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WEEKLY EXPORT RISK OUTLOOK: US & Canada, Austria, Philippines, Greece



​U.S. & Canada:  Bad week for Canada

Weaknesses in U.S. labour, trade and manufacturing are indicative of the slow growth expected through 2016. Only +160,000 jobs were added in April (expectations of +200,000), unemployment remained 5% and the labour force fell -362,000, the first contraction in seven months. Wages increased by +0.3% m/m and +2.5% y/y; this rate varied between +2.3% and +2.6% in the past six months, indicating tepid inflationary pressures. Core factory orders gained only +0.1% m/m and are still down    -2.3% y/y. The trade deficit contracted to –USD40.4bn from -USD47bn, but details suggest it resulted from weak domestic and global demand. The only positive came from the ISM non-manufacturing index, which gained +1.2 to 55.7. Meanwhile, it was a bad week for Canada, with the trade deficit increasing to a record -CAD3.4bn in March, -2,100 jobs were lost in April and widespread wildfires burned through the oil province of Alberta. Initial estimates of the damage vary widely, with some Q2 GDP growth estimates turning negative; insured losses are estimated at between -CAD4bn and            -CAD9bn. Oil production is expected to come back on line quickly and a rebound in Q3 is likely.

Austria:  Political turmoil ahead?

On Monday, Chancellor Faymann stepped down with immediate effect and also resigned as head of the Social Democratic Party (SPÖ), triggered by the loss of support from his party following the failure of the SPÖ’s candidate in the first round of the presidential election last month (he got 11% of the vote). Austria is currently governed by a "grand" coalition comprising the SPÖ and the centrist ÖVP whose candidate for the presidential post also failed with 11%. Thus the run-off on 22 May will see first round winner Hofer (35%) from the nationalist FPÖ compete against the independent and Greens-backed van der Bellen (21%). In practice, presidents have merely acted as ceremonial figureheads since 1945. However, Hofer has threatened, if elected, to make use of a presidential right to dissolve parliament before the 2018 elections. As a result, the SPÖ and ÖVP will be keen to try to form a new government as soon as possible since recent opinion polls show the FPÖ with a clear lead while SPÖ and ÖVP would be unable to form a new two-party coalition if early elections are held now.

Philippines:  And the election winner is…

Presidential, legislative and local elections were held on 9 May, with the presidential poll attracting most attention as this determines the head of state and of government. Preliminary results indicate that the winner is Rodrigo Duterte (mayor of Davao for almost 22 years) who campaigned in favour of tough measures on law and order; Duterte promotes unconventional methods to reduce crime and is seen as somewhat controversial. In terms of the economy, Philippines has been performing close to the regional average. The short-term impact of the elections is likely be minimal and we expect GDP growth of +5.8% in 2016. The outgoing Aquino administration is leaving office with a broadly positive legacy of strong growth and solid public finances and external accounts. Advanced indicators show increasing credit growth and rising remittances, which will underpin domestic demand. In the medium term, risks to the outlook include potential reductions in domestic investment growth and foreign investment inflows, particularly if the new government loses international confidence.

Greece:  The first step is almost finalised

Following the Eurogroup meeting on 9 May, the latest Troika review on Greece seems near to completion, at which point it will allow the disbursement of EUR5.6bn. This should cover all bonds and IMF loans maturing at end-July and help pay for pensions and civil servant salaries. With the exception of some technical details that still need to be agreed, the contingency mechanism, which will be implemented automatically if the government fails to meet the annual primary surplus target of 3.5% of GDP in 2018, should be ready soon. It will complement a first set of measures, equivalent to 3% of GDP, including an overhaul of the pension system, just voted through by the Greek Parliament. Eurozone finance ministers also recalled their willingness to lighten Greece’s debt burden. This could take the form of grace periods or longer maturities; more details are likely to be revealed on 24 May. For now, any haircut on the outstanding amount is excluded. The deal will allow further easing of capital controls in H2, thereby boosting economic growth.