Global economy lifting on schedule
Simon Ward
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The sustainability is open to question but the global economy is lifting in late 2011, as suggested by an earlier recovery in real money growth.
In the US, inflation-adjusted retail sales rose again in November while early December New York and Philadelphia Fed manufacturing surveys reported a further increase in order expectations, hinting at strength in ISM new orders.
While the Eurozone grapples with credit contraction, US bank lending continues to expand. Commercial banks’ loans and leases rose by 5.6% annualised in the three months to November, pushing the annual increase up to 2.2% – a three-year high.
Recent stronger demand for bank credit may partly reflect a rebuild of inventories, which should contribute significantly to fourth-quarter GDP expansion.
The inventory rebuild, in addition, may be boosting Asian exports, which were strong in November, with Taiwanese orders data today confirming an improvement.
It would be a stretch to suggest that the Eurozone is joining the party but last week’s flash PMIs seem consistent with an economy flatlining rather than heading into the abyss – at least for now. Today’s Ifo survey was also less dire than feared.
The onus is on central banks – specifically the ECB and PBC – to sustain global real money expansion in early 2012, especially with QE2-related US monetary buoyancy likely to fade.
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