Again...oil issues! Somehow, current strength of oil prices, and to a lesser degree food prices, is weighing on our emerging market outlook. Until recently, current pace of emerging market growth tended to outperform our expectations, boosting global demand, commodity prices and, thereby, inflation worries. In the future, though, signs of weakening domestic demand, generally tighter monetary policy, and continued high oil prices imply that aggregate emerging market economic growth is likely to be generally slower. It is also likely to be more disparate as the effects of high oil prices impact producers and users differently.
A large portion of rising commodity prices is likely due to growth in emerging markets, which proved more robust than we, or the market generally, expected. Seeing Asia for sample, latest indicators of industrial production in China and India also show deceleration in year-toyear growth, as does production in the broad Asia-Pacific region. These trends are consistent with modest deceleration in emerging market growth and waning pressure on commodity and oil prices.
From my point of view, there are wwo other factors may have been at play, but their contribution to commodity prices is uncertain and highly debated, which are: (1) less assurance in markets over the timing of supply increases in oil (implied in the upward slope of futures prices); and (2) increased demand for oil and other commodities, spurred by low global real interest rates and financial innovation that facilitated access to commodities as assets.
Next question: Do you think there is an alternative oil price paths?
No comments:
Post a Comment