21 / 97
World Economy
OPEC Monthly Oil Market Report – June 2016
19
Canada
The situation of Canada’s economy remains challenging. The combination of recent
wildfires that have hurt the oil industry and the current soft dynamic in the US economy,
Canada’s most important trading partner, are estimated to have negatively impacted
economic growth. Canadian exports declined again in April, falling by 2.3% y-o-y, after
a decline of 4.5% y-o-y in March. Also, industrial production remained muted and rose
by only 0.2% y-o-y in March and by 0.6% y-o-y in February. On a positive note, retail
trade improved again by 3.2% y-o-y in March, after an already considerable increase of
5.7% y-o-y in February. Some other positive developments are reflected in the PMI for
manufacturing, which remained almost unchanged in May at 52.1, compared to 52.2 in
April. This is now the third consecutive month of a PMI level above 50. Given the
challenges ahead, and despite some positive momentum up to around April, the GDP
forecast for 2016 remains at 1.5%. This compares to estimated GDP growth of 1.1% in
2015.
OECD Asia Pacific
Japan
The latest signals of ongoing challenges to the Japanese economy have been provided
by the government, which announced that it would postpone until 2019 a sales tax hike
that was planned for 2017. Despite year-long stimulus measures, the Japanese
economy remains in only a slow or no-growth dynamic. Postponing the sales tax
increase may allow for slightly more fiscal stimulus, constituting one of the so-called
“three arrows”. But the sovereign debt level needs to be very carefully managed.
Structural measures, as currently envisaged by the government, are only paying off
slowly and the effect in the short-term is limited. Monetary stimulus is already at an
unprecedented level. Despite these monetary measures, the yen has risen significantly
over the past months and inflation has turned negative again, while the Bank of Japan
(BoJ) is still trying to achieve an inflation rate of 2%. Hence, the situation for domestic
demand remains challenging and the most recent lead indicators again point to only
low growth this year.
After having turned slightly positive in February,
consumer prices
fell by 0.3% y-o-y in
April, after remaining stagnant in March. When excluding the two volatile groups of
energy and food, the country’s core inflation figure stood at 0.7% in April, slightly higher
than in March. Support for domestic consumption – and inflation – came again from the
March data for real income. After a decline in labour-related earnings in 2015, the 1Q
has shown an increase of 1.4% y-o-y, followed by now a monthly rise of 0.8% y-o-y in
April. This trend has continued to be supported by the extremely tight labour market,
which saw an unemployment rate of only 3.2% in April, unchanged from March.
Japanese exports
continued their declining trend. They have now declined for the
eighth consecutive month in April, falling by 10.1% y-o-y. The 1Q16 average decline
stood at 7.8% y-o-y. Also,
industrial production
fell again considerably in April,
declining by 1.9% y-o-y. 1Q16 industrial production already declined by 3.3% y-o-y.
Domestic demand
has also remained weak in the past months. It remained negative
and again declined by 0.8% y-o-y in April, compared to a decline of 1.0% in March.