6/5/20: The Glut of Oil: Strategic Reserves

The Giant Glut of Oil continues (see my analysis of oil markets fundamentals here: https://trueeconomics.blogspot.com/2020/04/23420-what-oil-price-dynamics-signal.html)

China strategic oil reserves have also surged. U.S. oil reserves are now nearing total capacity of 630 million barrels, and China's reserves are estimated to be about 90% of the total capacity of 550 million barrels. Japan's reserves similar (capacity of ca 500 million barrels). Australia is using leased U.S. strategic reserves capacity to pump its own stockpiles, with its domestic storage capacity already full. 

23/4/20: What Oil Price Dynamics Signal About Future Growth

My column at The Currency this week covers the fundamentals of oil prices and what these tell us about the markets expectations for economic recovery: https://www.thecurrency.news/articles/15674/supply-demand-and-the-dilemma-of-trade-what-the-collapse-in-oil-prices-tells-you-about-post-covid-10-economy.

Key takeaways:

• "...current futures market pricing is suggesting that traders and investors expect much slower recovery from the Covid-19 pandemic than the V-shaped one forecast by the analysts’ consensus and the like of the IMF and the World Bank. 
• "As a second order effect, oil markets appear to be pricing post-Covid-19 economic environment more in line with below historical trends global growth, similar to that evident in the economic slowdown of 2018-2019, rather than a substantial expansion on foot of the sharp Covid- shock."

6/4/19: BRIC Services Lead, Manufacturing Lag Global Growth Momentum

I have blogged recently on BRIC and global PMIs for manufacturing and services, covering the data for 1Q 2019, as well as monthly PMIs for BRIC economies. Here are the 1Q 2019 PMIs for composite economic activity across the same:

In 1Q 2019, only Brazil posted improving Composite PMI reading, with the rest of BRIC economies showing deteriorating growth conditions, in line with continued drop in Global Composite PMI. Over the last 5 quarters, Global Composite PMI has dropped from its peak of 54.23 in 1Q 2018 to 52.5 in 1Q 2019, with current reading at its lowest in 10 quarters.

Of all BRIC economies, India and Russia are outperforming the Global Composite PMI, with Russia posting the fastest growth at 54.1 of all BRIC economies in 1Q 2019. Brazil is statistically in line with Global Composite PMI, while China is a clear under-performer.

Sectorally, the main weakness amongst the BRICs is in Manufacturing, with Services outperforming Global Composite index:

7/2/19: Global Trade Indicators: Tanking

There is no reason to panic about global growth. None. None at all...

Source: topdowncharts.com with my annotations

Nothing to see here. Because, obviously, structurally and statistically lower growth in trade turning negative on foot of Baltic Dry Index literally collapsing over the last two weeks, while China data and stock markets signals remain negative, is just a glitch...

25/11/2014: When Executives Abandon the Ship of Fools...

A bit of gas... same chart, one year distance.

McKinsey Global Institute regularly surveys top C-level executives and analysts as to their expectations (current and 6 months forward) for the economic conditions.

Specific question of interest is: "How do you expect your country's economy to be six months from now?"

Marking with blue line responses from the euro area and with red line responses from to full survey (worldwide) we have: a year ago responses citing improving conditions 6 months out were

And this year at the end of Q3 the responses were:

Oh dear... things are, allegedly, getting better.

25/9/2014: Geopolitical Risks Weigh on Global Growth Expectations into Q1 2015

Some interesting insights into global economic conditions and expectations forward from the McKinsey Global executives survey for Q3 2014 (analysis link here):

Geopolitical Instability is still core threat to the global economy:

But it is not related directly to Ukraine. Instead, the source of key instability is MENA:

And expected impact of the risk is in North America, non-Euro area EU (presumably this has to be linked to Ukraine) and the Eurozone:

Gloom and doom overall prevail today, most significantly in North America (June-September swing in worsening expectations from 7% of respondents to 27%), Europe (from 11% of respondents to 28%):

And looking forward (6 months out), poor outlook (expected deterioration) remains in Europe (30%, a decline from 34% of respondents compared to current):

This survey supports recent revisions to global growth by a number of forecasters. 

5/11/2013: BlackRock Institute survey: Latin America October 2013

BlackRock Investment Institute released its latest Economic Cycle Survey for Latin America. EMEA region latest survey note is available here (http://trueeconomics.blogspot.ie/2013/11/5112013-blackrock-institute-survey-emea.html) and North America & Western Europe note is available here (http://trueeconomics.blogspot.ie/2013/10/11102013-blackrock-institute-survey-n.html).

"This month’s Latin America Economic Cycle Survey presented a mixed outlook for the region. Brazil, Colombia, Peru, Mexico, Brazil and Chile are described to be in expansionary phases of the cycle and expected to remain so over the next 2 quarters, while Argentina’s growth is expected to deteriorate from expansion to contraction over this horizon. Venezuela is described by the consensus to be in a recessionary state, with no improvement to this outlook at the 6 month horizon."

This is predictable. However, the surprise side is Brazil. Out 6 months from October, expectations are for continued recessionary pressures (35%) basically suggesting that forward-looking bears are slightly more bearish. The country, alongside with Mexico, is in a group that is stuck between higher growth states and Venezuela and Argentina. This despite the improving global outlook: "The global growth outlook remains positive, with a net of 69% of participants expecting a stronger global economy
over the next 12 months compared to 76% in the September report."

