Monthly Bulletin April 2008 - European Central Bank - Europa

LATIN AMERICA
In Latin America, economic activity continued to expand at a fast pace, driven by robust domestic
demand and elevated commodity prices. In Brazil, real GDP growth increased to an annual rate
of 6.1% in the fourth quarter of 2007, up from 5.6% in the third quarter. Private consumption and
investment were the main drivers of growth. Moreover, private consumption continued to be strong
in January of this year, with retail sales rising by 10.9% compared with a year earlier. Activity also
remained robust in Argentina, where real GDP expanded by 9.2% compared with a year earlier in
the fourth quarter of 2007. Inflationary pressures remained strong, however, with annual inflation at
8.4% in February 2008. In Mexico, industrial production rebounded in January, increasing by 3.1%
compared with a year earlier. Annual inflation stood at 3.7% in February, broadly unchanged since
December.
1.2 COMMODITY MARKETS
Against the background of tight fundamentals, oil prices reached historically high levels and became
increasingly volatile in March and early April amid financial market uncertainties and geopolitical
tensions. Brent crude oil prices increased to peaks well above USD 100 in mid-March (peak on 17
March: USD 107.4) to stand at a level of USD 106.5 on 9 April. In USD terms oil prices increased
by around 13% between the beginning of the year and 9 April, but by only around 5% in euro terms.
OPEC decided not to increase production at its meeting on 5 March and scheduled the next meeting
for September, underlining its intention to keep production constant despite the high oil prices and
relatively robust demand. In addition, non-OPEC production continued to fall short of expectations.
Geopolitical tensions and an explosion of a pipeline in Iraq resulted in additional upward pressure
on oil prices. The International Energy Agency’s (IEA) assessment points to tight supply-demand
balances for 2008. After revising downwards their global oil demand forecast at the beginning of
the year, owing to an expected slowdown in OECD economies, the IEA still predicts a pick-up in
oil demand growth in 2008, driven mainly by strong non-OECD demand.
Limited spare capacity in OPEC countries and
sluggish growth in non-OPEC output, amid
relatively robust oil demand and continued
geopolitical and supply risks, is likely to keep
oil prices at elevated levels. Throughout the
recent period of high volatility of spot prices and
despite market concerns about a global economic
slowdown, longer-term futures prices for Brent
crude oil have increased to unprecedented levels,
with December 2010 futures currently trading at
around USD 100.
Chart 3 Main developments in commodity
markets
110
100
90
80
Brent crude oil (USD/barrel; left-hand scale)
non-energy commodities
(USD; index: 2000 = 100; right-hand scale)
290
270
250
230
After surging to historical peaks, the prices of
non-energy commodities plunged in an overall
sell-off of commodities related to profit-taking
activity amid financial market uncertainty in
mid-March. The biggest price drops occurred in
tropical beverages and oilseed markets. Despite
losing almost 20% from their peak levels, prices
are still as high as their end-January levels, as
12 ECB
Monthly Bulletin
April 2008
70
60
50
40
30
2005 2006 2007
Sources: Bloomberg and HWWI.
210
190
170
150
130