* Euro zone, Japanese, Chinese surveys likely to be weak
* Monetary elixir from Fed, ECB needs time to work
* Reduced euro breakup risk could revive bank lending
By Alan Wheatley, Global Economics Correspondent
LONDON, Sept 16 The world's top two central
banks have administered extra-strong monetary painkillers, but
the global economy will still need a lot more time to recover
from its thumping debt hangover.
Financial markets were euphoric after the Federal Reserve
surpassed expectations and promised on Thursday to keep the
money taps fully open until the U.S. labour market makes a
The European Central Bank had already impressed investors a
week earlier by pre-announcing unlimited, albeit conditional,
secondary-market purchases to bring down sky-high yields on
bonds issued by struggling euro zone members such as Spain.
Now it's time to come down to earth.
Surveys due this week are likely to show why, in the words
of Stephen Cecchetti, the chief economist of the Bank for
International Settlements, there are no grounds for complacency.
Global financial reforms are not yet complete. Southern
Europe has not solved its fiscal problems and lack of
competitiveness. And the world economy is listless, he said.
"The pace of the recovery in the advanced economies remains
disappointing. There are also signs of lower economic growth in
emerging market countries," Cecchetti said on a conference call.
Exhibit No. 1 underlining that weakness will be Thursday's
advance September poll of purchasing managers across the euro
zone. It is likely to show the 17-country area mired in
Economists polled by Reuters expect the index derived from
the survey to edge up to 45.5, from 45.1 in August, but that
would still be well below the 50 mark delineating contraction
"A lot of very difficult steps need to be taken sooner
rather than later for the sovereign debt crisis to be resolved
and, until then, the economy will likely remain sluggish at
best," said Bert Colijn, an economist at The Conference Board
Exhibit No. 2, from Japan, will be the Reuters Tankan survey
for September due on Wednesday, which is likely to point to
challenging conditions for manufacturers, according to
economists at Daiwa Capital Markets.
The Japanese government last week lowered its growth outlook
for the second month in a row, putting pressure on the central
bank to ease monetary policy afresh, not least to weaken the
The Bank of Japan ends a two-day meeting on Wednesday.
However, Daiwa expects the central bank to stand pat until next
Exhibit No. 3 a day later will be September's survey of
Chinese purchasing managers. With no obvious pick-up in
activity, Goldman Sachs is looking for more weakness after
August's reading of 47.5.
Many investors have been surprised that China has not acted
more forcefully to cushion this year's slowdown in growth.
Cecchetti with the Basel-based BIS said the moderation in
developing nations could have the welcome effect of putting
their growth on a more sustained footing. "But, even so, it
means that the emerging market economies won't support global
growth as much as they have in recent years," he said.
Which means waiting for the Fed's and the ECB's monetary
medicine to kick in.
Andrew Cates, an economist with UBS in London, said it has
been foolhardy until recently to think Europe might spring a
positive surprise. But now, despite a still-difficult near-term
outlook, the ECB's plan to buy bonds provides some modest
grounds for optimism.
"If that initiative is successful in removing the risk of a
euro zone default and exit scenario, credit conditions in the
European banking sector ought to ease up, thereby generating a
higher flow of finance to the real economy," Cates said in a
His economic modelling suggests that increased lending to
businesses and consumers could boost 2013 GDP in the euro zone
by 0.5 percentage point. The spillover of confidence could raise
U.S. output by 0.3 percentage points, while Chinese growth would
get a similar boost through higher demand for its exports.