Date: 18 January 2016
Turmoil in the markets: but Britain's economic recovery will not be derailed
In this Perspective Ruth Lea, Economic Adviser to the Arbuthnot Banking Group, includes discussion of British economic developments in the light of the ongoing market turmoil.
The main points to note are:
- Market sentiment has deteriorated in so far in 2016 and even the Chancellor has been uttering warnings about a 'dangerous cocktail' of risks.
- The MPC was dovish at its January meeting, showing no signs of following the Fed's December hike in interest rates. The Bank has, moreover, downgraded their GDP growth forecasts for 2015Q4 and 2016Q1.
- The UK's industrial production and construction output data for November were very disappointing. Lower oil prices helped the trade deficit in the month.
- The pound has weakened further against a strengthening dollar and, recently, even fallen against the euro. This should help competitiveness.
- Commodity prices have fallen further in the past 12 months, especially in dollar terms. But the Economist's 'All Items' index in sterling terms has risen in the past month, reflecting the weaker currency.
- The fall in oil prices has been especially marked, not least of all in the past 2-3 weeks. Weaker demand is a factor, but the main reason for the recent price declines is oversupply.
- There are winners and losers from lower oil prices, with the UK consumer a winner as lower prices boost real incomes.
- There are three main developments relating to China at the moment. Firstly, the real economy is undergoing a transition from manufacturing to services. Secondly, the currency is slipping, unsurprisingly, against the strong dollar. Thirdly, the bursting of the equity market 'bubble', which began last summer, assumed a new and vicious turn in 2016, with serious knock-on effects for global stock markets. Market turmoil has been exacerbated by the seemingly ad hoc and inconsistent policy responses by the Chinese authorities.
- FTSE100 fell by 7% in the first two weeks of 2016.
For full story:http://www.arbuthnotgroup.com/economic_perspectives_group.html
Press enquiries:
Arbuthnot Banking Group PLC:
Ruth Lea, Economic Adviser
07800 608 674, 020 8346 3482
ruthlea@arbuthnot.co.uk
Follow Ruth on Twitter @RuthLeaEcon
David Marshall, Director of Communications
020 7012 2432, 07502 285 835
davidmarshall@arbuthnot.co.uk
Bell Pottinger:
Dan de Belder
020 3772 2561
ddebelder@bellpottinger.com
Arbuthnot Banking Group plc issued this content on 2016-01-18 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 2016-01-18 10:35:03 UTC
Original Document: http://www.arbuthnotgroup.com/pressreleases/turmoil_in_the_markets_but_britains_economic_recovery_will_not_be_derailed.html