The “new normal” for the economy –implications for charities     Andrew Sentance,     Senior Economic Adviser, PwC     CFG...
Disappointing UK economic growth                       % per annum change in non-oil GDP8.0%6.0%4.0%2.0%0.0%-2.0%-4.0%-6.0...
High and volatile inflation                       % per annum change in UK consumer prices6.0%5.0%4.0%3.0%2.0%1.0%0.0%    ...
Consumers under pressure                        % change in UK GDP and consumer spending543210-1-2-3-4-5     97-07 ave   2...
… while the euro crisis continues                                   % change in GDP, 2012 PwC forecast                    ...
World growth has disappointed                        % change in GDP in G-13 economies*6543210-1-2-3     1990 1992 1994 19...
… but emerging markets are strong                   % annual change in GDP in first 3 years of recovery76543210     UK (ex...
The rise and rise of Asia                       % share of world GDP, at market exchange rates40%35%30%25%20%15%10%5%0%   ...
What is the “new normal”?2007/8 marked the end of a long and sustained expansionin UK and other Western economiesCondition...
The end of a “long expansion”                     ave % pa increase: UK GDP and consumer spending4.0%3.5%3.0%2.5%2.0%1.5%1...
Sustaining economic growth                   Technology                      and                   innovation             ...
Key features of the “old normal”• Financial deregulation and liberalisation• New markets opening up as China, India, forme...
Forces shaping “new normal”• Rise of Asia and other emerging markets, with  associated price pressure for energy and other...
Two phases of “new normal”• Phase 1: Continuation (through mid-2010s) of current pattern of  disappointing growth in weste...
“New normal” – Phase 1• Prolonged period of disappointing GDP and consumer spending  growth in western economies, lasting ...
Implications for charities• Challenging fundraising climate, with continuing pressure on  discretionary spending in UK and...
Thank you for listening.Any questions or comments?andrew.w.sentance@uk.pwc.comThis publication has been prepared for gener...
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The economic outlook for the sector - Andrew Sentance

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Speaker at CFG's Annual Conference 2012

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The economic outlook for the sector - Andrew Sentance

  1. 1. The “new normal” for the economy –implications for charities Andrew Sentance, Senior Economic Adviser, PwC CFG Annual Conference, London, 17 May 2012
  2. 2. Disappointing UK economic growth % per annum change in non-oil GDP8.0%6.0%4.0%2.0%0.0%-2.0%-4.0%-6.0%-8.0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Non-oil GDP Underlying* Trend * Weighted average of manufacturing and services growth Note: Average non-oil GDP growth since mid-2009 = 1.4% Source - ONS
  3. 3. High and volatile inflation % per annum change in UK consumer prices6.0%5.0%4.0%3.0%2.0%1.0%0.0% Inflation Target Ave 2008-11 Source: Office for National Statistics
  4. 4. Consumers under pressure % change in UK GDP and consumer spending543210-1-2-3-4-5 97-07 ave 2008 2009 2010 2011 2012 2013 GDP Consumer spending Source: ONS and March 2012 PwC economic forecast
  5. 5. … while the euro crisis continues % change in GDP, 2012 PwC forecast Russia UK Canada 2.0 Germany 3.7 0.6 Ireland 0.9 -1.1 Greece France -4.9 2.0 0.1 Japan Spain ItalyMexico China 2.1 -0.7 -1.4 3.2 8.6 IndiaKey x.x = GDP growth in 2012 7.5 Brazil Australia South Africa 3.7 3.3 3.4
  6. 6. World growth has disappointed % change in GDP in G-13 economies*6543210-1-2-3 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 IMF, June 2011 IMF, Apr 2012 Ave 1990-2010 * EU, US and 11 other economies accounting for 85% of world GDP Source: IMF World Economic Outlook Updates
  7. 7. … but emerging markets are strong % annual change in GDP in first 3 years of recovery76543210 UK (exc oil&gas) Advanced economies Emerging and developing economies 1982-84 1992-94 2010-12 Source: ONS and IMF. 2011 and 2012 based on latest IMF, OECD and PwC forecasts
  8. 8. The rise and rise of Asia % share of world GDP, at market exchange rates40%35%30%25%20%15%10%5%0% 1980 1990 2000 2010 US EU-27 Asia-pacific G10* * Includes Australia, China, India, Indonesia, Japan, Malaysia, Singapore, South Korea, Taiwan Province of China and Thailand Source: IMF World Economic Outlook
  9. 9. What is the “new normal”?2007/8 marked the end of a long and sustained expansionin UK and other Western economiesConditions which supported this period of growth are notset to return quicklyProlonged structural readjustment is underway inresponse to financial crisis and East-West rebalancingThere are significant parallels with disappointing growthand volatility of the 1970s and early 1980s
  10. 10. The end of a “long expansion” ave % pa increase: UK GDP and consumer spending4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0% 1948-73 1973-82 1982-2007 2007-16* GDP Consumer spending * Based on PwC, OBR and other independent forecasts for 2012-2016 Source: ONS and PwC calculations
  11. 11. Sustaining economic growth Technology and innovation Sustained Private sector Policy economicenvironment expectations growth Financial regime
  12. 12. Key features of the “old normal”• Financial deregulation and liberalisation• New markets opening up as China, India, former Soviet bloc and others embrace the market economy• Relatively low energy and commodity prices (1985-2005),• US the dominant economic power; EU pursuing closer economic integration• Confidence in ability of policy-makers to support growth and of independent central banks to control inflation• Innovation and technological advance, particularly IT/comms
  13. 13. Forces shaping “new normal”• Rise of Asia and other emerging markets, with associated price pressure for energy and other natural resources• The legacy of the financial crisis• Structural adjustment in western economies following the long expansion which ended in 2007• Breakdown of pre-2007 policy regime and knock-on effect on financial, business and consumer confidence
  14. 14. Two phases of “new normal”• Phase 1: Continuation (through mid-2010s) of current pattern of disappointing growth in western economies, with financial volatility and high and fluctuating energy and commodity prices• Phase 2: Clearer and more sustained growth dynamic emerges, perhaps starting in the second half of this decade. Likely to be based on a different set of technological, regulatory, geopolitical and financial drivers from pre-2007 forces driving growth• Businesses, investors and other organisations need strategies to manage and survive through Phase 1, while building potential opportunities for Phase 2.
  15. 15. “New normal” – Phase 1• Prolonged period of disappointing GDP and consumer spending growth in western economies, lasting into mid-2010s• Asia and some other emerging markets continue to perform strongly and are main engine of global growth• Periodic bursts of inflation, driven by energy and commodity price movements, adding to growth volatility• High prices for energy and other natural resources• Policy-makers struggle to address medium term policy challenges• Continuing financial market volatility
  16. 16. Implications for charities• Challenging fundraising climate, with continuing pressure on discretionary spending in UK and other western economies• Continuing economic and financial volatility, with potential future shocks. Financial resilience a key issue.• Stresses and strains in society, creating opportunities and new pressures/challenges – eg youth unemployment• Premium on good operational and commercial management, sound financial planning and intelligent risk appraisal
  17. 17. Thank you for listening.Any questions or comments?andrew.w.sentance@uk.pwc.comThis publication has been prepared for general guidance on matters of interest only, and does not constitute professionaladvice. You should not act upon the information contained in this publication without obtaining specific professional advice. Norepresentation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in thispublication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do notaccept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining toact, in reliance on the information contained in this publication or for any decision based on it.© 2011 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (alimited liability partnership in the United Kingdom) which is a member firm of PricewaterhouseCoopers InternationalLimited, each member firm of which is a separate legal entity.

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