Just been to hear Mark Berrisford-Smith, Chief Economist at HSBC, give a talk on the prospects for economic recovery.
Mr. Berrisford-Smith, an excellent and amusing speaker, immediately endeared himself to the audience by comparing the world of global finance to a ‘bunch of neurotic sixteen year olds’. He was talking about reaction to the news of the tapering off of quantitative easing, but you got the feeling that he found the endless cycle of hyper-enthusiasm and bottomless-misery pretty tedious.
As you would expect, he took a balanced view of global prospects. Things are improving gradually – even in Europe – but we shouldn’t expect a magic return to pre-2008 levels of growth. One point he made very forcefully was that the BRIC countries are not going to grow at astronomical levels forever. The days of 10% annual growth are over: wages are rising; there are infrastructure investment costs – the ‘new’ economies are maturing.
The UK has surprised everybody, including Mr. Berrisford-Smith, by its strong performance, but he expressed real concerns that growth is too dependent on housing and general consumer spending. Sound familiar? He thinks it could be five years before we return to normality and stability.
At least unemployment is better than anticipated in the UK, at 7.8% and heading down. But it’s in double digits right across the EU. This is one of the problems with the optimism of Sr. Barroso, President of the European Commission, which I wrote about yesterday. Unemployment, and the associated political swing to hard right parties, creates real danger for the EU project.
Mr. Berrisford-Smith believes that the forthcoming Asset Quality Reviews of major European banks (part of the process of their coming under the supervision of the ECB), will put pressure on the Eurozone once more, by revealing shortfalls in the balance sheets of banks around the continent. But he thinks the fallout will be manageable.
During questions at the end of the session, I asked him how his forecasts would be affected if the UK voted to come out of the EU. To my surprise, he didn’t seem to think there would necessarily be much effect at all! He wouldn’t change the forecast if the UK left; but then, as he wisely observed, ‘nobody knows.’