DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES AND

ANALYST CERTIFICATIONS.
CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS BEYOND INFORMATION

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Global Cycle Notes



Spring Loaded
The mild global growth slowdown that began in Q4 is set to end imminently. We
expect above-trend global industrial production growth for the rest of the year.
So far in 2014, some US de-stocking has coincided with bad weather and weak
Chinese data to cause a minor stretch of weakness within the global recovery
from Europes recession.
That recession caused stagnant manufacturing, demand, and trade trends
worldwide from mid-2011 until early 2013 (Exhibit 1). But by late 2013, global
industrial production was growing much faster than its longer-term trend, amid a
few signs of inventory accumulation in the United States.
In our view, the 3m/3m annualized growth rate of global industrial production will
rise from a local trough near 2.5% in June to a multi-month plateau above 6% at
year-end. If we are right, global growth in late 2013 will be stronger than it was
late last year.
Markets have disregarded early signs of improvement. However, a rebound in
cyclical momentum has the potential to reverse the duration rally since the
beginning of the year, in our view.
In this note, which is the first of a new monthly publication, we detail the reasons
for our view.
Exhibit 1: The Global Goods Sector (Production, Demand, Trade)
Real Log Levels
5.24
5.25
5.26
5.27
5.28
5.29
5.30
5.31
5.32
5.33
5.34
Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14
Euro Area recession (2011Q4-2013Q1)
Global IP ex-China, nominal IP weights
Global Goods Demand x-China, trend-adjusted
World Trade Volume
Goods Demand = Adjusted IP Components from (C + I + G+X-M)
June Momentum
Trough

Source: Credit Suisse


Research Analysts
James Sweeney
212 538 4648
james.sweeney@credit-suisse.com

Neville Hill
44 20 7888 1334
neville.hill@credit-suisse.com

Matthias Klein
44 20 7883 8189
matthias.klein@credit-suisse.com

Wenzhe Zhao
212 325 1798
wenzhe.zhao@credit-suisse.com

Yiagos Alexopoulos
44 20 7888 7536
yiagos.alexopoulos@credit-suisse.com

Axel Lang
212 538 4530
axel.lang@credit-suisse.com

Jeremy Schwartz
212 538 6419
jeremy.schwartz@credit-suisse.com


02 June 2014
Fixed Income Research
http://www.credit-suisse.com/researchandanalytics

02 June 2014
Global Cycle Notes 2
Key Points
Momentum rebound: Global IP Momentum to bottom near 2.5% in June and
reaccelerate above 6% by year-end.
Exhibit 2: Global IP Momentum
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
3m/3m ann.%
pre-crisis: average: 3%

Source: Credit Suisse, Thomson Reuters Datastream
Strong goods demand: Steady US consumer, slower but still-high Chinese growth and a
recovering Eurozone economy are sufficient to support solid Global demand growth.
Inventories: The second half 2013 inventory build has been brought under control. There
is plenty of scope for re-stocking.
A less synchronous cycle: Growth is unusually uncorrelated across major regions. PMI
New orders have turned higher in Japan and China from depressed levels. Euro area and
US growth remain above-trend but is slowing. The Euro area is in the final stages of its
slowdown while the US is decelerating in a technical reversal of its post-winter
bounceback (Exhibit 3).
Interest Rates: A rebound in cyclical momentum has the potential to reverse the duration
rally since the beginning of the year. Duration risk appetite is nearing Euphoria (Exhibit 5)
and we think developed market inflation is turning higher.
Risk Appetite: Global risk appetite has been range-bound at middling levels. A rebound in
Global IP Momentum should boost risk appetite in the absence of a severe short-term
interest rate spike.
Four requirements: We don't think a momentum rebound alone will be sufficient to trigger
sharply more-hawkish Fed expectations. That will require additional progress towards US
full employment.

02 June 2014
Global Cycle Notes 3
Exhibit 3: PMI New Orders - North Atlantic-Asia Divide
38
42
46
50
54
58
62
09 10 11 12 13 14
US (Markit PMI) Euro Area
China (HSBC) Japan

Source: Credit Suisse, Markit
Exhibit 4: Global IP Momentum and Forward Rates
-10%
-5%
0%
5%
10%
15%
(250)
(200)
(150)
(100)
(50)
-
50
100
150
93 95 97 99 01 03 05 07 09 11 13
USD Swap, 5y5y Fwd, bps (LHS, dev from trend)
Global IP Momentum, % (RHS)

Source: Credit Suisse, Thomson Reuters Datastream
Exhibit 5: US Duration Risk Appetite
-7
-5
-3
-1
1
3
5
7
00 02 04 06 08 10 12 14
US Duration Risk Appetite
Euphoria
Panic

Source: Credit Suisse

02 June 2014
Global Cycle Notes 4
Global Demand
Global goods demand is back on track after being derailed by Europes recession. The
slowdown in global demand from late-2011 to early-2013 was comparable to prior world
recessions, but now year-on-year demand growth is above average.
Global goods demand
1
(x-China) has typically trended at 3-4% p.a. except during global
recessions (Exhibit 6). The chart illustrates the stylized fact that production is more volatile
than demand, and also shows how demand growth anchors trend production.
In March our goods demand measure reached 4.1% y/y, near the top end of the recent
range. This strength is partly attributable to a surge in Japanese spending before the April
consumption tax increase. A reversal in Japanese spending in April is likely to push global
demand growth down somewhat.
However, we expect a long period of 3-4% growth to follow, similar to the years before
2007, or between mid-2009 and mid-2011. In the second half of the year, industrial
production growth is likely to overshoot this demand trend, but over time, production
growth will converge to demand growth.
Exhibit 6: Global x-China Real Goods Demand Industrial Production y/y%
-15%
-10%
-5%
0%
5%
10%
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Global Goods Demand, x-China
Global IP, x-China

Source: Credit Suisse, Thomson Reuters Datastream
PMI surveys, market indicators, inventory estimates and changes in industry structure all
matter for the industrial production outlook, but estimating the global goods demand trend
is the most important part of our forecast. An unexpected speedup or slowdown in demand
can cause an abrupt change in IP growth even if these other indicators signal a different
path. For example, an unexpected slowdown in demand may lead to an inventory
accumulation which slows production later.
Of course, understanding global goods demand starts with knowing its composition.
Exhibit 7 shows a breakdown of global goods demand adjusted according to industrial
inputs given by input-output tables of the various economies. (We make these adjustments
to create a measure of demand more comparable to global industrial production). The
composition of demand has changed significantly in recent years, especially for China,
where the share of global demand has tripled from 7% in 2004.

