* Growth indicators pointing modestly upward
* Poor Q4 GDP data in store, but sentiment and China look up
* G20 looks to dodge a bullet in global currency wars
By Alan Wheatley, Global Economics Correspondent
LONDON, Feb 10 With the road ahead looking a bit
smoother, G20 finance ministers will be happy to ignore the
wreck in the rear-view mirror when they meet this week to steer
a course for the world economy.
The euro zone as a whole and a clutch of its members,
including France, Italy and the Netherlands, are expected to
report that their economies shrank last quarter - joining
Germany and the United States - while Japan's barely grew,
according to economists polled by Reuters.
But the Group of 20 leading economies, which meets in Moscow
on Friday, should be able to take heart from a pair of more
timely indicators - a New York Fed manufacturing survey and a
University of Michigan poll on consumer sentiment.
Economists expect both to show an improvement, despite the
gnawing uncertainty of how long-running U.S. deficit reduction
negotiations will affect taxes and spending.
Luca Paolini, chief strategist at Pictet Asset Management in
London, said he was more positive on the global outlook on
balance but a sense of perspective was needed. Buoyant markets
risked getting ahead of themselves.
"Our own leading indicators are going up, but we don't think
we're in a strong growth environment. We see weak growth, and
that's not going to change this year," he said.
PASSING THE GROWTH BATON
Simon Hayes, an economist with Barclays Capital, broadly
agreed. "On the whole, recent activity data have been
encouraging of our view that the global economy is improving,
albeit slowly," he said in a report.
January U.S. retail sales figures are likely to underline
this point. Hobbled by the Jan. 1 increase in payroll taxes,
economists expect a rise of just 0.1 percent on the month.
By contrast, U.S. capital spending is finally perking up
from a low level as corporations, realising that protracted
cost-cutting is hurting productivity and growth prospects, give
the green light to pent-up investments, Paolini said.
"But we're not overly optimistic because investment is based
on confidence. You can have all the money you want, but you're
not going to invest if you expect growth to be weak. So if we
have any kind of shock - it can be politics or something else -
investment will fall again," he said.
China delivered a boost to confidence on Friday with a batch
of strong trade and money data for January.
Economists are wary of reading too much into China's figures
at the start of the year because of distortions due to the
variable timing of the long Lunar New Year holidays.
But Ting Lu, Bank of America Merrill Lynch's chief China
economist, said they supported his view that gross domestic
product growth could accelerate to 8.3 percent in the first half
of this year from 7.9 percent in the fourth quarter of 2012.
China is not the only developing economy that is doing its
bit for global growth.
Mark Williams, chief Asia economist with Capital Economics
in London, said there had been signs of a rebound across the
emerging world in the past month. Goldman Sachs, too, said there
had been a marked improvement in consumer confidence across
emerging markets coming into 2013.
"It had been the case that Latin America and Asia were
looking up at the end of last year but emerging economies in
Europe were still looking very weak. But even they are now
joining in the recovery. So it's looking increasingly
broad-based," Williams said.
One obvious pothole on the road to recovery is the threat of
a spate of competitive devaluations, as growth-hungry countries
seek to give their exporters an edge by talking down their
currencies or actively pushing them lower by bold monetary
Japan has come in for fierce criticism in some quarters for
that very reason, but Finance Minister Taro Aso sought to
restore calm on Friday by saying the recent slide in the yen had
gone too far.
His emollient words reinforced expectations that the G20
will not point the finger at Tokyo.
At the same time, European Central Bank President Mario
Draghi's success in reversing the euro's climb with a few
well-chosen words last Thursday has eased the worries of France
and others for now that the single currency was approaching
levels that would do real damage to the euro area.
So, although Brazilian Finance Minister Guido Mantega fears
global currency wars could intensify, the betting is on an
anodyne statement from the Moscow meeting that avoids rattling
"There will be something very vague reminding everybody that
if you start getting into currency wars everybody is going to
lose," Paolini with Pictet said.