Economic Recovery and Oil Prices

The Price of oil has proved even more volatile than house prices or stock markets. At the start of the year, oil prices were languishing at $30 as the global economy faced the prospect of a very deep recession. But, now with the global economy showing signs of recovery and concerns over oil stocks returning, the price has more than doubled to $70.

However, since the start of the year, tentative signs of recovery have emerged. Whilst the recession is not over, the worst falls in output seem to be ending, at least for the moment.

The ONS reported a rise of 0.3% of manufacturing output. INterestingly the ONS have yet again revised output figures upwards e.g. In April the ONS have revised a 0.1% fall in industrial output to a 0.2% rise. (The ONS often later revise statistics so that falls in output are less than first anticipated)

However, on an underlying trend of the past 3 months, industrial output is still falling by 3.2%. The economy will need more than just the odd month of positive growth.

However, these figures are in line with other data showing a stabilisation in house prices and a slowdown in the growth of unemployment. I would still expect a weak economic recovery though

The first signs of economic recovery are helping to foster a boom in oil prices. The rise in oil prices is also being helped by speculators who feel oil prices could rise substantially and offer a better alternative to the weak dollar.