1
Our measure of global goods demand includes consumer goods purchases and business and government investment. We weight
each component by dollar sales and adjust weights according to the amount of industrial valued added involved in bringing each
type of good to market. We exclude China from our preferred global aggregate for data quality reasons but China is very much
part of our analysis. Methodological details are in a technical appendix of an earlier piece.
02 June 2014
Global Cycle Notes 5
Exhibit 7: Composition of Global Goods Demand (2012 weights)
14%
10%
13%
6%
5%
5%
7%
13%
17%
10%
US Consumption
US Investment
EA Consumption
EA Investment
Japan Consumption
Japan Investment
China Consumption
China Investment
ROW Consumption
ROW Investment

Source: Credit Suisse
Exhibit 8 through 11 show the contributions of major economies to growth in Global
demand. Chinese investment, US goods consumption, and rest of the world
investment and consumption have been the major drivers of global goods demand in
recent years. These are the things that have required global manufacturing to grow. In
contrast, US, Japanese and European investment, and Japanese and European goods
consumption, have not grown much overall since 2000, so they have not required
growing factory output.
Note that Europes goods consumption and investment growth since 2001 has been near
zero. In 2012, Europe went from being a large economy not contributing to global demand
growth to being a large economy shrinking rapidly, causing a major global shock, which
was further inflamed by Europes growing current account surplus.
However, in 2013, European demand began to grow again, helping global demand and
global industrial production to snap back. Those who emphasize the low levels of
European investment or durable goods spending or sluggish growth rates in recovery miss
something important. These things do not grow much in normal times, so any period of
improvement in them, even from low levels, can help to drive above trend global growth.
In comparison, the US consumer has been a juggernaut since the early nineties, with only
2008 as an exception. Real goods spending has generally grown steadily, and recent
labor market trends do not suggest any imminent disruption. One interesting theme we will
be monitoring is whether the composition of US goods demand starts to transition from
being led by durables to being led by non-durables. A major risk is that durable goods
spending continues to slow and non-durables does not pick up the slack, leading to sub-
trend US demand.
Investment in the US has been more volatile and has contributed much less to global
growth than consumer spending since 2001. Our input-output table adjustment means that
the investment we are focusing on is mostly equipment, which involves lots of industrial
activity, rather than construction, which involves less, or software, which involves none.
We expect above trend equipment spending in the US in the second half of the year, but
do not expect a boom. Stronger investment is a major upside risk to our view.
02 June 2014
Global Cycle Notes 6
Exhibit 8: Real Global Goods Demand (China included, y/y%)
-7%
-5%
-3%
-1%
1%
3%
5%
7%
9%
81 83 85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Other
China
Japan
EA
US
Contribution to Global Goods Demand, y/y

Source: Credit Suisse

Exhibit 9: Real Global Goods Demand Components, annualized growth rates
US EA Japan China Other
Cons. Inv. Cons. Inv. Cons. Inv. Cons. Inv. Cons. Inv.
1980-90 3.4% 3.4% 2.4% 2.4% 3.0% 5.2% 3.6% 4.5%
1990-01 3.8% 5.4% 1.8% 2.9% 1.3% -0.6% 9.4% 23.8% 3.1% 2.9%
2001-08 3.5% 2.5% 1.1% 2.5% 0.7% 0.8% 11.5% 18.9% 4.0% 6.2%
3/08-3/09 -5.5% -19.2% -3.7% -16.4% -5.3% -13.1% 16.5% 24.1% 0.8% -13.3%
3/09-9/11 3.1% 5.7% -0.2% 1.5% 4.0% -0.7% 12.6% 15.3% 4.1% 7.6%
9/11-3/13 3.8% 3.3% -2.4% -5.4% 2.0% 1.4% 11.5% 18.7% 3.3% 1.3%
3/13-2/14 2.5% 1.9% 1.5% 5.1% 5.1% 8.2% 9.4% 13.8% 4.6% 3.1%
3/01-2/14 2.7% 1.3% 0.1% 0.0% 1.3% -0.1% 12.0% 18.2% 3.7% 4.0%
Source: Credit Suisse

Exhibit 10: G3 Goods Consumption, rebased in 2007 Exhibit 11: G3 Investment, rebased in 2007
90
95
100
105
110
115
07 08 09 10 11 12 13
G3
US
EA
Japan


