MONTHLY ECONOMIC IMPACT October 2017 ECONOMY UPDATE Eurozone economic prospects remain bright; UK interest rates increased for the first time in a decade EUROZONE The preliminary Eurozone GDP estimate for Q3 revealed that the economy grew by 0.6%. This was slightly stronger than consensus but consistent with the strong sentiment indicator results of the last few months. The labour market continues to improve with strong job creation driving the unemployment rate down to an eight year low. Meanwhile, there is little evidence yet that the strong euro is affecting the industrial and external sectors, but it will cause inflation to fall significantly in early-2018. Overall, GDP growth of 2.3% is expected this year which will be the fastest rate of growth recorded in a decade. Next year growth of 1.9% is forecast, implying a sustained period of above potential GDP growth. UNITED KINGDOM The preliminary GDP estimate for Q3 reported quarterly growth of 0.4%, up a touch on the 0.3% reported in both of the previous quarters. The uptick was due to a stronger performance by the industrial sector, with services sector growth remaining sluggish. Stronger performance in Q3 was not enough to shift Oxford Economics forecast that the UK economy will grow by 1.5% in both 2017 and 2018, which is weaker than Eurozone forecast growth. Growth is expected to continue to be subdued by high inflation weighing on consumer spending, businesses wary of investing in a climate of Brexit-related uncertainty and the government continuing with its programme of fiscal austerity. Despite the underwhelming pace of growth, the Monetary Policy Committee (MPC) still increased interest rates in November for the first time in a decade, from 0.25% to 0.5%. However, continued sluggish growth and the prospect of weaker inflation next year should mean that the MPC does not hike again for a prolonged period. UNITED STATES Real GDP grew at an annualised rate of 3.1% in Q2 2017, with a rebound in consumer spending to 3.3% after a soft start to the year. Business investment in Q2 also increased by 6.7%, buoyed by firm domestic activity and stronger global growth. For 2017 overall, Oxford Economics expects growth of 2.1%, with consumer spending moderating a little from its 2016 pace, but business investment and trade firming. Looking ahead to next year, a 2018 fiscal stimulus package (worth $500 billion over the next decade) is expected to boost growth to 2.4%. While inflation remains well below the Fed s 2% target, Oxford Economics expects somewhat stronger inflation by year end, supporting a December rate hike. Next year, at least two 25 basis points increases in the federal funds rate are anticipated. EMERGING MARKETS In China, annual real GDP growth eased slightly to 6.8% in Q3, even though consumption growth remained relatively stable. Oxford Economics still forecasts growth of 6.8% for 2017, but expects somewhat lower growth to be targeted in 2018. Meanwhile in Brazil, GDP growth forecasts for 2017 and 2018 have been revised upwards, to 0.8% and 2.4% respectively, from 0.6% and 2.2%. The upward revision was driven by a more upbeat view on exports and private consumption. 2017 Global GDP growth (%) 2017 Direct T&T GDP growth (%) 2017 annual update 2.9% 3.8% October 2017 3.2% Note: Growth rates in this table are stated in 2016 constant prices and exchange rates The upward green arrow indicates that given global macroeconomic developments and year-to-date Travel & Tourism performance, Oxford Economics now expects global growth in direct Travel & Tourism GDP to be stronger than expected at the time of the 2017 annual economic impact research update (March 2017).
