Why Thomson Reuters Eikon? Accessing Fathom Charts in Thomson Reuters Eikon. Search for DATASTREAM and select the Chartbook or type DSCHART or CBOOK

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1 A selection of charts presented at Fathom Consulting s Global Economic & Markets Outlook Seminar on 20 th March 2018

2 Why Thomson Reuters Eikon? Whether you re doing top-down macro analysis, sector research or asset allocation strategy, Thomson Reuters Eikon has the content and tools you need, all in one place, to help you outperform. Eikon helps you see the complete picture by combining one of the most comprehensive economics databases in the industry, powered by Thomson Reuters Datastream, with our world-class company information and cross asset market data. Track daily news and events Compare and analyze key economic indicators Establish whether stock prices are over or under-valued Access unique economics point in time data Track market expectation Generate ideas and present them clearly Access a pre-built library of charts built by Fathom Consulting including the charts shown in this booklet Accessing Fathom Charts in Thomson Reuters Eikon Search for DATASTREAM and select the Chartbook or type DSCHART or CBOOK The Datastream Chart Studio in Eikon Includes full editing, customization and publishing capabilities Access the slides from this presentation under Fathom Global Forecast 2018 Q1 View an extensive library of example charts and pre-built topical charts from Fathom Consulting in the Chartbook Access Fathom Consulting s Macroeconomic Policy Indicator by searching for FMPI in the Chartbook 2

3 Fathom Consulting Global Economic and Markets Outlook Q Selected charts All commentary and opinion is that of Fathom Consulting and any views expressed are not those of Thomson Reuters. The full set of charts presented are available in Thomson Reuters Eikon along with many of the data sources. Is it The Euro Area s Time to Shine? March marked Fathom s first Monetary Policy Forum of 2018, a quarterly event hosted by Thomson Reuters. It featured a debate between William Hynes and Brian Davidson, Fathom s lead euro area and US economists, on whether Europe is set to outperform the US in the coming decades. They were joined by distinguished guest Paul Fisher, a former member of the Bank of England s Monetary Policy Committee. Proceedings began with Brian Davidson laying out Fathom s bullish near-term view on the US economy and predicting that President Trump s tax cuts and spending plans will boost economic growth, both this year and next. He was followed by William Hynes who presented a rosy outlook for the euro area, and reaffirmed Fathom s view that the currency bloc s cyclical upturn will continue through While both of Fathom s economists agreed on the near-term story, there was much debate about the future of the euro area. Fathom s central view is that, while some flaws remain, the euro area will continue to muddle through in the coming years. Ultimately, Fathom sees only a 5% chance that these flaws cause the currency bloc to fall apart within a forecast horizon stretching to Likewise, Fathom attaches a 10% probability to an upside scenario in which the euro area succeeds in forming a full fiscal and monetary union and addresses many of the shortcomings in the currency bloc s architecture. US and Euro area GDP Index, 2000 = 100 Refresh the chart in your browser 3 Available on Thomson Reuters Eikon

4 Euro area economist William Hynes saw encouraging signs of political progress towards addressing the bloc s flaws (Fathom s upside scenario), and also argued that there were other causes for optimism such as rising participation rates and lower aggregate debt levels, relative to the US. With regards to the US, he highlighted the United States poor record of controlling its public finances. Thus far, markets have granted the US a degree of slack, owing to the dollar s privileged status as the reserve currency. He cautioned that this privilege can be used but should not be abused or else it might be lost. Euro area market-implied probability of euro exit Percent Refresh the chart in your browser Labour force participation rates Percentage of population economically active, aged Available on Thomson Reuters Eikon

5 Brian Davidson suggested that it was the distribution of debt that was a challenge for the euro area and questioned whether the political demands of the union might prove too great. He highlighted the worrying rise of populist parties, whose policies often align with national, rather than international, interests. Given this, he was skeptical as to whether President Macron s reform agenda would gain traction. He also argued that loose US fiscal policy could have second-round effects if it enables faster monetary policy normalization and the slaying of zombie firms. Government borrowing Government borrowing (as percent of GDP) Refresh the chart in your browser In the panel discussion, former Bank of England policymaker and event referee Paul Fisher probed Fathom s economists on various aspects of their presentation material. In response to William Hynes upbeat but cautious take on the euro area, Mr Fisher agreed that the problem is not with the euro itself, but the euro area s fiscal disconnect. That is a view that Fathom Consulting shares. For the currency bloc ultimately to succeed, further fiscal integration will be needed. Despite the enormous political will that brought it into being and that has kept it afloat thus far, Fathom s view is that the future of the euro area is far from certain. The audience expressed their confidence in the sustainability of the currency bloc, with over half believing that all 19 euro area economies would still be members in 10 years time. Panelist and euro area economist William Hynes echoed this view when he argued that commitment to the project has always won through in the past and will continue to do so. In contrast, 37% of the audience felt that only some of the existing members would remain, while 11% sided with Brian Davidson s more pessimistic view that the architecture of the union is irreconcilably flawed and that the currency bloc will fall apart. 5 Available on Thomson Reuters Eikon

6 Again, in support of William Hynes more optimistic view, 78% of the audience felt that the euro had been a net positive for its members. This mirrored a 2017 European Commission survey, which revealed that the highest percentage of respondents on record felt that the euro had been good for their country. How many of the 19 euro area economies will still be members in ten years time? Percentage of respondents Refresh the chart in your browser Pointing to the rise of populist politics in both Europe and the US, one audience member asked about the growing danger of trade wars and the likely implications. As guest panelist, and referee, Paul Fisher highlighted, all economists tend to agree that trade is good, raising the possibility that with the passage of time President Trump and his protectionist policies will not be viewed favorably, even in the US. An unexpectedly large proportion of the audience (73%) believed that the president s policies would be net negative for the US economy, even though as Brian Davidson demonstrated a combination of fiscal policy and the arousal of animal spirits act as a boon for now. Echoing this disillusionment, 95% of the audience also felt that the US would lose influence over the coming decade, although not necessarily to a reformed and well-functioning euro area. Paul Fisher shared aspects of the audience s skepticism, saying don t we know how this typically ends, which is you have a period of output Has the euro been a net positive for its members? Percentage of respondents Refresh the chart in your browser growth and inflation, and then you have a subsequent period of recession? Fathom concurs with this view, as explained in our recent Global Economic and Markets Outlook: The dawning of a new error. 6 Available on Thomson Reuters Eikon

7 How will the economic policies of Donald Trump be seen with the passage of time? Percentage of respondents Will there be a greater role for Europe over the coming decade? Percentage of respondents Refresh the chart in your browser 7 Available on Thomson Reuters Eikon

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