15 Şubat 2016 Pazartesi

31.01.2016 Macroeconomic Outlook


Global Outlook
*Federal Open Market Committee met in 26-27 January of 2016 and decided to maintain federal funds rate between at 0,25 to 0,50 percent. The committee stressed that this interest rate policy will continue to support available labor market conditions and inflation cause 2 % in medium range (1). Commodity prices still seem to be biggest challenge in face of global economy with the price level hover around 30 USD for crude oil. The main country is effected from oil prices is absolutely Russia, The last time Russia had announced moratorium at 17 August 1998, embedded into minds indelibly as Russian Flu,Vladamir Putin inaugurated to presidency within 1999 while ongoing economic turbulence. Putin consolidated energy industry, He was lucky that oil and natural gas prices has risen up. Russian oil and natural gas manufacturing had the peak point. Today, Russia is stuck in another economic crisis. Failing to meet financial obligations is so imminent in 2016 (2).         
*2016 already seems to be tough year with outstanding anxiety about China economy. If it continues to get worsen, it is possible to show itself as permanent low prices in commodities, appreciation in USD dollar, recessions in emerging market along 2016 (3). On the other hand, Japan made a big surprise on the market with move of negative interest rates with -0,1%. Bank of Japan Governor Haruhiko Kuroda indicated that low salary increases and dramatic decline in commodities are hindering sustainable inflation in Japan economy and this decline will stimulate personal expenses and corporate investments (4).            
*European side, ECB still continues to supporting economy through liquidation and negative rate to deposit accounts. Governing Council of ECB decided that marginal lending facility will be stable at range 0,05 % - 0,30 % and -0,30 % for deposit accounts (5). On the contrary of previous months, European markets are heralded good news. Unemployment rate declined to lowest level of last four year at the fourth quarter of 2015 in Spain (6). According to Eurostat, Eurozone inflation rises highest level in January 2016 in last 15 month although low commodity prices. Consumer prices increased 0,4 % in January (7).    
*Russian Energy Minister’s declarations about possible meeting with OPEC to discuss oil production cuts created a positive aura in the market. Brent crude oil prices rises 8 % at immediately (8). Saudi Arabia, leader of OPEC, unofficially replied that they do not have any plan about to cut oil supply. Later Russia officially declared that there is no actual plan to negotiate oil supply although assigned committee is making preparation for meeting (9).
Local Outlook  
*Central Bank of Turkey kept the interest rates at the same level at the first meeting of 2016 in January, one week repo rate at 7,5 %  (known as policy interest rate) and overnight marginal funding rate at 10,75%. Although it seems that Central Bank did not changed the interest rates, it already gives more liquidation with O/N marginal funding rates and weighted average funding cost increased through 8,92 % at January 2016 from 7,93 % at January 2015.
  
                                        Table 1: Turkish money market funding rates (15)



Graph 1: Turkish money market funding rates (15)


*Bottom line legal salary amount has been revised to 1.300,98 Turkish Liras from 1.000,54 Turkish Liras. It brings additional cost not only companies, already employed bottom line legal salary worker. It also raised salary increase requests among all level of employees (11). It seems that it will decrease cost-based competitive advantage of Turkish companies in global market.
Automotive Market Outlook
Toyota keeps its top selling carmaker position at global automobile industry in 2015. Although it sales number has dropped 0,8 % compared to last year, It achieved to threshold of 10 million with sales 10,15 million in 2015. The most wondered point was the sales number of Volkswagen after sensational emission scandal in 2015. Volkswagen succeed to sell 9,9 million, seems that emission scandal did not make worthwhile effect on market share of VW. GM followed VW with 9,8 millions. Total automobile market actualized nearly 90 million in 2015 (12).   
First month of 2016, Turkish local automotive market has shrunk 5,49 % compared to same month of last year. Expected interest rate increase of FED, economic developments in China economy, ongoing liquidation operations led by European Central Bank, geopolitical risks, monetary politics of Central Bank of Turkey will be main indicator of market along 2016. According to Union of Automotive Industry Distributors, it is expected to come to live of 2016 Sales around 900k-950k (13).  
Global automobile suppliers market has positive outlook about 2016. Market’s utilization rates increased by 5 % through 85 % in 2015. Finished goods inventory level has declined to 34 % from 51 % with better solution in supply chain management.
Biggest problems faced by suppliers in relationship with OEM (Original Equipment Market) (14);
*Shifting of production to other plants globally requires approval by OEM, difficult to obtain at times,  
*Contractual issues related to investment,
*Short program durations and lack of longer-term program commitments,
*Slow response from OEM as to investment requirement approval and agreement.,
*OEMs willingness to commit to volumes that will justify expansion and provide a return of investment,
*Outlook for volumes (risk of increase capacity not being used and not underwritten by customer),
*Fluctuating demands and therefore required "over-invest" in capacity,    

Commodity Prices
Oil: Supply excess in oil continues threatening oil-export driven economies. Russia had a movement to have a meeting with OPEC to cut oil supply globally. But it does not replied positively by Saudi Arabia, leader of OPEC. But some analyst hope that production cut decision in OPEC will come to market soon, as these prices make too vulnerable some OPEC members regarding budget deficits.
(Bloomberg, 03.02.2016)
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 within the end of 2015. We see a small positive movement within 2016.
 
(Bloomberg, 03.02.2016)
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 (19)

References

 


 



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