Global Chartbook 20170908 PDF

September 08, 2017
Economics Group
Special Commentary
Jay H. Bryson, Global Economist

jay.bryson@wellsfargo.com (704) 410-3273
Michael Pugliese, Economic Analyst
michael.d.pugliese@wellsfargo.com (704) 410-3156
Global Chartbook: September 2017

Executive Summary
After slowing in 2016, global economic activity has accelerated this year. To wit, global industrial ContentsPage
production (IP) was growing less than 2 percent on a year-ago basis last autumn, but it
strengthened to a 3.6 percent growth rate this summer (Figure 1). Global trade volumes, which World ............................ 3
had more or less stalled through much of 2016, were up 5.0 percent in June. On a global basis, United States................. 4
real GDP grew only 3.1 percent in 2016, the slowest year of growth since 2009 (Figure 2). In our Eurozone ....................... 5
view, global GDP is on pace to grow 3.4 percent this year. Japan ............................. 6
United Kingdom ........... 7
Signs of stronger economic growth are widespread. Lets start with the United States where real Australia ........................ 8
GDP grew only 1.5 percent in 2016. The collapse in energy prices depressed investment spending Canada .......................... 9
in the sector, and slower growth in the rest of the world in conjunction with dollar strength Singapore .................... 10
weighed on U.S exports. But these two headwinds to U.S. real GDP growth have now largely South Korea ................. 11
faded. Economic growth in China, the worlds second-largest individual economy, slowed to a Sweden ........................ 12
26-year low of 6.7 percent in 2016. Concerned by the slowdown that was taking place, Chinese Switzerland ................. 13
authorities loosened economic policies in an effort to stabilize the countrys growth rate, which Taiwan ......................... 14
Argentina .....................15
they have largely succeeded in doing.
Brazil ........................... 16
Chile .............................17
China ........................... 18
Figure 1 Figure 2 India ............................ 19
Mexico ......................... 20
World Export & IP Volume Real Global GDP Growth
Year-over-Year Percent Change Year-over-Year Percent Change, PPP Weights
Russia .......................... 21
25% 25% 7.5% 7.5% Turkey ......................... 22
20% 20% Dollar Exchange Rates 23
6.0% 6.0% Energy ......................... 24
15% 15% Period Average
Other Commodities .... 25
10% 10%
4.5% WF 4.5% Forecast ....................... 26
Forecast
5% 5%
0% 0% 3.0% 3.0%
-5% -5%
1.5% 1.5%
-10% -10%
-15% -15%
0.0% 0.0%
-20% World Export Volume: Jun @ 5.0% -20%

World Industrial Production: Jun @ 3.6%
-25% -25% -1.5% -1.5%
92 94 96 98 00 02 04 06 08 10 12 14 16 1980 1985 1990 1995 2000 2005 2010 2015
Source: International Monetary Fund, IHS Global Insight and Wells Fargo Securities
Real GDP in the Eurozone rose 2.3 percent in Q2-2017, the strongest year-over-year growth rate
in more than six years. The downturn in energy prices weighed on Canadian economic growth
through most of 2015 and 2016. However, the economy has come roaring back this year with real
GDP up 3.7 percent on a year-ago basis in the second quarter. The Japanese economy has
expanded on a sequential basis for six consecutive quarters, the longest winning streak for the
This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

Global Chartbook: September 2017 WELLS FARGO SECURITIES
September 08, 2017 ECONOMICS GROUP
worlds third largest economy in more than a decade. Deep recessions in Brazil and Russia have
come to an end this year.
Looking forward, we forecast that global economic expansion will remain intact with real GDP
growing 3.4 percent in 2018 and 3.1 percent in 2019. Although these growth rates are well short of
the 5 percent per annum rates that were standard fare between 2004 and 2007, they are hardly
synonymous with global recession. With expansions becoming more firmly entrenched, we expect
most central banks to slowly remove policy accommodation over our forecast horizon.
Specifically, we look for the Federal Reserve, which has hiked rates twice already in 2017, to raise
its target range for the fed funds rate by 25 bps in December and by another 50 bps next year. The
Bank of Canada (BoC) has also tightened this year by raising its main policy rate by 25 bps in July
and again on September 6. We look for two rate hikes by the BoC next year.
Most other major central banks lag the Fed and the BoC, but they are moving closer to tightening
their own policy stances. The European Central Bank dialed back its monthly rate of bond
purchases earlier this year, and we look for it to announce another reduction in its monthly
purchase rate at its October 26 policy meeting. We believe that the ECB will cease buying bonds
altogether by the middle part of next year, and we look for it to begin a slow process of rate hikes
starting in late 2018. In our view, the Bank of England will also get into rate-hiking mode by mid-
2018. Our currency strategy team forecasts that the U.S. dollar will continue to trend lower versus
most currencies as other major central banks further normalize their own stances of monetary
policy.
Are there any downside risks to our base-case scenario of continued global economic expansion?
Yes. Topping the list would be the Chinese economy. The debt-to-GDP ratio of the non-financial
corporate (NFC) sector in China has exploded from less than 100 percent a decade ago to nearly
170 percent today. In our view, the debt problem of the Chinese NFC sector is largely manageable.
That said, the Chinese economy is rather opaque, and it is difficult to say with certainty how the
economy will evolve. If growth were to slow sharply in China due to the leveraged nature of the
NFC sector, global GDP growth surely would take a hit. The U.S. economy has entered its ninth
year of expansion. Although there is no reason to expect that the United States is about to slip into
recession, the expansion cannot go on indefinitely as imbalances start to build.
But perhaps the largest downside risks to the forecast stem from geopolitical factors. From North
Korea to Russia to the Middle East, there are plenty of geopolitical factors that have the potential
to raise risk aversion and tighten conditions in financial markets (i.e., declines in stock markets
and wider credit spreads) and weigh on global economic growth. Because geopolitical risks are
very difficult to predict, our forecasts are predicated on the assumption that geopolitical shocks
do not occur. However, the global economic outlook could change quickly if one or more of these
geopolitical risks were to transpire.
2
World Export & IP Volume

World Year-over-Year Percent Change
25% 25%
Global economic growth has strengthened in 20% 20%

2017 relative to last year. We do not have a good
15% 15%
measure of global GDP on a quarterly basis, but
global industrial production and trade volumes 10% 10%
have both accelerated. The recent strengthening 5% 5%

in global growth reflects, in part, supportive
0% 0%
policy stances in many countries put in place
over the past couple of years. Since our last -5% -5%
chartbook, we have upwardly revised our global -10% -10%

growth forecast for 2017 by 0.1 percentage
-15% -15%
point, to 3.4 percent. Our 2018 forecast remains
World Export Volume: Jun @ 5.0%
the same at 3.4 percent. -20%
World Industrial Production: Jun @ 3.6%
-20%
Despite stronger growth, inflation has moved -25%

92 94 96 98 00 02 04 06 08 10 12 14 16
-25%
lower in many countries. On a year-over-year

basis, global consumer prices were up
World Consumer Price Inflation
3.0 percent in June, nearly a percentage point Year-over-Year Percent Change
below the rate registered back in January. 12% 12%
Lower commodity prices account for some of 10% 10%

this deceleration, but core inflation in several
countries has also shown signs of cooling. 8% 8%
Faster economic growth and inflation helped 6% 6%

spur higher sovereign bond yields earlier this
year as investors considered a shift toward less 4% 4%
accommodative monetary policy around the

2% 2%
world. Although growth has remained firm, the
inflation slowdown has since tamped down 0% 0%
some of these more hawkish expectations,
World Consumer Prices: Jun @ 3.0%
bringing bond yields down with them. -2%
OECD: Jun @ 1.9%
-2%
Broadly speaking, we expect global monetary -4%

Emerging and Developing: Jun @ 2.3%
-4%
policy to become less accommodative in the 2000 2002 2004 2006 2008 2010 2012 2014 2016
coming quarters. However, with economic

growth still far from robust and inflation tame, Central Bank Policy Rates
caution will likely reign among the worlds 10% 10%
major central bankers. Federal Reserve: Sep-1 @ 1.25%
9% Bank of England: Sep-1 @ 0.25% 9%
ECB: Sep-1 @ 0.00%
10-Year Government Bond Yields Reserve Bank of Australia: Sep-1 @ 1.50%
Percent 8% 8%
5% 5%
Japan: Sep-07 @ 0.0% 7% 7%
United States: Sep-07 @ 2.1%
4% Germany: Sep-07 @ 0.2% 4% 6% 6%
United Kingdom: Sep-07 @ 1.0%
5% 5%
3% 3%
4% 4%
3% 3%
2% 2%
2% 2%
1% 1% 1% 1%
0% 0%
0% 0% 00 02 04 06 08 10 12 14 16
Source: IHS Global Insight, Bloomberg LP and

-1% -1% Wells Fargo Securities
10 11 12 13 14 15 16 17
3
United States U.S. Real GDP

Bars = CAGR Line = Yr/Yr Percent Change
10% 10%
Economic growth in the United States averaged 8%

