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The world economy looks set to slow sharply this year, with technical recessions in the form of two successive negative quarters of growth likely in a host of countries, including the US, UK, and the major economies of western Europe such as Germany and France. Global growth could slow towards 3% (based on the International Monetary Fund’s measure), and while positive, growth rates on this measure of 3% are often low enough to be referred to as a global recession. This weakness will continue into 2023.
One of the significant focuses for financial markets in recent weeks has been developments in China. A zero-covid policy has triggered a sharp economic slowdown and also is leading to wider contagion, as supply-chains affecting global trade are impacted. This is the latest evidence of China’s growing importance to the world economy. So, let’s look at five factors in China to better understand the implications of its decisions and how they affect the investment landscape worldwide.
The Bank of England reaches the milestone of a quarter-century of independence in early May. After some initial benefits, it is hard to claim that the experience has been an unbridled success. There are strong reasons this milestone should trigger a fundamental rethink of the Bank’s remit and governance.
The big picture has not fundamentally changed recently. Latest developments reinforce existing market expectations of slowing global growth, elevated inflation and tighter monetary policies in most countries.
The war in Ukraine is having economic reverberations around the globe. China has come under increased scrutiny.
Higher inflation, rising fuel duties and previously announced increases in taxation are all combining to point to a severe cost-of-living squeeze. In the face of this, the Chancellor unveiled some significant and welcome targeted measures in his Spring Statement to cushion the pain.
This week the Bank of England raised its policy rate for the third successive meeting, increasing it from 0.5% to 0.75%. This now returns the policy rate to its pre-pandemic level. But what are the future options for the Bank – and can they align with those of the Chancellor to keep the economy on track?
What are the economic and financial consequences of the war in Ukraine, and what may lie ahead?
Last Thursday, we were given insights into the Chancellor’s thinking when he delivered the annual Mais lecture. In a powerful speech he told us he was an optimist. He is right to be. But is he doing enough to overcome immediate challenges or to boost future trend growth so the UK economy thrives?
What is happening in financial markets, and what lies ahead? This year, the three “Rs” have driven financial markets: rotation, Russia and rates. Let’s focus on each, beginning with the immediate issue of Russia and Ukraine.
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