Tony Ward is chief executive of Home Funding
Of all the recent economic statistics to come out the numbers that concern me most are those coming out of a recent report from HSBC which suggests that growth is slowing in the four big Bric countries – Brazil, Russia, India and China.
These have been some of the fastest growing economies of the past ten years and have been largely responsible for keeping the global economy moving forward. Yet now they are facing a sustained slowdown which has largely been blamed on the euro crisis and deterioration in the US economy.
Let’s look at these two issues. Well sadly I predict that the euro crisis is set to run for some time.
Even Sir Mervyn King seems despondent accusing EU leaders of failing to tackle the fundamental causes of the crisis and adopting a policy of ‘kicking a can down the road’.
He suggests that ‘there is a great black cloud of uncertainty hanging over businesses’ and until they know how things are going to pan out, ‘they are holding back from investment and spending’. His comments seem to make sense albeit will do very little to instil confidence in the UK.
I think economic data from the US is a little more encouraging after all statistics suggest that the US trade deficit narrowed in May with exports to Europe rising.
Yet analysts have warned this may not last suggesting it is ‘unlikely to be sustained in the coming months’. I am however encouraged that the Federal Reserve will act to provide further stimulus if things get worse although I can’t see a rapid return to growth in the US.
So going back to the Brics. Of all the emerging economies, China in particular has responded rapidly to a slowdown with its government easing the curbs it imposed back in 2010 which at the time were brought in to cool an overheating economy and curb inflation. Beijing has cut interest rates twice since the start of June and announced various additional stimulus measures.
These measures initially appeared to do some good but with external influences affecting demand for China’s commodities, forecasters have now put back prospects of a rebound until at the earliest later this year.
I fear we will have to wait some time until the world’s second largest economy, along with other Brazil, Russia and India, once again drive global markets.