Banking & finance

Third successive rise in world economic climate index

  • 22 May 2006

Increasingly positive assessments of the general economic situation have resulted in another rise in the world economic climate index, according to the second quarter results of the International Chamber of Commerce (ICC)/Ifo World Economic Survey, released today.

The index has reached a five-year high thanks to more favourable evaluations of the present economic situation averaged from all 91 countries surveyed. In Western Europe the improvement of the overall climate index resulted from rosier assessments of the present economic situation, while in North America optimistic expectations for the next six months caused the index to rise. In Asia both current economic assessment and future expectations remained positive.

In most areas short- and long-term interest rates are expected to rise in the coming six months and inflation is expected to weaken slightly.

“Despite sharply rising prices of energy and raw materials, there are no signs that consumer price inflation (CPI) will accelerate this year,” the survey said. “On the contrary CPI is expected to stand at 3.1% in 2006 on the world-wide average, which is slightly lower than expected at the beginning of the year (3.2%).”

Experts surveyed regarded the Japanese yen as somewhat undervalued while the euro and more particularly the British pound were considered slightly overvalued. When asked to anticipate the movement of the US dollar over the next six months, respondents forecast a decline relative to other currencies.

“Global business sentiments are indicating that the economic expansion seems to be robust enough to withstand record oil prices and higher interest rates,” said the survey, which involved 1 087 economic experts in 91 countries.

A special section of the survey asked respondents about counterfeiting and piracy of intellectual property rights. Counterfeit products are widespread in many areas of the present marketplace and have a significant impact on almost every industry.

According to the latest survey results, the majority of 72 countries that responded reported no discernible change in the volume of counterfeit products being sold.

However, in Latin America, in Africa (particularly South Africa) and in some Western European countries the majority of surveyed experts feel the volume of counterfeit goods sold in their country is on the increase. In China, 55% of experts believe that the volume is increasing, 18% feel it is decreasing, and the remainder see it as unchanged.

Another special question asked experts to gauge whether the majority of consumers in their country understand that counterfeiting and piracy have proven health and safety risks and links to organized crime. Two thirds of respondents feel most consumers in their countries are not aware of this fact.

Finally, when asked whether companies were more or less likely to make foreign investments in a country lax on intellectual property right enforcement, most respondents felt decisions to invest were more influenced by other factors.