Helping you navigate the new normal
Everyone will now lose out as China’s real estate bubble continues to burst. The speculators who bought apartments they couldn’t afford will go bust. The new capacity built to supply the bubble will have to close down. And the millions of people who invested in China’s “growth miracle” will lose their shirts.
Japan has wasted trillions of yen with its failed stimulus programmes. Had it devoted even a tenth of this money to developing a proper Retraining programme for people in their 50s/60s, it wouldn’t now be facing a major debt and currency crisis. The rest of the Western world needs to rapidly learn from its mistake.
‘Business as usual’ has been a great strategy for the past 40 years. But nothing lasts forever. It has now – like the central banks’ stimulus policies – hit the inevitable brick wall.
Please join me for my free ACS webinar on Thursday, December 15, 2022 @ 2-3pm ET.
The World Cup runs till December 18. That’s a long time for Chinese viewers to ask themselves “Why am I still locked down, when the rest of the world is living a normal life again”? And in the background, the real estate bubble continues to burst.
Underlying growth has been slowing since 2000 as more people joined the Perennials generation. Now, the bursting of the central bank stimulus bubbles – combined with the impact of Russia’s invasion – will likely cause the global economy to go ex-growth.
The chemicals industry is a bellwether for the global economy and its message couldn’t be any clearer:
A severe global recession is imminent.
Russia’s invasion is a major wake-up call about the danger of assuming business will always be “as usual”. The window for investing in future growth is starting to close. As Hemingway warned in “Fiesta”, major changes (such as Net Zero) occur “gradually, then suddenly”.
Truss will be the first UK premier since Churchill to operate without the Queen in support. And as Robert Shrimsley had already noted in the Financial Times: “Few would envy Truss this moment. She is going to have to be one of the great premiers just to be a merely good one.”
It’s going to be a very difficult winter. Most of the world will be impacted as Europe bids up energy/food prices to keep its people warm and fed. And it would never have happened if policymakers had recognised the importance of geopolitics, energy markets and demographics.
As the head of Germany’s Employers’ Associations warned last month: “We are facing the biggest crisis the post-war Federal Republic has ever had. We have to be honest and say: First of all, we will lose the prosperity that we have had for years”.
Millions of people around the world are already having to cutback on buying food for their families due to today’s high prices. By wintertime, the risk is that they will have to choose between buying food or heating their homes.
The US is moving into recession as the Atlanta Fed chart confirms. Chemicals have been warning of this for some time. But policymakers and commentators remain in Denial about the economy. They prefer to focus on their computer models, and ignore the real world outside their window.
But now, the bubble is starting to deflate, as the zero-Covid policy cripples the economy. GDP grew just 0.4% in Q2. Beijing is issuing record amount of debt, but confidence has gone. Prices for unsold apartments are being discounted. And developers’ cashflow is being hit by mortgage strikes for unfinished apartments.
We are facing a perfect storm of global food, energy and financial crises set off by the war in Ukraine. Analysts need to stop focusing on monetary policy and the inversion of the yield curve. They need to look out of the window and start dealing with the geopolitical reality of Putinflation.
Please join me for the next ACS Chemicals & Economy webinar on Wednesday, at 2pm Eastern Standard Time, USA,
The market downturn couldn’t have come at a worse time for Apple. It was already facing major supply chain chaos in Q2. And now it has to face a major decline in the smartphone market itself. Inevitably this will lead to a brutal battle for market share as companies struggle to survive.
Central banks and investors believed stimulus programs had created a “New Paradigm” where asset prices would always increase. Now they are starting to realise that stimulus is irrelevant against the 3 Horsemen of the Apocalypse – China’s continuing battle with the pandemic, Russia’s invasion of Ukraine, and potential famine as rising gas/fertilizer prices mean farmers can’t afford to grow their crops or feed their animals.
Energy and financial markets are exacerbating the risks ahead. Oil prices at current levels – as the chart confirms, they now account for more than 3% of global GDP – have historically led to recession as the chart shows. The reason is that consumers have to cut back on their discretionary spending, which drives economic growth, in order to heat their homes and travel to work and school. Today’s high levels of natural gas prices add to this risk.
We are facing a K-shaped recession. Companies and investors have a difficult time ahead. They not only have to navigate a potentially major downturn. But they also have to completely reposition their portfolios for the New Normal world that will follow.
These are difficult times, and there is no guarantee that they may not get worse. But they also remind us of the critical need to move beyond the Age of Oil, and develop more sustainable energy resources for the future.
The issue is simply that investors are in a state of Denial. And so there is a growing risk of a financial crisis as reality finally dawns on them.
Recession may also burst today’s asset price bubbles in stock markets and housing prices – and even in more obscure assets such as art markets.
The transformation period is a wonderful opportunity to reset the clock and start a new race.
The Federal Reserve can’t control the fallout from the bursting of China’s ‘subprime on steroids’ real estate bubble
Companies moved away from simply providing products – valuable though these were – to instead provide solutions to the pressing problems created by the need to move to Net Zero
Central banks thought they could overcome demographic pressures from ageing populations by printing bucket-loads of money at zero interest rates to support housing and stock markets. Now they are finally realising this was wishful thinking.
