Henry’s editor, PD Jonson, has been looking into his crystal ball to see what the markets will be doing during 2007: “My instinct is to say ‘growth will be slower but still strong’ — and the risks are possibly lower.”
His article, “The Economic Outlook — 2007”, reports that the world’s most robust economies will more than likely continue their impressive growth and expansion.
“China is booming and shows no clear signs of slowing, though the authorities are trying to achieve this. Chinese deflation is slowly but surely turning into inflation, and this will make continued strong overall growth more difficult to sustain.
“India is also growing quickly, and has become large enough to matter to the global outcome.
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“Russia and Brazil — two neglected economic powers — are also growing rapidly. Russia is boosted by exports of oil and natural gas, and Brazil is rapidly building a large manufacturing base.
“Japan has consolidated its recovery and has a newfound confidence to bolster its cautious economic reform agenda.
“The tigers of South East Asia are benefiting from China’s massive growth and Japan’s cautious progress.
“Europe seems content to travel at a moderate pace in second gear, but Europeans long ago learned that slow and steady can win the race.
“The big question concerns the immediate future of the mighty USA. Here the pessimists are in the ascendant. US interest rates have risen more than in any other nation or group of nations as the US Fed has sought to nip inflation in the bud. But interest rates have risen around the world, as central banks lean against the boom of commodity prices, including oil and gas in the hope of containing inflation more generally.”
And in what will be bad news for home buyers, Henry’s editor concludes that we will most likely see further interest rate rises.
“Central banks always have a bias to action that is ‘too little too late’, although this bias is surely less than it was when it was politicians who were required to take pre-emptive action. How much interest rate hikes so far slow the various economies, and whether further rate hikes globally are required to restrain inflation, are the key questions for central bankers (and other economic forecasters) in late 2006.
“My money is on the proposition that there is still a fair bit of inflationary momentum in the global economy and that further rate hikes will be needed.
“The slower but still strong growth predicted for the year ahead might be accompanied by further rate hikes in 2007 and even slower growth in 2008.”
Read more at Henry Thornton.