24 BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 WORLD BUSINESS & ECONOMY US jobless claims drop beating forecasts Bukola Odufade THE NUMBER OF AMERICANS filing for unemployment benefits dropped by nine thousand to 221 thousand in the week ended February 3rd 2018, well below market expectations of 232 thousand. It is the lowest value in three weeks. Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal. The 4-week moving average was 224,500, a decrease of 10,000 from the previous week’s unrevised average of 234,500. This is the lowest level for this average since March 10, 1973 when it was 222,000. On a non-seasonally adjusted basis, the biggest decreases in initial claims were seen in Missouri (-7,636); California (-4,767); NY (-3,742); Georgia (-1,983); Pennsylvania (-1,579) and Connecticut (-1,506). Claims in Puerto Rice fell by 159 and in Virgin Islands by 27. The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week China inflation rate at 6-month low of 1.5% in January Agency Report CHINA’S CONSUMER PRICES rose by 1.5 percent year-onyear in January of 2018, after a 1.8 percent rise in the prior month and matching market consensus. It was the lowest inflation rate since July 2017, due to a slowdown in cost of non-food and a further fall in cost of food. Politically sensitive food prices declined by 0.5 percent (from -0.4 percent in the prior month) in January, while non-food cost rose at a softer rate of 2.0 percent (from 2.4 percent). Cost of consumer goods went up 1.0 percent (from 1.1 percent) and those of services increased by 2.3 percent (from 3.0 percent). Among food, prices dropped for: pork (-10.6 percent from -8.3 percent) and fresh vegetables (-5.8 percent from -8.6 percent). ending January 27, unchanged from the previous week’s unrevised rate. Continuing claims during the week ending January 27 were at 1,923,000, a decrease of 33,000 from the previous week’s revised level. The previous week’s level was revised up 3,000 from 1,953,000 to 1,956,000. The 4-week moving average was 1,946,000, an increase of 12,500 from the previous week’s revised average. The previous week’s average was revised up by 750 from 1,932,750 to 1,933,500. In contrast, prices rose for: eggs (14.2 percent from 11.4 percent); milk (0.9 percent from 0.6 percent), fresh fruits (6.4 percent from 6.3 percent) and tobacco (0.1 percent from a flat reading in December 2017). For non-food, prices increased at a slower pace for most categories: rent, fuel & utilities (2.7 percent from 2.8 percent); household goods and services (1.5 percent from 1.6 percent); transport and communication (0.2 percent from 1.2 percent); education, culture & recreation (0.9 percent from 2.1 percent); healthcare (6.2 percent from 6.6 percent) and other goods and services (1.2 percent from 1.9 percet). Meantime, cost went up more only for clothing (1.4 percent from 1.3 percent). On a monthly basis, consumer prices increased by 0.6 percent, following a 0.3 percent gain in the preceding month and slightly above estimates of a 0.7 percent rise. It was the highest monthly figure in a year. The producer price index increased by 4.3 percent from a year earlier in January 2018, compared to a 4.9 percent rise in the prior month, while markets estimated a 4.4 percent gain. It was the 17th straight month of rise in producer prices but the least since November 2016. Cost rose less for means of production (5.7 percent from 6.4 percent in December, namely extraction: 6.8 percent, raw materials: 7.3 percent and processing: 4.9 percent). UK posts largest trade deficit in 15 months to December 2017 Bukola Odufade THE UK’S DEFICIT on trade in goods and services widened by £1.2 billion to £4.896 billion in December 2017 from an upwardly revised £3.652 billion in the previous month and way above market expectations of £2.4 billion. It was the largest trade deficit since September 2016. Imports of goods and services to the UK rose by three percent to an all-time high of £57.02 billion in December from £55.35 billion in the previous month, boosted by a 3.8 percent increase in purchases of goods, mainly fuels (6.6 percent), and a 0.7 percent gain in imports of services. Among trading partners, imports of goods from the EU jumped 6.5 percent, mainly from Germany (6.1 percent), the Netherlands (5 percent), Belgium & Luxembourg (16.9 percent) and France (0.9 percent). In addition, purchases from non-EU countries advanced 0.8 percent, as imports increased the most from Norway (12.4 percent) and the US (7.9 percent). Exports from the UK increased at a slower 0.8 percent to £52.12 billion in December from £51.70 billion in November, due to higher sales of goods (1.5 percent), mainly manufactured goods (2.8 percent), while exports of services fell slightly (-0.1 percent). Among major trading partners, exports of goods to the EU grew 6.9 percent, as sales increased mainly to Germany (16.8 percent), France (21.7 percent) and Ireland (2.3 percent). By contrast, exports of goods to non-EU countries declined 3.6 percent, namely to China (-27.4 percent), Hong Kong (-30.4 percent) and South Korea (-20.3 percent), while exports rose to the US (6.9 percent). In the three months to December 2017, the trade deficit widened by £3.8 billion to £10.8 billion, due to a £3.3 billion widening of the trade in goods deficit and a £0.5 billion narrowing of the trade in services surplus. Large increases in fuels In the three months to December 2017, the trade deficit widened by £3.8 billion to £10.8 billion import prices along with decreases in fuels export volumes had the largest