April 24, 2017/InvestmentOne Research
China Roars Back to Lift Global Outlook as U.S. Consumer Weakens
The release of strong output data by China for Q1 2017 brightened the outlook for global GDP in 2017 as the world second biggest economy seems set to contribute one-third of global growth in 2017 as was the case in 2016. The Asian tiger posted 6.9% GDP growth in Q1 2017 ahead of 6.8% Bloomberg median forecast. The better-than-expected growth in China is a positive for emerging market through import demand given the Chinese economy’s dependence on commodity import. This expected to provide the much-needed support to Brent oil price via stable demand from the world second biggest economy.
IMF: Global economy to grow by 3.5 per cent
The IMF in its Global economic growth outlook released last week projected a 3.5% growth in Global economic output in 2017. The projected global GDP growth of 3.5% by IMF was premised on pick-up in growth in both developed and emerging economies. In our opinion, global economic output in 2017 may likely be spurred by improvement in Brent oil price and increased global trade. That said, we however point out that risk to growth remains from policy uncertainty and geopolitical risks among developed economies. Such risks include fallout of US and China trade relations, faster than expected rate hike by US Fed as well as impacts of outcome of elections in Europe.
Oil Prices Fall to 11-day Low on US Shale Output Surge
Brent oil price touched $51pb level on Friday on mounting evidence that U.S. production and inventory growth were offsetting OPEC’s attempts to reduce the global crude glut. In our opinion, the commitment by OPEC and non-OPEC members to cut oil production has seen Brent oil prices remain firmly above $50pb. However, the increase output from US Shale producers continues to put downward pressure on prices. Given that Shale oil producers appear more resilient than in the past, we believe that the downward pressure on oil prices may persist in the near term. This could be a negative for oil export proceeds, government revenues and CBN’s defense of the local currency.
