World Economy Indicators

17 July 2003

• Hopes of an imminent stateside recovery have been boosted by a rise in retail sales last month.

According to the Commerce Department, sales rose 0.5% compared with the previous month, following flat growth in May. This is the largest gain since March, and would have been 0.7% were it not for a decline in the auto sector.

June’s jump partly reflects a hike in gasoline prices and discounting at clothes shops. Although these two factors are temporary, economists hope the increase heralds the start of an upturn. Early estimates are that inflation-adjusted second-quarter sales were up 3% year-on-year – an improvement on the sub-2% growth rate over the previous six months.

The findings coincided with upbeat forecasts from Alan Greenspan, chairman of the Federal Reserve, and Treasury Secretary John Snow.

Greenspan is predicting US growth of between 3.75% and 4.75% for 2004. Snow expects expansion “comfortably above 4%”, declaring: “The American economy is coiled like a spring and ready to go.”

• Meanwhile, there are also positive signs for Germany, Europe’s largest economy, as an index of financial experts’ expectations for the coming six months surged to its highest since September last year.

The barometer – compiled by the Zentrum fur Europaeische Wirtschaftsforschung from a survey of 311 analysts and institutional investors – leapt from 21.3 in June to 41.9 this month, soaring beyond economists’ expectations of 24.

The figure represents the difference between the number of positive and negative forecasts; any reading above zero means that more analysts are upbeat than pessimistic.

ZEW attributed the surge to a weakening of the euro and tax cut proposals. Such a leap may signal that the economy has hit bottom, according to Wolfgang Franz, the economic institute’s president.

Data sourced from: multiple sources; additional content by WARC staff