No sign of the January blues - City Comment
16 January 2014
A happy New Year to all from my base here in Scotland as the World Bank declares that the global economy is now at a turning point, with strengthening growth both from high income and developing countries. Of course there are downsides, one such being the rate of the inevitable unwinding of the US Federal Bank’s stimulus package and how much this will impact upon global interest rates and flow of funds, which could well cause serious problems. But forecasts such as this from the World Bank, with global GDP
Thu, 16 Jan 2014 | Sue Dodd, director, Agile IntelligenceA happy New Year to all from my base here in Scotland as the World Bank declares that the global economy is now at a turning point, with strengthening growth both from high income and developing countries. Of course there are downsides, one such being the rate of the inevitable unwinding of the US Federal Bank’s stimulus package and how much this will impact upon global interest rates and flow of funds, which could well cause serious problems. But forecasts such as this from the World Bank, with global GDP for 2014 projected at 3.2%, are still music to the ears.
Taking this together with the latest economic news in the UK and this seemingly is surely as good as any Chancellor late in the term could wish. However, leaving the politicians to argue their own cases, more to the point this must be the best honeymoon period ever experienced by a new governor of the Bank of England. Mark Carney’s timing is remarkable and thus far all has been turning rosier in his garden ever since he arrived.
First, GDP has continued to strengthen, with 2013 forecasts being regularly revised upwards, then unemployment figures start to fall ahead of expectations, currently standing at a rate of 7.4%, and now the CPI inflation rate has fallen to 2%, on target for the first time in four years. Earlier guidance from Carney implied no fresh look at interest rates until unemployment falls to 7%. However, it may well arrive there at least a year ahead of those earlier expectations given the speed of upturn in the labour market so it is fortunate that the inflation rate is playing ball and inflationary pressures look to be at a low point and supported also by low input and factory gate prices feeding through to consumers.
What this means is that Carney may be a little embarrassed by premature good news but he has more leeway than possibly expected on interest rates simply because inflation is not currently an issue. So, as long as there appears to be spare capacity and / or a need to boost economic growth, interest rates can and most likely will remain at 0.5% and encouragement to lend to businesses to fund investment will be continued. Longer-term global recovery will have some impact upon prices through raw material inflation but that is for the future and right now with economy, labour market and overall confidence levels all pointing upwards the prospects for the recruitment industry must be better than seen for some time past.
The positive economic news, encouraging New Year surveys, fewer recruitment firm entering administration and an upturn in both demand and candidate confidence provides a strong combination. As we often say here at this time of the year over a glass of brown liquid, ‘slàinte’.
Taking this together with the latest economic news in the UK and this seemingly is surely as good as any Chancellor late in the term could wish. However, leaving the politicians to argue their own cases, more to the point this must be the best honeymoon period ever experienced by a new governor of the Bank of England. Mark Carney’s timing is remarkable and thus far all has been turning rosier in his garden ever since he arrived.
First, GDP has continued to strengthen, with 2013 forecasts being regularly revised upwards, then unemployment figures start to fall ahead of expectations, currently standing at a rate of 7.4%, and now the CPI inflation rate has fallen to 2%, on target for the first time in four years. Earlier guidance from Carney implied no fresh look at interest rates until unemployment falls to 7%. However, it may well arrive there at least a year ahead of those earlier expectations given the speed of upturn in the labour market so it is fortunate that the inflation rate is playing ball and inflationary pressures look to be at a low point and supported also by low input and factory gate prices feeding through to consumers.
What this means is that Carney may be a little embarrassed by premature good news but he has more leeway than possibly expected on interest rates simply because inflation is not currently an issue. So, as long as there appears to be spare capacity and / or a need to boost economic growth, interest rates can and most likely will remain at 0.5% and encouragement to lend to businesses to fund investment will be continued. Longer-term global recovery will have some impact upon prices through raw material inflation but that is for the future and right now with economy, labour market and overall confidence levels all pointing upwards the prospects for the recruitment industry must be better than seen for some time past.
The positive economic news, encouraging New Year surveys, fewer recruitment firm entering administration and an upturn in both demand and candidate confidence provides a strong combination. As we often say here at this time of the year over a glass of brown liquid, ‘slàinte’.
