Sluggish growth, weak job market ahead
WASHINGTON (Reuters) - The global economy appears to be shaking off a deep recession, but the recovery is likely to be anemic and some damage could be long-lasting.
The United States and Japan look set to pick themselves off the mat first among major economies with gradually improving business confidence, but high unemployment is expected to linger in the United States and Europe.
Analysts see the U.S. and Japanese economies resuming growth by the third quarter of this year, with the euro zone trailing by about a quarter.
"The timing and speed of recoveries will vary, with Asia leading, the U.S. coincident and much of Europe lagging behind," said IHS Global Insight economists Nariman Behravesh and Sara Johnson.
In the United States, strong orders for durable goods and the first rise in consumer spending since February added to signs last week that the worst of the deep downturn may have passed in the world's largest economy.
But with businesses still reeling from the impact of the financial crisis and the housing-market implosion, the U.S. jobs market has a rocky road ahead. That will weigh on consumer spending, which accounts for more than 70 percent of economic activity.
"Unfortunately, double-digit unemployment is not too far away," economists at Wachovia Economics Group told clients last week.
The Paris-based Organization for Economic Cooperation and Development raised its economic outlook for its 30 members countries for the first time in two years last week, but warned that soaring unemployment and ballooning budget deficits pose risks to a fragile recovery.
Many analysts believe that the major economies will grow at subpar levels for many months before settling at lower long-range levels than in the past as a post-crisis cautiousness grips consumers and businesses.
Reinforcing that, credit will remain tight in many markets as banks rebuild capital eaten away by losses. Improved economic conditions of recent months may fade as stimulative measures such as government spending and tax cut initiatives or generous central bank funds wind down.
"The path to recovery will be uneven," IHS's Behravesh and Johnson said.
U.S. payrolls data, due on Thursday, is expected to show that employers cut 355,000 more jobs in June, with the unemployment rate rising to a 26-year high of 9.6 percent from 9.4 percent in May.
Businesses have cut back deeply on investment and hiring, but may be starting to perk up. In the United States, a closely watched index from the Institute for Supply Management on Wednesday is expected to show the contraction in the U.S. factory sector continues to ease.
Some analysts believe the third quarter will likely be the critical turning point for the manufacturing sector.
Japanese manufacturers also appear much less gloomy about business even as they worry that consumers remain leery about spending. Manufacturers and non-manufacturers expect conditions to improve over the next three months, with sentiment buoyed by rising exports and industrial output, a Reuters survey found in mid-month. Continued...
