Global Economic Overview: June 2014
Global Outlook Turns Moderately Positive
Recent data from the major countries suggest that the global economy is emerging out of the slower growth period experienced at the beginning of this year. Though the Euro-zone economy continues to see softer trends, data from the U.S. has become more positive. The U.S. labor market is adding jobs at a healthy rate and has lifted consumer sentiment. In Japan, consumer confidence appears to be recovering after the expected decline following April’s consumption tax hike. Exports from select Asian countries, including China, continued to show improvement, underlining the improvement in global trade.
Global manufacturing output continued to expand during June, helped by further gains in the U.S. and the U.K. as well as the recovery in China. Factory output in the Euro-zone also increased during the month, but the pace moderated when compared to May. Among the other emerging economies, India and Indonesia saw stronger growth while Korea and Taiwan were subdued. The U.S. Federal Reserve has indicated that it is likely to end bond purchases completely by October this year, but increases to the target fed funds rate is expected only next year. Global equity prices saw further gains in June, helped by the sustained uptrend in the U.S. and a rebound in Japan. Emerging markets outperformed for the second month, as Thailand, Russia, India, and China led the gains.
GLOBAL INDUSTRY SPOTLIGHT FOR THE MONTH: AUTOMOBILES
Automobile sales remain robust across most major markets, the U.S. and China in particular, while demand continues to recover in Western Europe. New vehicle models with increased fuel efficiency, safety features, and reliability continue to attract buyers in the developed markets. In the emerging countries, rising income levels and easier access to credit remain the primary drivers of automobile demand.
The automobile industry was one of the worst hit by the global financial crisis, but was also among the quickest to recover. The sharp drop in demand and the strained balance sheets pushed several large automakers in the U.S. and Europe to the brink of bankruptcy. The most troubled U.S. manufacturers quickly went through a government supported restructuring effort, while the European companies sought financial support from governments and overseas investors. The Asian manufacturers were relatively less affected as the demand decline was not as severe when compared to Europe and North America.
The industry’s revival in recent years has been remarkable and the major global automakers, except few European companies, have seen record earnings. Average income levels have been slow to recover in the developed world, but that has not deterred consumers from buying new cars. The primary reason for this demand buoyancy is the superior fuel efficiency of modern vehicles. Most mass
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