Note: these views reflect opinions of survey respondents, not that of the BlackRock Investment Institute. Also note: cover of countries is relatively uneven, with some countries being assessed by a relatively small number of experts.

Here are two summary charts:

15/7/2013: 12 Months Ahead, Things are Getting Darker...

Two charts on business expectations for 12 months forward, via Markit (full release here: http://www.markit.com/assets/en/docs/commentary/markit-economics/2013/jul/GLOBAL_Outlook_ENG_1307_PR.pdf)

First, global (lower levels represent lower percentage of businesses expecting growth in the next 12 months net of the percentage expecting contraction):

and now, regional

 Ouch!.. For euro area, things are clearly bad enough and they get worse when we compare June 2013 results to February 2013. For Japan, same and even sharper. US is in the pain zone too. UK throws strange outlier.

Would have been good to see actual percentages listed on the bars... but...

21/6/2013: McKinsey Economic conditions Survey for H2 2013

Couple of interesting charts from the McKinsey Survey on global economic conditions (see full set of results here: http://www.mckinsey.com/Insights/Economic_Studies/Economic_Conditions_Snapshot_June_2013_McKinsey_Global_Survey_results?cid=other-eml-alt-mip-mck-oth-1306)

So the percentage of those who are saying the global economy is performing substantially better at the end of Q2 2013 is 36%, which is down on 43% in Q1 2013, signalling deterioration in the conditions. Percent of those who see any improvement in the global economy is down from 79% to 75% q/q. In terms of expectations forward:

Things are not going all too well in expectations 6mo forward either. 41% of all respondents are upbeat in expecting an improvement in global growth of H2 2013. Now, keep in mind, most of the official forecasts factor in significant uplifts in economic conditions in H2 2013 to deliver on annual targets set for 2013 at the end of 2012. Let's take a look at regions where H2 expectations were the most optimistic on the official side: 49% Eurozone executives expect things to improve, Asia-Pacific (especially China) 38% and North America 32%. Hmmm... nowhere over 50%. Sample biases are probably working toward reporting firms having more robust expectations, as the survey covers larger companies, with bigger investment pipelines, usually consistent with upside to expectations.

For their own countries:

Better vs Same/Worse percentages:

• Asia-Pacific: 42% vs 59% in Q2 2012, against 38% vs 61% in Q1 2012. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• Developing markets: 35% vs 64% in Q2 against 47% vs 53% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• Eurozone: 32% vs 68% in Q2 against 34% vs 66% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• India: 45% vs 55% in Q2 against 60% vs 40% in Q1. Own-country conditions confirm a 'no expansion' expectation in H2 2013
• North America: 54% vs 46% in Q2 against 43% vs 57% in Q1. Own-country conditions confirm a 'expansion' expectation in H2 2013

So of all regions, with exception of North America, own-executives signal no gains in growth in Q3-Q4 that is assumed ex ante in the official forecasts... time to go 'hmmmm...'

7/5/2013: Blackrock Institute: April 2013 Global Economic Conditions - 2

More updates from the Blackrock Investment Institute Economic Cycle surveys for April 2013. Here are core charts for regions not covered in the previous post.

Note of caution: some of the countries coverage in responses is thin, so data should be treated as only indicative. And the surveys are based on opinion of external experts, not Blackrock internal views.



EMEA:
"With caveat on the depth of country-level responses, which can differ widely, this month’s EMEA Economic Cycle Survey presented a generally bearish outlook for the region. However, there has been a marked improvement in the outlook for Eastern European countries at the 12 month horizon, compared to earlier reports this year.

The majority of respondents for the Czech Republic, Croatia, Egypt, Hungary, Poland, Slovakia, Slovenia, and the Ukraine describe these countries in a recessionary state; however only half of these -- Croatia, Slovakia, Slovenia and the Ukraine -- are expected to remain so by the majority of economists, at the 6 month horizon. 

At a longer horizon of 12 months, the outlook becomes more positive within Eastern Europe, with only the economies of Slovenia and Slovakia expected to continue to weaken."

Asia Pacific:

"...continuing bullish outlook for the region. Out of the 14 countries covered, only Singapore and Vietnam are currently described to be in a recessionary state. Over next 6 months the balance of consensus opinion shifts back to expansion for these countries, while in Australia the proportion of economists expecting recession increases to 50%. Australia stands out as the only country in the region where respondents expect the economy will weaken over the next year."

Latin America: 

"With a caveat on the depth of country-level responses, which differs widely, this month’s Latin America Economic Cycle Survey presented a generally bullish outlook for the region. Brazil, Mexico, Colombia, Peru and Chile are described to be in expansionary phases of the cycle and expected to remain so over the next 2 quarters, while Brazil is expected to mature from early-expansion to mid-cycle expansion and Chile is expected to move from mid-cycle expansion to late-cycle expansion. 

The exceptions to this theme within the region were Venezuela and Argentina. Both are described by the consensus of economists to be in a recessionary state, with growing proportion respondents expecting this to continue at the 6 month horizon." 

5/2/2012: Global & Irish Economic Conditions: UCC, January 2013

Slides for my recent presentation on the Global Economic environment and Ireland, delivered at UCC (click on individual slides to enlarge):