QNB Capital: A Healthier US Economy Is Good for the GCC

Doha, March 17 (QNA) - The economic outlook in the US continues to broadly show signs of improvement, which is positive news for the GCC economy, according to analysis from QNB Capital. After a generally gloomy second half of 2011, key indicators in the US have been improving in recent months. This has boosted stock markets and, during late February and early March, the benchmark Dow Jones Industrial Average traded over 13,000 for the first time since the 2008 financial crisis. It subsequently eased back a little but remains up on the year and well above its recent low of 10,402 in October 2011. Most notably, the Conference Board's consumer confidence index rose sharply to 71. This was 9 points up on January and the second highest reading in four years. QNB Capital notes that the inventory build is unlikely to continue into the current quarter, and therefore growth is expected to ease back. However, annual growth in 2012 should still exceed the 1.7% seen in 2011, and is forecast at around 2%. One disappointment amongst the recent stream of encouraging data was the national purchasing managers index (PMI), a key indicator of corporate activity. It eased back to 52 in February, after three successive months of improvement. However, any reading above 50 is understood to signal expansion and it is well above its low point of 33 in 2009. The direction of the March PMI reading could be a significant gauge of the health of the corporate sector, according to QNB Capital. A second month of decline would likely dent confidence, whereas a positive rebound could substantially enhance the outlook for economic growth. US officials remain cautions. The Chairman of the Federal Reserve, Ben Bernanke, stated recently that the fundamentals supporting consumer spending continued to be weak as real household wealth and income remained flat and access to credit was restricted for many borrowers. In addition, the recent rise in oil prices could accelerate inflation leading to further erosion in consumers purchasing power, which would threaten growth. Despite these concerns, the overall picture remains optimistic. The US represents over a fifth of global GDP, and therefore developments there reverberate internationally. In particular, QNB Capital notes that a healthier US economy will directly and indirectly support demand for oil, and hence benefit the GCC economy. (QNA)