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Portfolio > Economy & Markets

Ignore the ‘faint whiff of panic;’ global growth is accelerating

By Simon Kennedy

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(Bloomberg) — You wouldn’t know it given the noise from China and Greece, but the world economy is picking up steam.

Morgan Stanley predicted on Thursday global expansion of almost 4 percent in the second half of this year, up from 2.9 percent in the first six months.

The firm says monetary stimulus is taking hold and will even be extended by 18 central banks this year, enough reason for optimism despite it also forecasting a protracted slowdown in China and 75 percent risk of Greece leaving the euro.

“The strength of domestic demand in developed economies will be the key engine of growth,” Chetan Ahya and Elga Bartsch, Morgan Stanley’s co-chief economists, told clients. “We expect the global economy to continue on the path of gradual recovery.”

At Credit Suisse Group AG, economists are sanguine even as they detect a “faint whiff of panic” over China’s stock-market rout and the mounting prospect of Greece’s exit from the euro.

They nevertheless project improvements in the U.S. and Japanese economies alongside strengthening momentum in industrial production worldwide. A third consecutive gain in monthly new orders internationally is supporting their optimism as they reckon it’s the best lead indicator of demand for goods.

The upbeat tones stand in contrast to that of the International Monetary Fund, which this week said the world economy will grow 3.3 percent in 2015, below the 3.5 percent it estimated in April. Much of that reduction, however, was due to the U.S.’s weak first quarter.

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