from strong demand and price pressures, therefore, continued to ease in July.
Higher confidence amid The July PMI print left a mixed impression as businesses reported as many improvements as
reasons for concern they did reasons to remain cautious. Generally, current activity edged higher on stronger
orders and hiring but output and outlook remained subdued at best. Unless extra jobs are
matched with additional investment, demand will be only partially met and capacity
constraints will continue to cap the upside from weaker currency or fresh global growth
FIGURE 1 FIGURE 2
July output PMIs only marginally better Reaction of the currency and rates to the MPC minutes
65 1.0 8
0.8 6
0.6 4
60
0.4
2
0.2
55 0
0.0
-2
-0.2
-0.4 -4
50
-0.6 -6
-0.8 -8
45
Feb Mar May Jun Aug
10 11 12 13 14 15 16 17 18
Manufacturing Composite GBPEUR (%change, lhs) GBPUSD (%change, lhs)
Services Construction 10y Rates (bp, rhs)
Source: IHS Markit/Haver Analytics, Barclays Research Source: Bloomberg. Note: the chart shows the reaction of exchange and interest
rates 30 minutes after the release of the MPC minutes.
4 August 2017 15
momentum. The drop in construction or the rebound in services price pressures also raise
questions as to whether this simply reflects monthly volatility or rather a more significant
reversal. For now however, our take on July confidence is that Q3 is likely to look a lot like
Q2, supporting our view of low but stable growth.
Dovish MPC catches markets wrong-footed

Brexit uncertainty to weigh on Governor Carney spent most of the press conference explaining the consequences of Brexit
short and long-term growth as uncertainties and how lower investment could impair short and long-term growth. While
BoE announces end of TFS this dovish message resonated throughout markets for the rest of the day, sending rates
emergency measures and GBP lower, the hawkish conclusion appeared unaccounted for. According to Governor
Carney, lower trend growth would mean that monetary policy may have to react quicker to
upside surprises as the amount of slack in the economy would be removed faster.
Accordingly, the bank maintained that rates would need to be raised and given forecasted
inflation remains above the BOE target at the end of the forecast horizon (2020) the
increase would need to be steeper than currently expected by the market (forecasts are
conditional to market expectations). Such steepening would come in addition to the already
announced increase in counter-cyclical capital buffers as well as todays confirmation that
the drawdown window for the Term Funding Scheme will be closed in February 2018 as
originally planned.
MPC shifts to a more dovish Fundamentally, such a dovish / hawkish balancing act reflects the structural unease of central
stance and catches markets banks to respond to negative supply shock. Except for May, markets got caught systematically
wrong-footed wrong-footed by the MPC minutes: in March and June by the hawkish tone, in February and
August on the dovish side (Figure 2). Overall, we believe a dovish interpretation of the August
minutes is justified given the MPC moved away from expecting exports and investment to
make up for slowing consumption and now only expect it to act against it. Also, the Bank
seems increasingly certain about the negative impact of uncertainty (on investment, exports,
wages, etc), and highlights weaknesses in the auto and the housing sectors as reasons to
expect consumption to edge even lower than currently expected.
While growth forecasts are cut, The bank eventually had also to work into its assessment two quarters of lower-than-
inflation forecasts are largely expected growth after pushing back in Q1 by revising less than the extent of the downside
unchanged surprise. The bank also shaved its Q3 forecast down to 0.3% q/q and now expects growth
of 1.7% this year which would require at least 0.5% q/q in Q4. Hence, while the short-term
forecast reflects weaker data, the medium-term outlook remains unchanged with 1.6% and
1.7% growth expected in 2018 and 2019, respectively. The inflation outlook has, however,
been left largely untouched.
Data and policy views needed Nevertheless, many areas continue to raise questions (forecasts for productivity or imports,
more than ever to resolve reliance on internal alternative measures for production, GDP, etc) and we await further
existing inconsistencies and data (in August: Inflation on the 15th, Labour market report on the 16th and Q2 GDP
interrogations expenditure breakdown on the 24th) as well as MPC members policy statements to resolve
some of the inconsistencies. Andy Haldane, for instance, did not make a new statement
after his 21 June speech, while new MPC members, Silvana Tenreyro and Dave Ramsden,
are yet to make their positions known.
November now looks too soon We remain confident that the Bank will maintain the status quo as we expect growth and
to hike or even talk about a inflation to edge lower than in the Banks forecasts. We also highlight that by cutting its Q3
hike growth forecast to 0.3% q/q, November now looks too early to hike or even to prepare
markets for a hike. Indeed, 0.3% q/q growth in Q3 would not be informative regarding
whether the economy is stuck in low gear or gathering momentum. Rather, softer data,
volatile policy statements by MPC members and, in our view, some miscommunication
around the August inflation calls for resetting the MPC communication around some key
and clear messages.
4 August 2017 16
DATA REVIEW & PREVIEW: UNITED KINGDOM

Fabrice Montagne

Lloyds Business Barometer, % Jul 30 - 30 Business confidence grew unchanged in July.

Consumer credit, bn Jun 1.8 R 1.7 1.5 Funds raised by PNFCs enjoyed fresh momentum in June
at 7bn, boosted by new loans. But according to the credit
Mortgage lending, bn Jun 3.9 R 3.5 4.1
condition survey, these funds seemed to go into balance
sheet restructuring and commercial real estate rather than
capex. Meanwhile, consumer credit slowed in June but
Mortgage approvals, k Jun 65.1 R 65.4 64.7 remortgaging pushed up demand for secured lending. We
expect lending to ease in coming months reflecting
economic slowdown and tighter capital rules.
Nationwide house price Index, %
Jul 1.1 (3.1) - 0.3 (2.9) Monthly house price growth edged down in July.
m/m (y/y)
Confidence rose in July amid near record-high growth in
new export orders, reaching the second highest reading
on record. This is the first acceleration in headline
manufacturing PMI in three months, boding well for Q3.
Manufacturing PMI, index Jul 54.2 R 55.2 55.1 Output, however, was held back by capacity and supply
constraint limiting the upside from strong demand. Price
pressures continued to ease in July, indicating that the FX
shock is passing, while job market indicators remained
resilient as ever.
Services PMI, index Jul 53.4 52.2 53.8 Services firm sentiment strengthened more than expected
in July, pushing composite PMI up to 54.1 after 53.8.
Stronger services contrasted with hesitations in
manufacturing and a fall in construction. Hiring intentions
Composite PMI, index Jul 53.8 - 54.1 strengthened regardless of subdued business
expectations, while inflation pressures rebounded to a 3-
month high. Overall, the July print suggests that Q3
activity could look a lot like Q2.
BoE MPC Bank Rate decision, % Aug 0.25 0.25 0.25 The Bank of England MPC left monetary policy unchanged
at the August meeting, as we and consensus had
BoE MPC APF (gilts) decision, bn Aug 435 435 435
expected. The vote was split once again with Saunders
BoE MPC APF (corporates) decision, and McCafferty maintaining their votes for a hike.
Aug 10 10 10
bn Macroeconomic forecasts were downgraded to reflect
BoE MPC meeting minutes Aug downside surprises in data. Our initial take is that the MPC
is now more in line with economic data published in the
BoE MPC Aug 2017 Inflation Report Aug
first half of this year. We maintain our view of no change
BoE MPC Bank Rate vote Aug 5-3 6-2 6-2 over the next two years.
BoE MPC APF (gilts) vote Aug 8-0 8-0 8-0
BoE MPC APF (corporats) vote Aug 8-0 8-0 8-0
Preview of the next week

No significant events or releases scheduled

00:01 REC Permanent Staff Placements, index Jul 53.6 57.6 55.9 - -
00:01 REC Permanent Staff Salaries, index Jul 57.4 59.5 60.1 - -

4 August 2017 17

00:01 RICS house price balance, % Jul 22 17 7 - 10
09:30 Industrial output, % m/m (y/y) Jun -0.6 (1.4) 0.2 (-0.8) -0.1 (-0.3) 0.1 (-0.2) 0.1 (-0.2)
09:30 Manufacturing output, % m/m (y/y) Jun -0.6 (2.3) 0.2 (0.0) -0.2 (0.4) -0.1 (0.6) -0.1 (0.6)
09:30 Construction output, % m/m (y/y) Jun 0.7 (4.3) -1.1 (-0.1) -1.2 (-0.3) - 1.1 (1.7)
09:30 Total trade balance, bn Jun -3.7 -2.1 -3.1 -2.9 -2.4
13:00 NIESR GDP estimate, % 3m/3m Jul 0.2 0.2 0.3 - -
Industrial production: We expect Industrial production to come in largely unchanged from previous months as lower
manufacturing could be balanced by stronger utilities. Manufacturing woes reflect a fall in vehicle production in June as well as
softer global activity index. If realised, Q2 production would be 0.5% lower than in Q1, in line with preliminary GDP estimates.
Trade balance: We expect the trade balance to improve marginally at -2.9 after -3.1bn as goods imports slow and exports
continue to be supported by weaker currency.

Note: All times reported are local London time (BST). Consensus figures are taken as at 11am on Friday, 04 August 2017, from Bloomberg and, hence, may be subject
to significant change, given the final cut is 3pm London time of the same Friday. Source: Haver Analytics, Barclays Research
4 August 2017 18
OUTLOOK: JAPAN
Growth streak looks set to remain intact

Tetsufumi Yamakawa We expect real GDP growth of 2.5% q/q saar in Q2, led by domestic demand. While
+81 3 4530 1130 net exports likely weighed on growth, this would be due more to strong imports.
tetsufumi.yamakawa@
barclays.com
The latest IP data suggest that growth of about 1% could continue into Q3, with
capex and real exports offsetting any reactionary weakness in private consumption.
BSJL, Japan
Abes reshuffle may restore his support if upcoming Diet proceedings go smoothly,
Yuichiro Nagai but it does not resolve the issues behind the decline. Uncertainty remains elevated.
+81 3 4530 1064
yuichiro.nagai@barclays.com We updated our Q2 GDP estimates this week, accounting for major data releases through
BSJL, Japan June (Q2 GDP preview: Strong domestic demand-led growth continues, 1 August 2017). We
now expect real growth of 2.5% q/q saar during that period, up from our previous forecast
Yukito Funakubo of 2.0% q/q saar (first preliminary data: 14 August). This included upward adjustments to
+81 3 4530 1068 our estimates of private consumption (to 0.5% q/q from 0.3% q/q), capex (to 1.3% q/q
yukito.funakubo@barclays.com from 0.7% q/q) and housing investment (to 0.8% q/q from -0.9% q/q). The adjustment to
BSJL, Japan housing investment was particularly large, reflecting stronger-than-expected data in both
May and June.
James Barber, CFA
At the same time, we substantially lowered our estimate of the contribution from net
+81 3 4530 1542
exports to q/q GDP growth (to -0.4pp from -0.2pp). This was primarily due to a large
james.barber@barclays.com
upward revision to our estimate of GDP-based real imports to 1.8% q/q from 0.7% q/q,
BSJL, Japan
based on the BoJs real trade indices for that period: real exports fell 0.5% q/q (Q1: 2.9%
q/q) while real imports increased 3.0% q/q (Q1: 0.7% q/q). Although net exports appeared
to subtract from GDP growth in Q2, this was mainly due to an increase in imports reflecting
a recovery in domestic demand. Given the strength of business sentiment and the recovery
in overseas economic indicators, we expect real exports to increase again in Q3.
Domestic demand driving GDP We retained our estimate for public investment to rise 4.3% q/q, which would mark the first
growth through Q2 (our increase in four quarters. Based on leading indicators, it appears that the FY16 second
forecast revised to 2.5% q/q supplementary budget has given a boost to such investment. Private inventory investment,
saar from 2.0%) which subtracted from GDP growth in Q1 due to a reduction in oil inventories, could lend
FIGURE 1 FIGURE 2
Real wages down y/y, albeit slightly Production on track to grow about 1% q/q more in Q3
Nominal wages 2010=100

% y/y
3.0 CPI ex-imputed rent (inverted) 125
Real wages
2.0 120
1.0 115
110
0.0 Aug
105
-1.0
100
Jul
-2.0
Barclays 95
-3.0 forecasts Production
90
Shipments
-4.0 85 Inventory
-5.0 Inventory/shipment ratio
80
13 14 15 16 17 18 19 10 11 12 13 14 15 16 17 CY
Note: Our estimates used for CPI ex-imputed rent. Note: METI forecasts used for July (index adjusted for forecasting error) and
Source: MHLW, MIC, Barclays Research August. Source: METI, Barclays Research
4 August 2017 19
support in Q2. However, private inventories are a perennial source of uncertainty in the first
preliminary GDP data due to the methods of calculation and thus represent both an upside
and a downside risk.
Private consumption Private consumption always warrants special attention since it accounts for such a large
supported by improving share of the economy. In Q2, we believe consumption may have increased not only for
employment conditions, but services and durables but also non-durables, as discussed in Japan Outlook: Consumption
also weather and subdued drives GDP growth in H1, 28 July 2017. While improving employment conditions set the
downstream inflation stage, good weather may also have provided support in Q2. In addition, sentiment improved,
likely helped by rising share prices, and downstream inflation remained low.
Consumer confidence turned back up in July (to 43.8 from Junes 43.3), with the Cabinet
Office retaining its picking up assessment, based on the Consumer Confidence Survey.
This reflected improvements in all survey categories, with especially large gains in the
assessments of livelihood and willingness to purchase durable goods. This is consistent
with reports of increased appliance sales3.
Falling household inflation The same survey indicated that household inflation expectations, which rose to 2.1% in June
expectations amid high-profile price hikes for such items as potato chips and parcel deliveries, fell back to
1.9% in July. This is consistent with subdued downstream inflation as measured by the CPI.
Although real wages, which heavily influence private consumption, fell a somewhat sharp
0.8% y/y in June (May: 0.0%), this was largely a reaction to last years strong summer
bonuses. Consumer activity has not been undermined as a result (Figure 1).
IP data suggest growth of Even if private consumption slows in Q3 following the strength through H1, the latest IP data
about 1% could continue into suggest growth of about 1% could continue into Q3, with capex and real exports providing
Q3, with capex and real offsets. Production expanded 1.9% q/q in Q2, and METI forecast indices for July (-0.3% m/m
exports lending support based on the index adjusted for forecasting error) and August (3.6% m/m) indicate that
production will be 1.3% stronger on average during those two months than in Q1.
However, machinery orders, a That said, machinery orders, a leading capex indicator, are in a lull, based on the May
leading capex indicator, are in assessment (a downgrade) by the Cabinet Office. We expect core orders to increase 4.5%
a lull; machinery maker m/m in June (May: -3.6%), but to fall 2.7% q/q in Q2 (Q1: -1.4%), marking two consecutive
forecasts for Q3 to be focus of quarters of decline for the first time in about five years. In this context, one focus of the data
next weeks data will be the Q3 forecasts of major machinery makers. At this stage, we do not see any
reasons to lower our outlook for capex in H2 FY17 given the solid machinery orders from
manufacturers, the firm capex plans in various surveys such as the BoJ Tankan, and upbeat
business sentiment.
New Cabinet brings nothing In the political sphere, the Cabinet reshuffle on 3 August came without any major surprises.
new As expected, PM Abe appointed veteran ministers to key portfolios, such as defense,
education and foreign affairs, in a bid to reverse the distrust in politics that triggered a
decline in Cabinet and LDP approval ratings, while allocating ministerial posts to members
outside his own faction in order to build unity within the party. The former implies an
emphasis on stability and the latter on restoring a leadership base within the party, without
any obvious new implications for policy. Whether the reshuffle brings a significant recovery
in support may depend heavily on Diet proceedings during the extraordinary session that
gets underway from end-September. However, the reshuffle does not solve the underlying
political problems, and we expect uncertainty to remain elevated.
3 Consumption heats up with the temperature outside (title translated from Japanese), Nikkei newspaper, 24 August
2017.
4 August 2017 20
DATA REVIEW & PREVIEW: JAPAN

Yuichiro Nagai, Yukito Funakubo, James Barber, CFA
Review of this weeks data

Industrial production (% m/m) Jun -3.6 1.6 1.6 Production showed strong growth of 1.9% q/q in Q2,
and METI forecasts for July (-0.3% index adjusted for
forecasting error) and August (3.6% m/m) suggest
an increase of about 1.0% q/q is within reach for Q3.
Maikin wages per worker (% y/y) Jun 0.6 0.2 -0.4 Wages per worker fell, reflecting a drop in summer
bonuses. However, the scheduled pay of full-timers,
which most accurately reflects the increases in base
pay decided at shunto spring wage negotiations,
rose 0.2% y/y (May: 0.5%), a third consecutive
increase.
Preview for week ahead

08:50 BoP current account nsa/sa (JPY bn) Jun 2981/1797 1952/1807 1654/1401 701/1351 857/1465
08:50 Bank lending incl. shinkin (% y/y) Jul 3.0 3.2 3.3 3.2 n.a.
14:00 Economy Watchers current DI Jul 48.1 48.6 50.0 n.a. n.a.
Balance of payments: We estimate that the current account remained in the black (both nsa and sa) in June, with nsa surpluses
in trade and primary income offsetting a deficit in services.
Bank lending: We look for firm growth in outstanding loans, with a strengthening uptrend in lending by megabanks. Financial
institutions remain accommodative in their lending based on the latest BoJ Tankan survey.

