Volatility, but no double dip ahead

14th October 2010

A Schroders poll reveals that nearly 90% believe there is less than a 30% chance of a double dip.

And they expect to see inflation, rather than deflation. Some 47% of those asked said they expect inflation to be higher in a year's time and 82% anticipating inflation will rise in the eurozone within three years.

David Scammell, head of UK and European interest rate strategies, says: "While we expect inflation to remain subdued in the near term as excess spare capacity bears down on pricing pressures, government fiscal and monetary stimulus packages are likely to have an inflationary effect in the long term."

Schroders' economists share a similar view, saying that increased profitability in the corporate sector will feed through into capital expenditure and higher employment.

This is expected to be "enough to offset headwinds, such as fiscal tightening and continued household de-leveraging", helping the UK avoid a double dip.

Keith Wade, Chief Economist at Schroders, says: "Although we do not believe that a double dip is on the cards and despite seemingly ample capacity for the global economy to grow, we continue to forecast a slow and volatile recovery for the next few years due to the lack of growth demand and structural unemployment concerns."

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