As I See It

Osborne may need a new cocktail for economic growth

Terry beardGeorge Osborne has swapped his sunny disposition for a face like thunder. His stark warnings today on the global economy, couched in the sort of language he rarely utters, contrasted with the optimistic outlook in his autumn statement just six weeks ago.

His change of mood cannot be down to getting the wrong sort of socks for Christmas. Maybe somebody sneaked a copy of the latest report on the Chinese economy into his stocking. It would not have been the most entertaining festive read.

China is slowing more quickly than it has previously admitted and is talking about shifting the emphasis from manufacturing to services. No wonder the world’s trading desks took fright and wiped billions off company values.

No one remembers President Xi making any mention of this when Mr Osborne and Prime Minister David Cameron hosted his visit to Britain in October. Unless, of course, Mr Osborne thought it better to get the autumn statement and Christmas out of the way first before issuing his gloomy prognosis.

He is not alone in seeing the dark clouds gathering. Billionaire investor George Soros told an economic forum in Sri Lanka today that China is struggling to find a new growth model and its currency devaluation is transferring problems to the rest of the world.

Almost $2.5 trillion was wiped from the value of global equities this year through Wednesday, and losses deepened in Asia this morning  as a plunge in Chinese equities halted trade for the rest of the day.

Soros says there is a major adjustment in process and warned that challenge is similar to the crisis in 2008.
Together with a slump in oil prices to an 11 year low, stagnant growth in manufacturing and rising consumer debt at home, it certainly begins to add up to the “cocktail of new threats” that Mr Osborne described.
Political and economics analysts will now be looking for clues to a shift of direction by the Chancellor. Thus far he has poured scorn on those who have challenged the austerity strategy, but he may need to look at stimulating investment and propping up the public sector if the private sector stalls any further.

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