 |
| A co-branded Taco Bell/KFC fast food restaurant in San Francisco, California. Yum! Brands often likes to experiment with restaurants that offer products from two or more of its various brands. Photographed by user Coolcaesar on October 16, 2005. (Photo credit: Wikipedia) |
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.”
The rebound’s endurance may depend on whether authorities can clear a fog of doubt surrounding policy. U.S. lawmakers are debating how to curb $607 billion in automatic tax increases and spending cuts by year-end, while a once-in-a-decade leadership shift in China may raise questions about its direction. Elsewhere, Europe’s crisis-fighting remains erratic and Japan faces its own fiscal and political dilemmas.
“Policy uncertainty is affecting business confidence, delaying capital expenditure especially in the U.S.,” said Tim Drayson, global economist at Legal & General Investment Management in London and a former U.K. Treasury official. “The potential if we get a resolution of some of these issues is a release of pent-up demand.”
Optimistic Survey
Confidence in the economic outlook was highlighted by a survey of fund managers released Nov. 13 by Bank of America Merrill Lynch. Global growth expectations were the most optimistic since February 2011 and the outlook for China’s economy surged to a three-year high.
For the first time in seven months a majority said profits will improve rather than deteriorate. More investors said companies should use idle cash to grow and increase capital spending rather than repair balance sheets or buy back shares. A net 37 percent of asset allocators said they were overweight in global emerging-market equities, up from 32 percent last month.
Strategists at Aviva Investors Global Services Ltd. said yesterday that more expansive monetary policies mean they attach a 65 percent probability to the world economy enjoying “better days” over the next six months with only a 20 percent chance growth stalls.
‘Awfully Close’
“The risk has abated somewhat, but we’re still awfully close,” Bank of Israel Governor Stanley Fischer said in an interview in Jerusalem yesterday. He said last month the world was “awfully close to a recession.”
Stocks may be reflecting the continuing risk. The MSCI World Index has dropped the past six straight sessions. In early Asian trading today, the MSCI Asia Pacific Index was little changed as of 9:41 a.m. in Tokyo.
Even so, Rockwell Automation Inc. (ROK), a Milwaukee-based maker of software for factories, is among companies forecasting an economic turnaround.
“We’re counting on market conditions improving early enough to have a positive impact on the second half of our fiscal 2013,” Chief Executive Officer Keith Nosbusch said during a Nov. 5 conference call with analysts.
Third-quarter profits at Kentucky-based Yum! Brands Inc. (YUM), owner of the Taco Bell and KFC fast-food chains, topped analysts’ estimates on sales gains in the U.S. and China. Kimberly-Clark Corp. (KMB), the Dallas-headquartered maker of Huggies diapers and Kleenex tissues, reported earnings in the same period that exceeded estimates and raised its forecast for profit this year amid sales gains in Latin America.
Surprises Spreading
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. ... Continue to read.
No comments:
Post a Comment