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well is is half January now and over the past two months we've seen an acceleration in the momentum
in the global economy
fortunately this time this acceleration is more broad broad-based we're seeing a clear
pickup in the service sector activity which is ofcourse good for employment growth for the
simple reason
that services are far more labor intensive than manufacturing production
hence we see a more diversified recovery which would mean that the recovers more resilience
to country and sector specific shocks
having said that of course the economy remains vulnerable to global till risks the
first one is of course and the emu sovereign crisis which may lead to a tightening or financial
conditions and the decrease
in confidence
and the second till risk
is the one of overheating in emerging market economies
has many of these economies resist
two rapid an exchange rate appreciation
the more balanced recovery is underpinned by three pillars the first one being
a turn of the private sector towards more expansionary mode in the US we see corporates
wanting to invest more in stepping up their labor demand
that of course and third is good for household income and coupled with a fiscal stimulus
this generates positive multiplier effects which will lift growth above potential for
the entire year
the second pillar underpinning growth is the positive feedback loop between growth
and financial conditions which exists
because growth improves the collateral underlying financial assets which is ultimately
households and corporate income
and finally the third pillar is continued global liquidity conditions the fed is
still faced with a an extremely large employment gap
therefore will remain on hold this year
IM central banks still have very low real policy rates the only exception towards the
end of the year is possibly the ECB because of
very high German growth and therefore possibly a turn in German inflation momentum
will probably start to tight in towards the end of 2011