GDP - CAGR: Q2 @ 3.0%
GDP - Yr/Yr Percent Change: Q2 @ 2.2% 8%
roughly 2 percent in the first half of the year, in
6% 6%
line with the average growth rate for much of
this expansion. Despite soaring consumer 4% Forecast 4%
confidence and steady job growth, household 2% 2%

consumption growth has been relatively 0% 0%
ho-hum. A turnaround in business investment
has been a bright spot amid a more stable -2% -2%
environment for energy prices and improving -4% -4%

corporate profits. Our outlook is for continued -6% -6%
economic growth in the 2.0-2.5 percent range.
-8% -8%
Employment growth averaged a rock solid
-10% -10%
176,000 through the first eight months of the 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
year, helping to push the unemployment rate
down to 4.4 percent. The labor market is a clear Average Hourly Earnings
vs. Atlanta Fed Wage Growth Tracker; YoY % Chg. of 3-MMA
strength of the U.S. economy at present, but 6% 6%
faster wage growth remains the missing piece of
the puzzle. Slack in the labor market by most
5% 5%
metrics is relatively low, but wages have not
shown a marked acceleration over the past year.
4% 4%
Inflation has been soft recently, and with it has
come a raging debate around the causes of this
3% 3%
deceleration. One-off factors have undeniably
played a role, but the weakness has been broad-
based enough to warrant concerns that the 2% 2%
slowdown may not be transitory. We expect

inflation to turn modestly higher later this year 1% Atlanta Fed Wage Growth Tracker: Jul @ 3.3% 1%
and into next. Average Hourly Earnings (Prod. & Supervisory): Aug @ 2.3%
Average Hourly Earnings (Total Private): Aug @ 2.5%
We expect the FOMC to announce the start of 0% 0%
its balance sheet reduction program at its 97 99 01 03 05 07 09 11 13 15 17
September 20 meeting followed by a 25 bps PCE Deflator vs. Core PCE Deflator
increase in the fed funds rate in December and Year-over-Year Percent Change
5% 5%
two more rate hikes in 2018.
4% 4%
Appropriate Pace of Policy Firming
Target Federal Funds Rate at Year-End
5.0% 5.0% 3% 3%
June 2017 Median Response
4.5% March 2017 Median Response 4.5%
December 2016 Median Response 2% 2%
4.0% December 2015 Median Response 4.0%
Futures Market: September 5
3.5% 3.5%
1% 1%
3.0% 3.0%
0% 0%
2.5% 2.5%
2.0% 2.0%
-1% PCE Deflator: Jul @ 1.4% -1%
1.5% 1.5% "Core" PCE Deflator: Jul @ 1.4%
FOMC's 2.0% Inflation Target
1.0% 1.0% -2% -2%
92 94 96 98 00 02 04 06 08 10 12 14 16
0.5% 0.5%
0.0% 0.0% Source: U.S. Depts. of Labor and Commerce, Bloomberg LP,
2017 2018 2019 Longer Run
Federal Reserve System and Wells Fargo Securities
4
Eurozone Eurozone Real GDP

Bars = Compound Annual Rate Line = Yr/Yr % Change
6% 6%
Real GDP has accelerated in the Eurozone, as the
4% 4%
year-ago pace of growth recently crossed the
2 percent threshold for the first time since 2% 2%
Q1-2011. Economic growth has become 0% 0%
increasingly broad based amid steady
employment gains and improving business -2% -2%
sentiment. Strengthening economic growth in the -4% -4%

rest of the world has also helped bolster export
-6% -6%
growth in the euro area.
Looking forward, we expect the increasingly self-
-8% -8%
sustaining economic expansion to remain intact. -10% -10%
Our current projection looks for real GDP in the -12% Compound Annual Growth: Q2 @ 2.6% -12%
Eurozone to grow 2.1 percent in 2017, which, if Year-over-Year Percent Change: Q2 @ 2.3%
-14% -14%
realized, would be the strongest annual average 2000 2002 2004 2006 2008 2010 2012 2014 2016
growth rate since 2007.
Eurozone Consumer Price Inflation
Like several other advanced nations, Eurozone
5%
Year-over-Year Percent Change
5%
monetary policymakers face a challenging CPI: Jul @ 1.3%
conundrum; the unemployment rate has reached Core CPI: Jul @ 1.2%
an eight-year low, but core inflation remains 4% 4%
listless around 1 percent. As such, policymakers

at the European Central Bank (ECB) will likely 3% 3%
proceed with caution in the months ahead as it
begins to tamp down the policy stimulus. 2% 2%
The ECB has maintained its main refinancing

rate at 0.00 percent since March 2016. The ECB 1% 1%
dialed back its monthly rate of bond purchases
earlier this year, and we look for it to cease
0% 0%
buying bonds altogether by the middle part of
next year and for it to hike rates by the end of
2018. Expectations of tighter ECB policy should -1%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-1%
cause the euro to trend higher vis--vis the dollar

in coming months. ECB Balance Sheet
Trillions of Euros
4.5 4.5
Thousands
ECB Balance Sheet: Sep @ 4.28T
Eurozone Exchange Rate 4.0 4.0
USD per EUR
1.60 1.60
3.5 3.5
1.50 1.50 3.0 3.0
2.5 2.5
1.40 1.40
2.0 2.0
1.30 1.30
1.5 1.5
1.20 1.20 1.0 1.0
0.5 0.5
1.10 1.10
0.0 0.0
1.00 1.00 00 01 03 05 07 09 11 13 15 17
USD per EUR: Sep @ 1.192 Source: IHS Global Insight, Bloomberg LP and
0.90 0.90 Wells Fargo Securities
2010 2011 2012 2013 2014 2015 2016 2017
5
Japan Japanese Real GDP

12% 12%
The Japanese economy has quietly built some
momentum in recent quarters. Real GDP 8% 8%
growth picked up in Q2, the year-over-year pace 4% 4%

lifting roughly 2 percent. Economic growth was
driven primarily by domestic demand, another 0% 0%
encouraging sign for a country that has at times -4% -4%

relied on export growth to carry the burden.
Faster growth has yet to translate into an uptick -8% -8%
in inflation, which is hovering near zero percent. -12% -12%
At present, the Bank of Japans (BoJ) monetary

-16% -16%
policy programs encompass the following: (1) a
negative policy rate of -0.10 percent, (2) a pace -20% Compound Annual Growth: Q2 @ 4.0% -20%
of Japanese Government Bond (JGB) purchases Year-over-Year Percent Change: Q2 @ 2.0%
-24% -24%
sufficient to keep the yield on the 10-year JGB 2000 2002 2004 2006 2008 2010 2012 2014 2016
around zero percent at an annual pace of
roughly 80 trillion, (3) purchases of exchange- Japanese Consumer Price Index
traded mutual funds at an annual pace of 6 4% 4%
trillion, (4) purchases of real estate investment CPI ex-Food and Energy: Jul @ -0.1%
CPI: Jul @ 0.5%
trusts at an annual pace of 90 billion and (5) 3% 3%
commercial paper and corporate bond holdings
at their present values of 2.2 trillion and 3.2 2% 2%
trillion, respectively.
The Bank of Japan (BoJ) is steadfast in its 1% 1%
commitment to achieving what has been a

fleeting objective for a generation: sustained 0% 0%
inflation of 2 percent. Japan has struggled with

-1% -1%
slow growth and inflation to a far greater extent
than most other advanced nations, and as a
-2% -2%
result, its central bankers are resolutely
committed to banishing its deflationary
-3% -3%
demons. Thus, we believe the BoJ will remain 2001 2003 2005 2007 2009 2011 2013 2015 2017
committed to its accommodative monetary
policy measures for the foreseeable future. Japanese 10-Year Government Bond
Yield
2.5% 2.5%
Japanese Exchange Rate

JPY per USD (Inverted Axis) 2.0% 2.0%
70 70
1.5% 1.5%
80 80
1.0% 1.0%
90 90
0.5% 0.5%
100 100
0.0% 0.0%
110 110
10-Yr Government: Sep @ 0.01%
-0.5% -0.5%
120 120
2000 2002 2004 2006 2008 2010 2012 2014 2016
JPY per USD: Sep @ 109.7

130 130
2010 2011 2012 2013 2014 2015 2016 2017 Source: IHS Global Insight and Wells Fargo Securities
6
U.K. Real GDP

United Kingdom 8%
8%
Monetary policymakers in the U.K. are among 6% 6%
the few central bankers in the advanced world 4% 4%

facing too fast, rather than too slow, inflation.
2% 2%
CPI inflation has shot higher, at least in part,
due to the marked depreciation of sterling in the 0% 0%
wake of last years Brexit referendum. The -2% -2%

Monetary Policy Committee of the Bank of
-4% -4%
England (BoE) expects inflation to peak around
3 percent in October before the price pressures -6% -6%
from the sterlings depreciation begin to fade. -8% -8%
Economic growth has remained modest in this -10% Compound Annual Growth: Q2 @ 1.2% -10%
environment, registering 1.7 percent year-over- Year-over-Year Percent Change: Q2 @ 1.7%
-12% -12%
year in Q2. Faster inflation and stagnant wage 2000 2002 2004 2006 2008 2010 2012 2014 2016
growth have taken a bite out of households real
disposable income, exerting some headwinds on U.K. CPI and "Core" CPI
consumer spending growth. 6% 6%
The uncertainty related to Brexit also appears to

CPI: Jul @ 2.6%
"Core" CPI Inflation: Jul @ 2.4%
be affecting business investment. Real fixed 5% 5%
capital formation has decelerated over the past

few quarters, and survey data that measure 4% 4%
investment intentions generally remain low.

