Banking & finance

Economists see moderate world economic upturn

  • 22 November 2005

A moderate cyclical upturn in the world economy in the fourth quarter of 2005 is reported today in the World Economic Survey of corporate economists carried out by the International Chamber of Commerce and the Ifo Institute for Economic Research in Munich.

It was the first rise in the economic climate index since the beginning of 2004. However the improvement applied only to assessments by the 1,100 participating economists of the current economic situation. Expectations for the coming six months weakened slightly.

“The World Economic Survey thus signals a continuingly robust international economy. The weakening in the world economy in 2004 has proved to be only temporary and has now been supplanted by a moderate cyclical upturn, “ the survey said. Improvement was especially marked in Europe, where assessments of the current situation and expectations for the next six months were both stronger. The climate indicator also rose in Asia, although more confident assessments of the current economic situation were offset by more cautious expectations for the immediate future. Only in North America did the climate indicator decline, as a result of clearly worsening expectations, as well as less positive appraisals of the current situation.

Unlike surveys for the three previous quarters, the latest survey showed that a clear rise in inflation is expected. Inflation expectations had stood at 2.9%, the same inflation rate as in 2004, but expectations now were for an inflation rate of 3.3%. “The sharp price increases for oil and other raw materials are now expected to have a stronger effect on consumer prices than assumed in previous surveys.”

A growing number of participants in the survey expect an increase in central bank interest rates, especially in North America and Asia, but also in Western Europe. “The US dollar is regarded as adequately valued in all the surveyed countries, after having been undervalued for two years. The euro and the British pound were less frequently regarded as overvalued than in previous surveys.

For the first time since the beginning of 2004, the Japanese yen was appraised as slightly undervalued. ICC is the world business organization, the only representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC promotes an open international trade and investment system and the market economy. Business leaders and experts drawn from the ICC membership establish the business stance on broad issues of trade and investment, e-business, IT and telecoms policy, as well as on vital technical and sectoral subjects. ICC was founded in 1919 and today it groups thousands of member companies and associations from over 130 countries.

Since 1981 the Ifo Institute has conducted a quarterly survey in numerous countries on business cycle developments and other economic factors in the experts’ home countries. The October 2005 survey received responses from 1 100 experts in 91 countries. The survey is conducted in co-operation with the International Chamber of Commerce in Paris (ICC) and with financial support from the European Commission.