Sustained, though moderate, economic growth in the United States

Leading economic indicators for the United States point towards a sustained, though moderate, growth in the coming months. The Conference Board  monthly index and the Economic Cycle Research Institute (ECRI) weekly index, both released today, suggest that economic activity will continue to expand.

According to the IMF, the Bank of Canada and The Economist poll of forecasters, the US economy should grow at close to 3.0% this year. But, this scenario as downside risks. If energy and food prices keep going up that could add again pessimism in consumer confidence and, consequently, affect their buying intentions. Auto and electronic manufacturing could be affected for longer than initially anticipated by the lack of components or parts coming from Japan. Moreover, residential construction will stay very low based on the housing starts data for the first three months of this year.

So, good prospects on the horizon, not without threatening clouds.

The pace of economic expansion in China could moderate

The Conference Board published April 19 its most recent data on China leading economic index. The mensual and semestrial evolution of the index signal a slowdown in the pace of progression of the economic activity in the coming months. The OECD equivalent index, released April 12, points also towards a moderation of the pace of growth, but it would still increase faster than the long term historical trend of the economy.


All in all, China's economic outlook remains good. The IMF forecasted last week that China GDP growth would be 9.6% in 2011, compared to 10.3% in 2010. A preliminary assessment of  the first quarter growth is at 9.7% (annualised rate).

Inflation is actually the main concern of chinese authorities on the economic front. Different initiatives have been taken to try to slow it down : interest rate increases, higher rate of reserves for the banks to slow the expansion of credit, slight appreciation of the exchange rate of the yuan. The real interest rate remains in negative territory, and analysts expect further increases in interest rates if China wants to succeed in its fight against inflation. 
      

The canadian economy should continue to grow at a sustained pace

The short term outlook for the canadian economy remains good. Advanced signals of its evolution point  towards a sustained progression of the production in the coming months. Statistics Canada leading indicator index increased again in March (0.8%) according to data published today by that organisation; eight of the ten components of the index showed an increase.

Moreover, GDP growth forecasts for Canada in 2011 were recently revised upward by the IMF, the Bank of Canada and The Economist poll of forecasters. The new estimates are close to 3.0%.

World Economic Outlook, According to the IMF and the Bank of Canada

The International Monetary Fund (IMF) and the Bank of Canada (BoC) presented this week their respective assessment of the world economic outlook. Both forecast a world GDP growth of over 4.0% this year : 4.4% according to the IMF and 4.1% according to the BoC. (These estimations are based on a ponderation of the importance of countries' GDP evaluated at the purchasing power parity of their currency. When evaluated at market exchange rates, world GDP growth in 2011 is estimated by the IMF at 3.5 %.) Without surprise, emerging economies will grow faster than the advanced ones this year.  

The BoC, with 3.0%, is slightly more optimistic than the IMF, with 2.8%, as to the economic growth in the United States this year. Both, the IMF and the Bank, revised upward their estimation of GDP growth in Canada, with respective forecasts of 2.8% and 2.9% for 2011. But in its evaluation of the canadian economy, the BoC is not as optimistic as the OECD was last week. The OECD estimated that the canadian economy grew by 5.2% in the first quarter (annualised rate) and will grow by 3.8% in the present one. The respective numbers from the BoC are 4.2% and 2.0%.

As to the risks associated with world economic growth projections, the IMF and the BoC have similar ones : geopolitical developments, commodity prices that could increase further, especially oil, difficulties of refinancing  the public debt in many european countries, etc.

Details at : http://www.bank-banque-canada.ca/fr/
                 http://www.imf.org/external/pubs/ft/weo/2011/01/index.htm

Continuity of Economic Expansion in OECD Countries

The OECD published this morning its composite leading indicators. The most recent data are the February ones. The indicators point towards a sustained economic expansion in most OECD countries in the coming months. There are exceptions, like Spain and Greece.

For emerging economies, a strong expansion is in the cards for Russia and South Africa. In China, economic growth should slow down, but it will remain over the long term historical trend. In India and Brazil, economic growth should be close to the long term historical trend.

Details at : http://www.oecd.org/department/0,3355,en_2649_34349_1_1_1_1_1,00.html

Stockmarkets and Economic Outlook

As a leading indicator of the evolution of the economy, stockmarkets point again towards the continuity of the world economic expansion. The MSCI global index, which regroups developed and emerging economies, is still up since the trough (172.70) of early March 2009. There were short periods of decrease, like recently after the catastrophes in Japan, but the trend stays upward. But, on April the first (last Friday), the index, at 345.66, is still well below its record level (423.26) of October 2007. When separating developed and emerging countries, the respective MSCI indices both follow the same trend as the global one. It will be interesting to see how the stockmarkets will react in the coming weeks to the new round of announcements of  companies quarterly financial results.

To check on the evolution of the MSCI indices go to : http://www.bloomberg.com/


 

World Manufacturing Activity Will Continue to Expand

Surveys conducted in March and covering more than 7500 purchasing managers from close to 30 countries show that the expansion of the manufacturing activity should continue in the world in the coming months. New orders increased again in March, though at a slower pace than in February, according to data from the JPMorgan Global Manufacturing PMI. The pace of growth in new orders moderated in the US, the euro zone and China. Without surprise, new orders received by japanese firms decreased.

Details at : http://www.markiteconomics.com/