Autos are going through a genuine transformation, just as a caterpillar transforms via the chrysalis stage into a butterfly
The argument over the N Ireland Protocol creates the risk of a trade war developing between the UK and EU
Flooding in China and Europe, record temperatures in the USA, wild fires – all these are signs that climate change is accelerating. After all, the world has gone from 2.5bn people in 1950 to 7.9bn today. That must have an …
Auto industry provides a model for the transition to Net Zero Read More
The floods raging in Germany and Benelux highlight the scale of the Climate Change challenge ahead. Last week, Europe announced its roadmap towards a Net Zero economy. It emphasised that achieving Net Zero, even by 2050, will be impossible if we don’t start now. As the Commission noted in presenting the strategy: “Climate change is
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Governments have failed to properly protect their populations from the pandemic. Some have actively encouraged it, the rest have simply been incompetent. Today, their failure to vaccinate the world means poorer countries are now acting as a petri-dish – enabling …
The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the …
The blog’s 14th birthday – and the New Normal world it predicted has arrived Read More
Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard Time, USA, when we will discuss: How businesses can be more successful by taking a more holistic view of the environment in which they operate How companies are refocusing due to the shifts in consumer demand and the
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The pandemic has reminded us of the critical role played by vaccination in our lives. Its impact began 225 years ago today with Dr Edward Jenner’s discovery of smallpox vaccination. It literally changed the world. And today, we have a new opportunity to reshape our world. Please click here to download a more detailed PDF
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Major new opportunities are starting to appear in today’s New Normal world, as I describe in a new analysis for the Institution of Chemical Engineers. Please click here to read the full article. We are set to enter a “New Normal” world as economies slowly reopen again with the arrival of Covid-19 vaccines. This will
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A year ago, many were suggesting the lockdowns might produce a “baby boom” as couples spent more time together. But early data suggests the world is instead seeing a “baby bust”. As Nikkei Asia reports: “Births (in December/January) have fallen between 10% and 20% in such countries as Japan, France and Spain — and even
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The pandemic has reminded us of the critical role played by vaccination in our lives. But few realise the enormous impact made just 200 years ago by Dr Jenner’s discovery of smallpox vaccination. It literally changed the world. And today, we have a new opportunity to reshape our world. Please click here to download a PDF
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One of the good things to happen in the pandemic over the past year is that ‘cooking has become the new commute’ for many people. Working from home means they have often saved an hour or more a day in commuting time. And instead of sitting in a crowded bus or train, or being stuck
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Every now and then, people wake up to the fact that debt is only good news when it adds to growth. Otherwise, it simply destroys value. China is usually the case study for this analysis, as the chart confirms. It shows the rise in debt from 2002, when official data begins, versus the rise in
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The Brexit debate has always been about politics, not economics. So it was no surprise that December’s UK-EU Trade & Cooperation Agreement (TCA) was the first trade deal in history to actually increase barriers rather than reduce them. The reason is that Brexiters are focused on a very narrow concept of “sovereignty”. And last week’s
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“The challenges posed by plastics are to a large extent due to the fact that our production and consumption systems are not sustainable. “The COVID-19 pandemic and climate change have amplified public attention for the plastic waste crisis we face. “It is clear that the best way is to shift to a fundamentally sustainable and
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Most companies had closed when the new EU-UK Trade and Cooperation Agreement (TCA) was finally announced on Christmas Eve. And they are only now starting to get their heads around what it all means. Essentially, it creates the biggest shake-up to the UK’s trading relationships since 1973. As the BBC’s Economics Editor reported: “It is
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(Picture credit Shutterstock) A. Article 50 of the Lisbon Treaty set out the rules for leaving the European Union. As with most negotiations, it assumed the leaving country would present its proposals for the post-withdrawal period – which would then be finalised with the other members. But the UK government has little experience of trade negotiations, as these
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Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard Time, USA, when we will discuss: How US trade and other key policies will likely change when President-elect Biden takes office? What is happening with international debt, and how will this impact financial markets? What is the new
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Volatility has begun to rise in oil and bond markets, as we expected. China’s upcoming ‘Vision 2035’ seems likely to prove a major game-changer for its economic model over time.
Companies have entered a new landscape where the coronavirus has accelerated major paradigm shifts, as I discuss in my latest analysis for ICIS Chemical Business. 2020 is proving to be one of those years when time seems to speed up. The pandemic has been the catalyst for a range of paradigm shifts, which are
I spent from September 2015 onwards, during the last US Presidential election, trying to explain why Donald Trump was likely to win. As I noted after the event in November 2016: “It really wasn’t very difficult to see that Donald Trump could win the White House, and that the Republicans could control Congress, for the
Governments spent most of February/March ignoring my warnings here on the dangers posed by the Covid pandemic. Now many are moving in the opposite direction. Unintentionally, they are helping to create fear and panic, which could well lead to another Great Depression and major social unrest. HOW DID WE GET HERE? I began warning of
Last Wednesday, I gave the opening presentation for the ICIS PET Conference and looked at whether the global economy is seeing a Rebound or a full Recovery after the lockdowns? It covered a wide range of topics: Chemicals’ Capacity Utilisation is the best leading indicator for the global economy, and it continues to weaken Central
