Economic Views

Economic & Strategy Viewpoint - June 2015

In this month's viewpoint Schroders economists investigate the impact of lower global growth, the risks of UK wage inflation on interest policy, and the potential fallout of a Greek exit from the eurozone.


Keith Wade

Keith Wade

Chief Economist & Strategist

Azad Zangana

Azad Zangana

Senior European Economist and Strategist

Craig Botham

Craig Botham

Emerging Markets Economist

  • Learning to live in a low growth world
  • Is UK wage inflation becoming a risk?
  • Minimal economic impact from Grexit

The square root recovery (page 2)

Some five years on from the world economy’s initial rebound in 2010 and it is clear that we are operating in a growth environment best described by a square root sign.

The initial U-shaped upswing has given way to a world of flat 2.5% growth, well below the performance prior to the financial crisis


Near-term we see signs of better activity in the developed world with US consumers spending again and Europe and Japan reviving.

These trends bode well for the second half of the year and may continue into next if emerging market export growth responds.

However, the comparison with the pre-crisis world highlights the absence of a global locomotive and means that we are unlikely to break with the square-root recovery.

UK: Labour shortages risk higher inflation (page 5)

Warning bells are ringing. Labour market indicators suggest the supply is becoming tight as corresponding wage data is now accelerating.

In some more labour intensive-sectors, wage inflation is already alarmingly high.

Despite the mounting evidence that wage inflation may become a problem, the Bank of England remains relaxed.

This may change later this year as more evidence emerges, but at the same time, with current inflation barely above zero, can the Bank really hike interest rates in 2015?

The prophesies of Delphi: would Grexit topple EM? (page 10)

While we see little macroeconomic impact on the eurozone from the possibility of Grexit, we have not yet looked at the consequences for EM.

Direct linkages are limited, but there is always the risk of contagion.

Views at a glance (page 14)

A short summary of our main macro views and where we see the risks to the world economy.