The World Economic Forum in Davos was “the first barometer of global sentiment” at the start of a turbulent year, Mehreen Khan said in The Times.
The event was dominated by politics – particularly the war in Ukraine and the Gaza Strip. Unlike in recent years, central bankers are “lacking,” said the newspaper's economics editor: only the president of the European Central Bank, Christine Lagarde, is planned, while her counterparts from the USA, Great Britain and Japan stayed away. Meanwhile, any complacency about overcoming inflation in richer economies seems premature.
“After months of moderation in price increases, inflation in Britain unexpectedly rose to 4% in December, said Kate Beioley in the Financial Times. The culprit appears to be “a rise in tobacco prices following a recent tariff increase.” But it has revived concerns among economists about the potential impact of an external shock.
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“Living in a new reality”
Concerns center on the disruption by Yemen's Houthi rebels of a vital shipping route through the Red Sea, used by 12% to 15% of global trade, Dearbail Jordan said on ` Business. Large shipping companies relocate their ships around Africa; But there is no reason to panic yet, says Mohamed El-Erian, Allianz's chief economic advisor.
“In absolute terms” the disruption is “nothing compared to what we had in 2021 and 2022” when Covid disrupted deliveries, he said. But the situation is still precarious. “We live in a new reality where the supply side of the global economy is much more fragile, meaning inflation trends are greater than before.”
There is similar uncertainty in the price of oil, said Brian Swint at Barron's. Brent crude is up more than 2% year-to-date but is relatively stable at around $79/barrel. Contradictory factors play a role.
“Concerns about attacks on tankers in the Red Sea” have so far been trumped by broader worries about a slowdown in global energy demand. That could easily change.
“Feel-good factor”
“Everyone has a plan until they get punched in the face,” boxer Mike Tyson once remarked. The Prime Minister should take this into account when considering the timing of the next election, Liam Halligan said in the Sunday Telegraph.
Rishi Sunak plans to wait as long as possible “in the hope that repeated interest rate cuts and a steady easing of the cost of living crisis” will create a “feel-good factor” in 2024, said Halligan, also GB News business and economics editor.
But there is a growing risk of being hit by geopolitics. The expansion of the conflict into the Strait of Hormuz – the route for around 25% of hydrocarbons consumed daily and “the windpipe of the global economy” – could prove to be a real “bottleneck”. The international risks have increased significantly – “and could soon turn British politics on its head”.
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