TRAVEL & TOURISM INDICATOR UPDATE Evidence of strong global Travel & Tourism performance so far in 2017 Global international tourist arrivals were up by 6.4% in the first half of 2017, compared to growth of 3.9% for all of 2016. Positive arrivals growth was recorded across each world region, with the strongest growth recorded in North Africa (15.6%). The latter can be largely attributed to Tunisia, which has experienced year-to-date growth of 27% and continues its recovery from recent terror attacks. Similarly, there was strong growth of 8.9% for the Middle East region, following a decline in 2016, primarily driven by a 52% year-to-date rebound in arrivals to Egypt. Strong growth was also recorded across other major regions, including Europe (7.7%), Asia Pacific (5.7%) and Sub-Saharan Africa (4.2%). Growth was robust, if less spectacular, at 3.0% for the Americas. Global international air passenger traffic has also recorded strong performance this year, with year-to-date growth of 8.2% to August also faster than growth of 6.7% for 2016 overall. Contributing to this has been particularly strong growth in Asia Pacific (9.2%), Europe (8.7%), Africa (8.3%) and the Middle East (7.3%). North America also recorded robust growth of 4.8%. It should however be noted that airline traffic is allocated according to the region in which the carrier is registered and should not be considered to precisely measure regional air traffic. Regional hotel performance has been positive across most world regions so far this year, except, somewhat surprisingly given other indicator performance, for the Middle East, which recorded a decline across all three measures of hotel performance. Although hotel demand performance metrics also need to be viewed in the context of supply trends. North Africa recorded stand out growth rates across all key performance indicators, albeit this is partly driven from a low 2016 base. Although less spectacular, solid growth has been recorded across all hotel metrics in Europe, the Americas and Asia Pacific. Year-to-date (YTD) performance of airline traffic, international tourist arrivals and hotels (% growth unless stated) International air passenger traffic (RPK) International tourist arrivals Regional hotel performance Aug-17 2016 (full year) Jun-17 2016 Occupancy rate pp change Sep- 2017 ADR Sep-2017 RevPAR Sep-2017 Europe 8.7 4.8 7.7 2.1 2.6 3.8 6.5 Americas - - 3.0 3.6 0.7 2.0 2.7 North America 4.8 2.6 1.7 2.8 0.7 2.2 2.9 Asia Pacific 9.2 8.3 5.7 8.6 3.0 0.7 3.7 Middle East 7.3 11.8 8.9-3.4-1.6-4.9-6.4 Africa 8.3 7.4 7.6 8.0 - - - North Africa - - 15.6 3.5 12.8 25.7 41.8 Sub-Saharan Africa - - 4.2 8.0-0.6 5.0 4.4 World 8.2 6.7 6.4 3.9 - - - Sources: IATA, UNWTO, STR Global Note: Across the three metrics, the country composition of the different regions does not match exactly. FORWARDKEYS AIR TRAVEL BOOKING TRENDS Strong air travel growth expected in the end-of-year period covering October to December 2017 International inbound: During the three-month period between October 2017 and December 2017, Europe and Africa are expected to be the fastest growing regions in terms of inbound air travel passengers, according to ForwardKeys. Both regions are expected to experience doubledigit growth, which represents a pick-up in growth for Europe and similar rate of growth for Africa compared to year-to-date performance. Meanwhile, ForwardKeys booking data suggests solid growth in the 7-8% range for the October to December period for Asia Pacific and the Middle East, with growth in the Americas expected to be lower, at around 3%. At a global level, the ForwardKeys booking data suggest that the strong growth in international tourist arrivals reported by the UNWTO for H1 2017 will be maintained through the remainder of 2017. International outbound: Asia Pacific is expected to be the fastest growing region from an outbound perspective at 11%, based on ForwardKeys data on bookings issued by the end of September 2017 with a departure date between October and December 2017. This represents a significant pick-up in growth when compared with the year-to-date performance. By contrast, outbound air travel departures growth over the next three months from the Middle East and the Americas is expected to ease compared to their year-to-date performance. Despite this they are expected to grow by 2% and 7% respectively between October and December 2017. Meanwhile, growth is expected to be solid in Africa (8%) and Europe (7%).
