OPEC Monthly Oil Market Report – October 2017
Graph 3 - 3: Japanese retail trade
Graph 3 - 4: Japanese PMIs
numbers confirmed a positive trend as they remained almost unchanged and above the
growth-indicating level of 50 in August. The manufacturing PMI stood at 52.9 in September, after 52.2 in
August and 52.1 in July. The services sector PMI slowed a bit, moving down to 51.0 in September,
compared to 51.6 in August. Moreover, the BoJ’s 4Q17 Tankan survey index reached a new multi-year high
at a level of 19, the highest level in 10 years.
The most recent developments confirm a solid underlying growth dynamic in the Japanese economy. Hence,
forecast was revised up to 1.6%, mainly by taking the strong 1H17 into consideration,
while further upside may materialise in the 2H17. Moreover, the outcome of the upcoming elections will
certainly need close monitoring as also numerous challenges in the economy persist, and given the tight
labour market situation and high capacity utilisation rates, further growth advancements seem challenging.
The 2018 growth forecast remains unchanged at 1.2%.
While geopolitical concerns on the Korean-Peninsula continue, the latest output data underpinned solid
momentum in the economy. Also, consumer sentiment is holding up and remains almost unchanged at a
record level since around 6 months.
rose by 2.6% y-o-y in August, rising from 2.1%
y-o-y in July and 1.6% y-o-y in June. Also the latest
number for the manufacturing sector in September
indicated an improvement, as it moved back above the growth indicating level of 50 to stand at 50.6, after
49.9 in August. As this positive momentum is already considered in the
forecast number, GDP
growth for 2017 remained at 2.7% in 2017. The growth figure for 2018 remains also unchanged at 2.4%.
The latest GDP growth numbers from the 1H17 confirm better-than-expected growth, a momentum that to
some extent is expected to be carried over into 2H17. As in the previous months, the positive trend is visible
on all economies, at varying rates, and seems to be well supported across the various sectors. One
important sector, however, that is continuing to face challenges is the banking sector, which has also led the
European Central Bank (ECB) to conclude that higher capital levels are needed for the still large share of
non-performing loans in in the Eurozone’s banking system. This may have some negative, while digestible,
impact in the near-term, as bank financing is a major source of funding for the important small and medium-
sized enterprises (SMEs) in the Euro-zone. This may also come in combination with raising interest rates as
the ECB has indicated that it may start to normalise its monetary policy in the coming year. Such a decision
may also be supported by again rising inflation and the general economic improvement in the economy.
Moreover, business sentiment has continued to reflect the bettering situation, with the European
Commission’s economic sentiment index improving to 113.0 in September, compared to 111.9 in August.
This is the highest level of the index in more than 10 years. Challenges in the Euro-zone remain. Beside the
Sources: Ministry of Economy, Trade and Industry and
% change y-o-y
Sources: IHS Markit, Nikkei and Haver Analytics.