Deficits, debt in The Monday Briefing
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Last week data showed that the number of people in employment in the UK has fallen by 56,000. Long the standout success in Britain’s recovery the jobs market is feeling the chill winds of weaker growth. Brexit has played a role, but weakening UK activity is small part of a wider, global story.
The synchronised economic upswing of 2016-18, which lifted rich and developing countries alike, has gone into reverse. Not only are Germany, Britain and the US cooling; so too are India, China and Russia.
On the face of it the latest forecasts from the International Monetary Fund (IMF) look fairly reassuring. They show the global economy growing by 3.0% this year, down from 3.6% last year and the weakest reading since the financial crisis, before picking up to 3.4% in 2020.
Globalisation has been one of the defining features of the modern era. It has been marked by the movement of goods, services, ideas, capital and people through a plethora of cross-border networks.
This morning we are launching our third quarter “Global economy in charts” report, available here – https://blogs.deloitte.co.uk/mondaybriefing/2019/09/global-economy-in-charts-q3-2019.html
On Friday, millions of people around the world joined climate change protests. Earlier in the week, Bill Gates, the Microsoft co-founder and philanthropist, warned climate change campaigners that divesting, or refusing to hold, fossil fuel stocks, such as oil companies, was a waste of time. “Divestment, to date, probably has reduced about zero tonnes of emissions. It’s not like you’ve capital-starved [the] people making steel and gasoline.”
The weather may have been good but the global economy has had a lacklustre summer. Activity has been disappointing and forecasts for GDP growth next year are drifting down.
London is a major force in the UK economy, accounting for between a quarter and a third of UK output, depending on how the boundaries are drawn. And London is, by a multiple of over seven, the UK’s most populous city.
The global economy has been slowing for some time. The question is whether we are heading for a soft landing or something worse.
At the beginning of this year equity markets were reeling from a sell-off driven by fears over global growth and rising US interest rates.
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.
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.