Commodities: Overall financial conditions remain supportive for growth and demand – Goldman Sachs

Analysts at Goldman Sachs suggest that the overall financial conditions across the globe remain supportive for growth and demand of commodities in the near future.

Key Quotes

“With the Fed already some way into a hiking cycle, and Chinese policymakers raising interbank rates and cracking down on off-balance-sheet lending (including wealth management products), concerns have been raised over tightening credit conditions slowing growth.”

“In the US, our economists estimate that broad financial conditions, which are more illustrative of the underlying conditions for growth than short-term interest rates, have actually eased over 2017. Stronger equities, narrower credit spreads and a softening USD (vs. trading partners) all contributed to this easing.”

“In China, while recent tightening in the interbank market is a potential downside risk to growth, we do not expect it to result in growth dislocations. Further, we have not seen any significant tightening in mortgage rates, or broader interest rates that would substantially affect corporate or household investment (the more relevant credit metrics for metals demand). The ongoing crackdown on off-balance-sheet activity does, however, pose a downside risk to our view, particularly if it results in a greater-than-expected credit slowdown in 2017Q2.”