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120 Economic growth and the Real Price of Oil 12 Real Price of Oil End of Iranian hostage crisis Iranian 100 revolution OPEC cuts production World economic growth 10 Average growth rate in real GDP, 1970-2004: 3.7% 80 8 OPEC cartel collapses 60 20 Stagflation R E C E S S I O n 6 Start of second war in Iraq 4 Growth Boom R E C E S S I O n 2 Forecast Growth Percent % Constant US$ per barrel 40 Invasion of Kuwait 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: International Monetary Fund The US Household Savings Ratio, 1960-2004, % of income 12 12 month moving average 10 8 1960-2000 average 6 4 1990-2000 average 2 2000-2004 average 0 -2 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 05 06 07 08 Source: Ian Hanwood, Dresdner Kleinwort Wasserstein USA Real M4 Growth - Annual % Change USA Gross Domestic Product - Average Estimate Annual % Change USA Volume of Retail Sales - Annual % Change FEDERAL RESERVE DISCOUNT RATE 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 8 6.5 5.5 91 6.0 6.5 7 12 5.5 3 40 3 3.5 4.75 5.0 90 5.0 4.5 4.75 67 6.0 2.0 3.5 1.5 (15) (20) 1.0 2.5 4.0 5.0 5.5 2.0 1.5 2.5 14 84 85 86 87 88 89 ’90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 % Change in S&P 500 Saving ratio minus pension contribution Year on year 10pc 8pc 6pc 4pc 2pc 0pc -2pc -4pc 82 86 90 94 98 02 06 08 On Average no one is better off 6 wages RPI Exc. Bonus 5 Per cent 4 3 2 1 0 Jan 2005 Apr Jul Oct 2006 Jan Apr Jul 2008 May Apr Aug Fifty years of family spending % of households expenditure on selected categories 35 Food 30 25 20 Housing 15 Leisure goods and services 10 Clothing & Footwear Fuel & power 5 1957 1960 1965 1970 1975 1980 1985 1990 1995 2000 2006 UK Savings Ratio Saving ratio minus pension contribution Year on year 10pc 8pc 6pc 4pc 2pc 0pc -2pc -4pc 82 86 90 94 98 02 06 08 10 U.K. Real M4 Growth - Annual % Change * U.K. Gross Domestic Product - Average Estimate Annual % Change U.K. Volume of Retail Sales - Annual % Change 3 month INTEREST RATE 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 11 11 8 8 29 13 15 17 13.5 10 25 5.5 5.5 6.5 51 6 6.5 7.25 6.75 5.0 44 6 4.5 4.0 3.75 4.75 4.5 (36) 5.25 5.75 5.0 5.75 5.25 11 18 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 * Nominal M4 deflated by the RPI excluding mortgage interest payments Quarterly periods when stocks were reduced % change in FT all share index Germany M3 Money Annual % Share Germany Gross Domestic Product - Average Estimate Annual % Change Germany Volume of Retail Sales - Annual % Change 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 2.0 2.5 3.0 3.75 3.0 4.25 4 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 All figures inflation adjusted * Japan Real M4 Growth - Annual % Change Japan Volume of Retail Sales - Annual % Change Japan Gross Domestic Product - Average Estimate Annual % Change INTEREST RATE 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 0.5 0.75 0.25 1.25 1.5 2.0 1.75 2.0 2.25 2.5 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 Source: Independent Strategy £250,000 UK Long term Real House Price Trend £230,000 Actual Trend Base: Q2 2007 Trend at 2.7% per annum £210,000 £190,000 £170,000 £150,000 £130,000 £110,000 £90,000 £70,000 RMF Forecast Source: Nationwide Building Society 2023 Q1 2021 Q1 2019 Q1 2017 Q1 2015 Q1 2013 Q1 2011 Q1 2009 Q1 2007 Q1 2005 Q1 2003 Q1 2001 Q1 1999 Q1 1997 Q1 1995 Q1 1993 Q1 1991 Q1 1989 Q1 1987 Q1 1985 Q1 1983 Q1 1981 Q1 1979 Q1 £30,000 1977 Q1 £50,000 CHINA % Change year on year Real M4 Proxy Real GDP 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 93 94 95 96 97 98 99 2000 01 02 Real M4 Proxy is from IMF estimates. Treat with caution! 03 04 05 06 Source: IMF 07 08 09 The Distribution of Income by Household Type (Urban Households only) in China % Share of Urban Households by Income 100 90 80 70 Lower Middle Class ($3,000-$5,000) Upper Middle Class ($5,000-$12,000) Poor (<$3,000) 60 50 Mass Affluent ($12,000 - $24,000) 40 30 20 10 0 1985 1990 1995 2000 2005 2010 2015 2020 Actual Forecast In 2003 there were 200m Urban Households with an average of 3 persons in each 2025 India Real M4 Growth - Annual % Change India Gross National Product - Average Estimate Annual % Change 13 12 11 10 9 8 7 6 5 4 3 2 1 0 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 BRAZIL % Change year on year Retail Sales Real GDP 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 -1 -2 -3 -4 -5 -6 -7 -8 -9 -10 -11 -12 -13 84 86 88 90 92 94 96 98 2000 02 04 06 08 Source Brazilian Central Bank: