Head of Macroeconomic Research
Summary: Our 'Macro Chartmania' series collects Macrobond data and focuses on a single chart chosen for its relevance.
Click here to download this week’s full edition of Macro Chartmania.
The pandemic served as a wake-up call to European governments on the urgent need to reduce economic dependence on the rest of the world, notably Asia. Many European leaders, including French president Emmanuel Macron, have highlighted the urgency to relocate strategic supply chains in Europe. The EU is broadly self-sufficient, especially in agricultural commodities, but it is not certain it can regain autonomy in other products and goods where it is not self-sufficient yet. Relocation takes time, requires a lot of political will and a solid pre-existing industrial base in the host countries. It is especially necessary to reach a high level of robotization in factories in order to increase efficiency in production.
In the below chart, we have plotted robotics investment defined as the supply of industrial robots per year for the main global economies based on data released by the International Federation of Robotics (see here for methodology). It appears that the EU as a whole has made progress in this area over the past years, reflecting mostly an acceleration in robotization in CEE, but it is still lagging significantly behind China in robotics investment. This year, the supply of industrial robots is expected to reach 82K in Europe versus 250K in China. China is investing three times more than Europe in the key segment of industrial robots. Based on a country by country basis, the gap is even worse. France’s flat curve should not mislead you. The country has started to really invest in robotics since 2015-16 on the back of fiscal incentives, but the results are still too insufficient. In 2020, France will invest four times less than Germany – which certainly provides some explanation for why the country is lacking competitiveness.
And things are unlikely to change anytime soon for Europe. In the context of the seven-year Multi Financial Framework currently negotiated at the EU level, and that should be discussed today by President Macron and Chancellor Merkel at Meseberg, we estimate that the total package allocated to reduce reliance on extra-EU trade and push to supply chain relocation would represent, at best, 0.08% of EU GDP per year – mostly as part of the Horizon Europe Program. The least we can say is that it is clearly not enough to reduce economic dependence on Asia and especially China.
2024: The wasted year
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Amid AI and obesity drug excitement, equities see varied prospects: neutral on overvalued US stocks, negative on Japan due to JPY risks, positive on Europe. European defence stocks gain appeal.
With the economic slowdown, quality assets will gain favour, especially sovereign bonds up to 5 years. Central banks' potential rate cuts in Q2 suggest extending duration, despite policy and inflation concerns.
Commodities poised for rebound. The "Year of the Metal" boosts gold and silver, copper awaits rate cuts. Grains may recover, natural gas stabilises. Gold targets $2,300-$2,500/oz, copper's breakout could signal growth.