08:50 Money stock, M2/M3 (% y/y) Jul 4.0/3.4 3.8/3.2 3.9/3.3 3.9/3.3 3.9/3.3
Money stock: We estimate that M2 (excl. Japan Post Bank) and M3 (incl. Japan Post Bank) continued to show firm y/y growth.
Demand for cash may have increased with the decline in interest rates accompanying NIRP.

08:50 Core machinery orders (% m/m) Jun 1.4 -3.1 -3.6 4.5 3.1
08:50 Corporate goods price index, PPI (% y/y) Jul 2.1 2.1 2.1 2.3 2.4
13:30 Tertiary industry index (% m/m) Jun -0.3 1.4 -0.1 0.2 0.3
Machinery orders: We estimate that core orders, a leading capex indicator, increased m/m in June but fell q/q in Q2, a second
consecutive decline. In this context, the Q3 forecasts of major machinery makers will be a key focus.
Corporate goods price index: We expect the domestic component of the CGPI (PPI) to rise y/y for a seventh consecutive
month and will focus on the trend in upstream prices of food, where inflation has become more widespread.
Tertiary industry index: We estimate that the index of tertiary industry activity rose m/m in June amid generally firm retail data
during that period.
Source: Bloomberg (consensus figures), Barclays Research
4 August 2017 21
IN FOCUS: AUSTRALIA
Conflicting signals
Rahul Bajoria The Reserve Bank of Australia appears to be getting mixed signals from economic data,
+65 6308 3511 as better employment seems to be driving consumption, but a stronger exchange rate
rahul.bajoria@barclays.com may weigh on prices and possibly economic growth, thus delaying policy normalisation.
Barclays Bank, Singapore
RBA maintains a cautiously optimistic view of the economy

RBA remains positive on This week, the Reserve Bank of Australia kept rates on hold and released new growth,
economic growth outlook inflation and unemployment projections in its quarterly assessment. The bank maintained a
tone of broadly cautious optimism in its assessment of economic conditions, but appears to
be in somewhat of a bind over the conflicting signals coming from economic data and
financial markets. The Statement on Monetary Policy (SoMP) made small but extensive
changes to the central banks growth projections, with downgrades to the near-term
outlook and upgrades to its medium-term forecasts. Indeed, in downgrading its near-term
growth forecasts slightly, the RBA emphasised that the recent appreciation of the
exchange rate has been factored into the forecasts and has had a modest dampening effect
on the forecast for growth.
RBA left its inflation forecasts The RBAs inflation forecasts were largely unchanged, although its 2018 projections were
unchanged raised slightly, driven by utility price changes and a slightly higher assumed oil price (to
USD53/bbl from USD51/bbl). The increase in the inflation forecast is a bit surprising,
especially given the AUDs recent appreciation. But as the banks underlying inflation
projection was unchanged, it would appear that the upside is likely to be driven primarily by
utility price increases.
Consumption growth is improving in line with labour markets

Consumption growth has On household consumption and income, the RBA did not flag any reduction in uncertainty
picked up around these variables, but indicated that if employment growth continues, the tail risks of
weaker consumption will likely reduce over time. This was reflected in real retail sales data
for Q2, which showed an impressive 1.5% q/q sa increase, the strongest in almost eight
years. Household goods, apparels and department stores recorded strong q/q gains. Given
that retail sales are loosely linked to consumer spending, we expect consumption growth to
FIGURE 1 FIGURE 2
RBA downgrades near term outlook but keeps underlying inflation forecasts unchanged
5.5 6
% y/y % y/y
5.0
5
4.5
4.0 4
3.5
3
3.0
2.5 2
2.0
1
1.5
1.0 0
Jun-04 Jun-06 Jun-08 Jun-10 Jun-12 Jun-14 Jun-16 Jun-18 Jun-05 Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 Jun-19
Real GDP Aug-17 May-17 Underlying inflation (% y/y) May-17 Aug-17
Source: Haver Analytics, RBA, Barclays Research Source: Haver Analytics, RBA, Barclays Research
4 August 2017 22
improve. We believe this is broadly consistent with the improving trends around full time
employment and aggregate wage bills. But as the RBA continues to expect a very gradual
increase in wage growth, some uncertainty is likely to prevail.
Currency blues...
Strong AUD a constraining In its policy statement, the RBA significantly altered its assessment of the Australian dollars
factor for normalisation appreciation, and its impact on the economy. The bank noted that a stronger currency will
contribute to subdued price pressures, and could weigh on the outlook for output and
employment, resulting in a slower pickup in growth and inflation than what it currently
forecast. As expected, the RBA changed its assumptions for the Australian dollar, with the
trade-weighted index now expected to be almost 5% higher than previously.
If the AUD continues to At the current juncture, our fair value model does not indicate that the AUD is very
appreciate, we believe it could expensive. However, the rapid appreciation seen in the past few weeks has appeared on the
invite more jawboning from RBAs policy radar. As such, we expect the RBA to continue to monitor AUD valuations
policymakers. closely, and may even look to jawbone the markets through verbal intervention to prevent
the currency from strengthening beyond what the bank thinks fundamentals warrant.
Normalisation bias appears intact, but stronger signs needed for a hike
A normalisation bias, but no We believe the latest Statement on Monetary Policy (SoMP) is consistent with the central
urgency to raise rates bank looking to normalise its policy stance, albeit a move that is constrained by conflicting
signals from the economy. While growth in household spending and trade continued in Q2,
this has not necessarily boosted growth in wages and incomes. Although we expect the
ongoing improvement in employment and the aggregate wage bill to eventually support
policy normalisation, we believe the central bank will be watching these trends carefully in
the coming six months before decisively signalling a change in policy stance. We think the
recent downside surprise in inflation and appreciation pressures on the AUD will also likely
make the RBA careful about signalling clearly a change in policy bias. We continue to expect
the RBA to start raising interest rates in Q2 18. We forecast the hiking cycle will begin with a
25bp rate increase at the May 2018 MPC meeting, followed by two more hikes of 25bp each
at the August and November 2018 meetings (see Australia: August Statement on Monetary
Policy - AUD blues, 4 August 2017, and Australia: Growth fears relieved, but 2017 trajectory
to be lower, 7 June 2017).
FIGURE 3 FIGURE 4
Consumption likely to improve in Q2 2017 Australian dollar does not look very expensive
2.5
% q/q sa Real exchange rate (% of RBA estimate of fair value)
2.0 15
10
1.5
5
1.0
0
0.5
-5
0.0 -10
-0.5 -15
-1.0 -20 +/-1 SD

Jun-07 Jun-09 Jun-11 Jun-13 Jun-15 Jun-17 -25 Actual
Retail turnover ex inflation -30
GDP: Household consumption 1987 1992 1997 2002 2007 2012 2017
Source: Haver Analytics, RBA, Barclays Research Source: Haver Analytics, RBA, Barclays Research
4 August 2017 23
OUTLOOK: CHINA
Tougher Trump wont derail bilateral relations

Jian Chang President Trump is set to announce plans to target Chinas trade practices and
+852 2903 2654 intellectual property rights, likely including an investigation of certain exports.
jian.chang@barclays.com
Such measures could increase trade frictions, but more likely intended to increase
Barclays Bank, Hong Kong
negotiation leverage; unlikely to have a material impact on China exports in our view.
Yingke Zhou
Our base case expects the US and China to continue negotiations to address bilateral
+852 2903 2653
trade imbalances, and a full-blown trade war is unlikely.
yingke.zhou@barclays.com
Barclays Bank, Hong Kong President Trump is expected to give a speech and sign a memorandum at the White House
on Friday targeting Chinas trade practices and intellectual property (Trump set for Friday
speech, to sign memo on Chinese intellectual property and trade practices, 2 August 2017,
Trump likely to announce new CNBC). This follows recent remarks by the president expressing his increasing frustration at
measures to tackle trade the apparent lack of action by Beijing to pressure Pyongyang. Another report claimed that
deficit with China on Friday Trump is considering initiating an investigation of Chinese trade practices under the 1974
Trade Acts section 301 (Trump close to decision on addressing Chinese trade practices,
Reuters, 2 August). Section 301 allows a US president to unilaterally impose tariffs or other
trade restrictions on foreign countries.
Trumps honeymoon with We think these latest developments suggest that the short period of sweet relations
China is over between the US and China following the Trump-Xi summit in April has come to an end, with
signs of constructive and cooperative outcomes waning recently. Despite some
achievements since the summit, including positive steps on trade and financial services
under the 100-day Action Plan (Figure 1), Sino-US economic dialogue in mid July seemed to
fail to make new progress on major issues, as signalled by cancelled news conferences and
the absence of a joint statement.
Some achievements so far, but Areas of progress include Chinas lifting of the ban on US beef imports and allowing for the
more work is needed first time rice imports from the US. China has also opened its domestic markets to foreign
credit rating agencies and agreed to grant two US banks onshore bond underwriting and
settlement licenses. The yuan has also been kept on the stronger side against the dollar
(while being broadly stable against a basket of currencies) in recent months, which reflects
FIGURE 1 FIGURE 2
Achievements after 100-day Action Plan US trade deficit with China
Date Key achievements USD bn US trade deficit with China
The U.S. Commodity Futures Trading Commission extends 30 US trade deficit with China (% y/y, RHS) 80
May-17
no-action relief for Shanghai Clearing House till 30 Nov 2017.
25 60
Jun-17 China's imports of LNG from US increased rapidly in H1 2017
China re-started imports of US beef, lifting a ban put in place 40
Jun-17 20
in 2013
20
The PBoC published rules allowing foreign rating agencies to
Jul-17 15
assess the credit risks of the country's bonds 0
China agreed to issue bond underwriting and settlement 10
licenses to both JPMorgan and Citigroup, with JPMorgan -20
Jul-17
already being approved for underwriting coprorate bonds, 5 -40
and Citigroup receiving a bond settlement license in February
0 -60
Jun-13 Jun-14 Jun-15 Jun-16 Jun-17
Source: Reuters, Bloomberg, Barclays Research Source: Bloomberg , Barclays Research
4 August 2017 24
Chinas positive response during the dialogue with the US concerning currency policies, in
our view. However, we think these moves will not significantly reduce the US trade deficit
with China, which has continued to grow since the April summit meeting (Figure 2).
Trump likely to initiate While it remains to be seen what new plans President Trump will announce on Friday to
investigations of some trade target Chinas trade practices, he will likely show a tougher stance by ordering probes into
areas, but unlikely to impose certain trade areas. While we do not expect any immediate trade restrictions or sanctions
immediate sanctions before any investigations are completed, we think such investigations will increase trade
friction, including the threats of tariffs/quotas (under the 1974 Trade Acts section 301)
and/or initiating anti-dumping/subsidy investigations, in the near future. Sectors likely to be
targeted by such investigations (ie, those contributing most to the US trade deficit) would
include textiles, steel and other metals, and home appliances (Figure 3).
Limited impact of trade That said, given that no US Section 301 investigation since the WTO was launched in 1995
frictions on China exports, full has led to actual trade sanctions, we think such probes are more likely intended to increase
trade war unlikely to occur leverage for bilateral negotiations. Even if any trade investigations result in sanctions against
China (not our base case), we believe a full-blown US-China trade war is unlikely, as the two
sides would want to avoid the high economic risks from such an outcome. As both sides
agreed in the July dialogue that one of the solutions is for the US to expand exports to
China, rather than simply reducing imports from China, we think the impact of any increase
in trade frictions on Chinas exports would be short-lived and limited in scope. We expect
both sides to continue negotiations at all levels (Figure 4) to make practical progress on
trade rebalancing and financial services openness, with sanction threats and geopolitical
issues (ie, North Korea) likely to be used largely as bargaining chips.
Next week, the focus will be on On the data front, the NBS manufacturing PMI eased to 51.4 in July from the strong print of
trade and inflation data 51.7 in June. The moderation was driven by softer readings for the production and new
export orders indices. We think the softer NBS PMI suggests that GDP growth is likely to
slow after the unexpectedly strong print for Q2. Next week, China will release a series of
data, including trade, inflation, and credit. We forecast export growth moderated in July due
to weaker new export orders and a high base, while import growth edged up given the
rebound in commodity prices. We expect CPI inflation to remain subdued on continued
food deflation, and PPI inflation to have edged higher given the strong rebound in PMI input
prices. On credit, we expect total social financing and new loans to register a decline in July
on seasonal effects and mortgage tightening measures.
FIGURE 3 FIGURE 4
Sectors contributing most to the US trade deficit with China China-US dialogue
USD, bn China and US bilateral trade,2016 Dialogue Developments Date
200
China's exports to US Trump accepted invitation for Later this
President level
150 China's imports from US state visit to China year
US trade deficit with China Comprehensive economic dialogue 19-Jul
100
Four high-level Diplomatic and security dialogue 21-Jun

50
dialgoue Law enforcement and cyber Later this
0 mechanism security dialogue year
Social and people-to-people Later this
-50 dialogue year
Machinery& Textile Footwear & Basic Plastics &
Electrical Headgear Metals Rubbers
Equip
Source: CEIC,Barclays Research Source: Reuters, Bloomberg, Barclays Research
4 August 2017 25
OUTLOOK: EMERGING ASIA
A reluctant cut by the RBI

Siddhartha Sanyal The RBI cuts the repo rate, but stays non-committal on future action. MPC decisions
+91 22 6719 6177 will remain data dependent, with an innate cautionary bias, in our view.
siddhartha.sanyal@barclays.com
Barclays Bank, India
Proposed tax reform in Korea would hike income and corporate taxes, as part of the
government drive to address inequality. We expect this to be eventually approved.
Angela Hsieh, CFA Composite EM Asian PMI continues to moderate, but the weakness in Indias July
+65 6308 2003 PMIs post the GST rollout was in stark contrast to rest of the region.
angela.hsieh@barclays.com
Barclays Bank, Singapore
India: RBI cuts policy rates, stays non-committal on future action
Rahul Bajoria The Reserve Bank of India (RBI) cut the repo rate by 25bp, in line with consensus but against
+65 6308 3511 our expectation of no change. While headline CPI inflation surprised significantly to the
rahul.bajoria@barclays.com downside during Q2 17, the MPC maintained a neutral stance, as expected. The central
Barclays Bank, Singapore value of the RBIs CPI forecast for Q1 18 stays modestly above 4% (the midpoint of the RBIs
CPI target range), broadly in line with our forecast of CPI hovering around 4% (adjusting for
the adverse base effects) over the next 12 months. This, we believe, leaves the RBI with
limited room for further monetary easing in the coming months unless inflation continues
to surprise further lower (see India: RBI MPC Loyal only to caution, 28 July 2017).
We expect the RBI policy to From the discussion of a pre-emptive rate hike in April, subsequently lower inflation
remain data dependent readings, a stronger INR and reduced global risks had re-anchored the MPC debate to hold
versus cut, in our view. However, the guarded policy commentary in August and the
continued emphasis on anchoring inflation close to 4% on a sustainable basis suggest that
the MPC is not pre-committed to further rate cuts. Globally most central banks, in both DMs
and EMs, are following a path of monetary policy normalisation. While that does not
necessarily preclude further easing in India, we think the bar for further RBI cuts will likely
be higher, especially given that the RBI has already delivered 200bp of repo rate cuts and
the repo rate is currently c.100bp lower than its long-term average. We expect monetary
policy to remain data dependent; nevertheless, the innate bias of the MPC will likely stay in
favour of caution despite this weeks rate cut, in our view.
FIGURE 1 FIGURE 2
India: We expect CPI to average 4.4% over the next 12 India: Real policy rate high; will likely stay high despite
months; adjusted for the base effects, it will average c.4% expected uptick in CPI in H2 FY17-18
CPI Real interest rate (% 3mma, RHS)
% y/y
CPI - adjusted for base effects CPI (% y/y, 3mma)
7 14 Repo rate (%, 3mma) 5
RBI's target band 4%(+/-2%)
6 12 3
10 1
5
8 -1
4
6 -3
3
4 -5
2 2 -7
1 0 -9
Mar-17 Sep-17 Mar-18 Sep-18 Mar-19 Jun-06 Apr-08 Feb-10 Dec-11 Oct-13 Aug-15 Jun-17
Source: GoI, Haver Analytics, Barclays Research Source: GoI, Haver Analytics, Barclays Research
4 August 2017 26
Korea: Moon administration maintains policy momentum

