Macro Weekly – Global recovery conviction

by: Han de Jong , Nick Kounis

Big Picture: Last week’s data flow confirms the view we have held for some time and underscores the trend seen recently: global economic growth is gaining momentum. Economic reports were generally strong in Europe and in the US last week. Even China’s data came in better than expected, suggesting that China’s economy is stabilising, although Japan’s numbers disappointed.

Eurozone: Recent evidence suggests that Q2 GDP data – to be released this week –  should confirm that the eurozone economy moved out of recession last quarter. The German economy most likely led the way with a sharp jump in GDP, while most other states will be close to the zero mark. Notably this also includes Spain and Italy,  where already published data suggest that the recession in the economies has eased markedly.

US: Various indicators of domestic demand are picking up steam. The ISM nonmanufacturing index jumped in July, while the Bloomberg Consumer Comfort indicator hit its highest level since January 2008. Meanwhile, the 4-week moving average of jobless claims reached the lowest level since November 2007, before the recession.

Asia: The usual bunch of monthly data out of China surprised positively, suggesting that economic growth is stabilising at rates around the target of the authorities. Trade data showed a sharp turnaround in export growth to the US and EU, supporting the view that stronger advanced economy demand will pull up emerging markets.