Further fall in global economy expected

INTERNATIONAL investors foresee a “significant” slowdown in the global economy over the next year, but do not feel the world is headed for another recession, according to a report.

A survey of international fund managers, undertaken by Bank of America- Merrill Lynch, found that 13% of respondents think the global economy is heading for a period of weaker growth.

While this compares negatively with an earlier edition of the poll showing a 19% confidence level in the economy improving, 42% of investors still felt a global recession is “unlikely” over the next year.

The latest survey was conducted earlier this month, during the period when world equities fell by 12.3%.

Merrill said that investors are now basically waiting for “convincing, coordinated action” from international governments before recommitting their cash to equities.

“Flows out of equities into cash have reached capitulation levels, especially in the US, but it’s significant that a revival in optimism towards China has survived the global correction,” according to Michael Hartnett, chief global equity strategist at BofA-Merrill Lynch.

The starkest elements of the latest survey arein the regional opinions.

Managers in the US have become more pessimistic, with 14% believing the US economy is set to weaken further. Just two months ago, the same survey noted a near 30% trend in outlook for a strengthening US economy.

Similarly, some 71% of European respondents expect Europe’s economy to weaken. This reading was up from 22% last month; but another recession in Europe is not anticipated.