In the normal course of events, synchronised growth in activity at the rate we have been seeing across the globe would be accompanied by a clear increase in inflationary pressure that would, as a result, require an increase in interest rates significant enough to hold back risk-asset performance.
That clearly isn’t happening yet. Indeed, the latest inflation levels recorded in key developed economies and the BRICs (Brazil, Russia, India and China) are either not at central bank target rates/ranges, or are not a significant threat to them.
Trends in labour markets around the globe have led to more female, older, self-employed and part-time workers being drawn into labour markets, which in turn has resulted in wage growth that has been far more muted than expected.
At this point in time, we see no reason why more women, for example, cannot be drawn into, say, the US labour market. We can also see no reason why part-time self-employment shouldn’t continue to grow as a percent of total employment.
The big question then, is whether or not these constructive conditions of good growth with limited inflationary pressure can persist…
Steve Waddington – fund manager. Insight Investment, a BNY Mellon company