This week has seen a more pessimistic growth outlook from the IMF and rising geopolitical tensions between the USA and China over Taiwan. In sporting news, the Birmingham 2022 Commonwealth Games are underway and the England women’s football team were victorious in the Euro 2022 competition.
Global growth outlook
- The IMF has reduced their global growth outlook to 2% this year and 2.9% next year, representing downgrades of 0.4% and 0.7% from April’s update. This reflects stalling growth in the world’s three largest economies—the United States, China and the Euro area.
- Downside risks include a possible stop of gas flows from Russia to Europe, stubbornly high inflation, a surge in debt distress in emerging market and developing economies, renewed Covid-19 outbreaks and lockdowns suppressing growth in China, rising food and energy prices causing food insecurity and social unrest, and geopolitical fragmentation impeding global trade and cooperation.
Tensions around Taiwan and their economic implications
- Tensions between the USA and China have been heightened, following a visit by Nancy Pelosi (Speaker of the House in the US) to Taiwan.
- Taiwan’s economy is extremely important to the world economy, with much of the world’s everyday electronic equipment powered by microchips from Taiwan. One company (Taiwan Semiconductor Manufacturing Company) in Taiwan produces 65% of the world’s microchips, with the industry worth over $100bn (£730bn) in 2021.
- The majority of imports from Taiwan are in miscellaneous metal manufacturers, office machinery and telecoms and sound equipment. In the event of a disruption in trade, serious impacts would be felt in the manufacturing, digital and telecommunications industries in the UK, including in manufacturing and motor vehicle goods in the West Midlands.
Key business and economic trends in the West Midlands
- Online job adverts across eight of the UK regions decreased between the 15th and 22nd July 2022. The West Midlands online job adverts decreased by 4.2%. On 22nd July 2022 online job adverts were at 125% of the average level in February 2020.
- As of the 22nd July 2022, for the West Midlands region visits to retail and recreation, transit stations and workplaces had not yet returned to pre-coronavirus levels.
- The System Average Price (SAP) was unchanged in the week to 24th July 2022 (from the previous week) at 49% of the peak level seen on 10 March 2022. It was 145% higher than the equivalent period from the previous year and 805% higher when compared to the pre-Coronavirus baseline.
- Results from Wave 61 of the Business Insights and Conditions Survey (BICS) based on businesses surveyed across the West Midlands showed that, excluding ‘not sure’ responses, 48.4% of responding businesses reported exporting stayed the same in June 2022 when compared to June 2021; 20.6% of businesses reported exporting less and 18.5% reported exporting more.
- Regarding supply chains, 33.2% of West Midlands businesses reported additional transport costs due to the end of the EU transition period.
- 1% of West Midlands businesses expect the main concern for business in August 2022 will be inflation of goods and services prices.
- 38% of West Midlands businesses reported that they were currently experiencing a shortage of workers. 57.8% of West Midlands businesses reported that the worker shortage had caused employees to work increased hours.
- In June 2022, the West Midlands was the English region that reported the highest proportion of single-site businesses experiencing increases in prices of goods or services bought (60%) and sold (28%).
- Between late January and early June 2022, the West Midlands reported an 8 percentage point increase in the proportion of single-site businesses experiencing a shortage of workers, the highest of any English region.
Birmingham 2022 Commonwealth Games
- Hosting the 2022 Commonwealth Games is elevating the city to the world stage: the Games are set to attract an estimated 1 million spectators to the city and a TV audience of 1.5 billion
- The Commonwealth Games Value Framework report analysed the economic impact of previous games on their respective host cities between 2002 and 2018, finding there had been an economic increase of at least £1 billion for each previous host city, as well as several long-term social and environmental benefits.
- According to the government investment in the Birmingham 2022 Commonwealth Games is estimated to have created significant social and economic impacts including 40,000 new jobs and volunteering opportunities; a £38 million investment to kickstart programmes in the West Midlands to help those who need the most support to get physically active; a Business and Tourism Programme, supported by £21 million government investment, to attract more visitors and investors to the West Midlands; a brand new Aquatics Centre in Sandwell; the redevelopment of Alexander Stadium to transform it into a world-class sporting facility that will attract future major events to the region; the Birmingham 2022 Festival – the biggest celebration of creativity ever staged in the West Midlands with free events open to the public.
Other sporting events
- England’s women teams won the European football championship. This is the first time an England football team has brought a major international trophy home since the men’s team won the World Cup in 1966.
City-REDI / WMREDI has developed a resource page examing the impact of Coronavirus (COVID-19) on the West Midlands and the UK. It includes previous editions of the West Midlands Weekly Economic Monitor, blogs and research on the economic and social impact of COVID-19. You can view it here.
The views expressed in this analysis post are those of the authors and not necessarily those of City-REDI, WMREDI or the University of Birmingham.