I warned before the June 2016 Brexit referendum that Brexit was all about politics, and Boris Johnson’s bid to become prime minister: “All the evidence suggests that his real motive for deciding to lead the Leave campaign was that – win or lose – this would make him the likely successor to David Cameron as
The chemical industry is the best leading indicator for the global economy. On Friday, I had the privilege of discussing a wide range of key issues with Ajaya Sharma in a lunchtime interview for India’s main business station, ET Now. Our interview focused on a number of critical areas and why the future is going
Oil prices have moved into another ‘flag shape’ – which previously provided critical warning of the March collapse, and of those in 2014 and 2008. The shape is important as it means the bulls and bears have been battling each other to exhaustion, making it likely one or the other will give up. This time,
Governments, financial markets and central banks all originally assumed the Covid-19 pandemic would be over in a few days or weeks. But it is now clear they were wrong. And unfortunately, there is little sign of a Plan B emerging. The idea was that consumers would have plenty of money in their pockets after the
Most people missed the fact that last Tuesday was the last possible date to delay the UK’s exit from the EU at the end of the year. Yet as Germany’s leader, Angela Merkel warned on Wednesday: “To put it mildly, progress in the negotiations has been very limited. I will continue to press for a good
I have been warning about the Covid-19 risk since early February, and in April suggested here that: “None of us have ever seen a health crisis on the scale of Covid-19 . Nor have we seen an economic crisis on this scale before. The best guide to what may happen is therefore likely to be
The global chemical industry is the third largest sector in the world behind agriculture and energy, and its outputs find their way into everything we consume. Paul Hodges, chairman of the pH Report, analyzes the chemical industry to give a unique perspective on the global economy to investors and corporations. In this timely discussion, he
London property websites haven’t used the word “reduced” for many years. But it’s starting to appear again on homes for sale and rent, even in core city postcodes. And in another sign of the downturn, homes can now be on offer for months without moving. The problem is that prices were already ready to tumble
The Financial Times kindly made my letter on the risks now associated with central bank stimulus their Lead Letter One has to agree with your editorial that deflation is now probably inevitable (“Deflation is a bigger fear than hyperinflation”, FT View, April 28). But it is still disappointing to see that the role of central
Something quite dramatic is happening in the global economy. Of course, Wall Street analysts still maintain that the impact of the Covid-19 pandemic will be over by the summer. What else can they say, given their income mostly depends on persuading the public to buy shares? But anyone on Main Street knows that it will
Many companies and investors are still comparing today’s downturn to the 9-month hiccups seen after the 1990/91 Gulf War and the 2000/1 dotcom crash. In reality, however, this is wishful thinking, as the IMF highlighted last week in its World Economic Outlook: “The Great Lockdown: Worst Economic Downturn Since the Great Depression” One key question,
The head of the IMF has warned again on the likely scale of the economic depression ahead: “Global growth will turn sharply negative in 2020. In fact, we anticipate the worst economic fallout since the Great Depression.” None of us have ever seen a health crisis on the scale of Covid-19 . Nor have we
It is now 3 months since China’s state television broadcast the first news of the Wuhan virus, now known as Covid-19. And it is almost 3 months since China released the first genetic sequence for the virus on 9 January. But with certain notable exceptions, governments since then have mostly failed to properly activate their
Contingency planning has become mission-critical. The longer the coronavirus pandemic continues, the more it will expose the underlying fragility of today’s debt-laden global economy. Companies therefore have to move into crisis management mode, with a number of key areas requiring immediate attention: • Employee health and safety is the top priority. Governments are slowly waking
China is the world’s largest market for smartphones and autos – responsible for c30% of global sales for both. Yet as Reuters notes: “Most western policymakers and journalists view the world economy through a framework that is 10-15 years out of date, failing to account fully for the enormous shift in activity towards China and
Beijing has a population of 21.5 million, but you wouldn’t know it from this BBC video from last Thursday. Normally busy streets and transport systems are eerily empty, with food deliveries often the main traffic on the roads. It’s the same picture in industry, with the Baidu Migration Index reporting only 26% of migrant workers
China’s industrial heartland of Hubei (pop 59m) and its capital Wuhan (pop 11m) have now been locked down for nearly a month as a result of the coronavirus COVID-2019 epidemic. In total, more than half of the population (760m) are …
Financial markets head for (another) train crash as coronavirus starts to impact Read More
Last month, our Hong Kong-based pH Report colleague, Daniël de Blocq van Scheltinga, warned of the “Possible development (epidemic?) of the Wuhan SARS like illness, and economic impact?” His current view of developments, and their likely impact, is as follows: Hubei, …
Coronavirus disruptions make global recession almost certain Read More
A. Article 50 of the Lisbon Treaty set out the rules for leaving the European Union. As with most negotiations, it assumed the leaving country would present its proposals for the post-withdrawal period – which would then be finalised with the other members. The UK government, however, has still not yet set out its post-Brexit
The IMF has now confirmed that the world economy has moved into the synchronised slowdown that I forecast here a year ago. Its analysis also confirms the importance of the issues highlighted then, including “rising trade barriers and increasing geopolitical tensions”, a sharp decline in manufacturing, contraction in the auto industry and structural forces such
Finally, after three and a half years, the UK has reached “the end of the beginning” with Brexit, in Winston Churchill’s famous phrase. Since the referendum, its leaders have consistently refused to confront the real choices that have to be made over what type of Brexit it wants to have: In June 2016, then premier
Please join me for the next ACS Chemicals & Economy webinar on Thursday, at 2pm Eastern Standard Time, USA, when we will discuss: The contrast between the downbeat outlook for the chemical market and the upbeat stock market The challenges facing US shale gas polyethylene exports due to the US-China trade war and concerns over
