International Economic Outlook

INTERNATIONAL ECONOMIC OUTLOOK By Evangelos Otto Simos SOFT LANDING TO LONG-TERM TREND I. GLOBAL ASSESSMENT AND OUTLOOK Led by the United States and China, the world economy enters its sixth year of expansion in the global business cycle. The latest evidence from quarterly national accounts and forward-looking economic data suggests that global economic growth is broad based, above trend, and sustainable. On a year-to-year basis, in the first quarter of 2006 the U.S. economy expanded at an annual growth rate of 3.5 percent and China’s economic growth soared by 10.2 percent. Leading indicators of the global business cycle compiled in 35 countries are signaling even stronger growth in the second quarter of 2006. Despite the largest sustained increase in oil prices since the oil shocks of the midand late 1970s, both of which were followed by global recessions, world economic and financial conditions remain generally good supporting the continuation of the global economic expansion at a satisfactory pace during 2006-07. The strength of economic activity is particularly impressive in emerging economies with an increasing number of them reaping the benefits of globalization and higher ...