The BOJ left unchanged the negative interest rates it adopted in January, but lowered its assessment of inflation expectations to say they were “weakening recently,” suggesting it may increase its stimulus program.
CHINA’S TIERED ECONONOMY
Currently one-third of China’s economy has entered into a recession; one-third is experiencing relatively stable growth; and the final third lies somewhere in between. If the pace of capacity reduction picks up, a likely subsequent decline in manufacturing sector growth would have negative spillover effects on household income growth, which in turn would put downward pressure on the third of the economy which is currently experiencing relatively stable growth conditions.
In order to reduce this risk, further effort must be focused on developing new growth drivers in the economy. The government must “let go of the old and grasp the new” in order to achieve its transition goals. Iterations of aggressive excess capacity elimination, deleveraging and destocking efforts coupled with proactive fiscal policy and accommodative monetary policy is unlikely to promote rapid new economy development. (CEBM Research)
Many Shale Producers Are Unable to Ramp Up Oil Output As oil prices show some signs of stabilizing, U.S. shale producers and oilfield-services companies are warning that they may not be able to jump-start drilling.
The reason: Many independent companies are too financially strapped, have let go too many workers, or have idled too much equipment to immediately ramp up again.
“The balance sheets of these shale-only producers have to be repaired for them to get back to drilling,” said John Hess, the chief executive of Hess Corp. “That’s going to curb any recovery.” (…)
Some of the largest U.S. oilfield-services firms have laid off 110,000 people in the past year, Evercore ISI analysts estimate, and many of those workers have no plans to return to the industry.
Close to 60% of the fracking equipment in the U.S. has been idled during the downturn, according to IHS Energy, which estimates it would take two months for some of that equipment to return. (…)
In the Bakken Shale region, prices will need to be above $60 for benchmark West Texas Intermediate crude for at least three months before the area sees a meaningful uptick in drilling activity, said Lynn Helms, Director of North Dakota’s Department of Mineral Resources. (…)
The U.S. Energy Information Administration estimates that U.S. oil output in February was down 600,000 barrels a day from last year’s peak of close to 9.7 million barrels a day—a 6% drop—and some of the biggest U.S. shale producers have said they plan to curb production by another 10% this year. (…)
A recent survey by Hays PLC found that 72% of laid-off oil and gas workers around the world are looking for jobs in other industries.
Basic Energy Services Inc., a fracking firm that has cut more than 40% of its workforce since the downturn began, has estimated that only one in five laid-off workers will return, taking with them the expertise they developed during the years when companies mastered techniques like drilling and fracking wells that extended thousands of feet horizontally underground. (…)
A protest by Chinese coal workers over unpaid wages drew a swift, expected response: payoffs to get them off the streets and threats of police action if they don’t. The effort underscores the government’s long-standing worries about labor strife and its newly cautious approach to restructuring money-losing state firms. (…)
Chinese call the strategy “buying stability,” part of the government’s well-worn playbook for defusing public anger. (…)