World Economy looks to Twin Powers

The U.S. and China, the world’s traditional twin sources of growth, are planting seeds to lift the world economy from its midyear slowdown.

Among the green shoots indicating faster expansion: stronger housing demand and hiring in the U.S. and accelerating factory output and retail sales in China. Responsible for a third of the world economy, the two countries are now providing ballast internationally as Europe and Japan stagnate.

“China and the U.S. are both improving, which is extremely good news,” Jim O’Neill, chairman of Goldman Sachs Asset Management, said in a telephone interview. “If we could pretend Europe and Japan didn’t exist, the world would be fine.”

The rebound’s endurance may depend on whether authorities can clear a fog of doubt surrounding policy. U.S. lawmakers are debating how to curb $607 billion in automatic tax increases and spending cuts by year-end, while a once-in-a-decade leadership shift in China may raise questions about its direction. Elsewhere, Europe’s crisis-fighting remains erratic and Japan faces its own fiscal and political dilemmas.

“Policy uncertainty is affecting business confidence, delaying capital expenditure especially in the U.S.,” said Tim Drayson, global economist at Legal & General Investment Management in London and a former U.K. Treasury official. “The potential if we get a resolution of some of these issues is a release of pent-up demand.”

Bloomberg

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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments. He has a deep understanding of market fundamentals and the impact of global events on capital markets. He is respected among professional traders for his skilled analysis and career history as global head of trading for firms such as Scotia Capital and BMO Nesbitt Burns. Since joining OANDA in 2006, Dean has played an instrumental role in driving awareness of the forex market as an emerging asset class for retail investors, as well as providing expert counsel to a number of internal teams on how to best serve clients and industry stakeholders.
Dean Popplewell
Dean Popplewell

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