Slowdown ahead
Turning. While global GDP growth accelerated up until recently, there is now mounting evidence pointing to a tangible slowdown. The OECD leading economic indicators, one of the most reliable and most forwardlooking yardsticks for the global economy, are already heading clearly south (cf. chart below). Their still high level does, however, argue against a double-dip recession.
US. The slowdown is already evident in the hard numbers. Recent economic indicators were generally weaker than expected. In the second quarter, real GDP probably grew at an annual rate of only 2¼% (IV/09: +5.6%). For the first half of 2011, we expect only 2% (pages 3-5).
Fed. The central bank is also becoming increasingly concerned about the economy, since the retarding effects of the inventory cycle and the expiring fiscal programs will soon be joined by the headwind from higher taxes. There is, therefore, a growing risk that the Fed will initiate its tightening cycle later than projected so far. It may possibly wait until summer next year.
EMU. In Europe, the spring quarter should have still been pretty good. That, however, is attributable solely to a technical reaction to the poor start to the year because of the cold winter weather and not to the recovery of final domestic demand. But GDP growth is set to slow down, although maybe not as pronounced or as early as projected given the recent upbeat readings of PMIs as well as the German Ifo climate index.
ECB. The retarding effects of the inventory cycle and fiscal policy measures are being joined by external strains. This is increasing the risk that the ECB will also have to postpone the first rate hike, especially if today's bank stress test results disappoint investors (pages 6-7 & 8-9).
