Fisher Investments Editorial Staff
Others

Cheerio Ol’ Chap

By, 01/27/2010

Story Highlights:

 

  • Though the British government announced economic growth in the fourth quarter, headlines found few positive points in the report.
  • Despite its rich economic history, the UK is just another country in the global village. No single developed country can hold up the globe as a whole.
  • According to an IMF released forecast, global growth should pick up to 3.9% in 2010, with emerging markets leading the charge.

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The UK's Office for National Statistics (ONS) announced Tuesday Britain exited the recession in the fourth quarter—the last major developed nation to do so—with 0.1% q/q growth. Good news, right? Certainly better than the alternative. But if you want to see the pessimism of disbelief in action, peruse the headlines on this one. Britain is either stuck in the mud, limping out of recession, or just barely breaking out of the recession. And of course, the "real life" recession will continue.

 

The UK's Q4 growth was meager, but positive and not altogether shocking. And it's relative. The economy fell for six straight quarters, giving up 6.0% from peak to trough. Framed correctly, any growth is an improvement and indicative of global strength—the weakest are drafting the strongest. Despite its rich economic history, the UK is just another country in the global village. No single developed country can hold up the globe as a whole.

 

Including faster-moving emerging markets, 2010's prospects grow brighter. The IMF doesn't always get it right, but its Tuesday forecast seems to see the overall trend accurately: Global growth should pick up at a 3.9% clip in 2010 (up from a forecast of 3.1% growth in October). The older developed nations will mosey along at their more mature, venerable pace (it's only natural), and emerging markets (with their collective economies larger than the US) will spring ahead. According to the IMF, China should again lead the pack, posting 10% growth in 2010.

 

None of this is new or surprising (at least it shouldn't be). Modern economic development has been a long succession of developing countries undergoing stunning (albeit volatile) growth spurts to lead the globe. The UK was the cat's pajamas in the late 18th and 19th centuries—the very hub of global capital markets, industrial innovation, and 4pm finger sandwiches. But an upstart unseated the Brits long ago. The US doubled UK GDP by 1900 and assumed the mantle of global financial center after World War I. Or consider Japan after World War II—four decades of fast-paced growth drove Japan from poorer than Peru to the second biggest economy in the world. Today's emerging economies are scarcely different than the US earlier in its history or postwar Japan.

 

Investors shouldn't let nostalgia cloud their better judgment. The news out of Britain is better than some will admit, but even if it weren't, a spectacular British recovery is no prerequisite for a healthy global one. Respect and invest in the old fogies (US, UK, France, Germany, Japan, etc.), but don't underestimate (or outright ignore) the next generation of rising economic stars.

*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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