3% 3%
Until some of the uncertainty regarding the
Brexit process is cleared up, many businesses in
2% 2%
the United Kingdom may adopt a wait-and-see
attitude regarding investment spending.
1% 1%
The recent stabilization of sterling should help
relieve some of the inflationary pressure, and 0% 0%
stronger growth in the global economy,
especially the Eurozone, should also contribute -1% -1%
positively to real GDP growth. A modestly better 97 99 01 03 05 07 09 11 13 15 17
growth outlook should allow the Bank of U.K. Real Gross Fixed Capital Formation
England to start to hike rates next spring. Year-over-Year Percent Change
20% 20%
Gross Fixed Capital Formation: Q2 @ -0.2%
U.K. Exchange Rate 15% 15%
USD per GBP
2.20 2.20
10% 10%
5% 5%
2.00 2.00
0% 0%
1.80 1.80
-5% -5%
-10% -10%
1.60 1.60
-15% -15%
1.40 1.40
-20% -20%
-25% -25%
1.20 1.20 2000 2002 2004 2006 2008 2010 2012 2014 2016
USD per GBP: Sep @ 1.29 Source: IHS Global Insight, Bloomberg LP and
2000 2002 2004 2006 2008 2010 2012 2014 2016
7
Australia Australian Real GDP

The Australian economy has decelerated amid

8% 8%
the softer commodity price environment, but 6% 6%

economic growth continues to trudge along.
Unsurprisingly, a contraction in fixed investment 4% 4%
spending has weighed on growth as the

commodity-oriented sectors of the economy have 2% 2%
retrenched. Public spending has helped pick up 0% 0%

some of the slack.
At present, both headline and core inflation -2% -2%
remain well below the Reserve Bank of

-4% -4%
Australias (RBA) 2-3 percent target, a common Compound Annual Growth: Q2 @ 3.3%
theme in many advanced nations. In Australias -6%

Year-over-Year Percent Change: Q2 @ 1.8%
-6%
case, despite some recent improvement, the 2000 2002 2004 2006 2008 2010 2012 2014 2016
unemployment rate remains about

0.7 percentage points above its cycle-low reached Australian Consumer Price Index
in 2011 when commodity prices were much 7% 7%
higher. This slack in the labor market has Overall CPI: Q2 @ 1.9%
restrained wage growth and inflation. 6% Core CPI: Q2 @ 1.5% 6%
Despite below-target inflation and soft growth, 5% 5%

the RBA has resisted cutting its main policy rate
further. The main driver of this holding pattern is 4% 4%
elevated household debt. Even lower interest 3% 3%

rates could pour fuel on the fire, creating rising
debt imbalances, particularly in the countrys 2% 2%
housing market. The bifurcation between

1% 1%
booming areas like Sydney and Melbourne and
the struggling resource-intensive regions has 0% 0%
created a challenging balancing act for the RBA.
The recent stabilization of the Chinese economy -1%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
-1%
and strengthening in the global economy as a

whole should bode well for Australian growth. RBA Cash Rate Target
High household debt levels and still-low Percent
8% 8%
commodity prices, however, will likely keep a lid
on any acceleration in the economy.
7% 7%
Australian House Price Index

Established Houses, 2011-2012=100 6% 6%
160 160
House Price Index: Q1 @ 147.3
150 150
5% 5%
140 140
4% 4%
130 130
120 120
3% 3%
110 110
100 100 2% 2%
90 90 Cash Rate: Sep @ 1.50%

1% 1%
80 80 2000 2002 2004 2006 2008 2010 2012 2014 2016
70 70
60 60
50 50 Wells Fargo Securities
02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
8
Canadian Real GDP

Canada 9%
9%
Compound Annual Growth: Q2 @ 4.5%
The Canadian economy has gathered some

6%
6%
momentum of late, reaching year-over-year
growth of 3.7 percent, up from just 0.4 percent
3% 3%
in Q4-2015. With the economy growing at an
annualized rate of 4.5 percent, it is currently the
fastest growing G-7 economy. Fixed investment 0% 0%
spending has turned positive after remaining all

of 2015-2016 in negative territory on a year-ago -3% -3%
basis. Private consumption growth has also been
solid amid an improving labor market; the -6% -6%
unemployment rate has fallen nearly a
percentage point over the past year.
-9% -9%
Despite the pick-up in economic growth, 2000 2002 2004 2006 2008 2010 2012 2014 2016
inflation remains at the low end of the Bank of

Canadas (BoC) 1-3 percent target range. But, in Canadian Consumer Price Index
a semi-surprise move, the BoC increased its 5% 5%
overnight lending rate to 1.0 percent at its
September meeting. The BoC attributed this 4% 4%
increase to the acceleration in the Canadian
economy as being more broadly based and self- 3% 3%
sustaining. The BoC remains cautious in its
approach going forward, as high debt levels and 2% 2%
overheated housing markets could weigh on the

sustainability of consumer spending. 1% 1%
Higher interest rates could discourage 0% 0%

additional consumer leveraging, as well as the
funding available to finance home purchases. -1% -1%
However, if interest rates rise too quickly,
CPI: Jul @ 1.2%
existing vulnerabilities could cause more severe -2% -2%
economic disruptions. The BoC will be forced to 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
balance these factors going forward by

tightening policy at a gradual pace. Bank of Canada Overnight Lending Rate
Percent
6% 6%
BOC Overnight Rate: Sep @ 1.00%
Canadian and U.S. Existing Home Prices
Both Series Indexed, January 2000=100 5% 5%
350 350
Canada (Teranet National 11): Jul @ 324.9
325 United States (Case-Shiller 20): Jun @ 197.5 325
4% 4%
300 300
275 275 3% 3%
250 250
225 225 2% 2%
200 200
175 175 1% 1%
150 150
0% 0%
125 125
2000 2002 2004 2006 2008 2010 2012 2014 2016
100 100
75 75 Source: IHS Global Insight, Bloomberg LP, S&P Case-Shiller

2000 2002 2004 2006 2008 2010 2012 2014 2016 and Wells Fargo Securities
9
Singapore Real GDP

Singapore 20%
20%
Real GDP growth in Singapore can be highly 15% 15%

volatile, but it has held steady at 2.9 percent
year-over-year over the past couple of quarters. 10% 10%
The slowdown in global trade that occurred in
2015-2016 weighed heavily on the trade-reliant 5% 5%
Singaporean economy, pulling economic growth
in the island nation down to just 2 percent in 0% 0%
both years. Exports are more than double the
size of Singapores economy as a whole. -5% -5%
As we turn to the second half of this year, the

-10% -10%
recovery in global trade has helped spur an
improved global economic outlook that bodes Year-over-Year Percent Change: Q2 @ 2.9%
-15% -15%
well for a continued gradual revival of economic 2000 2002 2004 2006 2008 2010 2012 2014 2016
growth in Singapore.
Singapore Non-Petroleum Trade
Although we do not explicitly forecast real GDP 3-Month Moving Average, Year-over-Year Percent Change
in Singapore, we believe the Bloomberg 40% 40%
consensus of 2.4 percent real GDP growth for

30% 30%
full year 2017 to be a reasonable forecast. If
realized, this would mark an improvement in 20% 20%
growth relative to the past two years. That said,
we do not expect growth in global economic 10% 10%
activity to return to the robust rates seen during

0% 0%
the last expansion that would help drive growth
in Singapore back to its pre-recession pace. -10% -10%
Because of the open nature of Singapores

-20% -20%
economy, along with the importance of trade,
the Monetary Authority of Singapore is -30% -30%
Exports: Jul @ 5.7%
primarily concerned with the nations exchange Imports: Jul @ 11.7%
rate. Our currency strategy team looks for the -40% -40%
1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
U.S. dollar to depreciate modestly versus the
Singapore dollar in coming quarters amid Singapore Consumer Price Index
generalized greenback weakness. Year-over-Year Percent Change
8% 8%
CPI: Jul @ 0.6%
Singapore Nominal Effective Exchange Rate 7% Core CPI: Jul @ 1.6% 7%
Index, 1990=100
130 130 6% 6%
Nominal Effective Exchange Rate: Aug @ 125.2
5% 5%
125 125
4% 4%
120 120 3% 3%
2% 2%
115 115
1% 1%
110 110
0% 0%
105 105 -1% -1%
-2% -2%
100 100 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
10
South Korean Real GDP