Decent progress made on Within its first 100 days in office, the President's Moon administration is making good
Moon administration within his progress. His government has already formulated policies to tackle income inequality and to
first 100 days promote job creation, in line with his election manifesto. He cleared the first hurdle of
approval of a supplementary budget (22 July), delivered two sets of tightening measures to
stabilise housing prices (19 June, 2 August), and drafted a revised tax law bill to raise
income and corporate tax for high-income earners and large businesses.
We expect the tax reform to be The focus appears to have shifted to the likelihood of passage of the revised tax bill reform.
eventually approved, with While we expect the proposed tax bill to encounter pushback, owing to the political standoff
some amendments in the National Assembly, we think it may eventually be approved with some amendments,
given the strong public support. That said, we expect Budget 2018 to see stronger
pushback, if: 1) the pace of proposed fiscal expansion is considered too aggressive; and 2)
the opposition parties disagree with the composition of spending, as a larger share is likely
to be earmarked for welfare and job creation, rather than infrastructure spending. We see a
possibility that the final package could be watered down by opposition parties, with less
aggressive fiscal spending growth of 5-6% eventually agreed by the end of December.
Given 2017s tax revenue is likely to overshoot the governments projection, we see any
financing needs as being manageable.
Asia PMIs: Indias PMI tanks on GST related hiccups

Indias PMIs weakened sharply EM Asias manufacturing PMIs showed signs of a broad moderation in July, led by India,
in July where the weakness was sharp, albeit driven by temporary factors. The July PMI in India of
47.9 was the lowest since February 2009, as manufacturing sector appears to have been
disrupted by the roll out of the Goods and Services tax on 1 July 2017. Even the Services PMI
in India fell sharply, to 45.9, the lowest since September 2013. However, we see this
weakness as temporary, and expect activity to normalise over the coming months as the
GST process becomes smoother.
North Asia continues to In rest of emerging Asia, the performance was more mixed. While export oriented
outperform South East Asia economies such as China and Taiwan continue to report strong PMIs, in South East Asia,
PMIs weakened across the board, albeit slightly. In particular, the weakness in Indonesias
manufacturing PMI appears a bit worrisome, as a nascent recovery appeared to be taking
place given recent real sector data. Nonetheless, this moderation is consistent with our view
that the big pickup in exports is now behind us, and export momentum will slow to more
sustainable levels in H2.
FIGURE 3 FIGURE 4
Korea: Strong public support for the proposed tax reform India: PMI weakened sharply after GST implementation
Public opinion on tax reform 55
Strongly Unknown
object 4.4% 53
4.1%
Object
5.9%
51
Support
14%
49
Strongly
support 71.6%
47
Jul-12 Jul-13 Jul-14 Jul-15 Jul-16 Jul-17
EM asia ex India PMI India PMI
Source: Realmeter (released on 24 July), Barclays Research Source: Haver Analytics, Barclays Research
4 August 2017 27
DATA REVIEW & PREVIEW: AUSTRALIA & EM ASIA

Rahul Bajoria, Jian Chang, David Fernandez, Angela Hsieh, Siddhartha Sanyal, Dennis Tan, Yingke Zhou

China: NBS manufacturing PMI (Index) Jul 51.7 51.7 51.4 Slight moderation in July NBS PMI
Thailand: Manufacturing production (% y/y) Jun 1.6R 1.4 -0.2 Dropped due to lower production of air conditioners and steel
Korea: CPI (% y/y) Jul 1.9 2.1 2.2 Core inflation showing signs of strengthening
Korea: Exports (% y/y) Jul 13.6R 16.0 19.5 Signs of improvement broadening out to other tech sectors
China: Caixin manufacturing PMI (Index) Jul 50.4 50.5 51.1 Expanded due to a solid upturn in new export sales
-0.05/ 0.30/ 0.17/
Thailand: CPI - headline/core (% y/y) Jul Weakness continues, 2017 forecast downgraded
0.45 0.50 0.48
Indonesia: CPI - headline/core (% y/y) 4.4/ 3.6 / 3.9/
Jul Inflation eases after the festive season
3.1 3.0 3.1
Australia: RBA cash rate (%) Aug 1.50 1.50 1.50 Constrained by conflicting economic signals
New Zealand: Unemployment rate, (%) Q2 4.9 4.8 Dropped to the lowest level in more than eight years
Driven by a rise in total dwellings excluding houses (i.e.
Australia: Building approvals, (% m/m) Jun -5.4R 10.9
apartments)
India: RBI repo rate (%) Aug 6.25 6.25 6.00 RBI cuts rates, non-committal on future action
Korea: Current account balance
Jun 5.94 7.01 Increased services deficit on shrinking tourism receipts
(USD bn)
Australia: Trade balance (AUD mn) Jun 2024R 750.0 856 Moderation continues
Australia: RBA Statement on Monetary
AUD blues
Policy
Australia: Retail sales (% m/m) Jun 0.6 0.4 0.3 Strong Q2 suggests improvement in consumption growth
Malaysia: Exports (% y/y) Jun 32.46 25.00 10.00 June trade surplus surges amid weak imports
Preview of releases for the next week

Monday 07 August Period Prev 2 Prev 1 Latest Forecast Consensus
16:00 Taiwan: Exports (% y/y) Jul 9.3 8.4 13.0 14.6 10.0
China: Foreign reserves (USD bn) Jul 3029.5 3053.6 3056.8 3080.0 3074.9
Indonesia: Foreign Reserves (USD bn) Jul 123.2 125.0 123.1 123.0
Indonesia: GDP (% y/y) Q2 5.01 4.94 5.01 5.50 5.08
Taiwan: We expect exports to continue their robust growth on two extra working days as well as preparation for the iPhone
components ramp. That said, the production suspension in one of Taiwan Microns fabrication plants may have some impact on
DRAM shipments.
China: We expect FX reserves to rise by USD24bn to USD3080bn due to positive valuation effects from a weaker USD in July and
reduced capital outflows.
Indonesia: GDP growth recovery will be gradual as consumption and exports improve. Public sector under-spending likely to
reverse in H2 17.
Tuesday 08 August Period Prev 2 Prev 1 Latest Forecast Consensus

16:00 Taiwan: CPI (% y/y) Jul 0.1 0.6 1.0 0.9 0.9
China: Imports (% y/y) Jul 11.7 14.5 17.2 18.0 18.2
China: Exports (% y/y) Jul 7.5 8.3 11.3 10.0 11.0
China: Trade Balance (USD bn) Jul 38.0 40.4 42.8 43.3 45.2
Taiwan: Inflation is likely to stay mild, as the arrival of Typhoon Nesat had a limited impact on food prices. This, coupled with
lower fuel prices, is likely to keep headline inflation low. We see downside risks to our 2017 inflation forecast at 1.3%, in light of a
milder typhoon season this year.
4 August 2017 28
China: We forecast export growth to moderate to 10% y/y in July due to weaker new export orders and a high base, and import
growth to edge up to 18% given the rebound in commodity prices and a low base.
Wednesday 09 August Period Prev 2 Prev 1 Latest Forecast Consensus

07:00 Korea: Unemployment rate (%) Jul 4.0 3.6 3.8 3.8 3.8
09:30 China: CPI (% y/y) Jul 1.2 1.5 1.5 1.5 1.5
09:30 China: PPI (% y/y) Jul 6.4 5.5 5.5 5.8 5.6
Korea: We expect the unemployment rate to stay unchanged. The ongoing tourism drag from sharply lower Chinese visitors
amid poor sales for the auto manufacturing sector likely weighed on the labour market in July.
China: We expect CPI inflation to remain subdued at 1.5% on continued food deflation, and PPI inflation to edge higher to 5.8%
given the strong rebound in PMI input prices.
Thursday 10 August Period Prev 2 Prev 1 Latest Forecast Consensus

05:00 New Zealand: RBNZ official cash rate (%) Aug 1.75 1.75 1.75 1.75 1.75
09:00 Philippines: Total exports (% y/y) Jun 18.1 19.1 13.7 14.4 13.7
12:00 Malaysia: Industrial production (% y/y) Jun 4.6 4.2 4.6 4.0 3.6
16:00 Philippines: BSP policy rate (%) Aug 3.00 3.00 3.00 3.00 3.00
10-15 Aug China: M2 growth % (y/y) Jul 10.5 9.6 9.4 9.4 9.4
10-15 Aug China: New loans (CNY bn) Jul 1110.0 1110.0 1540.0 1540.0 800.0
10-15 Aug China: Aggregate Financing (CNY bn) Jul 1383.4 1065.9 1776.2 1780.0 1000.0
10-16 Aug India: Trade balance (USD bn) Jul -13.2 -13.8 -13.0 -13.0
New Zealand: With moderating inflation pressures and some weakness in employment, we expect the RBNZ to maintain a
neutral policy stance.
Philippines: We expect BSP to keep the policy rate on hold, despite faster growth in credit and a seemingly weak peso, and
maintain our forecast that the bank will start raising rates in Q4 with a 25bp increase. We expect trade growth momentum to
continue and export growth to edge up, but remain low due to a high base.
Malaysia: Growth momentum is likely to remain supportive amid a strong manufacturing performance.
China: We expect total social financing and new loans to decline in July due to seasonal effects and mortgage tightening
measures. M2 growth is likely to remain low at 9.4%, as financial deleveraging continues.
India: Merchandise trade deficit likely stayed range-bound in July.
Friday 11 August Period Prev 2 Prev 1 Latest Forecast Consensus

20:00 India: Industrial production (% y/y) Jun 3.8 2.8 1.7 0.8
Indonesia: Current account (USD bn) Q2 -5.0 -2.1 -2.4 -4.8 -3.2
India: We expect IP growth to stay subdued, in line with the soft core sector print for June.
Indonesia: Seasonal deterioration likely in the current account as dividend payments offset higher trade surplus.
Source: Bloomberg, Barclays Research
4 August 2017 29
OUTLOOK: EMERGING EUROPE, MIDDLE EAST AND NORTH AFRICA
Recoveries in Russia and Turkey gain pace

Liza Ermolenko The manufacturing PMI surveys for July were strong in both Russia and Turkey,
+44 (0) 20 7773 1571 pointing to robust growth rates at the start of Q3.
liza.ermolenko@barclays.com
Barclays, UK
Inflation in Russia and Turkey eased in July. While this clears the way for CBR to resume
rate cuts, CBT is likely to remain on hold given de-anchored inflation expectations.
Durukal Gun Rosstat is due to publish Russias preliminary Q2 GDP figure next week. We think
+44 (0) 20 3134 6279 growth accelerated to 2.0% y/y, up from 0.5% y/y in Q1.
durukal.gun@barclays.com
Barclays, UK Julys PMIs paint an upbeat picture of the region
The manufacturing PMIs for July, released early this week, suggest that the recoveries in
Brahim Razgallah Russia and Turkey remained on track, while growth continued to hold up in Central Europe.
+ 44 (0) 20 3555 4762
brahim.razgallah@barclays.com The Russian survey was particularly strong, rising to 52.7, up from 50.3 in June (Figure 1).
Barclays, UK Much of the increase in the headline index was driven by a pick-up in the new orders
component. The fact that new export orders rose only a little suggests that strengthening
Tomasz Wieladek domestic demand was the key factor behind last months improvement. In short, it looks
+44 (0) 20 3555 2336 like the recovery in the Russian economy continued to gain momentum at the start of Q3,
tomasz.wieladek@barclays.com helped by recovering domestic demand.
Barclays, UK
Meanwhile, although the Turkish manufacturing PMI dropped a little, it remained around
a historically high level, at 53.6 (vs. 54.7 in June). The survey has been overstating the true
Julys manufacturing PMIs strength of the manufacturing sector over the past few months (Figure 2). Julys fall seems
were strong for both Russia to be a reflection of the survey catching up with hard activity data. We still expect the
and Turkey combination of a fiscal stimulus, the recovery in the tourism sector and supportive external
demand to boost growth to 4.2% y/y in Turkey this year (up from 2.9% y/y in 2016).
Lastly, although the PMI surveys for Central Europe fell back across the board, in general
they still remained consistent with robust expansion in industrial sectors (for details see
EEMENA Manufacturing PMI: July's PMIs point to ongoing recovery in Russia and Turkey, 1
August 2017).
FIGURE 1 FIGURE 2
Russias manufacturing PMI points to continuing economic While the survey fell back in Turkey, it seems to be merely
recovery at the start of Q3 catching up with actual data
60 20 65 30
Russia PMI & Manufacturing Turkey PMI & Manufacturing
15
60 20
55
10
55
5 10
50
0 50
45 -5 0
45
-10
-10
40 40
-15
-20 35 -20
35
-25
30 -30
30 -30
08 09 10 11 12 13 14 15 16 17
08 09 10 11 12 13 14 15 16 17
Manuf. PMI Manufacturing (% y/y, 3m avg., RHS) Manuf. PMI Manufacturing (% y/y, 3m avg.)
4 August 2017 30
Inflation resumes downward trend in Russia, eases in Turkey

Russian inflation resumed its Following Junes surprise rise, which caused the central bank (CBR) to pause its easing cycle
downward trend in July after last month, inflation delivered another shock by falling sharply in July. The headline rate
Junes surprise rise came in at just 3.9% y/y, down from 4.4% y/y in June and well below expectations. The fall
in inflation was driven almost entirely by the unwinding of the food inflation spike as this
years harvest, which was delayed by around a month, had started to come in. Despite the
temporary nature of Junes increase in inflation, this appears to have already had an impact
on household inflation expectations, which edged up in July. With inflation now back on a
downward trend, we think that the CBR will resume its easing cycle at its next meeting on
15 September (see Russia: Inflation falls below target clearing way for rate cuts, 4 August).
Turkish inflation had a In Turkey, CPI inflation extended its downward trajectory, slowing to 9.8% y/y in July from
transitory decline to 9.8% y/y 10.9% y/y in June (see Turkey: Lower CPI, higher core, 3 August 2017). However, core
in July, will likely re-accelerate inflation momentum reversed its downward course (rising to 9.6% y/y), due to the weaker
to double digits from August TRY-basket led by EUR strength and inflationary pressures on services driven by growth
seeing its peak close to 11% in acceleration. Based on our core inflation model, we project core inflation will remain above
October 9% on average in H2 2017, before decelerating towards 8% handle in Q1 2018. The CBTs
Quarterly inflation report released yesterday (see Turkey: Hawkish inflation bias was
retained in CBT's Quarterly Inflation Report, 1 August 2017) also revealed CBTs discomfort
which argues for a tight with the underlying inflation trend in the near term. Julys retreat of CPI inflation into single
monetary policy stance digits is likely transitory, and we expect re-acceleration to double digits from August with
the contribution of unfavorable base effects. We expect CPI inflation to hover at double
digits, seeing its peak closer to 11% y/y in October, and then decelerating to single digits in
December (Barclays forecast: 9.3% y/y). This, coupled with de-anchored inflation medium-
term expectations, argues in favour of a tight monetary policy stance.
Next week: Russia Q2 GDP

