Same inflation, different growth – China vs the UK

It’s been an exceptionally busy morning of news today. Not withstanding Goldman Sach’s widely predicted poor Q3 results (which we discussed last week alongside many others), two key stories stand out today.

Firstly, China reported another slowdown in its growth. This is likely to send shivers down chief executives’ spines, as the global economy continues to cling onto China as its last great hope for growth. Then again, the word ’slowdown’ still masks the impressive statistic that China continues to grow at nearly 10% a year.  Inflation is coming down too, and a ’soft landing’ seems more likely than a hard bump.

Over in the UK meanwhile, George Osborne would likely kill for even a tenth of the 9.1% growth China reported. Instead, he has to grapple with another round of uncomfortable economic headlines, this time regarding inflation, which soared to 5.2% in September (or 5.6% if you prefer the old measure).

The news is particularly grim on the energy and food bills front, according to the ONS. It’s equally desperate for savers – as one of our clients pointed out today, savers are seeing a £10,000 pot in a savings account depreciate in value by around £500 a year, thanks to the combination of high inflation and low interest rates.

High Inflation + large budget deficit + stagnant growth + interest rates that can’t go much lower.

That’s the uncomfortable equation again confronting the Chancellor today.

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