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World Economy

16

OPEC Monthly Oil Market Report – October 2017

Canada

After GDP growth in 2Q17 confirmed the ongoing recovery in the Canadian economy, the momentum seems

to be well supported.

Industrial production

increased by 5.5% y-o-y, albeit slightly below the July level of

7.8% y-o-y.

Retail trade

also continued to expand to the considerable level of 7.8% y-o-y in July, comparing

to 7.4% y-o-y in June and 7.3% y-o-y in May, all at a nominal seasonally adjusted level. The

PMI

for

manufacturing rose again to a significant level of 55.0 in September, rising by 0.4 index points from the

August level of 54.6. Another support factor will be the ongoing dynamic in the US economy and the impact

this will have on the Canadian economy, given that the US is Canada’s second-largest trading partner after

China. Taking this positive momentum into consideration, the

GDP growth

forecast for 2017 was revised up

to 2.8%, from 2.5%. GDP growth in 2018 was lifted to 2.1% from 1.9%.

OECD Asia Pacific

Japan

After the 2Q GDP level confirmed the good underlying momentum, the dynamic seems to continue with the

latest Tankan Survey levels pointing at also solid economic growth in the 2H17. 2Q17 was slightly revised

down to 2.5% q-o-q SAAR from its previous estimate of 2.6% q-o-q SAAR. While this underscores solid

momentum and the strengthening of the Japanese economy, it is, however, much lower than the first growth

estimate by the Statistical Office of 4.0% q-o-q SAAR for 2Q17. Private consumption, which makes up 60%

of GDP growth, was confirmed at 3.4% q-o-q SAAR, significantly more than in 1Q17, when it only increased

by 1.5% q-o-q. Ongoing ultra-low unemployment and again rising income levels are also supporting inflation,

while it remains to be seen, if this development is temporary. Exports are also rising further and the ongoing

monetary and fiscal stimulus is also providing a sound base for growth in the coming quarter. While 2017 is

almost at its end, the outcome of the upcoming elections that were surprisingly called for by the Prime

Minister to be held 22 October will certainly also have an impact in the near term economic development. So,

political developments will be an influential factor for Japan, not only domestically, but also externally,

considering the latest geopolitical tensions in the Asian region.

Inflation

was higher in August, increasing by 0.7%, compared with 0.4% y-o-y in July. Tight labour markets

are slowly supporting wage growth, which was up by 0.6% y-o-y in July, the highest level in the past four

months. Core inflation (which excludes food and energy) also showed a better performance as it stood at

0.0% y-o-y in August, the highest level in five months and above the -0.1% seen in July. The

unemployment

rate

remained at the extremely low level of 2.8% for a third month in a row, a situation that may also lead to

rising wages and acceleration in inflation.

Japanese exports

were again a considerable support in August, as external trade rose by a large 18.1%

y-o-y in August after hitting 13.3% y-o-y in July. A strong increase in exports was seen in all main products

but was mainly supported again by the group of industrial goods and capital equipment. Additionally,

industrial production

continued its recovery, rising for the twelfth consecutive month, up by 5.2% y-o-y in

August, after 4.8% y-o-y in July. This was supported again by a strong trend in manufacturing, which climbed

by 5.4% y-o-y in August, compared with 4.6% y-o-y in July. Manufacturing orders in August point at a

continuation of a solid trend as orders rose by 10.2% y-o-y, after 4.3% y-o-y in July.

However, some deceleration continued in

domestic demand

as the level of retail trade retraced further to

1.7% y-o-y in August from 1.8% y-o-y in July. While it still shows good growth, it is the lowest level since

March. The trend will also depend on wage growth developments but with a slight uptick in consumer

confidence a continuation of a solid trend should be expected.