We think that growth in the Rosstat is due to publish Russias preliminary Q2 GDP figure next week. We think this is
Russian economy accelerated likely to show that the economy grew by 2% y/y, up from 0.5% y/y in Q1 (Figure 4). Most
to 2% y/y in Q2 sectors of the economy have shown significant improvement. The rebound in construction
points to a continuing recovery in fixed investment. Whats more, the combination of easing
inflation and strong labour market conditions has continued to provide support to
consumers (for more see Russia activity data: Growth accelerates to around 2% y/y in Q2,
19 July 2017).
FIGURE 3 FIGURE 4
The headline inflation rate eased back in Russia in July Growth in the Russian economy appears to have accelerated
following Junes surprise pickup further in Q2; we think output expanded by 2% y/y
20 Consumer Prices (% y/y) 15
% y/y
18
10
16
14 5
12
0
10
8 -5
6
4 -10
2
-15
0 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18
Leading Activity Indicator GDP
4 August 2017 31
DATA REVIEW & PREVIEW: EMERGING EUROPE, MIDDLE EAST AND NORTH AFRICA
Liza Ermolenko, Durukal Gun, Brahim Razgallah, Tomasz Wieladek

June trade deficit narrowed m/m, while preliminary July trade
Turkey: Trade balance (USD bn) Jun -7.3 -6.0 -6.0
data suggests a rebound in deficit.
Poland: Preliminary CPI (% y/y) Jul 1.5 1.5 1.7 Polish CPI rose due to base effects and food price pressures.
Russia: Manufacturing PMI Jul 50.3 52.0 52.7 Recovery continued at the start of Q3.
Hungary: PMI Jul 57.2 56 54.2 Hungarian PMI fell, but we expect activity to remain strong.
Poland: Manufacturing PMI Jul 53.1 53.6 52.3 Polish PMI fell due to domestic demand.
Despite some moderation in PMI, economic confidence
Turkey: Manufacturing PMI Jul 54.7 55.1 53.6
increased in July
Russia: Composite PMI Jul 54.8 55.0 53.4 The drop in composite PMI is likely to be temporary.
Turkey: CPI (% y/y) Jul 10.9 9.8 9.8 Core inflation momentum accelerated due to EUR strength
Hungary: Retail trade IA (% y/y) Jun 5.5 5.7 6.0 Hungarian retail sales rose due to strong real wage growth.
Preview of upcoming data

Monday 07 Aug Period Prev 3 Prev 2 Prev 1 Forecast Consensus
08:00 Czech: Industrial output (% y/y) Jun 10.2 -2.5 8.1 - 7.0
08:00 Czech: Trade balance (CZK bn) Jun 23.1 11.5 14.3 - 18.0
14:00 Russia: Official reserve assets (USD bn) Jul 401.0 405.7 412.2 413 414.8
Tuesday 08 Aug Period Prev 3 Prev 2 Prev 1 Forecast Consensus
08:00 Turkey: Industrial production WDA (% y/y) Jun 2.6 6.7 3.5 - 3.6
08:00 Hungary: Preliminary trade balance (EUR bn) Jun 1.0 0.9 1.0 - 1.0
08:00 Hungary: CPI (% y/y) Jul 2.2 2.1 1.9 2.2 2.0
- Russia: Light vehicle car sales (% y/y) Jul 7.0 15.0 15.0 14.0 15.0
Turkey: Industrial production in June is likely to strengthen, echoing the uptick in PMI output component in June.
Hungary: We expect Hungarian CPI to increase due to labour shortages.
Russia: Consumer spending probably remained in decent shape in July as domestic demand continues to recover.
Wednesday 09 Aug Period Prev 3 Prev 2 Prev 1 Forecast Consensus

07:00 Romania: Trade balance (EUR bn) Jun -1.1 -1.0 -1.1 - -
08:00 Czech: CPI (% y/y) Jul 2.0 2.4 2.3 - 2.3
Friday 11 Aug Period Prev 3 Prev 2 Prev 1 Forecast Consensus
08:00 Turkey: Current account (USD bn) Jun -3.0 -3.6 -5.2 -3.6 -3.9
13:00 Poland: Current account (EUR bn) Jun -0.5 -0.2 -0.2 0.2 -0.8
13:00 Poland: Trade balance (EUR bn) Jun 0.1 0.2 -0.2 0.2 0.1
13:00 Poland: Final CPI (% y/y) Jul 1.9 1.5 1.7 1.7 -
14:00 Russia: Advanced GDP (% y/y) Q2 -0.4 0.3 0.5 2.0 1.5
14:00 Russia: Trade balance (USD bn) Jun 12.5 8.0 8.5 - 7.6
- Russia: Budget level YTD (RUB bn) Jul -511.1 -563.7 -489.1 - -580.0
Turkey: While Turkish current account deficit for June is expected to narrow, it will likely widen again in July as indicated by the
surge in preliminary July trade deficit.
Poland: We expect the current account and trade balance to rise due to strong exports on the back of real activity in Germany.
Russia: We think that GDP growth accelerated to 2.0% y/y in Q2 helped by a rebound in investment and consumer spending.
Source: Bloomberg, Haver Analytics
4 August 2017 32
OUTLOOK: LATIN AMERICA
A polarization in fiscal budget executions

Bruno Rovai LatAm fiscal balances appear mixed, as countries at the regions poles (Mexico and
+ 1 212 412 5762 Argentina) are on much better footing than those in the middle (Brazil and Colombia).
bruno.rovai@barclays.com
BCI, US
We expect the Brazilian government to announce in the next few weeks a change in
this years fiscal target, underlined by lack of advance in the reform agenda.
Alejandro Arreaza In contrast, we believe that Mexicos fiscal accounts are in relatively good shape,
+1 212 412 3021 even when not accounting for one-off revenues from central banks surplus.
alejandro.arreaza@barclays.com
BCI, US In Brazil, after a successful Q1 fiscal adjustment, data for Q2 are not encouraging. The
headline primary fiscal deficit widened to 2.8% of GDP, from 2.5% in Q1, due to increased
Marco Oviedo fiscal expenditures. Fiscal spending amounts to 19.9% of GDP in Q2, above the 19.6% level
+1 212 526 6840 in Q1. After adjusting for the economic cycle and one-off items, the structural fiscal deficit is
marco.oviedo@barclays.com at 3.3% of GDP, the largest on record and implying a fiscal impulse of 0.3pp in the quarter.
BCI, US The looser stance towards fiscal expenditures can be explained by political events in the
period, specifically the criminal charge faced by President Temer. Data show that it is
Pilar Tavella possible that fiscal resources were deployed by the government in order to bolster Temers
+ 1 212 412 5564 support expenditures that averaged -3.9% y/y in real terms from January to April of this
pilar.tavella@barclays.com year suddenly increased 10.7% in real terms, on average, between May and June.
BCI, US
Overall, this is a negative background to the imminent change in the fiscal target. This years
fiscal target was set to be missed, despite the governments recent actions to make the
target more credible. 4 The increase in tax on gasoline and diesel announced by the end of
July may not be enough, and the government is expected to announce in the next few
weeks a wider fiscal deficit target for this year. Our forecast for the 2017 primary balance is
a deficit of BRL161bn, considerably larger than the governments current BRL139bn.
In the medium term, the political instability of the past months also decreased the already-
low probability of a pension reform being approved by the Congress. With these conditions,
the fiscal spending ceiling has a high risk of being revoked in the next few years. All
together, the imminent fiscal target revision and stalled reforms could lead to rating
FIGURE 1 FIGURE 2
Primary fiscal balance in Brazil deteriorated in Q2 17 while primary fiscal balance has improved in Mexico
3 % of GDP % of GDP
2 55 4.0
50
1 3.0
45
0 40 2.0
35
-1 1.0
30
-2 25 0.0
20
-3 -1.0
15
-4 10 -2.0
99 01 03 05 07 09 11 13 15 17 1993 1996 1999 2002 2005 2008 2011 2014 2017
Headline Adjusted Structural Net public debt Primary balance
Source: STN. Barclays Research Source: SHCP, Barclays Research
4 Brazil: Fiscal target set to be missed in 2017, 6 February 2017
4 August 2017 33
downgrades in the coming weeks, especially as S&P has had Brazils sovereign rating on
CreditWatch since late May. Given that this status usually lasts for about 90 days, a rating
action could be sooner rather than later.
On the northern side, fiscal Mexicos public finances up to June have shown an important improvement, of 2.6pp of
balance of Mexico improved GDP. In annualized terms, the public balance went to 1.4% of GDP surplus from 1.2% of
even when not accounting for GDP deficit in June 2016. Without considering the sizable Banxico transfer, of around 1.5%
one-off revenues of GDP from its operational surplus, the improvement in the balance year-to-date has been
of 2.2pp of GDP. This has been the result of both stronger revenues (1.2pp of GDP) and
lower expenditures (1.0pp of GDP) during the period.
In particular, the primary balance has reached 2.5% of GDP in H1 17 from 0.1% in June
2016, also without Banxicos revenue. Including all revenues, public net debt has reached
44% of GDP in H1 17 from 50.1% at 2016 year-end. As these are partial results, more
expenditure should be implemented as the year-end approaches, when we expect public
finances to show a primary surplus of 1.9% of GDP with public debt reaching 48.3% of
GDP.
We believe the 2018 fiscal Next years budget is expected to include additional expenditure cuts, but no more than
budget should bring a credible 0.2% of GDP. Revenues should continue improving, thanks to efficiency gains and
expected improvement stabilization of oil prices and production. In this context, the government might propose a
budget with a primary surplus around 0.9% of GDP, which would allow debt to stabilize at
48% of GDP by 2018 year-end. This seems feasible even if Banxico does not provide extra
revenues next year.
At the southern cone, fiscal In Argentina, the primary fiscal deficit was 1.5% of GDP in H1 17, as measured by the
accounts have also been on Treasury on a year-to-date cumulated basis. The print was well within the primary fiscal
track in H1 17, and we are deficit target set for H1 17 of 2.0% of GDP, and it is in line with our expectations that this
more comfortable with 2018s years 4.2% of GDP primary deficit target should be met. Year-to-date, total revenues
fiscal goals in Argentina increased 32% y/y in H1 17, a bit above primary spending, which grew 31% y/y. The
increase in revenues was partly aided by the tax amnesty program. Nonetheless, tax
collection in July when there was no affect from the tax amnesty was also strong: it grew
31.8% compared to July 16. In H1 17, higher pension spending (39% y/y) and capital
spending (31% y/y) were compensated by cuts in all others spending, which grew 21% y/y
below revenues and inflation.
The primary deficit target for 2018 is 3.2% of GDP, which implies a more ambitious targeted
consolidation of 1pp of GDP. The government will need to implement large cuts in energy
and transportation subsidies to meet next years target in a context in which some policy
and pension spending dynamics will be working against fiscal consolidation. However,
given that by now the government has surpassed the target by 0.5pp, next years target can
be met more easily if fiscal accounts continue along their H1 17 trajectory.
In Colombia, revised fiscal Colombia recently revised its fiscal target, and this has revived concerns about a downgrade.
deficit target could be even It is now expecting a fiscal deficit of 3.6% of GDP. The country is particularly exposed to the
wider due to Venezuelas crisis escalating political crisis in neighbouring Venezuela. It is likely to receive a large flow of
migrants that could potentially have an important fiscal cost. If the deficit ends up closer to
last years (4.0% of GDP) or more, the probability of a Colombian downgrade would
significantly increase. Although costs are hard to estimate precisely, in a worst case
scenario, a potential refugee crisis could easily mean a deviation of 0.4% of GDP or more.
4 August 2017 34
DATA REVIEW & PREVIEW: LATIN AMERICA

Alejandro Arreaza, Marco Oviedo, Bruno Rovai, Pilar Tavella
Review of the weeks data releases

Mexico: Preliminary GDP, % y/y Q2 2.8 2.7 1.8 Strong services performance points to stable growth path
Accelerated from 2.7% y/y in May, with stronger performance
Argentina: Industrial production, % y/y Jun 2.7 - 6.6
by the auto industry (15.9% y/y).
Brazil: Trade balance, USD mn Jul 7195.0 - 6298 Exports continue to grow at double-digit rates (+14.9% y/y)
Peru: CPI inflation, % m/m Jul -0.16 0.19 0.20
Consistent with a 0.9% increase in Q2 17, slightly lower than the
Brazil: Industrial production, % y/y Jun 4.0 -1.3 0.5
1.1% growth in Q1
Mexico: Remittances, USD mn Jun 2586.4 - 2417 Consistent with a 4.5% y/y increase
Uruguay: CPI inflation, % m/m Jul 0.15 - 0.32 Consistent with 5.24% y/y
Preview of the week ahead

Saturday 5 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus
13:00 Colombia: CPI inflation, % m/m Jul 0.47 0.23 0.11 0.09 0.12
15:00 Argentina: CPI inflation, % m/m Jul 2.66 1.43 1.19 2.0 -
Argentina CPI inflation: Monthly inflation should accelerate, due to announced increases in gasoil, healthcare, and cigarettes
prices. Nonetheless, in y/y terms, it should remain stable at 21.9% y/y.

8:00 Brazil: IPCA inflation, % m/m Jul 0.14 0.31 -0.23 0.19 0.17
9:00 Mexico: CPI inflation, % m/m Jul 0.12 -0.12 0.25 0.29 -
9:00 Mexico: CPI core inflation, % m/m Jul 0.45 0.28 0.30 0.26 -
Brazil IPCA inflation: Monthly inflation should accelerate, due to regulated prices increases (0.73% m/m), mainly electric energy
and gasoline. Nonetheless, in y/y terms, it should continue to move down, to 2.7% from 3.0% in June.
Mexico CPI inflation: We expect a low print in the second half (0.07% 2w/2w), driven by a mild core inflation print and no
pressures coming from the non-core component. Annual inflation should remain at 6.3% y/y, with core inflation at 4.9% y/y.

- Costa Rica: Econ. activity index, % y/y Jun 3.5 3.7 3.9 - -
14:00 Mexico: Overnight rate, % Aug 7.00 7.00 7.00 7.00 -
19:00 Peru: Reference rate, % Aug 3.75 3.75 3.75 3.50 -
Mexico Overnight rate: The minutes from the previous meeting made clear that the board consensus is to pause; hence, we
expect the rate to remain at 7.00% this time. We expect a neutral tone, derived from an improvement in the financial sectors
performance and a reduction in risks, counterbalanced by stronger-than-expected growth in the economy and tightness in the
labor market.

