He says: “While the Bank of England anticipates below-trend growth in 2008 and a recovery in 2009, our recession predictor is suggesting concern.”
Carrick explains that, despite a weaker pound, more indicators today are signalling danger than before the 2001 economic downturn. “The economy is borrowing more now than it was then and lending standards appear to have been tightened more aggressively”.
Coupled with high food and energy prices which are dampening consumer spending and deteriorating leading indicators in Europe, Carrick believes that investors should be prepared for a possible recession.
Carrick says that while an ending of the credit crunch, normalising lending standards or a correction in the price of oil have the ability to improve growth prospects, he remains convinced that global growth needs to slow further to curtail commodity demand.”
“With global inflation so high, the burden of an economic slowdown is likely to be felt most severely in countries with the weakest financial positions. A decade ago that was Asia. Today it is the US and the UK.”