World economic confidence at 10 year high, poll finds

The overall economic climate indicator of the joint ICC/Ifo poll, conducted in January 2004, hit 7.3 out of a possible 9 – its highest level since 1985, pointing to a pronounced upswing of the world economy.

The poll surveyed some 1,114 economic experts in 92 countries. Jointly conducted by the Paris-based International Chamber of Commerce (ICC) and the Munich-based economic research institute, Ifo, the survey is the onl y one of its kind to give a global overview of business confidence.

The poll found that the favorable global conditions are also expected to have beneficial effect on export/import performance worldwide and thus on the world trade.

Other notable poll outcomes included:

• More than in the previous survey the euro was assessed as overvalued. On the other hand, the US dollar was seen by even more ICC/Ifo poll experts than in the previous two surveys as undervalued
• More than in the previous survey, short-term interest rates are expected to start rising in the course of the next six months. Central-bank interest-rate hikes are still seen as more likely in the US than in the euro area.
• Inflation is expected to rise, with an average 2.7% increase in consumer prices expected for the world economy in 2004 – slightly lower than the latest estimate for 2003 (2.9%) and much lower than the estimate at the beginning of last year (3.2%).
• No change of the inflation rate is expected in the US (2.2% in 2004 and 2003). The expected inflation rate in the US remains clearly under the 2.5% mark that the Federal Reserve would still consider acceptable. From this side there is no need for them to start the monetary tightening process soon.
• Bird flu has devastated the Asia’s poultry industry, but the region’s overall economy appears not to have been otherwise noticeably affected, with domestic demand forecast to strengthen in almost all Asian countries.
• Among the Asian countries surveyed by the ICC/Ifo Poll, India has become the “shining star” economically. The recovery course taken already in the beginning of 2002 was undisturbed by the conflict in Iraq or the economic weakness in Western countries. It has also escaped the outbreak of SARS in Asia. The present economic performance of India has been assessed unanimously with the highest possible marks on the WES rating scale by all 14 surveyed economists.
• The latest survey results indicate that the economy in North America will remain strong. In particular, the US economy demonstrated, according to poll experts, a strong performance in January. Given the high level of consumption and corporate investments, which are foreseen to underpin further growth, the foundations for further improvement remain favourable.
• Confidence in economic recovery is returning in Western Europe. Though the current situation is not yet seen to be satisfactory, the survey’s assessments have followed a positive trend since July 2003. An improvement of the current economic state has been reported from all Western European countries, except Denmark.