South Korea 15%
15%
As has been the experience of most economies, 10% 10%

South Korea has experienced a slower rate of
economic growth in recent years, with real GDP 5% 5%
growing at an annual average rate of only
2.8 percent between 2012 and 2016. 0% 0%
Growth in the rest of the world is important for

-5% -5%
the South Korean economy because real exports
of goods and services are equivalent to about
-10% -10%
55 percent of GDP. China takes in one-quarter
of South Koreas exports, making it South
-15% -15%
Koreas most important export market by a wide Compound Annual Growth: Q2 @ 2.4%
margin. Economic deceleration in China since Year-over-Year Percent Change: Q2 @ 2.7%
-20% -20%
the beginning of the decade has exerted a 2001 2003 2005 2007 2009 2011 2013 2015 2017
slowing effect on the South Korean economy.
South Korean Consumer Prices
This slow growth environment has depressed Year-over-Year Percent Change
rates of CPI inflation. Consequently, the Bank of 6% 6%
Korea cut its policy rate from 3.25 percent in

2012 to 1.25 percent today. The Korean won slid 5% 5%
significantly against the dollar from mid-2014 to
early-2016. It has since recouped some of its
4% 4%
losses, but if tensions with the North boil over,
the won could come under downward pressure.
3% 3%
Over the longer-run, the South Korean economy
faces some secular challenges. We expect a
2% 2%
continued deceleration in the Chinese economy,
which will weigh on the Korean economy. An
aging population and a historically elevated 1% 1%
household debt-to-GDP ratio also threaten to CPI: Aug @ 2.6%

Core CPI: Aug @ 1.8%
exert a drag on future economic growth. 0% 0%
We project that the economic expansion in

2000 2002 2004 2006 2008 2010 2012 2014 2016
South Korea will continue for the foreseeable Korea Volume and Value of Exports
future with real GDP growing 2.9 percent in Year-over-Year Percent Change of 3-Month Moving Average
50% 50%
2017 and 2.8 percent next year.
40% 40%
South Korean Exchange Rate
KRW per USD (Inverted Axis)
30% 30%
1,000 1,000
KRW per USD: Sep @ 1,119.1
20% 20%
1,050 1,050
10% 10%
1,100 1,100 0% 0%
-10% -10%
1,150 1,150
-20% -20%
1,200 1,200 -30% Volume of Exports: Jul @ 1.3% -30%

Value of Exports: Jul @ 10.5%
-40% -40%
1,250 1,250 05 06 07 08 09 10 11 12 13 14 15 16 17
1,300 1,300 Source: IHS Global Insight, Bloomberg LP and

2010 2011 2012 2013 2014 2015 2016 2017 Wells Fargo Securities
11
Swedish Real GDP

Sweden 16%
16%
Compound Annual Growth: Q2 @ 7.1%
Swedish GDP jumped in Q2, rising 1.7 percent 12%

12%
sequentially (7.1 percent annualized), marking
the fastest sequential growth rate registered by 8% 8%
the Swedish economy since Q4-2010 when the

4% 4%
global economy was climbing back from the
throes of the Great Recession. Encouragingly, 0% 0%
economic growth was generally broad-based in
Q2, led by strength in domestic demand. -4% -4%
Earlier this year, the Swedish Riksbank signaled -8% -8%

that, despite healthy economic activity and
rising inflation, it did not expect to increase its -12% -12%
currently negative policy rate until mid-2018.

-16% -16%
Since then, growth has continued to firm, and 2000 2002 2004 2006 2008 2010 2012 2014 2016
inflation has moved above 2 percent. Despite
this progress, monetary policy in Sweden Swedish Consumer Price Inflation
remains highly accommodative. 5% 5%
After several years of relatively benign inflation,

the Riksbank is cognizant of how quickly 4% 4%
inflation and inflation expectations can revert

3% 3%
back to below-target levels. In addition, labor
market progress remains slow going: Swedens
2% 2%
unemployment was a semi-elevated 7.1 percent
in July, and, despite faster inflation and
1% 1%
improved economic growth, wage growth has
been subpar. 0% 0%
This slow progress on the labor market front is
coupled with high household debt levels. Higher -1% -1%
Overall CPI: Jul @ 2.2%
interest rates as a result of monetary policy Underlying CPI: Jul @ 2.4%
tightening could drive the household -2% -2%
2000 2002 2004 2006 2008 2010 2012 2014 2016
debt-service ratio higher, choking off the
nascent recovery in growth and inflation. Sweden Wage Growth
Avg. Hourly Earnings, Year-over-Year Percent Change of 3-MMA
6% 6%
Swedish Central Bank Policy Rate

5% 5%
5.0% 5.0%
4% 4%
4.0% 4.0%
3% 3%
3.0% 3.0%
2% 2%
2.0% 2.0%
1% 1%
1.0% 1.0%
Average Hourly Earnings: Jun @ 1.4%
0% 0%
0.0% 0.0%
00 02 04 06 08 10 12 14 16
Central Bank Policy Rate: Sep @ -0.50%

-1.0% -1.0%
Source: IHS Global Insight and Wells Fargo Securities
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
12
Switzerland Swiss Real GDP

Bars = Compound Annual Rate, SA Line = Yr/Yr % Change, NSA
8% 8%
Economic growth in Switzerland has been on Compound Annual Growth: Q2 @ 1.1%
6% 6%
the soft side in recent quarters, increasing just
0.3 percent over the past year. Switzerland is a 4% 4%
very open economy, as exports account for
2% 2%
roughly 70 percent of GDP. As a result, slow
growth in its major trading partners, 0% 0%
particularly in the Eurozone, and the strong -2% -2%

Swiss franc have weighed on economic growth.
The manufacturing sector, which accounts for
-4% -4%
about 18 percent of value added in Switzerland, -6% -6%
has faced a challenging environment amid the -8% -8%

stronger currency and weaker growth abroad.
Recently, however, the Swiss manufacturing -10%
2000 2002 2004 2006 2008 2010 2012 2014 2016
-10%
purchasing managers index has surged to a

six-year high, and supply-side data from the
Swiss Consumer Price Index
Q2 GDP release showed manufacturing output Year-over-Year Percent Change
growing a solid 0.9 percent, helping to 3.5% 3.5%
corroborate the improvement in sentiment. 3.0%
CPI: Aug @ 0.5%
3.0%
Price growth has shifted from deflation to 2.5% 2.5%
inflation, but the pace of growth is quite benign.
The Swiss National Bank (SNB) looks for 2.0% 2.0%
inflation to remain below 1 percent until 2019. 1.5% 1.5%
Our currency strategy team expects the Swiss 1.0% 1.0%

franc to soften versus the euro but to strengthen 0.5% 0.5%
against the dollar. The SNB has shown few signs
of shifting to a more hawkish stance, saying that 0.0% 0.0%
the Swiss franc is still significantly overvalued. -0.5% -0.5%

Furthermore, year-ago consumer price growth -1.0% -1.0%
has averaged -0.3 percent over the past
five years, so the SNB may wait for a clear, -1.5%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-1.5%
sustained increase to ensure that inflation

expectations are well-anchored above zero Swiss Manufacturing PMI
Diffusion Index
percent. 70 70
Switzerland Real Effective Exchange Rate 65 65

Index
130 130 60 60
Real Effective Exchange Rate: Jul @ 109.6
55 55
120 120
50 50
45 45
110 110
40 40
100 100
35 35
Swiss Manufacturing PMI: Aug @ 61.2
30 30
90 90 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017

00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
13
Taiwanese Real GDP

Taiwan 15%
15%
Real GDP growth in Taiwan was 2.1 percent 12% 12%
year-over-year in Q2. From a glass-half-full
perspective, this represents an improvement 9% 9%
from the sharp downturn in growth that 6% 6%

occurred over the past two years amid the broad
slowdown in global growth and trade. For the 3% 3%
pessimists, however, economic growth has been
decisively slower in this expansion compared to 0% 0%
previous periods.
-3% -3%
International trade is critically important to
Taiwan. Exports and imports are each -6% -6%
equivalent to roughly 70 percent of GDP.

