Recent World Economy Dynamics

The global economic recovery remained highly uneven in 2010. Growth in the emerging market economies (EMEs) of Asia and Latin America has exceeded our Spring outlook while the pace of activity in advanced economies, especially in the second half of 2010, has fallen short of what we expected in the spring.

U.S. output growth decelerated markedly to below its trend rate by the middle of the year. Over the first three quarters, housing investment continued to plummet, consumption growth was held back by very rapid household deleveraging, and net imports of goods and services widened considerably. While a definite upturn started in the Euro area in the spring, turmoil in sovereign debt markets prompted stringent fiscal retrenchment measures and a sharp widening of sovereign credit spreads that is holding back growth in many E.U. countries.