Points and views of the current economic climate.
September 23, 2008
Central banks have not been implementing enough “tough love” to try to cure their economies’ woes, particularly in light of the credit crunch.
Surging food and energy prices have been matched by higher import costs for the West, with manufacturing costs in the East rising and that cost being passed on to consumers.
The ECB has raised rates to try and counter the problem of inflation and the demon of stagflation. However, other central banks have failed to follow suit.
The US and UK are in a much tougher position, with high levels of debt undercutting the central banks ability to raise interest rates without stalling the economy altogether.
We can expect Europe to be more robust than emerging markets due to its stable wage base and diversified economy.
Emerging economies are already surpassing developed economies in terms of growth.
Global brands such as Cocacola and Colgate-Palmolive are expanding into these flourishing consumer markets.
Less familiar names outside of consumer brands pose attractive investment opportunities, particularly in infrastructure-related industries.
Dollar weakness has boosted demand for US export produce, up 13.2% annually.
Future growth in emerging markets could be influenced by a western-based slowdown, depending on whether de-coupling actually happens.
US companies will have been encouraged by data showing the US economy grew much faster in the second quarter of 2008 thanks to international trade.
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