Can the Olympics save Britain’s 2012?
ROLL up, roll up – the circus is in town. More than seven years of waiting are almost over as athletes from 204 countries descend on London town for the Olympics.
While G4S is busy getting hammered over the security for the Games, policymakers I know are hoping the event will lift the British economy at a time when frankly little else is.
My economist friends tell me that our economy probably remained in recession during the second quarter as demand both at home and abroad fell away against a backdrop of uncertainty and fear.
We’ll get official confirmation later tomorrow when the second quarter growth estimate is published. Whatever the number, insiders at the Treasury are saying they expect to see virtually no growth this year and are hoping instead for a better 2013.
The International Monetary Fund seems to agree. Even with a small boost expected from the Olympics, the IMF expects the British economy to grow by just 0.2pc this year. Its latest set of forecasts for the global economy saw Britain’s prospects downgraded by the biggest proportion of all major economies.
As we have heard time and again, the Government is unwaveringly committed to austerity, but business groups are getting frustrated with George Osborne’s lack of vision for the economy and want to see more pro-growth measures.
The Bank of England may well roll out the printing presses again in the coming months. Economists tell me they are expecting more quantitative easing, on top of the £375bn already committed.
Of course, the biggest threat to a global recovery remains the eurozone crisis and I’m told that recent steps taken to stimulate some of the region’s worst-hit economies are likely to be repeated.
Measures to relieve some of the immediate tensions in Spain’s stricken banking sector have been agreed, but fears are now escalating that the sovereign itself will need a bailout.
Further afield, China has also signalled that it is prepared to deploy more stimulus measures in a bid to halt the slowdown in the world’s second largest economy.
The main action in commodities has been in agriculturals, as blazing hot weather looks likely to hit US crop yields substantially. In the last six weeks, corn prices are up about 40pc, with wheat prices rising 20pc.
Although the hot weather looks likely to continue, I would be cautious about chasing the Bull Run. Agricultural markets can whipsaw very quickly and it’s very easy to accumulate losses. Would you bet on the prospect of rain?
Oil also continues to recover despite the moribund global economy and an apparent glut of oil around the world. The prospect of more QE in the US is likely to have sparked this, but Ben Bernanke has hinted at no immediate quantitative easing.
The oil price could still be hit by other factors though. The dollar, for example, usually rises in a US election year – something which is likely to be repeated. This is usually negative for commodity prices.
That’s all for now. Here’s hoping for some British medal success on the track, field and in the pool over the next two weeks. I’ll certainly be there – wearing a Pepsi t-shirt and eating a KFC. I can’t wait to see the look on Lord Coe’s face.
Until next time…
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