UK: Deloitte Monday Briefing: Who's Growing, Who's Not

Last Updated: 24 April 2013
Article by Ian Stewart

Most Read Contributor in UK, August 2017

* Consensus or average GDP growth forecasts are valuable economic indicators. Based on forecasts from hundreds of economists these data show where the average economist thinks the world economy is going.

* Despite the continuing uncertainty about growth, economists expect the pace of global growth to edge higher, from 2.9% last year to 3.1% this year.

* But that growth continues to be unevenly distributed.

* In 2013 the world's ten fastest growing countries are likely to be emerging economies with China and India topping the global growth league. Emerging economies are expected to account for in excess of two thirds of world growth this year.

* By contrast economists expect all of ten of the world's weakest economies to be in Europe. The Greek, Portuguese, Spanish and Italian economies are forecast to contract sharply this year and these countries are at the bottom of the global growth league.

* Economists slashed their forecasts for European growth through last year and have continued to cut them since the start of 2013, suggesting continued gloom about growth prospects this year. The euro area is expected to contract again in 2013 at about the same rate as it did in 2012, by 0.4%.

* Within Europe there is a clear north-south growth divide. Scandinavia, Germany, the UK, Austria and Switzerland are expected to post some, weak growth this year while southern countries, including France, are expected to shrink.

* The recession stricken countries of southern Europe can take some comfort from the fact that Iceland, Latvia and Ireland have rebounded from their deep recessions and are growing again. Ireland's expected growth rate this year, of 0.9%, puts it in the Northern European growth camp.

* Economists are more upbeat about the US and Japan. US growth forecasts have held up at 2.1% in recent months – hardly a strong rate by historic standards, but enough to make it the industrialised world's fastest growing major economy this year.

* Aggressive stimulus measures introduced by the new Japanese government have led to a doubling, to 1.3%, in Japan's expected growth rate this year.

* In a sign of economic rebalancing Western consumers are retrenching and their share of country GDP is shrinking. Meanwhile growth in emerging markets consumer spending is outstripping GDP growth and the consumer is accounting for a growing share of these economies.

* The weakness of the European economies has been the biggest drag on global growth in the last year. Economists believe that another tough year lies ahead for Europe and, especially, for the euro area. But the expectation is that if the global economy can avoid further big shocks activity should pick up in Europe and across the industrialised world in 2014.

* The Global Financial Crisis has shifted not just the path of growth but has also has also undermined confidence in the growth potential of Western nations.

* Longer term expectations for growth for the major industrialised nations, looking six to ten years ahead, have fallen since 2007. In the last six years the consensus has downgraded America's longer term growth rate from 3.0% to 2.5%; Japan's from 1.7% to 0.8% and Germany's from 1.5% to 1.3%.

* This loss of future growth highlights the long shadow cast by the financial crisis.


UK's FTSE 100 ended the week down 1.53% following weak global economic data.

Here are some recent news stories that caught our eye as reflecting key economic themes:


* The Chinese economy grew by a slower-than-expected 7.7% in Q1 2013

* Ratings agency Fitch downgraded the UK's credit rating to AA+, citing weak growth and a challenging fiscal outlook

* UK unemployment rose by 70,000 in the 3 months to the end of February, to 2.56m

* The Bank of England's next governor, Mark Carney, claimed in a speech that "The US is breaking out of the pack of crisis countries that includes the euro area, the UK and Japan"

* The US surpassed China as the top destination for Japanese exports for the first time since 2009, with exports to the US having risen at an annual rate of 10% in March and exports to China falling 9%

* A seminal paper which highlighted the damaging effect of high levels of government debt on growth, written by Kenneth Rogoff and Carmen Reinhart from Harvard University in 2010, came under fire after "significant errors" were found in the paper's methodology, including an Excel coding error

* The cost of German government borrowing fell to a record low, with Berlin raining €3.35bn through the sale of 10-year bonds at a yield of 1.28%

* German car sales fell 13% Q1 2013 compared to a year earlier, according to data from the Acea industry association

* The Portuguese government announced that it has identified a series of new spending cuts to fill its budget hole and keep its €78 billion bailout on track, following a previous court ruling that some of this year's planned cuts were unconstitutional

* Ireland's Insolvency Service has set out monthly spending limits for people seeking debt deals from their creditors, with homeowners applying for debt writedowns having to give up satellite television, foreign holidays and private school educations for their children under a strict new insolvency law

* Brent crude oil, the global benchmark oil price, fell below $100 for the first time since July, having fallen as much as 10% in the last month

* The price of commodities, as measured by the Dow Jones-UBS index – a basket of commodity futures – has declined by 4.9% in the past year

* Romania has dropped setting a target date for joining the euro, although officials insisted that joining the single currency remains a fundamental objective for the country, having previously been targeting 2015 to adopt the single currency

* The Kauffman Foundation's annual index of entrepreneurial activity showed that 514,000 entrepreneurs formed new businesses in the US in 2012 compared to 543,000 the year before, with the decline attributed to the improvement in the economy

* Total delays caused by the theft of metal from railways fell by more than half in the year to March 2013 according to data from National Rail, with the fall attributed in part to increased targeting of thieves and scrap dealers by the British transport police

* German carmaker BMW announced that it is to begin building the Mini in Chennai, India, later this year.

* Dairy Crest, one of the UK's largest milk suppliers, is to transfer around 20m kilograms of maturing cheese to its pension fund, to fill its pension gap – cash cows

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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