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					            THE GLOBAL ECONOMY
                   IN 2004


          HOW ROBUST IS THE GROWTH?




Jonathan Bradley
Jonathan Bradley
Jonathan Bradley
       INFLATION OR DEFLATION?
       A SUSTAINED RISE OR FALL
        IN THE OVERALL PRICE
        LEVEL

Jonathan Bradley
Jonathan Bradley
             THE WORLD ECONOMY IS
              RECOVERING, AND THE
                  TALK AMONG
               ECONOMISTS IS NOW
               MUCH MORE ABOUT
                   INFLATION


Jonathan Bradley
               THE ECONOMIC AIM: A
               SAFE MIDDLE COURSE




Jonathan Bradley
                   WORLD GDP GROWTH
                     2003 AND 2004
              5
            4.5
              4
            3.5
              3
            2.5                                     2003
              2                                     2004
            1.5
              1
            0.5
              0
                    UK   GERMANY   JAPAN   USA
                                                 STRONGER!
Jonathan Bradley
                   JAPAN PUTS OUT
                      THE FLAG
        After  more than a
         decade of stagnation,
         Japan looks as though
         it has turned the
         corner.
        At last Japan has
         become more
         “normal”!


Jonathan Bradley
                   What is now driving the
                         recovery?
        Very        low interest rates

        Continued        expansionary fiscal policy

        Recovery        in company finances

        Buoyant        consumer demand

        Some        stock market recovery
Jonathan Bradley
                   GLOBAL SHORT TERM
                     INTEREST RATES
        7
        6
        5
        4                                                 USA
                                                          EURO
        3
                                                          JAPAN
        2
        1
        0
                   2000   2001   2002       2003   2004


                                    Source: IMF
Jonathan Bradley
                    BUDGET DEFICITS
                   COMPARED 2004 (est)
             0
            -1
            -2
            -3                       UK
            -4                       JAPAN
            -5                       USA
                                     EURO
            -6
            -7
            -8
                         % GDP
Jonathan Bradley
                           US: Equity prices
       Jan 1973=100                                  Jan 1973=100
     2200                                                      2200
                           Technology Media
     2000                   Telecoms (TMT)                    2000
     1800                                                     1800
     1600                                                     1600
                           US Market*           US Market
     1400                                     excluding TMT   1400
     1200                                                     1200
     1000                                                     1000
       800                                                    800
       600                                                    600
       400                                                    400
       200                                                    200
              *Datastream market index
          0                                                  0
           1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
             Source: Datastream
Jonathan Bradley
Jonathan Bradley
                    OIL
                   PRICE




Jonathan Bradley
Jonathan Bradley
                      The impact of a $10 pb rise in the world oil price
  % difference from base          Year 1           Year 2                  Long Run

  GDP
  UK                                -0.2            -0.5                     -0.4
  US                                -0.1            -0.5                     -0.6
  Eurozone                          -0.3            -0.4                     -0.3
  Japan                             -0.2            -0.5                     -0.7

  Inflation
  UK                                0.2             0.5                      0.0
  US                                0.4             0.4                      0.0
  Eurozone                          0.2             0.4                      0.0
  Japan                             0.3             0.4                      0.0




Jonathan Bradley
Jonathan Bradley
No.1
                           World: Current account imbalances
                   $ billion                                         $ billion
                    300                                                    300
                    200            Japan                                  200
                    100                                                   100
                       0                                                  0
                                           Asia
                   -100                                                   -100
                   -200                           Eurozone                -200
                   -300                    US                             -300
                   -400                                                   -400
                   -500                                                   -500
                   -600                                                   -600
                                                              Forecast
                   -700                                                   -700
                       1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
                        Source: OEF


Jonathan Bradley
No.2

         PRODUCER PRICES 2003/4
             5
             4
             3
             2
             1                                              2003
             0                                              yr to May

            -1
            -2
            -3
                   UK   GERMANY   JAPAN               USA

                                  Source: Economist
Jonathan Bradley
                   THE MAIN ECONOMIES
                        RIGHT NOW
        STRONG GROWTH EVERYWHERE
         EXCEPT EURO AREA
        ENERGY PRICES
        BEGINNINGS OF INFLATION???
        MAJOR IMBALANCES WITH USA




Jonathan Bradley
Jonathan Bradley
Jonathan Bradley
      DESPITE:




Jonathan Bradley
             NOW ON THE WAY UP….




Jonathan Bradley
ALTHOUGH, INFLATION STILL OK




Jonathan Bradley
Jonathan Bradley
                   1: HOUSE PRICES IN
                        BRITAIN

        Are  they “too high”?
        Is there a “bubble”?
        Will they fall?
        What will happen if
         they do?



Jonathan Bradley
        STOCK  MARKETS
         AND LAND PRICES
         GO UP FAR TOO
         MUCH
        BUBBLES!!
        WHEN THEY
         BURST
         ECONOMIES
         SUFFER

Jonathan Bradley
        Impact of 10% house price fall
                              OEF
     LOOK AT                         No monetary response       Wealth &
                             central
     THE RED                                     Wealth &   confidence effects
                            forecast Wealth confidence        with monetary
     NUMBERS                                                     response
                                      effects
 GDP    2004                  3.1        3.1       3.0             3.0
 growth 2005                  2.8        2.2       1.2             1.9
                   2006       2.3        1.6       0.7             2.4
 CPIX              2004Q4     1.5        1.5       1.5             1.5
 inflation         2005Q4     1.7        1.5       1.1             1.3
                   2006Q4     1.7        1.0       0.6             0.8
 Interest 2004Q4              5.0        5.0       5.0             4.7
 rates    2005Q4              5.0        5.0       5.0             3.6
                   2006Q4     4.5        4.5       4.5             3.3

Jonathan Bradley              Source: Oxford Economic Forecasting
                    2: HUGE CONSUMER
                          DEBTS!




                   Total UK, May 2004: £993 BILLION
Jonathan Bradley
                   SO, WHAT NOW?
       In the world:         In Britain:
        Little danger of     Still strongest growth
         deflation             in Europe, BUT
        Growth generally     Highest interest rates
         healthy               in Western Europe
        Main threats from    Main threats political
         energy prices and     and from a housing
         politics              asset price bubble


Jonathan Bradley
Jonathan Bradley

				
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posted:9/27/2012
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