UK financial trends don’t exist in a vacuum. On the contrary, global economics are at work influencing the health of every national system, including financial prospects for UK residents. While things happening close to home are important concerns, taking a broader view can be enlightening.
In today’s environment, citizens facing inflation and stagnant salaries might be surprised by observers viewing the current state of global economic balance as ideal, in many ways. But that’s exactly the way some economists are weighing-in, according to a recent piece by Harvey Jones at Express. Using the familiar story about a young girl named Goldilocks to draw a comparison; the article highlights global economic trends that may be “just right”, similar to one of the bowls of the young lady’s porridge, sampled by three visiting bears. Despite good news on many fronts, some believe the world economy is vulnerable to a downturn.
National Financial Health Reflects Steady Global Economics
Overall, global economic conditions show some healthy signs. The International Monetary Fund set its GDP to 3.6 per cent for the year and to 3.7 per cent for 2018. The encouraging forecast comes at a time when US unemployment chugs on at historically low levels and UK numbers mirror the trend, hanging around 4.3 per cent unemployed. The UK figure is the lowest since the mid 70’s. Even eurozone employment is trending in the right direction.
Interest rates are beginning to rise, as evidenced by the Bank of England’s recent move, following a decade of holding firm. But loan applicants still have access to affordable credit, from long-term personal loans to short-term payday financing made available by a number of lenders. Inflation is generally in-check across Europe and the United States, though weak sterling and Brexit have made for more volatile conditions in the UK. Even these challenging conditions are predicted to improve, with at least one top economist forecasting conditions to begin moving in the right direction within 12 to 18 months.
Although annual wage growth of only 2.2 per cent leaves Britons experiencing an earnings backslide, the UK economy could be in much worse shape than it is – particularly as the government jockeys for position, anticipating Brexit. While the positive global signs don’t make butter and eggs less expensive, the hope is UK conditions will catch-up with the seemingly healthy trends seen elsewhere.
Another positive nugget taken away from global economic observers involves relatively low market volatility in the US, European and Asia-Pacific Markets. In fact since Donald Trump’s presidential election, world markets have risen around 15-20 per cent, depending on which stock market you study.
Could Global Economy Take a Downward Turn?
Although conditions are holding up at the present, a few possibilities could undercut economic stability. One worry is China’s massive economy, which continues growing at more than 6 per cent. Unfortunately the world’s second largest economy is growing on burgeoning debt, which could cause problems.
If Chinese officials make moves to curb debt it could cause an economic slowdown in the country, with the effects ultimately rippling throughout other national economies. The Bank raised interest rates earlier in the month, and the US Federal Reserve is projected to make a similar move in December. The hike could cause mortgage concerns, slowing major borrowing. Coupled with consumer uncertainty, the interest rate moves could interfere with global economic stability, though it is hard to predict how conditions might unfold.
For now, there is plenty of reason for optimism, despite a less-then-perfect UK economy. It could be much worse on the home front, so the positive signs in global economics are enough to prompt a prevailing view among some observers that global conditions are “just right”. Time will tell how individual citizens fare, particularly in the UK where Brexit still poses uncertainty. But as the holidays approach, a major slide doesn’t appear looming on the horizon.