The UK is about to go to the polls again to try and decide the Brexit issue. Chemicals will be one of the industries most affected by the decision, as it depends on cross-border supply chains. As the UK Chemical Industries Association has warned: “The chemical industry in the UK and in Europe needs a
Whisper it not to your friends in financial markets, but the global economy is moving into recession. The US stock markets keep making new highs, thanks to the support from the major western central banks. But in the real world, where the rest of us live, the best leading indicator for the global economy is
It is now 8 years since John Richardson and I published our 10-year forecast for 2021 in Boom, Gloom and the New Normal: How the Western BabyBoomers are Changing Demand Patterns, Again’. Remarkably, its core conclusions are very relevant today, as the summary confirms. Unfortunately, as we feared, policymakers refused to junk their out-of-date models,
MY ANNUAL BUDGET OUTLOOK WILL BE PUBLISHED NEXT WEEK Next week, I will publish my annual Budget Outlook, covering the 2020-2022 period. The aim, as always, will be to challenge conventional wisdom when this seems to be heading in the wrong direction. Before publishing the new Outlook each year, I always like to review my
Major paradigm shifts are occurring in the global economy, as I describe in a new analysis for ICIS Chemical Business Over the past 25 years, the budget process has tended to assume that the external environment will be relatively stable. 2008 was a shock at the time, of course, but many have now forgotten the
Canada’s normally pro-UK ‘Globe and Mail’ summed up the prevailing external view of Brexit last week: “We begin this editorial with an apology to you, our faithful readers. In March, we described the Brexit situation, then careening through its third year and nowhere close to resolution, as an “omnishambles. “An omnishambles is a state of
New UK premier, Boris Johnson, said last week that the UK must leave the EU by 31 October, “do or die, come what may”. This means UK, EU27 and EEA companies now have less than 100 days to prepare for a UK No Deal Brexit. That’s less than 70 working days – and even less
After the excitement of Wimbledon tennis and a cricket World Cup final, Londoners were back to their favourite conversation topic last week – house prices. But now the news has become bittersweet as the price decline starts to accelerate. As the London Evening Standard headline confirms: “The London property slump has dramatically accelerated with prices
If a country doesn’t have any babies, then in time it won’t have an economy. But that’s not how the central banks see it. For the past 20 years, through subprime and now their stimulus policies, they have believed they could effectively “print babies”. Even today, they are still lining up to take global interest
The blog has now been running for 12 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the blog’s early forecasting successes This led to the publication of ‘Boom, Gloom and the New
Resilience is set to become the key issue as we look forward to H2, as I note in a new analysis for ICIS Chemical Business. None of us have ever seen the combinations of events that are potentially ahead of us. And none of us can be sure which way they will develop. So it
Never let reality get in the way of a good theory. That’s been the policy of western central banks since the end of the BabyBoomer-led SuperCycle in 2000, when the oldest Boomer moved out of the Wealth Creator 25-54 age group and into the Perennial 55+ cohort. Inevitably this led to a slowdown in growth,
Trade wars, Dieselgate and recession risk are having a major impact on the European auto industry, as I describe in my new video interview with ICIS Chemical Business deputy editor, Will Beacham. One key pressure point is created by the downturn in China’s auto industry. As the chart shows, it has been a fabulous growth
There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and the Economy: 2019 Mid-Year Update webinar for the American Chemical Society. Please join me on Thursday @ 2pm – 3pm Eastern US Time for the webinar, which will be moderated as usual by Bill Carroll, former ACS Chair. Free
There are few real surprises in life, and President Trump’s decision to launch a full-scale trade war with China wasn’t one of them. He had virtually promised to do this in his election campaign, as I noted here back in September 2015: “The economic success of the BabyBoomer-led SuperCycle meant that politics as such took a back
Uber’s IPO next month is set to effectively “ring the bell” at the top of the post-2008 equity bull market on Wall Street. True, it is now expecting to be valued at a “bargain” $91bn, rather than the $120bn originally forecast. But as the Financial Times has noted: “Founded in 2009, it has never made
In my interview for Real Vision earlier this month, (where the world’s most successful investors share their thoughts on the markets and the biggest investment themes), I look at what data from the global chemical industry is telling us about the outlook for the global economy and suggest it could be set for a downturn. “We look at
Thank goodness for backbench MPs and the European Union. Without their efforts, the UK would by now have left the EU without any trade deals, or ongoing relationship with it’s biggest export market. And as the Duke of Wellington said in another context, “It was a damn close-run thing”: In a historic vote, MPs decided
Residential construction work in Qingdao, China. Government stimulus is unlikely to deliver the economic boost of previous years © Bloomberg China’s falling producer price index suggests it could soon be exporting deflation, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog On the surface, this year’s jump in China’s total
With the European Commission saying that a No Deal is now “likely“, small businesses across the UK and EU27 have begun to look forward to the opportunities that it will create, as this 1 April report from Ready for Brexit suggests. Businesses across Europe are thrilled by the uncertainty of Brexit. “We’re absolutely loving it”
The world’s best leading indicator for the global economy is still firmly signalling recession. That’s the key conclusion from the chart above, showing latest data on global chemical industry Capacity Utilisation (CU%) from the American Chemistry Council. The logic behind the indicator is compelling: Chemicals are one of the world’s largest industries, and also one
BASF has been working with Ready for Brexit (the online platform I co-founded last year) as part of its programme to prepare its UK supply chain for Brexit. Here, Ready for Brexit’s editor, Anna Tobin, reports on the workshops that BASF has been running this month for SMEs. The world’s largest chemical business, BASF, has
Companies across the UK and EU27 are realising there are now just 30 working days until the UK leaves the EU on 29 March, and starts to trade on WTO terms. If this happens, every supply chain involving a movement between the UK and EU27 will change. And many supply chains involving movements outside the
