Savings rates to push Eurozone to net creditor status and the region faces prospect of repeating Japan's lost decade
JERSEY CITY, N.J., January 7, 2013 — Pershing LLC, a BNY Mellon company, today announced the release of an independent study authored by senior economists at Roubini Global Economics on the pace and direction of the global economic recovery leading into 2013. The report, Rebalancing and Recovery: The Slow, Risky Road to Global Growth, available through Pershing Prime Services, states that the global economic recovery is losing momentum, and is likely entering a sustained period of below-trend growth. The study, commissioned by Pershing, looks at the major global markets and concludes that a sizable increase in global net savings will have a major impact on invested assets; thereby weighing on returns.
"As the global economy continues to undergo structural shifts, we are committed to providing our customers with high-level insight and thought leadership that will allow them to stay ahead of events and understand the forces driving policy decisions," added Gerry Tamburro, managing director, Pershing Prime Services. "We are living in a time of almost unprecedented global economic change and uncertainty, which is impacting every aspect of our customers' business and requires an understanding of the top-down factors driving the markets."
To soften the impact of this global move toward savings, the report suggests that big surplus markets, Germany and China, and other traditional creditor nations, should focus on restructuring to stimulate consumer spending. It also notes that the U.S., which is no longer at the epicenter of the financial crisis, will likely continue its slow recovery. The speed of this recovery will depend on the impact of fiscal, monetary and political policies, as well as major economic concerns—such as the "fiscal cliff" in 2013, which could potentially trigger a second recession.
"The continued sluggish global growth and the increase in global savings are, in large part, a reflection of the limited ineffectiveness of policy at solving underlying issues, such as excessive debt," said Nouriel Roubini, chairman of Roubini Global Economics. "Governments around the world have far less policymaking flexibility than they had in 2008, and less of an ability to stimulate the economy by shifting expenditures or offering fiscal stimulus."
The study notes that the premature withdrawal of stimulative measures and continued austerity in the Eurozone could lead to a confluence of demographic trends, structural rigidity and ineffectual policies, resulting in a "lost" economic decade similar to that seen in Japan in the 1990s. With the recession worsening in the periphery of the region and growth stalling even in core nations, credit continues to contract in the Eurozone, while savings are likely to increase. This boost in household savings may result in the Eurozone becoming a net creditor.
In China, as in most emerging markets, the report foresees continued growth deceleration to begin again in late 2013 as investment and consumption fails to make up this slack. Chinese stimulus may help restrain the extent of the slowdown, but is unlikely to counteract a greater structural slowdown, driven by weak returns on property values, loan bailouts and lower return on investment.
To obtain a copy of the independent study, Rebalancing and Recovery: The Slow, Risky Road to Global Growth, visit www.pershingprimeservices.com.
Pershing LLC (member FINRA/NYSE/SIPC) is a leading global provider of financial business solutions to more than 1,500 institutional and retail financial organizations and independent registered investment advisors who collectively represent approximately 5.5 million active investor accounts. Located in 23 offices worldwide, Pershing and its affiliates are committed to delivering dependable operational support, robust trading services, flexible technology, an expansive array of investment solutions, practice management support and service excellence. Pershing is a member of every major U.S. securities exchange and its international affiliates are members of the Deutsche Borse, Australian Stock Exchange, Irish Stock Exchange, London Stock Exchange and Toronto Stock Exchange. Pershing LLC is a BNY Mellon company. Additional information is available at www.pershing.com.
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $27.1 trillion in assets under custody and administration and $1.3 trillion in assets under management, services $11.5 trillion in outstanding debt and processes global payments averaging $1.4 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter@BNYMellon.
Roubini Global Economics (RGE) is the independent, global economic and market strategy research firm built by renowned economist, Nouriel Roubini. RGE provides a view into the dynamics and developments within the global economy—showing how those changes can impact investment decision making. Founded in 2004, RGE has offices in New York and London, and its clients include leading asset managers, commercial and investment banks, central banks and government, and academic institutions.