* Confused data means policymaking will stay on pause
* Central banks to wait-and-see across developed world
* Few major economies giving clear signals on growth
By Andy Bruce
LONDON, June 9 Financial markets have become
convinced in the past two weeks that two years of one-way
traffic from the developed world's central banks on policy is
coming to an end.
The difficulty, on the evidence of the last few days, is the
mass of conflicting signals on how shaky things still are, or
how much better they will get - and as a result getting from
here to actual changes in policy will probably take months.
Since the euro zone's sovereign debt crisis administered
another jolt to the global economy three years ago, central bank
decisions on more monetary easing have not so much been a
question of if, but when. The same has largely gone for a
fragile U.S. recovery.
That's not the case in 2013, even if global growth looks
likely to disappoint again this year.
Faced with fewer immediate threats but still under pressure
to nurse the world economy back to more convincing health,
central bankers have been grasping at a disparate and volatile
set of economic indicators for a steer on policy.
"That's a fairly difficult challenge at the best of times,
and we're hardly in the best of times," said Craig Wright, chief
economist at Royal Bank of Canada in Toronto.
Data from the United States last week summed up the problem.
Depending on the indicator, there was a case for the Federal
Reserve maintaining support for the economy by pressing on with
its $85 billion-a-month bond purchase programme for a long time,
or scaling it back soon.
U.S. manufacturing activity unexpectedly fell to the lowest
level in four years in one sign, said economists, that the Fed
would refrain from winding down its programme anytime soon.
On the other hand, Friday's news that U.S. employers stepped
up hiring was interpreted as a sign of economic resilience,
suggesting the Fed could begin to scale back its stimulus later
The Fed's officials are split too, meaning it could be
months until a consensus emerges, but most economists expect a
scaling back of bond purchases by the end of the year and a
sizeable number expect reduced buying as early as September.
Of course, central bankers have to take into account
developments in economies other than their own, and the economic
data from the rest of the world has been similarly volatile.
"The indicators are mixed across the globe, some countries
look a little more convincing than others. I'd put the U.S. and
Canada as looking like a recovery is taking hold, while the UK
and euro zone is still hit-and-miss," said Wright.
While a fairly quiet week for economic data lies ahead,
central bankers and top officials from the World Bank, OECD and
Asian Development Bank will give their views on the world
economy on Monday at the 2013 Conference of Montreal.
MORE TO DO?
For Europe and Japan, the question is whether yet more needs
to be done.
Early doubts about the effectiveness of a growth strategy
outlined by Japanese Prime Minister Shinzo Abe, dubbed
Abenomics, pushed Japanese stocks to two-month lows on
Friday after their worst week in two years.
This week will provide a better idea of whether that was a
blip in the aftermath of the Bank of Japan's announcement of
$1.4 trillion in monetary stimulus, or a sign investors reckon
even that might not be enough to right the world's No.3 economy.
"Recent weakness in the market represents a little bit of a
disappointment for Abenomics," said Kenji Shiomura, an analyst
at Daiwa Securities.
"But it would be too extreme to say that hopes for Abenomics
have faded completely because the biggest impact Abenomics gave
the market was monetary easing, and it is still continuing."
Perhaps the biggest worry for Japanese officials is the
yen's spike to its strongest in two months against the dollar.
The government showed little concern about Friday's surge,
but the calm response masks a lack of solid policy options
should the yen strengthen further and stamp on the country's
ability to export.
European policymakers, like their American counterparts,
have had a hotchpotch of numbers to deal with.
Economic confidence figures have surprised on the upside in
the euro zone over the last month, but harder data like business
surveys still point to a dearth of demand.
And like the Fed, the lack of a clear guide for the economy
means the European Central Bank is sitting on the fence when it
comes to the question of stimulus.
"There was a common assessment that the changes that have
taken place are not sufficiently one-directional as to grant
action now," said ECB President Mario Draghi after leaving
policy unchanged last Thursday.
Unusually, Britain has been leading the way in Europe of
late, according to the latest business surveys. But like the
United States, there is little certainty about whether the UK
will keep up the momentum.
"I think when you look at turning points in the cycle, which
is hopefully where we are in Europe, you do get these mixed
signals. And that's what we're seeing," said Wright from RBC.