International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos TAKEOff IN INfLATION LEAdS TO SOfT LANdINg IN gLOBAL gROwTh I. Global assessment and outlook Although the U.S. economy has experienced two quarters of growth below 1 percent and several signs of slowing economic activity have emerged in Europe, the focus of economic indicators is on the inflation front. Several years of loose monetary conditions coupled with above trend synchronized worldwide economic growth have caused a takeoff in global inflation. The International Monetary Fund’s (IMF’s) composite price index of all commodities surged 45.5 percent in the first quarter of 2008 from the same quarter a year ago, after an increase of 30.5 percent in the last quarter of 2007. When fuels are excluded, the commodities price index jumped on a year-over-year basis by 19.5 percent in the first quarter of 2008, following an increase of 9.6 percent in the last quarter of 2007. Rising commodity prices and excessive demand have led to escalating consumer prices. In the first quarter of 2008, the combined inflation rate of the member countries of the Organization for Economic Cooperation and Development (OECD)—the 30 richest ...