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World Economy

OPEC Monthly Oil Market Report – November 2017


October’s PMI for the manufacturing sector, as

provided by


ISM, also indicated ongoing

support in the underlying economy, with very strong

numbers in both the manufacturing and non-

manufacturing sectors. The manufacturing PMI fell,

but remained at a very high level of 58.7, compared

to 60.8 in September. The important index for the

services sector, which constitutes more than 70%

of the US economy, rose to 60.1, after a level of

59.8 in September.

Given the considerable growth in 3Q17 and

expectations that the current momentum will also

continue in 2018, the US

GDP growth

forecast for

both 2017 and 2018 was raised by 0.1 percentage

points (pp) each. The growth forecast for 2017 now

stands at 2.2% and GDP growth in 2018 is

estimated to reach 2.4%. This takes into

consideration a slightly positive outcome of the US

administration’s tax proposal, to positively impact

the 2018 GDP growth forecast by 0.1 pp.

Graph 3 - 2: Manufacturing and

non-manufacturing ISM indices


Canada continues to benefit of the US growth dynamic, the recovery in the oil market and the positive

consequence these developments have on rising income and domestic demand. After GDP growth in 2Q17

confirmed the ongoing recovery in the Canadian economy, the momentum seems to continue somewhat in


Industrial production

remained strong, but decelerated, as it rose by 3.8% y-o-y in August,

compared with 5.5% y-o-y in July and the June level of 7.8% y-o-y.

Retail trade

continued to expand to the

considerable level of 7.0% y-o-y in August, albeit slightly lower than in the previous months, when trade

increased by 7.7% y-o-y in July and 7.2% y-o-y in June, all at a nominal seasonally-adjusted level. The

strong, but slightly slowing momentum is also confirmed by the PMI index for manufacturing, which dipped

slightly to 54.3 in October, compared with 55.0 in September.

Taking the ongoing positive momentum into consideration, the

GDP growth

forecast for 2017 was revised

up to 2.9%, from 2.8%. The GDP growth forecast for 2018 remained unchanged at 2.1%.

OECD Asia Pacific


After the elections at the end of October, government-led stimulus measures, in combination with structural

reforms, are expected to continue. These measures, together with strong exports, also led to strong

domestic demand in the recent quarter. 2Q17 GDP growth was supported by the momentum rising by 2.5%

q-o-q SAAR. The ongoing considerable tightness in the labour market has still not led to significantly rising

wages. While the reasons for this development may be manifold, the Prime Minister proposed major wage

increases in the coming year at a range of 3%, which would certainly be a considerable boost to inflation,

which remains low. So far, unions and employee representatives have been relatively passive in demanding

higher wages, despite private sector profitability improving in the past years. According to the trade union,

wage rises stood below 2% in 2016 while based on numbers from the Ministry of Health, Labour and

Welfare, wage growth stood at only 1.0% in the same year. Tax incentives for those companies that are

willing to raise wages considerably higher, could be one aspect that may be envisaged by the government.

The upside to the current growth level is limited, given that the economy seems to have reached its short-

term growth potential and while the government is pursuing structural reforms that may pay off in the medium

to the long-term, the aim of raising inflation could certainly help to overcome a major challenge for the

Japanese economy. However, this may also negatively impact the competitiveness of exporting companies,

depending on the development of the yen compared to the currencies of its most important trading partners.











Oct 16

Nov 16

Dec 16

Jan 17

Feb 17

Mar 17

Apr 17

May 17

Jun 17

Jul 17

Aug 17

Sep 17

Oct 17


ISM manufacturing index

ISM non-manufacturing index

Sources: Institute for Supply Management and Haver Analytics.