9:00 Mexico: Industrial production, % y/y Jun 3.2 -4.2 1.0 0.5 -
13:00 Uruguay: Industrial production, % y/y Jun -11.6 -16.1 -16.0 - -
14:00 Colombia: Banrep meeting minutes Jul
Mexico industrial production: We estimate a 0.3% m/m sa decline, as a result of the decline in car production (-3.5% m/m sa)
and oil output (-1.2% m/m sa), partially offset by the positive expansion in the US counterpart (0.2%). However, the preliminary
GDP report suggests that risks are to the upside.
Week 5 - 11 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

- Peru: Trade balance, USD mn Jun 133.7 120.8 236.0 - -
4 August 2017 35
COUNTRY SNAPSHOT: AUSTRALIA

2016 2017 2018 Calendar year
% change Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016E 2017E 2018E
Real GDP (% chg, q/q) 0.9 0.7 -0.4 1.1 0.3 0.4 0.9 0.8 0.8 0.8 0.8 0.9
Real GDP (% chg, y/y) 2.5 3.1 1.8 2.4 1.7 1.4 2.7 2.3 2.8 3.2 3.1 3.3 2.4 2.5 2.0 3.1
Private consumption (% y/y) 3.0 2.8 2.2 2.5 2.3 2.3 2.5 2.6 3.0 3.0 3.0 3.0 2.7 2.6 2.4 3.0
Public consumption (% y/y) 3.9 4.7 4.5 2.9 2.9 3.0 2.8 2.7 2.6 2.6 2.5 2.4 3.5 4.0 2.9 2.5
Investment (% y/y) -3.8 -3.0 -3.1 -0.6 -0.4 0.5 1.7 1.7 1.7 1.7 2.0 2.0 -3.0 -2.6 0.9 1.9
Inventories contribution (pp) -0.4 0.2 0.5 0.0 0.6 0.3 0.2 0.2 0.3 0.4 0.4 0.3 0.2 0.1 0.3 0.4
Exports (% y/y) 4.8 10.1 6.6 10.2 5.6 6.0 7.0 8.0 5.5 4.5 5.0 5.0 6.0 7.9 6.7 5.0
Imports (% y/y) -2.8 -0.7 1.3 3.1 7.9 5.5 5.5 6.0 3.0 4.0 4.0 3.0 2.0 0.2 6.2 3.5
Net exports contribution (pp) 1.6 2.1 1.1 1.4 -0.4 0.1 0.3 0.5 0.5 0.1 0.3 0.5 0.7 1.5 0.1 0.4
Nominal GDP (% chg, q/q) 0.8 1.4 0.6 3.2 2.3 1.0 1.5 1.4 1.3 1.3 1.3 1.5 1.8 3.6 7.3 5.5
Unemployment rate (end, %) 5.7 5.8 5.6 5.8 5.9 5.6 5.6 5.6 5.5 5.4 5.4 5.3 6.0 5.7 5.6 5.4
CPI inflation (y/y) 1.3 1.0 1.4 1.5 2.1 1.9 2.0 2.0 2.2 2.3 2.2 2.1 1.5 1.3 2.0 2.2
Underlying inflation (y/y) 1.6 1.5 1.5 1.5 1.8 1.8 1.9 1.9 2.1 2.1 2.1 2.1 2.2 1.5 1.9 2.1
Current account (% GDP) -3.5 -3.8 -2.6 -0.8 -0.7 -1.5 -1.8 -2.0 -2.0 -2.5 -2.5 -3.0 -4.7 -2.7 -1.5 -2.5
RBA cash rate (period end, %) 2.00 1.75 1.50 1.50 1.50 1.50 1.50 1.50 1.50 1.75 2.00 2.25 2.00 1.50 1.50 2.25
Source: Australian Bureau of Statistics, Reserve Bank of Australia, Barclays Research
COUNTRY SNAPSHOT: BRAZIL

2016 2017 2018 Calendar year average
% change q/q saar
(unless otherwise stated) Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP -4.0 -1.3 -2.3 -2.2 4.3 0.4 0.0 1.6 2.2 1.8 1.6 1.5 -3.8 -3.6 0.5 1.5
Private consumption -4.7 -4.0 -1.1 -1.9 -0.6 1.1 0.0 1.0 1.4 1.2 1.0 1.0 -3.9 -4.2 -0.6 1.0
Investment -6.1 0.4 -9.3 -6.1 -6.1 8.2 7.8 2.0 3.5 3.8 5.3 4.1 -13.9 -10.2 -1.0 4.3
Net exports (contr, % y/y) 2.9 1.6 0.4 0.4
Industrial output (PA) -9.2 5.2 -1.7 -2.8 4.7 1.3 0.2 1.9 2.9 2.6 2.3 2.1 -8.2 -6.8 1.1 2.1
CPI inflation (% y/y)* 9.4 8.8 8.5 6.3 4.6 3.0 2.7 3.3 3.7 4.6 4.4 4.3 10.7 6.3 3.3 4.3
CPI inflation (% y/y, PA) 10.1 9.1 8.7 7.0 4.9 3.6 2.6 3.0 3.6 4.2 4.5 4.3 9.0 8.7 3.5 4.2
Unemployment rate % (PA) 10.1 10.9 11.6 12.3 13.1 13.4 13.2 12.2 11.5 10.8 10.6 10.3 8.3 11.3 13.0 10.8
Key central bank rate (EOP)* 14.25 14.25 14.25 13.75 12.25 10.25 8.50 8.25 8.25 8.25 8.25 8.25 14.25 13.75 8.25 8.25
Current account (% GDP)* -3.3 -1.3 -1.2 -1.5
Government balance (% GDP)* -10.2 -9.0 -7.9 -7.5
Gross public debt (% GDP)* 65.5 69.5 75.3 79.1
Gross external debt (% GDP)* 37.0 37.3 36.6 39.4
Note: *End of period for quarters and years. Source: IBGE, BCB, National Treasury, Barclays Research
4 August 2017 36
COUNTRY SNAPSHOT: CHINA

% change y/y Q1 Q2 Q3 Q4 Q1E Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP 6.7 6.7 6.7 6.8 6.9 6.9 6.8 6.7 6.5 6.4 6.3 6.4 6.9 6.7 6.8 6.4
Real GDP (q/q, saar) 6.6 7.1 6.8 6.6 7.3 6.9 6.5 6.3 6.1 6.6 6.4 6.3
Real GDP (% y/y, YTD) 6.7 6.7 6.7 6.7 6.9 6.9 6.9 6.8 6.5 6.4 6.4 6.4
Consumption* (pp) 5.6 4.9 4.8 4.3 5.3 4.4 4.3 4.0 4.2 4.2 4.1 4.0 4.1 4.3 4.0 4.0
Investment* (pp) 2.5 2.5 2.5 2.8 1.3 2.3 2.3 2.5 2.3 2.3 2.3 2.3 2.9 2.8 2.5 2.3
Net exports contribution* (pp) -1.4 -0.7 -0.5 -0.5 0.3 0.3 0.3 0.3 0.0 0.0 0.0 0.1 -0.1 -0.5 0.3 0.1
Industrial output 5.9 6.1 6.1 6.1 6.7 6.9 6.3 6.2 6.0 6.0 6.0 5.9 6.2 6.0 6.5 6.0
CPI inflation 2.1 2.1 1.7 2.2 1.4 1.4 2.9 2.9 2.5 2.4 2.1 2.0 1.4 2.0 2.2 2.3
Unemployment rate (%) 4.0 4.1 4.1 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4.0 4 4 4
Current account (% GDP) 1.6 2.3 2.4 0.4 0.7 2.1 2.0 0.8 0.5 1.9 1.1 1.6 2.7 1.7 1.5 1.4
Government balance (% GDP) -2.4 -2.9 -3.3 -3.5
General government debt ( % GDP) 42.9 46.3 49.9 52.6
Key CB rate (period end, %) 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35 4.35
Note: All numbers are expressed in y/y % change unless otherwise specified. *Contributions by GDP expenditure components are all reported as year to date
numbers officially. Source: Barclays Research
COUNTRY SNAPSHOT: EURO AREA

% change q/q Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP 0.5 0.3 0.4 0.6 0.5 0.6 0.5 0.5 0.4 0.5 0.5 0.5 ... ... ... ...
Real GDP (saar) 2.1 1.4 1.6 2.4 2.0 2.3 2.0 1.8 1.7 1.9 2.0 2.0 ... ... ... ...
Real GDP (y/y) 1.7 1.7 1.7 1.9 1.9 2.1 2.2 2.1 2.0 1.9 1.8 1.9 1.9 1.7 2.1 1.9
Private consumption 0.6 0.5 0.4 0.4 0.4 0.4 0.4 0.4 0.3 0.4 0.4 0.3 1.8 2.0 1.6 1.4
Public consumption 0.7 0.3 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.2 0.2 1.3 1.8 1.1 1.1
Investment 0.2 2.7 -0.1 1.4 -0.5 0.6 0.6 0.7 0.8 1.2 1.3 1.4 2.9 4.1 2.1 3.7
Inventories contribution (pp) -0.1 -0.3 0.2 0.1 0.0 -0.2 -0.1 -0.1 0.0 0.0 0.0 0.0 -0.1 -0.1 -0.1 -0.1
Final dom. demand cont. (pp) 0.6 0.9 0.2 0.6 0.2 0.4 0.4 0.4 0.4 0.5 0.5 0.5 1.9 2.4 1.6 1.9
Net exports contribution (pp) 0.0 -0.2 0.0 -0.1 0.4 0.4 0.2 0.1 0.0 0.0 0.0 0.0 0.1 -0.4 0.6 0.2
Industrial output (ex construct.) 0.8 -0.2 0.5 0.7 0.2 0.4 0.3 0.2 0.3 0.4 0.4 0.4 2.0 1.3 1.3 1.3
Employment (q/q) 0.3 0.4 0.3 0.4 0.4 0.4 0.3 0.3 0.3 0.3 0.3 0.3 1.0 1.4 1.5 1.2
Unemployment rate % 10.3 10.1 9.9 9.7 9.5 9.2 9.0 8.8 8.6 8.5 8.3 8.2 10.9 10.0 9.1 8.4
CPI inflation y/y 0.0 -0.1 0.3 0.7 1.8 1.5 1.3 1.2 0.9 1.2 1.3 1.4 0.0 0.2 1.4 1.2
Core CPI (ex food/energy) y/y 1.0 0.8 0.8 0.8 0.8 1.1 1.1 1.1 1.1 1.2 1.2 1.3 0.8 0.9 1.0 1.2
Nominal GDP (y/y) 3.1 2.6 3.3 3.0
Current account % GDP 3.6 4.0 3.5 2.8 3.3 3.7 3.9 4.0 4.0 4.0 3.9 3.9 3.2 3.5 3.7 3.9
Government balance % GDP -2.1 -1.5 -1.3 -1.2
Gross public debt % GDP 92.5 91.3 91.0 89.0
Refi rate (period end %) 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.05 0.00 0.00 0.00
Note: All numbers expressed in % q/q unless otherwise specified. Source: Barclays Research
4 August 2017 37
COUNTRY SNAPSHOT: FRANCE

% change q/q Q1 Q2 Q3 Q4 Q1 Q2 Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP 0.6 -0.1 0.2 0.5 0.5 0.5 0.5 0.5 0.4 0.5 0.5 0.6
Real GDP (saar) 2.3 -0.3 0.7 2.0 2.2 2.2 2.0 2.1 1.7 1.8 2.1 2.2
Real GDP (y/y) 1.2 1.2 0.9 1.2 1.1 1.8 2.1 2.1 2.0 1.9 1.9 2.0 1.0 1.1 1.8 1.9
Investment (GFCI) 1.1 0.1 0.1 0.7 1.2 0.5 0.7 0.8 1.1 1.2 1.5 1.5 0.9 2.7 2.8 4.3
Final domestic demand 1.0 0.2 0.1 0.5 0.4 0.4 0.5 0.5 0.5 0.6 0.6 0.7 1.2 2.0 1.5 2.2
Inventories (pp) -0.4 -0.6 0.7 -0.2 0.7 -0.6 0.0 0.0 0.0 0.0 0.0 0.0 0.3 -0.1 0.3 -0.1
Net exports (pp) -0.1 0.3 -0.7 0.1 -0.6 0.8 0.0 0.0 -0.2 -0.2 -0.1 -0.1 -0.5 -0.8 -0.1 -0.2
Exports 0.2 0.3 0.7 1.1 -0.7 3.1 1.5 1.0 1.1 1.1 1.2 1.3 4.0 1.9 3.9 5.2
Imports 0.4 -0.7 2.8 0.6 1.2 0.2 1.3 0.9 1.5 1.5 1.5 1.6 5.5 4.2 3.8 5.3
Employment 0.2 0.2 0.2 0.2 0.3 0.3 0.3 0.3 0.3 0.3 0.3 0.4 0.2 0.7 1.1 1.3
HICP inflation (y/y) 0.0 0.1 0.4 0.7 1.5 1.0 0.8 0.9 0.6 1.0 1.2 1.2 0.1 0.3 1.1 1.0
Core HICP ex food/energy (y/y) 0.7 0.6 0.6 0.6 0.5 0.5 0.6 0.7 0.7 0.8 0.9 1.0 0.6 0.6 0.6 0.8
Nominal GDP (y/y) 2.1 1.5 2.5 3.9
Current account % GDP -0.5 -0.8 -1.1 -1.1 -1.2 0.1 0.1 0.1 0.0 -0.2 -0.4 -0.5 -0.4 -0.9 -0.2 -0.3
Government gross debt % GDP 95.3 95.7 96.5 95.7
Note: All numbers expressed in % q/q unless otherwise specified. Source: Eurostat, INSEE, Barclays Research
COUNTRY SNAPSHOT: GERMANY

Real GDP 0.7 0.5 0.2 0.4 0.6 0.6 0.5 0.4 0.4 0.5 0.5 0.5
Real GDP (saar) 2.9 1.9 0.7 1.7 2.4 2.4 2.1 1.6 1.7 1.8 1.9 2.2
Real GDP (y/y) 1.8 1.8 1.7 1.8 1.7 1.8 2.2 2.1 2.0 1.8 1.7 1.9 1.5 1.8 1.9 1.8
Investment (GFCI) 1.5 -1.3 -0.1 0.4 1.7 0.3 0.1 0.1 0.8 1.5 1.5 1.6 1.1 2.0 2.0 3.3
Inventories (pp) -0.4 0.0 0.3 0.4 -0.4 0.0 -0.1 -0.1 0.0 -0.1 0.0 0.0 -0.4 -0.1 -0.1 -0.2
Net exports (pp) 0.1 0.4 -0.4 -0.2 0.5 0.3 0.3 0.1 0.0 -0.1 -0.1 0.0 0.1 -0.3 0.6 0.2
Exports 1.6 1.1 -0.3 1.7 1.3 1.2 1.3 0.9 1.0 1.1 1.1 1.0 4.6 2.5 4.5 4.3
Imports 1.5 0.2 0.6 2.5 0.4 0.7 0.7 0.7 1.2 1.5 1.5 1.1 5.0 3.7 3.7 4.5
Employment 0.3 0.3 0.3 0.4 0.2 0.1 0.0 0.0 0.1 0.1 0.1 0.1 0.9 1.2 0.8 0.2
HICP inflation (y/y) 0.1 0.0 0.4 1.0 1.9 1.6 1.2 0.9 0.9 1.1 1.4 1.5 0.1 0.4 1.4 1.2
Nominal GDP (y/y) 3.5 3.3 3.5 3.9
Government balance % GDP 0.7 0.8 0.7 0.0
Note: All numbers expressed in % q/q swda, unless otherwise specified. Annual historical data are computed using quarterly aggregation and could therefore differ
from other statistics sources. Source: Eurostat, Destatis, Barclays Research
4 August 2017 38
COUNTRY SNAPSHOT: INDIA

FY 15-16 FY 16-17 FY 17-18 Fiscal year average
% change y/y Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2015-16 2016-17 2017-18 2018-19
Real GDP 7.6 8.0 7.2 9.1 7.9 7.5 7.0 6.1 7.6 7.7 8.0 8.0 8.0 7.1 7.8 7.9
Fixed investment 4.3 3.4 10.1 8.3 7.4 3.0 1.7 -2.1 6.0 6.3 6.3 6.5 6.5 2.4 6.3 6.6
CPI inflation (average) 5.1 3.9 5.3 5.3 5.7 5.2 3.7 3.6 2.4 2.7 4.1 5.0 4.9 4.5 3.5 4.8
Current account (% GDP) -1.1 -0.7 -1.2 -1.3
General govt balance
-6.5 -6.2 -6.0 -6.0
(% GDP)
Gross public debt
66.0 66.0 65.5 65.5
(% GDP)
Repo rate (period end, %) 7.25 6.75 6.75 6.75 6.50 6.50 6.25 6.25 6.25 6.00 6.00 6.00 6.75 6.25 6.00 6.00
Cash reserve ratio
4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00
(period end, %)
Note: Values expressed in % y/y unless otherwise specified. Indias fiscal year begins in April and ends in March.
Source: Barclays Research
COUNTRY SNAPSHOT: ITALY

