14 August 2015 Reassessing the economic impact of the oil price shock Michael P. Carey Chief Economist - USA +1 212 261 7134 michael.careyca-cib.com https://catalystresearch.ca-cib.com Crdit Agricole Corporate and…
Topic summary Oil market: Summary of current conditions and outlook Positive impact on oil price impact on consumers Negative impact on oil & gas sector spending Net impact on US growth is positive How will the Fed respond to…
The oil price decline Strong US supply growth - increased cost efficiencies OPEC focus on market share July production at 3-yr. high 31.5Mb/d. Supply demand imbalance leads to sharp decline in crude oil prices World Liquid Fuels…
The boost to consumer spending from lower energy prices The average household is expected to spend about 750 less on gasoline in 2015 compared to last year because of lower prices. EIA looks for retail gasoline prices to decline…
The downside of lower oil prices: Investment outlays There is a negative impact of lower energy prices from declines in oil & gas exploration capital spending and related services. We estimate the direct impact would trim about 0.4…
The downside of lower energy prices Oil and gas extraction and support Employees in oil & gas extraction activities employed less than of 1% of and support activities total US nonfarm payrolls. Last year the sector created…
US Outlook: Positive Fundamentals Solid gains in payroll employment and further reduction in slack to boost wage growth Risks: Other factors (globalization, unionization rates, low productivity growth) account for subpar wage growth…
US Outlook: Negative Risks Global weakness: Increasing global imbalances and fragility Risks of a larger-than-expected slowdown in China and Emerging Markets with financial and real spillovers. US net exports suffer from soft foreign…
US Macro 2015 Baseline Summary Road to Recovery Growth in 2015 is expected at a 2.3% pace in 2016 and 2.6% in 2016. US Macroeconomic Outlook GDP % % 10 SAAR Recession Forecast Q2 growth rebounded to a 2.3% annual 4 8 rate with a…
The impact of lower energy prices for Fed policy We believe the reduction in labor market slack continues to push the FOMC further along the road towards rate normalization. However, the Fed continues to miss its inflation objective.…
Financial market impact of recent oil price declines Bond Markets 13 Wider credit spreads for energy bonds 12 The energy sector accounts for about 11 13-15% of the high-yield bond market. 10 Lower oil prices weaken energy firms 9…
Global Outlook: Winners and losers We project global growth near 3.2% in 2015 and 3.5% in 2016 - Gradual pickup in advanced economies and a slowdown in emerging market and developing economies. Eurozone GDP Growth: 1.4% in 2015, 1.8%…
Global Macroeconomic Outlook Chinas quest to rebalance growth continues. 2015 growth slows to 7%. Q3 GDP growth likely to slow. More support from policymakers expected. 54 Factory activity slowing 53 52 51 50 49 48 47 46…
Key Conclusions Lower oil prices are a net positive for the national economy. The impact on the US energy sector and certain regions will be negative but that is overwhelmed by positive real income gains nationally. Fed policy is…
Annex IMF Global Growth Forecasts Source: World Economic Outlook July 2015 Page 15 14 August 2015
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