Posts Tagged ‘Saudi Arabia’

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Is it for real? We keep hearing talk of an export-led recovery for the UK. But is it simply that the UK exports are so low that any rise looks to be quite significant in percentage terms. A new report from Ernst and Young provides just a hint that this time it might be for real.

UK companies need to look abroad. The last few years have seen UK consumers cutting back, and that, suggests Ernst and Young, is why they have been focusing on ways to increase exports.

The story overall? Well, let’s return to that in a moment. Let’s start with the positive.

According to Ernst and Young, the West Midlands “is emerging as an export powerhouse” and “is on track to grow goods exports faster than any other UK region by selling high-end engineering far outside Europe.” Engineering goods exports are forecast to grow at “an annualised rate of 4.8 per cent, worth £6.9 billion in 2017, compared with £5.5 billion in 2012.”

UK automotive exports to China are expected to grow 11.6 per cent – making it the UK’s top automotive trading partner by 2017, while exports of personal vehicles to Thailand are expected to rise from $302 million in 2012, to $617 million by 2017. The UK is expected to capture a 53 per cent share of the entire import market. UK engineering is also seeing exports rise to the Middle East – with growth in turbo jet exports to Qatar alone forecast to grow from $273 million in 2012 to $481 million in 2017. And finally, UK biopharma exports to China are expected to double from $52 million in 2012 to $104 million by 2017, with Chinese biopharma imports set to rise to $2.5 billion by 2017 (from $1.4 billion in 2012).

Break it down bit further, and Ernst and Young forecasts that in 2017, UK engineering exports to China will be worth $2.4 billion, automobile exports $3.8 billion and metals $2.1 billion. For Brazil, it forecasts $0.7 billion for engineering, $0.6 billion for automobiles and $0.6 billion for chemicals. For Hong Kong it forecasts engineering exports of $1.7 billion, $1.4 billion for electronics, and $1.3 billion for previous metals. And for Saudi Arabia it forecasts engineering exports of $0.9 billion, $0.4 for electronics and $0.4 for pharmaceuticals.

And yet for all that, Ernst and Young says that across the UK exports are not growing fast enough. It forecast 0.3 per cent annual growth for UK good exports against 1 per cent for the European average between now and 2017. So for the conclusion: making progress, but could do better.

© Investment & Business News 2013

It has happened before, and when it did oil bears said told you so. And then it rose back up again. Brent Crude oil has fallen below $98 for the first time since last July. At the time of writing, US Sweet crude oil is at $86.57, the lowest level since last November.

The reasons for the fall are not obvious. Economic pessimists have been predicting falls in the price of oil for some time, and the economic news has not been so good of late. Notwithstanding falls of the last few days, the markets have been pretty euphoric of late, and, rightly or wrongly, many have invested a good deal of hope in Japan’s new QE friendly regime.

Capital Economics, long time oil bear, has already started factoring the effect of recent falls in the oil price on the Russian economy. After Saudi Arabia, these days Russia is the second biggest oil exporter in the world. Oil accounts for no less than 60 per cent of Russian exports, and around 50 per cent of government tax receipts.

Capital Economics calculates that, roughly speaking, for every $1 per barrel change in the price of Brent oil, Russia gains or loses – depending on which way the oil price moves – $2 billion worth of exports. But Neil Shearing, Chief Emerging Markets Economist at Capital Economics, said: “Prices would need to fall much further to pose a threat to economic stability (and fiscal sustainability) in Russia. We would only become concerned if oil fell below $80pb for a prolonged period.”

Okay, so that’s Brent, which – as was said above – is trading at just under $98 right now.

Looking at US crude, for which Investment and Businesses News has data going back many years, the story is as follows.

Over the last few years, oil has traded in a range between $80 and $110. The last time US Sweet crude was over $110 was in 2008. The last time it was under $80 was in 2011. The last time it was under $70 was June 2009.

In other words the current price of oil is nothing unusual. It is merely at the lower end of a range it has fluctuated within for some time.

In contrast, 2009 saw US Sweet crude fall to less than $40, and the global economy saw a reasonably strong pick-up soon afterwards.

We would need to see much stronger falls than we have seen over the last few weeks to start concluding that – thanks to the falling price of oil – the global economy is set to see a major impetus for growth, and that recessionary risk may return for Russia.

©2013 Investment and Business News.

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