UK: The Monday Briefing: 2015 - The Year Ahead

Last Updated: 19 January 2015
Article by Ian Stewart

Most Read Contributor in UK, August 2017

Look at the news headlines from the last few weeks and you might think that the global recovery is over. From the collapsing oil price to the emerging market slowdown, euro area deflation and geopolitical risk, there's plenty to worry about. The most timely global activity data, the Purchasing Managers' Indices, suggest that the pace of global activity slowed in the fourth quarter of last year. And in a classic sign of nervousness, investors have been dumping equities and buying government bonds.

So given these signals, why do we think that 2015 will be a year of reasonable growth, with global activity accelerating?

This is a big subject and this week's Monday Briefing is, therefore, longer than usual. Before we examine what could go wrong we look at the three key reasons for our optimism: cheap money, cheap oil and a resurgent US economy.

First, cheap money. Interest rates in the Western world are rock bottom and credit is cheap and plentiful. Central banks have responded to lower inflation and growth jitters by signalling that credit will stay cheap for longer. The European Central Bank is likely, finally, to undertake Quantitative Easing. Despite strong growth in the US and UK, the US Federal Reserve and the Bank of England have backed away from early rises in interest rates. Markets are assuming interest rates will stay lower for longer and this is pushing down the cost of borrowing for corporates and consumers. 30-year mortgage rates, the benchmark measure of housing finance for the US, have fallen from 4.9% to 4.1% in the last 18 months. Cheaper credit will provide a boost to global activity in 2015. 

Second, cheap oil – and other commodities. Financial markets worry that plunging oil prices are the canary in the cage signalling a downturn in global growth. Yet the International Energy Agency reports that global oil demand has risen, not fallen, last year and that demand growth will accelerate in 2015. We think increasing supply, caused by OPEC's insistence on maintaining output in the face of sharply higher US oil production, has been the primary driver of lower oil prices, not weaker demand. Over the last year, the oil price has fallen 53%, natural gas prices 30%, copper prices 17% and agricultural prices by 4%.  These declines are feeding into lower bills – and rising spending power - for Western consumers. Falling commodity prices have hit growth in commodity-producing nations, including Russia and Saudi Arabia. But they boost activity in the world's commodity-consuming economies such as North America, Europe, Japan and China, which are bigger and more economically significant than the producers. So, lower commodity prices are positive for global growth. The International Monetary Fund thinks that a falling oil price alone will add 0.3-0.7% to global GDP growth in 2015.  With global growth running around the 3.5% mark, that represents a pretty sizeable boost to activity.

Third, the resurgent US economy. The US has decoupled from lacklustre growth in the euro area and Japan. US growth accelerated through 2014 and job growth last year was the highest in 15 years. The upswing in real earnings growth underway since last summer is set to continue as lower commodity prices feed through to lower prices in the shops. US households are upbeat; cheaper credit and rising real incomes should mean that 2015 is a year of accelerating consumer spending and good growth in housing. Agreed, a key measure of US business sentiment, the Purchasing Managers' Index, has softened. But with US firms cash rich, banks keen to lend and firms more bullish about investment than at any time in 25 years, we expect to see good growth in business activity and a quickening pace of US GDP in 2015. 

That's the good news, but what about the risks? We consider these under three headings: a euro area crisis, a hard landing for China and geopolitics.

The euro area's weak recovery is threatened by deflation and the risk of Greece giving up on austerity and leaving the monetary union. The European Central Bank gives every indication that it is preparing to respond to euro area weakness with Quantitative Easing. We see a high likelihood of the ECB undertaking aggressive QE, possibly later this month, with the aim of awing markets and convincing observers of the Bank's determination to resist deflation. Credit demand among consumers and corporates has, perhaps surprisingly, already picked up in the euro area and we think (though many don't) that QE should help bolster it and asset prices. The good news is that the plight of the euro area consumer seems to be improving. Unemployment has fallen in the last year, thanks to improvements in Germany and the so-called periphery of Spain, Greece and so on. Consumer confidence is at above-average levels. Coupled with the boost to spending power from low inflation, consumer spending is likely to edge up in 2015.

QE should help ensure the euro area maintains weak growth, around the 1.0% mark, this year, but the risks are things turn out weaker. QE could, of course, prove inadequate or may not work at all (QE seems to have contributed to America's and the UK's recoveries, but its effects in Japan have been more mixed).

In Greece the anti-austerity party, Syriza, is ahead in the polls and could gain power in the 25th January elections. Germany's Chancellor, Angela Merkel, has made it clear that if Greece gives up on austerity then it will have to leave the euro area. A Greek exit is a real risk, but one with less disastrous consequences than the breakup crisis of 2012-13, because this is confined to Greece. Unlike in 2012, the ECB is able to lend at-risk governments support by buying their bonds, a move that should help stop Greece's woes spreading to other indebted countries. But that still leaves a non-trivial risk of a damaging Greek exit that may linger and could crystallise.   

China's growth is proceeding at what, by the standards of virtually any other country, is a blistering pace. The Chinese government is engineering a shift in activity away from exports and investment towards consumer spending. The concern is that together with a shrinking of the working age population and rising labour costs, this rebalancing could result in a continued slowdown in Chinese growth. Last year's growth, of around 7.4%, is likely to have been the slowest in 25 years; this year economists expect Chinese growth to slow to the 7.0% mark. Together with weak or virtually no growth in Russia, and much weaker growth in Brazil, one might have thought this would mean a slowing of emerging market activity this year. But activity is generally expected to pick up in India, Africa and Central and Eastern Europe; as a result, the IMF expects overall emerging market activity to accelerate this year.

China's massive credit boom after the financial crisis is another cause of worry for economists. Chinese private sector debt has risen 70% since 2008 and now amounts to almost twice its GDP. This boom has resulted in a housing bubble which, when burst, could seriously damage the Chinese banking system. Attempts at controlling the flow of credit to the economy and cooling house prices have had some success. Prices fell for the third straight month in November, down 3.7% from a year ago.

For the moment, Chinese policymakers seem to be in control of these adjustments but watch out for sharp falls in house prices or a slowdown in consumption which could mark a hard landing in China.

Finally, geopolitical risks in the Middle East, Ukraine and Russia could affect global growth by influencing energy prices. In addition, there is a reasonable chance of sovereign defaults by Ukraine and Russia which could further affect growth in those economies and in Eastern Europe. If materialised, the effects of these shocks are likely to be short-term and will displace global activity from one point in time to another. External political and geopolitical shocks rarely fundamentally change the direction of other economies.

In sum, growth rates will, as always, be de-synchronised across countries but the big story is likely to be of decent global growth in 2015. Financial markets exhibit a recency bias and can exaggerate the real economy implications of latest news and transient factors. To us, the fundamentals of easy money, falling commodity prices and good US growth suggest a brighter outlook than markets seem to fear at the moment. 

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.