-9% -9%
Exports to China account for more than a 90 92 94 96 98 00 02 04 06 08 10 12 14 16
third of all Taiwanese merchandise exports, and
Taiwanese Consumer Price Index
as a result, the slowdown in growth in China has Year-over-Year Percent Change
weighed on Taiwans economy. 6% 6%
CPI inflation in Taiwan is running at only

1 percent. With economic growth likely to 4% 4%
remain lackluster for the foreseeable future,

inflation in Taiwan probably will remain benign. 2% 2%
Due in part to the low inflation environment,
the central bank reduced its main policy rate
from 1.88 percent in September 2015 to 0% 0%
1.38 percent in June 2016 and subsequently has

maintained it at this level. Most analysts look -2% -2%
for the central bank to keep policy on hold for
the foreseeable future. CPI: Aug @ 1.0%
Looking forward, our currency strategy team

-4%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
-4%
expects that the Taiwanese dollar will modestly

strengthen further against the U.S. dollar as the
greenback continues to lose ground vis--vis Central Bank of Taiwan Policy Rate
most other currencies. 4.00% 4.00%
Taiwanese Exchange Rate 3.50% 3.50%

TWD per USD (Inverted Axis)
28 28
3.00% 3.00%
TWD per USD: Aug @ 30.32
29 29 2.50% 2.50%
30 30 2.00% 2.00%
31 31 1.50% 1.50%
1.00% 1.00%
32 32
0.50% 0.50%
33 33
Taiwan Central Bank Rate: Sep @ 1.375%
0.00% 0.00%
34 34 04 05 06 07 08 09 10 11 12 13 14 15 16 17
35 35

2000 2002 2004 2006 2008 2010 2012 2014 2016
14
Argentine Real GDP Growth

Argentina 20%
Not Seasonally Adjusted
20%
Real GDP is accelerating again in Argentina as 15% 15%
economic growth entered positive territory on a
year-ago basis in Q1 for the first time in a year. 10% 10%
Stronger domestic demand helped spur the
improvement as personal consumption and 5% 5%
gross fixed capital formation both strengthened.
Although the manufacturing sector remained 0% 0%
weak in the first quarter of the year, declining

2.2 percent from a year earlier, the severity of -5% -5%
the weakness lessened. It appears that

-10% -10%
conditions continued to improve in the
manufacturing sector in Q2 as year-over-year
-15% -15%
industrial production growth hit a five-year high 05 06 07 08 09 10 11 12 13 14 15 16 17
in June, although base effects have likely made
this gain look more favorable. Argentine Industrial Production Index
Inflation has fallen from its soaring highs but 30% 30%
remains elevated at 21.5 percent year-over-year 25% 25%

as of July. Inflation skyrocketed last year after 20% 20%
the sharp devaluation in the Argentine peso that
15% 15%
occurred at the end of 2015.
The Argentine peso has continued to slide this
10% 10%
5% 5%
year, falling roughly 9 percent against the dollar
since the start of the year. This continued 0% 0%
downward trend for the peso raises questions -5% -5%

about whether inflation will continue to slow. -10% -10%
Our currency strategy team sees the Argentine
-15% -15%
peso continuing to weaken against the U.S.
dollar in the quarters ahead despite dollar -20%
IPI NSA: Jul @ 5.9%
-20%
weakness against most other currencies. -25% -25%

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
The Argentine central banks monetary policy
levers mainly rely on short-term interest rates, Argentine Consumer Price Index
which have crept higher since the start of 2017. 50%
50%
Consumer Price Index: Jul @ 21.5%
Exchange Value of Argentine Peso vs. U.S. Dollar 45% 45%
ARS per USD, Inverted Scale
40% 40%
2.00 2.00
35% 35%
4.00 4.00
30% 30%
6.00 6.00
25% 25%
8.00 8.00 20% 20%
10.00 10.00 15% 15%
10% 10%
12.00 12.00
5% 5%
14.00 14.00
0% 0%
16.00 16.00
-5% -5%
01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
18.00 18.00
ARS per USD: Sep @ 17.21
20.00 20.00 Source: IHS Global Insight and Wells Fargo Securities
2010 2011 2012 2013 2014 2015 2016 2017
15
Brazilian Real GDP

Brazil 15%
Bars = Compound Annual Rate, SA Line = Yr/Yr % Change, NSA
15%
Brazil posted its second consecutive positive 10% 10%

print for real GDP growth in Q2, the first back-
to-back positive readings since Q4-2014. 5% 5%
Growth also returned to positive territory on a
year-over-year basis. 0% 0%
Inflation has continued to slow, falling further

-5% -5%
below the central banks 4.5 percent target in
July. To help the Brazilian economy climb back
-10% -10%
from the deep recession, the Brazilian central
bank has reduced its policy rate by 600 bps
-15% -15%
since October 2016. Real GDP: Q2 @ 1.0%
Lower interest rates appear to have helped -20% -20%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
produce the desired outcome, although
favorable base effects have also helped. Both Brazilian Consumer Price Index
industrial production growth and retail sales Year-over-Year Percent Change
growth appear to have turned the corner 18% 18%

CPI: Aug @ 2.5%
alongside the improvement in economic growth.
We believe the economy is positioned to 15% 15%
continue growing throughout the remainder of
the year, with gradual growth of 0.6 percent for 12% 12%
2017 and 2.0 percent in 2018.
Our outlook remains cautious as the Brazilian 9% 9%
political system embodies vast uncertainty.
While President Michel Temer has recently 6% 6%
evaded a corruption trial, he remains subject to
political turmoil, inevitably constraining the
3% 3%
swift success of future Brazilian governmental
reforms. Such uncertainty surrounding the
current political system is reflected in a lack of 0% 0%
98 00 02 04 06 08 10 12 14 16
public confidence. As the Brazilian economy
progresses, markets will remain impatient as Brazilian Central Bank Policy Rate
the recovery is likely to persist at a slow pace. Percent
21% 21%
Brazilian Exchange Rate

BRL per USD (Inverted Axis) 18% 18%
1.0 1.0
1.5 1.5
15% 15%
2.0 2.0
12% 12%
2.5 2.5
3.0 3.0 9% 9%
3.5 3.5 Selic Rate: Sep @ 8.25%

6% 6%
05 06 07 08 09 10 11 12 13 14 15 16 17
4.0 4.0
BRL per USD: Sep @ 3.14

4.5 4.5
10 11 12 13 14 15 16 17
Wells Fargo Securities
16
Chilean Real GDP

Chile 12%
Not Seasonally Adjusted
12%
Year-over-Year Growth: Q2 @ 0.9%
GDP growth in Chile avoided negative territory 10% 10%
in Q2, improving to a still-soft 0.9 percent year-
over-year pace. The construction sector, the 8% 8%
darling of the Chilean economy during the past

6% 6%
several decades, once again weighed on
economic growth. 4% 4%
Thus far, Chile is one of the few economies that

2% 2%
has not benefitted from the rebound in global
economic activity. Chiles reliance on the mining 0% 0%
sector has highlighted the lack of diversity in the
nations economy. Fortunately, mining output -2% -2%
rose on a quarter-over-quarter basis in Q2,

-4% -4%
though it remained negative year-over-year. 2004 2006 2008 2010 2012 2014 2016
Against this weak economic backdrop, inflation Chilean Consumer Price Index
in Chile has slowed. The Chilean peso that Year-over-Year Percent Change
began a long slide against the U.S. dollar in 10% 10%
2013 has seen more stability over the past year.

More recently, the peso has seen some modest 8% 8%
strengthening against the dollar amid general

greenback weakness. The Central Bank of Chile 6% 6%
elected to keep its main policy rate unchanged

at 2.5 percent at its August meeting after cutting 4% 4%
rates 100 bps points over the past year amid the
2% 2%
slowdown in growth and inflation.
Perhaps the recent jump in copper prices, if 0% 0%
sustained, will provide a second half tailwind to
the Chilean economy. Economic growth is -2% -2%
unlikely to return to the faster growth rates CPI: Jul @ 1.7%
registered earlier in this decade any time soon, -4% -4%
however. A sustained period of modest 04 05 06 07 08 09 10 11 12 13 14 15 16 17
economic growth is a phenomenon with which Chilean Construction Output

Chilean policymakers have not had to grapple in Year-over-Year Percent Change, NSA
several decades. 20% 20%
Construction: Q2 @ -3.7%
Chilean Exchange Rate 16% 16%
CLP per USD (Inverted Axis)
400 400 12% 12%
8% 8%
500 500 4% 4%
0% 0%
600 600 -4% -4%
-8% -8%
700 700 -12% -12%

2004 2006 2008 2010 2012 2014 2016
CLP per USD: Sep @ 625.25

800 800
2010 2011 2012 2013 2014 2015 2016 2017
17
China Chinese Real GDP Forecast

Volatility rose in financial markets in early 2016

16% 16%
as investors fretted that growth in China was 14% 14%
slowing sharply. Fast forward six quarters, and

12% 12%
Chinese economic growth has actually been
remarkably stable between 6.5 percent and 10% 10%
WF
7.0 percent over that period. Chinese foreign Fcst.
exchange reserves, after falling significantly 8% 8%
amid these fears, have also stabilized alongside 6% 6%

economic growth around the $3 trillion mark.
Chinese authorities encouraged stronger
4% 4%
credit growth last year when the economy 2% 2%

needed an extra boost, helping to stabilize Year-over-Year Percent Change: Q2 @ 6.9%
economic growth. It appears that policymakers 0%

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
0%
are now attempting to tamp down credit growth

so as not to inflate a housing bubble. House Chinese Industrial Production Index
Year-over-Year Percent Change of 3-Month Moving Average
prices in Top Tier cities, such as Beijing and 25% 25%
Shanghai, have soared over the past couple 3-Month Moving Average: Jul @ 6.8%
years, and policymakers face the daunting task
of deleveraging, while also threading the needle 20% 20%
on the governments economic growth target.
We forecast that GDP growth in China will slow
15% 15%
somewhat in 2018 relative to the rate that likely
will be achieved this year. Although there is
justified concern about the amount of financial 10% 10%
leverage in the non-financial corporate sector,
we believe that the Chinese government should
be able to manage any issues that may arise in 5% 5%
the banking system in the foreseeable future.

