The US economy appears to be stabilizing, but rising gasoline prices have surfaced as the latest Achilles heel to the recovery and President Obama’s road to re-election. Data from the EIA shows that since the start of March, US gasoline prices averaged US $3.91 per gallon (US $1.04 per liter), which is the highest seasonal level on record. To make matters worse, forecasts hint that in some regions gasoline is likely to breach US $5 per gallon (US $1.33 per liter) during the summer driving season. This reality would cause headaches for any incumbent US President but during an election year it is more like a crippling migraine.
Since the onset of the financial crisis, global economic growth has been strongly supported by developing economies. Illustrating this trend, the International Monetary Fund (IMF) placed GDP growth in advanced economies at 1.6% while emerging nations posted a 6.2% growth in 2011. Although the figures are lower in this year’s IMF forecast, growth in developing economies is expected to be 5.4%, which is 4.2 percentage points above OECD nations. With an average GDP growth of 10.2% since 2000, China has been a pillar of non-OECD and global economic growth.
This week’s note provides a summary of our recently published Short Term Outlook. As the first quarter of 2012 is almost consigned to history it is clear that the tumultuousness of 2011 was not a one-off. Tensions between Iran and Western countries are supporting rising oil prices and have the potential to further destabilize an already shaky economy. Meanwhile, developments in Syria, Yemen and Sudan are also limiting oil supplies. There have been some positive indicators out of the United States but other regional economies remain under pressure. The debt crisis in Europe continues to cast a cloud over the continent and on Tuesday, the European Union’s (EU) statistics office released data confirming GDP contracted by 0.3% in Q4 2011. Compounding concerns, China’s official economic growth target of 7.5% for 2012 indicates that even the dragon economy may not be formidable enough to halt the slide.