75
80
85
90
95
100
105
07 08 09 10 11 12 13
G3
US
EA
Japan

Source: Credit Suisse, Source: Credit Suisse

02 June 2014
Global Cycle Notes 7
Chinas final demand growth has slowed in recent years, reflected in most indicators other
than the suspiciously steady headline investment and retail sales data. However, since
Chinas weight has grown so much in recent years, it can continue to be a major
contributor to global growth even if growth rates slip.
In summary, a steady US consumer, slower but still high Chinese growth, and a
recovering Eurozone economy are sufficient to support 3-4% global demand growth in the
next few years. Key upside risks could come from US and Eurozone investment, or a
strong rebound in China.
In the very short term, Japan presents a negative risk. Further out, we view a slowdown in
US durable goods consumption and a sharper slowdown in China as the biggest possible
negative developments.
Inventories
Exhibit 12 below is a long term picture of global industrial production and goods
demand with China excluded. One benefit of viewing these things together is that it
allows us to estimate changes in inventories during periods when demand growth and
production growth are different. For example, in early 2008 global goods demand
slowed relative to production, leading to an inventory build, which was rapidly reversed
in late 2008, as production collapsed relative to demand. This then led to an extremely
strong bounce in production.
Exhibit 13 is our imputed measure of global inventories based on deviations of global (x-
China) production and demand. We show it against the average change in GDP
inventories for the US, Europe and Japan, and note that our monthly time series is mostly
in line with the GDP measure, but is less volatile and may lead slightly. Our imputed
measure (in red) falls below zero when production falls relative to demand. In late 2013,
however, our measure captured a mild increase in inventories.
US data, on the other hand, suggested something larger was happening. US GDP data
showed a large increase in inventory investment in the second half of last year, which was
also visible in bottom-up data for the automobile sector, non-auto retailers, and aerospace
industries. However, much of this inventory build was reversed sharply in Q1.
Measured any way, inventories are difficult to estimate, especially since a larger part of
the global supply chain involves intermediate or in-transit inventories in places far from
their final markets. Our analysis here, however, suggests there was an inventory build
late last year, but it was not very large, and, in our view, it has largely been brought
under control recently.
The demand outlook, not the current inventory balance, will be the key driver for
production going from here, in our view.
02 June 2014
Global Cycle Notes 8
Exhibit 12: Global x-China Industrial Production vs. Goods Demand
Log Levels
4.5
4.6
4.7
4.8
4.9
5
5.1
5.2
5.3
5.4
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Global Industrial Production, x-China
Global Goods Demand x-China, trend-adjusted
Goods Demand = Adjusted IP Components from (C + I + G+X-M)

Exhibit 13: G3+ Inventory Change vs. Global Inventory Change Proxy
-350
-250
-150
-50
50
150
-12%
-10%
-8%
-6%
-4%
-2%
0%
2%
4%
Jan-80 Jan-84 Jan-88 Jan-92 Jan-96 Jan-00 Jan-04 Jan-08 Jan-12
Global Inventory Change Proxy, x-China
G3+ GDP Inventory Change, rhs, 2005 bn USD

Source: Credit Suisse

Lead Indicators
Cyclical indicators have begun to pick up, consistent with our view of a June momentum
trough. The May improvement in ISM New Orders, the best lead indicator for Global IP
Momentum, points to an imminent re-acceleration. At 56.9, ISM New Orders is consistent
with Global IP Momentum above 5% (Exhibit 14).
However, performance across the major regions is not synchronous at present
(Exhibit 15).
In particular, North Atlantic growth rates are elevated compared to historical trends, while
Asian growth rates are depressed. PMI new orders have turned higher in China and
Japan, albeit from very low levels. In the US and the euro area, PMI new orders are
trending lower, albeit at historically elevated levels (Exhibit 16).
02 June 2014
Global Cycle Notes 9
Exhibit 14: ISM New Orders and Global IP Momentum
-15%
-10%
-5%
0%
5%
10%
15%
20
25
30
35
40
45
50
55
60
65
70
95 97 99 01 03 05 07 09 11 13
ISM New Orders (lhs)
Global IP Momentum (rhs, 1m lag)

Source: Credit Suisse, Thomson Reuters Datastream

Exhibit 15: G3 and China IP Momentum
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-15%
-10%
-5%
0%
5%
10%
12 13 14 15
(3m/3m % ann)
US Euro Area
Japan (rhs) China (rhs)
Forecast

Exhibit 16: PMI New Orders - North Atlantic-Asia Divide
38
42
46
50
54
58
62
09 10 11 12 13 14
US (Markit PMI) Euro Area
China (HSBC) Japan

Source: Credit Suisse, Markit

02 June 2014
Global Cycle Notes 10
The consequence of the unusually de-synchronized regional cycles is a slow bottoming of
growth. Momentum often turns within two months in the major regions. This time, we
expect a sequence of troughs between April and August.
The sequence of troughs is also unusual with Japan and China turning first, then the
euro area, and the US last. Momentum in two of the main countries, the US and China,
is thus moving in opposite direction in the next few months. That caps the downside for
Global IP Momentum and is one of the reason for the elevated Global IP Momentum
trough at trend-growth.
The recovery of developed markets was the key driver of above-trend growth in 2013
and countered wide-spread weakness across EM. We expect a more equal contribution
of emerging and developed markets to the Global IP re-acceleration in the remainder of
2014 (Exhibit 17). However, EM growth should only recover back to its pre-crisis
average, whereas developed markets are likely to experience a longer period of above-
trend growth.
Signs of a rebound in EM are already becoming apparent in the Credit Suisse Basic
Materials Index (CSBMI)
2
. Emerging economies are especially sensitive to the raw
materials sectors measured by the CSBMI and this indicator has consistently tracked
emerging market IP momentum with a slight lead (Exhibit 19).
Our preliminary estimate for the May CSBMI (-0.07) rises to its long-term average of zero
from the low end of its recent years range. This suggests the worst part of economic
slowdown in developing economies is likely to be behind us, which is corroborated by
rising Asian export data.
Exhibit 17: EM and DM IP Momentum
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
(3m/3m % ann)
EM IP momentum
EM Pre-Crisis Mean
DM IP momentum
DM Pre-Crisis Mean

