Global Talent Update -- December 2017

Europe, Middle East and Africa

While Germany goes through some political upheaval surrounding failed talks between Chancellor Angela Merkel's allies and the nation's opposition parties, its economy appears to be in excellent shape. According to Bloomberg, unemployment as of October 2017 stands at what is approximately a 25-year-low level of 5.6 per cent, while overall economic activity grew 2.5 per cent. In the most recent quarter, an uptick of 0.8 per cent was notably ahead of what German and international economists had predicted.

Some experts, including Bloomberg's own Economics division, believe the German economy isn't out of the woods yet and are concerned about the country's politics. However, the broader consensus is that tensions between Merkel's party and opposing legislators won't have excessive effects on the market.

Holger Sandte, chief European analyst at the Copenhagen-based economics firm Nordea, told Bloomberg: "This is uncharted territory for Germany, nothing can be taken for granted right now. But I think the impact on investment and the economy will be small, maybe invisible."

Citing data from INSEE, the country's statistics department, The Local France reported that in 2017's third quarter - the most recent period for which data was available - the French economy grew 0.5 per cent of GDP. On a year-over-year basis, growth totals up to 2.2 per cent, the highest such rate reported in the nation since 2011, although unemployment increased slightly to reach 9.8 per cent for July 2017.

Moreover, the Q3 uptick continued the positive trends of 2017's first and second quarters, which saw French GDP growth of 0.5 per cent and 0.6 per cent, respectively. The International Monetary Fund estimated that France would see 1.6 per cent growth for the entirety of this year, but RFI reported that 1.8 per cent - the number hoped for by recently inaugurated French President Emmanuel Macron - is more likely.

Asia-Pacific

The economy in Japan has grown continuously for much of the past two years, according to The New York Times, and in the third quarter of 2017, that trend continued. GDP rose 1.4 per cent over the whole of the year's past three quarters, with the expectation that continued expansion will round out 2017.

The recent period of success constitutes seven consecutive quarters of GDP growth, which is the longest streak of continuous increases in this metric seen in Japan since 1999. Foreign spending served as the most recent primary driver of Japanese economic success, though in the year's second quarter, a massive surge in spending among the country's consumers fueled the growth of the economy instead.

Because domestic consumer purchases - one of the only economic metrics to drop by any significant amount of late - dropped by 1.9 per cent in the most recent period of gathered data, some remain uncertain about the implications of Japan's dropping consumer prices, which make for deflation that is just as dangerous as inflation in its own fashion. The current Japanese government under Prime Minister Shinzo Abe, however, is confident that the country will soon reach its target rate of 2 per cent inflation. Currently, this figure stands at 0.7 per cent, the Times reported.

Due in part to measures intended to foster aggressive growth including tax breaks and infrastructure development plans, Thailand's economy is on track to see a highly positive rate of expansion by the end of 2017. Referring to information provided by the country's National Economic Development Board, Bloomberg reported that 2017 should ultimately bring Thailand an economic growth rate of 3.9 per cent. Estimates for 2018 are even more positive, projecting that further developments could ultimately lead to 4.6 per cent growth once the next year has concluded.

In addition to the aforementioned infrastructure projects - worth a total of $46 billion - numerous economic experts believe that upticks in consumer spending will keep the Thailand economy in solvent through the end of 2017, into 2018 and beyond. A somewhat uncertain political situation, stemming from the nation's state of martial law that began in 2014 and continues as of November 2017, may cause unease among some investors, but democratic elections are slated to take place next year. Also, tourism remains a massive driver for the developing Southeast Asian nation, as noted by Australia & New Zealand Banking Group Ltd. economist Eugenia Victorino.

"Growth is broadening with exports and tourism still doing the heavy lifting," Victorino said, according to Bloomberg. "Our 2017 GDP forecast of 3.5 per cent now looks slight and we will be revising it to reflect the endurance of the export recovery."

Americas

American employment experienced notable surges across several metrics during October 2017. According to the Employment Situation Summary released by the Labor Department's Bureau of Labor Statistics, the unemployment rate dropped to 4.1 per cent - a 0.1 per cent decline from the previous month - as the overall field of payroll employment, except farm work, added 261,000 jobs.

The food and drink services industry's job gains constituted a vast majority of the new positions created in October. After sharp declines in this sector stemming from the damages of Hurricanes Harvey and Irma, it created 89,000 new roles, some of which were recreations of jobs just briefly lost. Professional and business services, meanwhile, increased its labour force by 50,000 jobs, and the manufacturing sector continued the trend of notable growth it has been experiencing since the summer of 2017.

There were a few declining employment metrics that bear closer analysis, particularly in light of many economists' belief that the Federal Reserve will raise interest rates sometime in December. Specifically, the rate of labour-force participation fell 0.4 per cent in October to reach 62.7 per cent - a position around which it's hovered most of the year - and average hourly wages fell by 1 cent. The latter came on the heels of a 12-cent uptick in earnings during September.

TD Securities' chief U.S. economist Michael Hanson noted that while wage declines are always suboptimal, planned interest rate increases shouldn't be meaningfully affected.

"The weakness in wages will not go unnoticed at the Fed, particularly for members that remained more concerned over the inflation outlook," Hanson said in an interview with Reuters. "Overall, sustained job growth and labour market slack and pre-crisis lows keeps December [rate hikes] in play."

Argentina has seen steady economic growth during the past several years, even under the heavily regulated administration of former President Cristina Fernandez. Per data from the government's National Institute of Statistics and Censuses, economic activity in August 2017 - the most recent month for which data was available - experienced a 4.3 per cent uptick from its levels seen in the previous year. On a monthly basis, the gain in activity was a more modest 0.3 per cent, but is nonetheless indicative of favourable progress.

Reuters noted that the Argentine economic activity metric is approximately equivalent to a measure of the nation's gross domestic product growth (or contraction).

Argentina has earned a reputation of late as a market attractive to the world's most well-known venture capitalists, including Steve Cohen and George Soros, according to another Reuters report. Between 2014 and 2016, the country experienced a skyrocketing 214 per cent growth rate of venture-capital transactions. By comparison, Chile, a reasonably strong economy in its own right, saw a 46 per cent expansion rate by that same measurement.

Oil prices saw some declines during the past two years, and these adversely affected the Colombian economy, causing a jump in inflation alongside a drop in economic activity. However, according to Nasdaq, the fourth-largest economic power in all of Latin America is finally starting to experience clear signs of progress.

Although economic growth ended up lower than what had been estimated by Colombian Finance Minister Mauricio Cardenas, it still saw a year-over-year increase of 1.5 per cent during the first three quarters of 2017. The President of Colombia, Juan Michael Santos, believed this indicated better things on the horizon.

"Our economy continues to show signs of sustainable recovery," President Santos said in a post from his verified Twitter account. "We knew how to weather the external shock."