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Economic growth may falter in 2010, says L&G

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Although the stage is set for a global economic comeback, there is scope for disappointment in 2010, particularly in the US, according to Tim Drayson, economist at Legal & General I

Although the stage is set for a global economic comeback, there is scope for disappointment in 2010, particularly in the US, according to Tim Drayson, economist at Legal & General Investment Management.
 
Economics data show that the global recession is over and financial markets have rallied following an end to the financial crisis.

However, with households yet to adjust fully to the credit crunch and companies remaining cautious, the strength of the economic recovery is under debate.

While economic data and business surveys have painted a far brighter picture of the global economy in recent months, Drayson (pictured) says investors need to show caution.

‘We expect business surveys to continue to improve for a few more months as global industrial production expands briskly. However, we remain doubtful about the strength of final demand for goods and services as consumers remain under pressure to rebuild their savings. Once the initial effects of government stimulus wear off, the US and UK economy may suffer a relapse in growth.’

LGIM is not anticipating a double-dip recession, but rather a relatively subdued period of growth next year.

‘While we believe the global economy may produce a short period of above average growth during the second half of this year, it will fall back towards its long term average in 2010. As a result, central banks are likely to keep official interest rates on hold, potentially until 2011,’ says Drayson.

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