DESPITE GLOOMY DATA GLOBAL ECONOMY SHOULD AVOID A DOUBLE DIP RECESSION - This week has seen the US Federal Reserve talk about a slowing recovery in the US and an unexpected rise in unemployment claims there. There were also questionable growth figures from China. All of this raises the question once again of whether the dreaded double dip could become a reality.
Kevin Gardiner, Managing Director and Head of Investment Strategy for the Europe, Middle East and Africa region at Barclays Wealth, says that while an economic double dip can not be ruled out, the world economy should manage to avoid it. He says the fact that US households have managed to rebuild their savings should be enough to stave off a double dip recession. He says the US economy and how it fares has a huge knock-on effect on the Irish economy as not only is it a big export market, but also a huge source of direct investment into the country.
Mr Gardiner said that the comments from Central Bank Governor Professor Patrick Honohan on the 'ridiculous' demands from international investors come as those investors remain nervous about the peripheral states in the euro zone, including Ireland. He also says they are focusing on the Irish banking sector.
On the better than expected economic growth from Germany this morning, Mr Gardiner says it should put the German government on the way to a smaller than expected deficit and so the country will be in a better position to better help the so-called PIIGS states.
He says the outlook on the Irish economy is 'pretty patchy' and not really much has changed since the start of the year. However, he says that some stability is being seen and US firms are making much more than expected and so investing much more than expected - which is always good for the economy here.
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MORNING BRIEFS - Irish investors, including the Holy Faith nuns in Glasnevin, are suing the investment bank Morgan Stanley for up to €6m over a bond purchase through Bloxham Stockbrokers. Court proceedings were launched in the High Court in London this week. They relate to the purchase of €6m worth of bonds in 2005 and 2006. Other investors include The Sisters of Charity of Jesus and Mary and The Irish Veterinary Benevolent Fund. Some credit unions have taken separate cases. The investors claim that they paid €5.87m for 'Hybrid Structured euro constant maturity notes' with guaranteed steady returns of 6.25% a year for four years. They claim Morgan Stanley said the bonds would be sold immediately if downgraded to a certain level, but when downgraded to junk in January last year the bonds were not sold for five months. Morgan Stanley, which made nearly €2 billion in profit between April and June, has not yet responded to the claims.
*** The Construction Industry Federation says the Government is well behind target in its spending on infrastructure. The Federation says that based on figures up to the end of June, investment in public projects was running at less than half of what is needed to meet the Government's commitment in 2011. It bases its figures on the volume and value of public sector construction projects posted on the Government's tender notification website. It said €97m for tender notices in June was the lowest so far this year, and only €14m worth of contracts was awarded.
*** Growth figures for the euro zone are due out this morning, with signs of recovery expected, despite the Greek debt crisis. Countries will publish details of their gross domestic product for the second three months of the year. Already this morning figures for Germany show the biggest economy in Europe posted record economic growth of 2.2% in April, May and June compared to the previous three month period.
*** On the currency markets the euro is trading at $1.2873 cents and 82.36 pence sterling.
