All three main economic regions − North America, Asia and Western Europe − saw the Ifo economic climate index rise significantly in the first quarter of 2006 and the global economy is predicted to grow further still in the first half of the year, the survey revealed.
“After three consecutive positive survey results, with the assessments of the current economic situation following positive economic expectations in almost all regions, the latest survey results can be interpreted as indication of a sound global economic expansion,” the survey said.
Expectations for Asia − and in particular Hong Kong − were a little more cautious.
Economic growth is particularly evident in Western Europe where assessments of the present economic situation showed improvements in all countries of the euro area since the last survey in October 2005.
According to the survey, world inflation is expected to remain high in 2006 despite being marginally lower than in 2005. The slight decrease is attributed to expected price increases of 2.8% in North America, down from 3.2% in 2005. Although inflation expectations remain unchanged for Western Europe they have increased slightly for Asia, and more participating experts than in previous surveys anticipate rising central bank and capital market interest rates for these areas.
After having being regarded as adequately valued in the previous survey, the US dollar is now considered by survey experts to be slightly overvalued, as is the euro. The British pound is considered to be clearly overvalued. Only the Japanese Yen is still considered as undervalued, as it was in the previous survey.
A total of 1 080 economic experts in 90 countries took part in the survey.