The world economy is in its worst shape in two years, with the eurozone and emerging markets deteriorating and the danger of deflation rising, according to a Bloomberg Global Poll of international investors.
A plurality of 38 percent of those surveyed this week described the global economy as worsening, more than double the number who said that in the last poll in July and the most since September 2012, when Europe was mired in a recession.
Much of the concern is again focused on the eurozone; almost two-thirds of those polled said its economy was weakening, while 89 percent saw disinflation or deflation as a greater threat there than inflation over the next year. Respondents said the European Central Bank (ECB) and the region’s governments are making the situation worse by pursuing too-tight policies, and fewer expressed confidence in European Central Bank President Mario Draghi and German Chancellor Angela Merkel.
“The eurozone economy has deteriorated and will get worse if there are no fiscal policy actions from core European countries, mainly Germany,” poll participant Lee San-wook, a senior portfolio manager at Shinhan Bank in Seoul, said in an e-mail.
Europe is not the only source of concern in the global economy, according to the quarterly poll of 510 investors, traders and analysts who are Bloomberg subscribers. More than half of those contacted said conditions in the BRIC economies — Brazil, Russia, India and China — are getting worse, compared with 36 percent who said so in July.
The sole bright spot was the US. Just under two-thirds said the world’s largest economy is improving, while roughly half said US markets would be among those offering the best returns over the next year. China’s and India’s markets were a distant second at 22 percent each.
“In comparison to the other major economies, we are head and shoulders the strongest of them all,” said Brian Dolan, who took part in the poll and is lead market strategist for DriveWealth.com, an online investment broker in Chatham, New Jersey.
The US, though, was not immune to the growing nervousness among investors about slowing increases in consumer prices. Forty-seven percent said disinflation or deflation was a greater risk for the US than inflation over the next year, up from 31 percent in July.
The European Central Bank is having more difficulty than the US Federal Reserve in meeting its inflation objective. A plurality of 43 percent described the European bank’s monetary policies as too restrictive, up from 31 percent in July. Draghi’s popularity with investors took a knock in response. Fifty-nine percent viewed him favorably in the latest poll, down from 74 percent in July.
“The ECB measures are coming up too little and too late,” Dolan said.
Draghi last week stepped up efforts to boost inflation back toward the bank’s goal by suggesting it will buy about 1 trillion euros (US$1.25 trillion) of assets.
The eurozone’s fiscal policies are also too tight, according to 57 percent of those surveyed. Germany, the currency zone’s linchpin economy and its largest, has pushed back against lobbying by French and Italian officials, who want to pursue easier budget policies.
Meanwhile, Japan’s economy was seen as mostly stable by survey respondents, though it too was said to face a danger of disinflation and deflation. Almost three-quarters viewed that as a greater threat to the Asian nation than inflation over the next year, up from 58 percent in July.
The poll of Bloomberg customers was conducted on Tuesday and Wednesday by Selzer & Co, a Des Moines, Iowa-based firm. It has a margin of error of plus or minus 4.3 percentage points.
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