The world economy [October 2003]

The most recent economic data suggests that the recovery is strengthening in the US and the Asian economies (excluding Japan) but is weaker in the Euro Area and Japan. Global domestic demand remains relatively weak but is expected to pick up in the second half of this year. There are mixed signals from consumer confidence measures with some remaining weak while others are showing signs of improvement. The labour markets also demonstrate mixed performance. The unemployment rate fell in the US but so did the employment rate. Oil prices have remained flat but there is little evidence to suggest that the world economy is experiencing any significant inflationary pressures. There are clear signs however from central banks that interest rates will have to rise shortly. While the hostilities in Iraq were brought to a rapid conclusion there is now more concern over "guerrilla warfare" from disaffected Iraqis and opposition groups. This is not only potentially destabilising for the Middle East but adds to the uncertainty in the world economy.