According to recent reports, the UK economy is set to grow at a slower pace than any other major advanced or emerging nation in 2018, according to the OECD.
The OECD says UK growth is forecast at 1.3% in 2018 amid a strengthening global recovery. Earlier figures presented a 1.2% growth; however this is still the weakest of the G20.
Consequently, Finance Monthly has asked several experts, market analysts and economists to comment on the news, in this week’s Your Thoughts.
Angus Dent, CEO, ArchOver:
Despite the Office for National Statistics’ cautious optimism about UK productivity in late 2017, the Office for Budget Responsibility (OBR) has refused to upgrade its productivity outlook. It’s just another chapter in a now-familiar story – the Government just can’t jolt the economy out of its lethargy.
If we can’t get out of this rut, we won’t stand much chance of making a smooth economic transition out of the EU next year – we won’t have the leeway to absorb any unexpected shocks. Despite that, Philip Hammond used today’s Spring Statement speech to essentially sit on his laurels and avoid taking any new decisive action.
While the Chancellor rests easy, British business must get to work. Given that the OBR continues to find the government’s position on SME productivity ineffectual, business owners need to take matters into their own hands and look to fund bolder new business projects and models.
They should use alternative financing options to fund new services, hire more staff and improve working conditions. You need money to make money, so UK companies must invest in driving productivity. If the Government won’t do it, entrepreneurs must take the initiative, using tailored financing to secure the tools they need to boost productivity.
Jonathan Watson, Chief Market Analyst, Foreign Currency Direct:
Whilst being rather gloomy in recent forecasts, the OECD (Organisation for Economic Co-operation and Development) are right to single out the UK for a slower pace of growth. The uncertainty created by the Brexit has seen reduced confidence in the UK and held back growth.
Business needs certainty and whatever you think the longer-term outcomes may or may not be, for now there is some mystery in what lies ahead from Brexit for the UK. Since we still don’t know what Brexit will ultimately mean, businesses and consumers cannot easily make long-term decisions. That doesn’t mean they have stopped making any decisions, life is carrying on, just at perhaps a slower pace than would have been before the vote, or upon a Remain vote.
The global economy is, as the OECD states performing better than expected, which is helping support the UK through any difficult period. This doesn’t take away the Brexit disadvantage which is currently hampering not only the longer-term overall economic outlook, but overseas investment in the UK, domestic UK business investment and consumer spending, plus that closely watched barometer of economic strength, GDP or economic growth.
Chris McClellan, CEO, RAM Tracking:
What readers of this article need to ask themselves is if they’re a follower or a pioneer? Yes, we understand that it’s being reported that the UK economy is growing at a slower pace, but what will separate those businesses that struggle from those that thrive, is their mind-set and work ethic.
I firmly believe that growth for a lot of businesses can and will soar this year by making smart, well-informed decisions. Assess not only your immediate but future risks and have well-thought out strategies to mitigate these. Consumers are always going to buy whether it be your product/service or another’s. What’s going to make you stand out is clever thinking - how can you add more value? How can you export or trade with countries in a stronger climate? This flexible approach will not only give you competitive advantage but will widen your business horizons further than just UK shores.
The introduction of trusted sites such as TrustPilot, Facebook and Google (to name a few) together with ‘consumer-power’ should not be overlooked. By focusing on exceeding and delighting your customer’s expectations will result in repeat purchases as well as positive reviews, the power of your business growth lays firmly in the hands of your customers.
At RAM Tracking, we’re increasingly analysing our data and utilising innovative technology to delight our customers and highlight improvements that need to be made quickly. Investment into platforms like Salesforce have helped us become more data focused in a bid to work smarter to save costs but still have the ability to reinvest even when growth is reported to slow down.
If you have thoughts on this please feel free to comment below and let us know Your Thoughts.
Things have been looking okay for the US’ overall economy, and with implementing change in Washington, who knows what’s to be of the economy in months to come. Samuel E. Rines, Senior Economist and Portfolio Strategist at Avalon Advisors LLC discusses for Finance Monthly below.
The US economy currently finds itself in a familiar position. Following a weak start affected by statistical anomalies and an absent consumer, the economy is beginning to find its footing. But this does not mean that the US economy is going to suddenly take-off. On the contrary, the US economic outlook is heavily reliant on decisions made in Washington.
Recently, manufacturing, employment, and personal consumption indictors have been generally positive. While headline job creation in May was disappointing, jobless claims and other indicators of labor market stress have been subdued. There are certainly areas of the US economy that are less encouraging. Inflation and lackluster wage growth remain conundrums of sorts given the extremely low unemployment rate. Most economic models would have wages and inflation accelerating at these levels.
Taken together, the current state of the US economy is much the same as it has been for the past several years: not too hot, not too cold. Slow and steady growth around the post-recession trend growth of around 2 to 2.5%. Nothing to become too excited about, but also fast enough to generate sustainable growth. There are reasons to suspect the US economy will significantly accelerate its pace of growth in the second half.
While little has changed for the US economy so far in 2017, numerous events and policies could alter the trajectory over the next year or so. The most important are the Trump Administration’s promised tax breaks and fiscal policies, closely followed by the Federal Reserve’s policy decisions. And, in many ways, the two are related.
Following the election of President Trump, the markets cheered these pro-growth policies as yields on US government debt rose and equity markets made all-time highs. But some of this initial optimism—euphoria even—has dissipated. At least partially, this is due to the declining potential for timely fiscal policy changes. It has taken GOP members of Congress and the Senate far longer to come to agreement on what their version of the healthcare bill should be than markets anticipated.
The importance of the healthcare bill, and, the drawn out debate surrounding it, are difficult to overstate. To do meaningful tax reform, the healthcare reform must be completed first as there are taxes and costs embedded in the ACA law that the GOP deal with before it can fully rework the tax code. And reducing the costs within the ACA is critical to freeing up fiscal room to maneuver greater tax breaks than would otherwise be achievable. Until healthcare is completed, tax reform is on the backburner.
Further reducing prospects of growth boosting initiatives are the significant headwinds Trump Administration faces to implementing its agenda. Many of the headwinds are likely to pass over time, but that is precisely the problem—time. Unless there is a significant acceleration in the pace of legislation, tax reform now appears to be a late 2017 or early 2018 catalyst.
Because of this extended timeline, markets may be forced to refocus on the Fed’s policy trajectory. The Trump Administration’s fiscal policies are incorporated into economic projections used to recommend monetary policy changes. Simply, policy timing matters—not only for markets and the economy—but also for the evolution of the Fed’s monetary policy.
For markets, tax and infrastructure are imperative: the lower the taxes, the greater the after tax profits, and the higher the valuations. That dynamic is undeniably a positive for markets. Infrastructure spending would boost revenues for companies associated with building the nation’s infrastructure. Not only in the common sense of infrastructure, but communications, electrical grid, and other areas in need of national investment—again, a positive for markets. The only outstanding issue is when the positives might arrive.
One of the odd dynamics for US growth is that “good enough" growth is likely to prove "good enough" for a couple more Fed rate hikes this year. In the absence of fiscal policy, this could cause some issues for markets with growth and Fed tightening awkwardly out of sync. The evolution of politics in Washington will have a direct, and uncomfortable, influence on both. The US economy will be heavily, if not solely, reliant on Washington for its direction for the next couple of years.
