Mixed signals for the global economy

Sun May 12, 2013 3:16pm EDT
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By Lucia Mutikani

WASHINGTON (Reuters) - A flood of data this week will paint a mixed picture of the global economy, with belt-tightening continuing to dampen activity in the euro zone, but accommodative policies helping to stimulate growth in Japan.

Reports from the United States are expected to show some slowdown in momentum early in the second quarter, and the Chinese economy's prospects are unlikely to have changed much.

"We expect global growth to decelerate further in the second quarter, hamstrung, mainly from fiscal austerity in the U.S. and Europe," said Ruth Stroppiana, chief international economist at Moody's Analytics in Sydney.

Preliminary data is expected to show euro zone gross domestic product fell 0.1 percent in the first three months of the year from the prior quarter, according to a Reuters survey. In the fourth quarter, it had contracted 0.6 percent.

The anticipated improvement will mostly reflect a return to growth in Germany, which will help offset ongoing weakness in France and Italy. In another hopeful sign for the austerity-hit region, industrial production likely accelerated in March, but the gains remain uneven.

"We have had a mix of weak survey data at the start of the second quarter, but some strengthening in IP should give us a fairly firm base going to the second quarter, plus car sales have been fairly strong," said Nick Matthews, a senior European economist at Nomura International in London.

While the euro zone is trying to climb out of recession, Japan's economy is expected to have perked up a bit after a flat performance in the fourth quarter - thanks in part to the government's radical steps to end two decades of deflation.

Economists at Barclays in Tokyo also attribute the anticipated pick-up to front-loading by consumers and businesses before an increase in the value added tax. The consensus forecast is for a 0.7 percent rise from the prior quarter.   Continued...

Pedestrians walk towards the (L-R) Irish, Greek, Spanish and French national flags outside the European Parliament in Brussels May 3, 2013. REUTERS/Francois Lenoir