Source: Credit Suisse, Thomson Reuters Datastream


2
The CSBMI is a monthly index constructed to summarize variation among 25 cyclically sensitive market indicators covering the
basic material sectors including chemicals, energy, materials, paper & packaging, and transportation & shipping. The CSBMI
allows timely inference from high frequency market data without reliance on lagged economic data releases.
02 June 2014
Global Cycle Notes 11
Exhibit 18: CSBMI (last six months and the prior year)
May 14* Apr14 Mar14 Feb14 Jan14 Dec13 May13
CSBMI -0.07 0.01 -0.13 -0.88 -1.05 0.20 0.13
CSBMI 3m ma -0.06 -0.33 -0.68 -0.57 -0.33 0.22 -0.42
Source: Credit Suisse *Preliminary estimate

Exhibit 19: CSBMI and Emerging Market IP Momentum
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
-6
-5
-4
-3
-2
-1
0
1
2
3
01 02 03 04 05 06 07 08 09 10 11 12 13 14
CSBMI 3mma
EM IP Momentum, rhs

Source: Credit Suisse

Regional Developments
US IP: At the beginning of the year, we expected US IP to decelerate gradually from Q4
before picking up again in the second half of the year. However, the bounce-back from an
unseasonably cold winter has set us up for a large, swift, and quite technical momentum
cycle. We now see momentum in the US peaking near 6% in April. And from here we
expect a July trough before reaccelerating back towards 6% in the beginning of Q4.
While production growth should slow sequentially from its Feb-March strength, we expect
the deceleration will be short-lived. Markit PMI new orders, regional PMIs and auto
manufacturer production schedules are all pointing in the right direction, and we expect the
greatest strength to be concentrated in Q3. This should be supported by robust goods
demand. We expect steady trends in consumption to hold up, and both residential and
business investment should accelerate later this year. The risk of extreme weather from an
El Nio event this summer adds additional upside potential from utilities production.
Earlier in the year, excessive inventories (especially in autos) appeared to be a large
headwind towards US production (Exhibit 23). However, data revisions as well as some
genuine destocking have improved the outlook for inventories, allowing strong demand to
feed through directly into production growth.
The biggest risk to our view from here is the potential for disappointing business
equipment investment. Survey data last year suggested 2014 would finally see significant
contributions from this category, but so far this hasnt been confirmed in the hard data. If
this investment fails to materialize, it would mute the acceleration in US momentum later in
the year.
02 June 2014
Global Cycle Notes 12
Exhibit 20: US IP Momentum and PMI New Orders Exhibit 21: US Motor Vehicle Production Schedules
-22%
-17%
-12%
-7%
-2%
3%
8%
13%
25
30
35
40
45
50
55
60
65
05 06 07 08 09 10 11 12 13 14 15
Markit PMI New Orders (1m lead)
IP 3m/3m% ann.(rhs)


10.0
10.2
10.4
10.6
10.8
11.0
11.2
11.4
11.6
11.8
projection (In millions)

Source: Credit Suisse, Thomson Reuters Datastream, Federal Reserve, Wards
Exhibit 22: Capital Goods Orders and Investment Exhibit 23: Retail Inventory-Sales Ratio
350
450
550
650
750
850
950
30
35
40
45
50
55
60
65
70
92 94 96 98 00 02 04 06 08 10 12 14
T
h
o
u
s
a
n
d
s
Core Capital Goods Orders
Equipment Investment (RHS)


1
1.2
1.4
1.6
1.8
2
2.2
2.4
2.6
95 97 99 01 03 05 07 09 11 13
Autos
ex Autos

Exhibit 24: Labour Income remains on Trend Exhibit 25: Retail Sales Resilience
4800
5000
5200
5400
5600
5800
6000
6200
2006 2007 2008 2009 2010 2011 2012 2013 2014
Wage and Salary
Payrolls
4.6% Trend


5.75
5.80
5.85
5.90
5.95
6.00
6.05
6.10
00 04 08 12
US Real Retail Sales
(log level)

Source: Credit Suisse, Thomson Reuters Datastream
02 June 2014
Global Cycle Notes 13
China IP: A policy-guided cyclical slowdown is at an inflection point, led by selective policy
easing and improvement in external demand. However, Chinese growth should remain on
a slower trend relative to the pre-2008 average, due to its unbalanced growth model and
severe credit overhang.
We expect Chinese IP momentum to pick up modestly to 11% in Q3, slightly below its
October 2013 peak. In retrospect, a series of policy tightening measures prompted the
decline in IP Momentum last year. Although the market missed these developments in real
time, they are apparent from our policy proxies such as infrastructure investment and bank
loan growth (especially mortgage loans).
Tighter policy and weaker external demand drove March IP momentum to 6% early this
year, the lower bound of the unofficial targeted range. That prompted a reversal in
policy, amid sluggish labor market conditions, deteriorating sentiment, and evident
financial vulnerabilities.
Although infrastructure investment and easing of lending standards are slow and carefully
targeted, they have already appeared to impact economic activities. As shown in Exhibit
27, a broad range of leading indicators have rebounded from low levels, including PMI
New Orders and the CSBMI.
Domestic final demand is likely to stabilize, especially helped by stabilization in investment
growth. This should lead a short-lived re-stocking cycle at multiple stages of the production
chain, causing a growth upswing which we think has scope to surprise on the upside
relative to a still-bearish market consensus.
We expect healthier mortgage loan initiation and an easing of home buying restrictions to
reverse recent contractions in home sales, and to underpin residential investment going
forward. The latest data have shown a tentative stabilization in housing starts and a
rebound in cement output, an intermediate product which is particularly sensitive to
demand changes.
We also expect exports to benefit China in coming quarters, as Europe continues to
recover from recession and US consumer demand remains resilient. This should outweigh
the demand drag following the Japanese VAT hike. Recent data from China's main trade
partners has shown a pick-up. Furthermore, lead indicators such as export growth in
Korea and Taiwan, and PMI Export New Orders, have also rebounded.
02 June 2014
Global Cycle Notes 14
Exhibit 26: PMI New Orders show stabilization
Exhibit 27: confirmed by broad range of activity
proxies
35
40
45
50
55
60
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
China IP Momentum, estimate from y/y data,
seasonally adjusted, 3m/3m ann.
HSBC PMI New Orders(rhs)
Source: Credit Suisse, NBS, CEIC

