New Economy Puts the Fizz into Forecasts for 2000 ; the Impact of the Internet Will Be a Recurring Theme in This Year's Sector Analysis, Leaving the Old Industrial Economy under a Cloud and Bringing Mergers and Shake-Outs to Businesses Struggling to Adapt

The Independent (London, England), January 3, 2000 | Go to article overview
Save to active project

New Economy Puts the Fizz into Forecasts for 2000 ; the Impact of the Internet Will Be a Recurring Theme in This Year's Sector Analysis, Leaving the Old Industrial Economy under a Cloud and Bringing Mergers and Shake-Outs to Businesses Struggling to Adapt


THE ECONOMY

THERE IS an extraordinary degree of optimism about economic trends, a fizz of anticipation that can be explained by looking back at last New Year. As 1998 turned into 1999 it was not yet clear that the world economy was emerging from what most participants experienced as the worst financial crisis in post-war memory.

The Asian crisis had continued through the year, Russia defaulted in August, swiftly followed by the rescue of LTCM, and Brazil was clearly on the verge. Alan Greenspan, the Fed chairman, cut US interest three times in rapid succession and even so Wall Street fell 25 per cent. Closer to home, many forecasters expected a recession in the UK. Hopes for 1999 were not high.

The past 12 months have been extraordinarily buoyant in the circumstances. The US economy has delivered another year of high growth with low inflation and low unemployment, and share prices have reflected New Economy thinking and the dot.com boom. The UK economy paused, then picked up again.

No wonder then that most economists are upbeat about prospects in 2000. In the UK most forecasters agree with the Chancellor's prediction that the economy will grow 2.5 to 3 per cent, and most are more optimistic than Gordon Brown about the likely size of the Government's budget surplus.

Elsewhere, growth is expected to be higher than during the past year pretty much everywhere apart from the US. But even a US slowdown will be welcomed as long as Mr Greenspan - whose term is due to expire next summer - can achieve a soft landing.

Some economists remain extremely pessimistic about the potential for a stockmarket crash or dollar crisis. The Fed's conventional model suggests share prices are about 50 per cent overvalued.

DIANE COYLE,

Economics Editor

INTERNET

IF 1999 was the year the Internet boom started, 2000 should see its impact gather pace.

Internet access is rising every month and forecasts suggest that one in five British households will be on-line by year end. What's more, with digital subscriber line and cable modems being rolled out from the spring, home users will begin to have access to bandwidth to now only available to corporate users.

This is expected to boost e-commerce activity. On-line shopping faces a crunch year with backers looking for their expensive investments to start paying off with significant sales increases. Usage of banking and personal finance services on-line should also grow as should media-related applications, notably the downloading of MP3 files for playback on PCs and MP3 recorders.

A powerful symbol of the Internet's emergence, however, is its profile in the stock market. The soaring share prices of internet stocks such as Freeserve and QXL may be just the beginning for the UK on-line sector.

BILL McINTOSH

RETAILERS

IF RETAILERS thought last year was tough, this year is not going to be much easier. That is the view of most retail analysts, who predict that the trends of price deflation and increasingly choosy consumers are set to continue.

Rising interest rates could be a factor, particularly in sales of electrical goods and furniture, which have risen strongly helped by the digital boom and the housing market respectively. Margins are expected to remain under pressure, though the key will be the interest rate effect on demand, which has remained healthy this year. If that starts to falter, profits will be severely affected.

Key points to look out for will include the millennium effect on sales, the threat of e-commerce, the performance of Marks & Spencer and further consolidation as retailers seek protection with scale.

Verdict, the retail consultants, predicts that the high street will enjoy a millennium surge in spending as consumers treat themselves to special items. But others are more sceptical, saying spending will merely be dragged forward.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

New Economy Puts the Fizz into Forecasts for 2000 ; the Impact of the Internet Will Be a Recurring Theme in This Year's Sector Analysis, Leaving the Old Industrial Economy under a Cloud and Bringing Mergers and Shake-Outs to Businesses Struggling to Adapt
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?