Transcript A lost half decade Victoria Clarke Investec Economics

The UK economy in a global context
Philip Shaw
Chief Economist, Investec
WMEF ‘Entrepreneurship, Innovation & Growth’ Conference
21 June 2013
Global economic trends…
Global growth: Actual & projections……
6.0%
Forecasts
Annual GDP Growth
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
2005
2006
2007
-1.0%
Source: IMF World Economic Outlook April 2013
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
Shares of global growth have shifted
Contributions to global growth (percentage points)
6.0
5.0
4.0
3.0
2.0
1.0
0.0
-1.0
-2.0
-3.0
China
India
Source: IMF World Economic Outlook April 2013
Japan
US
EU27
RoW
Global GDP
Key economies - GDP growth recent and forecast…
Annual GDP growth
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
China
India
US
Japan
-1%
-2%
Source: IMF World Economic Outlook April 2013
2012
2013
2014
Germany
UK
EU17
A few points on global growth
20y ago the US
and EU accounted
for half of world
GDP growth – now
it is less than 20%
China and India’s
share in 2012 44%! Rising trend
should remain in
place in Emerging
Markets generally
Chinese growth
has cooled – could
be less than 8%
this year (!) –
down from peak
of 14% in 2007
Global GDP
growth of 4%-5%
is not the norm –
long-term average
is 3%-3.5%
This is a super cycle – it is not the world ‘New Normal’
The UK economy in a
global context…
Sterling depreciation
110
Trade weighted sterling
105
100
95
90
85
-24%
80
75
-17%
70
Source: Bank of England
Euro crisis hits EU17 growth outturns…
4.0%
Annual GDP growth
3.0%
2.0%
1.0%
0.0%
EU17
Germany
France
Italy
-1.0%
-2.0%
-3.0%
Source: Datastream, Investec forecasts
2011
2012
2013 - forecast
2014 - forecast
Spain
Other
UK trade export volumes weakened by Euro area crisis..
30%
Export volumes (% change 3m yoy), trade balance (£bn)
12
10
20%
8
6
10%
4
2
0%
0
-2
-10%
-4
-6
-20%
-8
-10
-30%
-12
-14
-40%
Source: ONS
Trade balance £bn (RHS)
EU exports (LHS)
Non-EU exports (LHS)
-16
Global GDP growth – weighted by UK trade shares
6.0%
Annual GDP growth
Forecasts
5.0%
4.0%
3.0%
2.0%
1.0%
0.0%
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
-1.0%
-2.0%
-3.0%
World GDP growth
UK trade weighted world GDP growth
Source: IMF World Economic Outlook April 2013, Bank of England, Investec calculations
UK export growth to selected countries
Change between 2009 and 2012 (£ values)
160%
140%
120%
100%
80%
60%
40%
20%
0%
Russia
-20%
Source: ONS
China
India
Brazil
Japan
Germany
France
US
EU17
Italy
Spain
Other factors
Quarterly UK growth- contributions by sector
2.0%
Unwinding of Jubilee
effect and Olympic boost
1.5%
1.0%
0.5%
0.0%
Q2
2004
Q4
2004
Q2
2005
Q4
2005
Q2
2006
Q4
2006
Q2
2007
Q4
2007
Q2
2008
Q4
2008
Q2
2009
Q4
2009
Q2
2010
Q4
2010
Q2
2011
Q4
2011
Q2
2012
Q4
2012
-0.5%
Royal Wedding
-1.0%
Diamond Jubilee
-1.5%
Collapse of Lehman
Brothers
-2.0%
-2.5%
Source:
Agriculture
Manufacturing
Industrial production- ex mfg
Construction
Services
GDP
Various factors to watch for….
• New Euro area upturn??
•
 More stimulus? QE?
Interest rate guidance?
• Is the eurozone financially more
robust?
•
• Are individual countries less
systemic? (Probably!)
• Attitudes to and UK relationship
with the rest of ‘Europe’.
 Referendum on the EU in
the next parliament??
New Bank of England Governor
on 1 July.
An upturn in the housing
market?
 Bank of England Funding
for Lending Scheme
helped mortgage market.
 Chancellor’s Help to Buy
scheme to raise demand?
 Government help to SME sector?
EU referendum opinion polls
Voting to stay in the EU (net balances)
40
30
20
10
0
Source: YouGov
To remain in EU on renegotiated terms
Jun 9-10
To remain in EU
May 12-13
-20
May 9-10
Apr 7-8
Feb 17-18
Jan 24-25
Jan 23-24
Jan 20-21
Jan 17-18
Jan 10-11
-10
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