FRANKFURT (MNI) – The global recovery continues, though at a slower
pace, as shown by recent hard and soft data, pointing to weaker growth
in the second half of 2010, the European Central Bank said in its
Monthly Bulletin released on Thursday.

“This is confirmed by the latest survey-based indicators, which
suggest that global growth might weaken in the second half of this
year,” the bulletin read. “These developments are also reflected in
global trade growth which, despite remaining robust overall, has started
to slow down from the exceptionally buoyant rates recorded in the first
quarter of this year.”

Breaking down the world developments by zones, the central bank
noted that the recovery in the U.S. had lost steam at the start of the
year. The recovery in the American economy is likely to remain
“relatively modest by historical standards” in the second half, with
weak labour conditions and less-than-optimistic household financial
developments to weigh on consumption growth, the ECB said.

In Japan, the recovery has lost momentum and is likely to stay
subdued for the remainder of the year, due in large part to waning
fiscal stimulus programs and a stronger yen weighing on external demand.

On emerging Asia, the bulletin noted that the economic performance
in the region remained robust, though it slowed over the last quarter.
Regarding China specifically, the economic growth is expected to
moderate and thus bring down inflationary pressures.

Looking to the UK, the rebound in the island economy should also
continue, as a depreciated currency, inventory rebuilding and stimulus
programs support the economic recovery. However, the ECB warned of
weakening domestic demand, hampered by government austerity measures and
tight credit conditions.

Regarding other parts of Europe, the central bank predicted the
economic recovery to continue in Denmark, boosted by government stimulus
and external demand. Economic conditions in the Baltic region and
Bulgaria should also continue to stabilize. However, the ECB warned that
a weak labour market and tight credit conditions could hamper domestic
demand in the areas.

Russia should also be able to maintain its economic recovery,
though the ECB highlighted some downside risks, including
weaker-than-expected commodity prices and slow domestic credit growth.

Looking to 2011, most private and public forecasters see a slower
GDP growth rate than for this year, the ECB noted.

Citing the declines in OECD composite leading indicator, as well as
the Ifo World Economic Climate Indicator, the ECB expects moderation in
the global recovery, with risks “slightly tilted to the downside”.

“On the upside, trade may continue to perform more strongly than
expected. On the downside, concerns remain relating to the emergence of
renewed tensions in financial markets, renewed increases in oil and
other commodity prices, protectionist pressures, as well as the
possibility of a disorderly correction of global imbalances,” the
central bank said.

— Frankfurt bureau: +49 69 720 142; e-mail: frankfurt@marketnews.com —

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