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Schroders to downgrade forecast for global growth

19/11/2015

At Schroders International Media Conference held in London today, Keith Wade, Chief Economist, announced that Schroders’ global growth forecast for 2016, which currently stands at 2.9%, is likely to be downgraded in Schroders’ next Economic & Strategy Viewpoint, due to be released at the end of this month. There are a number of factors that point towards disappointing growth in 2016:

Schroders’ Chief Economist, Keith Wade, commented:

“We thought the fall in commodity prices – particularly oil – would create stronger demand and, as we approach 2016, that we would see more growth, but that doesn’t seem to be coming through. The world economy seems to be stuck with growth around about 2.5%.”

One of the key factors will be disappointing growth in China; Schroders believes that the true rate of growth in China this year will be somewhere around 6%, rather than the official figure of 6.9%. This does not represent a hard landing, although it does signify that prospects for China will remain dull unless there is significant stimulus. Wade also mentioned that China is promoting deflation by exporting its excess capacity, which is one of the reasons why British steel firms are struggling to compete in the world market.

In the US, the effects of the contraction in the shale gas industry have offset part of the benefits to GDP of falling oil prices. Whilst there is evidence that the US public is spending the gains of falling petrol prices, most of it is focused on domestic services such as eating out, rather than goods that might have given a lift to world trade.

The weakness in the global economy is reflected in global trade running at less than a third of the normal level, according to Keith Wade. Given the weak recovery in many countries, he expects that the US Federal Reserve will be cautious about raising interest rates.

Schroders expects interest rates to rise slowly, forecasting rates of about 1% by the end of 2016 and 2% by the end of 2017.

For further information, please contact:

Estelle Bibby, Senior PR Manager, Schroders         

Tel: +44 (0)20 7658 3431 / estelle.bibby@schroders.com

Charlotte Banks, PR Manager, Schroders

Tel: +44 (0)20 7658 2589 / charlotte.banks@schroders.com

Notes to Editors

For trade press only.  To view the latest press releases from Schroders visit: http://ir.schroders.com/media

Schroders plc

Schroders is a global asset management company with £294.8 billion (EUR 400.0 billion/$446.5 billion) under management as at 30 September 2015.  Our clients are major financial institutions including pension funds, banks and insurance companies, local and public authorities, governments, charities, high net worth individuals and retail investors.   

With one of the largest networks of offices of any dedicated asset management company, we operate from 37 offices in 27 countries across Europe, the Americas, Asia and the Middle East.  Schroders has developed under stable ownership for over 200 years and long-term thinking governs our approach to investing, building client relationships and growing our business.

Further information about Schroders can be found at www.schroders.com.

Issued by Schroder Investment Management Ltd, which is authorised and regulated by the Financial Conduct Authority.  For regular updates by e-mail please register online at www.schroders.com for our alerting service.

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