Insightperspectives January 1, 2016 v3

Insight Perspectives

Far more important is the still upbeat sentiment in the

service sector, which accounts for close to 80% of GDP.

This sector is still exposed to plenty of tailwind, not

least due to the fact that US households remain in an

excellent position; wages are increasing, the wealth

effect is still positive and the labour market will

continue to show strength in the first half of 2016 -

read more in the article,

Underlying details show strong US retail sales report as households see strong tailwind .

Europe

, where the economy is seen to be mid-cycle,

the biggest threat to the current cyclical tailwind is

increasing political tensions brought about by the

refugee crisis. Ironically, this is the case even though

the influx of refugees is supposed to boost growth. The

latter is still expected to be the case, at least in the very

short run. A true “Willkommen policy” requires more

than just politically correct statements; successful

integration of refugees requires further reforms of the

European welfare system and lower minimum wages,

which is barely part of discussions in, for instance,

Germany.

The problem, however, is that the failure to find a

common policy approach to the refugee crisis is

threatening the survival of the entire European Union.

Many European countries blame Berlin for a sharp

increase in the number of refugees. This is the case as

Chancellor Mrs. Merkel autocratically made more

important decisions on behalf of the entire union

without consulting the other EU-members. Most

notable was Mrs. Merkel’s decisions to grant visa to all

Syrian refugees in August and her “embracement” of

Turkey’s maverick president, Mr. Erdogan.

The political divide in the European Union is already felt

in Poland and France, where the far right has seen

soaring support from voters in national and regional

elections. This is not only a threat to further EU

integration; soaring support to the political parties on

the far right is also a boost to anti-market forces to the

GDP growth

USA China EMU Japan S. Korea Germany Brazil

France UK Italy Spain Portugal India

2014

2,4% 7,3% 0,9% -0,1% 3,3% 1,6% 0,1% 0,2% 2,9% -0,4% 1,4% 0,9% 7,0%

2015

2,5% 6,7% 1,5% 0,8% 2,6% 1,5% -3,6% 1,2% 2,4% 0,7% 3,1% 1,5% 6,9%

2016

2,1% 6,0% 1,6% 1,3% 2,4% 1,6% -3,0% 1,2% 1,8% 1,5% 2,8% 1,2% 6,7%

2017

1,5% 5,4% 1,5% 1,3% 2,0% 1,7% -0,5% 1,3% 1,5% 1,2% 2,1% 1,2% 6,8%