Yet another budget showdown in Washington and yet another government crisis in Italy herald more turbulence for a global economy growing below trend. On top of these problems, banks and households in Europe are still shedding debt, several big emerging economies are slowing and markets are struggling to decode the Federal Reserve's policy signals. Yet there is a guarded confidence at some banks that a recovery, not powerful but worthy of the name, might finally be within reach.
Credit Suisse, for instance, is pencilling in 3.8 percent global growth for 2014, up from 3.0 percent this year and surpassing what it sees as the trend rate of 3.5 percent.
A lessening of fiscal headwinds will be important in allowing the hoped-for pickup in the United States, said John Calverley, head of macroeconomic research with Standard Chartered Bank in Toronto.
"So you should start to see growth moving up well into the 2.5, 3.0 percent range, maybe more, over the next couple of years," he said. The U.S. economy has expanded at an average pace of less than 2 percent in the last four quarters.
But that view could be sorely tested in coming days.
The White House, in its fourth major budget standoff with Congress since 2011, has vowed to veto a bill
approved by the Republican controlled House of Representatives,to delay Democratic President Barack Obama's landmark healthcare law for a year as part of an emergency spending bill.
Italy's political instability has also revived concerns about its stagnant economy. Centre-right leader Silvio Berlusconi effectively brought down the government of Prime Minister Enrico Letta by pulling his ministers out of the cabinet on Saturday, further delaying agreement on changes intended to reduce debt and revive growth.
Source: Reuters