Domestic: Domestic air travel is expected to experience strong growth in the upcoming three-month period across all world regions, with growth accelerating across all regions relative to year-to-date performance, apart from in Africa where a slight slowdown is anticipated. At a global level, year-to-date growth to August is reported at around 6%, with expected domestic departures between October and December growing by 10% relative to the same period last year. ForwardKeys Air Travel Booking Trends (% growth vs. same period last year) International inbound International outbound Domestic travel departures next 3m (Oct- Dec) Change in growth next 3m vs. YTD departures next 3m (Oct-Dec) Change in growth next 3m vs. YTD Aug 2017 YTD departures departures next 3m (Oct-Dec) Europe 12.1 6.9 7.1 9.4 Americas 3.0 6.7 4.2 5.3 Asia Pacific 7.4 11.2 9.7 29.0 Middle East 7.7 1.8 28.3 102.9 Africa 12.1 8.1 6.6 4.8 World 7.8 7.8 6.1 10.1 Source: ForwardKeys Note: Data relate to air travel bookings for visitors staying at least one night, expressed as % change compared to the same period last year. Domestic data relate to air travel within the same country. MAJOR ECONOMY AND TRAVEL & TOURISM HEADLINES LAST MONTH Brent oil hit US$60 per barrel for the first time in over two years, in the latest sign the market is tightening after a three-year supply glut. However, Oxford Economics forecasts that prices will fall back to around US$55 per barrel in 2018 as the market continues to rebalance. Spanish economic growth maintained its encouraging pace in Q3, despite the domestic political uncertainty in Catalonia, with GDP growing 0.8% over the 3 months to September. However inbound tourism to Catalonia is reported to have slumped significantly since the region s controversial referendum on independence. According to ForwardKeys, air reservations for Catalonia have fallen 22% since the beginning of October, benchmarked against the equivalent dates last year. President Trump extended his US travel ban, adding North Korea, Chad and Venezuela to the list of targeted countries. Meanwhile, Sudan has been dropped from the list of nations and Iraqi citizens will not be subject to travel prohibitions but will face enhanced scrutiny and vetting. Monarch airlines (UK) went into administration after failing to gain a renewal of its Air Travel Organiser s Licence. 110,000 stranded customers were flown home by special government-chartered planes. A further 750,000 customers have had their bookings cancelled. The UK had a record 23.1 million overseas visits during the first half of the year. Staycations are also on the rise with a record 20.4 million domestic overnight holidays in England, with visitors spending 4.6bn between January and June.
Overnight international tourist arrivals growth (% year-on-year to the indicated month) Year to: % Year to: % Year to: % EUROPE AMERICAS ASIA-PACIFIC Austria Aug 2017 4.6 Antigua & Barbuda Jul 2017-6.1 Australia Jun 2017 7.2 Belgium Jul 2017 12.2 Argentina - - - Cambodia May 2017 12.5 Bulgaria Aug 2017 7.9 Aruba Jun 2017-8.7 China Croatia Sep 2017 13.7 Bahamas - - - Fiji Jul 2017 6.3 Cyprus Sep 2017 14.7 Barbados Jun 2017 7.5 Hong Kong Jul 2017 4.9 Czech Republic Jun 2017 12.8 Bermuda Jul 2017 12.7 India Jul 2017 15.4 Denmark Jun 2017 6.9 Brazil - - - Indonesia Jun 2017 15.2 Estonia Aug 2017 5.0 Canada Jun 2017 6.2 Japan Sep 2017 17.9 Finland Aug 2017 14.5 Chile Jul 2017 17.0 Kiribati Mar 2017 165.0 France May 2017 10.1 Cuba - - - Laos - - - Germany Aug 2017 5.3 Dom Republic Jul 2017 5.9 Macau Jul 2017 12.6 Greece Jun 2017 6.6 Grenada Jun 2017 5.3 Malaysia May 2017-0.9 Hungary Aug 2017 6.6 Jamaica Jun 2017 4.3 Maldives Jun 2017 6.1 Iceland Aug 2017 29.9 Martinique May 2017 4.6 Myanmar - - - Italy Jun 2017 2.0 Mexico Jun 2017 12.2 Nepal Jun 2017 41.5 Latvia Jun 2017 12.8 St Lucia Jun 2017 7.9 New Zealand Jul 2017 8.1 Lithuania Jun 2017 6.1 St Vincent Mar 2017-6.8 Papua New Guinea Mar 2017-12.8 Malta Aug 2017 16.6 US May 2017-2.8 Philippines