G20 to skirt potholes and follow growth signposts

Sun Feb 10, 2013 2:52pm EST
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By Alan Wheatley, Global Economics Correspondent

LONDON (Reuters) - With the road ahead looking a bit smoother, G20 finance ministers will be happy to ignore the wreck in the rear-view mirror when they meet this week to steer a course for the world economy.

The euro zone as a whole and a clutch of its members, including France, Italy and the Netherlands, are expected to report that their economies shrank last quarter - joining Germany and the United States - while Japan's barely grew, according to economists polled by Reuters.

But the Group of 20 leading economies, which meets in Moscow on Friday, should be able to take heart from a pair of more timely indicators - a New York Fed manufacturing survey and a University of Michigan poll on consumer sentiment.

Economists expect both to show an improvement, despite the gnawing uncertainty of how long-running U.S. deficit reduction negotiations will affect taxes and spending.

Luca Paolini, chief strategist at Pictet Asset Management in London, said he was more positive on the global outlook on balance but a sense of perspective was needed. Buoyant markets risked getting ahead of themselves.

"Our own leading indicators are going up, but we don't think we're in a strong growth environment. We see weak growth, and that's not going to change this year," he said.


Simon Hayes, an economist with Barclays Capital, broadly agreed. "On the whole, recent activity data have been encouraging of our view that the global economy is improving, albeit slowly," he said in a report.   Continued...

The headquarters of Germany's largest business bank, Deutsche Bank are seen behind a construction site warning sign in Frankfurt, January 30, 2013. REUTERS/Kai Pfaffenbach