The Financial Times has kindly printed my letter below, arguing that it seems the default answer to almost any economic question has now become “more stimulus” from the central bank. After 15 years of subprime lending and then quantitative easing, last week’s warning from the Bank of England suggests there are fewer and fewer economic
Women in most parts of the world are not having enough children to replace our population. This is one of the great issues of our time, but is hardly ever discussed. Yet the issue is very topical, with Chinese births falling to a 60-year low last year. Only 15.23 million babies were born, the lowest
“That couldn’t happen” are probably the 3 most dangerous words in the English language. They mean “I don’t want to think about something that might be painful“. So if you hear MPs saying a “No Deal Brexit can’t happen“, ignore them. They are wrong. ‘NO DEAL’ BREXIT IS THE LAW OF THE LAND The issue
Many indicators are now pointing towards a global downturn in the economy, along with paradigm shifts in demand patterns. CEOs need to urgently build resilient business models to survive and prosper in this New Normal world, as I discuss in my 2019 …
Last year it was Bitcoin, in 2016 it was the near-doubling in US 10-year interest rates, and in 2015 was the oil price fall. This year, once again, there is really only one candidate for ‘Chart of the Year’ – it has to be the collapse of China’s shadow banking bubble: It averaged around $20bn/month
The chemical industry is easily the best leading indicator for the global economy. And thanks to Kevin Swift and his team at the American Chemistry Council, we already have data showing developments up to October, as the chart shows. It confirms that consensus hopes for a “synchronised global recovery” at the beginning of the year
There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and the Economy: 2019 Outlook webinar for the American Chemical Society. Please join me on Thursday @ 2pm – 3pm Eastern US Time for the webinar, which will be moderated as usual by Bill Carroll, former ACS Chair. Free
The Brexit debate had appeared to be a simple game of Snakes & Ladders till now. The Leave campaign landed on the ladders that led to its goal of No Deal, whilst the throw of the dice left Remain on the snakes, tumbling down towards irrelevance. Yet today, at the very last minute, there are
The chemical industry is the best leading indicator for the global economy. And my visit to Singapore last week confirmed that the downturn underway in the Asian market creates major risks for developed and emerging economies alike. The problem is focused on China’s likely move into recession, now its stimulus policies are finally being unwound.
“The UK is now facing a national crisis”, according to Margaret Thatcher’s former Defence Secretary, Michael Portillo, speaking to a dinner in London on Thursday night. Brexit continues to tear the UK apart, and places the economy at greater and greater risk. On Thursday, premier Theresa May had unveiled her draft Withdrawal Agreement with the
A petrochemical plant on the outskirts of Shanghai. Chinese chemical industry production has been negative on a year-to-date basis since February Falling output in China and slowing growth globally suggest difficult years ahead, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Chemicals are the best leading indicator for the
Companies and investors are starting to finalise their plans for the coming year. Many are assuming that the global economy will grow by 3% – 3.5%, and are setting targets on the basis of “business as usual”. This has been a reasonable assumption for the past 25 years, as the chart confirms for the US economy:
I well remember the questions a year ago, after I published my annual Budget Outlook, ‘Budgeting for the Great Unknown in 2018 – 2020‘. Many readers found it difficult to believe that global interest rates could rise significantly, or that China’s economy would slow and that protectionism would rise under the influence of Populist politicians. […]
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Fears are rising about the risks of recession, as I discuss in a new one-page summary of the key issues facing the aromatics industry, ‘What does the future hold for Aromatics?‘. Please click here to download it. These issues will also be key topics at next month’s 17th World Aromatics and Derivatives Conference, jointly organised with ICIS, […]
The post Rising interest rates, volatile exchange rates, high oil prices and plastic waste challenge aromatics industry appeared first on Chemicals & The Economy.
Europe’s petrochemical sector must prepare now for the trade war, US start-ups, Brexit and the circular economy, as I discuss in this interview with Will Beacham of ICIS news at the European Petrochemical Association Conference. With higher tariff barriers going up between the US and China, the market in Europe is likely to experience an influx of […]
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Time is running out for the UK government to agree a Brexit deal with Europe. As my new analysis for ICIS Chemical Business highlights, companies need to move quickly to prepare for the “No Deal” scenario Legendary England footballer Gary Lineker best summarised the general sense of disbelief over the state of the Brexit negotiations when […]
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“The 1950-2000 period is like no other in human or financial history in terms of population growth, economic growth, inflation or asset prices.” This quote isn’t from ‘Boom, Gloom and the New Normal: How Western BabyBoomers are Changing Demand Patterns, Again‘, the very popular ebook that John Richardson and I published in 2011. Nor is […]
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The Financial Times has kindly printed my letter as their lead letter, arguing that the rise of the populists emphasises the risk of continuing to deny the impact of today’s ageing populations on the economy. Sir, Martin Wolf’s sobering analysis of policymakers’ post-crisis decision to “go back to the past”, ( “Why so little has changed since […]
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Last week, the UK’s Foreign Secretary, its chief Brexit negotiator and several junior ministers, resigned. President Trump gave an interview attacking the UK prime minister, Theresa May, and suggesting her policies would “kill” any future trade deal with the US. And the EU 27’s main negotiator on the critical Brexit issue, Michel Barnier, warned: “On both […]
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I was interviewed on Friday about the likely impact of President Trump’s trade wars on the global chemical industry by Will Beacham, deputy editor of ICIS Chemical Business. His interview is below. The introduction on Friday of trade tariffs by China and the US is the first step in a trade war that could turn into […]
The post US-China tariffs could lead to global Polyethylene price war appeared first on Chemicals & The Economy.
