World economies In the broker’s latest
Economic Review Bootle says that although the American industrial sector may be past the worst, the slowdown is moving into the second and potentially more serious phase in which consumers will finally wilt under the twin weights of higher unemployment and falling wealth. He expects the US economy to contract by 1% in 2002.
The Japanese economy remains caught in a deflationary spiral, says Bootle, whilst the global slowdown in hi-tech investment spending has hit the Asian Tiger economies hard. China is less exposed to such forces but will suffer too and Latin America remains a serious concern.
The UK, on the other hand, is forecast to fare much better than its major competitors this year, even if the economy does not escape unscathed. Deloitte & Touche predict that the UK is likely to be the G7’s best performing economy in 2002 – as it was in 2001.
Strain on jobs Staff numbers are likely to be cut even more severely during 2002 than last year, as Bootle warns that the state of balance sheets may force many firms to be ‘ruthless’. However, even this is unlikely to prevent profits from falling and optimistic estimates for company earnings are likely to be disappointed, says the broker, somewhat grimly.
Outlook The report concludes that although 2002 will disappoint many hopes for stronger output, the stage will be set for recovery in 2003.
