Global Recovery Still at Risk via Dallas Fed

The global outlook remains uneven, with emerging economies outperforming advanced economies in terms of growth while registering higher inflation rates (Chart 1A, B).[1] Overall, inflation continues to moderate as commodity prices retreat, although the weak recovery also may be a restraining force.

Indicators of global economic activity—particularly in manufacturing—are raising the prospect of a further slowdown. The Federal Reserve Bank of Dallas’ weighted purchasing managers index (PMI) measures show that manufacturing has staggered since the second half of 2011 in both advanced and emerging economies (Chart 2A). Despite that, the global service sector PMI remains in expansion.

Financial conditions have returned to 2010–11 levels after substantial monetary support and intervention, as evidenced by declining spreads between corporate and government bonds (Chart 2B). However, credit is not equally accessible across countries due to the strained banking systems of some advanced economies.

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