Real GDP 0.4 0.1 0.3 0.3 0.4 0.3 0.2 0.2 0.2 0.2 0.3 0.3
Real GDP (saar) 1.4 0.5 1.2 1.4 1.8 1.1 0.7 0.9 0.9 1.0 1.1 1.2
Real GDP (y/y) 1.1 0.8 1.0 1.1 1.2 1.3 1.2 1.1 0.9 0.9 1.0 1.0 0.7 1.0 1.2 0.9
Public consumption 0.8 -0.2 -0.2 0.6 0.5 0.1 0.2 0.1 0.1 0.1 0.1 0.1 -0.7 0.6 1.0 0.4
Investment 0.9 0.4 1.5 1.2 -0.8 0.0 -0.1 0.0 0.2 0.5 0.7 0.7 1.4 3.1 0.8 1.0
Inventories (pp) -0.2 -0.3 0.1 0.0 0.4 -0.2 -0.2 -0.1 0.1 0.1 0.1 0.1 0.2 -0.4 0.1 -0.1
Net exports (pp) 0.2 0.0 -0.2 -0.1 -0.3 0.2 0.2 0.2 0.1 0.0 0.0 0.0 -0.5 -0.1 -0.1 0.4
Exports -0.6 2.2 0.3 1.9 0.7 1.7 1.2 0.8 0.6 0.6 0.6 0.6 4.1 2.6 4.9 3.0
Imports -1.2 2.2 1.0 2.3 1.6 1.0 0.6 0.2 0.3 0.5 0.5 0.5 6.7 3.1 5.6 1.9
Employment 0.3 0.5 -0.1 0.4 0.3 0.1 0.1 0.1 0.1 0.2 0.2 0.2 0.7 1.3 0.8 0.5
HICP inflation (y/y) 0.0 -0.3 -0.1 0.2 1.3 1.6 1.3 1.4 1.2 1.2 1.3 1.3 0.1 -0.1 1.4 1.2
Nominal GDP (y/y) 1.3 1.8 2.2 2.4
Note: All numbers expressed in % q/q unless otherwise specified. Source: Eurostat, Istat, Barclays Research
4 August 2017 39
COUNTRY SNAPSHOT: JAPAN

Real GDP 0.6 0.4 0.3 0.3 0.3 0.6 0.3 0.2 0.3 0.2 0.4 0.4
Real GDP (q/q, saar) 2.5 1.6 1.0 1.4 1.0 2.5 1.3 0.9 1.0 1.0 1.4 1.7
Real GDP (y/y) 0.5 0.9 1.1 1.6 1.3 1.5 1.5 1.4 1.4 1.0 1.1 1.3 1.1 1.0 1.4 1.2
Private consumption 0.3 0.2 0.4 0.0 0.3 0.5 0.2 0.1 0.1 0.1 0.1 0.1 -0.4 0.4 1.0 0.5
Public consumption 1.4 -1.2 0.2 0.0 -0.0 0.2 0.2 0.2 0.2 0.3 0.3 0.3 1.7 1.3 0.1 0.9
Residential investment 1.2 3.1 2.6 0.2 0.3 0.8 -0.5 0.3 1.6 0.2 -0.4 0.4 -1.6 5.6 2.8 1.8
Public investment -0.3 0.7 -1.3 -3.0 -0.1 4.3 2.4 1.0 -1.8 -1.0 0.0 0.2 -2.1 -3.0 1.7 0.5
Capital Investment -0.1 1.3 -0.2 1.9 0.6 1.3 0.5 0.5 0.6 0.5 0.5 0.5 1.1 1.3 3.7 2.3
Net exports (q/q cont.) 0.5 -0.1 0.4 0.4 0.1 -0.4 0.1 0.0 0.1 0.1 0.2 0.2 0.4 0.7 0.3 0.3
Exports 0.5 -1.4 1.9 3.4 2.1 -0.3 1.0 0.5 0.8 0.9 1.3 1.5 2.9 1.2 5.7 3.3
Imports -2.0 -1.1 -0.2 1.3 1.4 1.8 0.6 0.5 0.2 0.2 0.3 0.3 0.8 -2.3 3.8 1.7
Ch. Inventories (q/q cont.) -0.3 0.3 -0.3 -0.2 -0.1 0.3 -0.1 -0.0 -0.0 -0.0 -0.0 -0.0 0.6 -0.3 -0.2 0.0
Nominal GDP 0.9 0.2 0.1 0.4 -0.3 0.9 0.5 0.6 0.4 0.4 0.5 0.8 3.2 1.3 1.2 2.1
Industrial output -0.9 0.2 1.6 1.9 0.2 1.9 1.2 1.1 0.8 0.8 1.1 1.3 -1.2 -0.2 4.7 4.4
Employment 0.4 0.1 0.6 0.0 0.6 0.4 0.2 0.2 0.2 0.3 0.2 0.2 0.4 1.1 1.4 0.9
Unemployment rate (%) 3.2 3.2 3.0 3.1 2.9 2.9 2.8 2.8 2.7 2.7 2.7 2.6 3.4 3.1 2.8 2.7
CPI inflation (y/y) -0.1 -0.4 -0.5 -0.3 0.2 0.4 0.7 0.7 0.5 0.3 0.5 0.7 0.5 -0.3 0.5 0.5
Core CPI ex food/energy (y/y) 0.6 0.5 0.2 0.1 -0.1 -0.2 -0.0 0.0 0.2 0.2 0.3 0.4 1.0 0.3 -0.1 0.3
Current account (% GDP) 3.9 3.5 3.6 3.8 4.0 3.5 3.7 3.6 3.6 3.6 3.8 3.9 3.1 3.7 3.7 3.7
Overnight call rate (% EOP) -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 -0.10 0.00 0.10 -0.10 -0.10 0.00
BoJ 10y yield target (% EOP) - - 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.10 0.10 - 0.00 0.00 0.10
Note: Central bank rates are for end of period, %. Source: BoJ, Cabinet Office, METI, MIC, MoF, Barclays Research
COUNTRY SNAPSHOT: MEXICO

% change q/q saar
(unless otherwise stated) Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP 1.8 0.2 4.4 2.9 2.7 2.4 1.6 2.4 2.4 2.8 2.8 2.8
Real GDP (% y/y) 2.2 2.6 2.0 2.3 2.8 1.8 2.4 2.3 2.2 2.3 2.6 2.7 2.6 2.3 2.3 2.5
Public consumption 0.3 3.9 1.2 0.8 -2.0 0.8 1.1 1.5 1.6 1.6 1.6 1.6 2.3 1.2 0.4 1.5
Investment 11.2 -7.2 0.0 0.9 -2.8 1.9 2.3 2.7 2.9 2.9 2.9 2.9 4.3 0.1 0.4 2.7
Exports -4.3 -8.8 16.8 5.6 18.9 7.1 6.7 6.3 6.1 6.1 6.1 6.1 10.4 1.2 10.0 6.3
Imports -5.7 -1.3 12.2 -2.0 27.4 4.9 5.3 5.7 5.9 5.9 5.9 5.9 8.6 1.1 9.2 5.7
Industrial output 1.1 -2.3 -0.6 1.8 1.2 1.3 1.4 1.6 3.2 2.8 2.4 2.4 1.0 0.0 0.9 2.4
Nominal GDP (% y/y) 5.6 6.6 7.1 8.6 11.0 5.0 5.9 5.8 6.8 5.7 5.8 5.9 5.8 7.0 6.9 6.1
CPI inflation (% y/y, avg) 2.7 2.6 2.8 3.2 5.0 6.1 6.2 6.1 4.4 3.3 3.0 3.1 2.7 2.8 5.9 3.4
Unemployment rate (%, avg) 4.2 3.9 3.7 3.7 3.6 3.5 3.3 3.3 3.3 3.3 3.2 3.2 4.3 3.9 3.4 3.2
Key central bank rate (%, eop)* 3.75 4.25 4.75 5.75 6.50 7.00 7.00 7.00 7.00 7.00 7.00 7.00 3.25 5.75 7.00 7.00
Current account (% GDP)* -2.5 -2.1 -1.8 -1.5
Government balance (% GDP)* -3.5 -2.6 -1.4 -1.9
Gross public debt (% GDP)* 46.2 50.8 48.9 48.0
Gross external debt (% GDP)* 36.5 40.5 38.7 37.6
Note: *End of period for quarters and years. Source: INEGI, Banxico, SHCP, Barclays Research
4 August 2017 40
COUNTRY SNAPSHOT: SPAIN

Real GDP 0.8 0.8 0.7 0.7 0.8 0.9 0.8 0.7 0.6 0.6 0.5 0.5
Real GDP (saar) 3.1 3.4 2.8 2.8 3.3 3.8 3.4 2.8 2.5 2.5 2.2 2.2
Real GDP (y/y) 3.4 3.4 3.2 3.0 3.0 3.1 3.3 3.3 3.1 2.8 2.5 2.3 3.2 3.2 3.2 2.7
Public consumption 0.2 -0.6 0.5 -0.2 0.3 0.3 0.3 0.2 0.2 0.2 0.2 0.2 2.0 0.8 0.7 0.9
Investment 0.4 1.4 -0.1 0.5 2.0 1.6 1.4 1.0 1.2 1.2 1.4 1.6 6.0 3.1 4.9 5.1
Inventories (pp) 0.0 -0.1 0.1 0.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.1 0.2 0.0 0.0
Net exports (pp) 0.1 0.3 0.2 0.1 0.2 0.2 0.2 0.2 0.1 0.1 0.0 -0.1 0.0 0.5 0.8 0.4
Exports 0.2 3.4 -1.2 2.0 4.0 2.9 2.5 1.5 1.2 1.1 1.0 1.0 4.9 4.4 9.9 6.0
Imports -0.2 2.6 -2.0 1.8 3.8 2.7 2.3 1.2 1.1 1.0 1.3 1.4 5.6 3.3 8.6 5.7
Employment 0.8 0.6 0.7 0.4 0.7 0.9 0.6 0.4 0.6 0.5 0.5 0.5 2.5 2.7 2.6 2.1
HICP inflation (y/y) -0.8 -1.0 -0.3 0.8 2.7 2.1 1.7 1.4 1.0 1.6 1.8 1.7 -0.6 -0.3 2.0 1.5
Nominal GDP (y/y) 3.7 3.6 4.4 3.9
Note: All numbers expressed in % q/q unless otherwise specified. Source: Eurostat, INE, Barclays Research
COUNTRY SNAPSHOT: SOUTH KOREA

% Change Q1 Q2 Q3 Q4 Q1 Q2E Q3E Q4E Q1E Q2E Q3E Q4E 2015 2016 2017E 2018E
Real GDP (q/q, saar) 2.0 3.7 1.9 2.0 4.3 2.4 3.2 2.1 2.6 3.0 3.4 2.4
Real GDP (y/y) 2.9 3.4 2.6 2.4 2.9 2.7 2.9 3.0 2.6 2.7 2.8 2.9 2.8 2.8 2.9 2.8
GFCF 2.9 5.2 5.3 7.1 10.4 10.0 5.5 4.1 5.0 4.0 2.5 3.0 5.1 5.2 7.3 3.6
Exports 1.3 2.6 3.4 1.2 3.9 -0.1 3.8 3.2 3.5 3.1 3.7 3.5 -0.1 2.1 2.7 3.5
Imports 3.4 4.8 6.5 3.3 9.9 6.5 2.9 1.9 -0.8 -2.0 2.6 1.9 2.1 4.5 5.2 0.4
Industrial output -0.3 0.8 0.5 2.8 3.7 0.6 1.8 1.8 0.6 3.5 2.5 2.4 -0.3 1.0 2.0 2.3
CPI inflation (y/y) 0.9 0.8 0.7 1.5 2.1 1.9 2.0 1.8 1.5 1.9 2.2 2.1 0.7 1.0 2.0 1.9
Current account (% GDP) 7.7 6.9 6.0 5.7
Consolidated fiscal balance*
-2.4 -1.4 -1.7 -2.0
(% GDP)
Key CB rate (period end, %) 1.50 1.25 1.25 1.25 1.25 1.25 1.25 1.25 1.50 1.50 1.50 1.50 1.50 1.25 1.25 1.50
Note: All numbers expressed in y/y basis unless otherwise specified. *Consolidated fiscal balance is shown after excluding social security funds.
4 August 2017 41
COUNTRY SNAPSHOT: UNITED KINGDOM

% Change q/q Q1 Q2 Q3 Q4 Q1 F Q2 F Q3 F Q4 F Q1 F Q2 F Q3 F Q4 F 2015 2016 2017F 2018F
Real GDP 0.2 0.6 0.5 0.7 0.2 0.3 0.2 0.2 0.4 0.4 0.4 0.4
Real GDP (saar) 0.8 2.4 2.0 2.8 0.9 1.2 1.0 0.8 1.5 1.6 1.5 1.4
Real GDP (y/y) 1.6 1.7 2.0 1.9 2.0 1.7 1.4 1.0 1.1 1.2 1.4 1.5 2.2 1.8 1.5 1.3
Public consumption 0.4 0.2 -0.1 0.0 0.7 0.5 0.5 0.5 0.5 0.4 0.5 0.5 1.3 0.8 1.4 1.8
Investment 0.0 0.2 0.6 0.1 1.0 -0.2 0.0 0.3 0.4 0.4 0.5 0.5 3.4 0.5 1.4 1.2
Inventories (pp) -0.2 -0.1 0.2 -0.3 -0.1 0.0 -0.1 -0.1 0.1 0.1 0.1 0.0 -0.2 -0.5 -0.3 0.1
Net exports (pp) -1.1 0.3 -1.4 1.7 -0.8 0.1 0.1 0.1 0.1 0.0 0.0 0.0 0.0 -0.4 0.0 0.2
Nominal GDP (y/y) 2.9 3.0 3.7 4.8 4.4 4.3 4.2 3.5 3.4 3.2 3.3 3.4 2.8 3.6 4.1 3.4
Employment (Mn) 31.6 31.7 31.8 31.8 31.9 32.1 32.0 32.0 32.0 31.9 31.9 31.9 31.3 31.7 32.0 31.9
Employment growth 0.1 0.5 0.1 0.1 0.4 0.4 -0.2 0.0 -0.1 -0.2 0.0 0.1 1.7 1.4 0.9 -0.2
CPI inflation (y/y) 0.3 0.4 0.7 1.2 2.1 2.7 2.6 2.6 2.3 2.0 1.9 1.9 0.0 0.7 2.5 2.0
Current account (% GDP) -5.4 -4.3 -5.3 -2.4 -3.0 -3.2 -3.0 -2.9 -2.8 -2.8 -2.8 -2.7 -4.3 -4.4 -3.1 -2.8
Government debt (% GDP) 83.5 88.1 90.5 91.6
Bank Rate (EOP) 0.50 0.50 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.25 0.50 0.25 0.25 0.25
Note: Government balance is fiscal year forecasts, eg, 2016= FY 16/17, and defined as public sector net borrowing excluding financial interventions. Government debt
is fiscal year forecasts, eg, 2016 = FY 16/17, and defined as public sector net debt. Source: ONS, Barclays Research
COUNTRY SNAPSHOT: UNITED STATES