-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
Jan-08 Jan-10 Jan-12 Jan-14
China IP Indicator, PCA
HSBC PMI New Orders
CSBMI, 2m lead
IP Momentum, derived from official Y/Y

Exhibit 28: Policy bias has turned Exhibit 29: Less tightening in mortgage lending
-20%
-10%
0%
10%
20%
30%
40%
50%
60%
-5%
0%
5%
10%
15%
20%
25%
30%
35%
Jan-01 Jan-04 Jan-07 Jan-10 Jan-13
China IP Momentum (3m/3m% ann.)
Real Loan Growth Momentum, RHS


10.2
10.4
10.6
10.8
11
11.2
11.4
11.6
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
Jan-06 Jan-08 Jan-10 Jan-12 Jan-14
Quarterly Growth Rate of Mortgage Loan Stock,
SA
Residential Building Floor Space Sold, SA log,
rhs

Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse
Exhibit 30: Investment growth remains stable Exhibit 31: Other Asian exports signal acceleration
-5%
5%
15%
25%
35%
45%
55%
08 09 10 11 12 13 14
Infrastrucuture Investment: Utilities +
Transportation (13% )
Real Estate Investment (20%)
Manufacturing Sector Investment
(32%)


-80%
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
07 09 11 13
3m/3m ann.%
Taiwan
Korea
China (trade partner data)

Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse

02 June 2014
Global Cycle Notes 15
Euro area IP: Momentum has been decelerating since the beginning of the year, and we
expect it to reach a trough of -1% in June. The global slowdown put a drag on European
exports with domestic demand only partially offsetting this. However, lean inventories and
stronger goods demand should lead the acceleration of Euro area IP in the second half of
the year.
Higher disposable income, less tight credit conditions and lower uncertainty are finally
setting the stage for a pickup in durable goods consumption. Car sales are 12% up from
the bottom, but are still close to 50% below their pre-crisis levels in the periphery
(Exhibit 35). The improving macro environment, depressed levels of car sales and
stretched car life expectancy create a much more positive mix for demand. Consumer and
retail confidence indicators are pointing to an acceleration in retail sales.
On the investment front, the outlook is more mixed in the short-run. Boosted by
frontloaded transport equipment investment in the end of last year (due to changes in
emission regulations), euro area fixed investment has started 2014 on a weaker footing.
However, the pull-back is likely to be temporary. Investment intentions are at multi-year
highs, while the demand for credit has shown a sharp rise in the most recent surveys.
These trends suggest to us that Euro area IP momentum will accelerate above 5%
towards the end of the year. The inventory cycle represents an upside risk to our forecast.
No significant restocking has taken place in this recovery, a combination of limited access
to financing and high economic uncertainty. The completion of the ECBs AQR and
potential measures from the ECB to increase lending to corporates could provide
companies with the much needed inventory financing, and provide an additional boost to
Euro area production.

02 June 2014
Global Cycle Notes 16
Exhibit 32: Euro area IP Momentum is in the final
stage of slowdown
Exhibit 33: Very lean inventories should support
output although financing remains a constraint
-30%
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25
30
35
40
45
50
55
60
65
70
97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
PMI - new orders,
1m lead
IP 3m/3m% ann.
(rhs)


-5
0
5
10
15
20
25
85 87 89 91 93 95 97 99 01 03 05 07 09 11 13
Stocks of finished
products
Long-term avg

Exhibit 34: Consumer sentiment points to stronger
retail spending
Exhibit 35: Car sales still have ample scope to
recover
-4%
-3%
-2%
-1%
0%
1%
2%
3%
4%
-36
-31
-26
-21
-16
-11
-6
-1
95 97 99 01 03 05 07 09 11 13
Euro Area Consumer
Confidence
Euro Area Retail Sales (yoy%,
3mma, rhs)


30
40
50
60
70
80
90
100
110
120
06 07 08 09 10 11 12 13 14
Euro area
Italy
Germany
Spain
France

Exhibit 36: Investment should continue to rebound
despite a likely near-term pull-back
Exhibit 37: Stronger domestic demand recently has
countered persistent export weakness
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
25
30
35
40
45
50
55
60
65
98 00 02 04 06 08 10 12 14
EA PMI New
Orders
GFCF qoq% ann
(rhs)


6.8
6.85
6.9
6.95
7
7.05
7.1
7.15
7.2
7.25
7.3
J
a
n
-
0
7
J
u
l
-
0
7
J
a
n
-
0
8
J
u
l
-
0
8
J
a
n
-
0
9
J
u
l
-
0
9
J
a
n
-
1
0
J
u
l
-
1
0
J
a
n
-
1
1
J
u
l
-
1
1
J
a
n
-
1
2
J
u
l
-
1
2
J
a
n
-
1
3
J
u
l
-
1
3
J
a
n
-
1
4
Exports
Imports

Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse
02 June 2014
Global Cycle Notes 17
Japan IP: Japan has bucked the global slowdown in Q1 due to strong domestic demand
in the run-up to the consumption tax hike, but is now confronting a double-shock. The
severe drag on demand from the consumption tax hike is being exacerbated by the final
leg of the global momentum slowdown.
We expect Japanese IP Momentum to slow about 20pp in merely three months, an
extreme drop even for the standards of very volatile Japanese output. The recent bounce
in PMI New Orders in May, however, suggests that momentum is approaching its trough
and could start rebounding from extremely depressed levels in Q3.
Base effects will cause a sharp bounce-back in momentum. However, weak domestic
demand, especially consumption, leaves downside risks for IP growth during the
remainder of the year, making Japan dependent on external demand dynamics. The
recent pickup in exports suggests that stronger external demand will probably counter
some of the domestic demand weakness.
Exhibit 38: PMI New Orders suggest sharp
slowdown is coming to an end
Exhibit 39: High-Frequency Indicators show severe
demand drag after cons tax hike with little rebound
-65%
-45%
-25%
-5%
15%
35%
20
30
40
50
60
70
08 09 10 11 12 13 14
PMI - New Orders (lhs)
IP 3m/3m% ann. (rhs)
1m lag