China also faces some fundamental issues that 0% 0%
likely will lead to even slower economic growth 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
in the next decade. Not only will the working-
China House Price Index by City Type
age population in China decline in coming years, Existing Homes; 2011=100
but the build-up in leverage likely will constrain 190 190
Tier I Cities: Jul @ 183.7
growth in capital spending. 180
Tier II Cities: Jul @ 115.4
180
Tier III Cities: Jul @ 104.0

Chinese Foreign Exchange Reserves 170 170
Trillions of USD
$4.5 $4.5 160 160
Foreign Exchange Reserves: Sep @ $3.1 Trillion
150 150
$4.0 $4.0
140 140
$3.5 $3.5
130 130
$3.0 $3.0
120 120
$2.5 $2.5
110 110
$2.0 $2.0
100 100
$1.5 $1.5 90 90
2011 2012 2013 2014 2015 2016 2017
$1.0 $1.0
$0.5 $0.5
Source: IHS Global Insight, CEIC, Bloomberg LP and
$0.0 $0.0 Wells Fargo Securities
1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
18
Indian GDP Growth

India 10%
10%
Real GDP Growth: Q2 @ 5.7%
Many other economies have experienced some 9% 9%
acceleration this year, but real GDP growth in 8% 8%
India clearly has lost some steam. Real GDP 7% 7%

growth in India continued to slide in Q2,
6% 6%
slowing for the fifth consecutive quarter.
Year-over-year growth in investment spending 5% 5%
returned to positive territory in Q2, but the 4% 4%

1.6 percent growth rate is rather anemic.
3% 3%
Consumer price inflation rebounded in July
2% 2%
from a multi-year low, but on trend inflation has
slowed significantly. A sharp deceleration in 1% 1%
food prices has driven much of this slowdown. 0% 0%

Food & beverages account for nearly half of 2013 2014 2015 2016 2017
Indias consumer price index, and prices in this

sector are up just 0.4 percent over the past year. Indian Consumer Price Index
In response to this weak backdrop, the RBI cut

21%
CPI: Jul @ 2.4%
21%
its main policy rate last month by 25 bps, but 18% 18%
with inflation slowing more rapidly, real interest
rates have risen. High real interest rates pose 15% 15%
another challenge to increasing output in the 12% 12%

more investment-heavy, production-oriented
sectors of the economy. This economic backdrop 9% 9%
of slowing growth and inflation likely leaves the

6% 6%
RBI with scope to cut interest rates further in
the month ahead. 3% 3%
Despite the recent interest rate cut, Indias real 0% 0%

interest rates remain high, while the policy
easing is somewhat supportive for growth. Our -3% -3%
1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
currency strategy team sees these dynamics as a
possible catalyst behind further capital inflows,
which drives their view of further rupee Reserve Bank of India Repo Rate
Percent
appreciation over time. 10% 10%
Indian Exchange Rate

INR per USD (Inverted Axis)
37.0 37.0
8% 8%
41.0 41.0
45.0 45.0
6% 6%
49.0 49.0
53.0 53.0
57.0 57.0 4% 4%
61.0 61.0
Repo Rate: Sep @ 6.00%
65.0 65.0 2% 2%
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
69.0 69.0
INR per USD: Aug @ 64.03
73.0 73.0
2010 2011 2012 2013 2014 2015 2016 2017
19
Mexican GDP
Mexico 10%
Not-Seasonally Adjusted
10%
Mexico: Q2 @ 1.8%
Sentiment regarding the Mexican economy was 8% 8%
generally downbeat to start the year amid a 6% 6%

rapidly falling peso and fears about the United
4% 4%
States pulling out of the North American Free
Trade Agreement (NAFTA). 2% 2%
Since then, economic growth has held up 0% 0%
reasonably well. Real GDP growth was -2% -2%

1.8 percent year over year in Q2, roughly in-line
-4% -4%
with trend growth over the past couple years.
The service sector remains the lead driver of -6% -6%
growth, up 3.9 percent on a year-earlier basis. -8% -8%
Inflation continues to be a key challenge for the -10% -10%

Mexican economy. The Bank of Mexico has 94 96 98 00 02 04 06 08 10 12 14 16
increased its main policy rate by 400 bps since Mexico Central Bank Policy Rate
November 2015 to combat the rapid increase in Percent
inflation and sharp depreciation of the peso. So 9.00% 9.00%
far, the abrupt tightening in monetary policy

8.00% 8.00%
implemented over the past couple of years has
yet to make a serious dent in economic activity.
7.00% 7.00%
Uncertainty continues to surround the Mexican
economy. It is unclear where US-Mexico trade 6.00% 6.00%
relations are headed, as renegotiations of the

NAFTA have recently commenced. 5.00% 5.00%
We expect modest growth in the Mexican 4.00% 4.00%

economy of 2.1 percent in 2017 and 2.3 percent
in 2018, with inflationary pressures from the 3.00% 3.00%
sharp fall in the peso beginning to abate as they Banxico Policy Rate: Sep @ 7.00
fade from the year-ago calculations. The near 2.00% 2.00%
doubling of interest rates remains the biggest 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
threat to continued improvement in economic

activity in the second half of the year. Mexican Consumer Price Index
8% 8%
CPI: Jul @ 6.4%
Mexican Exchange Rate Core CPI: Jul @ 4.9%
MXN per USD (Inverted Axis) 7% 7%
11.00 11.00
12.00 12.00
6% 6%
13.00 13.00
14.00 14.00
5% 5%
15.00 15.00
16.00 16.00
4% 4%
17.00 17.00
18.00 18.00 3% 3%
19.00 19.00
20.00 20.00 2% 2%
2004 2006 2008 2010 2012 2014 2016
21.00 21.00
MXN per USD: Aug @ 17.85
22.00 22.00
2010 2011 2012 2013 2014 2015 2016 2017
20
Russian Real GDP

Russia 12%
12%
GDP: Q2 @ 2.5%
The past couple of years have been challenging 9% 9%
for the Russian economy as the plummeting 6% 6%

ruble, skyrocketing inflation and economic
sanctions led to a rapid tightening in monetary 3% 3%
policy and a severe recession.

0% 0%
Recently, real GDP in Russia has accelerated.
-3% -3%
The Q2 GDP reading pushed Russias economy
firmly into expansionary territory. Commodity -6% -6%
prices and the ruble have stabilized, and
inflation has receded. International trade has -9% -9%
also improved, as real exports rose 7.1 percent -12% -12%

year-over-year in Q2. This in turn has allowed 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
the central bank to bring its main policy rate

back down, helping to nourish seeds for the
budding economic recovery. We predict steady Russian Consumer Price Index
expansion in 2017 and 2018, with annual GDP 20% 20%
growth at 1.7 and 2.0 percent, respectively.
18% 18%
Despite the recent acceleration, economic
growth in Russia is unlikely to return to the 16% 16%
supercharged growth rates of the past. Still-low 14% 14%

commodity prices, economic sanctions and a
declining working-age population will likely 12% 12%
weigh on capital and labor growth, restraining 10% 10%

the nations capacity to sustainably increase
production over time. 8% 8%
The ruble has weakened slightly over the past 6% 6%
few months, tracking declining oil prices over 4% CPI: Jul @ 3.8% 4%
the same period. Our currency strategy team Core CPI: Jul @ 3.3%
looks for the ruble to weaken slightly against the 2% 2%
2002 2004 2006 2008 2010 2012 2014 2016
dollar in the remainder of 2017, partially due to
the possibility of future rate cuts from Russias Russian Central Bank Key Policy Rate
central bank.
18% 18%
Russian Exchange Rate

RUB per USD (Inverted Axis)
15% 15%
20.0 20.0
12% 12%
30.0 30.0
9% 9%
40.0 40.0
6% 6%
50.0 50.0
3% 3%
60.0 60.0
Russian Central Bank Policy Rate: Sep-03 @ 9.0%

0% 0%
70.0 70.0
Jan 14 Jul 14 Jan 15 Jul 15 Jan 16 Jul 16 Jan 17 Jul 17
RUB per USD: Aug @ 59.98

80.0 80.0
2010 2011 2012 2013 2014 2015 2016 2017
21
Turkish Real GDP

Turkey 15%
15%
Economic growth in Turkey has rebounded after 10% 10%

a short but sharp slowdown that began in the
middle of last year. The improvement has been 5% 5%
broad-based, led by strong growth in personal
consumption and government spending. Export 0% 0%
growth has also surged amid a weaker Turkish
lira and improving global growth. -5% -5%
Since the start of the year, economic growth has

