The Good, the Bad and the Ugly
Referring to the famous western The Good, the Bad and the Ugly, Richard noted that the western movie heyday coincided with the US economic heyday in the 50s and, like westerns, the global economy has traditionally been viewed through the eyes of the Americans and the Western World however he revealed that this perspective is now outdated as the centre of economic activity has shifted to the east. He continued by highlighting the current good, bad and ugly factors at play.
Richard pointed out that western world media portray that in the last 10 years or so things have got worse with the financial crisis, squeezed middle class, increased poverty, food banks etc. whereas the facts are different. The biggest story being that global poverty has halved in the last 20years; in 1990 in China 750m were subject to extreme poverty the figure today is <10m and global growth remains strong particularly in the US. With employment at a record high the UK unemployment rate is at its lowest rate since the early 70s and whilst the NI economic growth remains subdued there are a number of positives: unemployment is also at a record low and employment at a record high (+32k more jobs than before the recession!); there has been a record year for tourism and exporters, strong wage growth in 2018 and some sectors are booming especially ICT (Belfast now has the highest concentration of cyber-security jobs in Europe).
Unfortunately however Richard revealed that there are many bad signs on the horizon with mounting signs of a global slowdown with 3 of the 4 top economies (Germany, Japan & China) suffering – will the US be next he queried? Noting emerging markets have turned ugly and risks to growth include US interest rate hikes, the US-China trade war and Italy, he revealed that there will be another recession and we are closer to the next recession than we are from the last one! He stressed that in UK & NI the problem is productivity which is the driver of standard of living improvements and the UK is lagging behind noting that what the UK can produce by 5pm Friday Germany would have produced by lunchtime Thursday, Ireland and France by close of play Thursday and even Italy by lunchtime Friday. In NI hr revealed it would take till 6pm Saturday… the NI private sector is producing as much in Q2 2018 as it did 12½ years ago but with almost 76k more people. He highlighted that wages in real terms have fallen particularly for people in their 30s, 10years ago this age group earned more than any other today they earn less than older age groups and warned austerity is coming to an end but taxing times lie ahead!
The ugly he maintained was one word – Politics. The rules of the game are changing and being challenged there are movements away from free-trade and many flash-points with unilateralism increasing. A major issue will be how this non co-operation will affect the world’s ability to counter the next recession particularly as little scope remains for fiscal or monetary policies.
Richard concluded that with multiple stand-offs globally and locally (US v China and Iran, EU v Hungary, Poland and Italy, EU v UK, Remainers and Leavers and DUP v SF) forecasting economic developments are rather tricky and we are really in the business now of forecasting politics!