-60%
-40%
-20%
0%
20%
40%
Sep 13 Nov 13 Jan 14 Mar 14 May 14
Department store sales
Supermarket store sales
Electronics retail store sales for
major 5 items

Exhibit 40: Investment has bounced ahead of the
consumption tax hike
Exhibit 41: Japanese exports rebounded in April, as
imports collapsed
600
650
700
750
800
850
900
950
1000
1050
1100
06 07 08 09 10 11 12 13 14
Core machinery orders
3 per. Mov. Avg. (Core
machinery orders)


8.2
8.3
8.4
8.5
8.6
8.7
8.8
8.9
9
07 08 09 10 11 12 13 14
Goods exports
Goods imports

Source: Credit Suisse, Thomson Reuters Datastream Source: Credit Suisse, Thomson Reuters Datastream

02 June 2014
Global Cycle Notes 18
Market Implications
We have written recently that there are four requirements for the market to price for a
significantly more hawkish Fed path. Those requirements are:
1. Higher inflation (particularly core inflation in the US rising near 2%).
2. Rising global industrial production momentum
3. Ongoing strength in credit markets
4. Further progress towards US full employment (unemployment rate below 6%)
Very soon, the first three of these will be in place, in our view. However, even if jobs
growth is strong in the next few months, it will likely take months before the US
unemployment rate is below 6%. Rising momentum alone is not enough to spark fears that
the Fed is behind the curve.
Many investors have been puzzled by the declines in US yields in recent months.
However, the rally in duration since the beginning of the year has occurred alongside
falling global growth momentum, as is often the case. Low inflation, dovish pol icy
statements and the pricing in of ECB cuts all have helped to reinforce the move lower
in yields.
Now that our duration risk appetite measure is nearing euphoria, inflation is troughing,
momentum is turning and the ECB may be about to complete the last major North Atlantic
policy ease of a cycle that goes back to 2007/8, we think it is time for the first stage of a
reversal. Our rates strategist, Carl Lantz, agrees that US duration has become rich and is
likely to reverse soon.
Recently, risky assets have begun to hint at this rebound. Emerging market assets have
been outperforming, perhaps driven by the early momentum rebound in place already
there. We think European and US numbers will be improving as well soon, and the EM
rebound will turn out to be a precursor to a more general pro-growth environment.
Rising momentum will be good for risk appetite as long as the move in yields is contained.
The equity and credit markets can likely easily handle the US 10-year yield returning to
3%. The risk, we believe, is that the US labor data, including wages, pick up sooner than
we think, sparking a rebellion from the Fed's guidance that sends short term rates much
higher. That would have the potential to usher in a far more difficult environment.
Exhibit 42: Global Risk Appetite and Global IP Momentum
-10
-8
-6
-4
-2
0
2
4
6
8
-25%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Jan 00 Jan 04 Jan 08 Jan 12
Global IP Momentum (3m/3m ann.%)
Global Risk Appetite, rhs

Source: Credit Suisse, Thomson Reuters Datastream

02 June 2014
Global Cycle Notes 19
Appendix: Global IP and GDP Forecast Update
Exhibit 43: Global Industrial Production - latest data and current estimates
Global Americas Asia Europe
m/m 3m/3m ann. y/y m/m y/y m/m y/y m/m y/y
Feb-14 0.3% 4.1% 4.3% 0.9% 2.9% -0.2% 6.6% 0.4% 2.3%
Mar-14 0.4% 4.3% 4.2% 0.6% 3.0% 0.7% 6.8% -0.3% 1.4%
Apr-14 -0.1% 3.4% 3.8% -0.4% 2.4% -0.2% 6.3% 0.3% 1.4%
May-14 0.3% 3.0% 4.0% 0.3% 2.9% 0.5% 6.0% -0.2% 1.8%
Jun-14 0.5% 2.3% 4.1% 0.1% 2.4% 1.0% 7.2% 0.1% 1.2%
Jul-14 0.7% 3.5% 4.3% 0.4% 3.1% 0.9% 6.7% 0.6% 1.8%
Aug-14 0.5% 4.9% 4.5% 0.5% 3.2% 0.6% 6.8% 0.2% 2.2%
Sep-14 0.6% 6.4% 4.5% 0.3% 2.8% 0.8% 6.9% 0.4% 2.5%
Source: Credit Suisse