-10% -10%
improved, prices have accelerated and the lira
has appreciated against the dollar modestly. At
-15% -15%
present, the Turkish central bank appears to be
GDP YoY: Q1 @ 5.0%
on hold as it waits to see how the economic
-20% -20%
fundamentals respond to tighter monetary 2000 2002 2004 2006 2008 2010 2012 2014 2016
policy. Its latest policy statement from the end
Turkish Consumer Price Index
of July signaled that the tight stance in Year-over-Year Percent Change
monetary policy will be maintained until the 15% 15%
inflation outlook displays significant
improvement.
12% 12%
Turkeys demographic makeup presents a
potential positive opportunity for the country.
The working-age population is expected to grow 9% 9%
further over the next two decades, which should
translate into more national production,
everything else equal. But, in the long term, if 6% 6%
Turkey cannot raise its national savings rate, its

long-term economic growth prospects should 3% 3%
remain constrained. The nation relies heavily on
CPI: Jul @ 9.8%
capital inflows to finance a relatively large CPI Ex-Energy/Food&Bev/Gold: Jul @ 9.6%
current account deficit. 0% 0%
2005 2007 2009 2011 2013 2015 2017
The consensus expects year-over-year real GDP
growth of 5.3 percent in Q2. Turkish Central Bank Policy Rate Corridor
14% 14%
Turkish Exchange Rate 12% 12%

TRY per USD (Inverted Axis)
1.25 1.25
1.50 1.50 10% 10%
1.75 1.75
8% 8%
2.00 2.00
2.25 2.25 6% 6%
2.50 2.50
4% 4%
2.75 2.75
3.00 3.00 2% 2%
Overnight Lending Rate: Sep @ 9.25%
3.25 3.25 Overnight Borrowing Rate: Sep @ 7.25%
0% 0%
3.50 3.50 2010 2011 2012 2013 2014 2015 2016 2017
3.75 3.75
TRY per USD: Aug @ 3.532 Source: IHS Global Insight, Bloomberg LP and
2010 2011 2012 2013 2014 2015 2016 2017
22
Dollar Exchange Rates Ok

Trade Weighted Dollar
The U.S. dollar has been soft this year, as the 115
Major Curency Index, 1973 = 100
115
Federal Reserves trade weighted dollar major
110 110
currency index is down 6.8 percent year-to-date.
105 105
Over the past couple of years, monetary policy at Forecast
the Fed has diverged from policy at the worlds 100 100
other major central banks. Policymakers at the 95 95
Fed have spent most of the past two years 90 90

gradually tightening policy amid steady economic
85 85
growth and an ever-tightening labor market,
while the Bank of Japan, the European Central 80 80
Bank and others have eased policy further over 75 75

that period.
70 70
More recently, the divergence that has 65
Trade Weighted Dollar: Q2 @ 90.5
65
characterized the past two years has flipped to a 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
story of convergence. Markets have begun to
U.S. Trade Weighted Currency Indexes
anticipate that central banks around the world March 1973=100
will soon begin to slowly take away the respective 170 110
punch bowls. This has occurred at the same time "Other ITP" Index: Aug-11 @ 153.0 (Left Axis)
Major Currency Index: Aug-11 @ 88.2 (Right Axis)
that inflation has slowed markedly in the U.S.,
raising questions about whether the Feds current 160 100
projected path of tightening is too hawkish.

In addition, after a surge in optimism following 150 90
the U.S. presidential election last fall, markets
appear to have dialed back their expectations for
a substantial fiscal bump. 140 80
Our currency strategy team expects trend

softness in the U.S. dollar to continue over the 130 70
medium term. They forecast moderate emerging
currency gains, with global financial market
conditions mostly benign even as some major 120 60
central banks start to move to less 2010 2011 2012 2013 2014 2015 2016 2017
accommodative monetary policy. Euro, Pound & Yen Exchange Rates

USD per Euro, USD per Pound Yen per USD
2.20 40
Central Bank Policy Rates 2.00 60
7.5% 7.5% 1.80 80

US Federal Reserve: Sep-01 @ 1.25%
ECB: Sep-01 @ 0.00%
Bank of England: Sep-01 @ 0.25% 1.60 100
6.0% 6.0%
1.40 120
1.20 140
4.5% 4.5%
1.00 160
0.80 180
3.0% 3.0%
Dollars per Euro: Aug @ 1.18 (Left Axis)
0.60 Dollars per Pound: Aug @ 1.30 (Left Axis) 200
Yen per Dollar: Aug @ 109.19 (Right Axis, Inverted)
1.5% 1.5% 0.40 220
00 02 04 06 08 10 12 14 16
Source: Federal Reserve Board, Bloomberg LP, IHS Global

0.0% 0.0%
00 02 04 06 08 10 12 14 16
Insight and Wells Fargo Securities
23
World Oil Prices

Energy $130
Weekly Average Cash Spot Prices, Dollars per Barrel
$130
Oil prices have rebounded from their 2017 low

$110 $110
that occurred right around the last publication
of the Global Chartbook in June. Brent prices
have held above the $50 threshold since late $90 $90
July and have moved modestly higher recently.

Oil prices have been relatively range bound this $70 $70
year, mostly moving within a $45-$55 range.
U.S. crude oil production has shown continued $50 $50
resiliency. Despite oil prices remaining low
relative to a few years ago, U.S. oil output has $30 $30
nearly reached its pre-oil price collapse high. WTI: Sep-1 @ $47.30
Rig counts have been on the rise, although July Brent: Sep-7 @ $53.26
$10 $10
saw the fewest monthly oil rig additions since 2009 2010 2011 2012 2013 2014 2015 2016 2017
rig count began increasing last summer. The rig
count still remains roughly 50 percent below its U.S. Crude Oil Production
Millions of Barrels per Day
2015 peak despite near record levels of 10 10
Thousands
Thousands
production. Productivity growth has been
sluggish elsewhere in the U.S. economy, but 9 9
certainly not in this sector.

8 8
The International Energy Agency (IEA) projects
that oil demand will rise about 1.5 percent this 7 7
year amid firming global economic growth in

6 6
both advanced and developing economies. The
IEA cited stronger demand growth in OECD 5 5
countries, particularly the United States and
Germany, as key drivers of stronger oil demand 4 4
this year.
3 3
Natural gas prices have been relatively stable in U.S. Oil Production: Sep-1 @ 8.78 M
recent months. The IEA expects natural gas 2 2
production to decline slightly in 2017 before 05 06 07 08 09 10 11 12 13 14 15 16 17
recouping the losses with stronger output Baker-Hughes Rig Count vs. Oil Prices
growth in 2018. Oil Rotary Rigs; USD per Barrel
1,800 $180
Oil Rig Count: Aug-18 @ 763 (Left Axis)
Henry Hub Natural Gas Spot Price 1,600 WTI: Sep-01 @ $47.30 (Right Axis) $160
Monthly Average Cash Spot Prices, Dollars per MMBtu
$15 $15
1,400 $140
Henry Hub International Natural Gas: Aug @ $2.84
$13 $13 1,200 $120
1,000 $100
$11 $11
800 $80
$9 $9
600 $60
$7 $7 400 $40
200 $20
$5 $5
0 $0
$3 $3 05 06 07 08 09 10 11 12 13 14 15 16 17
Source: IHS Global Insight, Moodys Analytics, Baker-

$1 $1 Hughes and Wells Fargo Securities
98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17
24
Commodity Indices
Other Commodities CRB Indices, 3-MMA, 1967 = 100
1200 1200
CRB Index: Aug @ 441.3
Prices for industrial metals have been a key CRB Index - Metals: Aug @ 869.5
1000 1000
driver of rising commodity prices in recent
months. Prices for industrial metals jumped
amid expectations for greater U.S. 800 800
infrastructure spending following the

presidential election, and have regained their 600 600
momentum after some softening earlier this

year. 400 400
Copper prices have risen about 14 percent over

the past three months and more than 30 percent 200 200
since the U.S. presidential election. Other
metallic commodities, such as steel, have seen a 0 0
similar trend. 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13 15 17
The United Nations Food Price Index has risen Crop Prices
6 percent over the past year. Dairy prices have Dollars per Bushel
soared 42 percent over that period, although $2,100

Corn: Sep-1 @ $340.00
$2,100
much of this is a recovery after a decline of a Wheat: Sep-1 @ $420.50

$1,800 $1,800
similar magnitude occurred, beginning in 2014. Soybeans: Sep-1 @ $942.00
Cereals prices are up about 7 percent, while the $1,500 $1,500

sugar index saw the only year-over-year decline,
with prices falling about 29 percent. Cocoa $1,200 $1,200
prices have remained mired in a slump,
hovering near lows not seen since early 2011. $900 $900
In the United States, survey respondents in the

$600 $600
ISM manufacturing index have reported rising
input prices. In addition, inflation as measured
$300 $300
by the producer price index was 1.9 percent in
July, matching the pace from three years earlier $0 $0
right before the broad-based decline in 2011 2012 2013 2014 2015 2016 2017
commodity prices began.

