Global Outlook
*Federal Open Market Committee met in December 16, raise the
interest rates to 0,25 to 0,50 for the first time after the year of 2006.
Committee stress the points that economic activity has been expanding at
moderate pace, unemployment rate is declining constantly. However, inflation
rate is still under the Federal Reserve objective (2%) with the temporary
effect of low commodity and energy prices (1). OPEC declared to increase daily
oil supply from 30 million barrels to 31,5 million barrels with affiliation of
Indonesia to committee after the meeting held at 4 of December in Vienna,
Austria (2). It seems that low energy prices will be prominent challenge to
achieve inflation cause over the next period. Emerging market currencies had
been depreciated with the onset of 2015 through the oppression of imminent FED
interest rate increase. It was certain
that finalization of this pending period will make an enormous relief on
financial markets. After interest rate increase, USD depreciated against all
major and emerging market currencies. The question in minds now, How will
emerging market be affected by constant interest rate increase in 2016?
*China’s currency yuan joined International Monetary Fund
currency (SDR) basket. Yuan incorporates the dollar, euro, pound and yen in the
basket (3). It accompanied with extension trading hours of Yuan by China’s
Central Bank (People’s Bank of China) (4). These two amendments can be an
important milestone for China to overtake USD dollar and become reserve
currency in global economy. On the other hand, financial datas comes from China
still shows deceleration signs. Although OECD projected that growth rate of
China to decline gradually to 6,2 % by 2017 (5). It is probably that we will be
acquainted with this level or below for 2015. However, doubts rises over China’s
official GDP growth rate as a possible fraud within this year. As the biggest
consumer of many raw materials and oils, sharps fall in prices of these
commodities does not affect China’ s growth rate although economic activity is
moderate than previous years (6).On the social side, surprisingly, China
declared that one-child policy will be ended with the onset of 2016 (7). Approximately,
17% of economic activity in the world came to live in China; it can make
sharpen up unemployment problem in coming years (11). First day of market in
2016, CSI (China Stock Index) has dramatically fallen at 7 % nearly with the
data of weak manufacturing fifth times at consecutive. This dramatic drop ended up with temporary halt
on trading and increased concern on global economy (10). Another Asian country,
Japan economy is stuck in recession problem with the 1,6 % of shrunk at the 3rd
quarter of 2015(8). Manufacturing industry output fell in November for the
first time after the month of August (9). This entire negative outlook makes us
pessimistic about coming year.
* European side, Germany and England are the most effected
countries by China’s economic decelerations as biggest economic partners among
European Union countries. Inflation rate of EU in December announced as 0,2 %
increase below the expectations of 0,3 %. Food, alcohol and tobacco had the
biggest contribution on it. This is an apparent indication of monetary policy
has been taken into account at March of 2015, still has no positive effect on
stimulating economy through tangible investments creating employments (12).
* Foregoing oil prices tension between Iran and Saudi Arabia
moves toward a new possible war within execution of Iran citizens by Saudi
Government, increased anxiety at globally. The recent three meeting of OPEC has
acquainted with dispute over oil prices, while Iran proposed to cut oil supply
to prevent decrease in oil revenue after the sanction has ended within 15
January. On the opposite side, Saudi Arabia refused to cut oil supply (13).
Political tension accompanied economic dispute can lead new adversity.
Local Outlook
* The inflation rate of 2015, has been declared by TUIK as
8,81 % although central bank’s cause is only 5 % (14). The variance 76 % by the
expectation brings so many discussions. Many economists ironically agreed upon
mentality about the letter, explaining reason behind failing about inflation;
need to be sent by government to president of Central Bank in replace of
routine as contrary. Central Bank of Turkey keeps political interest rates at
same level, 7,5 % although president stress the point that possible rate hike
by FED may change policy (15). It is possible in next meeting to see
simplification on interest rate policy.
