OPEC Monthly Oil Market Report – August 2017
Graph 3 - 4: Euro-zone CPI and lending activity
Graph 3 - 5: Euro-zone PMIs
grew by 4.0% y-o-y in May, after 1.2% in April. Retail sales growth in value terms was
again an important support factor for Euro-zone growth, increasing by 3.7% y-o-y in June, after 3.5% y-o-y in
May. As these indicators have remained at considerable levels over the past months and demonstrate a
healthy dynamic, the ongoing improvements in the underlying economy are forecast to be carried over into
the 2H17 and the coming year.
indicators remained at very high levels and point to a continuation of Euro-zone
improvements. The manufacturing PMI moved down slightly to 56.6 in July, compared to 57.4 in June, which
was its highest level since the initiation of the index. The important PMI for the services sector, which
constitutes the largest sector in the Euro-zone, remained stable at a level of 55.4 in July, the same number
as in June.
The underlying momentum has led to an upward revision in the 2017
forecast for the
Euro-zone, which now stands at 2.0%, compared to 1.8% in the previous month. Given that some of this
momentum will be carried over into 2018, the next year’s GDP growth forecast was also revised up to 1.8%
from 1.7% in the previous month. Among the political uncertainties, Brexit procedures and the upcoming
German elections remain important factors to monitor. These factors need to be seen in combination with a
potential reduction in monetary stimulus towards the end of the year.
The most recent developments in the Brexit negotiations have shown only slow progress as it seems
uncertainty about details of the procedure remain high. In the meantime, the economy is showing some
negative impacts due to these uncertainties, but in general the UK economy remained relatively robust.
After GDP growth of 0.2% q-o-q seasonally adjusted (sa) in the 1Q17, GDP growth in the 2Q17 rose to a
level of 0.3% q-o-q sa. The upcoming releases of GDP related detail will show how the components of GDP
developed, but it seems likely that investment and private household consumption will face challenges in the
near-term due to rising inflation and the numerous uncertainties due to Brexit. However, for the time being
the unemployment rate remains very low at 4.4%, as shown in the latest available number from April, while
wage growth in April and May stood at only 1.4% y-o-y and 1.8% y-o-y, respectively. This compares to yearly
averages of 2.4% in 2016 and 2.6% in 2015. This low wage growth now compared to inflation numbers of
2.9% y-o-y in May and 2.6% y-o-y in June. This compared to average inflation of 0.7% y-o-y in 2016 and 0%
in 2015. These rising inflation numbers may also keep the Bank of England thinking about raising interest
rates. Falling real incomes in the near-term may become a reality and a negative factor for consumption. The
GfK consumer confidence index at least is at its lowest point since last year’s referendum. In the meantime,
continue to benefit from a relatively weak pound and hence have benefitted from an improving
competitive position. Exports increased by 12.6% y-o-y in May, following a 10.2% y-o-y rise in April. In
for manufacturing remained at a high level of 55.1 in July, higher than the already elevated
level of 54.2 in June. Also, the services sector PMI increased slightly to 54.8 in July, from 53.4 in June.
continued showing some weakness, falling by 0.3% y-o-y in May, coming from -0.8%
MFI lending (RHS)
Sources: Statistical Office of the European Communities,
European Central Bank and Haver Analytics.
% change y-o-y
% change y-o-y
Sources: IHS Markit and Haver Analytics.