My tentative expectation is that global growth indicators will stabilise this summer and improve during the second half, mainly reflecting a revival in the US – see yesterday’s post and here. The latest US purchasing managers’ surveys seem consistent with this scenario. As the first chart shows, the new business indicator rose to a seven-month high in May and is at a level historically consistent with GDP growth of about 2% annualised.

The improvement in the US surveys contrasts with a further deterioration in Europe – particularly the UK. A rotation of growth momentum back to the US would be consistent with my regional monetary conditions indicators, shown in the second chart. It would also fit with the outperformance of US equities relative to Europe year-to-date.

One risk to my global scenario is that European weakness will outweigh any revival in US momentum. Based on the latest surveys, the US effect seems likely to dominate. Also, business confidence is positively correlated across countries – this month’s US improvement could be precursor of a stabilisation in European indicators.