0
2

J
u
n
e

2
0
1
4

G
l
o
b
a
l

C
y
c
l
e

N
o
t
e
s


2
0

Credit Suisse Global Economics Forecasts
2014E 2015E 4Q to 4Q Annual Average

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 12 13E 14E 15E 12 13 14E 15E
Global Real GDP (y/y) 3.2 3.2 3.2 3.3 3.8 3.9 3.9 3.9 2.8 3.3 3.3 3.9 3.1 2.9 3.2 3.8
IP (y/y) 3.8 3.9 4.0 4.2 4.2 4.6 4.5 4.4 2.3 3.7 4.2 4.4 2.8 2.8 4.0 4.4
Inflation (y/y) 2.9 3.4 3.4 3.6 3.6 3.4 3.4 3.4 2.9 3.0 3.6 3.4 3.3 3.0 3.4 3.4
US Real GDP (q/q ann) -1.0 4.0 2.9 2.9 3.0 3.0 3.0 3.0 2.0 2.6 2.2 3.0 2.8 1.9 2.2 3.0
Inflation (y/y) 1.4 1.9 1.8 2.0 2.1 2.0 2.0 2.1 1.9 1.2 2.0 2.1 2.1 1.5 1.8 2.0
Policy rate (eop) 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0.50 ... ... ... ... ...
10yr bond yield 2.72 3.00 3.30 3.65 3.75 3.75 ... ... ... ... ... ...
Japan Real GDP (q/q ann) 5.9 -4.3 2.0 1.6 2.3 -1.3 1.3 -1.2 -0.3 2.5 1.2 0.3 1.4 1.6 1.4 0.7
Inflation ex. fresh food (y/y) 1.3 3.1 2.6 2.3 2.1 0.5 0.5 1.7 -0.1 1.1 2.3 1.7 -0.1 0.4 2.3 1.2
Policy rate (eop) 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 0-0.1 ... ... ... ... ...
10yr bond yield 0.60 0.75 0.80 0.85 ... ... ... ... ... ... ...
USDJPY (eop) 102.72 102.96 107.56 112.22 120.00 ... ... ... ... ... ...
Euro Area Real GDP (q/q ann) 0.8 1.4 2.1 2.1 2.3 2.3 2.3 2.3 -1.0 0.5 1.6 2.3 -0.6 -0.4 1.2 2.2
Inflation (y/y) 0.7 0.6 0.5 0.9 1.0 1.2 1.2 1.2 2.2 0.8 0.9 1.2 2.5 1.4 0.7 1.2
Policy rate (eop) 0.25 0.15 0.15 0.15 0.15 0.15 0.15 0.15 ... ... ... ... ... ...
10yr bund yield 1.59 1.85 1.95 2.10 ... ... ... ... ... ... ... ... ... ... ... ...
EURUSD (eop) 1.36 1.37 1.36 1.34 1.32 ... ... ... ... ... ... ... ... ... ... ...
UK Real GDP (q/q ann) 2.9 3.0 3.1 2.8 2.5 2.2 2.2 2.2 0.2 2.7 2.9 2.3 0.3 1.8 3.0 2.5
Inflation (y/y) 1.7 1.9 1.8 2.1 2.5 2.6 2.6 2.5 2.7 2.1 2.1 2.5 2.8 2.6 1.9 2.6
Policy rate (eop) 0.50 0.50 0.50 0.50 0.75 0.75 1.00 1.00 ... ... ... ... ... ... ... ...
10yr bond yield 2.72 2.95 3.05 3.15 ... ... ... ... ... ... ... ... ... ... ... ...
GBPUSD (eop) 1.65 1.70 1.73 1.74 1.76 ... ... ... ... ... ... ... ... ... ... ...
Switzerland Real GDP (q/q ann) 2.0 2.3 2.8 3.0 1.4 1.3 1.3 0.6 1.6 1.7 2.5 1.1 1.0 2.0 2.0 1.8
Inflation (y/y) 0.3 0.1 0.1 0.4 0.9 0.8 0.9 1.0 -0.3 0.3 0.4 1.0 -0.7 -0.2 0.2 1.0
Policy rate (eop) 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 0-.25 ... ... ... ... ... ... ... ...
USDCHF (eop) 0.90 0.90 0.91 0.91 0.92 ... ... ... ... ... ... ... ... ... ... ...
NJA Real GDP (y/y) 6.3 6.2 6.2 6.2 6.6 6.8 6.9 7.0 6.7 6.3 6.2 7.0 6.1 6.1 6.1 6.7
Inflation (y/y) 3.2 4.2 4.1 4.5 4.4 4.4 4.3 4.3 3.3 3.9 4.5 4.3 4.2 4.1 4.1 4.1
China Real GDP (y/y) 7.4 7.1 7.0 7.0 7.8 7.9 7.9 7.9 7.9 7.7 7.0 7.9 7.7 7.7 7.1 7.9
IP (y/y) 8.7 9.1 9.4 9.4 9.4 9.4 9.5 9.5 10.0 10.0 9.4 9.5 10.1 9.7 10.0 10.3
Inflation (y/y) 2.3 3.1 2.9 3.5 3.5 3.6 3.5 3.6 2.1 2.9 3.5 3.6 2.6 2.6 3.0 3.5
India*** Real GDP (y/y) 5.4 5.7 6.3 6.2 5.6 5.9 6.1 6.8 4.7 4.7 6.2 6.8 4.6 4.8 6.0 6.3
EMEA Real GDP (y/y) 2.1 1.6 1.8 1.6 2.6 3.1 3.3 3.6 1.3 2.2 1.6 3.6 2.9 2.2 1.6 2.9
Inflation (y/y) 5.0 5.6 5.3 5.5 5.3 4.9 5.0 5.1 5.2 4.9 5.5 5.1 4.8 4.7 5.1 4.6
Latin America Real GDP (y/y) 1.5 2.0 2.4 2.8 3.1 3.1 3.1 2.9 2.9 2.1 2.8 2.9 2.8 2.4 2.2 3.3
Inflation (y/y) 9.4 9.5 9.9 10.1 10.0 9.6 9.4 9.1 6.1 8.4 10.1 9.1 6.2 7.5 9.9 9.5
Note: IMF PPP weights are used to compute regional and global aggregate figures; 10yr bond yield figures are averages for the last month of each quarter; * End of period. ** CPI ex. Fresh food; *** Annual figures for India are on fiscal year basis.
Source: Credit Suisse




GLOBAL FIXED INCOME AND ECONOMICS RESEARCH
Ric Deverell
Global Head of Fixed Income and Economics Research
+1 212 538 8964
ric.deverell@credit-suisse.com

