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China Ends Year of Stabilization on High as Consumers Spend

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China's Consumer Prices
  • China Ends Year of Stabilization on High as Consumers Spend

China’s economy accelerated for the first time in two years in the final quarter of 2016, cementing an economic stabilization that’s giving leaders a buffer as they transition to neutral policy and prepare for potential trade tensions with Donald Trump.

Gross domestic product increased 6.8 percent in the three months through December from a year earlier, compared with a 6.7 percent median estimate in a survey. The full-year expansion of 6.7 percent was the slowest since 1990, but still landed right in the middle of the 6.5 percent to 7 percent official target.

China powered through a volatile start to the year with strength that surpassed expectations, propelled by robust consumption from an increasingly wealthy middle class. With manufacturing also rebounding and deflation tamed, the central bank is turning to neutral policy to address a debt binge that inflated asset bubbles during a two-year easing cycle.

  • Retail sales increased 10.9 percent from a year earlier in December, the strongest reading in a year and more than the projected 10.7 percent advance
  • Industrial production rose 6 percent in December from a year earlier, compared with and estimated 6.1 percent rise
  • Fixed-asset investment excluding rural areas expanded 8.1 percent for the full year

“As China’s traditional growth drivers of investment and exports have weakened, Chinese private consumption has become the key engine for economic growth,” said Rajiv Biswas, Asia-Pacific chief economist at IHS Global Insight in Singapore. “This trend is expected to continue over the medium term.”

That points to continued stable growth ahead of a twice-a-decade Communist Party leadership reshuffle this year. Consumption contributed 64.6 percent to 2016 growth, a statistics official said at a briefing in Beijing. Services, which accounted for more than half of output for the first time in 2015, made up 51.6 percent last year, official data showed.

Yet, behind the solid headline figures, there’s a widening divergence among regions and industries that’s creating winners and losers across the nation of 1.4 billion people.

The full-year expansion in 2017 will edge lower to 6.4 percent, Bloomberg economist surveys show, while the International Monetary Fund has raised its forecast to 6.5 percent. Maintaining growth requires fending off policy challenges including a slumping yuan that posted its biggest annual drop in two decades and increasing capital flight pressure.

Policy makers unleashed more fiscal stimulus last year to help prop up growth, in addition to keeping the old benchmark interest rate at a record low. New money supply management tools are coming to the fore as an alternative to broad easing that could weaken the yuan.

Reflation has been a bright spot as the producer price index snapped four years of deflation. Manufacturing has strengthened with official gauges at or near multi-year highs.

Beyond those promising signals, exports have fallen for months amid tepid global demand. That’s just as China’s government prepares for potential trade tensions with Trump.

While the economic rebalancing toward consumer-led growth continues, reforms of inefficient state-owned enterprises in heavy industries have stalled as the old smokestack economy came roaring back last year, competing more for capital against private firms.

Credit growth remains robust with shadow banking making a comeback, fueling concerns deleveraging isn’t happening despite official pledges. Authorities also are trying to deflate big-city property prices that soared then moderated near year-end on tightening measures.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Crude Oil

Oil Prices Slide as U.S. Crude Stockpiles Surge, Heightening Demand Concerns

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Crude oil

Oil prices declined on Thursday as concerns over demand intensified due to a larger-than-anticipated build in U.S. crude stockpiles.

Brent crude oil, against which Nigerian oil is priced, dropped by 0.5% to $83.25 a barrel while U.S. West Texas Intermediate crude oil fell by 0.3% to $78.28 a barrel.

The Energy Information Administration’s report revealed a substantial increase in U.S. crude oil stockpiles by 4.2 million barrels to 447.2 million barrels for the week ending February 23rd.

This surge surpassed analysts’ expectations and marked the fifth consecutive week of rising inventories.

While gasoline and distillate inventories witnessed a decline, concerns regarding a sluggish economy and reduced oil demand in the U.S. were amplified.

