Global economy keeps slogging along

The global economic recovery that most economists and world market analysts had either expected or hoped for by the closing months of this year is looking more and more fragile. The outlook for 2003 is looking less rosy than originally forecast — although still reasonably positive.

The Conference Board's assessment of global leading indexes points to a moderate economic recovery worldwide for the balance of this year and into 2003. The business research outfit's indexes all point to economic recovery for the world's leading economies (including the U.S.) but with only modest cyclical momentum.

Money growth throughout the world is positive, but what is missing is conclusive evidence from the industrial sector that orders and shipments will continue to improve on a month-to-month basis. This is worrisome, because most of the improvement in industrial production and orders numbers to this point has come from inventory replenishment — not from real growth in end-market demand.

The level and pace of actual improvement in economic activity to date has varied considerably from region to region, and between individual countries. Australia has generally outpaced other countries in terms of overall economic growth, largely because of strong gains in the nation's housing market.

Other export-dependent economies (e.g., Mexico, South Korea) have also done well compared to the rest of the world through the first two-thirds of this year. The Conference Board's leading economic index for Japan turned upward over the first two-thirds of 2002. But this was from a very low base and almost wholly export-driven.

Leading indexes for almost all of the European economies remained depressed. The United Kingdom has fared relatively well this year, but indexes for France, Spain, and Italy have turned lower. Despite initial signs of improvement this past spring, the German economy remained in recession during the late summer of this year.