Bleak Outlook for 2017
In a recent blog entry on the ICIS Chemicals and the Economy website, Paul Hodges states unequivocally, It is hard to be optimistic about the outlook for 2017. He notes that markets are returning to being based on supply and demand fundamentals, rather than central bank money-printing, and that companies and investors will bear the costs of this failed experiment. Hodges, Chairman of International eChem, commercial advisers to the global chemical industry, identifies five major risks facing the global economy:
First, he foresees a global recession. The American Chemistry Council index of global capacity utilization is the best indicator that exists in terms of the outlook for the economy, he said. It has been falling since December 2015, and its latest reading is close to the all-time low seen in March 2009.
Second, populist policies are gaining support. Populists provide simple answers to complex questions, and 2016 saw them gain major success with the Brexit vote for the U.K. to leave the EU, Donald Trump winning the U.S. Presidency and Italys … potential … vote on leaving the euro.
Third, protectionism is replacing globalization. Countries are turning inward, and international trade deals are effectively dead, according to Hodges.
Fourth, interest rates have begun to rise around the world. Investors have begun to worry about return of capital, rather than just return on capital, he said.
Finally, Indias economy is under major strain as a result of currency reforms, while Chinas debt levels remain far too high for comfort. He notes that the value of Chinas currency has been falling, adding potential for major trade friction with the U.S.
Hodges concludes by predicting that the winners in this new economic climate will be those who refocus their business models on demand rather than supply issues. They will find their future revenue and profit growth becoming turbocharged, as they benefit from investment in designing materials and providing sustainable solutions that can meet current and future market needs for mobility, shelter, health, food and water affordably.
You can read the full analysis at www.icis.com/blogs/chemicals-and-the-economy/2017/01/recession-the-base-case-scenario-for-2017/. These and other topics are high on the agenda for this months ICIS World Base Oil and Lubricants Conference, and you can depend on LubesnGreases to keep you abreast of these developments to help your company be one of the winners in this uncertain environment.