The blog has now been running for 14 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the blog’s early forecasting successes This led to the publication of ‘Boom, Gloom and the New
The post The blog’s 14th birthday – and the New Normal world it predicted has arrived appeared first on Chemicals and the Economy.
The blog has now been running for 11 years since the first post was written from Thailand at the end of June 2007. And quite a lot has happened since then: There was the 2008 financial crisis, one of the …
The blog’s 11th birthday – and a look forward to 2021 Read More
Suddenly, businesses across Europe are waking up to the realisation that the UK is currently on course to leave the European Union (EU) on 29 March next year, without a deal on trade and customs. As Katherine Bennett, the UK boss of aerospace giant, Airbus, warned on Friday: “This is not project fear, this is […]
The post Airbus warns of “dawning reality” there may be no Brexit deal appeared first on Chemicals & The Economy.
There will be no shortage of important topics to discuss on Thursday, at my regular Chemistry and the Economy: 2018 Mid-Year Update webinar for the American Chemical Society. Please join me on Thursday @ 2pm – 3pm Eastern US Time for the webinar, which will be moderated as usual by Bill Carroll, former ACS Chair. Free […]
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Is global economic growth really controlled by monetary policy and interest rates? Can you create constant growth simply by adjusting government tax and spending policy? Do we know enough about how the economy operates to be able to do this? Or has something more fundamental been at work in recent decades, to create the extraordinary […]
The post Time to recognise the economic impact of ageing populations appeared first on Chemicals & The Economy.
Chemicals are easily the best leading indicator for the global economy. And if the global economy was really in recovery mode, as policymakers believe, then the chemical industry would be the first to know – because of its early position in the value chain. Instead, it has a different message as the chart confirms: It […]
The post Chemicals flag rising risk of synchronised global slowdown appeared first on Chemicals & The Economy.
The results of the central bankers’ great experiment with money printing are now in, and they are fairly depressing, as the charts above confirm: On the left are the IMF’s annual forecasts from 2010 – 2018 (dotted lines) and the actual result (black) Until recently, the Fund was convinced the world would soon see 5% […]
The post The tide of global debt has peaked: 8 charts suggest what may happen next, as the tide retreats appeared first on Chemicals & The Economy.
There should be no surprise that President Trump has launched his trade war with China. The real surprise is that financial markets, and business leaders, are so surprised it is happening. He was, after all, elected on a platform that called for a trade war, as I noted originally back in November 2016 – and […]
The post Trump’s trade war should set warning bells ringing for every company and investor appeared first on Chemicals & The Economy.
President Trump no longer tweets regularly about new record highs for US financial markets. The tweets were a core activity in the first year of his Presidency, when he was still feeling his way into the job. But now, as last week’s sackings of his Secretary of State and National Security Advisor confirm, his focus has returned […]
The post Trump’s trade war hits Wall Street as tech downturn begins appeared first on Chemicals & The Economy.
Rising life expectancy, and falling fertility rates, mean that a third of the Western population is now in the low spending 55-plus age group. Given that consumer spending is around two-thirds of the economy in developed countries, the above charts provide critically important information on the prospects for economic growth. They show official data for household […]
The post West faces “demographic deficit” as populations age appeared first on Chemicals & The Economy.
Commentators have confused cause with effect when analysing this month’s sudden downturn in financial markets, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Surprise and confusion seem to have been the main reactions to this month’s sudden downturn in western financial markets. Yet across the world in […]
The post China’s role in market volatility – Beijing’s shifting priorities raise questions over assumptions of global growth appeared first on Chemicals & The Economy.
Every New Year starts with optimism about the global economy. But as Stanley Fischer, then vice chair of the US Federal Reserve, noted back in August 2014: “Year after year we have had to explain from mid-year on why the global growth rate has been lower than predicted as little as two quarters back.” Will […]
The post The global economy and the US$ – an alternative view appeared first on Chemicals & The Economy.
We are living in a strange world. As in 2007 – 2008, financial news continues to be euphoric, yet the general news is increasingly gloomy. As Nobel Prizewinner Richard Thaler, has warned, “We seem to be living in the riskiest moment of our lives, and yet the stock market seems to be napping.” Both views […]
The post The return of volatility is the key market risk for 2018 appeared first on Chemicals & The Economy.
‘What is this block of waste plastic doing on an Arctic ice-floe’, thousand of miles from where it was manufactured? Even more worrying is the question, ‘what will happen to it next?’ As David Attenborough’s ‘Blue Planet II‘ programmes have shown, plastic can break down into micro-particles after it has been used. And these micro-particles […]
The post Sustainability now the key driver for plastics industry profits appeared first on Chemicals & The Economy.
China is no longer seeking ‘growth at any cost’, with global implications, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog A pedestrian covers up against pollution in Beijing © Bloomberg China’s President Xi Jinping faced two existential threats to Communist party rule when he took office 5 […]
The post Anti-pollution drive hits China’s role as global growth engine appeared first on Chemicals & The Economy.
“Average UK wages in 2022 could still be lower than in 2008” UK Office for Budget Responsibility While Western stock markets boom under the influence of central bank money-printing, wages for ordinary people are not doing so well. So it is no wonder that Populism is rising, as voters worry their children will be worse […]
The post Central banks’ reliance on defunct economic theory makes people worry their children will be worse off than themselves appeared first on Chemicals & The Economy.
