ICC/Ifo survey reveals slight brightening in world economic climate
After two quarters of successive decline, the global economic climate has begun to improve, although it still remains significantly below its long-term average, according to the latest World Economic Survey (WES), published today by the International Chamber of Commerce (ICC) and the Munich-based Institute for Economic Research (Ifo).
The January survey polled 1,129 economic experts from business and academic institutions in 120 countries to assess current and expected economic developments. Their answers were analyzed to reach a quarterly figure representative of the current global economic climate.
While appraisals of the current situation were even poorer than the last ICC-Ifo survey in October 2011, falling from 86.0 to 84.1, overall improvement was driven by a more optimistic six-month outlook among experts, rising from a year-end low of 71.9 to 80.7.
“The latest results confirm that the cyclical downswing of the world economy is still underway,” said Gernot Nerb, Ifo Director of Business Surveys. “But they also confirm the now-prevailing view that the downswing will be relatively short and moderate in most countries and not devolve into a recession.”
Lingering scepticism in Western Europe
The economic climate in Western Europe changed little. While the current economic situation deteriorated further compared to the last quarter of 2011, the six-month outlook brightened slightly but nevertheless continued to signal scepticism.
However, the prevailing view in Western Europe, as in other parts of the world, is that the collapse of the Eurozone and a return to national currencies can now be avoided, Mr Nerb said.
“This view, coupled with the brightening economic outlook in some other parts of the world, particularly in the US, allows us to reasonably hope that the Western European economy will start picking up in the second half of 2012,” he said.
Positive drive from US offsets Asia
Signs from North America mark a clear improvement over 2011, the report indicates, especially from the US, where both the current economic situation and the six-month,outlook are more positive.
“In the US economy, the six-month outlook is certainly more positive than it was three months ago,” said ICC Secretary General Jean-Guy Carrier.
“Other data from the US in the report also pointed to a moderate pick up,” Mr Carrier continued. “The private sector, for example, showed a remarkable increase in new jobs, fixing the unemployment rate in January 2012 at an almost three-year low.”
This offset the economic climate in Asia, which is pointing to an economic slowdown, after significantly worse appraisals of the current situation further pushed the climate indicator below its long-term average, Mr Carrier said.
Decreased inflation expected
The inflation estimate for the beginning of 2012 decreased significantly over the end of 2011, dropping from 4.0% to 3.5%, the report shows. Experts expect the short-term interest rates to remain unchanged and/or decrease slightly over the next six months.
In terms of currencies, the report indicates that the yen, in particular, remains over-valued. Experts also expect the dollar exchange rate to rise slightly on a worldwide average over the next six months.
Effects of potential Eurozone collapse
In response to the ICC special question about possible damage to the world economy and global business should the Eurozone collapse and all member countries return to national currencies, the vast majority of surveyed experts see danger of great damage in the short-term, i.e. one to three years.
While the majority of the surveyed WES experts in the Eurozone (57%), Western Europe (53%), and Eastern Europe (47%) would still expect great damage to the world economy in the mid-to-long term, a moderately higher number in all other regions believe a collapse would cause only “moderately damaging” effects instead of “very damaging” effects in the same time frame.
The great majority of participants agree, however, that a political solution could prevent any such collapse from happening.