UniCredit: Double Dip and Oil Shock

Uni Credit makes a broad analysis of the world economy in their latest issue of Friday Note.  The Italian bank sees a U.S. GDP of only 1,0 % first half of 2010, the Eurozone economy will soon make a doble dip, and the prise of oil will rise shaply above 100 dollar a barrel towards 2011.  GDP in industrialized countries will contract by 3½% this year, according to the analysis. Next year, the industrialized countries will post only modest growth.

“For the first time since World War II, global economic activity will, however, fall 1.1% on average for 2009, weighted for purchasing power parities. At market exchange rates, the decline is even twice as strong. For 2010, we expect real GDP to rise 2.9% on a PPP basis. That is, however, clearly below trend.”

UniCredit Market & Investment Banking

Some highlights:

* The US economy exited the worst recession since WWII in 3Q 2009. Real GDP showed pretty robust growth in the summer months of 3% (annual rate). But that is merely “borrowed” growth. We expect an expansion of “only” 1% for the first half of 2010. Support of private consumption is still missing for a self-sustaining upswing. The recovery will, therefore, be W-shaped.”

*  “The Fed is now pursuing a Quantitative Easing Policy. Since the economic upswing should not be sustainable, the US central bank will likely adhere to its current ultra-expansionary monetary policy well into next year. But it could start to tighten verbally at the turn of the year.”

* “Similar to the US, the upswing is not likely to be sustainable. The initial V should soon become a W. On average for 2009, real GDP will nevertheless contract by a whopping 4%. And growth of 0.8% in 2010 is attributable partly to a statistical overhang.”

* We expect oil prices to remain relatively high in the next two years. For 2010, we are raising our estimate for the average price for the year from USD 75 to USD 85 per barrel. For 2011, we expect an average oil price of USD 105 per barrel. As a result, the oil price would reach a higher average for the year than in 2008 (USD 99).


Study the full report here:

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