This wasn’t the chart that companies and investors expected to see when they were busy finalising $bns of investment in new US ethylene and polyethylene (PE) capacity back in 2013-4. They were working on 3 core assumptions, which they were sure would make these investments vastly profitable: Oil prices would always be above $100/bbl and […]
The post Difficult times ahead for US polyethylene exports as business models change appeared first on Chemicals & The Economy.
“There isn’t anybody who knows what is going to happen in the next 12 months. We’ve never been here before. Things are out of control. I have never seen a situation like it.“ This comment from former UK Finance Minister, Ken Clarke, aptly summarises the uncertainty facing companies, investors and individuals as we look ahead […]
The post Budgeting for the Great Unknown in 2018 – 2020 appeared first on Chemicals & The Economy.
Next week, I will publish my annual Budget Outlook, covering the 2018-2020 period. The aim, as always, will be to challenge conventional wisdom when this seems to be heading in the wrong direction. Before publishing the new Outlook each year, I always like to review my previous forecast. Past performance may not be a perfect […]
The post The Great Reckoning for policymakers’ failures has begun appeared first on Chemicals & The Economy.
The Financial Times has kindly printed my letter below, wondering why the US Federal Reserve still fails to appreciate the impact of the ageing BabyBoomers on the economy Sir, It was surprising to read that the US Federal Reserve is still puzzled by today’s persistently low levels of inflation, given that the impact of the ageing […]
Imagine living in the capital city of a major country, and suffering the level of pollution shown in the above photo on a regular basis. We used the photo in chapter 6 of Boom, Gloom and the New Normal when we highlighted how pollution was inevitably going to move up the political agenda in China. Controversial at the […]
Our 16th World Aromatics and Derivatives conference will take place on 8-9 November. Co-organised with ICIS, it provides an excellent opportunity for delegates to meet and exchange views in the critical end-of-year period. It features the usual strong line-up of speakers: Ronald Doesburg, GM for Shell’s Base Chemicals business, will describe how innovation is driving new […]
“By Monday, the third straight day of flooding, the aftermath of Hurricane Harvey had left much of the region underwater, and the city of Houston looked like a sea dotted by small islands. ’This event is unprecedented,’ the National Weather Service tweeted. ‘All impacts are unknown and beyond anything experienced.’” This summary from the New […]
Western central bankers are convinced reflation and economic growth are finally underway as a result of their $14tn stimulus programmes. But the best leading indicator for the global economy – capacity utilisation (CU%) in the global chemical industry – is saying they are wrong. The CU% has an 88% correlation with actual GDP growth, far […]
It was almost exactly 10 years ago that then Citibank boss, Chuck Prince, unintentionally highlighted the approach of the subprime crisis with his comment that: ‘We are not scared. We are not panicked. We are not rattled. Our team has been through this before.’ We are ’still dancing’.” On Friday JP Morgan’s CEO, Jamie Dimon, […]
Companies and investors have some big decisions ahead of them as we start the second half of the year. They can be summed up in one super-critical question: “Do they believe that global reflation is finally now underway?” The arguments in favour of this analysis were given last week by European Central Bank President, Mario Draghi: […]
We are living in an ever more uncertain world, where “business as usual” is becoming the least likely option for the future. Companies and investors need to adapt quickly to this new normal environment, if they want to maintain revenue and profit growth. One example comes from the American company 3M, which has become legendary […]
My 6-monthly webinar for the American Chemical Society is on Thursday at 2pm EDT – please click here to register for this free event. It will focus on two key topics: How does a market adapt in the face of declining growth? Many different sectors across the chemical industry are in a state of […]
My first blog post was written exactly 10 years ago this week, on 22 June 2007, from Bangkok in Thailand. Titled The 10th anniversary of the Asian financial Crisis, it covered the early days of the sub-prime financial crisis and noted the changes that had taken place in Asia since 1997. Who knew that the blog […]
We are living in very uncertain times, where the only certainty is that there is no “business as usual” option for the future. One sign of this is that the extraordinary has become ordinary : □ The FBI appear convinced Russia’s government targeted last year’s US elections: US President Trump and his former FBI head […]
China’s ‘One Belt, One Road’ project and the need to reduce pollution have replaced “growth at any price” as key government priorities, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Companies and …
Stock markets used to be a reliable indicator for the global economy, and for national economies. But that was before the central banks started targeting them as part of their stimulus programmes. They have increased debt levels by around $30tn since the start of the Crisis in 2008, and much of this money has gone […]
G7 Summits began in the crisis years of the mid-1970s, bringing Western leaders together to tackle the big issues of the day – oil price crises, the Cold War with the Soviet Union and many others. Then, as stability returned in the 1980s with the BabyBoomer-led economic SuperCycle, they became forward-looking. The agenda moved to […]
Yesterday, senior EU negotiators warned that “the chances of Britain crashing out of the EU without a new (trade) deal were now “over 50%””. Clearly, therefore, the UK’s preparations are not going well. Instead of building trust, the UK’s Brexit Secretary, David Davis, seems to think that threats – such as promising “the row of […]
The UK goes to the polls on 8 June in a surprise General Election. And premier Theresa May has clearly decided to base her campaign on a ”Who governs Britain?” platform, as she highlighted when launching her campaign last week: “Britain’s negotiating position in Europe has been misrepresented in the continental press, the European Commission’s stance […]
