Sunday, June 3, 2007

The global expansion – a positive world

For most of the last fifteen years, the US consumer has been the driver of global expansion. Most of the rest of the world was in a state of malaise without overly optimistic confidence in the future. This confidence difference has turned around significantly in the last year with the other major global economies showing growing confidence while the US has fallen into swings of confidence and depression.

The chart from the OECD Economic Outlook provides a good review of consumer and business confidence for the major global economies. This strong global confidence is a key reason for the continued world growth which outstripping what is happening in the US. Consumer and business confidence are above the US for the first time since the recession of 2001.

Confidence numbers can be fickle especially in the US where the swing are much greater than in other major economies. Confidence sometimes just describes sentiment to current conditions, but longer-term trends provide a good indication of what consumers and business will do with their wealth. It never makes sense to fight the trend in confidence.

No comments: