Global recovery depends on US rebound

A recovery in the US economy is a key ingredient in the prevailing view that there will be an upturn in the global economy in the second half of 2003.

Speaking at last week’s ECB press conference, the President, Wim Duisenberg, stated that over time the euro economy should benefit from a global recovery. However, it is unlikely that the eurozone itself will contribute much to this global upturn, at least in the course of 2003. Growth is strong in Asia, excluding Japan, where the latter continues to be prone to major setbacks. It is to the US, therefore, that we must look for the main source of sustainable global recovery.

Latest data show that the US economy grew at an annualised rate of 1.4% in the final quarter of 2002. This equated to 2.9% in year-on-year terms. For 2002 as a whole, the US economy grew by 2.4%. Growth rates below 3-3.5% represent below potential performance for the US economy. This has been the picture over most of the past three years. The evidence so far this year does not suggest that the economy is back on track towards its growth potential.