Perhaps the price of oil is a good global
yard-stick for the current state of economic activity. Crude oil prices have
hit a four-year low after Saudi Arabia
unexpectedly cut the price of oil sold to the US. Brent crude fell below $70 at
the time of writing. Falling oil prices means generally falling demand unless
this was prompted by over-supply. In fact, OPEC output is still pegged to
December 2011’s agreed
levels of 30 million barrels a day. This fact alone would indicate a current
slow-down in activity. One important bright spot has been the U.S. which has
seen some of the highest growth in GDP in the G20--in excess of over 3% towards
the latter part of 2014 and is set to continue into 2015. The strength of the
largest economy in the world should help with demand pull.
Europe has suffered from low growth and to a certain extent
depressed confidence recently. The ECB has at least acknowledged this and has
proposed some initiatives but more Quantative Easing is not ruled out in 2015.
Inflation is running dangerously low at 0.4% and there is a real risk of
deflation.
China, a big driver of growth in electronics production has
been reported as slowing below the target of 7.5% set by the central plan, this
measure recently has been unofficially thought to be nearer 6% in reality.
Growth in China's
manufacturing sector slowed in October, an official survey suggests,
reinforcing concerns about a slowdown in the wider economy. The country's
Purchasing Managers Index (PMI) fell to a lower-than-expected 50.8, from 51.1 in the previous month. (Any score above
50 represents growth.) Recently released figures showed the wider Chinese
economy growing at its slowest pace for more than five years. Growth between
July and September was 7.3% compared with a year earlier, down from 7.5% in the
previous quarter.
There has however been some positive news and
indeed the telecoms sector in China
has invested heavily in 2014 and certainly significantly added to PCB and
laminate demand at least for the first two quarters of 2014. In particular
Chinese telecom equipment maker Huawei has reported a 19% jump in sales to
135.8bn yuan ($21.9 billion) for the first six months of the year. It said it
expects to make an operating profit margin of 18.3% for the period.
Huawei has traditionally concentrated on
making telecoms network equipment, but has benefited by diversifying into
fast-growing sectors such as smartphone manufacturing. It is now one of the
world's largest smartphone makers.