Jun 2017 12.7 Montenegro Aug 2017 11.4 MIDDLE EAST Singapore Jun 2017 4.5 Netherlands Jul 2017 13.9 Egypt Jul 2017 51.5 South Korea Jul 2017-21.0 Norway Jun 2017 0.9 Israel Jul 2017 24.4 Sri Lanka Jul 2017 3.6 Portugal Jul 2017 12.8 Jordan Mar 2017 9.5 Taiwan Jul 2017-5.1 Russia Mar 2017-8.4 Lebanon Jul 2017 12.3 Thailand Jul 2017 4.5 Slovakia Jul 2017 8.5 UAE Jul 2017 9.5 Vanuatu May 2017 28.9 Slovenia Aug 2017 18.5 AFRICA Vietnam Jul 2017 30.4 Spain Aug 2017 9.9 Kenya May 2017 10.7 REGIONAL ESTIMATES Sweden Jun 2017 8.4 Madagascar Jun 2017 4.1 Europe Jun 2017 7.7 Switzerland Aug 2017 6.7 Mauritius Jul 2017 6.3 Americas Jun 2017 3.0 Turkey Aug 2017 26.4 Morocco Jun 2017 9.2 Africa Jun 2017 7.6 UK Jul 2017 8.7 Nigeria - - - Middle East Jun 2017 8.9 Sources: UNWTO, TourMIS, JNTO, ONS, NTTO South Africa Jun 2017 1.0 Asia Pacific Jun 2017 5.7 Tunisia Jul 2017 26.7 Uganda - - - WORLD Jun 2017 6.4 According to the latest UNWTO World Tourism Barometer, global tourist arrivals grew by 6.4% to June 2017, an increase on full year growth of 3.9% for 2016. While an encouraging start to 2017, with data only available for the first half of the year across many countries, and in some cases not covering peak periods, emerging trends should still be interpreted with caution. Europe recorded strong international tourist arrivals growth of 7.7% for the first half of the year compared to the same period last year. Growth has been robust and broad-based throughout the region with the strongest year-to-date growth in Iceland (30%), Turkey (26%), Slovenia (19%) and Malta (17%). The major Travel & Tourism economies in Europe also recorded strong year-to-date arrivals growth during the period, including Portugal (13%), Spain (10%), France (10%), the UK (9%) and Germany (5%). Year-to-date growth figures show that the Americas has been the slowest growing region (3.0%) in terms of international arrivals, despite double-digit growth in Chile (17%) and Mexico (12%). The US, the region s largest Travel & Tourism economy, experienced a year-to-date contraction of 3% for the first five months of the year according to the NTTO, with mixed arrivals performance from key origin markets. Specifically, arrivals from Canada were up for the year to May, but were down from China, Mexico and the UK. However, based on a strong uptick in inbound spending between May and August, arrivals growth is also expected to have improved during the second half of 2017. Africa experienced a positive first half of 2017, with year-to-date arrivals growth of 7.6%. A contributing factor has been the continued rebound of the tourism industry in Tunisia, with recorded growth of 27% for the first 7 months of the year. Growth remains underwhelming in South Africa (1%), the region s largest Travel & Tourism economy. The Middle East has been the fastest growing world region in terms of international tourist arrivals so far this year, with year-to-date growth of 8.9% recorded. A key factor behind this has been the recovery of the Travel & Tourism industry in Egypt, with data for the first seven months of 2017 showing 52% growth in international tourist arrivals. Strong growth has also been recorded for the year-to-date in Israel (24%), Lebanon (12%) Jordan (10%) and UAE (10%). The Asia Pacific region also enjoyed a positive start to 2017, with year-to-date growth for the first half of the year of 5.7%. There has been double digit growth across a considerable number of countries within the region, including Nepal (42%), Vietnam (30%), Japan (18%), India (15%), Indonesia (15%) and the Philippines (13%). In contrast, international arrivals to South Korea are down 21% for the first seven months of the year, linked to the diplomatic row with China, which has banned travel agencies from selling package tours to Korea in protest at Seoul allowing a US missile defence system. It should be noted that regional estimates are based on limited country coverage, particularly in the cases of the Middle East and Africa.
