Decision-makers, be they in business or public policy, will struggle in 2023, not least because no clear trends appear to have emerged.
After narrowly escaping a financial accident, the global economy is poised to slow significantly in the first months of the year as interest rates continue to rise and inflation remains far from beaten. At the same time, regional economic divergence is increasing. The world remains a very unbalanced place and supply chain uncertainty is at its highest in many years.
Growth is set to slow down in the UK in 2023, more than in its developed market peers. Consumption and services look better than manufacturing, but the latter is usually a leading indicator, which means we could yet see a slowdown. The Windsor framework, if implemented, can significantly improve the longer-term outlook.
After several months of dismal performance, consumption in the UK has unexpectedly picked up. However, we remain sceptical about the sustainability of this trend.
Unemployment is low but job vacancies remain very high. This means that there aren’t enough skilled workers to fill in jobs. Market forces alone are proving insufficient to solve this issue, especially in a climate of economic uncertainty, which may require a more systemic approach to resolve.
As global economies diverge, the Bank of England has signalled that it's close to, or even possibly at, the end of its rate hike cycle. However, the course is far from linear, and the decisions of other central banks, as well as global inflation will continue to influence UK rates.
Inflation is falling, albeit at a slow pace. Consensus expects less than 7% inflation by the end of 2023 and less than 3% by the end of 2024. The road to getting there, however, will probably not be a smooth one.
Real estate is set to slow down, as consumers are pressured and the number of office workers is reduced. However, as long as interest rates level off and supply remains constrained, we expect the damage to be contained.
Last year, windfall energy profits lifted British businesses. However, this year is projected to be difficult in terms of bottom-line earnings, as rising wages and lower demand put pressure on profits.
On Wednesday 29 March, join our Chief Economist and Chief Investment Officer as they discuss the current economic landscape, including the rise in inflation rates and high market volatility following the closure of Silicon Valley Bank and the takeover of Credit Suisse.
The last quarter of the year saw some relief for investors who had been hit from all sides throughout 2022 as markets rallied on the belief that the economy was perhaps showing enough signs of stress to persuade central banks to consider slowing and then stopping interest rate rises. Central banks, for their part, remain consistent in their messaging that markets may be overoptimistic.
In this quarter’s investment outlook, our Chief Economist George Lagarias shares his thoughts on the impact the markets are having on businesses, and if we are reaching a tipping point. George also shares his thoughts on the Global UK and US economies.
In this quarter’s investment outlook, Chief Economist George Lagarias shares his thoughts on the paradigm shift and what it means for portfolios and businesses. In addition, George provides us with an economic outlook for the UK, Europe and the US.
Join our Chief Economist and Chief Investment Officer as they discuss the global economy, inflation, interest rates, and the investment landscape.
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