Global economy expected to pick up steam


ChartThe rate of growth in 2013 is not expected to be a straight line skyward, but after getting through a possibly sluggish summer, the pace is likely to improve after Labor Day, according to a new forecast from BNY Mellon.
By years end, Mellon is expecting a 4% increase over 2012.

Two factors are expected to play into a summer slump – it is believed that the European recession will still be in progress, and in the US, the effects of the sequester are expected to provide a drag on the economy.

“We expect a ‘Labor Day inflection point’ from the 2% growth rate of recent years to a new cyclical growth rate of 3% or more,” commented BNY Mellon’s Chief Economist Richard Hoey. “This would be an important ‘Two Percent to Three Percent Transition’ in the growth rate of the U.S. economy. However, it is unlikely to occur until late 2013.”

The presence of stimulative monetary policy is expected to continue and provide positive benefits.

Hoey is hoping that Europe will begin to experience at least mild expansion by 2014; at the very least, he does not expect any imminent collapse there despite continuing challenges.

He also noted that new monetary policy in Japan may have a positive effect, while stating that it is still too early to tell.