The International Chamber of Commerce (ICC) reported from its Paris office that its “ICC/Ifo global climate index in July fell for the fourth consecutive quarter in a row since sentiment became downbeat last summer, recording its lowest level since 2001.
“The ICC/Ifo world economic climate index for the third quarter, which polled 1025 economic experts in 92 countries, dropped 8.0 points to 73.4 from 81.4.”
The ICC’s bulletin noted that economic “sentiment darkened especially in Western Europe and Asia.” But the economists’ view of the current US economy was even worse, as it “scored its lowest marks seen in a decade.” However, they did slightly raise their expectations for the US economy in the coming six months due to expectations of a pickup in US exports.
“The global climate index fell in all major Asian economies,” the report continued. “In some of the major economies of Latin America, including Brazil and Mexico, economists also foresee a cooling off period for the second half of the year.”
The “greatest impediment to global economic growth,” cited by the economists who participated in the survey, “is rising inflation, which they say is further aggravating the cyclical downturn. They estimated worldwide inflation at 5.2 percent. Economists polled raised their expectations for inflation in each region of the world: 3.8 percent for the US, a major upgrading in inflationary expectations in Europe to 3.5 percent, and pegged inflation at 5.3 percent in Asia, 9.7 percent in Latin America, and 14.5 percent in the CIS states.”
The conclusions on inflation caused the economists to reverse their previous view on interest rates. “Despite expectations for a further weakening in the global economy, with US$130 oil contributing to economic slowdown,” the economists said they now “expect a rise in central bank and long-term interest rates.”
The ICC asked a special question in the current survey on the impact of rising oil prices on the global economy and the ability of companies and countries to meet their energy needs. It found that “a large majority of economists said they expect oil prices above US$130 a barrel to create disequilibrium and reinforce recessionary tendencies in the global economy in 2008, and to negatively affect company earnings.
“Over the next six months, economists also said that US$130 oil will lead to high current account deficits in many Asian countries, in South Africa, and in several European countries, including Spain, Portugal and Greece.”
However the ICC said its economists also “saw a silver lining to oil prices at that level: in Western Europe, North America, and major Asian economies. The $130 per barrel price of oil is expected to “induce companies to invest in cleaner and more efficient technologies.”
The International Chamber of Commerce is the world business organization, a representative body that speaks with authority on behalf of enterprises from all sectors in every part of the world. ICC participates in the quarterly survey with the Ifo Institute for Economic Research and the Center for Economic Studies at Ludwig Maximilian University, both based in Munich, Germany.
To view the article and accompanying graphs online, go to:
http://www.iccwbo.org/icccdecg/index.html
Source: International Chamber of Commerce
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