Global Economic Supply / Demand

In the post Great Global Recession period, worldwide production resource growth has expanded
steadily with little apparent mothballing of plant. Business pricing power overall appears to gain
little or no leverage unless demand grows about 4% y/y. Since the spring of 2014, global demand  
growth in terms of output has slowed from 3.8% y/y to about 3% reflecting growth deceleration
in the advanced economies plus a sharp slowdown in China's industrial output. Nowhere has the
development of excess productive capacity captured investor attention more than the oil output
sector which has seen prices fall by 50%.

The US has ended its quantitative easing program, but has sufficient liquidity to grow its economy
moderately as more seasonal weather returns and the effects of the winter time west coast port
terminal labor difficulties wear off. Moreover, China has stepped up monetary easing substantially
and the EZ and Japan have major QE programs underway. It is not unreasonable then to expect
global output growth to return to the 4% y/y level in real terms and for capacity utilization to
stabilize and recover some as 2015 progresses. This leaves a significant probability that inflation
pressures may re-emerge excluding the oil and gas sectors and that we may also see a hastening of
of a significant, partial re - balancing of supply / demand in the oil sector, too.