Business Week - The U.S. and China, the world’s traditional twin sources of growth, are planting seeds to lift the world economy from its midyear slowdown.
Among the green shoots indicating faster expansion: stronger housing demand and hiring in the U.S. and accelerating factory output and retail sales in China. Responsible for a third of the world economy, the two countries are now providing ballast internationally as Europe and Japan stagnate.
“China and the U.S. are both improving, which is extremely good news,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a telephone interview. “If we could pretend Europe and Japan didn’t exist, the world would be fine.”
In a sign the world economy is emerging from its rough patch faster than economists anticipated, Citigroup Inc. gauges of whether incoming data exceeds or undershoots forecasts show U.S. and China indicators are increasingly proving stronger than anticipated. The so-called surprise index for the U.S. is at 57, up from a 2012 low of minus 65.30 in July, while China’s has risen to 27.30 from minus 87.80 in May.
Behind the upward turn is continued stimulus from monetary policy makers and a potential recovery in industrial growth after manufacturing production fell 2.6 percent in the three months through September, said David Hensley, director of global economic coordination at JPMorgan Chase & Co. in New York. Order books and inventories suggest the slide may now begin reversing.
“We’re quite confident about the signs of stabilization,” Hensley said in a telephone interview. “We expect some modest acceleration and we’re seeing signs of it if not full confirmation.”
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