Satoru Yoshida, a commodity analyst with Rakuten Securities, highlighted that the significant stockpiles have heightened investor worries.

Moreover, the anticipation of delayed U.S. interest rate cuts further weighed on market sentiment, potentially undermining oil demand.

Traders have adjusted their expectations for rate cuts, with an easing cycle predicted to commence in June rather than March as previously anticipated.

Market participants await the U.S. personal consumption expenditures price index for insights into inflation trends, while the possibility of an extension of voluntary oil output cuts from OPEC+ looms over price dynamics, amid lingering uncertainty in the demand outlook and geopolitical tensions in the Middle East.

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Crude Oil

Crude Oil Shortage Threatens Dangote, Government Refineries, Minister Raises Alarm

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Dangote Refinery

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, has sounded a clarion call over a looming crude oil shortage that threatens the operations of the newly inaugurated Dangote Petrochemical Refinery and government-owned refineries in Nigeria.

Addressing stakeholders at the seventh edition of the Nigeria International Energy Summit in Abuja, Minister Lokpobiri expressed concerns that unless deliberate efforts are made to increase investments and crude oil production, these refineries may struggle to obtain enough feedstock for petroleum product manufacturing.

The Dangote refinery, a colossal project spearheaded by Dangote Industries Limited, has a daily requirement of up to 650,000 barrels of crude oil, while government-owned refineries could need approximately 400,000 barrels.

However, the current pace of crude oil production and investment in Nigeria falls short of meeting these demands.

Minister Lokpobiri highlighted the need to ramp up production and attract investments in the upstream sector to ensure adequate feedstock supply for the refineries.

He emphasized the importance of efficiently utilizing Nigeria’s abundant oil and gas reserves to enhance domestic energy security and economic prosperity.

Furthermore, the minister underscored the significance of investing in energy infrastructure and transitioning towards more environmentally friendly practices to address Nigeria’s energy needs effectively.

The alarm raised by Minister Lokpobiri underscores the urgency for strategic interventions and collaborative efforts to mitigate the impending crude oil shortage and secure the future of Nigeria’s refining industry amidst evolving global energy dynamics.

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Energy

NNPCL Pledges End to Nigeria’s Energy Scarcity Within a Decade

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Mele Kyari - Investors King

The Nigerian National Petroleum Company Limited (NNPCL) has announced a bold initiative aimed at ending Nigeria’s persistent energy scarcity within the next decade.

Mele Kyari, the Group Chief Executive Officer of NNPCL, revealed this ambitious plan during the opening ceremony of the seventh Nigerian International Energy Summit in Abuja.

Kyari’s announcement comes as a beacon of hope for millions of Nigerians grappling with chronic power shortages and energy deficiencies.

In his statement, Kyari expressed confidence that all issues related to energy scarcity in the country would be resolved within the next 10 years.

Assuring stakeholders of NNPCL’s unwavering commitment, Kyari emphasized the company’s dedication to collaborating with partners to bridge the energy deficit gap and foster prosperity for all Nigerians.

He highlighted NNPCL’s pivotal role as a key partner to oil-producing companies in Nigeria, facilitating the divestment of international oil companies from onshore and shallow water assets in the country.

Furthermore, Kyari underscored NNPCL’s statutory mandate as the enabler of national energy security, emphasizing the importance of sustainable production from divested assets to ensure energy security for Nigerians.

In addition to addressing domestic energy challenges, NNPCL is also exploring avenues for sustainable energy investment across Africa.

Kyari revealed the company’s intention to invest in the proposed African Energy Bank, aiming to secure funding for energy projects on the continent and guarantee regional energy security.

The event, attended by prominent stakeholders including government officials and representatives from international organizations, marks a significant step towards reshaping Nigeria’s energy landscape and fostering economic development through improved energy access.

As NNPCL charts its course towards energy abundance, Nigerians remain cautiously optimistic about the prospects of a brighter energy future.

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