Difficult Global Economic Growth Momentum Causes - By: Allan Michael Taylor

Bernanke in the Congress semi-annual monetary policy testimony warned that the U.S. economic outlook uncertain abnormal, if necessary, the Fed will take further policy actions to boost the economy;
However, he also shows the short term, no specific measures to consider.

Remarks against the background, with a strong financial incentives influence was in decline, the U.S. economy started to slow down the pace of: leading indicator of the ISM (Institute for Supply Management) manufacturing index in April from 60.4% to 56.2% in June, including new orders and export index fell significantly; non-manufacturing index fell from 55% early to 54% in June.

The U.S. economic slowdown will lead to "double dip" problem, Bernanke played down the remarks in this concern. U.S. Federal Reserve cut U.S. GDP growth expected this year, 0.2 percentage point, to 3% to 3.5%.

"The global economy 'second bottom' very unlikely." Goldman Sachs Group, the global chief economist Jim O'Neill In an interview with "Financial State Week" interview, said that although economic growth in coming quarters will be lower than the U.S. trend level, but the strong global economy from the "BRIC" economies continued vitality, "including China."
V-recovery end?

"Can not predict," "bad judge" is a company description for the perception of export markets, economists and analysts are the prospects for the future of the universal answer. This situation is reflected in the background, pre Pang Tai's fiscal stimulus plan now started the Global Fan Wei Zai decline gradually within each country on economic growth in support.

The first quarter of 2010, U.S. GDP growth of 2.7%; while the global economy is the annualized growth rate of more than 5%. According to the International Monetary Fund (IMF) monitoring, the global real economic activity until the indicators are stable at high levels in May, industrial production and trade to achieve double-digit growth, consumer confidence continues to improve, re-employment in advanced economies start growth. The pace of global economic recovery appears to sound pleasing.

However, subject to financial sustainability, especially in the euro zone sovereign debt crisis, the developed economies, downside risks have increased.

In the U.S., in addition to leading economic indicators, consumer confidence index and the index of all related real estate market provides more evidence of economic slowdown. July 22 National Association of Realtors (NAR) released data showed existing home sales in June 2 consecutive monthly decline, down 5.1%; in June U.S. consumer confidence index dropped from 62.7 last month to 52.9, and the other A University of Michigan consumer confidence index: in July from the previous 76 months dropped to 66.5.

Goldman Sachs, Jim O'Neill, chief global economist in an interview to the "Financial State Week" news analysis, the recent economic slowdown in the U.S. mainly due to the end of the fiscal stimulus, as well as domestic demand still appears weak foundation. The future, "loose monetary policy and the export will be supporting the main aspects of the economy."

Goldman Sachs expects U.S. GDP growth this year at 2%, while only 1.5% this year. In addition, global economic growth this year and 4.8%, 4.6% next year.

From the data, in the euro zone unemployment rate remains high, in May, the unemployment rate at 10% the third consecutive month, growing unemployment; 27 members of the overall industrial production is also down.

Japan's economic outlook is not optimistic. China International Economic and Exchange Center researcher transgenic cotton to remind the Japanese economic recovery, increasing the possibility of reversals. ZHANG Yong-jun said that Japan has not so far out of deflation, the unemployment rate in May hit a new high of 5.2% for the year, exports have emerged, decreased for two consecutive months.

As China's important trade partner, Japan's economic slowdown trend of concern.

IMF released in July the latest "World Economic Outlook," suggested that the current global growth sharply increased downside risks. The main risk is the recent increase in sovereign risk concerns led to increased financial pressure and diffusion effects; Another risk comes from the U.S. real estate market may once again decline.

Despite the strong growth in emerging economies, but the advanced economies, downside risks to growth will allow the rapid growth of some of them face some risk of overheating of the large economies complicate macroeconomic management.

Slowdown in growth momentum

External economy, particularly the slow growth in developed economies has become a reality. After all, mainly due to the early stage of fiscal stimulus will eventually have a V-recovery period, only the recovery of domestic demand and the real economy can be endogenous to economic growth momentum.
But slow and uncertain future, does not directly mean the economy, "the second bottom" of the risk.

And Bernanke view similar to Jim • O'Neill does not believe that the global economy, the risk of secondary depression. He said that according to Goldman Sachs's leading economic indicators compiled their own (including in many countries and even the world as a whole) to determine, after the recovery of the strong, the recent slowdown in some indicators, only indicates that the engine of growth slowdown in the world without the other.

A more crucial problem is that in this situation of uncertainty and economic slowdown, the U.S. decision-making authorities and other decision-making and how it will respond?

Goldman Sachs Global Economic Research report believes that the United States do not rush to exit the current policy, but it may further relax the overall policy stance, the means is more buy federal assets or other financial packages.

However, the interest rate is difficult to occur.Jim O'Neill said that until the year 2011, the Federal Reserve and the G7 countries will maintain the current low interest rates, that is, quite a long time will not raise interest rates.

"World Economic Outlook," that today is the most important policy challenge is not inhibited in the context of economic recovery to restore confidence in financial markets, restore confidence in the euro zone to adopt the policy of full co-ordination is particularly important. The advanced economies face the challenge to restore public debt is high and unemployment as well as some economies, lack of bank credit.

"World Economic Outlook," suggested that policy should focus on a credible plan, particularly the medium-term growth prospects will improve the welfare and tax system reform and other measures to deficit in the medium term while maintaining a supportive monetary conditions, accelerated financial sector reform and rebalance global demand.

Asian Development Bank in July, "Asian Economic Monitor," to judge, the East Asian economies, the recovery trend of V-established, with few exceptions, the region should consider the gradual withdrawal of monetary and fiscal stimulus. The report also pointed out that East Asian economies will be three major risk threat: the recovery of developed economies have been disrupted; instability of capital movements; out of the economic stimulus plan is expected when the non-policy failures.

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