UK-based investment manager Schroders is likely to downgrade its global growth forecast for next year, which currently stands at 2.9%.
According to the firm’s chief economist, Keith Wade, there are a number of reasons why growth might disappoint next year. The fall in commodity prices, in particular oil, was expected to create greater demand but this has not happened. The revised growth figure is expected to be around 2.5%.
Wade also points to disappointing growth in China, his firm believes that the true level of growth will be around 6%, rather than the official figure of 6.9%. He adds that China is promoting deflation by exporting its excess capacity, this being one of the reasons that British steel firms are struggling to compete in the world market.
In the US, the effects of the contraction in the shale gas industry have offset part of the benefits to GDP of falling oil prices. US consumers are using the extra income from falling petrol prices on purely domestic services such as eating in restaurants rather than spending it on goods that might give a lift to world trade.
However, the firm does expect interest rates to rise slowly, forecasting rates of about 1% by the end of 2016 and 2% by the end of 2017.
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