impact on the widening of the trade in goods deficit. Considering 2017 as a whole, the trade deficit narrowed by £7.0 billion from the previous year to £33.7 billion, as exports rose 11.3 percent to £617.2 billion while imports increased at a softer 9.3 percent to £650.9 billion. Main exports were mechanical machinery, cars, electrical machinery and medicinal and pharmaceutical products, and the biggest export partners were the United States, Germany, France, the Netherlands, Ireland and China. Meanwhile main imports were electrical machinery, mechanical machinery, cars, other miscellaneous manufactures and medicinal and pharmaceutical products. The most important sources of imports were Germany, China, the Netherlands, the United States and France. BoE keeps rate at 0.5%, warns rate hike sooner than expected Business a.m. THE BANK OF ENG- LAND voted unanimously to keep the Bank Rate at 0.5 percent on February 8th as widely expected, saying that inflation is expected to remain around 3 percent in the short term, reflecting recent higher oil prices. The bank also warned that interest rates may rise sooner than anticipated, as the economy will expand faster than expected over the next couple of years lifting inflation above 2 percent target. The Committee also voted unanimously to keep the stock of UK government bond purchases at £435 billion and the stock of sterling non-financial investment-grade corporate bond purchases at £10 billion. Excerpts from the BoE Monetary Policy Summary: CPI inflation fell from 3.1% in November to 3.0% in December. Inflation is expected to remain around 3% in the short term, reflecting recent higher oil prices. More generally, sustained above-target inflation remains almost entirely due to the effects of higher import prices following sterling’s past depreciation. These external forces slowly dissipate over the forecast, while domestic inflationary pressures are expected to rise. The firming of shorter-term measures of wage growth in recent quarters, and a range of survey indicators that suggests pay growth will rise further in response to the tightening labour market, give increasing confidence that growth in wages and unit labour costs will pick up to target-consistent rates. On balance, CPI inflation is projected to fall back gradually over the forecast but remain above the 2% target in the second and third years of the MPC’s central projection. As in previous Reports, the MPC’s projections are conditioned on the average of a range of possible outcomes for the United Kingdom’s eventual trading relationship with the European Union. The projections also assume that, in the interim, households and companies base their decisions on the expectation of a smooth adjustment to that new trading relationship. Developments regarding the United Kingdom’s withdrawal from the European Union – and in particular the reaction of households, businesses and asset prices to them – remain the most significant influence on, and source of uncertainty about, the economic outlook.
BUSINESS A.M. FEBRUARY, MONDAY 12 - SUNDAY 18, 2018 ENERGY, POWER & RENEWABLE 25 Conference report: WAPIEC 2018 Regional local content seen to drive growth in West African, but integration is key Bukola Odufade AFTER NIGERIA IM- PLEMENTED its local content act in 2010, other African oil producing countries have followed suit and some, like Ghana and Uganda, even modeled their local content act, using Nigeria’s loacl content act as a framework. However, there is little to no regional local content integration across the West African region. This was one of the concerns raised at the second annual West African International Petroleum Exhibition and Conference (WAIPEC) held for two days last week in Lagos, Nigeria. “With so much focus given to national local content, we are gradually realising that as West African countries, we can’t go on this journey on our own,” said Juliette Twumasi-Anokye, managing partner, Anojul Afriyie & Company. Although many at the conference generally agreed that regional integration of local content is the next step to take, in reality, they said, this continues to be farfetched. Olusoga Odusela, general manager, Nigerian Content Development, Chevron Nigeria asked: “What is the business structure of Nigerian contractor? Are we focused on Nigeria alone or are we regionally ready? Are our work processes and ethnics globally competitive and can they be audited to global standards? Because if you want to go beyond the shores of Nigeria, that means you’re now going international.” Odesela said the price structure of local companies makes them uncompetitive outside of the country, asking pointedly, “Is our price structure competitive?” He noted that in some cases, “our pricing makes it challenging for us to compete in the West African region.” The reluctance of Nigerian contractors to willingly develop local community contractors, he said represents another challenge, adding that in order to reduce the cost of doing business, developing local capabilities will go a long way. According to him, the Nigerian business environment is mature enough to compete favourably in the West African region, but that local companies need to build themselves up to be able to overcome the barriers. “There is nothing to be done in terms of exploration and development in oil and gas industries in Ghana or Togo that has not been done in Nigeria,” he said. Austin Uzoka, Nigerian content manager at Shell Petroleum Development Company (SPDC) cited three barriers for the non-integration and non-standardization of local