Daily Insight
Group Economics Macro & Financial Markets Research
30 September 2016
OPEC deal or no deal? US consumer fal Macro & Financial Markets Research team Tel: +31 20 343 5616 nick.kounis@nl.abnamro.com
Energy: OPEC deal or no deal? - On 28 September, there was an extraordinary meeting of the OPEC members. In a press release OPEC said that it opted for an OPEC-14 production target ranging between 32.5 and 33.0 mb/d, in order to accelerate the ongoing drawdown of the stock overhang and bring the rebalancing forward. This statement came as a surprise to financial markets. As a result, oil prices rallied sharply, as did currencies of oil exporting countries. However, there remain some doubts about whether this will actually lead to lower oil supply. The target range of between 32.5 and 33.0 mb/d would be taking into account the production increase in the first half of this year. In November last year, the ceiling was 31.5mb/d and the new target range is still above this. The new range is slightly below the production in August though. Moreover, this “agreement” still needs to be ratified, which is scheduled at the next meeting on 30 November. Finally, there needs to be an agreement on quotas for the individual countries, which could be a challenge. This uncertainty will likely cap oil prices in the near-term. We see more upward potential for oil prices in the fourth quarter of this year and in 2017 because of a better supply and demand balance. (Hans van Cleef & Georgette Boele) Euro Macro: Economic sentiment bounces back - The European Commission’s Economic Sentiment Indicator rose from 103.5 in August to 104.9 in September, reaching its highest level since the start of the year. At its current level it is consistent with modest GDP growth at a rate slightly above the 0.3% qoq that was recorded in Q2 of this year. Indeed, we expect GDP growth to have slowed down a bit in Q3 and pick up modestly again in Q4. The details of the report show that sentiment improved the most in industry (up by 2.6 points), which is probably related to easing worries about the short-term negative impact from the Brexit vote. Moreover, sentiment improved markedly in the retail and the construction sectors, whereas in the services sector it improved only slightly. The change in sentiment in the individual eurozone counties seem to underline the waning fears for the impact of Brexit. Sentiment jumped the most in the Netherlands and Belgium, which –after Ireland- have the closest trade links with the UK (the sentiment survey for Ireland has been discontinued), while it had dropped the most in the Netherlands and Belgium in the two months following the Brexit vote. (Aline Schuiling) US Macro: Revised GDP growth shows economy expanded at faster pace - In the third estimate of second quarter GDP, the US economy grew at a slightly faster pace than initially reported. The final reading of GDP growth showed that the economy expanded at 1.4% qoq annualised, up from an initial reading of 1.1% and higher than the 0.8% reported in the first quarter. The main revisions suggest that weak business investment was less lacklustre than initially reported. Investment in non-residential structures fell by 2.1%, rather than the previously reported 8.4% decline. This, combined with stronger growth in intellectual property of 9% (was previously 8.6%), resulted in a growth in non-residential investment of 1% (was previously -0.9%). This is the first gain since the third quarter of 2015. Still, total fixed investment was a drag for GDP growth (-0.2ppts) in the second quarter. We think that
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