Friday 13 November 2015
Is the economic boom ending?
Certainly, a fall in input prices of oil and commodities should be very stimulative to the overall global GDP. But the World Bank has been cutting its forecasts. Post 2008 the main global growth engine was China which is now rapidly slowing down.
Closer to home, with debt levels still very high in both the public and private sector in the UK, there is no more room to stimulate demand. Housing supply shortages also drain money from more useful economic activity to pay rents instead. The biggest dove in the Bank of England is forecasting a reduction in UK economic activity
My own direct experience of the market at the moment is seeing management start to discuss the next downturn - be it one year or two years away. Certainly, when this happens in the past my experience is that it comes quicker than we think.
Having said that, in 2011 in the Euro Crisis the UK managed to avoid recession in the face of a calamitous external event and a big jump in Sterling. So, the die is not yet cast and perhaps a very shallow drop-off is on the cards for the UK, even if the likes of China and Brazil fair worse.
One thing I can't see though is how the UK will avoid a significant economic slow down before the next election; perhaps a window will open for Mr Corbyn after all? The state of the UK public finance is poor when faced with a renewed global slowdown.