2016 2017 2018 Calendar year avg
% Change q/q saar Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2016 2017 2018
Real GDP 0.6 2.2 2.8 1.8 1.2 2.6 2.5 2.0 2.0 2.5 3.0 2.5 1.5 2.0 2.3
Real GDP (% y/y) 1.4 1.2 1.5 1.8 2.0 2.1 2.0 2.1 2.3 2.2 2.4 2.5
Private consumption 1.8 3.8 2.8 2.9 1.9 2.8 2.5 2.0 2.0 2.5 3.0 2.5 2.7 2.6 2.4
Public consump and invest. 1.8 -0.9 0.5 0.2 -0.6 0.7 1.0 1.0 1.0 2.0 2.5 2.5 0.8 0.2 1.4
Residential investment 13.4 -4.7 -4.5 7.1 11.1 -6.8 2.0 2.0 3.0 3.0 3.0 3.0 5.5 2.1 2.1
Equipment investment -13.1 -0.6 -2.1 1.8 4.4 8.2 4.0 3.0 2.5 2.5 2.5 2.5 -3.4 3.3 3.1
Intellectual property investment 6.3 11.1 4.2 -0.4 5.7 1.4 2.5 2.5 2.5 2.5 3.5 3.5 6.3 3.3 2.6
Structures investment 2.3 0.5 14.3 -2.2 14.8 4.9 4.0 4.0 4.0 3.0 3.0 3.0 -4.1 6.6 3.7
Exports -2.6 2.8 6.4 -3.8 7.3 4.1 4.0 4.0 2.5 2.5 2.5 2.5 -0.3 3.5 3.1
Imports -0.2 0.4 2.7 8.1 4.3 2.1 2.5 2.5 3.0 3.0 2.9 3.0 1.3 3.8 2.8
Net exports (contr to GDP, pp) 0.0 0.2 0.9 -1.8 0.2 -0.4 0.1 0.1 -0.1 -0.1 -0.1 -0.1 -0.1 -0.3 0.0
Ch. inventories (contr to GDP, pp) -0.4 -1.2 0.5 1.0 -1.1 -0.1 0.0 0.0 0.0 0.0 0.0 0.0 -0.4 -0.1 0.1
Final sales to domestic purchasers 1.5 2.6 2.2 2.3 2.4 2.4 2.4 2.0 2.0 2.5 3.0 2.7 2.1 2.4 2.4
GDP price index 0.3 2.4 1.4 2.0 2.0 1.0 1.4 2.5 2.3 2.1 2.1 2.2 1.3 1.7 2.1
Nominal GDP 0.8 4.7 4.2 3.8 3.3 3.6 3.9 4.6 4.3 4.6 5.1 4.8 2.8 3.8 4.5
Employment (avg mthly chg, K) 196 164 239 148 166 194 186 175 175 175 175 175 187 180 175
Unemployment rate (%) 5.0 4.9 4.9 4.7 4.7 4.4 4.3 4.2 4.1 4.0 3.9 3.8 4.9 4.4 4.0
CPI inflation (%y/y) 1.1 1.0 1.1 1.8 2.5 1.9 1.9 1.9 1.7 2.3 2.4 2.2 1.3 2.1 2.2
Core CPI (%y/y) 2.2 2.2 2.2 2.2 2.2 1.8 1.7 1.8 1.7 2.2 2.3 2.3 2.2 1.9 2.1
PCE price index (% y/y) 1.0 1.0 1.2 1.6 2.0 1.6 1.3 1.4 1.4 1.8 2.0 1.9 1.2 1.6 1.7
Core PCE price index (%y/y) 1.6 1.7 1.8 1.9 1.8 1.5 1.3 1.4 1.4 1.6 1.9 1.9 1.8 1.5 1.7
Current account (%GDP) -2.6 -2.3 -2.4 -2.4 -2.5 -2.3 -2.3 -2.3 -2.4 -2.4 -2.4 -2.4 -2.4 -2.3 -2.4
Federal budget bal. (%GDP) -3.2 -3.2 -4.2
Government debt (%GDP) 107.5 109.5 108.5
Federal funds, target range (%) 0.25-0.5 0.25-0.5 0.25-0.5 0.5-0.75 0.75-1.0 1.0-1.25 1.0-1.25 1.25-1.5 1.5-1.75 1.75-2.0 1.75-2.0 2.0-2.25
Note: All numbers expressed in q/q saar % unless otherwise specified. Bold fed funds indicate quarter of projected rate increase. The budget balance is fiscal year.
Source: BEA, BLS, Federal Reserve, US Treasury, Barclays Research
4 August 2017 42
GLOBAL WEEKLY CALENDAR

Saturday 05 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus
17:00 Colombia: CPI inflation, % m/m Jul 0.47 0.23 0.11 0.09 0.12
Sunday 06 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

23:30 Australia: AIG construction PCI, index Jul 51.9 56.7 56.0 - -
Monday 07 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

15:45 US: St. Louis Fed President Bullard (FOMC non-voter) speaks on U.S. Economy in Nashville, TN
17:25 US: Minneapolis Fed President Kashkari (FOMC voter) speaks in Bloomington, MN
- China: Foreign reserves, $ bn Jul 3029.5 3053.6 3056.8 3080.0 3074.9
- Indonesia: Foreign Reserves, $ bn Jul 123.2 125.0 123.1 123.0 -
01:30 Australia: Job advertisements, % m/m Jul 1.5 0.4 2.7 - -
03:00 New Zealand: RBNZ 2yr inflation expectation, % y/y Q3 1.68 1.92 2.17 - -
06:00 Germany: Industrial production, % m/m (y/y) Jun 0.2 (2.1) 0.7 (2.8) 1.1 (5.0) -0.6 (2.9) 0.1 (3.7)
06:00 Norway: Manufacturing production, % m/m (y/y) Jun -0.7 (-3.2) 1.7 (0.4) -0.3 (0.0) - 0.4
07:15 Switzerland: CPI, % m/m (y/y) Jul 0.2 (0.4) 0.2 (0.5) -0.1 (0.2) - -0.3 (0.3)
07:30 South Africa: Unemployment, % Q2 27.1 26.5 27.7 - 27.7
08:00 Taiwan: Exports, % y/y Jul 9.3 8.4 13.0 14.6 10.0
13:00 Russia: Official reserve assets, $ bn Jul 401.0 405.7 412.2 413.0 414.8
23:01 UK: REC Permanent Staff Placements, index Jul 53.6 57.6 55.9 - -
23:01 UK: REC Permanent Staff Salaries, index Jul 57.4 59.5 60.1 - -
23:50 Japan: Current account,SA, JPY bn Jun 1797.0 1807.4 1400.9 1351.2 1502.9
23:50 Japan: Bank lending, including shinkin, % y/y Jul 3.0 3.2 3.3 3.2 -
Tuesday 08 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

- Japan: Economy watchers' DI Jul 48.1 48.6 50.0 - 49.7
- China: Imports, % y/y Jul 11.7 14.5 17.2 18.0 18.0
- China: Exports, % y/y Jul 7.5 8.3 11.3 10.0 11.0
- China: Trade Balance, $ bn Jul 38.0 40.4 42.8 43.3 45.2
- Ukraine: CPI, % y/y Jul 12.2 13.5 15.6 - 15.1
- Russia: Light vehicle car sales, % y/y (to 09/08) Jul 7 15 15.0 14.0 15.0
01:30 Australia: Business confidence, index Jul 13.3 8.0 9.0 - -
04:30 Netherlands: HICP, % m/m (y/y) Jul 0.9 (1.4) -0.4 (0.7) -0.3 (1.0) - -
05:45 Switzerland: Unemployment rate (adj), % Jul 3.2 3.2 3.2 - 3.2
06:00 Germany: Trade balance sa, bn Jun 19.8 19.8 20.3 - 23.9
06:45 France: Trade balance, bn Jun -5.2 -5.6 -4.9 - -4.9
06:45 France: Budget, year-to date, bn Jun -29.6 -57.9 -66.4 - -
07:00 Hungary: CPI, % y/y Jul 2.2 2.1 1.9 2.2 2.0
08:00 Taiwan: CPI, % y/y Jul 0.1 0.6 1.0 0.9 0.9
10:00 US: NFIB small business optimism Jul 104.5 104.5 103.6 - 103.8
11:00 Brazil: IGP-DI inflation, % m/m Jul -1.24 -0.51 -0.96 - -0.45
12:15 Canada: Housing starts, k saar Jul 213.5 195.0 213.2 - 205.0
14:00 US: JOLTS, k job openings Jun 5785 5967 5666 - -
19:00 Argentina: CPI inflation, % m/m Jul 2.66 1.43 1.19 2.00 -
22:00 New Zealand: ANZ truckometer, % m/m Jul -2.1 4.0 0.0 - -
23:00 Korea: Unemployment rate, % Jul 4.0 3.6 3.8 3.8 3.8
23:50 Japan: M2/M3, % y/y Jul 4.0 / 3.4 3.8 / 3.2 3.9 / 3.3 3.9 / 3.3 3.9 / 3.3
Wednesday 09 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

21:00 New Zealand: RBNZ official cash rate, % Aug 1.75 1.75 1.75 1.75 1.75
00:30 Australia: Consumer confidence, % m/m Aug -1.1 -1.8 0.4 - -
01:30 China: CPI, % y/y Jul 1.2 1.5 1.5 1.5 1.5
01:30 China: PPI, % y/y Jul 6.4 5.5 5.5 5.8 5.6
01:30 Australia: Home loans, % m/m Jun -0.9 -1.9 1.0 - 1.5
01:30 Australia: Investment lending, % m/m Jun 0.4 -2.5 -1.4 - -
06:30 France: BdF industrial business sentiment, index Jul 104.5 104.4 103.1 - 103.0
Note: All times reported in GMT. Some data or events are boxed to indicate their importance to financial markets. Market events are highlighted in light blue.
Sources: Reuters, Market News, Bloomberg, Barclays Research
4 August 2017 43
Wednesday 09 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

07:00 Czech: CPI, % y/y Jul 2.0 2.4 2.3 - 2.3
08:00 Italy: Industrial production, % m/m (y/y) Jun 0.4 (2.8) -0.5 (1.2) 0.7 (2.9) 0.3 0.2
09:00 Greece: HICP, % y/y Jul 1.6 1.5 0.9 - -
12:00 Brazil: IPCA inflation, % m/m Jul 0.14 0.31 -0.23 0.19 0.17
12:30 Canada: Building permits, % m/m Jun -4.9 0.5 8.9 - -
12:30 US: Non-farm productivity-p, % q/q Q2 3.5 1.8 0.0 1.5 0.8
12:30 US: Unit labor cost-p, % q/q Q2 2.0 1.3 2.2 1.5 1.0
13:00 Mexico: CPI inflation, % m/m Jul 0.12 -0.12 0.25 0.29 0.34
13:00 Mexico: CPI core inflation, % m/m Jul 0.45 0.28 0.30 0.26 0.26
14:00 US: Wholesale inventories-p, % m/m Jun -0.5 0.4 0.6 P 0.6 0.6
22:45 New Zealand: Retail Card spending, % m/m Jul 0.9 -0.4 0.0 - 0.3
22:45 New Zealand: Total Card spending, % m/m Jul 0.4 -0.1 0.1 - -
23:01 UK: RICS house price balance, % Jul 22 17 7 - 10
23:50 Japan: Core machinery orders, % m/m Jun 1.4 -3.1 -3.6 4.5 3.7
23:50 Japan: Corporate goods price index, % y/y Jul 2.1 2.1 2.1 2.3 2.3
Thursday 10 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

08:00 Philippines: BSP policy rate, % Aug 3.00 3.00 3.00 3.00 3.00
14:00 US: Fed Vice Chairman Dudley (FOMC voter) speaks in New York
18:00 Mexico: Overnight rate, % Aug 7.00 7.00 7.00 7.00 -
23:00 Peru: Reference rate, % Aug 3.75 3.75 3.75 3.50 -
- Costa Rica: Econ. activity index, % y/y Jun 3.5 3.7 3.9 - -
- China: M2 growth, % y/y (to 15/08) Jul 10.5 9.6 9.4 9.4 9.4
- China: New loans, CNY bn (to 15/08) Jul 1110.0 1110.0 1540.0 1540.0 790.0
- China: Aggregate Financing, CNY bn (to 15/08) Jul 1383.4 1065.9 1776.2 1780.0 1000.0
- India: Trade balance, $ bn Jul -13.2 -13.8 -13.0 -13.0 -
- India: Exports, % y/y Jul 19.8 8.3 4.4 - -
01:00 Philippines: Total exports, % y/y Jun 18.1 19.1 13.7 14.4 13.7
01:00 Philippines: Total imports, % y/y Jun 18.0 -0.1 16.6 - 11.9
04:00 Malaysia: Industrial production, % y/y Jun 4.6 4.2 4.6 4.0 4.2
04:30 Japan: Index of tertiary industry activity, % m/m Jun -0.3 1.4 -0.1 0.2 0.2
06:00 Norway: CPI, headline, % m/m (y/y) Jul 0.2 (2.2) 0.2 (2.1) 0.4 (1.9) - (1.4)
06:00 Norway: CPI-ATE, underlying, % m/m (y/y) Jul 0.3 (1.7) 0.3 (1.6) 0.5 (1.6) - 0.3 (1.2)
06:45 France: Industrial production, % m/m (y/y) Jun 2.3 (2.5) -0.6 (0.1) 1.9 (3.2) -0.6 (3.1) -0.6 (3.1)
07:00 Denmark: CPI, headline, % m/m (y/y) Jul 0.2 (1.1) -0.1 (0.8) -0.1 (0.6) - (0.8)
07:30 Sweden: Industrial production, % m/m (y/y) Jun 0.1 (3.6) -1.3 (0.4) 2.1 (8.0) - -0.6
07:30 Sweden: Service production, % m/m (y/y) Jun 0.5 (4.9) -0.1 (3.4) 0.6 (4.3) - -
08:30 UK: Industrial output, % m/m (y/y) Jun -0.6 (1.4) 0.2 (-0.8) -0.1 (-0.3) 0.1 (-0.2) 0.1 (-0.2)
08:30 UK: Manufacturing output, % m/m (y/y) Jun -0.6 (2.3) 0.2 (0.0) -0.2 (0.4) -0.1 (0.6) -0.1 (0.6)
08:30 UK: Construction output, % m/m (y/y) Jun 0.7 (4.3) -1.1 (-0.1) -1.2 (-0.3) - 1.1 (1.7)
08:30 UK: Total trade balance, bn Jun -3.7 -2.1 -3.1 -2.9 -2.4
09:00 Greece: Unemployment rate, % May 22.6 22.0 21.7 - -
09:30 South Africa: Mining output, m/m sa Jun 3.7 -1.4 -0.2 - 0.0
10:00 Ireland: HICP, % m/m (y/y) Jul 0.4 (0.7) -0.2 (0.0) 0.1 (-0.6) - -
10:00 Portugal: HICP, % m/m (y/y) Jul 1.5 (2.4) -0.3 (1.7) -0.5 (1.0) - -
11:00 South Africa: Manufacturing production, % m/m, sa Jun -0.4 2.3 -0.3 - -0.6
12:00 UK: NIESR GDP estimate, % 3m/3m Jul 0.2 0.2 0.3 - -
12:30 Canada: New house price index, % m/m (y/y) Jun 0.2 (3.3) 0.8 (3.9) 0.7 (3.8) - -
12:30 US: Initial jobless claims, k (4wma) Aug-05 234 (244) 245 (244) 240 (242) 240 (240) -
12:30 US: PPI, % m/m (y/y) Jul 0.5 (2.5) 0.0 (2.4) 0.1 (2.0) 0.1 (2.2) 0.1 (2.3)
12:30 US: Core PPI, % m/m (y/y) Jul 0.4 (1.9) 0.3 (2.1) 0.1 (1.9) 0.2 (2.1) 0.2 (2.1)
18:00 US: Treasury budget balance, $ bn Jul 50.5 6.2 -90.2 - -
22:30 New Zealand: Business PMI, index Jul 56.9 58.2 56.2 - -
4 August 2017 44
Friday 11 Aug Period Prev-3 Prev-2 Prev-1 Forecast Consensus