*In post-election period, campaign promises are the object of
interest within coming year 2016. Can Governor party be able to come to live
its all promises, leading by increase of bottom line legal salary. After the
several meeting with employer
council, the governor party keeps its word and increase
salaries as promised (16). Besides of imposing another monetary burden to employers,
it will also bring higher inflation rates, higher social security support
contribution and disobedience between blue collar employees.
* EU membership
keeping progress day by day, Visa-free travel between Schengen Countries and
Turkey expected to be announced at October of 2016 after new amendments in
various policies in Turkey. While tension between Russia and Turkey has been
increasingly continue with additional sanctions of Russian government, Economic
cooperation unities of these two countries concur that crisis will be ended up
in soon time (18).
Automotive Market Outlook
Global car sales have improved in 2015
compared to 2014, hoped to be finalized with record sales with nearly 89
Million vehicles although 1,5% annual growth in sales is the slowest pace since
2010 (19). Western Europe, North America and Asia are three leading territory
in this growth although downsizing of market in South America and Eastern
Europe (20).
All OEM car manufacturers have not closed their accounts yet
for 2015. So it is too early to comment about market share leadership of
brands. It is still waited in excitement effects of emission scandal at
Volkswagen.
The economic policies of Government have enormous effect on
emerging and developing economies. South Korea deducted excise tax to 3,5% from
5%, and already be successful to stimulate the economic activity. Consumers in
emerging market buy their car with financial institution loans in general.
Because of this habit, monetary policies through finding easier and cheaper
money have enormous effect on car sales. Central Banks in Asian Side deduct
interest rates 50 basis points over last year led by China and India with 125
basis points. Taking growth potential
into consideration too, we can expect much more potential in Asia. It is the
fact that G7 countries average 0,69 vehicles per capita while 0,03 in India and
0,1 in China (20).
According to survey by KPMG over 200 senior executive from
world’ s leading executives, some of trends listed below expected for coming
years(21):
-Innovative trends will keep its position as second key trend
until 2025 ranged after number one key trend emerging market growth problem
-Fuel efficiency,
safety and comfort will be main criteria on purchasing choices until 2020.
Innovative concepts and online services will outweigh after this year.
-Small and basic car segment bears more potential to grow in
next 5 years, especially in emerging markets.
-Starting from 2020, vehicle ownership will be less important
than today’s. It will substitute with usage trend.
-Downsizing will keep importance as investment area in
powertrains.
- Plug-in-hybrids will have highest demanded product in all
electrified propulsion technologies.
Automotive suppliers achieved to attain 7,5 % average EBIT
margin this year too, same level with 2014 (23) .
1.410.034 motor vehicle has been
produced in 2015 at Turkey and 1.007.267 pieces have been exported (25). 2015
was the record year of automotive market in aspect of sales. 968.017 motor
vehicles has been sold locally. According to Union of Automotive Industry
Distributors, it is expected to come to live of 2016 Sales around 900k-950k
(24).
Commodity Prices
Oil: After United States has been ranked as number one oil
reserved country with rendering possible use of passive oil reserves under deep
rocks with developing technology, oil prices are constantly depreciated. Brent
crude hovers around 40-60 USD dollar in 2015 and lately 33 USD (26). Supply excess is still threatening oil-export
economies thoroughly lower prices and deeper budget deficits. ). OPEC declared
to increase daily oil supply from 30 million barrels to 31,5 million barrels
with affiliation of Indonesia to committee after the meeting held at 4 of
December in Vienna, Austria although oppositions of Iran (2). It is probable to
see the level of 20 Dollar if the dollar continues to getting power (27)
(Bloomberg, 11.01.2016)
Copper: Economists use copper as one of the main economic indicator
for several years. Relatively inexpensive and abundant nature with resistant to
corrosion and effective conductor specifications makes it most prevalent raw material
used is especially in emerging market economies relied on manufacturing
industry. The decline trend in price of copper indicates a slowing in emerging
market economies. The one year price level graph below show us a constant
decline in price level from 280 USD/Ibs to 198 USD/Ibs (28). This price level
is the lowest point in five year although there is no change in supply side. So
we can say that danger bell is ringing for emerging markets.
