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Macroeconomics  |  August 02, 2012 08:55:39

How will the world economy in the second half of 2012?

Caterpillar is a major global player - many large manufacturers depend on their machines and other products. For the second quarter reported record profit and revenue growth of more than 22% (to 17.4 billion USD). The company also updated its full-year outlook, which, however, goes much further than other companies - even the projected growth rate of GDP of some countries and the policy of the world's major central banks.

Next month will be in accordance with Caterpillar's gloomier than the company predicted earlier this year.However, the prognostic team believes that the United States do not fall into recession, even though her other developed countries are likely to escape.

First Economic growth will stimulate demand for commodities, but their prices will decline. Key estimates Brent oil price for the whole year 2012 are on average around 105 USD per barrel, copper $ 3.50 per pound and Chinese iron ore 145 USD per tonne. Caterpillar believes that the prices of most commodities remain attractive enough not to encourage production and investment.

Second Low prices impact negatively on coal miners. In the U.S., prices have fallen enough to encourage miners to reduce production and investment. Producers increase exports to record highs, contributing to lower prices for coal in Asia. Caterpillar, however, does not expect the Asian coal prices have fallen so much that companies here have also had to reduce production or investment.

Third In developed regions, due to a deeper recession in Europe worse economic conditions persist. The recovery in developed countries remain anemic, some even returning the economy into recession. Most central banks keep a record low interest rates and inflated balance sheets in order to maintain stability in financial markets. Last year the dollar value of the Fed's balance sheet grew by 18% (1.4 trillion).

4th The U.S. recovery is weaker than originally expected Caterpillar, but perhaps there is no recession. In the first quarter of 2012 +2 0, +1.5% in the second - the U.S. economy slowed down significantly, and data regarding unemployment suggest that growth in the second quarter will also be weak. However, leading indicators do not predict a recession yet.

5th The government's massive cuts in the U.S. occurred mainly in the first half. Declines in federal, state and local spending declined in the first half of the U.S. GDP of at least 0.5%. State and local investments, including infrastructure, were the lowest since the fourth quarter of 2008. In the second half of this year would slow the pace of spending cuts.

6th The current Fed policy will have no significant effect on financial markets. Inflation of the Fed's balance sheet in the first half of 2010 helped the economy, but this positive impact is already fading away. Money supply growth is slowing, although the central bank balance sheet zooming in at a moderate pace continues. The policy of extending the maturity of its securities Caterpillar does not observe any effect on the economy.

7th U.S. growth slows to measure just over 2%. Although the Fed probably will again pump money into the economy, it will not be soon enough to make it support the growth later in 2012. A slight recovery in the U.S. will continue.

8th The U.S. real estate market recovery will be evident. Some replies important for Caterpillar sales in the U.S. are beginning to recover. Real estate market is growing in response to rising demand for housing, low interest rates on mortgages and more than four-year downturn activities. Non-residential construction should also record the rise, although the construction of highways will be restricted. Caterpillar estimates growth of 750 thousand units, which may be under the original estimates of 800 000, but still represents the best level since 2008.

9th Problems of the euro area spreads further indebted countries. Budget savings and restrictive monetary policy in 2011 pushed the eurozone economy in the first quarter of 2012 to the brink of recession. Problems with fighting spreading across countries with high debt (most of the euro area), rising unemployment and business confidence is deteriorating.

10th Regardless of the policy of the ECB European economy will decline this year. The European Central Bank has offered two programs to provide liquidity and cut interest rates for the third time since October 2011. Rates are now at a record low. Caterpillar is expected before the end of next action, but still remains Europe's economic growth for this year is negative.

More about the outlook for the second half to find investment site

The ECB and the CNB will continue to reduce rates, 90% probability Grexitu end view of Citigroup
The ECB and the CNB will continue to reduce rates, 90% probability Grexitu end view of Citigroup

Citigroup in its July report made only small changes in the global economic outlook. Besides the widely cited increase the probability of leaving Greece to 90% of the euro area is still very pessimistic view on the developments across the euro area, which slows growth in the global economy.

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