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Deloitte’s latest survey of UK chief financial officers, released overnight, shines light on the plans of Britain’s largest corporates as the economy reopens. The full report is available at: https://www2.deloitte.com/uk/en/pages/finance/articles/deloitte-cfo-survey.html
The S&P 500 closed on Friday at a new all-time high. Since last year’s pandemic-induced crash, the index has almost doubled in value, reflecting a surprising feature of the COVID-hit global economy – buoyant equities. Indeed, stocks have rallied since last March, when the global economy was on the verge of the deepest downturn in more than a century. So far, investors have shrugged off a deadlier second wave, further lockdowns, the more transmissible Alpha and Delta variants and, most recently, concerns over rising inflation.
The pandemic has been the main determinant of UK activity in the last 15 months. Rising case rates last spring and autumn, and then at the start of this year, triggered lockdowns that shrank the economy. But that link between case rates and growth has softened. The recent rise in cases and hospitalisations, driven by the Delta variant, have not dented economic optimism. On the contrary, economists have been raising their UK growth forecasts and the regular economic data have been coming in on the strong side of expectations.
Throughout history economies have been shaped by shocks, from recessions to technological shifts and energy transitions. The Great Depression helped change thinking about the role of government, paving the way for a permanent expansion in the state. The switch from steam power to electricity triggered a vast reorganisation of manufacturing.
Commodity prices have boomed over the last year, boosted by low interest rates and a snap back in global demand. The Goldman Sachs commodity index has risen by 55% from its low and the rally has been broad-based, lifting metals, oil and agricultural commodities.
Among the many unusual features of the recession perhaps the most striking is the resilience of jobs market. Unemployment rates have risen, but far less than had been feared based on the experience of recent recessions.
The world is moving into its fourth great energy transition, from fossil fuels to renewables. Previous transitions have marked new epochs. Fire gave hominids energy-rich food, with profound consequences for human evolution. Agriculture and animal power paved the way for settled societies and great cities. The industrial age, powered by fossil fuels, transformed the human condition – and created unimagined environmental damage.
The saying “Never make predictions, especially about the future” is attributed to individuals as varied as the physicist Niels Bohr and the baseball player Yogi Berra.
Sentiment in financial markets changes quickly. The big worry for most of the last year has been about collapsing growth and falling prices. Now markets are fretting about inflation. Such fears were behind the sharp sell-off in US equities in the early part of last week.
Through the vast majority of human existence homo sapiens held little power over nature. Efforts by our ancestors to ’tame’ nature were modest and had little lasting effect. In perhaps 200,000 years of human existence it has been only in the last 250 or so years, since the industrial revolution, that human activity has impinged on nature. Industrialisation, economic activity and a rising population have taken a toll.