Salient to Investors:

Kyohei Morita and Yuichiro Nagai at Barclays said:

  • Abe’s policies can succeed even if wages don’t immediately accompany price increases, because 2.21 million people born between 1947 and 1949 are starting to retire and will become buyers rather than workers and savers, even as the total population declines.
  • With wages not growing as strongly as consumption, financial assets become an important source of funding for expenditure as well as income, and so the retirement of baby boomers cannot be overlooked.
  • The emergence of the elderly as consumers tends to prompt a swing from goods to services, while the correlation between consumption and industrial production naturally drops. There is a risk that analysis based on industrial production will underestimate the momentum of private consumption and the economy as a whole.

EC Harris said:

  • Concerns that China is threatened by overinvestment may be misplaced, at least for the time being, but if investment continues to expand at a high rate as expected, overinvestment will become a growing concern.
  • China had $35.45 trillion of built assets in 2012 versus the US with $39.73 trillion. China’s total stock of built assets is estimated to be 286 percent of GDP versus the average of 284 percent of 30 economies. China will have accumulated $75.7 trillion of such assets by 2022, versus $47.3 trillion in the US.
  • The fastest growth of 63 percent over the next decade is expected in the Middle East and Africa and in Asia.
  • A hard landing in China would mean trouble for asset prices and economies far from Beijing.

Patrick Legland et al at Societe Generale forecasts Chinese growth at 7.4 percent in 2013 slowing to 6 percent by 2017; but said a slump in 2013 expansion to under 6 percent could trim 1.3 percent from global growth, drop base metal prices 30 percent to 40 percent drop Brent Crude 30 percent, and hurt equities across Asia.

Julie Ades at the Conference Board of Canada said:

  • Canadian Baby Boomers may have trouble selling their big houses as they retire because condos and smaller multiple-unit dwellings are becoming more popular as fewer young people marry and have smaller families. These trends raise the question of whether future demand for single-detached homes will be enough to support price growth, particularly for homes far from city cores.
  • Boomers will add to the trend as the popularity of living in single-unit houses starts to decline when people hit 55.
  • Boomers are 29 percent of Canada’s population and the biggest owners of single homes. Census data shows the percent of people in their 20s who were part of a couple fell to 30.8 percent from over 50 percent in 1981.
  • Greater immigration and new families will support demand, while builders will reduce the supply of new single-family homes and convert others into semi-detached units.

Ben May at Capital Economics said the euro has not led to true convergence of euro-region economies as evidenced by unemployment rates, output gaps and competitiveness. Nominal economic variables such as inflation or public and private sector debt levels are more similar.

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