Unsurprisingly, Friday’s US GDP report showed Q1 growth was just 0.7%, as the New York Times reported: “The U.S. economy turned in the weakest performance in three years in the January-March quarter as consumers sharply slowed their spending. The result fell far short of President Donald Trump’s ambitious growth targets and underscores the challenges of […]
The Financial Times has kindly printed my letter below, suggesting that President Trump’s focus on tax cuts is misplaced, given the headwinds created for spending and economic growth by today’s ageing US BabyBoomers. Sir, Gillian Tett provides an excellent analysis of the wishful thinking that seems to dominate US economic policy today (“Trump tested as […]
Mention India to many CEOs and investors, and they will smile broadly at the thought of its “demographic dividend”. Two-thirds of India’s population are under-35,and are already swelling the numbers of those in the critical Wealth Creator 25 – 54 age group which drives economic growth. As the chart shows: India’s median age […]
Last week’s summit meeting between US President Donald Trump and China’s President Xi Jinping was initially overshadowed by Friday’s news of US missile strikes on Syria. But from the details since released, it is clear the summit will likely have far-reaching impact on the global economy. As US Commerce Secretary Wilbur Ross revealed afterwards, the […]
US GDP growth is slowing, again, as the chart of the Atlanta Federal Reserve’s “GDP Now” forecast shows: Forecast Q1 growth has slipped to just 0.6% from an initial 3.4% at the end of January Consensus economic forecasts are still much higher, but even they have fallen to 1.7% from 2.2% […]
The UK economy set off into the Great Unknown on Wednesday, when premier Theresa May officially notified the European Union of the UK’s intention to leave (Brexit) by the end of March 2019. In response, the EU released its draft guidelines for the negotiations: “The first phase of the negotiations should aim to […]
President Trump’s defeat on healthcare makes it very unlikely that he will be able to push through his proposed $1tn infrastructure boost, as I discuss in a video interview with Will Beacham, deputy editor of ICIS Chemical Business BARCELONA (ICIS)–Donald Trump’s infrastructure plan is unlikely to be approved because of a legislative bottleneck, denying the US chemical […]
President Trump ran for office on the basis that he would “drain the swamp” in Washington, and deliver major change in a number of critical areas, as I noted immediately after his election on 14 November. Sensibly, his “Contract with America” also recognised that his Top 10 legislative priorities would take time to deliver: “I […]
The clash of priorities between President Xi and Premier Li over the role of stimulus in China’s economy is close to being decided, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog The stakes are rising in China’s power battle ahead of October’s 19th Party Congress. Normally, the […]
Monetary policy used to be the main focus for running the economy. If demand and inflation rose too quickly, then interest rates would be raised to cool things down. When demand and inflation slowed, interest rates would be reduced to encourage “pent-up demand” to return. After the start of the Financial Crisis, central banks promised […]
2016 data highlights one startling statistic about the world’s Top 7 auto markets. They are 85% of total world sales and as the chart shows, their overall sales growth since 2007 has been entirely due to China: China’s sales have risen nearly four-fold since 2007, from 6.3m to 24.2m Sales in […]
If you want to know what is happening to the global economy, the chemical industry will provide the answers. It has an excellent correlation with IMF data, and also benefits from the fact it has no “political bias”. It simply …
The global economy’s best leading indicator forecasts a downturn Read More
If you want to know what is happening to the global economy, the chemical industry will provide the answers. It has an excellent correlation with IMF data, and also benefits from the fact it has no “political bias”. It simply tells us what is happening in real-time in the world’s 3rd largest industry. The chart […]
“Will economists start to consider demographics when making their forecasts and developing government policies?” This was the question on my mind at a recent discussion on the topic of “An economy that works for everyone” at the UK’s Institute for Government. The speaker was the Chief Economist of the Bank of England, Andy Haldane, and the Institute’s […]
Corporate debt in the Emerging Markets highlights the impact of the Great Reckoning, with the US dollar and interest rates rising, as I describe in my latest post for the Financial Times, published on the BeyondBrics blog Corporate borrowers in Emerging Markets (EMs) are now facing higher debt service and capital repayment costs, due to […]
It is hard to be optimistic about the outlook for 2017. The good news is that policymakers are finally giving up on the idea that stimulus can somehow return us to the growth levels seen when the Baby Boomers were young. As the Bank of England note in a new Report: ”Economic theory suggests that a […]
2016 saw the start of the Great Reckoning for the failure of stimulus policies. Political and social issues are now beginning to dominate the landscape. As we saw in the UK’s Brexit vote to leave the European Union, voters no longer see economics as the sole issue in elections. This paradigm shift was then followed […]
It is now just over a month since India introduced the biggest currency reform the world has ever seen. In a country of 1.3bn people, it abolished the 2 main banknotes (worth $207bn), that accounted for 86% of all cash in circulation. At 20:15 hours on 8 November, the government announced that the 500 and 1,000 […]
This year has seen a paradigm shift in how major governments view trade. We may well be seeing an end to globalisation: In Europe, the United Kingdom voted to leave the E.U., and Italy may well have a referendum on leaving the euro In the U.S., President-Elect Donald Trump’s 100-day Action Plan will see […]
All of us would love to be able to see into the future. And 5 years after the publication of ‘Boom, Gloom and the New Normal: How the Ageing of the Western BabyBoomers is Changing Demand Patterns, Again‘, it seems timely to review its 10 predictions about how the world will look in 2020: […]
The chemical industry is the best leading indicator that we have for the global economy. It has an excellent correlation with IMF data, and also benefits from the fact it has no “political bias”. It simply tells us what is happening in real-time in the world’s 3rd largest industry. Sadly, the news is not good. […]