content in the region, one being cultural barrier. “Nigeria being surrounded by Francophone countries means there is a big cultural gulf that we West Africans need to overcome particular in terms of collaboration,” he said. Regional integration is still non-existent because of the cultural diversity that the region has, Uzoka said. He drew example from, “Nigerians preferring to fly to Accra to do trainings, which is an Anglophone country but further, rather than Lomé, where French is the primary language but closer.” With so much focus given to national local content, we are gradually realising that as West African countries, we can’t go on this journey on our own Another fact hindering integration is what he called the ‘reality phenomenon’, which is the fact that West African countries don’t have bilateral and multilateral treaties that can sustain cross-integration or intra-country integration across the West African terrain. However, this is a deliberate act on the part of government of the various countries who haven’t encouraged the transfer of knowledge, technology and skills across the region, he explained. He also noted that the ease of doing business is higher in other West African countries than in Nigeria, because certain restrictions are not faced in those countries and incentives have been put in place for them, he said. For instance, Uzoka spoke about drilling pipes that are imported into Nigeria but the company had no use for them, so it was decided that the pipes should be sold to Ghana. According to him, when calculations were done, it turned out that it would have been cheaper to import through Ghana rather than Nigeria. He said aspiration will drive reality as aspirations are impeded by the cost of business. “As the cost of business in Nigeria remains high, it begins to challenge our competitiveness with our West African counterparts, Uzoka also said. Opportunities are present, he said, but noted that in order to harness the opportunities and drive change, we have to be deliberate, focused and target-oriented. Oduselu also advised Nigerian entrepreneurs to make their business focus beyond the shores of Nigeria, noting that the country should be the hub in supporting other West African countries. Sylvester Iduseri, capacity development manager, Total Nigeria also noted that, “local content is survival for the sustainability of any country,” citing Egina FPSO as an example. The representative from the Ghana Petroleum Commission advised that the focus should be on creating synergies within the region rather than duplicating capabilities as West African countries keep working separately with no integration or standardization approach. The governments of West African countries were also advised to offer incentives and tax waivers to stimulate the growth of the economies and regional local content. The regional economic organisation, Economic Community of West African States should be used as a platform for harmonizing standards to facilitate the integration growth, it was also suggested. The example was cited of the West African gas pipeline, which runs from Nigeria to Benin, then Togo and finally Ghana, where the governments of these nations let go certain restrictions to make it happen, because benefits were to be gained. PETAN and its other West African counterparts were also advised to start a dialogue on creating a path for the free movement of technical and engineering skills and not just leaving it to the government alone. US oil flood markets worldwide, taking share from OPEC nations in Asia, Europe In the two years since Washington lifted a 40-year ban on oil exports, tankers filled with US crude have landed in more than 30 countries, ranging from massive economies like China and India to tiny Togo. The repeal has unleashed a flood of US shale oil, undercutting global crude prices, eroding the clout of the Organisation of Petroleum Exporting Countries (Opec) and seizing market share from many of its member countries. In 2005, before the shale revolution, the United States had net imports of 12.5 million barrels per day (bpd) of crude and fuels — compared to just 4 million bpd today. US producers are making new customers out of some of the world’s biggest oil-importing nations in Asia and Europe, posing a serious competitive threat to the only other countries that produce as much crude: Saudi Arabia and Russia. At home, the export boom has filled pipelines and sparked a surge of investment in new shipping infrastructure on the Gulf Coast. US producers now export between 1.5 million and 2 million barrels of crude a day, which could rise to about 4 million by 2022. The nation’s output is expected to account for more than 80 per cent of global supply growth in the next decade, according to Paris-based International Energy Agency. Much of the increased flow will go to China, the world’s top importer and, since November, the largest buyer of US crude other than Canada. Chen Bo, president of Unipec — China’s largest buyer of US crude — told Reuters that the firm expects to double US imports this year to 300,000 bpd as it seeks to expand sales in Asia and find new customers for US exports in other regions, including Europe. Unipec — the trading arm of Asia’s largest refiner, state-owned Sinopec — is also considering long-term crude supply deals with US pipeline and terminal operators. The firm may also partner with such firms to expand and improve US export infrastructure, Chen said in an interview. “US crude flowing to Asia is a major trend in global oil trading,” Chen told Reuters.