12 Jan 2016
US manufacturing under serious threat from lower oil investments – Danske Bank
FXStreet (Delhi) – Research Team at Danske Bank, suggests that lower oil investments are weighing on US manufacturing and pose a risk to non-manufacturing sectors.
Key Quotes
“Oil investments do not account for a large share of the economy (around 1% of GDP) but nonetheless dragged GDP growth down by 0.4pp in 2015.
Oil investments are likely to pull down GDP growth again in 2016, as they lag oil price development. In our view, they could stabilise/rebound slightly by the end of 2016 given the current oil forward curve.
The spill over effects of the slowdown in the energy sector on the manufacturing sector are evident from the very weak ISM manufacturing figures. Many US manufacturing companies service the energy sector.
Given the current oil forward curve and a rebound in manufacturing globally, we expect ISM manufacturing to rebound slightly as well.
Still, we see a risk of negative contagion effects on non-manufacturing sectors.”
Key Quotes
“Oil investments do not account for a large share of the economy (around 1% of GDP) but nonetheless dragged GDP growth down by 0.4pp in 2015.
Oil investments are likely to pull down GDP growth again in 2016, as they lag oil price development. In our view, they could stabilise/rebound slightly by the end of 2016 given the current oil forward curve.
The spill over effects of the slowdown in the energy sector on the manufacturing sector are evident from the very weak ISM manufacturing figures. Many US manufacturing companies service the energy sector.
Given the current oil forward curve and a rebound in manufacturing globally, we expect ISM manufacturing to rebound slightly as well.
Still, we see a risk of negative contagion effects on non-manufacturing sectors.”