* China's premier to bow out with bullish growth forecast
* Pressure on ECB, BOE as growth flags, voters protest
* U.S. jobless rate to mark time as spending cuts bite
By Alan Wheatley, Global Economics Correspondent
LONDON, March 3 As central banks in the euro
zone and Britain edge closer this week to deciding that their
flagging economies need yet more monetary stimulus, they can be
forgiven for casting an envious eye towards China.
The same goes for the United States. Because of deadlock in
budget talks, mandatory federal spending cuts are now being
phased. They will brake a recovery that, as Friday's jobs report
is likely to show, is already frustratingly weak.
China, the biggest contributor to global growth in recent
years, has plenty of headaches of its own, of course.
Over reliance on investment in heavy industry, a financial
system rigged in favour of the state, and a failure to integrate
some 140 million rural migrant workers into urban life top the
list of structural problems.
Louis Kuijs, an economist with Royal Bank of Scotland in
Hong Kong, adds rising inflation, a renewed climb in house
prices and a rapid expansion in 'shadow banking' to the
government's to-do list for 2013.
But Kuijs and other economists expect outgoing Premier Wen
Jiabao to reaffirm a growth target of 7.5 percent for this year
when he delivers his last 'state of the nation' report to the
annual meeting of parliament that opens on Tuesday.
China entered 2013 with solid growth momentum thanks to
measured policy stimulus in the second half of last year. That
impetus is now fading somewhat after a strong fourth quarter, as
figures for January and February will probably suggest.
So, just as the West is looking to China to boost global
demand, China is counting on a pick-up in the West as 2013
unfolds to help exports and revive corporate investment, Kuijs
"Looking at trade and industrial production indicators, we
are all expecting a strengthening global picture, coming
especially from the United States and Europe, but it's still a
forecast: it's not showing up yet in the hard data," he said.
EURO ZONE DISAPPOINTS
Indeed, the European Commission is projecting that the euro
zone economy will shrink in 2013 for the second straight year.
And February's survey of purchasing managers was downright weak.
"This increases the chances of a rate cut, but it's still
not our baseline assumption," said Petr Zemcik, director of
European economics at Moody's Analytics in London. "The ECB has
done all it can at this stage."
His comments were in line with a Reuters poll of economists,
which saw a 90 percent chance that the ECB, the European Central
Bank, would keep its main short-term interest rate unchanged at
0.75 percent when it meets on Thursday.
However, a growing minority expects the ECB will cut rates
at some point. Doing so now, right after Italy's election
produced a big protest vote against austerity, would invite the
suspicion that the bank was acting out of political panic.
But President Mario Draghi is sure to be quizzed about
further easing and possible activation of the ECB's bond-buying
programme for euro zone strugglers, especially if the bank
lowers its 2013 growth and inflation forecasts again.
Jeffrey Anderson with the Institute for International
Economics in Washington, a financial-industry lobby group, said
a rate cut would send a useful signal of the importance of
growth to voters weary of austerity.
The Italian economy has shrunk for six quarters in a row.
Euro zone unemployment hit a record 11.9 percent in January.
At the same time, euro zone finance ministers, who meet on
Monday, should excuse Italy from further fiscal tightening as
its budget is close to structural balance, Anderson argued.
"Ways must still be found to prod Italy to move on overdue
labour market liberalisation. But action to boost near-term
growth would help Europe to sustain the popular backing
necessary to advance the reforms needed for the longer term," he
said in a note.
BANK OF ENGLAND CLOSER TO EASING
In Britain, the government seems determined to stick to
budget austerity despite a sharp drop in manufacturing in
February and a stinging defeat for Prime Minister David
Cameron's Conservative party in a parliamentary by-election.
This keeps the onus on the Bank of England, three of whose
nine policymakers have already voted to expand the central
bank's stock of asset purchases, now set at 375 billion pounds.
That could turn into a majority as soon as Thursday, when
the BOE meets to set policy, if a survey two days earlier of the
all-important services sector is weak, said Simon Hayes, an
economist at Barclays Capital in London.
Further easing by the Federal Reserve is not on the cards.
But job figures on Friday are likely to underscore that the U.S.
central bank is in no hurry to withdraw its stimulus - the
message Chairman Ben Bernanke relayed to Congress last week.
According to a Reuters poll, firms probably added 160,000
non-farm jobs last month, in line with January's 157,000 gain,
while the unemployment rate held steady at 7.9 percent.
That is well above the Fed's goal of 6.5 percent. Moreover,
federal spending cuts, if not reversed, will stiffen fiscal
headwinds and could lop 0.5 percent off growth over the rest of
this year, many economists estimate.
Nevertheless, Jim O'Sullivan, chief U.S. economist with High
Frequency Economics in Valhalla, New York, is confident that it
is just a matter of time before the Fed's ultra-easy policy
starts to bear more fruit.
Job growth was already brisk enough to reduce the
unemployment rate given a secular decline in the participation
rate due to an ageing population, he argued.
"Based on what we're seeing in the labour market, in the
battle between monetary stimulus and fiscal drag, the Fed is
winning," O'Sullivan said.