Comment: More doom and gloom as grim outlook goes global

HOPES that the stock market would deliver investors a pre-Jubilee boost were right royally dashed on Friday.

A flurry of grim economic news pushed indices on both sides of the Atlantic sharply lower and wiped billions of pounds off share prices.

In New York, the Dow Jones took a battering as it emerged that US employers had added jobs at the slowest pace in a year – a worrying sign in an economy that has largely eschewed austerity and taken an expansionary stance with its fiscal policy.

With dire manufacturing figures showing the second sharpest fall in activity in the 20 years of the closely-monitored Markit/Cips survey, that momentum appears to have fizzled out.

There was further unwelcome news from the continent. Manufacturing sectors in France and eurozone powerhouse Germany contracted at their fastest pace in nearly three years. China, too, is suffering an increasingly bumpy ride, with factory output there hitting its lowest point this year.

All of which suggests the political paralysis afflicting the eurozone is now impacting worldwide. As one analyst said on Friday, “the global economy is in a seriously bad way”.

The hope is that politicians will grasp the nettle at the G20 leaders’ summit later this month in Mexico. Clearly, the stakes have never been higher.

Meanwhile, Bank of England officials must be watching developments from the sidelines with growing anxiety. They are due to convene later this week for their monthly rate-setting meeting, at which a fresh round of quantitative easing cannot be ruled out.

May’s decision on whether or not to restart the money presses was no close call – with 8 to 1 voting against. Most commentators expect others will have joined David Miles in the dove camp, and those converts may be sufficient in number to get the QE ball rolling again.

It may have a modest recession-fighting arsenal at its disposal, yet the central bank has the capacity to take some of the sting out of the economic pain currently being suffered.

It should act decisively this Thursday, and also examine other stimulus measures. Markets may rebound and the feel-good factor could return for a few days at least.

However, the boil that is the eurozone crisis has yet to be lanced and political action on a wider level is paramount. Inaction risks a meltdown that will spread far beyond the single currency bloc.

Jubilee hangover a double dose of pain

BRITAIN will spend this Diamond Jubilee holiday doing what Britain does best. Stringing up the bunting, breaking open the bubbly or Pimm’s and having a good old fashioned knees up.

Come Wednesday morning, the clearing up will have been completed, the champers locked away and the nation will be nursing the mother of all hangovers.

But what of the economic impact? On the up side, retailers are estimated to have enjoyed an £800 million-plus boost to takings as anything and everything sporting a Union flag is snapped up. The patriotic splurge is roughly double what was spent on last year’s royal wedding between Will and Kate.

Yet, economists have issued dire warnings about the impact on growth from the extra public holidays. We must brace for a “significant hit” to GDP in the second quarter that seems unlikely to be recouped over the remaining summer months.

Another reason to stock up on those painkillers then.

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