OPEC Monthly Oil Market Report – November 2017
Business sentiment and consumer confidence may also be supported by the US Administration’s efforts to
implement a tax reform in Congress. If this materializes in the near term, growth next year will also likely be
higher. Importantly, the Federal Reserve (Fed) acknowledged the improvements and highlighted that the
normalisation of interest rates would continue and it seems likely that the key policy interest rate will be
revised up again in December by 25 basis-points. The main driver for the strong numbers seen in 3Q17 was
personal household consumption, which expanded by 2.4% q-o-q SAAR, the outcome of a considerably
strengthening labour market. It is estimated that 3Q17 exports rose by 2.4% q-o-q SAAR, while imports have
declined by 0.8% q-o-q SAAR, bringing down the US trade deficit. Investments continued to grow, with a
considerable share coming from the energy sector. Private investments advanced by 6.0% q-o-q SAAR, with
investments in the oil sector and related activities – so-called investments into mining exploration, shafts, and
wells – rising by 21.7% q-o-q SAAR.
is still under discussion and while some form of a framework has been established, it
remains to be seen how negotiations in Congress will develop. It is likely that this will boost GDP growth in
the short-term, but the magnitude may vary, depending on the depth and the details of the reform. Both the
proposal of the Senate and the House are now suggesting a deficit increase of $1.5 trillion over 10 years. A
valid concern is that this rising deficit, in combination with growing underlying inflation, may require the Fed
to raise interest rates less gradually than currently anticipated. In combination with the discussions on the tax
reform, a potentially upcoming debate on the debt ceiling will also need close monitoring as the debt-ceiling
agreement expires in December and would need to be extended. This has also been intensively discussed in
the past and remains important in light of the likely perspective of a rising budget deficit.
While the Fed has highlighted that its
are contingent on the development of the domestic
economy in general, the labour market, inflation and potential spill-overs to the global economy, recent
comments seem to indicate that the Fed will pursue its tightening cycle as planned. It is expected that the
key policy rate will be increased by 25 bp in the upcoming December meeting.
stood at 2.2% y-o-y
in September, again rising for a third consecutive month and confirming a solid trend that would also allow
the Fed to continue tightening. Core inflation, excluding volatile items such as food and energy, remained at
1.7% y-o-y for the fifth consecutive month, below the Fed’s inflation target of around 2%, but should also be
expected to pick up, given the tightness in the labour market.
’s positive momentum continued and clearly recovered after the negative impact by the
hurricane season in August and September. Non-farm payrolls increased again by 261.000 jobs in October,
after they rose by only 18.000 in September, as shown in the latest labour market report. The sector that was
mostly affected by the hurricanes - leisure and hospitality – recovered almost all job losses from August and
September, as the sector saw 106.000 job additions in October. Positively, the unemployment rate fell to
4.1%, while average hourly earnings growth for the private sector stood at only 2.4% y-o-y, the lowest since
the beginning of 2016. This is, however, expected to pick up again given the ongoing improvements in the
labour market. Long-term unemployment numbers fell slightly to stand at 24.8% in October, after 25.5% in
September. On the slightly negative side, the participation rate fell again to stand at 62.7% in October, after
63.1% in September.
While having picked up in September,
nevertheless seems to have been
impacted by weather conditions during the month,
to increase by just 1.6% y-o-y, after August’s low
rise of only 1.1% y-o-y, both numbers compared
with around 2% growth in previous months.
held up very well in September,
supported by growth in retail sales, which stood at
4.1% y-o-y, after an already strong August number
of 3.9% y-o-y. The generally positive trend in
domestic consumption was also visible in the
Consumer Confidence Index
which increased to 125.9 in October, a multi-year
high and which compares to 120.6 in September.
Graph 3 - 1: US consumer confidence index
Sources: The Conference Board and Haver Analytics.