Oct 2008-MasterLink-Global Economy Outlook

Outline􀀁
􀁺 U.S. Economy: FY09 housing market to improve on sales recovery and decreased
inventory….………………………………………………………………………………………...Pg 2
1. After the U.S. government took over Fannie Mae and Freddie Mac, mortgage interest rate
pulled back to propel housing affordability and to stabilize housing sales in 3Q08.
2. Existing home inventory should decrease gradually after home foreclosure peak in 4Q08.
3. Housing starts plunged 60%. As sales is stabilizing and inventory is decreasing, housing
starts and prices may hit a trough in 4Q08 and 1Q09, respectively.
4. FY09 residential investment growth may improve to –10.1% YoY from –20.6% YoY.
􀁺 Taiwan Economy: 2H08 GDP growth to weaken to 2.5% from 5.3%………………………..Pg 4
1. Affected by weakening macro economy, exports contribution to GDP growth may slip to
0.8% in 2H08.
2. Investments from electronics companies have been weak. 2H08 private business
investment may decrease by 2.3%.
3. Drops in raw material prices may spill into 1H09. Annual CPI growth rate remains high
after the peak in Jul08.
4. The Central Bank may cut discount rates to 3.375% by late FY08 as: 1) GDP fell further
due to sluggish domestic demand and exports; 2) inflationary pressures have eased.
􀁺 China Economy: Domestic demand expanded, tax reduced and monetary policy
relaxed………………………………………………………………………………………………Pg 6
1. China investment contribution to GDP is to rise to 1.4% from 1.2% thanks to expansion in
domestic demand.
2. Tax reduction in end-2008 to 2009 to boost the economy.
3. China’s monetary policy to loosen accompanied by tax cuts
􀁺 Japan Economy: FY08 consumer spending to remain weak amid falling enterprise profits and
loosening tight labor market………………………………………………………………………Pg 8
1. Consumer confidence index (CCI) witnessed an unprecedented low but oil sales supports
retail sales growth.
2. FY08 retail sales is projected to rise merely 0.88% as enterprise profits are sliding and
tight labor market is loosening up.
􀁺 European Economies: ECB to reduce interest rate amid global and European economic
jitters……………………………………………………………………………………………. ….Pg 9
1. Continued economic downturn in Europe.
2. ECB is to cut interest rate by 0.5-0.75%.