Experts bullish on global upturn

THE economic outlook in the United States is looking good and the recovery looks capable of being sustained and built upon, a leading Irish economist said yesterday.

Jim Power, chief economist with Friends First, said there was a very solid consensus that the US economic recovery was now firmly established.

“Even previously downbeat forecasters have become much more optimistic,” he said. “There are no illusions about the imbalances in the economy and the ongoing risks to economic growth, but there is a belief that these risks and imbalances will play out in a benign manner.”

Bank of Ireland chief economist Dr Dan McLaughlin also believes the global recovery is gaining momentum.

“The current global growth is being led by the US and Japanese markets with the eurozone lagging behind, despite recent survey evidence pointing to a pick-up in the market. The Irish economy is emerging from the global downturn in good shape,” he said.

Ulster Bank head of investments Derek Moore is also optimistic about the outlook. The equity strategist believes that although markets have rallied in the last few months it’s time to get back into the market.

The Morgan Stanley Capital International (MSCI) world equity index was up 15.1% for the year to date at the close of business last Friday.

However, in euro terms, because of the currency’s appreciation the increase was only 5.3%. This compares to a fall last year of 21%, 17.8% in 2001 and 14% in 2000.

Jim Power pointed out that monetary authorities were among the most cautious on the economic outlook and the most concerned about the threat of deflation.

“Part of this caution is influenced by a desire to reassure bond markets that inflation is not a threat on the horizon and that a low interest rate policy will be justifiably pursued for as long as necessary to sustain the economic recovery,” he said.

“Cautious optimism best describes the attitude towards equity markets but the strong growth in productivity is having a very positive impact on profit growth. Markets have further upside potential from here, provided economic and profit growth continues. This is thought likely.”