International tourism receipts growth (% year-on-year to the indicated month) Year to: % Year to: % Year to: % EUROPE AMERICAS ASIA-PACIFIC Austria Mar 2017-2.8 Antigua & Barbuda Mar 2017-5.3 Australia June 2017 10.5 Belgium Mar 2017-0.8 Argentina* Mar 2017 7.2 Cambodia Mar 2017 13.6 Bulgaria Jun 2017 12.3 Aruba Mar 2017 3.6 China Mar 2017 2.3 Croatia Mar 2017 2.3 Bahamas - - - Fiji - - - Cyprus Mar 2017 8.5 Barbados Jun 2017 5.5 Hong Kong Jun 2017-1.3 Czech Republic Mar 2017 8.4 Bermuda Mar 2017 6.5 India Jul 2017 16.6 Denmark Jun 2017 4.9 Brazil* Jul 2017-3.4 Indonesia* Jun 2017 17.2 Estonia Mar 2017 0.2 Canada Jun 2017 10.2 Japan Jun 2017 9.1 Finland Mar 2017 8.6 Chile* Jun 2017 37.2 Kiribati* - - - France Jun 2017 8.3 Cuba - - - Laos* - - - Germany Jun 2017 4.4 Dom Republic* Mar 2017 9.9 Macau Jun 2017 18.2 Greece Jun 2017 7.1 Grenada Mar 2017 12.3 Malaysia Jun 2017 1.8 Hungary Mar 2017 4.6 Jamaica* Mar 2017 3.7 Maldives* - - - Iceland Jun 2017 16.7 Martinique - - - Myanmar* - - - Italy Jun 2017 3.0 Mexico* Jun 2017 9.8 Nepal Mar 2017 75.2 Latvia Jun 2017-3.1 St Lucia Mar 2017 13.4 New Zealand Mar 2017 0.4 Lithuania Mar 2017 5.0 St Vincent Mar 2017-8.5 Papua New Guinea Mar 2017-51.4 Malta Mar 2017 16.2 US* Aug 2017 1.4 Philippines* Mar 2017-20.1 Montenegro Jun 2017 20.5 MIDDLE EAST Singapore Jun 2017 12.4 Netherlands Mar 2017 3.1 Egypt* Mar 2017 128.3 South Korea* Jun 2017-25.5 Norway Jun 2017-1.1 Israel* Jun 2017 16.0 Sri Lanka* May 2017 4.8 Portugal Jun 2017 21.0 Jordan Jun 2017 14.5 Taiwan* Jun 2017-15.7 Russia* Jun 2017 29.2 Lebanon* - - - Thailand Jun 2017 8.5 Slovakia Mar 2017 1.2 UAE - - - Vanuatu - - - Slovenia Jun 2017 5.6 AFRICA Vietnam* Jun 2017 6.4 Spain Jun 2017 12.0 Kenya* Mar 2017 37.2 REGIONAL ESTIMATES Sweden Jun 2017 9.4 Madagascar - - - Europe - - - Switzerland Mar 2017 0.2 Mauritius Jun 2017 7.8 Americas - - - Turkey* Jun 2017-2.3 Morocco Jul 2017 3.1 Africa - - - UK Mar 2017 11.3 Nigeria* Jun 2017-8.9 Middle East - - - South Africa Mar 2017-5.1 Asia Pacific - - - Tunisia Jun 2017 9.5 Uganda* Mar 2017 49.3 WORLD - - - Source: UNWTO, NTTO Note: Countries whereby data are recorded in US$ are denoted by an asterisk after the country name. In Europe, Russia has shown strong growth in international tourism receipts (29%), which is in contrast to its weaker performance for international arrivals for Q1. Portugal (21%), Spain (12%) and the UK (11%) have enjoyed similar strong growth in international tourism receipts. In line with strong arrivals performance so far this year, inbound international tourism receipts growth has been particularly strong in Montenegro (21%) and Iceland (17%). Turkey, despite a rebound in international arrivals, has seen receipts decline by 2% in US$ terms in the first half of 2017. However, the lira has depreciated significantly this year against the dollar, and so growth in local currency terms will still be in positive territory. In the Americas, growth has been encouraging in Mexico (10%), Canada (10%) and to a lesser extent, the US (1%). Chile also recorded substantial growth in the first half of 2017 (37%), in line with strong inbound arrivals for the same period. In the Middle East, the recovery of the Travel & Tourism industry in Egypt has led to strong inbound receipts growth (128%) for the first three months of 2017. Receipts growth in Israel (16%) and Jordan (15%) has also been strong in the first half of the year. In Africa, Kenya recorded impressive growth in international receipts (37%), consistent with an encouraging increase in international arrivals so far this year. Tunisia s strong growth in international arrivals has been partly translated into an increase in international tourist receipts with growth in receipts of 10% compared to the recorded 27% increase in arrivals. In the Asia Pacific region, Nepal has been the stand out performer with 75% growth in international receipts for the first three months of the year as the country s Tourism & Travel industry continues to recover from the devastation of the 2015 earthquake. Other economies within the region have also enjoyed strong growth in inbound receipts such as Macau (18%), Indonesia (17%), Cambodia (14%), and Australia (11%). Japan looks set for another year of strong inbound receipts growth, with growth of 9% recorded for the year-to-date. However, it looks likely that growth for 2017 overall will be less spectacular than that enjoyed since 2012. In China, moderate growth of 2% has been recorded for the year-to-date.