Hamish McRae: Ad man is worried about four major uncertainties in the world economy – and if anyone knows, he does

It is better for us if business leaders are realistic rather than over-optimistic

Advertising is the classic lead indicator. It tells you precisely, maybe brutally, what businesses think about future demand, for you don't advertise unless you think that ad spend will be rewarded by demand for the product. So when Sir Martin Sorrell, head of the world's largest advertising network, says that demand ground to a halt last month, we should sit up and take notice.

His particular concern, after talking with the bosses of major companies, was that "people have just become very, very cautious". He goes on to cite the four potential shocks that might hit the world economy in the coming months: the problems in the eurozone, volatility in the Middle East, the slowdown in the Chinese economy, and the US fiscal deficit.

They are the leading candidates that might derail what is already a slowing global recovery. But they are very different in their nature and potential impact.

For example, the problems of the eurozone are widely appreciated, and their economic impact already evident. The uncertainty is over the policy response, with the assumption being that the EU will continue to muddle through. If the eurozone were to break up, that would be a huge blow to confidence in Europe, but the eurozone is less than 20 per cent of global GDP, and most multinationals have already made contingency planning for such an outcome.

Volatility in the Middle East would have a direct impact on the world economy if it led to disruption in oil supplies. A number of calculations have been made about the consequences, for example, of the Straits of Hormuz being shut for a few weeks. The impact would be big, for it would lead to a spike in the oil price, but global energy markets are pretty resilient.

A sharper-than-expected Chinese slowdown would have another set of effects. It would cut demand for imports, and that would affect exporters of raw materials, but it would equally cut commodity prices and maybe the oil price. So there could be benefits for the rest of us.

Finally, the US deficit. It will eventually need to be tackled; what we don't know is when and how. It may be that the world has been lulled into a false calm by this period of very low interest rates, but the idea of US default is beyond most people's imagination. It is hard to see another great inflation, as in the 1970s.

Business leaders are right to be worried. The threats noted by Sir Martin are real. But having a realistic business community is surely better than an over-optimistic one – better, that is, for the rest of us. Let them do the worrying.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
Arts and Entertainment
Mark Wright has won The Apprentice 2014
tvThe Apprentice 2014 final
News
File: James Woods attends the 52nd New York Film Festival at Walter Reade Theater on September 27, 2014
peopleActor was tweeting in wake of NYPD police shooting
Arts and Entertainment
X Factor winner Ben Haenow has scored his first Christmas number one
music
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

$200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

$125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

Sheridan Maine: Commercial Finance Manager

Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Sheridan Maine: Regulatory Reporting Accountant

Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

Day In a Page

The week Hollywood got scared and had to grow up a bit

The week Hollywood got scared and had to grow up a bit

Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

Panto dames: before and after

From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
Thirties murder mystery novel is surprise runaway Christmas hit

Thirties murder mystery novel is surprise runaway Christmas hit

Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

Anne-Marie Huby: 'Charities deserve the best'

Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
The botanist who hunts for giant trees at Kew Gardens

The man who hunts giants

A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

The 12 ways of Christmas

We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
Birdwatching men have a lot in common with their feathered friends, new study shows

The male exhibits strange behaviour

A new study shows that birdwatching men have a lot in common with their feathered friends...
Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

Famous diaries: Christmas week in history

Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
From noble to narky, the fall of the open letter

From noble to narky, the fall of the open letter

The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

A Christmas ghost story by Alison Moore

The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

Marian Keyes

The author on her pre-approved Christmas, true love's parking implications and living in the moment
Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

Bill Granger's Christmas Eve fish feast

Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

Rodgers fights for his reputation

Liverpool manager tries to stay on his feet despite waves of criticism
Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

Amir Khan attacks the Taliban

'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

Michael Calvin's Last Word

Sepp Blatter is my man of the year in sport. Bring on 2015, quick