- Narva Communications
Standard Life Investments, the global investment manager, believes that while events in Europe, China and energy markets have been three major factors contributing to the global economic slowdown, there are still positive signs of recovery in the world economy which could be supported by more co-ordinated policy action.
In the latest edition of Global Outlook, the leading investment house looks at why the recent slowdown has appeared, how the global economy will move forward in the second half of the year, and what response is necessary from authorities worldwide.
Andrew Milligan, Head of Global Strategy, Standard Life Investments said:
“After a strong start to the year the return environment for risk assets has deteriorated once again and market volatility has returned. This has coincided with concerns about self-sustaining momentum in the world economy, prompted by worries about the sustainability of the Euro-zone, the impact of energy costs and the extent of the policy-induced slowdown in China.
“By far the most important factor has been the ongoing lack of resolution to the sovereign debt and banking crises in the Euro-zone, which have spiked business and household confidence. The good news is that European authorities are being forced to reconsider their emphasis on austerity measures, to bring deficits more into line, and focus more on the need for growth.
“Another major factor in the slowdown has been the deceleration in the Chinese economy, after the authorities deliberately engineered a slowdown to control inflation, which had ended up in danger of overshooting.
“Energy costs have been both a hindrance and a spur to economic growth. Earlier this year oil prices rose as high as $125 per barrel, but the recent fall back to $90-100 per barrel, as better supply and demand dynamics prevailed, will help many consumers and businesses.
“Despite these risks there are many encouraging aspects to the world economy, coming from the US in particular where consumer spending power is well underpinned, the housing market looks to be in recovery mode, and much of manufacturing is in good shape. In Japan there are signs that GDP could grow closer to 3% this year. Even in the UK, where household disposable incomes have been squeezed by unemployment, the situation is improving with the jobs market holding up better than expected and consumer inflation falling back.
“So there are optimistic signs. However, a release from this repressed but contained returns environment requires a profound policy response. Whilst various authorities are currently taking or considering further stimulus measures, there needs to be a globally coordinated approach between politicians and central banks, beyond just monetary policy, towards fiscal and regulatory, if policy makers are to stand any chance of triggering sustained economic recovery.”
Brian Simmons, Press Manager, Standard Life Investments, +44 (0)131 245 5935
Sara Reed, Press Manager, Standard Life Investments, +44 (0)131 245 2750
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Notes to Editors: