It is being reported that sanctions on some members and low investment by others hindered the bloc from producing as it should. For some context, the compliance with production targets stood at 546% in July – that compares with 320% in June.
In other words, OPEC+ is producing nowhere near their output targets (which have been increased over the course of the year) and even with Saudi Arabia and UAE believed to be the only ones with spare capacity, they aren’t pressing the pumps either. As a reminder, the bloc agreed to increase its output target by 100k bpd for September in what was a rather trivial gesture.
Inflation will continue to accelerate and could peak above 10% this autumn
Upside risk for inflation is high
High degree of uncertainty over gas supplies and sharp price increases likely to weigh heavily on households, companies
That’s a fair assessment and one that isn’t quite clouded by political bias for the most part. It almost seems inevitable now especially when you look at how energy prices have gone parabolic in Europe. The set of PMI data releases tomorrow could be what it takes to tip the euro over the edge as it holds on the brink of parity at the moment.
This has been dragging on for the longest of time and latest talks are that a deal is “imminent” again with reports suggesting that Iran has dropped demands related to delisting several companies tied to the IRGC – a key sticking point in discussions previously. But from the messaging above, it remains to be seen if we are actually seeing any real progress. Or if this is just another rodeo ride.
The headline to the post is a typical one I’m seeing from notes around the place. “Stumbling” is a mild word to describe the Chinese economy, its getting hit hard by the property sector imploding under debt loads, defaults, mortgage payment strikes and buyers pulling away in fear of further price falls (and holes too!). Consumer demand is drying up. Rolling COVID-related restrictions and lockdowns are not helping. Even the weather is not helping right now:
The People’s Bank of China cus its one year prime rate less than expected, and its five year more than expected:
China rate cuts: LPR 1 year 3.65% (from 3.7%) & 5 year 4.30% (from 4.45%)
n interest piece while we wait for financial markets to fully kick off for the week.
Japan’s Nikkei have excerpts from an interview with chief economist and director of the World Bank’s Prospects Group Ayhan Kose.
In a nutshell:
One of the risks we look at is this higher-than-expected rise in interest rates — so, the much faster tightening of financial conditions.
The other risk we look at is the risk of commodity prices being higher
and the third important risk we analyze is the risk of further COVID disruptions, the types of disruptions we saw in the case of China. These disruptions are quite important because they translate into the supply-side interruptions, weaker growth, as well as higher inflation.