With one hugely important exception, the global economy looks set to enter 2013 on a better footing than it entered 2012. This should be positive for equity markets and maybe the FTSE 100 is getting a sense of it with what appears to be, as the chart shows, an attempt to overcome resistance heading into the New Year. So what's better?Back to top
Leaving the US for later and starting with China, the old guard is handing over to the new leaders an economy that has made the adjustment to slower growth and, in doing so, is neither heading for a hard landing nor heating up again. In setting their sights for growth in 2013, the new leaders are expected to target the 7.5 percent GDP growth that was targeted for 2012. The latest consensus expectation for GDP growth next year is 8.1 percent, no change on what it was last month and the month before.
In making the adjustment to slower growth, two points are relevant. One is that the de-rating of the Chinese equity market associated with the adjustment to slower growth has likely run its course and the other is that the drag on the global economy from China's own loss of momentum these past few years has likely run its course too. This, by itself, provides for a steadier outlook heading into 2013, but if growth in China rebounds even modestly, as is expected, this will be even better.
Better still will be the focus by China's new leaders on economic reform. To this end, policy is likely to remain geared to stabilising rather than stimulating the economy but also to nurturing the growth of domestic demand. This combined with a further strengthening of the renminbi, should boost import penetration and be supportive of the global economy.