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31 January 2012

The monkeys discuss Apple Inc, the Eurozone and which stocks to make the most of the energy situation.

Find out what The Wise Monkeys are keeping their eyes on in the investment jungle in our fortnightly investment programme.

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Tuesday 31 January 2012

Comparing the US and UK Economies

Dr Stephen Barber who advises Selftrade on economics and markets comments:

By way of confirmation of the new positive trend over the Atlantic, the latest US growth figures contrast sharply with those closer to home. The United States economy grew at 2.8% during the last quarter of 2011, compared to a small contraction in the UK economy over the same period. While stockpiling underpinned the expansion in GDP, consumer spending improved noticeably. At home, consumer confidence remains muted, pessimism driven by fears of Eurozone failure.

This recovery (such as it is) from recession has been unusual in that it was led, not by the States, but rather from these new emerging economies with China at their head. It has taken a long time for the American sleeping giant to stir but it is worth remembering that while growth is much lower than the sometime double digit expansion seen in the likes of China and India, this is the biggest national economy in the world. As such, 2.8% growth represents a huge amount of dollars pumped into the world economy. That might not be quite enough to offset the effects in Britain of recession in Europe, but it will be a much needed counter balance.

Of course the global economy itself is vulnerable to Europe. After all, the Emerging countries rely on developed economy export markets. And many analysts are currently keeping a watchful eye on the Gulf where political instability threatens oil supplies and therefore prices. But the United States has (at last) something very positive in its favour.

It is unclear if Britain faces the prospect of recession this year. We only need this quarter to be negative, for technical recession to have occurred. But worse than simple contraction, the British economy is experiencing output below that at the peak of the boom. And it is the same story across the Eurozone. Not so in America. These latest GDP figures take the economy above pre-crisis levels. While the downturn continues to represent a permanent loss of output, growth represents a return from the brink of a lost decade.

Only time will tell if Britain can enjoy a return to growth similar to that in the US. Pressures are finely balanced but an expanding America can only be good news for prosperity closer to home.