Standard Life: Why we don't think a UK recession will happen in 2016 

Jeremy Lawson, chief economist at Standard Life Investments has disclosed the reasons why he believes the UK and the world will avoid recession in 2016.

 Standard Life: Why we don't think a UK recession will happen in 2016 

Lawson has long been cautious on the health of the global economy, asserting that austerity has served to put a brake under the global economy.  

He commented, ‘The combination of sluggish growth and acute market turmoil has triggered fears that the global economy could be heading for recession, eight years after the global financial crisis. Whilst we have a number of tools and indicators we can use to understand the business cycle and the risks ahead, there is conflicting evidence. ‘

Lawson continued, ‘At first glance, economic variables such as current account balances, labour market slack and credit growth are showing characteristics that activity is more mid-cycle than late-cycle. In contrast, financial variables such as equity market values, credit spreads and the yield curve suggest that the cycle is maturing more quickly. The OECD’s {Organisation for Economic Cooperation and Development} composite leading indicator is designed to provide early signs of turning points and is currently signalling stable albeit subdued growth across the developed world, with a mixed outlook in emerging markets. More ominous signals are however coming from those recession probability models that are based on financial variables.’

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If the economic cycle is at a late stage, it implies that a recession could happen in the near term, if it is mid cycle, then it implies that some growth potential remains.

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The economist, who formerly worked for the Australian central bank, commented, ‘Economists have a poor record of predicting recessions ahead of time, and equally, in raising false alarms. What we can say with confidence is that the global economy is not in a recession at present, while forward looking indicators point to continued growth through the spring outside of the commodity sector. Although we are seeing conflicting signals between economic and financial indicators, we do not see enough compelling evidence in the fundamentals to convince us that we are heading into recession this year. However, we need to monitor conditions very closely over the coming months for signs that we are too sanguine.’

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