Tags: europe | global | growth | economy

Europe Tops US as Global Growth Locomotive

Friday, 27 Sep 2013 06:58 AM

While Europe struggles to raise its economic growth rate, when it does it provides a more powerful boost to the world economy than the U.S., says Barclays Plc in a challenge to conventional wisdom.

A 1 percent increase in aggregate demand in Europe’s developed nations gives 33 of 39 international economies a bigger lift in their gross value added, a proxy for gross domestic product, than if the higher demand had occurred in the U.S., Barclays strategists including London-based Jim McCormick said in a Sept. 25 report.

The impact of the European demand rise on the entire world is more than 0.25 percent, three times the U.S. effect. The explanation is that that Europe has a bigger economy with greater trade links and its banks are more exposed globally, McCormick, Barclays’ global head of asset allocation research, told reporters in London.

Europe’s positive spillovers were calculated using historical relationships between economies. The ripples extend as far as emerging Asian economies and to some in Latin America.

“While it is often believed that the U.S. cycle is a bigger source of global growth shocks, statistics suggest otherwise,” the Barclays report said.

The observation was contained in a study suggesting “the evolution of the European recovery could well be the most important factor for financial markets in the months ahead.”

Among other reasons for that analysis: The euro region’s eight-quarter recession may have hurt asset markets abroad too. Barclays noted that assets typically linked to growth have underperformed the Standard & Poor’s 500 Index by almost 20 percent since Europe’s slump began in the middle of 2011. Since the rebound started this year, growth assets have started to gain against the S&P.

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Economy
While Europe struggles to raise its economic growth rate, when it does it provides a more powerful boost to the world economy than the U.S., says Barclays Plc in a challenge to conventional wisdom.
europe,global,growth,economy
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2013-58-27
Friday, 27 Sep 2013 06:58 AM
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