Business Irish

Sunday 18 November 2018

Sentix warns risk of global economy overheating has risen

US President Donald Trump pictured after signing his $1.5trn tax overhaul plan in the White House before Christmaszone
US President Donald Trump pictured after signing his $1.5trn tax overhaul plan in the White House before Christmaszone

Colm Kelpie

The likelihood that the global economy could begin to overheat is increasing, German researchers have warned.

All regions of the world are showing a "stable, positive and moderately improved economic picture", according to the latest assessment of the international economy from the Frankfurt-based Sentix research group.

In the wake of US President Donald Trump's tax overhaul, Sentix added: "The US economic expectations, which are stimulated by the tax reform, have improved particularly significantly.

"In the eurozone, too, progress is continuing. And even latecomers such as Eastern Europe and Latin America continue to improve.

"The upswing is thus broad and synchronous. The likelihood of overheating is increasing."

The report said the eurozone economy continues to expand.

"The boom is not only being driven by catch-up effects in the eurozone, but above all by a very strong global economy," the report added.

"All regions are experiencing an upturn or boom and signs of weakness are hard to detect."

It comes as separate data shows confidence in the eurozone has hit its highest level in 18 years.

The European Commission's economic sentiment indicator rose to 116 points in December from 114.6 in November - its highest value since October 2000. The record was the 119 set in May 2000.

Separately, the Commission's business climate indicator, which points to the phase of the business cycle, reached the highest value since measurements began in 1985, hitting 1.66, up from 1.49 in November.

Sentiment was buoyed by a rise in optimism across all sectors - in industry, services, retail trade, and construction.

By contrast, in the UK consumers have reined in their spending for the first time in five years.

Visa's UK spending index fell an annual 1pc in December, the crucial Christmas shopping period for stores, and is unlikely to recover this year, the credit card company said.

A separate report from Halifax showed house prices fell for the first time in six months in December, damped by uncertainty over the economy and the decline in real wage growth.

The reports suggests consumers are being hurt by the fallout from the UK's vote to leave the EU, as uncertainty increases and the pound's decline feeds through.

Irish Independent

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