(Bloomberg,
11.01.2016)
Steel: Similar to copper, Steel is also one of the main raw
materials of construction and durable goods. But, overcapacity of steel industry
and high transportation cost make steel prices locally differs although
contract of this commodity are sold in London Metal Exchange on the basis of
cash settlement. There are too many kind of steel from HRC to rebar. Because of
this reason we will not put a graph in there. But, Steel prices is also
declining all around the world because of slowing down consumer goods and
construction industry (29)
References
1. http://www.federalreserve.gov/monetarypolicy/files/monetary20151216a1.pdf
2. http://www.opec.org/opec_web/en/press_room/3193.htm
3. http://www.euronews.com/2015/11/30/imf-allows-chinese-yuan-to-enter-the-jet-set-currency-club/
4. http://blogs.wsj.com/chinarealtime/2015/12/24/china-to-extend-yuans-trading-hours-widening-currencys-appeal/
5. http://www.oecd.org/economy/china-economic-forecast-summary.htm
6. http://www.ft.com/intl/cms/s/0/723a8d8e-5c53-11e5-9846-de406ccb37f2.html
7. http://www.euronews.com/2015/12/27/china-officially-ends-one-child-policy-from-january-1/
8. http://www.bloomberght.com/haberler/haber/1665265-japonya-resesyona-girdi
9. http://www.reuters.com/article/us-japan-economy-output-idUSKBN0UA0ON20151228
10.http://www.bloomberg.com/news/articles/2016-01-04/chinese-stocks-in-hong-kong-extend-annual-slump-as-yuan-declines
11. http://www.euronews.com/2016/01/07/european-economies-face-harsh-headwinds-from-china/
12. http://www.euronews.com/2016/01/05/inflation-headache-for-ecb-with-second-monthly-growth-drop/
13.http://www.euronews.com/2016/01/05/oil-supply-could-grow-further-after-diplomatic-fall-out-between-iran-and-saudi/
14. http://www.tuik.gov.tr/PreHaberBultenleri.do?id=21684
15. http://tcmb.gov.tr/wps/wcm/connect/tcmb+tr/tcmb+tr/main+menu/duyurular/basin/2015/duy2015-73
16. http://www.csgb.gov.tr/csgbPortal/cgm.portal?page=asgari
17. http://www.bbc.com/turkce/haberler/2015/11/151129_abzirve_vize
18. http://www.hurriyetdailynews.com/crisis-with-russia-will-not-continue-for-a-long-time.aspx?pageID=238&nID=93664&NewsCatID=353
19.http://press.ihs.com/press-release/automotive/ihs-global-outlook-automotive-sales-continued-momentum-north-america-europe
20. http://www.gbm.scotiabank.com/English/bns_econ/bns_auto.pdf
21.https://www.kpmg.com/Global/en/IssuesAndInsights/ArticlesPublications/global-automotive-executive-survey/Documents/2015-report-v1.pdf
22. Z:\Reports\2015_Reports\04_Project_Profitability\2015
Profitability Cumulative\Cumulative 2015
23. http://www.eulerhermes.com/mediacenter/Lists/mediacenter-documents/Economic-Outlook-The-global-Automotive-market-Sept14.pdf
24. http://www.odd.org.tr/web_2837_1/neuralnetwork.aspx?type=35
25. http://www.osd.org.tr/yeni/wp-content/uploads/2016/01/Rapor2015-12.pdf
26. http://www.bloomberg.com/quote/CO1:COM
27. http://www.bloomberg.com/news/articles/2016-01-11/morgan-stanley-sees-20-a-barrel-oil-on-u-s-dollar-appreciation
28. http://www.bloomberg.com/quote/HG1:COM
29. https://www.steelbb.com/steelprices/
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