Global economic recovery has started, says business poll

A world survey of business sentiment today pointed to the onset of global economic recovery, with upbeat expectations evident in North America, Europe, Asia and most other regions.

The quarterly economic climate indicator of the International Chamber of Commerce and the Munich-based Ifo economic research institute rose to 100.2 from 91.3 in July.

Assessments of the current situation and the outlook for the next six months were both positive for the first time this year. The expectations indicator climbed from 114 to 122.8.
More than 1,000 experts from 91 countries took part in the survey, among them corporate economists from multinational companies, academic economists and chamber of commerce executives.

Dr Gernot Nerb, Ifo’s Director of Business Surveys, said : “The improvement in the economic climate index had set in by the end of April, after the fall of Sadam Hussein. Since we now have had three consecutive positive surveys, the latest figures can be interpreted as the onset of a global economic recovery.”

Dr Gernot Nerb, Ifo Institute
Tel: +49(0)89/92241236
Fax: +49(0)89/9077951236
Website: http://www.cesifo-group.de/nerb-g
A regional breakdown showed the strongest improvement in the economic climate in Asia (up from 96.3 to 110.2) followed by North America (up from 97.1 to 106) and Western Europe (from 80.2 to 89.6).

As in the July survey , the euro was on average seen as overvalued, along with the British pound Sterling. The US dollar and the yen were both considered to be undervalued. Most of the business experts expected no appreciable change in currency parities over the next six months.

• GDP growth expectations for over the next three to five years have marginally improved to 2.9% from 2.7% a year ago.
• An average 2.9% increase in consumer prices is expected for the world economy in 2003, only slightly higher than in July (2.8%).
• The present cycle of interest rate cuts has ended. Over the next si x months, increasing short-term interest rate increases are expected for the first time since the July 2002 survey.
• Central bank interest rate hikes are seen as more likely in the US than in the euro area, where most survey participants expect the European Central Bank to leave interest rates unchanged or only slightly increase them.