The Monday Briefing
A succinct and eclectic weekly take on economics and finance from Ian Stewart, Deloitte's Chief Economist in the UK
Central banks to the rescue – again?
This morning we are launching our second quarter “Global Economy in Charts” report, available here - https://blogs.deloitte.co.uk/mondaybriefing/2019/06/global-economy-in-charts-q2-2019.html
Created by my colleague Debo, the report examines the big global macro trends and challenges. Charts can be cut and pasted into your own reports. Do drop Debo a line at dde@deloitte.co.uk with ideas and comments.
Economists went into 2019 expecting growth in the West to cool. If anything, the slowdown has come quicker than expected.
Global Economy in Charts - Q2 2019
China’s Belt and Road Initiative
China’s growth rate has slowed in recent years. Its sustainable growth rate has almost halved, to around 6.0% in a decade or so.
By Western standards this is an unattainably rapid growth rate. It would enable China’s economy to double in size every 12 years. China is still a fast-growing country, and one that exercises growing authority on the world stage. From technology to overseas investment and geopolitical influence China increasingly matters.
China’s Belt and Road Initiative (BRI) – dubbed by the authorities as “the Project of the Century” – illustrates the scale of the government’s ambitions. Launched in 2013 as a vast programme of overseas infrastructure, president Xi Jinping proclaimed it would restore the ancient Silk Road trading route that connected Asia and Europe.
Modern Monetary Theory – or alchemy?
For centuries governments have taxed, borrowed or created money to pay for public spending. All carry risks. Heavy taxes dampen growth and upset voters. Excessive public borrowing triggers financial crises. Printing money to pay for public spending can look tempting. But, as rulers from Henry VIII to Venezuela’s Nicolás Maduro have discovered, creating money out of thin air and spending it tends to destroy confidence and send inflation rocketing.
Safe as houses
To outsiders the British can seem slightly obsessed with house prices. Yet it is an asset that matters. Two-thirds of UK households are owner occupiers and 35% of household wealth is tied up in property.
Jobs and work, how the UK compares
Last week saw UK unemployment fall to the lowest level since 1974. Against a backdrop of sluggish GDP growth this is quite an achievement. But the success of labour market policies should be judged on wider criteria. The quality of work, the flexibility of the jobs market and how inclusive and productive it is also matter. This week’s Briefing assesses the UK on each count.
If life is getting worse then why are we so happy?
Last year I was asked to give a presentation on the challenges facing Western policymakers. We ranged widely across a depressing set of subjects, from stagnating incomes to inequality, public sector austerity, job insecurity and the rise of populism.
Climate change and the threat to financial stability
Last month the governor of the Bank of England, Mark Carney, issued a stark warning about the impact of climate change: “If…companies and industries fail to adjust to this new world, they will fail to exist”. Mr Carney’s statement was co-signed by the chair of the Network for Greening the Financial System, a coalition of 36 central banks, including the People’s Bank of China. The Network helps central banks measure and mitigate the risks to the financial sector posed by climate change. Last month’s statement signals that climate change has well and truly arrived as an issue for central bankers.
Global growth update
Today’s Briefing looks at the state of global activity one-third the way through the year.
Economists went into 2019 expecting global growth to slow modestly and that’s just what has happened. The slowdown is being driven largely by advanced economies, especially the euro area.
Human capital, where the UK stands
Most conversations about the UK’s poor productivity record eventually turn to education and skills. Everyone agrees that education is vital but there is more debate about the relative value of different models and types of education. This week’s Briefing offers some thoughts on how the UK system compares to others and looks at some of the salient characteristics of the British model.
Deloitte CFO Survey: The dash for cash
Today’s Briefing summarises the findings of the latest Deloitte Survey of Chief Financial Officers which was released overnight. The full report is available at: https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html