Round up - August 14

Merrill survey sees world downturn

Financial Times

Fund managers are expecting a global recession as the credit crunch marks its first anniversary by turning a financial crisis into a world economic downturn, Merrill Lynch says. Around 25pc of fund managers questioned by Merrill in August for its monthly survey said the global economy was already in a recession and almost 50pc said they expected the world economy to contract during the next 12 months.

‘Addicted’ to equities – and with very good reason

Financial Times

Pension fund deficits could not have been solved if pension funds had sold equities during the bull market; rather, the selling of equities by pension funds almost certainly contributed to the slide in prices earlier in this decade. Pension funds remain ‘addicted’ to equities because they provide a return in excess of the increase in liabilities over the lifetime of the fund.

Twin forecasts set challenge for Bank

Financial Times

The Bank of England’s quarterly inflation report released yesterday shows how wrong central bankers have been in forecasting economic trends in recent years. The Bank has been persistently optimistic about inflation but yesterday revealed inflation would hit 5pc and possibly higher later this year. The Bank has predicted the UK’s growth domestic profit to hover around zero for the next year. Governor Mervyn King said the UK would have to experience a "painful period" to combat inflation as food and fuel prices hit record highs.

Fall in house prices forces the elderly to look for a wage

Financial Times

Falling house prices are forcing elderly people who relied on the resale value of their homes for a pension back into the job market. But finding a job to boost retirement income is becoming increasingly difficult as the UK enters into an economic downturn. Capital Economics economist Vicky Redwood said many people had been relying on increases in house prices to substitute for pensions.