GLOBAL ECONOMICS AND STRATEGY
James Sweeney, Chief Economist
Co-Head of Global Economics and Strategy
+1 212 538 4648
james.sweeney@credit-suisse.com
Neville Hill
Co-Head of Global Economics and Strategy
+44 20 7888 1334
neville.hill@credit-suisse.com
GLOBAL STRATEGY AND ECONOMICS
Matthias Klein
+44 207 883 8189
matthias.klein@credit-suisse.com
Wenzhe Zhao
+1 212 325 1798
wenzhe.zhao@credit-suisse.com
Yiagos Alexopoulos
+44 20 7888 7536
yiagos.alexopoulos@credit-suisse.com
Axel Lang
+1 212 538 4530
axel.lang@credit-suisse.com
Jeremy Schwartz
+1 212 538 6419
jeremy.schwartz@credit-suisse.com
US ECONOMICS
James Sweeney
Head of US Economics
+1 212 538 4648
james.sweeney@credit-suisse.com
Jay Feldman
+1 212 325 7634
jay.feldman@credit-suisse.com
Dana Saporta
+1 212 538 3163
dana.saporta@credit-suisse.com
Xiao Cui
+1 212 538 2511
xiao.cui@credit-suisse.com
LATIN AMERICA (LATAM) ECONOMICS
Alonso Cervera
Head of Latam Economics
+52 55 5283 3845
alonso.cervera@credit-suisse.com
Mexico, Chile
Casey Reckman
+1 212 325 5570
casey.reckman@credit-suisse.com
Argentina, Venezuela
Daniel Chodos
+1 212 325 7708
daniel.chodos@credit-suisse.com
Latam Strategy
Juan Lorenzo Maldonado
+1 212 325 4245
juanlorenzo.maldonado@credit-suisse.com
Colombia, Peru
Di Fu
+1 212 538 4125
di.fu@credit-suisse.com
BRAZIL ECONOMICS
Nilson Teixeira
Head of Brazil Economics
+55 11 3701 6288
nilson.teixeira@credit-suisse.com
Daniel Lavarda
+55 11 3701 6352
daniel.lavarda@credit-suisse.co
Iana Ferrao
+55 11 3701 6345
iana.ferrao@credit-suisse.com
Leonardo Fonseca
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leonardo.fonseca@credit-suisse.com
Paulo Coutinho
+55 11 3701-6353
paulo.coutinho@credit-suisse.com
EURO AREA / UK ECONOMICS
Neville Hill
Head of European Economics
+44 20 7888 1334
neville.hill@credit-suisse.com
Christel Aranda-Hassel
+44 20 7888 1383
christel.aranda-hassel@credit-suisse.com
Giovanni Zanni
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giovanni.zanni@credit-suisse.com
Violante di Canossa
+44 20 7883 4192
violante.dicanossa@credit-suisse.com
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+44 20 7883 7360
steven.bryce@credit-suisse.com
Mirco Bulega
+44 20 7883 9315
mirco.bulega@credit-suisse.com
EASTERN EUROPE, MIDDLE EAST AND AFRICA (EEMEA) ECONOMICS
Berna Bayazitoglu
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berna.bayazitoglu@credit-suisse.com
Turkey
Sergei Voloboev
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sergei.voloboev@credit-suisse.com
Russia, Ukraine, Kazakhstan
Carlos Teixeira
+27 11 012 8054
carlos.teixeira@credit-suisse.com
South Africa
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+33 1 7039 0103
gergely.hudecz@credit-suisse.com
Czech Republic, Hungary, Poland
Alexey Pogorelov
+7 495 967 8772
alexey.pogorelov@credit-suisse.com
Russia, Ukraine, Kazakhstan
Nimrod Mevorach
+44 20 7888 1257
nimrod.mevorach@credit-suisse.com
EEMEA Strategy, Israel

JAPAN ECONOMICS NON-JAPAN ASIA (NJA) ECONOMICS
Hiromichi Shirakawa
Head of Japan Economics
+81 3 4550 7117
hiromichi.shirakawa@credit-suisse.com
Takashi Shiono
+81 3 4550 7189
takashi.shiono@credit-suisse.com

Dong Tao
Head of NJA Economics
+852 2101 7469
dong.tao@credit-suisse.com
China
Robert Prior-Wandesforde
+65 6212 3707
robert.priorwandesforde@credit-suisse.com
Regional, India, Indonesia, Australia
Christiaan Tuntono
+852 2101 7409
christiaan.tuntono@credit-suisse.com
Hong Kong, Korea, Taiwan
Dr. Santitarn Sathirathai
+65 6212 5675
santitarn.sathirathai@credit-suisse.com
Regional, Indonesia, Malaysia, Thailand
Michael Wan
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michael.wan@credit-suisse.com
Singapore, Philippines
Weishen Deng
+852 2101 7162
weishen.deng@credit-suisse.com
China

Disclosure Appendix
Analyst Certification
James Sweeney, Matthias Klein, Wenzhe Zhao, Yiagos Alexopoulos and Jeremy Schwartz each certify, with respect to the companies or securities
that the individual analyzes, that (1) the views expressed in this report accurately reflect his or her personal views about all of the subject companies
and securities and (2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views
expressed in this report.
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Buy: Indicates a recommended buy on our expectation that the issue will deliver a return higher than the risk-free rate.
Sell: Indicates a recommended sell on our expectation that the issue will deliver a return lower than the risk-free rate.
Corporate Bond Fundamental Recommendation Definitions
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are undervalued, or they may be weaker credits that, we believe, are cheap relative to the sector and are expected to outperform on a total-return
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Market Perform: Indicates a bond that is expected to return average performance in its sector.
Underperform: Indicates a below-average total-return performer within its sector. Bonds in this category have weak or worsening credit trends, or
they may be stable credits that, we believe, are overvalued or rich relative to the sector.
Sell: Indicates a recommended sell on the expectation that the issue will be among the poor performers in its sector.
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investor, designated as Market, or that it has a higher or lower risk profile, designated as Speculative, and Conservative, respectively.
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