Fork in the road as U.S. outstrips Europe

Sun Oct 21, 2012 3:04pm EDT
 
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By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters) - Slowly but surely, the global economy is witnessing a modest parting of the ways as the United States pulls ahead of a euro zone still shell-shocked by its debt and banking crisis.

To be sure, a slew of reports this week will show neither America nor Europe in great shape.

But while advance October surveys of purchasing managers are likely to confirm the euro zone stuck in recession, U.S. economic growth probably picked up to a 1.8 percent rate in the third quarter from 1.3 percent between April and June, according to a Reuters poll.

The euro zone polls were due on Wednesday with the U.S. gross domestic product release scheduled for Friday.

"My impression is that there is more of a divergence re-emerging between the U.S. and Europe," said Andrew Kenningham with Capital Economics, a London consultancy.

Retail sales, auto purchases and the housing market have all perked up in the United States as the Federal Reserve's ultra-loose monetary policy shows signs of gaining traction.

"If there is one area where there is a possibility of an upside surprise, it is the U.S. economy," said John Lipsky, a former deputy managing director of the International Monetary Fund.

BRIGHTER IN THE LONG TERM   Continued...