As we return to business after the summer holidays, the world is looking rather unsettled, both economically and politically.
The global economy seems to be slowing. In Japan Abenomics is running out of the steam, shrinking at an annual rate of 7.1%. After an abysmal, weather-affected Q1, the US economy recovered dramatically in Q2 with 4.2% growth. That being said, growth in the next Quarter is set to be potentially weaker than the 3% previously forecast. Although the nation’s August Manufacturing PMI was recorded at 57.9 - the best since April 2010 and well above the neutral 50 - payroll data is weaker, sending slightly mixed signals.
If only Europe were so positive. Dithering about quantitative easing or other financial stimuli, the Eurozone is slowing. Overall, PMI is modestly positive at 52.5, with Germany still slightly ahead, but France remains mired at 49.5. Something strong by way of a boost is clearly needed, to avoid a Japanese style lost decade.
Meanwhile, the extraordinarily strong UK economy risks huge levels of uncertainty with the Scottish separatist movement potentially disrupting a tremendous economic performance. The rest of the UK can only look on aghast as just 5% of the current population decides on September 18th whether to break up a 300 year old union. The ramifications of Scotland’s separation would be extremely complex. Business and markets abhor uncertainty, so one can only imagine what might happen if the UK chooses to exit Europe as well.
Further afield, uncertainties abound in Syria and Iraq, while Ukraine separatists have triggered Western sanctions that are intended to affect Russia but will clearly have an impact on Eurozone as exports to Russia are reduced. However, Russian retaliation is also having an impact – the raised barriers on Russian food import thresholds are starting to be noticed. Car imports may follow and, who knows, lubricants thereafter?
In terms of lubes production, the gap between import and self-sufficiency still varies widely amongst developing nations. Kazakhstan is suffering the effects of currency devaluation and, with limited output from domestic refiners, local distributors are having to capitalise on the relaxation of Russian import restrictions to meet national consumption volumes. At the other end of the scale, despite(or perhaps because of) the constant threat of sub-standard or fake lubricants flooding the market, Nigeria is looking to its home producers to futureproof capacity and reduce further its dependence on imported oils.
Across the globe, the twin factors of economic growth - as represented by vehicle manufacturing - and health as evidenced by emission controls go hand-in-hand as the primary drivers of fuel and lubricants development and consumption. Even the supercar manufacturers are being forced to stay ahead of the game.
Evidence continues to grow that the methodology being used by OEMs to establish urban cycle fuel consumption and emission figures for new vehicles are substantially out of date. While the manufacturers are prepared to admit the flaws in the existing tests, which they conduct themselves under laboratory conditions, they are also robust in challenging the EC to ensure the introduction of proposed road-based tests are equally realistic. More importantly, as vehicle components are designed to meet the challenges of rising global fuel prices, such as in the all-wheel-drive(AWD) passenger car market, the lubricants industry needs open standards that can permit not quasi parts but real interchangeability of products.
As always, the internet marketers have been busy with innovative approaches to selling online. While Kia is using smartphone technology to attract a younger audience to a brand generally perceived as one for the 'more mature' driver, Mercedes is asking for a show of hands by Europe's workforce to gain a discount off its Vito workhorse. Meanwhile, for the gadget fans, businesses such as UBIsense are applying location technology to broader equipment than just cars. In due course this will impact lubricants as well.
OATS continues to monitor global innovations - digital and mechanical - to provide the very latest in lubricants database marketing tools and solutions. To find out more, or comment on anything you have read in this month's Bulletin, simply contact us by e-mail or follow our updates on social media via Twitter @Oats_Ltd, Facebook and LinkedIn.
Sebastian Crawshaw
Chairman, OATS