Global Outlook Update

Submitted by Jim Thesiger on 23 May, 2008 - 13:58

This Global Outlook Update is provided by Australian stockmarket analyst Macquarie Research Equities.

Pleasantly Surprising Global Outlook

US, European and Japanese leading indicators for the first quarter have been surprisingly strong based on data released this week which indicates that the repercussions from the sub-prime crisis should be short and shallow. Despite the US housing slump, regional manufacturing surveys suggest that the industrial sectors have passed their low point. Europe’s first quarter GDP growth was remarkably firm, particularly in Germany and France. Japan’s soft core machinery orders point to more cautious capital investment, but economic growth for the first quarter was surprisingly robust. More ..

US

Demand for US equities and treasuries jumped in April despite concerns around the housing slump and inflation on the back of record oil prices. Housing starts and building permits lifted in April, although consumer sentiment remains weak. The Conference Board leading indicator rose by 0.1% in April for its second consecutive month and is above a growth rate consistent with previous recessions. The ECRI weekly leading index turned upwards in the week ended May 09. Importantly, the Philly Fed manufacturing survey turned upwards with new orders and shipments showing especially solid improvement.

Europe

The Bank of England decided to keep rates on hold in May with policy makers focussing on curbing inflation rather than downside risks to growth. European first-quarter GDP growth rose by 0.7% and yearly growth was above potential at 2%. France and Germany grew by 1.5% and 0.6% respectively with a rise in business investment and net exports. The energy sector drove price gains resulting in higher PPI’s, however business conditions and expectations were higher.

Japan

Japanese first-quarter GDP growth rose by 0.8% with personal consumption and net exports ticking higher despite weaker capital expenditure. Non-manufacturing sector orders and core machinery orders were higher in March.

Regardless of inflation concerns due to record oil prices and weaker general consumer sentiment, the global outlook for the world’s major economies is robust, being driven by demand from the world’s emerging economies.

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