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World Economy
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OPEC Monthly Oil Market Report – June 2016
been clearly below expectations, the US Federal Reserve (Fed) will carefully review
these developments. And although it seems that the Fed is envisaging another interest
rate hike in the coming months, a rate hike at its upcoming June meeting seems rather
unlikely, given the current uncertainties.
Total
industrial production
remains weak and has been significantly impacted by the
challenges in the energy sector, while manufacturing continues growing, albeit at a low
pace. Total industrial production declined by 1.1% y-o-y in April. But while it is the
eighth consecutive month of decline, the rate of decline is improving – i.e. it is
recovering on a monthly base. Mining, including oil sector-related output, fell
considerably again, dropping 13.3% y-o-y, the largest decline in this data series on
record. However, within this number, manufacturing held up relatively well at 0.6%
y-o-y, following growth of 0.5% y-o-y in March. Ongoing weakness is reflected in
manufacturing orders, which fell by 1.8% y-o-y in March. But this development is also
less dramatic than it was in the previous month, when orders fell by 4.3% y-o-y. The
negative trend of order growth in the energy sector continued to be considerably
negative, with new orders for machinery in the mining, oil and gas sectors declining by
92.4% y-o-y in April.
Retail sales
continued rising in April, when growth stood at 3.0% y-o-y after growth of
1.7% y-o-y in March. The lessening improvements in the
labour market
, however, are
pointing at some potential softening of this growth trend. While the unemployment rate
stood at 4.7% in May, non-farm payroll additions grew by a meagre 38,000 after a
downward revision of 123,000 in April. The lower unemployment rate may also be
explained by the worsening level of the participation rate, which fell again to 62.6%
from the April level of 62.8%. The Conference Board’s Consumer Confidence Index
remained solid, though it fell slightly to 92.6 in May, after 94.7 in April and 96.1 in
March.
A positive signal came from May’s
Purchasing Manager’s Index
(PMI) for the
manufacturing sector, as provided by the Institute of Supply Management (ISM). The
May level increased to 51.3 from 50.8 in April. The very important services sector,
however, seems to have weakened as the index fell to a level of 52.9, after 55.7 in
April.
Graph 3.1: Manufacturing and non-manufacturing ISM indices
The 2016 growth forecast remains unchanged at 2.0%. This is considering a strong
rebound in the remainder of the year, after very low GDP growth in 1Q16.
51.3
52.9
45
50
55
60
May 15
Jun 15
Jul 15
Aug 15
Sep 15
Oct 15
Nov 15
Dec 15
Jan 16
Feb 16
Mar 16
Apr 16
May 16
Index
ISM manufacturing index
ISM non-manufacturing index
Sources: Institute for Supply Management and Haver Analytics.