13:40 US: Dallas Fed President Kaplan (FOMC voter) speaks in Arlington, TX
15:30 US: Minneapolis Fed President Kashkari (FOMC voter) speaks to Independent Community Bankers in Minneapolis, MN
- Indonesia: Current account, $ bn Q2 -5.0 -2.1 -2.4 -4.8 -3.2
00:00 Singapore: Final GDP, (% q/q saar / % y/y) Q2 12.3 / 2.9 -1.9 / 2.5 0.4 / 2.5 - -
05:00 Singapore: Retail sales, % y/y Jun 2.0 2.7 0.9 - 1.5
05:00 Singapore: Retail sales Ex autos, % y/y Jun 0.5 5.0 0.6 - -
06:00 Germany: Final CPI, % m/m (y/y) Jul -0.2 (1.5) 0.2 (1.6) 0.4 (1.7) P 0.4 (1.7) 0.4 (1.7)
06:00 Germany: Final HICP, % m/m (y/y) Jul -0.2 (1.4) 0.2 (1.5) 0.4 (1.5) P 0.4 (1.5) 0.4 (1.5)
06:00 Romania: CPI, % y/y Jul 0.6 0.6 0.9 - 1.4
06:45 France: Final CPI, % m/m (y/y) Jul 0.0 (0.8) 0.0 (0.7) -0.3 (0.7) P -0.3 (0.7) -0.3 (0.7)
06:45 France: Final HICP, % m/m (y/y) Jul 0.0 (0.9) 0.0 (0.8) -0.4 (0.8) P -0.4 (0.8) -0.4 (0.8)
06:45 France: CPI ex tobacco index Jul 101.23 101.28 101.30 100.99 -
07:00 Turkey: Current account, $ bn Jun -3.0 -3.6 -5.2 -3.6 -3.9
07:00 Spain: Final HICP, % m/m (y/y) Jul 0.0 (2.0) 0.1 (1.6) -1.2 (1.7) P -1.2 (1.7) -1.2 (1.7)
08:00 Italy: Final CPI, % m/m (y/y) Jul -0.2 (1.4) -0.1 (1.2) 0.1 (1.1) P 0.1 (1.1) -
08:00 Italy: Final HICP, % m/m (y/y) Jul -0.1 (1.6) -0.2 (1.2) -1.9 (1.2) P -1.9 (1.2) (1.2)
12:00 Poland: Current account, bn Jun -0.5 -0.2 -0.2 0.2 -0.8
12:00 Poland: Trade balance, bn Jun 0.1 0.2 -0.2 0.2 0.1
12:00 Poland: Final CPI, % y/y Jul 1.9 1.5 1.7 1.7 -
12:00 India: Industrial production, % y/y Jun 3.8 2.8 1.7 0.8 -
12:30 US: CPI, % m/m (y/y) Jul 0.2 (2.2) -0.1 (1.9) 0.0 (1.6) 0.2 (1.8) 0.2 (1.8)
12:30 US: Core CPI, % m/m (y/y) Jul 0.1 (1.9) 0.1 (1.7) 0.1 (1.7) 0.2 (1.7) 0.2 (1.7)
12:30 US: CPI, NSA index Jul 244.524 244.733 244.955 244.900 244.918
13:00 Mexico: Industrial production, % y/y Jun 3.2 -4.2 1.0 0.5 -
13:00 Russia: Advanced GDP, % y/y Q2 -0.4 0.3 0.5 2.0 1.5
17:00 Uruguay: Industrial production, % y/y Jun -11.6 -16.1 -16.0 - -
4 August 2017 45
GLOBAL KEY EVENTS

2017 2018
Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul
North America
FOMC meeting - 20 - 1 13 31 - 21 - 2 13 -
FOMC minutes 17 - 11 22 - 3 21 - 11 23 - 4
Fed's Beige Book - 6 18 29 -
Bank of Canada - 6 25 - 6 17 - 7 18 30 - 11
Europe
ECB "policy" meeting - 7 26 - 14 25 - 8 26 - 14 26
ECB minutes 17 - 5 23 - 11 22 - 5 24 - 12
ECB economic bulletin 3 17 - 9 28 - 8 22
ECB "non-policy" meeting 2 20 4 8,22 6 10 7,21 21 11 2,16 27 11
Bank of England 3 14 - 2 14 - 8 22 - 10 21 -
BoE Inflation Report 3 - - 2 - - 8 - - 10 - -
BoE minutes 3 14 - 2 14 - 8 22 - 10 21 -
Riksbank - 6 25 - 19 - 13 - 25 - - 2
SNB - 14 - - 14
Norges Bank - 21 - - 14 25 - 15 - 3 21 -
Asia/RoW
Bank of Japan - 20-21 30-31 - 20-21 22-23 - 08-09 26-27 - 14-15 30-31
BoJ minutes - 26 - 6 26 29 - 14 - 7 20 -
Reserve Bank of Australia 1 5 3 7 5
RBNZ 10 28 - 9 - - 8 22 - 10 28 -
Key international meetings
IMF/IBRD - - 13-15 - -
EU Summit - - 19-20 - 14-15 - - 22-23 - - 28-29 -
ECOFIN - 16 10 7 5
G20 - - - - - - - - - - - -
G7 - - - - - - - - - - - -
Elections
Chile (Presidential) - - - 19 - - - - - - - -
Chile (Parliament) - - - 19 - - - - - - - -
Colombia (Presidential) - - - - - - - - - 27 - -
Germany (Regional) - - - - - - - - - - - -
Germany (Parliamentary) - 24 - - - - - - - - - -
South Korea (Presidential) - - - - - - - - - - - -
Argentina (Legislative) - - 22 - - - - - - - - -
Portugal (Local) - - 1 - - - - - - - - -
Note: (-) No event, () Event yet to be confirmed.
Source: Central banks, IMF, European Commission, Reuters, Bloomberg, Market News, Barclays Research
4 August 2017 46
CRITICAL EVENTS CALENDAR FOR US, EURO AREA, JAPAN AND UK

Date Country Event Likely outcome: Our assessment
August 2017
28-Aug UK Round 3 of EU-UK Brexit negotiations David Davis and Michel Barnier are set to continue discussions on
issues ranging from EU-UK citizens rights, financial settlement and the
Irish border.
September 2017
07-Sep Euro area ECB Governing Council meeting
07-Sep UK Second reading of the EU (Withdrawal) Bill
in the Commons
11-Sep UK The Commons vote on the EU
(Withdrawal) bill
14-Sep UK BoE policy meeting
15-Sep EU Eurogroup meeting (Tallinn)
16-Sep EU ECOFIN meeting (Tallinn)
16-19 Sep UK The Liberal Democrats party holds its
annual party conference in Bournemouth.
18-Sep UK Round 4 of EU-UK Brexit negotiations David Davis and Michel Barnier are set to continue discussions on
issues ranging from EU-UK citizens rights, financial settlement and the
Irish border.
20-Sep US FOMC meeting We expect the Fed to announce balance sheet run-off.
20-Sep UK BoE FPC meeting
24-Sep France Senate elections 170 of the 348 seats of the Senate will be up for grabs. Senate has no
meaningful powers and is already controlled by the centre right.
24-Sep Germany Parliamentary election According to polls, Angela Merkel's CDU/CSU will likely receive the most
votes. While the baseline for our forecasts remains a CDU-SPD coalition,
the probability of a CDU-FDP coalition is rising, and could become more
likely if migration returns to the forefront of the electoral debate.
24-27 Sep UK The Labour party holds its annual party
conference in Brighton
October 2017
01-Oct Portugal Local elections
01-04 Oct UK The conservative party holds its annual
party conference in Manchester
09-Oct EU Eurogroup meeting (Luxembourg)
09-Oct UK Round 5 of EU-UK Brexit negotiations David Davis and Michel Barnier are set to continue discussions on issues
ranging from EU-UK citizens rights, financial settlement and the Irish
border. Barnier will have to assess whether "sufficient progress" has
been achieved ahead of the October 19 EU summit.
10-Oct EU ECOFIN meeting (Luxembourg)
13-15 Oct Global IMF meeting (Washington, D.C)
19-20 Oct EU EU Summit (Brussels) Heads of government will hear EU negotiator Barnier's report and could
already sign off some issues if "sufficient progress" has been achieved.
26-Oct Euro area ECB Governing Council meeting
30-31 Oct Japan BoJ monetary policy meeting GDP and CPI forecasts to be updated as part of quarterly Outlook report.
November 2017
01-Nov US FOMC meeting
02-Nov UK BoE policy meeting
06-Nov EU Eurogroup meeting (Brussels)
07-Nov EU ECOFIN meeting (Brussels)
22-Nov UK BoE FPC meeting
4 August 2017 47
Date Country Event Likely outcome: Our assessment
December 2017
04-Dec EU Eurogroup meeting (Brussels)
05-Dec EU ECOFIN meeting (Brussels)
13-Dec US FOMC meeting We expect the Fed to increase the federal funds target by 25bp.
14-Dec UK BoE policy meeting
14-Dec Euro area ECB Governing Council meeting
14-15 Dec EU EU Summit (Brussels) Heads of government will hear EU negotiator Barnier's report. If progress
is insufficient on the withdrawal issues, moving on the next phase would
be delayed until the Council decides otherwise.
20-21 Dec Japan BoJ monetary policy meeting
January 2018
22-23 Jan Japan BoJ monetary policy meeting GDP and CPI forecasts to be updated as part of quarterly Outlook report.
25-Jan Euro area ECB Governing Council meeting
31-Jan US FOMC meeting
4 August 2017 48
GLOBAL ECONOMICS RESEARCH

Christian Keller
Head of Economics Research
+44 (0)20 7773 2031
christian.keller@barclays.com
Barclays, UK
Americas
Michael Gapen Alejandro Arreaza Marco Oviedo Bruno Rovai
Head of US Economics Research Economist Colombia, Peru, Venezuela Head of LatAm Economics Research Economist Brazil
+ 1 212 526 8536 +1 212 412 3021 Mexico, CAC +1 212 412 5762
michael.gapen@barclays.com alejandro.arreaza@barclays.com +1 212 526 6840 bruno.rovai@barclays.com
BCI, US BCI, US marco.oviedo@barclays.com BCI, US
BCI, US
Pilar Tavella Blerina Urui
Economist Argentina US Economist
+1 212 412 5564 +1 202 452 4774
pilar.tavella@barclays.com blerina.uruci@barclays.com
BCI, US BCI, US
Europe and Middle East

Philippe Gudin de Vallerin Francois Cabau Liza Ermolenko Fabio Fois
Head of EMEA Economics European Economist Emerging Europe Economist Senior European Economist
+33 (0) 1 4458 3264 +44 (0) 20 3134 3592 +44 (0) 20 7773 1571 +39 02 6372 2637
philippe.gudin@barclays.com francois.cabau@barclays.com liza.ermolenko@barclays.com fabio.fois@barclays.com
Barclays, UK Barclays, UK Barclays, UK Barclays, UK
Jeff Gable Antonio Garcia Pascual Durukal Gun Apolline Menut
Head of Macro and FICC Research, Chief European Economist Economist Turkey and EM Europe European Economist
Barclays Africa Group +44 (0)20 313 46225 + 44 (0)20 3134 6279 +44 (0)20 3555 0862
+27 11 895 5368 antonio.garciapascual@barclays.com durukal.gun@barclays.com apolline.menut@barclays.com
jeff.gable@absacapital.com Barclays, UK Barclays, UK Barclays, UK
Absa, South Africa
Fabrice Montagne Brahim Razgallah Tomasz Wieladek
Chief UK Economist Economist MENA Senior International Economist
+44 (0)20 7773 3277 + 44 (0) 20 3555 4762 + 44 (0) 20 3555 2336
fabrice.montagne@barclays.com brahim.razgallah@barclays.com tomasz.wieladek@barclays.com
Barclays, UK Barclays, UK Barclays, UK
Africa
Jeff Gable Miyelani Maluleke Ridle Markus Peter Worthington
Head of Africa Non-Equity Research Economist South Africa Head of Sub Saharan Africa Economics Head of South Africa Research
+27 11 895 5368 +27 11 895 5368 Research + 27 21 927 6611
jeff.gable@ barclays.com miyelani.maluleke@ barclays.com +27 11 895 5374 peter.worthington@ barclays.com
Absa, South Africa Absa, South Africa ridle.markus@ barclays.com Absa, South Africa
Absa, South Africa
Asia-Pacific
David Fernandez Rahul Bajoria Jian Chang Krishna Goradia
Chief Economist, Asia-Pacific Economist ASEAN, ANZ Chief Economist China Economist
+65 6308 3518 +65 6308 3511 +852 2903 2654 +65 6308 3211
david.fernandez@barclays.com rahul.bajoria@barclays.com jian.chang@barclays.com krishna.goradia@barclays.com
Barclays Bank, Singapore Barclays Bank, Singapore Barclays Bank, Hong Kong Barclays Bank, Singapore
Angela Hsieh Siddhartha Sanyal Dennis Tan Yingke Zhou
Economist Korea, Taiwan Chief Economist India Economist Singapore Economist China, Hong Kong
+65 6308 2003 +91 22 6719 6177 +65 6308 3065 +852 2903 2653
angela.hsieh@barclays.com siddhartha.sanyal@barclays.com dennis.tan@barclays.com yingke.zhou@barclays.com
Barclays Bank, Singapore Barclays Bank, India Barclays Bank, Singapore Barclays Bank, Hong Kong
Tetsufumi Yamakawa James Barber, CFA Yukito Funakubo Yuichiro Nagai
Head of Research, Japan Japan Research Economist Japan Economist Japan
+81 3 4530 1130 +81 3 4530 1542 +81 3 4530 1068 +81 3 4530 1064
tetsufumi.yamakawa@barclays.com james.barber@barclays.com yukito.funakubo@barclays.com yuichiro.nagai@barclays.com
BSJL, Japan BSJL, Japan BSJL, Japan BSJL, Japan
4 August 2017 49
Analyst Certification
We, Tomasz Wieladek, Blerina Urui, Michael Gapen, Fabio Fois, Antonio Garcia Pascual, Philippe Gudin, Apolline Menut, Fabrice Montagne, James Barber,
CFA, Yukito Funakubo, Yuichiro Nagai, Tetsufumi Yamakawa, Rahul Bajoria, Jian Chang, Yingke Zhou, Angela Hsieh, CFA, Siddhartha Sanyal, David
Fernandez, Dennis Tan, Liza Ermolenko, Durukal Gun, Brahim Razgallah, Alejandro Arreaza, Marco Oviedo, Bruno Rovai and Pilar Tavella, hereby certify (1)
that the views expressed in this research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this
research report and (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in
this research report.
Each research report excerpted herein was certified under SEC Regulation AC by the analyst primarily responsible for such report as follows: I hereby
certify that: 1) the views expressed in this research report accurately reflect my personal views about any or all of the subject securities referred to in this
report and; 2) no part of my compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
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Barclays Global Economic Weekly

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Global Economics Weekly

Japan: Growth streak looks set to remain intact 19 Emerging Asia

Latin America: A polarization in fiscal budget executions 33

Momentum drives GDP, not inflation

But inflation pressures are likely to remain weak

% q/q saar % q/q %

EM PMIs indicate a more moderate recovery than in developed markets

GLOBAL RATES AND INFLATION

Key CPI projections

OUTLOOK: UNITED STATES

Wage growth is not as weak as it seems

% y/y % % y/y, 4 qtr average

1 The Labor Market in 2016 (Joshua Montes), February 2017.

% % y/y, 4 qtr average

Labor share (6 qtr average) Actual wage growth Fitted

GDP TRACKING: UNITED STATES

US GDP: Q2 GDP tracking at 2.4%

24-Jul Existing home sales Jun 2.5

26-Jul New home sales Jun 2.4

27-Jul Advance goods trade balance Jun 2.7

28-Jul Q2 advance GDP estimate Q2 2.6

1-Aug Construction spending Jun 2.4

3-Aug Factory orders Jun 2.4

4-Aug Trade balance Jun 2.4

%m/m Construction spending %m/m q/q % chg, saar

DATA REVIEW & PREVIEW: UNITED STATES

Review of last weeks data releases

Manufacturing sentiment moderated in July,

Preview of the upcoming week

Tuesday 08 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Wednesday 09 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Thursday 10 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Friday 11 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

OUTLOOK: EURO AREA

Well begun is only half won

DATA REVIEW & PREVIEW: EURO AREA

Review of last weeks data releases

Preview of the week ahead

Tuesday 08 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Italy IP: We expect Italian IP to have increased 0.3% m/m in June.

Thursday 10 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Friday 11 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

OUTLOOK: UNITED KINGDOM

Caught on the wrong footagain

Dovish MPC catches markets wrong-footed

DATA REVIEW & PREVIEW: UNITED KINGDOM

Review of last weeks data releases

Lloyds Business Barometer, % Jul 30 - 30 Business confidence grew unchanged in July.

Preview of the next week

Monday 07 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Tuesday 08 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Wednesday 09 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Thursday 10 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Friday 11 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Growth streak looks set to remain intact

Nominal wages 2010=100

DATA REVIEW & PREVIEW: JAPAN

Review of this weeks data

Preview for week ahead

Tuesday 8 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Wednesday 9 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Thursday 10 August Period Prev 3 Prev 2 Prev 1 Forecast Consensus

Source: Bloomberg (consensus figures), Barclays Research