World Bank predicts growth slowdown

Global economic growth will slow in 2008 as the credit crunch hits the richest countries, according to the World Bank. But higher growth in developing countries, particular China, will cushion the slowdown. It expects US growth to slow sharply to 1% in the first half os 2008 but recover quickly by 2009. Overall, the industrialised countries are expected to grow by 2.2% this year. In contrast, China is expected to grow by 10% over the next two years, with India not far behind.

However, it warns there is also a risk on the "upside", with the economic boom leading to accelerating inflation and an over-valued stock market in China and other emerging markets.

http://news.bbc.co.uk/1/hi/business/7177397.stm

http://www.guardian.co.uk/business/2008/jan/09/globaleconomy.worldbank

Get your holiday euros now

According to Larry Elliott, the Guardian's Economics Editor, 'sterling has been flying too high to long - a fall will bring us back to earth'. All the factors that have ensured the pound's strength over the past ten years will go into reverse. Whilst a lower pound is no magic answer for exports it will 'help to start the long overdue rebalancing of the economy.' The financial markets were given a shock before Christmas when balance of payments data was released showing that Britain's current account deficit was proportionately just as big as that in the United States at 5.7% of GDP in the three months to September 2007. Investment income was never going to fill the gap in the current account left by the decline of manufacturing exports.

http://www.guardian.co.uk/business/2008/jan/07/economy.sterlingrate

End of the good times?

A very entertaining article by William Keegan in this week's Business Observer. He suggests that we have made the mistake of believing that the business cycle had been abolished and that the good times were going to go on uninterrupted and indefinitely. He believes 2008 will be the year of reckoning.

http://www.guardian.co.uk/business/2008/jan/06/economics.useconomy

Tight decision for Monetary Policy Committee?

The slowdown in employment, caused by the impact of the credit crunch, and rising fuel prices will be key factors considered when the MPC meet this week. After voting unanimously last month to cut interest rates the members will have to decide whether there is sufficient evidence of a slowdown to justify a further rate cut or whether the fear of infationary pressure results in a more cautious approach. The MPC may also have been alarmed by the increase in US unemployment, at a two year high of 5%, indicating that the world's largest economy is on the brink of recession.

An 'Economic Storm' on the way?

An excellent overview of the prospects for the British and world economies by Larry Elliot in today's Guardian G2. What impact will political developments have on the world economy? How likely is a full blown recession? Are we on the verge of another Great Depression? Is the British economy in a better position to weather a downturn as a result of the growth and stability of the past fifteen years?

Are we heading for a 'perfect economic storm'?

Evanomics

It is worth your time to check out Evan Davis' reports on the BBC website entitled 'Evanomics'. See 'Unsustainable Deficit' for a very clear analysis of our current balance of payments situation and the impact on the economy as a whole.

Banks reduce UK household loans

Signs that the credit crunch is working its way through to consumers with the news that banks reduced their lending to households in the the last three months of 2007. Lending to business customers has also fallen sharply. This is likely to have an effect on both consumer spending and business investment, adversely affecting prospects for meeting the growth target.

http://news.bbc.co.uk/1/hi/business/7169389.stm