ECB bulletin just published today, sharing with all my friends. A good summary, concise yet detailed on the major markets.
Brent crude oil prices have continued to recover since mid-March, reflecting a moderation in the global oil supply overhang and higher than expected global demand for oil.
Brent crude oil prices have traded in the range of USD 38-47 per barrel since mid-March 2016, trading at USD 47 per barrel on 28 April. This equates to a 67% increase compared with the 12-year lows recorded in mid-January. The recent increase in the oil price was underpinned by a moderation in the global oil supply overhang. In particular, OPEC output decreased in March 2016, mainly on account of supply disruptions in Iraq, Nigeria and the United Arab Emirates. In addition, oil demand was higher than expected in the first quarter of 2016, largely because of strong demand in India and other non-OECD Asian countries. Oil price volatility has decreased slightly since mid-March, but remains high. A number of factors have contributed to the current volatility, including geopolitical tensions, issues surrounding the return of Iran to the global oil market, uncertainty surrounding the economic outlook for EMEs and doubts about a deal between OPEC and leading non-OPEC producers to freeze output. The prices of non-oil commodities such as food and metals have remained stable in the period since mid-March. Looking ahead, the volatile geopolitical situation in the Middle East (notably Iraq) and in Nigeria continues to represent a short-term risk, potentially leading to further supply-side disruptions.
The soft patch in US activity appears to have continued into the first quarter of 2016, although underlying fundamentals remain healthy.
Following a moderate expansion of real GDP by an annualised rate of 1.4% in the fourth quarter of 2015, economic activity showed signs of further deceleration in the first quarter of 2016. In particular, high-frequency indicators for business equipment spending suggested only modest growth in business investment. While real consumption growth remained moderate in February, recent manufacturing data indicate improving conditions in the sector. Non-farm payrolls rose strongly in March and the labour force participation rate increased further, suggesting that previously discouraged workers are returning to the labour market. This resulted in only a small uptick in the unemployment rate, to 5.0%. Looking forward, the strengthening of the labour market is expected to support real income and consumption. Headline inflation remained low. Annual headline CPI inflation decreased slightly in March to 0.9%, from 1.0% in February, weighed down by energy and food prices. Excluding food and energy, annual CPI inflation declined to 2.2% in March, restrained by negative goods price inflation, but has been on a gradual upward trend since mid-2015.
In Japan, the growth momentum remains subdued.
Economic indicators at the start of 2016 continue to point to sluggish economic activity, following a quarter-on-quarter decline in real GDP of 0.3% in the last quarter of 2015. Recent surveys indicate that private consumption was weak at the start of the year. Industrial production also remained subdued, although this was largely due to one-off factors, while real exports staged a mild recovery. At the same time, survey indicators signalled some deterioration in business sentiment. Annual CPI inflation picked up from 0% in January to 0.3% in February, while annual CPI inflation excluding food and energy rose slightly, to 0.8%.
In the United Kingdom, GDP growth is expected to moderate.
In the fourth quarter of 2015 real GDP increased by 0.6% quarter on quarter, more than previously estimated and at a more rapid pace with respect to the previous quarter. As a result, annual GDP growth was 2.3% in 2015, compared with 2.9% in 2014. In the last quarter of 2015 economic growth was driven by solid private consumption, while investment growth turned sharply negative on the back of uncertainty regarding the pace of global demand and net exports continued to exert a drag on growth. Short-term indicators and surveys of business intentions suggest a moderate slowdown in the pace of GDP growth in the first half of 2016. The unemployment rate stabilised at 5.1% in the three months to January 2016, while earnings growth remained relatively subdued at 2.1%, despite improvements in labour market conditions. In February 2016 annual headline CPI inflation edged up to 0.3% owing to base effects stemming from energy prices, while inflation excluding food, energy, alcoholic beverages and tobacco declined marginally to 1.1%.
In China, available data remain consistent with a gradual slowdown in activity growth, which has been underpinned by policy support and rapid credit expansion.
In the first quarter China recorded GDP growth of 6.7% year on year, which was marginally below that recorded in the previous quarter but in line with the new growth target range set by Chinese authorities for 2016 (6.5-7.0%). The latest short-term indicators point to sustained economic momentum, with industrial production, fixed-asset investment, credit growth and retail sales showing some improvements. There are also signs of stabilisation in the housing market, with a modest rebound in residential investment and strong increases in house prices in the large cities. Conversely, trade data, which have shown a high degree of volatility in recent months, weakened in the first quarter of the year. Greater stability in financial markets and the Renminbi exchange rate has helped to alleviate some of the uncertainty which prevailed at the start of the year, while monetary accommodation and modest fiscal stimulus are expected to continue supporting demand.
Growth momentum remains weak and heterogeneous across other EMEs.
Activity has remained resilient in commodity-importing countries such as non-euro area central and eastern European countries and, to a lesser extent, India and Turkey, while growth continues to be very weak in commodity-exporting countries. In particular, latest short-term indicators suggest that the downturn in Brazil will continue into 2016. Political uncertainty, deteriorating terms of trade and tightening financing conditions are weighing heavily on economic activity. In line with expectations, economic activity in Russia declined again in the last quarter of 2015, following tentative signs of improvement in the third quarter of last year. Uncertainty remains high and business confidence weak, while lower oil revenues continue to restrain public expenditure.
