Global Economy: Grappling with the Fed and other uncertainties

Sun Sep 22, 2013 4:12pm EDT
 
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By Alan Wheatley

LONDON (Reuters) - A clutch of surveys this week is likely to show the global economy slowly picking up even as new and old uncertainties combine to test the optimism of businesses and consumers alike.

Purchasing managers indexes (PMIs) for the euro zone, China and the United States are all forecast to climb further away from the boom-bust line of 50. Germany's closely watched IFO business sentiment index is also expected to show a gain.

Gross domestic product in the euro zone remains 3 percent below its 2008 peak and unemployment is at a record high, but the 17-member bloc is set to expand for the second quarter in a row after 18 months of contraction, according to Bert Colijn, an economist with the Conference Board in Brussels.

Even the construction industry, which crashed when the financial crisis struck, appears to be bottoming out.

"The outlook continues to improve for Europe in general," Colijn said. "The fact that we're seeing a momentum change at the moment is a positive signal."

Jim O'Neill, former chairman of Goldman Sachs Asset Management, said the PMIs of the entire Group of Seven advanced industrial countries were all rising quite significantly for the first time since 2008.

An exceptionally strong reading last week for the Philadelphia Federal Reserve's manufacturing survey also hinted that the global economy was stirring.

"It's quite conceivable that declining commodity prices are giving a big lift to real incomes," O'Neill said.   Continued...

 
Workers assemble a new Porsche 918-Spyder sports car at the production line of the German car manufacturer's plant in Stuttgart-Zuffenhausen July 2, 2013. REUTERS/Michaela Rehle