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Ihs global insight   wrold flash feb 2014
 

Ihs global insight wrold flash feb 2014

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    Ihs global insight   wrold flash feb 2014 Ihs global insight wrold flash feb 2014 Document Transcript

    • IHS Global Insight's February World Flash, an update on the global economy from IHS Chief Economist Nariman Behravesh and IHS Global Insight Economist Sara Johnson follows. Nariman may be reached at +1 781.301.9101 and Sara at +1 781.301.9115 for additional comment or if you have questions. If you would like to receive the complete Global Executive Summary for February when it is available please contact Jim Dorsey at +1 781.301.9069 or Jim.Dorsey@ihs.com or Kate Smith at +1 781.301.9311 or kate.smith@ihs.com. -0- World Flash February 2014 Despite financial market volatility, stronger global economic growth is on its way In late January and early February, financial markets reacted badly to weak economic data on China and the United States, resulting in continued pressures on emerging markets. By mid-February, calm had returned to the markets. Economic fundamentals in the developed world remain broadly positive and point to stronger growth—especially for the US and European economies. At the same time, the panic about emerging markets has likely been overdone; the outlook is for continued weak growth, but no systemic crisis. In fact, the IHS forecast of global economic growth has not changed significantly since last month. After a 2.5% increase in 2013, world real GDP is projected to advance 3.3% in 2014 and 3.7% in 2015. United States—Solid fundamentals and temporary headwinds.Severe winter weather has caused major disruptions in economic activity. GDP growth in the first half of 2014 will be dominated by weather-related
    • distortions and business efforts to bring inventories more in line with sales (after excess accumulation in late 2013). Once these transient forces pass, economic growth should strengthen during the second half, supported by improving household balance sheets, a continuing housing market recovery, and reduced fiscal policy drag. Europe—Growth is beginning to edge up. While still far from dynamic, European economies are moving in the right direction, led by the northern core. Encouragingly, there were further signs of improvement in the longsuffering southern periphery countries: Italy, Portugal, and Spain all recorded growth. Although the risks of a financial crisis have greatly diminished, the Eurozone faces an extended period of weak growth and high unemployment. Japan—Very choppy waters ahead. Real GDP grew at a disappointing 1.0% annual rate in the fourth quarter of 2013, after a similar gain in the third quarter. Spending should surge in the first quarter, in advance of the April sales tax increase, and then contract in the spring quarter. After that, a weakened yen and strengthening global growth will boost exports and investment. China—A mixed picture, with data distortions due to the Chinese New Year.Recent data have been hard to interpret because of the distorting effects of the Chinese (Lunar) Near Year. While export and import data were strong in January, recent manufacturing survey data suggest a slowdown. More generally, the rapid expansion of credit over the last decade has created vulnerabilities in real estate, banking, and local government. Excess industrial capacity, deleveraging, and a housing market slowdown are likely to restrain future growth. Other large emerging markets—Growth will remain subpar, but a fullblown crisis is unlikely. Emerging-market growth continues to disappoint, but the preconditions for a systemic financial crisis (similar to the 1997–98 episode) do not seem to be in place. Near-term growth projections for India, Brazil, Russia, Turkey, and Argentina have been marked down in this month’s forecast, reflecting weak investment climates. Political uncertainties are limiting near-term economic progress in several emerging markets.
    • Bottom line: While there have been a few data disappointments in recent weeks, especially vis-à-vis the United States and China, the fundamental forces of global growth, particularly in the developed world, remain in place. A Quick Look at the Numbers 2010 2011 2012 2013 2014 2015 2016 2017 2018 World 4.3 3.1 2.6 2.5 3.3 3.7 3.9 3.9 3.8 United States 2.5 1.8 2.8 1.9 2.7 3.3 3.4 3.1 2.8 Eurozone 1.9 1.6 -0.6 -0.4 1.1 1.5 1.6 1.7 1.6 Japan 4.7 -0.4 1.4 1.6 1.4 1.5 1.4 1.7 1.4 China 10.5 9.3 7.7 7.7 7.8 8.1 7.7 7.4 7.2 1.34 1.29 1.32 1.38 1.27 1.32 1.34 1.36 1.38 81 78 87 105 106 106 108 108 108 Real GDP Growth (Annual percent change) Exchange Rates (Year-end) Dollar/Euro Yen/Dollar -0Danny Cheung Asia Pacific Media Relations IHS Corporate Communications Singapore Office: Phone: +65 6439 6192 Mobile: +65 9171 3200 Outside APAC hours: Please email your press inquiries to: press@ihs.com