Goldilocks economy and new business4/2/2023 ![]() The tech-heavy Nasdaq composite in the US hit an all-time high in October, with Amazon and Microsoft soaring 13 per cent and 7 per cent respectively after posting strong quarterly results, and Apple and Facebook powering on. ![]() This global expansion and bull market have much further to run.” "Yet the move remains an indication of how strong risk appetite is. ![]() “The news has brought out the usual chorus of doom-mongers and top-of-the-market callers, and comparisons with ill-fated tie-ups such as the $160bn AOL/Time Warner merger at the peak of the dot-com boom in 2000, or Royal Bank of Scotland buying Dutch rival ABN Amro for $99.9bn in 2007, just before the banking crisis. The confidence is seen in the largest merger in the history of the tech industry, Broadcom’s unsolicited US$130 billion mega bid for Qualcomm. Goldilocks is happy so far but what about those rising stock markets? The fear is that they are a little too hot, with global share prices trading at near record highs.Ĭhris Beauchamp, chief market analyst at online trading platform IG, which has offices in Dubai, says indices continue to break records, both in terms of closing levels and winning streaks. Even so, inflation is expected to start falling again next year. UK inflation is higher at 3 per cent, at time of writing, but that is mostly due to sterling’s post-Brexit plunge, which has driven up the cost of imports. In the UAE, consumer prices increased 1.15 per cent in the year to September. The result is low inflation, with consumer prices rising 2 per cent in the US and just 1.2 per cent in Europe. “Workers in most sectors have little bargaining power due to the decline in unionisation and the increased possibility of substitution by either smart machines or overseas workers if wages did rise faster.” John Hawksworth, chief economist at PwC, says the wage-price spirals seen in the 1970s are conspicuous by their absence. In the UK, unemployment is at a 42-year low, despite growing Brexit angst.Įurozone unemployment rates remain high but have now fallen to 8.9 per cent, the lowest since 2009. Unemployment in the UAE is the lowest in the world at just 0.4 per cent, according to the Dubai Statistics Centre.Īs unemployment falls, workers have traditionally been able to negotiate higher pay rises that push up inflation, but this is not happening today. Unemployment is certainly low in many countries, for example, in the US, it is close to historic levels just 4.1 per cent in October, below what is seen as the natural rate of unemployment of around 5 per cent. The Goldilocks economy is typified by low unemployment, low inflation, rising stock and property markets, low interest rates and steady GDP growth, according to Investopedia. ![]() If so, it would be a rare piece of good news in these troubled times. It may surprise many to discover that economists believe that we could just be in a Goldilocks global economy today. This is what they want to see: an economy that is neither so hot it drives up inflation or so cold that it triggers a recession. It is the bowl that is “just right” that analysts are interested in. ![]() The first bowl she samples is too hot, the second is too cold but the final one is just right. The story of Goldilocks and the Three Bears has become a financial metaphor, based on the little girl's verdict on the bears' porridge. A lot of financial experts are talking about Goldilocks at the moment, but they are not discussing the children's bedtime story. ![]()
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