ISM Prices Paid Index
Diffusion Index
100 100
90 90
Monthly Food Price Index
Year-over-Year Percent Change; 2002-2004 = 100 80 80
70% 70%
Year-over-Year Percent Change: July @ 10.2% 70 70
60% 60%
50% 50% 60 60
40% 40% 50 50
30% 30%
40 40
20% 20%
30 30
10% 10%
20 20
0% 0%
10 ISM Prices Index: Aug @ 62.0 10
-10% -10% 12-Month Moving Average: Aug @ 61.9
0 0
-20% -20%
92 94 96 98 00 02 04 06 08 10 12 14 16
-30% -30%
-40% -40%
Source: Bloomberg LP, ISM, Commodity Research Bureau,
91 93 95 97 99 01 03 05 07 09 11 13 15 17
the United Nations and Wells Fargo Securities
25
Economics Group International Economic Forecast Wells Fargo Securities
Wells Fargo International Economic Forecast

(Year-over-Year Percent C hange)
GDP CPI
2017 2018 2019 2017 2018 2019
Global (PPP Weights) 3.4% 3.4% 3.1% 3.2% 3.3% 3.1%
Global (Market Exchange Rates) 3.2% 3.3% 2.8% 3.2% 3.3% 3.1%
Advanced Economies 1 2.3% 2.3% 1.8% 1.7% 1.9% 1.4%

United States 2.2% 2.6% 2.5% 1.9% 1.7% 2.2%
Eurozone 2.1% 2.0% 1.7% 1.5% 1.7% 1.9%
United Kingdom 1.6% 1.7% 1.6% 2.6% 2.1% 2.0%
Japan 1.9% 1.1% 0.7% 0.3% 0.7% 0.3%
Korea 2.9% 2.8% 3.0% 2.1% 2.0% 2.4%
Canada 3.0% 2.0% 1.9% 1.6% 1.9% 2.0%
Developing Economies 1 4.5% 4.5% 4.3% 4.8% 4.8% 4.8%

China 6.6% 6.3% 5.9% 1.5% 2.0% 1.9%
India2 7.1% 6.4% 7.2% 3.1% 4.1% 4.3%
Mexico 2.1% 2.3% 2.4% 6.0% 5.0% 5.2%
Brazil 0.6% 2.0% 2.2% 3.5% 3.5% 3.8%
Russia 1.7% 2.0% 2.2% 4.2% 4.3% 4.5%
Forecast as of: September 7, 2017
1
Aggregated Using PPP Weights
Wells Fargo International Interest Rate Forecast

(End of Quarter Rates)
3-Month LIBOR 10-Year Bond
2017 2018 2017 2018
Q3 Q4 Q1 Q2 Q3 Q4 Q3 Q4 Q1 Q2 Q3 Q4
U.S. 1.35% 1.65% 1.65% 1.90% 1.90% 2.15% 2.30% 2.49% 2.57% 2.66% 2.71% 2.78%
Japan 0.00% 0.00% 0.02% 0.02% 0.03% 0.03% 0.00% 0.03% 0.05% 0.07% 0.09% 0.12%
Euroland1 -0.37% -0.35% -0.30% -0.15% 0.05% 0.20% 0.40% 0.45% 0.60% 0.75% 0.85% 1.00%
U.K. 0.27% 0.30% 0.40% 0.60% 0.65% 0.85% 1.10% 1.20% 1.40% 1.50% 1.60% 1.75%
Canada2 1.40% 1.50% 1.65% 1.75% 1.90% 2.00% 1.90% 2.00% 2.20% 2.30% 2.40% 2.45%
Forecast as of: September 7, 2017
1 2
10-year German Government Bond Yield 3-Month C anada Bankers' Acceptances
Source: IMF and Wells Fargo Securities
26
Wells Fargo Securities Economics Group
Diane Schumaker-Krieg Global Head of Research, (704) 410-1801 diane.schumaker@wellsfargo.com

Economics & Strategy (212) 214-5070
John E. Silvia, Ph.D. Chief Economist (704) 410-3275 john.silvia@wellsfargo.com
Mark Vitner Senior Economist (704) 410-3277 mark.vitner@wellsfargo.com
Jay H. Bryson, Ph.D. Global Economist (704) 410-3274 jay.bryson@wellsfargo.com
Sam Bullard Senior Economist (704) 410-3280 sam.bullard@wellsfargo.com
Nick Bennenbroek Currency Strategist (212) 214-5636 nicholas.bennenbroek@wellsfargo.com
Eugenio J. Alemn, Ph.D. Senior Economist (704) 410-3273 eugenio.j.aleman@wellsfargo.com
Azhar Iqbal Econometrician (704) 410-3270 azhar.iqbal@wellsfargo.com
Tim Quinlan Senior Economist (704) 410-3283 tim.quinlan@wellsfargo.com
Eric Viloria, CFA Currency Strategist (212) 214-5637 eric.viloria@wellsfargo.com
Sarah House Economist (704) 410-3282 sarah.house@wellsfargo.com
Michael A. Brown Economist (704) 410-3278 michael.a.brown@wellsfargo.com
Jamie Feik Economist (704) 410-3291 jamie.feik@wellsfargo.com
Erik Nelson Currency Strategist (212) 214-5652 erik.f.nelson@wellsfargo.com
Michael Pugliese Economic Analyst (704) 410-3156 michael.d.pugliese@wellsfargo.com
E. Harry Pershing Economic Analyst (704) 410-3034 edward.h.pershing@wellsfargo.com
Hank Carmichael Economic Analyst (704) 410-3059 john.h.carmichael@wellsfargo.com
Ariana Vaisey Economic Analyst (704) 410-1309 ariana.b.vaisey@wellsfargo.com
Abigail Kinnaman Economic Analyst (704) 410-1570 abigail.kinnaman@wellsfargo.com
Shannon Seery Economic Analyst (704)410-1681 shannon.seery@wellsfargo.com
Donna LaFleur Executive Assistant (704) 410-3279 donna.lafleur@wellsfargo.com
Dawne Howes Administrative Assistant (704) 410-3272 dawne.howes@wellsfargo.com
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September 08, 2017

Jay H. Bryson, Global Economist

Global Chartbook: September 2017

-20% World Export Volume: Jun @ 5.0% -20%

This report is available on wellsfargo.com/economics and on Bloomberg WFRE.

World Export & IP Volume

Global economic growth has strengthened in 20% 20%

have both accelerated. The recent strengthening 5% 5%

chartbook, we have upwardly revised our global -10% -10%

Despite stronger growth, inflation has moved -25%

lower in many countries. On a year-over-year

Lower commodity prices account for some of 10% 10%

Faster economic growth and inflation helped 6% 6%

accommodative monetary policy around the

Broadly speaking, we expect global monetary -4%

coming quarters. However, with economic

Source: IHS Global Insight, Bloomberg LP and

United States U.S. Real GDP

Economic growth in the United States averaged 8%

confidence and steady job growth, household 2% 2%

environment for energy prices and improving -4% -4%

slowdown may not be transitory. We expect

Eurozone Eurozone Real GDP

sentiment. Strengthening economic growth in the -4% -4%

sustaining economic expansion to remain intact. -10% -10%

listless around 1 percent. As such, policymakers

The ECB has maintained its main refinancing

cause the euro to trend higher vis--vis the dollar

1.50 1.50 3.0 3.0

1.20 1.20 1.0 1.0

Japan Japanese Real GDP

growth picked up in Q2, the year-over-year pace 4% 4%

encouraging sign for a country that has at times -4% -4%

in inflation, which is hovering near zero percent. -12% -12%

At present, the Bank of Japans (BoJ) monetary

commitment to achieving what has been a

inflation of 2 percent. Japan has struggled with

Japanese Exchange Rate

JPY per USD: Sep @ 109.7

U.K. Real GDP

Monetary policymakers in the U.K. are among 6% 6%

the few central bankers in the advanced world 4% 4%

wake of last years Brexit referendum. The -2% -2%

from the sterlings depreciation begin to fade. -8% -8%

The uncertainty related to Brexit also appears to

capital formation has decelerated over the past

investment intentions generally remain low.

Australia Australian Real GDP

The Australian economy has decelerated amid

the softer commodity price environment, but 6% 6%

spending has weighed on growth as the

retrenched. Public spending has helped pick up 0% 0%

remain well below the Reserve Bank of

theme in many advanced nations. In Australias -6%

unemployment rate remains about

restrained wage growth and inflation. 6% Core CPI: Q2 @ 1.5% 6%

Despite below-target inflation and soft growth, 5% 5%

elevated household debt. Even lower interest 3% 3%

housing market. The bifurcation between

and strengthening in the global economy as a

Australian House Price Index

90 90 Cash Rate: Sep @ 1.50%

Canadian Real GDP