Given the important role China plays as a sales market and consumer of raw materials, the slowdown in the Chinese industrial sector is having a knock-on effect on other emerging markets as well. With the slide in commodity prices, primarily as a result of an expansion in supply in the past few years, and given the uncer-tainty as to when and how quickly US monetary policy will return to normal, exchange rates have shifted considerably. A measure of uncertainty still lingers as to where the economy is headed. In our view, global economic activity will fail to latch on to earlier trends next year as well, but the recovery is likely to gather further momentum.
Lower commodity prices are likely to stimulate the economy in most developed countries for a while yet. The oil glut is likely to subside only gradually as adjustments continue to be made on the production side, for example in the US. The upward correction in oil prices is likely to be moderate at best, especially if Iran returns to the international oil market. Oil prices are likely to average USD 55/barrel in 2016, only marginally up on this year.
Overall, monetary policy will remain very loose, even if the Federal Reserve starts to gradually nudge up rates. Even without further central bank action, low interest rates will exert more of an impact as access to credit, be it corporate credit within the EMU or mortgage loans in the USA, has now improved further.